E-motions: Vol. No. 1, Issue No. 20 Brought to you by California News Tech (OTC BB: CNTE)

By: Tai Nicolopoulos E-Motions Writer 01/24/2006

When Industry Titans Make Waves, Smart Investors Can Benefit

1. Emotions in Focus: The Halo Effect

    There is a reason that advertisers use incredibly attractive, famous people to sell everything from soft drinks to shampoo. There exists what is known as “the halo effect” where someone or something that is viewed as very positive in one respect is often assumed to be positive in other respects as well. The effect goes even further, where just being associated with, or seen next to, something very positive can make people judge an object, person or other entity more highly. In the world of finance certain companies or figure can have a halo effect on other sector-related companies. While stocks in a sector often move together because they share a market, media that are much more subjective in nature can also create movement.

    Recently, a series of events in the tech community have put a halo around digital technology. Starting the trend, at the Las Vegas Consumer Electronics Show gave a speech glamorizing the bright future of all-digital electronics. Microsoft’s forays into digital consumer electronics may not actually be creating the kind of profit the company would like. Nonetheless, Gates’ images of elegant touch-screen glass panels that will control entire home entertainment systems were so alluring that they created a whole new level of excitement about digital technology. Subsequently, Microsoft’s alleged conflict for industry dominance with Google over its new Windows substitute, Google Pack, kept Gates in the media. Consequently, buzz about Gates, and his digital revolution took hold of the entire tech sector. Investor sentiment about any widely available digital solution was soaring.

    Now, the media buzz surrounding technology continues with the Macworld conference, and Apple’s announcement that its latest computers now will have Intel microprocessors. Long term, the trend seems to be making digital technology smaller, higher quality and more widely available. Overall, this new sentiment should boost sentiment for all new generation technology with a halo effect.

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2. The Big Movers and Why

    Just one of the companies benefiting from Bill Gate’s recent speech, Macworld buzz, and the latest happenings at Google, was HeadsUp™ Big Mover Xyratex, Ltd. (NasdaqNM: XRTX), which went up 19% on a positive HeadsUp™ recommendation after releasing earnings on January 5th. Xyratex, Ltd. provides enterprise data storage subsystems and network technology internationally, specializing in technology that offers higher-performance data storage. The story behind this particular company’s success includes its recent solution of a data storage connector problem that had previously made conventional micro-manipulator alignment techniques too expensive to be practical. In non-technical terms, Xyratex was able to bring a faster, more compact technology down to a lower price point so that more businesses could afford the company’s digital storage solutions.

    While Xyratex’s innovation certainly received attention, what brought the stock it’s remarkable 19% gain was the convergence of it’s technology profile with larger industry trends. Coming the wake of Microsoft founder Bill Gate’s speech on the future democratization of digital technology, Xyratex nicely reflected these themes. Investors were aware of Gates’ highly-influential statements, and overall more cognizant of the pervasiveness of digital technology because of Macworld and the Vegas conference. buys Consequently, they were looking harder for good digital technology buys. Industry leading stocks such as Google and Microsoft themselves were not necessarily the most appealing, however. Debate goes on over how long Google’s climbing price can continue, and technology blue chip Microsoft does not offer enough volatility for many investors. As a result, investors found stocks like Xyratex instead.

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3. How to Use the News

    It is well established that hype surrounding an important company can move the rest of its sector. Which parts of the sector will move, and how much, however, can be more difficult to determine. Often, one or two companies are at the eye of any given media storm. In some cases, enthusiasm in a sector as a whole can be legitimate. A paradigm shift in an industry, such as the move to all-digital consumer electronics, can create a great deal of room for growth. In other cases, company-specific intellectual property or branding may make these high profile stocks more valuable than others.

    In terms of making the right play on industry sentiment, timing largely dictates what an investor should buy. Also, it is important to factor in current prices for leading stocks in the sector. If a stock that is in the media’s focus, also happens to be a good buying opportunity, then looking around for other stocks in the sector may not be as important. If the stock or stocks creating the hype are already over valued or do not have a great deal of room for growth, then it becomes necessary to carefully assess other stocks in the industry. Are there companies in other segments of the industry close enough to the much-hyped area to receive attention as well? In a case like digital technology, the focus might first be on trendy devices like iPods, but in a few months the hot new story may be another digital solution. If you can beat the media to the next popular product concept, there is a great deal of money to be made. If the product concept is actually a good one, the benefits might be even more long-term.

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4. Last Week in Media Sentiment

    Recent correlations between MediaSentiment.com's thumbs-up / thumbs-down recommendations for Heads Up™ rated companies and subsequent day price highs and lows show a strong relationship. The correlation between ratings for MediaSentiment.com selected stocks and their average percent volume over the three month average the next day is 83%. Therefore, this week, MediaSentiment™ gave an edge up to 83% to smart investors who used Heads Up™ recommendations to trade on volume!

    Investors can take this MediaSentiment™ advantage to the next level by adding supply / demand indicators to Heads Up™ thumbs up / thumbs down recommendations, for up to 148% greater profits. Also, MediaSentiment™ subscribers can take advantage of MediaSentiment Trend™ to follow sentiment trends about individual companies, as well as E-motions™ to follow market-wide trends.

    All figures reflect all MediaSentiment Heads Up™ recommendations for the week of January 2, 2006 through January 6, 2006, rating companies on the day of their quarterly earnings releases correlated with their stock highs, lows, closing prices and daily volumes for the subsequent day.

5. Links you can use

Las Vegas Abuzz Over Google Keynote
Google Pack Lays Foundation for Windows-Free PC
Gates Still a Gladiator