THE STEWART REPORT HOTLINE SUMMARY

Saturday, May 7, 2005

(Next HotLine Recording Scheduled for Thursday, May 19, 2005)

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OVERVIEW: This is not the HotLine I’d envisioned last time, but it should be a fun and informative HotLine nonetheless, so I won’t waste any time getting right to the point. I’m basically going to preview – in a quick item-by-item format – how we’re going to be making money (and what we’ll be reporting on) in the next few months, as well as explaining why it will be another two weeks or so before we have a regular, full-scale HotLine.

For starters, the reason this isn’t the HotLine I’d originally envisioned is because I’d planned to focus primarily on the first-quarter and year-end earnings numbers for International Card Establishment, Inc. (Nasdaq/BB: ICRDE – 25 cents) – and we still haven’t gotten those numbers yet. They haven’t yet been “Edgar-ized” – i.e., put in the form required for reporting to the SEC. That’s why, as you may have already noticed, an “E” has been added – at least temporarily – to the normal ICRD symbol, making it “ICRDE.” The “E” simply means “earnings delayed” – a situation that should be fully remedied by Thursday, May 19, which is when I’ve tentatively scheduled the next HotLine – and the “E” will be removed when those numbers are presented.

It was only this week that I learned why I-Card’s numbers, along with those of many other companies, are running late these days – and it’s actually a good thing. It seems that, in this post-Enron and post-WorldCom financial world, it’s not enough to have your own accountants quickly crunch some numbers and fire them off to the SEC and shareholders. Even if you regularly use a major accounting firm for your corporate audit – say even one of the Big Four – that firm’s work now has to be double-checked by another major accounting firm before the results can be sent to the government. In other words, the auditors have to be audited.

Thus, while International Card Establishment’s numbers are done, they’re still undergoing that second check – and, as I said, that’s a good thing. Actually, from what I understand, the numbers look pretty darn good. Revenues are reportedly around $17 million to $17.5 million – up from basically nothing about a year and a half ago. Rumors regarding those results have sparked some buying flurries recently, but the final numbers will no doubt have to be on the table before the gains will stick – and they should be by our next HotLine.

With respect to the price quotes themselves, here they are, as of the end of trading on Friday, May 6:

Emergency Filtration Products, Inc. (Nasdaq/BB: EMFP – 44 cents) – That’s up a penny on the day, but down six cents since the last HotLine. Nothing new driving the price changes; just normal fluctuations reflecting the wait for firm commitments on some of the pending contracts for EMFP’s technology.

Amarillo Biosciences, Inc. (NASDAQ/BB: AMAR – 40 cents) – That’s up a penny for the day and up four cents since last time.

And, as already noted, International Card Establishment, Inc., finished the week at 25 cents, down 7 cents on the day, but up four cents since the last HotLine.

There have been a couple of press releases from Amarillo and EMFP, but no major news was contained in either. At least none we hadn’t predicted. However, for those of you who want all the details without waiting for my analysis of their analysis, the complete text of those releases is posted on our website – StewartReport.com. We try to post all the news from our featured companies on the site – and will continue to do so in the future – so we hope you take advantage of the information offered there. I’m stressing that service this time because we’ve just finished a major re-vamp of the site and I want you to check it out. The design is greatly improved, it’s modern, all the icons work and it’s a lot easier to navigate, thanks almost entirely to our new webmaster, Jim Webb, who did a bang-up job. (Yes, that’s right – our new “web”-master is really named “Webb.”) Jim will continue working to keep the site both attractive and user-friendly, so give it a look. I think you’ll like it, and find it useful. And, if you don’t – or have any suggestions for further improvement – let us hear about that, too.

As for the market as a whole, prices remain in a state of flux, with the major indexes knee-jerking back and forth on news about oil prices, Iraq, earnings and what some mutual fund manager’s mother made for his breakfast. Of course, as I’ve said in the past, it doesn’t really matter whether we’re in a Bull Market or a Bear Market, so long as we’re in the RIGHT market. There’s simply no question – if you want to find long-term market success, you have to become adept at sector analysis.

They’ve verified this with a number of studies, as well as with actual performance. I recall one specific study a while back in which they gave one guy $1 million in pretend money. They provided him with access to all the information there was about the general market – e.g., the all-time high for the Dow, the absolute low for the Dow, details on all the other major indexes, volume patterns, earnings trends, program-trading info, you name it. Armed with this information, the guy turned the $1 million into – and I’m kind of making this up here because I don’t remember the exact numbers – around $3 million in about two years. At the same time, they gave another guy $1 million in pretend money and withheld all the general market information from him. All they told him was which specific stock sectors were hot. So, all he invested in was stocks in the hottest sectors – e.g., had it been in the ’70s, he would have been in the oils – and he literally crushed the other guy, multiplying his initial million by nine- or tenfold.

So, sector analysis is definitely the most important thing – and I favor fundamental sector analysis, looking at revenues, earnings, growth, management, etc. Then, once I’ve got those numbers in hand, we refine our decision-making process and our timing based on the skills of Larry Spears, our editor in chief and technical analyst. That’s how we’ll be focusing our interests for the remainder of this year. In fact, I’m getting ready right now to hit the road and check out the fundamentals of several “hot sector” companies – one in Florida, one in New York, one in Nevada and two or three right here in California. At this point, I don’t know which will emerge as my top choice, but I can tell you each has a leading role in one or the other of today’s two most promising sectors:
The country of China, which is experiencing an absolute explosion of economic activity.
The vast potential of nanotechnology, which we’re already involved in peripherally through our investment in EMFP.

All of our members – including those of you who recently renewed your subscriptions in response to our “ransom note” or other mailings – will get full and complete reports on my findings as soon as I’ve completed my analysis and am ready with recommendations. And that brings me to the final point of this brief HotLine. I was extremely gratified by how many of you renewed your subscriptions, and want to sincerely thank each of you for your continued support and confidence. I also want to ensure that you get full value for your subscription dollar, so we’ll be changing the HotLine “pass code” before the next edition. We’ve had the current code for a long time, and I’m sure some people are getting the information while no longer paying for it. So, look for an e-mail or a postcard providing your new pass code at some point before the next scheduled HotLine on May 19.

That wraps it up except for one final bit of very important advice: For those of you who are Dads, don’t forget to treat the Moms in your life to something special this Mother’s Day Sunday. And, for those of you who are Moms, don’t forget to treat yourself to something very, very nice!

As always, thank you for listening, for subscribing – and especially for your recent renewals.

J. David Stewart
Analyst and Publisher, The Stewart Report