NEW BUY RECOMMENDATION

The Home Improvement Research Institute estimates the home center market to command $167 billion in sales by 2001. The DIY (do it yourself) market is expected to grow to $121 billion by 2001.

The home center industry's future growth depends on many factors, including the number of homeowners, the age of the housing stock, interest rates, housing turnover, and housing prices.

As the U.S. housing stock gets older, this will also affect the home center market, spurring both the new home building and the repair and remodeling markets. Recent trends in interest rates have been favorable, and we expect interest rates to remain at moderate levels at least through 1998. Also, increases in housing prices have been kept in check by the low-inflation environment of the past few years.

NOTE: Home Depot is the leader in the retail home improvement industry. Recently HD reported record 2nd quarter revenue and earnings, that is, sales up 24%, while earnings up 29%. This bodes well for small players in the group; i.e., PCSH.

PAYLESS CASHWAYS, INC. (pcsh)

PCSH is a retailer of building materials and home improvement products in the United States. PCSH operates 164 retail stores in 20 states.

Recent price: $2.00
52-week range $1.00-$5.75
Shares outstanding-20 million
Book value-$8.00
Market-cap-$40 million
Total sales est. for 1998-$2 Billion

For second quarter just released July 14, 1998 sales reached $500 million and net income/sh equalled .04-We believe that a turnaround is in motion since emerging from chapter 11. Recent weakness in stock price due to release of 800k shares of additional stock because of chapter 11 -released around June 28th - should almost be played out.

Show me another company with a market cap of $40 million and sales of $2 Billion-also trading for about 70% below its stated book.

We initially recommended PCSH at $2.125 and sold half at $4.00 -- $3.1398.

To reiterate: we believe that an earnings turnaround is in place. The industry is huge and growth is excellent. The leader, HD, reports excellent 2nd quarter numbers. PCSH has only a market cap of $40 million - in our opinion, it is a great takeover candidate. HD could tender the whole company at a $2.00 premium above the current price and issue 2 million HD shares and buy an additional $2 billion in sales. SOUNDS LIKE A DEAL TO ME!

In our opinion, PCSH is a superb speculation with limited downside risk, with HUGE upside either by earnings growth or by takeover. Since PCSH remains on the OTC BB because of its price, it remains below most radar screens. It is mot likely the largest BB stock in the universe of OTC BB investments. We own it, like it and anticipate to profit from it.

Broker contact: Greg at 1-801-256-2160 or 800-269-9460.

Briefs

1. Bonzo Electronics-NASDAQ-bnsof. The company manufactures electronic products built in China and sells them in the US and Europe. We initially recommended the warrants (bnswf) at $1 a number of months ago and recently as of July 20th they were trading at $3.00-that was then this is now! A major blunder by management killed the common by $3 and the warrants by $2.50-They announced that the warrants are to be called and expire worthless by Sept. 28, 1998-everything has imploded!!!!!!!!!! At present we believe that warrant holders who purchased @ $1 should convert (the price of conversion is around $7.37). The latest earnings report that was just released a few days ago is outstanding, that is, $23.7 million vs $16 million last year and earnings of .73 fully diluted vs. 16, book value is around $8, and the company has ZERO debt!!!!! (fully diluted 3.1 million shares outstanding). We rate this situation with a strong BUY recommendation at current levels!!! Cash level is around $2/share. The current price is $7.50. We intend to monitor this situation!

2. PCSN - $4.875 - Precision Standard engaged in aircraft maintenance and modification design and manufactured of aerial target and guidance systems, aircraft cargo handling systems, precision springs and components and rocket launch vehicles. Six months: $73 mil and $1.25 (operating income), backlog $340 million and only 3.7 million shares outstanding. We will monitor this opportunity for percentage gain performance. We rate strong BUY.

Broker: Mike Chesler at 1-800-331-1355.

Special Note: We have decided to close our hypothetical $100K portfolio that was created during 1991 ($100K initial contribution). We have not done any action within this portfolio since December, 1997. As of December 15, 1997, our overall value of this portfolio equalled $2,759,907.46. When we added remaining cash on hand, our resulting valuation equalled $289,866.00. We have decided to dissolve this portfolio due to our expanding usage of the internet. See January, 1998 letter for closed out portfolio. Our November/December 1997 newsletter shows our other large portfolio still being monitored.

Note: In order to stay in line with SEC guidelines, S.A. Advisory may buy, hold or sell positions in all securities recommended. The portfolios are all hypothetical in nature. It is likely that all recommendations were purchased prior to the recommendation. We may buy additional shares or may sell shares at any time. S.A. Advisory's portfolios are geared towards sophisticated investors aiming for long-term capital gains. Our trading habits may vary at our own discretion. Most recommendations are based upon strict fundamental analysis. Usually revenue and earnings EST for low priced common stocks result from management discussions.