MediaSentiment Newsletter: Vol. No. 1, Issue 18 December 22, 2005

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MediaSentiment Newsletter: Vol. No. 1, Issue 18 December 22, 2005

Mediasentiment
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E-motions: Vol. No. 1, Issue No. 18 Brought to you by California News
Tech (OTC BB: CNTE)

By: Tai Nicolopoulos
E-Motions Writer
12/22/2005

Despite Praise for Boring Stocks, Courting a Wallflower is Not Always
Profitable
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1. Emotions in Focus: Mere Exposure Can Make a Company Seem More Likeable

    Lately in the press there has been a great deal of praise for "boring
stocks". When investors fear a bear market they starting looking for
investments that are going to be less volatile, make for better long term
holds, and perhaps even pay dividends. Indeed, some of these "boring
stocks" may indeed have good fundamentals and thus make for smart holds.
Nonetheless, the take away message in the news that any company out of
the limelight is a strong buy can lead investors astray.

In a hurry to avoid high volatility, many analysts are indulging in an
over simplification of the problem, and ignoring a basic principle of
media psychology. First of all, regardless of whether or not a company
receives large quantities of press, if investors are looking for a good
longer term hold, they should consider a stock’s fundamentals and the
health of the sector it is in. The importance of looking at fundamentals
and sector growth can be even greater when a stock does not receive a lot
of media attention. If such a stock experiences a difficult period it can
be more difficult to regain investor confidence if it is not prominent in
the public mind.

Furthermore, many experts in media psychology would disagree with the
fundamental assumption that is it better to be boring than to get bad,
volatile press. Esteemed emotions researcher Dr. Robert Zajonc is the
pioneer of "mere exposure" theory, which states that people like what
they find familiar. One way of explaining mere exposure is to consider
human cognition; that which is easier to process is more likely to be
something we have dealt with before, and thus it is less likely to be
threatening or problematic. Zajonc’s studies showed that participants
found abstract characters more pleasing and invented more positive
meanings for them if they had seen the characters before. Further
research has demonstrated that in some cases, even if the original
context of a symbol or name is negative, when participants revisit the
name later, they often forget the context. Instead, they base their new
perceptions, now positive, on its familiarity. In other cases,
familiarity with a name or source of information can even make
participants find information more credible.

    What mere exposure theory means for the practice of public relations
is that in many cases, there is no such thing as bad press. Investors are
more likely to like a company if it is frequently in the news, even if
some of the stories are negative. Investors may even be more likely to
trust press releases about a stock if its company has a larger media
presence. While smart investors should certainly avoid basing their
decisions entirely on their subconscious impressions from business news,
it is still definitely important to understand how a company comes across
to others in the media. Moreover, a well-established public image is an
especially important factor to consider when buying a stock that is down
and may be experiencing other problems. Ultimately, while it is often
wise to avoid high volatility stocks, "boring" can still be bad.

Presented By:

2. The Big Movers and Why

Last week two MediaSentiment Heads Up™ big movers demonstrated how
“boring” is not always brilliant when it comes to investing strategies.
On Thursday, Imperial Sugar Company (Nasdaq: IPSU) went down 4.0% after
releasing a negative earnings report. The Sugar Land, Texas-based company
experienced increased operations costs because of high energy prices this
year. Despite the long history of the company and steady demand for
sugar, the stock is not likely to rally back after this earnings release.
There is not likely to be enough media coverage of the company to create
investor interest in this potentially-valuable company.

    In another example of why being a media wallflower does not always
pay, Jacuzzi Brands, Inc. (NYSE: JJZ) went down 4.4% after releasing a
negative earnings report on Monday. The company suffered last quarter
from soft luxury bath and spa markets in the US, UK and Italy. Unlike
higher-profile companies offering luxury brands, such as Mokt Hennessey
Louis Vuitton, Jacuzzi Brands, Inc. is unlikely to get the benefit of the
spot light if consumers start spending more on luxury items in the
future.

Presented By:

3. How to Use the News

If you are trying to determine whether a “boring” stock is actually a
solid long term hold, or just a depressed wallflower, take a good look at
not only the health of the company’s sector and its fundamentals, but
also its media coverage. If the fundamentals are strong, the stock’s
sector is healthy, and MediaSentiment Trend™ shows consistently neutral
sentiment, rather than wild fluctuations in sentiment, or consistently
negative sentiment, a “boring” stock may indeed be a good buy.
Conversely, if a stock’s fundamentals are not strong, sentiment is
consistently, or a stock’s sector is depressed, the company’s low press
volume may make it more difficult for the stock price to bounce back.

Presented By:

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 highs and lows
the next day is 80%. Therefore, this week, MediaSentiment™ gave an edge
up to 80% to smart investors who used Heads Up™ recommendations to trade
on intraday volatility!

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 December 12, 2005 through December 16, 2005, 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

Let a Pro Pick the 'Boring' Stocks
Mere Exposure Theory

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