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Executive Summary	March 27, 2015

The Economy While not as serious as it was in 2014, the economy seems to have a case of the winter blues for the second straight year. Recent data indicates that the US hit several economic speed bumps in February, some of which may have been at least partly due to terrible weather in various parts of the country. New orders for nondefense capital goods spending excluding aircraft, which is considered a good gauge of business investment, fell 1.4% in February, for example, while January's surprise 0.6% gain was revised to a 0.1% loss. Overall, durable goods orders were down 1.4%. Industrial production inched higher by 0.1% in February, according to a new Federal Reserve report. January's figure was revised lower, however, from a 0.2% increase to a 0.3% decline. For February, manufacturing output fell 0.2%, the Fed said, while mining output dropped 2.5%. Utility output, which tends to be seasonally driven, jumped 7.3%. Industrial production capacity utilization, which was near six-and-a-half year highs in November, fell for the third straight month, dipping 0.2%. Retail sales declined sharply again in February, falling 0.6%, according to a new report from the Census Bureau. That's just 1.2% higher than they were in the year-ago period. As I noted last month, however, the recent retail sales declines have been led by sharp drop-offs in gasoline station sales. Given the growth in employment and wages recently, the declines may well be a case of consumers not yet spending the money they're saving at the pump, rather than a sign of any sort of economic trouble. Speaking of job growth, on a positive note, new claims for unemployment moved slightly lower since our last newsletter, and are about 10% below year-ago levels. Continuing claims, the data for which lag new claims by a week, also declined and are about 14% below year-ago levels. News from the housing market, meanwhile, was very mixed. On the bright side, new home sales jumped 7.8% in February, according to the Census Bureau. That put them nearly 26% above year-ago levels. Median sale prices were 2.6% above where they were a year ago. Housing starts tumbled 17% in February, however, according to the Census Bureau, putting them about 4% below year-ago levels. But permit issuance for new construction rose 3%, and is about 8% above where it stood a year ago. Oil prices have been up and down. That has moderated the rebound in gas prices. A gallon of regular unleaded on average cost $2.42 as of March 24, up 11 cents from a month earlier, according to AAA. That's more than 30% below where it was a year ago. Since our last newsletter, the S&P 500 returned -0.5%, while the Hot List returned 1.3%. So far in 2015, the portfolio has returned 9.3% vs. -0.1% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 253.5% vs. the S&P's 105.5% gain. Portfolio Update It's been an up and down fortnight for the broader market, but overall the Hot List has faired pretty well, continuing its strong 2015 performance. As of early trading on Thursday, 6 of the portfolio's 10 holdings were in the black since our last newsletter. Leading the way was SodaStream International, which was up nearly 11%. The catalyst for the move wasn't clear. SodaStream had been hit hard recently as earnings results showed declining US demand, so the recent gains may be a bounce-back as investors have realized they overreacted to the demand data. The turnaround also coincided with the firm's announcement of a new product, SodaStream Power, which provides touch-button automatic carbonation. It's unclear whether optimism about the new product was involved in the stock's rise, however. Not far behind SodaStream was Sasol Limited, the South Africa-based energy and chemicals firm. Sasol had been hit hard in recent weeks after the oil price plunge led it to close down significant parts of its operations and change its dividend policy. But it's been on the rebound, with two likely catalysts. First, investors often overreact to bad news, so the recent gains have probably been a natural bounce-back as fears subside a bit. Second, Federal Reserve officials decreased their expectations for how high they will raise interest rates this year. While 15 of the 17 Fed officials said they still expect to raise the benchmark federal funds rate before year-end, most said they expect the rate to be 0.625% by the end of 2015, about half a percentage point lower than they forecast in December, The Wall Street Journal reported. The more-dovish-than-expected comments boosted emerging market equities -- investors have turned to EMs in a quest for yield amid the US's low-rate environment -- and Sasol likely benefited. On the downside, generic pharmaceutical firm Lannett Company lost close to 6%. Lannett tumbled on March 25 amid a broader sell-off in biotech stocks and other recent market leaders. It wasn't clear exactly why leading stocks were hit so hard that day, though Investor's Business Daily cited the "prospect of rising interest rates in the U.S., weakness in the Chinese economy, the recent rebound in crude oil prices and continued problems in Europe" as possible factors. Overall, however, it was another solid couple weeks for the Hot List. In two weeks, we'll rebalance the portfolio, and see if the Hot List is continuing its stellar 2015 performance as we move into the second quarter.		