Institutional Growth Portfolio

You can think of the Institutional Growth Portfolio as your own private growth fund and a core position in your investment strategy. You see, we've taken an institutional investment strategy and brought it to you - the individual investor. So, why pay all those hefty management fees when you've got a better insitutional portfolio available that YOU can control?

However, while the portfolio utilizes an institutional approach to equity management (and has beaten the pants of the average mutual fund), the method is surprisingly easy to follow.

While the stock market can be challenging at times, our Institutional Growth Portfolio has proved successful in most every market environment. And I'll let you in on a little secret - managing an "institutional level" portfolio really isn't that hard! Perhaps the best part of the portfolio is it only takes about 15 minutes a week.

Hello, my name is David Moenning and I have been been managing "other people's money" in the stock market at my firms since late 1987. Frankly, during this time, I've seen an awful lot of investment strategies come and go. But in early 2005, after 18 years of investing in bull markets, bear markets, and everything in-between, I came across the simplest, most effective way to manage stocks that I had ever seen.

I was skeptical at first (you don't stay in this business very long without a healthy dose of skepticism) so I spent months researching what is now the Institutional Growth Portfolio system. I even hired the country's largest independent institutional research firm to thoroughly test the strategy. And when all the due diligence was complete, I concluded that this simple, easy to use system for owning the market's top rated stock was a winner.

How the Institutional Growth Portfolio Works

The strategy is easy to summarize: Instead of owning the biggest companies in each sector - as the S&P 500 Index does - our plan is to own the BEST companies in each market sector (i.e. the "TopStocks").

Each week the computers crunch the numbers and rank every stock in our universe in terms of earnings strength and company performance. Our goal is simple: We want to identify those companies that are truly tops in their category.

It is important to note that we do not employ the typical "earnings momentum" type of formula that became so popular in the early 1990's. Our proprietary rating system is extremely robust and cannot be found in any newspaper or public website. The TopStock system for determining a company's earnings strength and performance incorporates hundreds of indicators, including the analysis of:

• Earnings Estimates
  
• Revisions to Earnings Estimates
  
• Momentum of Earnings Revisions
  
• Measures for Earnings Surprises
  
• Upside Potential for Earnings Estimates
  
• Company Momentum
  
• Industry Performance

From there, our research team painstakingly analyzes each of the top rated stocks on an individual basis. We review the charts from a technical perspective. We review Wall Street's current research and brokerage ratings (we have access to most of the Street's important research), and we check our long-term fundamental models. While it takes an enormous amount of time and energy, the goal is to identify the top stocks in the sector.

Next, we compare our existing holdings to each of the week's "contenders." If one of the new kids appears to offer more upside or has a substantially higher rating, we don't hesitate to make a change.

To put it succinctly, only those stocks with the strongest performance and earnings strength "make it" into our Institutional Growth Portfolio.

Putting My Money Where My Mouth Is

Before I opened my mouth about this exciting portfolio strategy of owning the market's top stocks to my firm's sales reps, my clients, or my newsletter subscribers, I decided it was important to put my money where my mouth was. So, on May 31, 2005, I opened an account with $50,000 of my own money (I wanted to keep the amount small enough to prove that you don't need a zillion dollars to make money in the stock market) and the Institutional Growth Portfolio was born.

Below is a table illustrating the results of actual account performance from 5/31/05. There is nothing hidden and all commissions and fees were paid out of the account as I went. So to be clear, these are real-life returns and are net of commissions and fees.

To be honest, it hasn't been a great time for the stock market. However, the performance results show that the strategy can dramatically outperform in a short period of time.

Do Ratings Really Matter?

We certainly think so, but sometimes it is best to let the numbers do the talking. Below is a table showing the average annualized returns for each rating category, as determined by historical testing performed by one of the country's largest independent institutional research firms.

We Tell You EXACTLY What We're doing

Each week, we send members a TRADE ALERT! detailing the changes that we are making to the portfolio. It's that simple. We tell you what we're buying and what we're selling.

We Publish Performance

At StateoftheMarkets.com, we believe that performance is job # 1. And unlike so many newsletter services out there, we don't hide our performance. Every week we will send a Portfolio Roundup which includes a summary of any changes that we've made as well as the current performance to the portfolio.

