In my last column on September 24, I expected a 1/4 point interest rate drop with little benefit to the large cap's. As Tuesday approached, it became clearer that 1/4 point would be a general disappointment. That disappointment along with the threat of future hedge fund failures took its toll today, with point drops in the Dow of 237 and in the Nasdaq of 40.

Those drops of some 3% and 2 1/2% respectively compares to a .6% drop in the Russell 2000 and a 1% gain in the Dow Utilities. The good news for small stock and value stock aficionados is that these stocks have been showing improving relative strength, and I expect this trend to continue. We have also previously written that electric utilities were a likely safe haven, and so are U.S. Government Bonds, with the 30 year issue reaching a record high along with a concomitant record low yield of 4.96%!!!

Even with all these unnerving cross-currents that prevail today, some stocks will go up when they have particularly positive dynamics going for them. I'm going to review one of my favorite long-shots for you today, that I expect will take off between now and the 1st half of next year. I'm sorry to be that general about its take-off timing, but if it were more definite, it wouldn't be a "sleeper". I have been buying the stock [Aura Systems] and I intend to be buying more shortly, so I won't tell you the name today, as I never like to compete against myself when trying for a good price.

Stock "X" [Aura Systems] is a technology company developing revolutionary patented products in energy generation systems, advanced display systems, audio and sound systems, and other areas. It was founded in 1987 by aerospace industry scientists, and is loaded with physicists and engineers. Their forte is electro-magnetics and optics, and they have 76 issued patents and 6 applications that will be issued as patents. Of this total of 82 patents, 29 pertain to automotive/industrial applications, 28 pertain to sound applications, 21 pertain to electro-optics applications, and 4 pertain to communication technology. In addition, they have 14 patents pending.

It sells for under $1.50, and has had a last 10 year price range of 15 ½ reached in 1991 and 1 reached this year. That's right - 1 measly buck! Their last 12 month range has been 1 - 4 1/16. The stock has always lost money as it has primarily been in a product development mode. Last quarter it lost $.02 per share on its 80 million shares. That's a lot of shares, but it they are successful, it won't be an impediment to shareholders' realizing profits. Over the last 5 years, their revenue went from $11 million to $136 million including non-recurring items.

It has always amazed me that for both Technology and Biotech stocks, their stock prices reach peaks early in their development phases when shareholders are romanced by all the early rosy projections. Then by the time these efforts are close to fruition, the shareholders are exhausted and sell their stock at giveaway prices. This stock is selling around book value, and even with the market getting blasted of late, it is just not going down. They have built one hell of a base. I'll tell you more about Stock "X" next time. In the meantime, remember - CASH IS KING!!!

The Market Pro - September 30, 1998