Editor-in-Chief: John Reese Since Inception   Hot List 253.5% S&P 500 105.5% Accuracy 55.4% Beta 1.2 YTD   Hot List 9.3% S&P 500 -0.1% Since Last Issue   Hot List 1.3% S&P 500 -0.5% Avg. Fundamentals   Market Cap (mil) $76,532 PE Ratio 15.0 5 Yr EPS Growth 30.0% Yield 1.0% Rel. Strength 67 Portfolio Sectors Consumer/Non-Cyclical 2 Financial 2 Services 2 Technology 1 Healthcare 1 Basic Materials 1 Capital Goods 1
Guru Spotlight: Peter Lynch During the 13 years he headed Fidelity's Magellan fund, Peter Lynch became known for his ability to hone in on rapidly growing companies whose stocks were ready to pop. But while Lynch did indeed love his "fast-growers", he didn't disregard companies growing much more slowly. Lynch had room for them in his portfolio, too. Because they were lacking in growth, however, "slow-growers" -- stocks of companies growing earnings per share at less than 10% a year over the long term -- had to offer something else for Lynch to take notice. That something else was dividends. For slow-growers, Lynch wanted a high dividend yield, and the model I base on his approach requires dividend yield to be higher than the S&P 500 average and greater than 3 percent. Lynch famously developed the PE-to-growth ratio as a way to value stocks, dividing a stock's P/E ratio by its long-term growth rate. His idea was that when a company was producing strong growth, you should be willing to pay a higher multiple for its earnings. For slow-growing stocks, he tweaked the ratio a bit. Since slow-growers often were large firms that paid out nice dividends, he adjusted the "G" portion of the PEG ratio to include dividend yield. For example, consider a stock that has a P/E ratio of 10, EPS growth of 8 percent, and a 4 percent dividend. To find the PEG, you'd divide the P/E (10) by the total of the growth rate and yield (8+4=12). That gives you 10/12 = 0.83 To Lynch, anything under 1.0 indicated that the stock was indeed a good value. As he did for other stocks, Lynch looked at the inventory/sales ratios of slow-growers, which my Lynch-based model wants to be declining, and the debt/equity ratio, which should be below 80%. (For financial companies, it uses the equity/assets ratio and return on assets rates rather than the debt/equity ratio, since financials typically have to carry a lot of debt as a part of their business.) The final part of the Lynch strategy includes two bonus categories that apply to all types of stocks: free cash flow/price ratio and net cash/price ratio. Lynch loved it when a stock had a free cash flow/price ratio greater than 35 percent, or a net cash/price ratio over 30 percent. (Lynch defined net cash as cash and marketable securities minus long term debt). Failing these tests doesn't hurt a stock, however, since these are only bonus criteria. Lynch's slow-grower approach is a great example of the fact that you don't have to target high-growth dynamos to make money in the market. In fact, because so many investors are drawn to stories of explosive growth, oftentimes you can find some great buys among slower growing firms that are getting overlooked. But remember one word of caution Lynch mentioned in his One Up On Wall Street when it came to buying slow-growers: "If you do plan to buy a stock for its dividend, find out if the company is going to be able to pay during recessions and bad times. If a slow grower omits a dividend you're stuck with a difficult situation: a sluggish enterprise that has little going for it. A company with a 20- or 30-year record of regularly raising the dividend is your best bet." He says to avoid over-indebted high-dividend stocks (which my Lynch model should do), and adds that cyclical stocks are not always reliable dividend payers. With all that in mind, here's a sampling of stocks that pass my Lynch-based model, have dividend yields of at least 3.5%, and have five-year annualized growth rates under 10%. (Note that the PEG ratios listed here are not dividend-yield-adjusted.) Slow-Growing, High-Dividend Lynch-Based Model Picks (as of March 25) News about Validea Hot List Stocks Apple Inc. (AAPL): Apple is preparing a major overhaul of its digital music services that would let it compete directly with streaming services like Spotify, The New York Times reports. Apple is working with engineers and executives from Beats, which it acquired last