Technology

If we see strong numbers from techs early on, especially from the big boys (Intel, Microsoft, etc.) then tech will remain a good place to make money, although selection of stocks will require more attention to valuations and fundamentals. The best places to put money will be those that are going to benefit from an increase in business spending. I would likely reexamine all tech positions at mid-year and look at their 6-month prospects and how they might react to the changing economy.

� Look to companies that serve a specific niche. Here I�d mention Red Hat and other enterprise software makers (although I�m staying away from Red Hat at its current level). Look at companies that service Linux architectures like Dot Hill Systems Corp (HILL).

� Try to play a possible scenario from more than one angle. Consider the security-technology play. In this area look at RSA Security (RSAS) and Symantec (SYMC), which both work in different niches under the security umbrella. Both will benefit from a tech rally, but they�ll also go up if there�s a computer security problem or worries about homeland security.

� Take a risk on an emerging technology or idea. We�ve seen how profitable a good idea can be with Sirius Satellite Radio and Netflix. If you hear of a great idea, a great new technology that you think will catch on then buy into it.

Healthcare

Many healthcare stocks made little progress last year and I�d guess that healthcare companies will outperform the market this year. My favorites here are those that I�ve seen talked about nearly everywhere � they include Baxter International (BAX), Cardinal Health (CAH) and UnitedHealth Group (UNH). I will be buying BAX and CAH for the Model Portfolio if they pull back from recent gains. I�d like to get BAX below $30 and CAH at around $57. Also, I think that investbio.com has a number of interesting ways to play the possible completion of testing and approval of new drugs.

Energy/Mining

Here there are a number of interesting companies. This sector should do well and I believe gold and other commodities will continue to rise until midyear. This is easy money. Newmont is especially strong and well positioned as are QGX and Samex (all held in the MP). Of the gas stocks my favorite is Patterson-UTI (PTEN), there�s been a lot of buzz on them in the last few months and they�ve hardly moved up since the beginning of 2003. I�ll be adding this one to the MP soon as well. Also, given the enormous demand for oil from China , I�d look to some of the big names in oil.

Defense

If Bush is reelected defense stocks will do better than if a democrat comes into office. I think these are a pretty good place to be in general and my favorite is the big and bold United Technologies (UTX). But be careful when choosing these stocks, because they�ve had a significant run.

Housing

Until interest rates go up, I think the housing market will continue to perform strongly. As the jobs picture strengthens I believe that people will continue to buy houses. As I said last year, people are expecting a rise in interest rates sometime before August and as the time approaches and it looks more and more likely that an increase is coming, people will look to buy before a rate hike. These stocks have had a nice run though, so I�d look to pick them up on a pullback.

International Stocks

While I don�t have any great ideas in this area right now, I�d suggest that the Asian play is the best place to be internationally. China is on a roll and Japan is picking itself back up. While some (including my Dad) have suspicions about Japan �s banks, I think that their strong connection with U.S. banks and the U.S. government will hold them up. The Nikkei has room to rise. To play profit on Japan as a whole buy Japan iShares (EWJ).

—

Given any scenario, some sectors of the market will perform better than others. In general I believe that small caps will continue to rally through Q1 and will give way to larger companies sometime before midyear. Around this time I would shift my portfolio from a small cap focus to a large cap one. Well known companies will perform the best: Microsoft (MSFT), Intel (INTC), Cisco (CSCO), and Yahoo (YHOO) are some of my favorites, as are the big names in industry like International Paper (IP), Dow Chemicals (DOW), and Procter & Gamble (PG). I�d start shifting to these when the interest rates rise and I�d pick up some dividend stocks too.

Of course, investcollege.com will continue to select the best companies throughout the year that meet the criteria laid forth in our Strategy. By Midyear I expect the Dow to have tested 11000 and by year end I�d guess it will be between 11500 and 11750. The Nasdaq will likely rise early on and then slow its move upwards, but I expect it to reach 2450 once the IT spending comes through. Obviously I�m expecting a good year but this year will require more work than the last. Be proactive and pay attention to shifts in the commentary and political climate.