More firms added to our stop-loss list (page 1 of 2)

Last week, terrorist bombings in Turkey pressured stock markets. The S&P 500 lost 1.43% and the NASDAQ Composite Index declined 1.31%, offsetting broadly betterthan-expected economic data.

As we expect U.S. stock markets to remain volatile, with investors concerned about sales and profit growth sustainability for 4Q, we continue to advice investors to have a strict stop-loss policy.

Hence, last week, we removed from the Recommendation List American International Group Inc. (AIG, $56.59, CSFB: Outperform) after stock price hit our stop-loss level of $57, and Goldman Sachs Group Inc.(GS, $92.97, CSFB: Not rated) to protect some gains.

Both companies remain our favourites in their respective sectors, and we are waiting for lower prices before recommending them again. On corporate side, we do not expect much news, as the year-end is closing.

However, if terrorism concerns increase in the short-term, defense companies should outperform as investors would look for less volatile sectors. Companies such as Northrop Grumman Corp. (NOC, $93.15, CSFB: Outperform) would attract more investors due to its defensive nature beta<1, no correlation with the S&P 500).

For investors interested in small & mid cap in the defense sector, Teledyne Technologies Inc. (TDY, $17.60, CSFB: Not rated) should be a suitable investment idea. The company provides electronic and communication products. It also manufactures aviation and missile engines.

We would like to highlight InVision Technologies Inc. (INVN, $29.03, CSFB: Not rated), a small cap in electronic security devices business. INVN develops, manufactures, markets, and supports automated explosive detection systems for civil aviation security and drug detection applications.

Its major customers are airports, where the company implements explosive detectors. Although most of U.S. airports already have such detectors, we believe there is still sales growth potential abroad. Besides, it is expected that in 2005, U.S. airports would have to renew their detectors.

We have a Buy rating on InVision for more aggressive investors, with a target price of $33 and a stop-loss at $24.50.

The Chinese telephone maker Qiao Xing Universal Telephone Inc introduced new mobile handsets jointly developed with UTStarcom Inc (UTSI, $35.75, CSFB: Not rated) and utilizing UTSI's PAS technology. PAS™ (personal access network system) is a wireless access network solutions.

It enables network migration from wireline to wireless so service providers can offer mobile wireless voice and data services within a city or community.

The joint development gives UTSI the possibility to leverage its expertise in the PAS technology. Thanks to the competitive pricing of the handsets and the services based on PAS the technology has seen rapid user growth.

China Netcom and China Telecom customers can make phone calls via PAS services for the cost of a fixed line call. By the end of September there were over 28 million PAS users, and the number is expected to grow to over 30 million by year-end and by another 20 million in 2004; offering growth opportunities for UTSI, not only in handset sales, but also in networking equipment, as capacity utilisation of the PAS networks is rapidly growing at a 4-5% monthly rate, approaching 60%, according to UTSI estimates.

UTSI in the coming year should also benefit from continuing deployments to Reliance in India, as well as to Yahoo Broadband in Japan, which is likely to drive UTSI's sequential income growth in the respective business segment.