year, to introduce its own subscription streaming service, the Times said, adding that Apple is also planning an enhanced iTunes Radio service "that may be tailored to listeners in regional markets, and, if Apple gets what it wants, more splashy new albums that will be on iTunes before they are available anywhere else, according to people briefed on the company's plans." According to several music executives, "Apple recently tried but failed to persuade record labels to agree to lower licensing costs that would have let Apple sell subscriptions to its streaming service for $8 a month -- a discount from the $10 that has become standard for services like Spotify, Rhapsody and Rdio," the Times said. The Next Issue In two weeks, we will publish another issue of the Hot List, at which time we will rebalance the portfolio. If you have any questions, please feel free to contact us at hotlist@validea.com.

Current Portfolio Ticker Company Name Industry Guru Score JLL JONES LANG LASALLE INC Real Estate Operations 100 AAPL APPLE INC. Communications Equipment 97 LCI LANNETT COMPANY, INC. Biotechnology & Drugs 96 UVE UNIVERSAL INSURANCE HOLDINGS, INC. Insurance (Prop. & Casualty) 93 SODA SODASTREAM INTERNATIONAL LTD Beverages (Non-Alcoholic) 90 GTLS CHART INDUSTRIES, INC. Misc. Capital Goods 89 SAFM SANDERSON FARMS, INC. Food Processing 86 SSL SASOL LIMITED (ADR) Chemical Manufacturing 79 CACC CREDIT ACCEPTANCE CORP. Consumer Financial Services 66 ZUMZ ZUMIEZ INC. Retail (Apparel) 16 Ticker Market Cap Date Added Start Price Current Price Return JLL $7,314 2/13/2015 $161.15 $163.14 1.2% AAPL $723,667 2/13/2015 $127.08 $124.24 -2.2% LCI $2,357 2/13/2015 $57.78 $65.83 13.9% UVE $871 3/13/2015 $24.58 $24.68 0.4% SODA $400 3/13/2015 $18.29 $19.05 4.2% GTLS $1,053 3/13/2015 $33.50 $34.50 3.0% SAFM $1,808 1/16/2015 $80.96 $78.03 -3.6% SSL $22,735 12/19/2014 $38.95 $35.02 -10.1% CACC $3,977 3/13/2015 $188.06 $193.06 2.7% ZUMZ $1,138 10/24/2014 $32.97 $38.70 17.4%

Detailed Stock Analysis Disclaimer: The analysis is from Validea's selection and interpretation of content from the guru's book or published writings, and is not from nor endorsed by the guru. See Full Disclaimer JLL   |   AAPL   |   LCI   |   UVE   |   SODA   |   GTLS   |   SAFM   |   SSL   |   CACC   |   ZUMZ   |   JONES LANG LASALLE INC Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Jones Lang LaSalle Incorporated (Jones Lang LaSalle), is a financial and professional services firm specializing in real estate. Jones Lang LaSalle has over 200 corporate offices worldwide and operations in more than 1,000 locations in 70 countries. The Company offers integrated real estate and investment management services on a local, regional and global basis to owner, occupier and investor clients. It delivers an array of Real Estate Services (RES) across its three geographic business segments: the Americas, Europe, Middle East and Africa (EMEA), and Asia Pacific. LaSalle Investment Management, a wholly owned member of the Jones Lang LaSalle group that consists of its fourth business segment, is a diversified real estate investment management company. In July 2014, Jones Lang LaSalle Inc acquired CLEO Construction Management (CLEO), a construction project management services firm that specializes in medical facilities. Analysis Guru Score: 100% MARKET CAP: [PASS] The first requirement of the Cornerstone Growth Strategy is that the company has a market capitalization of at least $150 million. This will screen out the companies that are too illiquid for most investors, but still include a small growth company. JLL, with a market cap of $7,314 million, passes this criterion. EARNINGS PER SHARE PERSISTENCE: [PASS] The Cornerstone Growth methodology looks for companies that show persistent earnings growth without regard to magnitude. To fulfill this requirement, a company's earnings must increase each year for a five year period. JLL, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 3.48, 3.70, 4.63, 5.98 and 8.52, passes this test. PRICE/SALES RATIO: [PASS] The Price/Sales ratio should be below 1.5. This value criterion, coupled with the growth criterion, identify growth stocks that are still cheap to buy. JLL's Price/Sales ratio of 1.35, based on trailing 12 month sales, passes this criterion. RELATIVE STRENGTH: [PASS] The final criterion for the Cornerstone Growth Strategy requires that the Relative Strength of the company be among the top 50 of the stocks screened using the previous criterion. This gives you the opportunity to buy the growth stocks you are searching for just as the market is embracing them. JLL, whose relative strength is 87, is in the top 50 and would pass this last criterion.   