How to Use The Prudent Speculator

As President of Al Frank Asset Management, I thank you for your interest in becoming a member of The Prudent Speculator community, the #1 rated investment newsletter, according to the Hulbert Financial Digest, for the past 10, 15, 20 and 25 years based on total return performance. (As of 9/30/08) In order to help familiarize readers with our service, we offer details below pertaining to the various aspects of our newsletter and electronic content.

Our publication has always been designed to educate our subscribers so that they can create, track and sculpt their own portfolios. Our objective is to give our readers the proverbial fishing pole, rather than just the fish. Of course, for those without an interest in angling, we do offer four model portfolios, Millennium, PruFolio TPS and Buckingham, each of which is updated in our newsletter, our Hotlines, and on our website, alfrank.com. For more than 25 years, we have successfully combined patience, diversification and selection for superior investment results.

--John Buckingham

Front Page: Our interpretation of market happenings at publication time. We attempt to thoroughly analyze market conditions and outlooks based on historical, technical and fundamental trends, as well as Federal Reserve policy, inflation and interest rates. Of course, because strict, almost religious adherence to our time-tested, value-oriented investment strategy is of paramount importance, we generally incorporate a great deal of philosophical discussion into our Page 1 commentary.

Stock of the Month: Though we always advocate purchasing a broadly diversified portfolio of our undervalued stocks, we offer this feature for those seeking a single investment idea and investors who are utilizing a system of dollar-cost averaging, allotting a fixed amount of money each month for stock purchases. The latter has proven to be an excellent strategy to counteract market fluctuations. Generally speaking, our Stock of the Month is a recommended stock that we think has great potential or is otherwise particularly noteworthy in light of market developments.

Portfolio Builder: Several readers, both new and old, have requested a little help in picking a few stocks or a small portfolio from our sometimes unwieldy current buy list. In order to make our newsletter more user-friendly, we offer, often based on a special theme, a listing of 10 stocks for purchase today with share quantities displayed for three differing portfolio sizes. The intent of this feature is to provide a starting point for new subscribers as well as to offer additional purchase ideas for existing portfolios. With this in mind, each month we feature a different set of 10 stocks. Of course, should a stock not reappear in the subsequent month's Portfolio Builder section, it does not mean that we have sold or otherwise no longer like the company. Remember that we hold our stocks on average more than six years!

Currently Recommended Stocks: This is the heart of The Prudent Speculator and the pulse of many of our readers' portfolios. It is here where our stock research and market insight shine and where the toughest question is answered - What stocks do we like? Though the list can sometimes be lengthy, we present all of the companies that are trading for 50% or less than their Liquidity or Fundamental Goal Prices. These price targets are our three-to-five year determination of a company's fair value. Happily, 69% of the 1000+ stocks we have recommended in 25 years of publishing the newsletter have proven to be profitable.

Currently Recommended Stock Commentary: Just as with our Hotline updates, we strive to keep readers abreast of pertinent developments with our current recommendations. As with our Stock of the Month feature, we select the companies for this section based on recent news headlines or other distinguishing considerations. Often, these stocks are among our most favored purchase candidates.

Industry Analysis: When space allows and conditions dictate, we discuss developments in a particular industry of interest. As our recommended list is often studded with many stocks from the same sector, a broad overview of industry activity can be very germane to an investment decision. In recent publications, we have discussed sectors such as Oil, Homebuilders and Semiconductors.

Stocks to Watch: Because share prices are constantly gyrating, in this section we list equities that we believe are "within range" of their buy or sell limits. While most may wish to await an "official" purchase or sale recommendation, this feature offers advance warning of possible portfolio changes.

Sales, Splits and Other Considerations: Though knowing when to sell is the hardest part of investing, we offer details on any stocks we have parted with during the month. In addition, we discuss merger and acquisition activity as well as splits, spin-offs and any other important events affecting our companies.

Model Portfolio Listings: Every fourth month, we list in its entirety, the contents of one of our four model portfolios - TPS, Millennium, PruFolio and Buckingham. Changes to any of these portfolios are also discussed in detail in the newsletter and on our thrice-weekly Hotline messages.

All Currently Recommended Stocks That Have Not Been Closed Out: Unlike some of our competitors, we only drop coverage of our recommendations when they are sold. We presently have over 400 companies that we have recommended buying in the past and have yet to sell. In this space (and on alfrank.com), we update our Liquidity and Fundamental Goal Prices for all of the stocks that have yet to be closed out, providing up-to-date guidance on our three-to-five year valuation measures. Remember that we sell stocks trading above their Fundamental Goal Price, we buy stocks trading for 50% of the greater of our Fundamental or Liquidity Goal Prices and we hold at all prices in between. For us, hold, really means hold and is not broker-talk for sell. Some of our biggest long-term winners have been rated as a hold for years.

Technical and Fundamental Update: While we have been bullish on the prospects for our undervalued stocks for a quarter of a century, we comment in this section on near-term market, economic, national and world events. Buy and hold has been our strategy of choice, but we do think it important to pay attention to factors that may impact our portfolios in the short-term, especially as we would like to be more aggressive in buying stocks in oversold and undervalued markets and less assertive in overbought and overvalued markets.

Performance Scoreboards: The ‘proof is in the pudding' is one of our favorite expressions. This section displays how we are doing relative to our benchmarks over the long-term and the short-term. In addition to our three model portfolios, we also display the performance of our Hotline Specials and our Stocks of the Month.

Hotlines: While the newsletter is a terrific summary of recent events and excellent reference material, our two-times-a-week Hotlines provide timely analysis of market events, corporate developments, purchase/sale decisions and model portfolio changes. On Wednesday, we offer individual stock related commentary and on Monday morning, we feature market analysis and philosophical ruminations on investing and life. In addition, should the Dow Jones Industrial Average move 3% or the Nasdaq Composite Index move 5% on a daily closing basis, we will have a Special Hotline to help make sense of the day's events. Finally, we often feature a Hotline Special stock recommendation; one company that we think is especially noteworthy for purchase. Of course, it should be noted that we have yet to repeat a Hotline Special, so only stocks that have not already appeared will be considered. We have been told that our Hotlines are the most valuable part of our service. That only makes sense in that there are more than a dozen of these extensive commentaries each month!