To sum up, we do all the legwork, we you EXACTLY what we are about to do and why, and then we follow it up with a performance summary every week.

What You Receive

Before anyone becomes a member of our service, we feel it is important for them to understand exactly what they will be getting from us. So here's a summary of the reports you will begin receiving once you've signed up for a free-trial:

Real-Time Trade Alerts - We send a real-time ALERT! via email BEFORE every trade we make. These live reports tell members EXACTLY what we are about to do and why we are doing it. And to avoid any conflicts, it is our policy to wait until after we have received the ALERT to actually enter our trades. Each ALERT! includes:


• Company Name
• Ticker Symbol
• Position Size

Weekly Round-Up - Every week we update members on trading activity, current holdings, and performance of our portfolio.

Daily State of the Markets - As a TopStockPortfolios.com member, you'll receive our "Daily State of the Markets" market analysis and commentary each morning BEFORE the opening bell.

All the SOTM Reports - In addition, you can choose to receive any or ALL of the following reports: (just click on the reports you'd like to receive in Your Account)

• Breaking News - Up to the minute market news
• The Big Picture Report - Stay in tune with major market cycles
• Daily Stock Pick - Our pick of the day
• Daily Focus List - The TopStocks we're watching today
• The 10.0 Report - The REAL "Best of Breed"
• The Risk Manager Report - Understand the Risk/Reward environment
• Market Model Roundup - We quantify the current market
• The Insiders Report - What are the "insiders" buying?
• The SOTM 100 - The TOP 100 stocks (updated monthly)
• IRA/401(k) Portfolios - TSP Portfolios for your long-term assets
• Top Stories - Never miss an economic report or top story

Risk Management Strategies Are Built In!

Perhaps the best advice we can provide investors is simple: Stop Feeding the Bears!

As the saying goes, "sometimes the best offense is a good defense." So, in addition to a powerful stock selection strategy designed to outperform by a wide margin in Bull markets, the Institutional Growth Portfolio also has a risk management strategy built into the portfolio for when the Bears begin to growl.

Our disciplined sell strategy is actually pretty darned simple. You see, we have no tolerance whatsoever for stocks that are not technically healthy from a chart standpoint. Thus, whenever one of our holdings moves into a downtrend or breaks important support -- we sell the stock, no questions asked.

While it may sound simplistic, this "bottom up" or stock-by-stock approach to managing risk causes us to automatically reduce exposure to market risk during bear markets. And since one of the best ways to make money in the long run is to avoid losing big money in the short run, this approach is an easy way to protect your net worth during bear market periods.

Let's Talk Price

The Institutional Growth Portfolio is a "pro level" portfolio that can easily replace those closet-index funds in your portfolio. And instead of paying asset managers 1% of your portfolio, you can run your own institutional portfolio for just $349 a year, which is less than $30 per month!

So if you are looking for an easy way to invest the exciting world of TopStocks, be sure to give this service a try!

Wishing you green screens in your investment endeavors,

David D. Moenning
Founder and Chief Investment Strategist 

The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of StateoftheMarkets.com and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

The information contained in our websites and publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

The performance of the Stock Ratings are linked monthly price changes of equal weighted hypothetical portfolios consisting of those stocks with the indicated TopStock Rating assuming monthly rebalancing zero transaction costs. Results do not include dividends and are from the time period 12/31/95 through 6/30/02.

The returns shown for the Institutional from 2006 are a hypothetical implementation of the portfolio strategy allocating equal portions of the portfolio to the portfolio positions. Hypothetical returns do not reflect actual trading. Please note that hypothetical test results do not take into account market conditions which could adversely affect management decisions. Results after 1/1/07 are based on the implementation of trade alerts of the model portfolio.

Index returns are price only and do not include the reinvestment of dividends. The S&P 500 is a stock market index containing the stocks of 500 large-cap corporations, most of which are US companies. The index is the most notable of the many indices owned and maintained by Standard & Poor's, a division of McGraw-Hill. S&P 500 is used in reference not only to the index but also to the 500 companies that have their common stock included in the index.

All live returns assume reinvestment of dividends. Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.