APPLE INC. Profile Strategy: Growth Investor Based on: Martin Zweig Apple Inc. designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players and sells a variety of related software, services, peripherals, networking solutions and third-party digital content and applications. The Company's products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud and a variety of accessory, service and support offerings. The Company offers a range of mobile communication and media devices, personal computing products and portable digital music players, as well as a variety of related software, services, peripherals, networking solutions and third-party hardware and software products. The Company's primary products include iPhone, iPad, Mac, iPod, iTunes, Mac App Store, iCloud, Operating System Software, Application Software and Other Application Software. Analysis Guru Score: 85% P/E RATIO: [PASS] The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. AAPL's P/E is 16.74, based on trailing 12 month earnings, while the current market PE is 18.00. Therefore, it passes the first test. REVENUE GROWTH IN RELATION TO EPS GROWTH: [PASS] Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. AAPL's revenue growth is 27.30%, while it's earnings growth rate is 28.92%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, AAPL passes this criterion. SALES GROWTH RATE: [PASS] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (29.5%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (12.4%) of the current year. Sales growth for the prior must be greater than the latter. For AAPL this criterion has been met. The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria. CURRENT QUARTER EARNINGS: [PASS] The first of these criteria is that the current EPS be positive. AAPL's EPS ($3.06) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. AAPL's EPS for this quarter last year ($2.07) pass this test. POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: [PASS] The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. AAPL's growth rate of 47.83% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [PASS] Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for AAPL is 14.46%. This should be less than the growth rates for the 3 previous quarters, which are 15.28%, 19.63%, and 20.34%. AAPL passes this test, which means that it has good, reasonably steady earnings. This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: [PASS] If the growth rate of the prior three quarter's earnings, 18.16%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 47.83%, (versus the same quarter one year ago) then the stock passes. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 47.83% must be greater than or equal to the historical growth which is 28.92%. AAPL would therefore pass this test. EARNINGS PERSISTENCE: [FAIL] Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. AAPL, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 2.16, 3.95, 6.31, 5.68, and 6.45, fails this test. LONG-TERM EPS GROWTH: [PASS] One final earnings test required is that the long-term earnings growth rate must be at least 15% per year. AAPL's long-term growth rate of 28.92%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test. TOTAL DEBT/EQUITY RATIO: [PASS] A final criterion is that a company must not have a high level of debt. A high level of total debt, due to high interest expenses, can have a very negative effect on earnings if business moderately turns down. If a company does have a high level, an investor may want to avoid this stock altogether. AAPL's Debt/Equity (29.52%) is not considered high relative to its industry (72.03%) and passes this test. INSIDER TRANSACTIONS: [PASS] A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For AAPL, this criterion has not been met (insider sell transactions are 432, while insiders buying number 87). Despite the fact that insider sells out number insider buys for this company, Zweig considers even one insider buy transaction enough to prevent an insider sell signal, therefore there is not an insider sell signal and the stock passes this criterion.   LANNETT COMPANY, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Lannett Company, Inc. develops, manufactures, packages, markets and distributes solid oral (tablets and capsules), extended release, topical and oral solution finished dosage forms of drugs. The Company also manufactures active pharmaceutical ingredients through its Cody Laboratories, Inc. (Cody Labs) subsidiary. The Company operates pharmaceutical manufacturing plants in Philadelphia, Pennsylvania and Cody, Wyoming. Customers of the Company's pharmaceutical products include generic pharmaceutical distributors, drug wholesalers, chain drug stores, private label distributors, mail-order pharmacies, other pharmaceutical manufacturers, managed care organizations, hospital buying groups, Governmental entities and health maintenance organizations. The Company's products include Levothyroxine Sodium tablets, Digoxin tablets, Butalbital, Cocaine Topical Solution and Morphine Sulfate Oral Solution. