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EXPERTS BULLISH ON LOW-COST STOCKS

"To look out the window when it's raining and forecast rain is not the way the stock market operates," says Smart Money (6 Deer Trail, Old Tappan, NJ 07675), vividly, if ungrammatically, explaining it's continued bullishness on stocks despite the moribund economy.

"Many people who worry about the poor economy believe the market should reflect it and are bearish on stocks. But the market does not review or reflect, it discounts. Between 1949 and 1960, the Dow tripled while earnings were flat. In the next 14 years the Dow stood still while earnings tripled. We find it puzzling when analysts state unequivocally that the Dow is on shaky ground because earnings may not recover sufficiently over the next few quarters."Smart Money bases its optimism for stocks on three specific factors:

1. the enormous business potential it sees in the death of communism and the unity of Europe;

2. the cheery precedent of past bull markets in presidential election years;

3. the continuing accommodation of the Federal Reserve."

Smart Money recently rated 11 of the stocks in its model portfolio as outright buys. Only one cost more than $10 per share: Lancit Media Products. The rest were real cheapies: Continental Pacific, Oceanic Exploration, Davastar Industries, DataImage, Syntech, Medphone, Jillian's, Automobile Protection, Gynex Pharmaceuticals, Health Club Media Network.

- Speaking of inexpensive stocks, Larry Abraham, editor of Insider Report (P.O. Box 84903, Phoenix, AZ 85071) says he has learned after years of buying penny stocks that there are some definite rules for success. He recently shared these rules, "the tuition for which has been very expensive," with his readers:

"One, never invest one dime more than you are prepared to lose in any deal, no matter how good it looks.

"Two, never put all your high-risk capital into any one company, no matter what someone else promises you.

"Three, never expect to get rich on any one deal.

"Four, never let yourself become impatient. These small companies take time to make it.

"Five, never be too greedy to take profits.

"Six, always listen to your guts before investing a penny. If a deal `feels' bad to you, walk away from it.

"Seven, always look for situations that you know something about. Don't be shy about asking questions.

"Eight, always look to see if people who have already been successful are affiliated with the venture. Amateurs seldom make it the first time out - and never if they're unwilling to listen to experienced veterans.

"Nine, always invest in companies that have, or are capable of raising, the money they say they will need to become successful.

"Ten, always have a strategy for what you're going to do if you do in fact find a winner."