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| A wise man once told me that the key to successful real estate investing is location, location, location. And when it comes to stock market investing, the key is earnings, earnings, earnings. To evaluate earnings, we look at the compounded annual growth over the past one, three, and five years in earnings. We also look at an anaylsis of earnings before interest, taxes, depreciation and amoritization (EBITDA), forecasted earnings by First Call and an analysis of Whisper's earnings. We evaluate the growth of earnings for the company, the industry and the country. It is earnings expectations and managing those expecations when the surprises are posititve or negative that is the key to successful investing. |
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On a regular basis, we analyze the future expectations of earnings and compare them to the past 12 months of earnings to identify opportunities. Going forward for the next six months, the greatest jump in earnings will be (1) basic materials, (2) energy and (3) technology. So far, we are comfortable with overweighting in the strongest companies in these industries where the future looks constructive and healthy. With the bottom of oil and gas, copper, nickel and gold prices behind us, in addition to fuel prices and positive GDP growth in Asia and Europe, we think the momentum should carry forward for the next 12 months.
Is Gold Glittering Again? What is going on with gold? Between 1980 and 1996, the average gold price was $385 to $400 an ounce. In the last three years, the price has averaged a mere $300 an ounce. In fact, on August 25 of this year, gold traded at $252.55 an ounce. That’s the lowest price in two decades and just slightly above the average cost of production. All changed in less than a month. The price of gold soared. Why? In late September, 15 European central banks said they would not sell gold over the next five years, beyond the 2000 tons already scheduled to be sold. That announcement removed fears that additional supplies of gold would be put in to the market. As a result, bullion prices jumped more than 20% to $317 on September 30, 1999. Gold mining stocks jumped twice as much, to almost 40%. According to the World Gold Council, in the second quarter of 1999, gold demand set a new record, gaining 16% compared to 2Q-98. The demand set a new all-time high for any three-month period, just a fraction above the previous peak set in 4Q-98. The World Gold Council also noted several other events that have affected gold demand this year: Jewelry demand in 2Q-99 totaled 686 metric tons, a 13% increase over 2Q-98. Investment demand rose 32% to 123.1 metric tons. For the first six months of 1999, gold demand totaled 1,598 metric tons, a gain of 35% year-on-year and also a record for the period. Overall, demand set records for 2Q-99 in the United States, India, the Gulf States and Mexico. Also, there were signs of continued economic recovery in Southeast Asia and South Korea, with demand rising to over 90% of “pre-crisis” levels. Japan and Taiwan also showed signs of economic recovery, and demand in the Middle East was higher. Use Asset Allocation The key for every successful investor - conservative or aggressive, GenXer, baby boomer or retiree - is asset allocation. Most money managers suggest that you reconsider your allocation each year to make sure it is suited to your goals. Research has shown that over 90% of a successful portfolio return is a function of selecting the right asset allocation, not on individual fund selections. For example, recent increases in the stock market may have caused your portfolio to be out of balance. You may want to diversify your portfolio by investing in a fund such as our Global Resources Fund, which is up 11% year to date, compared to 6% for the S&P. * Investing in Volatile Markets The best way to invest in a volatile market, such as gold and global resources, is with our ABC Investment Plan,® a dollar-cost averaging program that allows you to build a position in a fund and take advantage of the benefits of investing a set amount on a regular basis. Because the amount of money you invest stays the same, your money buys more shares when the price is low and fewer shares when the price is high. Of course, no investment plan can guarantee a profit or protect against depreciation in a declining market, but the ABC Investment Plan® can help smooth out the effects of market volatility. ** Give the Gift of Education Did you know that the cost of a four-year college education is expected to reach $102,839 in 20 years? That’s why we’ve designed an exclusive offer for parents and grandparents. Between now and December 30, 1999, when you use the ABC Investment Plan® for Kids to open an account in the All American Equity Fund, we will waive the $100 minimum initial investment. Be sure to read the article on page 6 to find out more about this exclusive offer. |
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Win a Free IRA!
Begin the millenium with a bang! Enter our IRA Sweepstakes and you could win $2,000 for your 1999 or 2000 IRA! For more information on the sweepstakes and retirement planning, please read the article on page 10 or visit our website at www.usfunds.com. We are excited about these opportunities for our shareholders and believe that our investment options and financial programs will enable our shareholders to better meet their financial goals for their family and businesses as we move forward into the new millenium. Sincerely,  Frank Holmes Chairman and CEO | 
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| For more information about our family of funds, including charges and ongoing expenses, call 1-800-US-FUNDS or click here to download a free prospectus. Please read the prospectus carefully before investing. |