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider LCI a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (19.28) relative to the growth rate (47.15%), based on the average of the 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for LCI (0.41) is very favorable. SALES AND P/E RATIO: [NEUTRAL] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. LCI, whose sales are $368.8 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for LCI was 21.54% last year, while for this year it is 16.38%. Since inventory to sales has decreased from last year by -5.16%, LCI passes this test. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for LCI is 47.2%, based on the average of the 4 and 5 year historical eps growth rates, which is considered 'OK'. However, it may be difficult to sustain such a high growth rate. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for LCI (0.28%) to be exceptionally low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for LCI (0.82%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for LCI (5.97%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.   UNIVERSAL INSURANCE HOLDINGS, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Universal Insurance Holdings, Inc. (UIH) is a vertically integrated insurance holding company. The Company's insurance products are offered to its customers through Universal Property & Casualty Insurance Company (UPCIC) and American Platinum Property and Casualty Insurance Company (APPCIC), (collectively the Insurance Entities). Substantially all aspects of insurance underwriting, distribution and claims processing are covered through the Company's subsidiaries. Blue Atlantic Reinsurance Corporation (BARC), a wholly owned subsidiary of UIH, is a reinsurance intermediary broker. The Insurance Entities generate revenues primarily from the collection of premiums. Universal Risk Advisors, Inc. (URA), the Company's managing general agent, generates revenue through policy fee income and other administrative fees from the marketing of the Insurance Entities' insurance products through its distribution network of independent agents. Analysis Guru Score: 77% P/E RATIO: [PASS] The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. UVE's P/E is 11.90, based on trailing 12 month earnings, while the current market PE is 18.00. Therefore, it passes the first test. REVENUE GROWTH IN RELATION TO EPS GROWTH: [FAIL] Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. UVE's revenue growth is 13.62%, while it's earnings growth rate is 35.56%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, UVE fails this criterion. SALES GROWTH RATE: [PASS] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (34.7%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (32.1%) of the current year. Sales growth for the prior must be greater than the latter. For UVE this criterion has been met. The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria. CURRENT QUARTER EARNINGS: [PASS] The first of these criteria is that the current EPS be positive. UVE's EPS ($0.59) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. UVE's EPS for this quarter last year ($0.43) pass this test. POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: [PASS] The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. UVE's growth rate of 37.21% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [FAIL] Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for UVE is 17.78%. This should be less than the growth rates for the 3 previous quarters which are 31.03%, 11.36% and 52.50%. UVE does not pass this test, which means that it does not have good, reasonably steady earnings. This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: [PASS] If the growth rate of the prior three quarter's earnings, 30.97%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 37.21%, (versus the same quarter one year ago) then the stock passes. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 37.21% must be greater than or equal to the historical growth which is 35.56%. UVE would therefore pass this test. EARNINGS PERSISTENCE: [FAIL] Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. UVE, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.92, 0.50, 0.74, 1.56, and 2.08, fails this test. LONG-TERM EPS GROWTH: [PASS] One final earnings test required is that the long-term earnings growth rate must be at least 15% per year. UVE's long-term growth rate of 35.56%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test. INSIDER TRANSACTIONS: [PASS] A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For UVE, this criterion has not been met (insider sell transactions are 144, while insiders buying number 48). Despite the fact that insider sells out number insider buys for this company, Zweig considers even one insider buy transaction enough to prevent an insider sell signal, therefore there is not an insider sell signal and the stock passes this criterion.   