OK, let’s kick off with the most important subject of the day: Taking profits. Here’s an e-mail I received at the close of trading on Friday from my colleague Ian Cooper:

“When my fellow Red Zoner Christian DeHaemer first recommended a buy on three flourishing Chinese Internet stocks – Netease.com (NTES:NASDAQ), Sina Corp (SINA:NASDAQ) and Sohu.com (SOHU:NASDAQ) – we had a feeling that all three would turn out to be very productive trades, given the strength of the Chinese economy and ever-increasing power of the Internet.

“And so it’s come to pass.

“We entered all three positions back on August 27, 2004 at the following levels:

NTES: US$35.88

SINA: US$21.46

SOHU: US$15.85

“At the close on Friday, these stocks finished at these prices:

NTES: US$60.10 – a 67.5% gain

SINA: US$24.92 – a 16.1% climb

SOHU: US$18.13 – a 14.3% advance

“We’re now recommending that you exit all three of these positions and lock in the gains. Congrats! If you have a moment, we’d love to hear how you did with these plays, so please e-mail us with any feedback here: taipan@taipangroup.com. Thanks.”

DAWSON HITS 45%

However, “Coop” wasn’t done there. He also informed me that Erin Beale’s recommendation on Dawson Geophysical Company (DWSN:NASDAQ) from May 3, 2005 (for the May Taipan issue) is also going gangbusters. From an entry price of US$19.70, the stock has blasted its way to US$28.56 following a recent upgrade. That’s a 45% gain. We recommend that you continue holding this position.

CUT YOUR LOSSES ON QUANTUM

Unfortunately, it’s time to cut our losses with Quantum Fuel Systems Technologies Worldwide Inc (QTWW:NASDAQ).

Initially recommended on June 30, 2005 (for the July Taipan issue) at US$4.50, we’ve given this stock plenty of leeway and time to mount a recovery. But alas, it’s not looking likely at this point. Since it’s hit and surpassed our 25% stop loss (set at US$3.35 and currently trading for US$2.56), take it off the table now and put your investment capital to more profitable use in another position.

And speaking of other positions, we just put the finishing touches on the December Taipan issue – with five new recommendations for you. We should have this online before the Thanksgiving holiday, so you can take a look while digesting your turkey and wine. I’ll send you an e-mail notification as soon as it’s on the website.

HANDICAPPING THE RETAILERS – A LOSING BATTLE?

And as we enter the shortened Thanksgiving workweek, it’s traditionally the time of year when the holiday shopping season kicks into high gear. So what’s the outlook for retailers?

“It will be a good holiday, but not a stellar one.”

That’s according to my colleague and retail expert Tony Mullen.

Tony continues: “I’ve been watching the buildup to the holidays for months, but even so, it’s always tough to handicap retailers at this critical time of year. I find that trying to do so with any kind of conviction is like betting on a horse after the race has started. You might think you can get an edge, but all you get is an even money bet at best and a huge cloud of confusion at worst.

“Nobody with any retail experience in retail would try to gauge who will make it and who won’t, simply based on what they see and hear during the weeks between Thanksgiving and Christmas Eve. So don’t pay much attention to anybody who tries!

“Everyone always talks about sales, which is all well and good. But what happens if the merchandise is sold too cheaply? Answer: those great sales will still struggle to offset the eventual damage done to the bottom line.

“Lots of people always talk about crowds, too. Madness! What if they’re all just there for the ‘Door Buster’ or ‘Early Bird Specials?’ Worse yet, what if they’re only doing what most people do on ‘Black Friday,’ which is braving the crush and just looking?

“Bottom line: Long lines, big crowds and talking heads can’t be trusted.”

He’s a sage fellow, that Tony!

FRAUD FIGHT

So at a time of year when folks are merrily spending in stores and online, wouldn’t it be nice to know that the credit card companies have a handle on fraud?

It would. But unfortunately, it’s not quite true.

The vice presidents of both Visa USA and MasterCard International said recently that the fight against card crooks has hit the wall, with the industry forced to throw out millions in preventive measures just to keep pace with the criminals – never mind beat them. This is because web-savvy thieves are using increasingly advanced software programs that allow them to bypass existing security.

According to Symantec, three quarters of the top 50 viruses generated over the first half of 2005 were designed to steal personal information and bank details from consumers. That was up from 54% a year earlier.

So be careful out there in Store-Land this week!

Catch you again soon.

Martin Denholm

Executive Editor, Taipan

MMM

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