By Paul Honda
paul@hondareport.com
Thursday, Apr. 5, 2007

A part of me loves research, but only if it involves something fascinating.

Sports. History. Anthropology and migration. The markets. Oh yes, the free markets. I'm no Warren Buffett, of course, but in those late night hours that I'm so familiar with, I found a new hobby. Using a basic formula of low P/E, strong earnings-to-price, and increased earnings over 3-4 years, I dug deep and found 25 companies that are in a faux portfolio I have dubbed (with great imagination), "Fundamental Growth."

No, I didn't go out and buy every one of them. Or any of them. Takes some serious moola to do that. (Sadly, it does take money to make money.) But I popped in my information based on my research, using tools that come with an online brokerage I recently signed up with. Tools are beautiful.

I did the work in the month of March, not really sure what the results would be. Well, the market is doing a bit better now in April, but even through the volatility of March, these 25, my Top 25, stunned me. Of them, 21 are on the upside. With equal weighting, they've returned at a rate of 5.61 percent.

Not bad for an amateur, and sure, that's nothing compared to a fluky short squeeze and pop by Dandreon (DNDN) for 20 percent in one day. (Watching that go up-up-up this morning was absolutely the most insane thing I have ever witnessed on a TV or laptop screen!) Still, I'm sorta proud that my research has reaped positive results so far. Take a look.

Pupule's 25: Fundamental Growth

There are some profoundly boring companies here. Coke. AT&T. McDonald's. Then there's Longs Drugs. Yes, our Longs. Not the greatest growth story, but the numbers don't lie. LDG is a very sound stock. China Mobile (CHL) is a big corporation, but there's still room for growth in the Middle Kingdom, and the stock proves it. News Corp., owner of MySpace, is another solid, reliable behemoth with solid, accelerating growth.

By no means am I implying that there are no better stocks than these. I just happened to hear about many of them through various means, did my due diligence, and discarded stocks that didn't pass the test, i.e. formula. These 25 are low-risk (in my world, anyway) and high return, as opposed to A) low risk, low return, or B) high risk, huge return. (The high-risk, huge-return babies will be in a future column. Anybody like fruit? Apples?)

Tell me what you think. I love hearing from everyone about any topic. This one is going to be fascinating to discuss, especially for those of you here in the islands who actually get up early to watch the market for fun and/or profit.

Disclosure: Paul 'Pupule' Honda does not own any of the stocks written in this column. He hopes to, though, some day.

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