ROBERT RUBIN

JULY 11, 2007

Proven Money Making TacticsPart II

Buy Chinese ADRs Before The Chinese IPO

Many Chinese companies issued ADRs outside of China without issuing stock in China Early discomfort with capitalism

The Chinese exchanges are rushing to catch up Shanghai and Shenzhen IPOs in China for stocks already traded here

Chinese IPOs create huge new demand for stock Chinese eager to invest, so IPOs oversubscribed Caution – Chinese government raising taxes and interest to lower liquidity

Prices soar after IPO, despite new shares Example: GSH (Guangshen Railway Company)

12/15/06 - Last day before IPO – closed at 27.81 1/3/07 closed at 35.24 – a 26.7% gain Price began rising two months before

English version of People’s Daily for Chinese business news http://english.people.com.cn

Buy Stocks After Special Dividends

When stocks issue special dividends, they usually return to the pre-dividend price within 6-12 months

Special dividends are large one-time dividends Dispose of cash the business can not profitably use Acquire debt to make themselves unattractive takeover target

Buy stock on ex-dividend date When stock price adjusted down to reflect the special dividend Price rise after dividend announced lowers profit, so wait for ex-dividend

Make sure the company is a stock you want to own Not liquidating or lacking future plans

Sell when the stock returns to its pre-dividend price Example: SKS (Saks) went ex-dividend 12/01/06

Price fell from 20.52 on 11/30/06 to 16.88 on 12/01/06 after $4 special dividend Price closed at 20.67 on 7/05/07 (back to pre-dividend price) – a 22.45% profit

Short Stocks Before IPO Unlocks

Lock-up Agreements stop insiders from dumping their stock after an IPO Commonly for 180 days

Prices fall and volumes rise before and after unlocks Average prices start to fall before unlock

Start to fall 1-2 weeks before, continue for 1-2 weeks after Short or buy puts 1-2 weeks before unlock Example: FSLR (First Solar)

28.50 on 1/3/07 69.63 on 5/7/07 64.126 on 5/16/07 (unlock date) a 7.9% drop 62.03 on 5/21/07 another 3.3% drop 96.29 on 7/6/07

Free subscription to Dynamic Market Alert includes IPO unlock dates with every day’s issue http://www.taipanfinancialnews.com/dma_archive.html

Find and Buy Acquisition Targets Early

Companies often sweeten executive compensation when they receive unsolicited bids Extra bonuses protect executives who might have to go

Companies must report new compensation SEC Form 8-K, Section 5.02

Learn about likely mergers before announcement Example: OO (Oakley)

On 5/31/07, Form 8-K, Section 5.02 says Long Term Incentive Plan payments after “Change of Control” will be twice normal

On 6/20/07 Oakley and Luxottica announce OO sale for 29.30 OO at 25.42 on 5/31/07 OO at 28.45 on 6/21/07 – an 11.9% gain

www.sec.gov

Buy (the right!) Options Instead of Stocks

Invest a fraction of what you would for stock Lower your cost, not your potential profit

Buy deep-in-the-money long-dated options instead of stocks In-the-money options give you gains and losses close to the

underlying stock Deep-in-the-money options likely to stay in the money despite

volatility of the stock Long-dated options give your investment time to mature

Example: GOOG (Google) 539.40 close on 7/6/07 so $53,940 for 100 shares 284.70 Ask for January, 2009, $280 calls so $28,470 for 1 contract If GOOG rises 100, you would make the same $10,000 profit on both Do the same with puts if you expect the price to fall

Buy Dividend Stocks With DRIPs

Stocks returned 10% per year in the 20th century 6.7% after inflation = 4.6% dividends + 2.1% capital gains Dividends have been 68.7% of total returns

Growth stocks often underperform over time Seldom pay dividends & must beat exaggerated expectations

“Old Economy” stocks often excel over time Pay higher dividends & easy to beat low expectations

Dividends often do more than share price over time The price you pay for dividends is critical – old idea that still works

Use Dividend Reinvestment Plans (DRIPs) for buy-and-hold Dividends automatically reinvested in stock, so they compound Buy stock from company, bypassing brokers and commissions Automatic purchase plans available for dollar cost averaging Some companies offer a 2%-10% discount off the market price

Source: "The Future for Investors" by Jeremy Siegel