SODASTREAM INTERNATIONAL LTD Profile Strategy: P/E/Growth Investor Based on: Peter Lynch SodaStream International Ltd., formerly Soda-Club Holdings Ltd., along with its subsidiaries, is engaged in developing, manufacturing and marketing home beverage carbonation systems and related products. The Company's operational activities are managed by Soda-Club International BV (SCBV), wholly owned subsidiary of Soda-Club Enterprises N.V. (SCNV), whch is the wholly owned subsidiary of the Company. SodaStream manufactures home beverage carbonation systems, which enable consumers to transform ordinary tap water into carbonated soft drinks and sparkling water. The Company's products include soda makers, CO2 refills, flavors and carbonation bottles. In October 2011, the Company acquired CEM Industries S.R.L. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider SODA a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (14.53) relative to the growth rate (46.84%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for SODA (0.31) is very favorable. SALES AND P/E RATIO: [NEUTRAL] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. SODA, whose sales are $572.0 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for SODA was 25.83% last year, while for this year it is 25.01%. Since inventory to sales has decreased from last year by -0.82%, SODA passes this test. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for SODA is 46.8%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered 'OK'. However, it may be difficult to sustain such a high growth rate. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for SODA (11.12%) to be acceptable (equity is three to ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for SODA (-10.24%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for SODA (10.22%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.   CHART INDUSTRIES, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Chart Industries, Inc. is an independent global manufacturer of engineered equipment used in the production, storage and end-use of hydrocarbon and industrial gases. The Company supplies engineered equipment used throughout the global liquid gas supply chain. It operates in three segments: energy and chemicals (E&C), distribution and storage or (D&S), and biomedical. The E&C and D&S segments manufacture products used primarily in energy-related and general industrial applications, such as the separation, liquefaction, distribution and storage of hydrocarbon and industrial gases. Through its BioMedical segment, it supplies cryogenic and other equipment used in the storage and distribution of biological materials and oxygen, used primarily in the medical, biological research and animal breeding industries. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: This methodology would consider GTLS a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (13.01) relative to the growth rate (22.31%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for GTLS (0.58) makes it favorable. SALES AND P/E RATIO: [PASS] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth high enough to support a P/E above this threshold. GTLS, whose sales are $1,193.0 million, needs to have a P/E below 40 to pass this criterion. GTLS's P/E of (13.01) is considered acceptable. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for GTLS was 18.09% last year, while for this year it is 18.08%. Since inventory to sales has not changed appreciably, GTLS passes this test. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for GTLS is 22.3%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for GTLS (23.75%) to be acceptable (equity is three to ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for GTLS (5.33%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for GTLS (-9.39%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.   SANDERSON FARMS, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Sanderson Farms, Inc. is a poultry processing company which is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared chicken items. In addition, the Company is engaged in the processing, marketing and distribution of prepared chicken through its wholly owned subsidiary, Sanderson Farms, Inc. (Foods Division). It produces a range of processed chicken products and prepared chicken items. It sells ice pack, chill pack, bulk pack and frozen chicken, in whole, cut-up and boneless form, under the Sanderson Farms brand name to retailers, distributors, and casual dining operators in the south-eastern, south-western, north-eastern and western United States and to customers who resell frozen chicken into export markets. During the fiscal year ended October 31, 2013 (fiscal 2013), it processed 452 million chickens, or over 3.0 billion dressed pounds. Analysis Guru Score: 100% PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical (non-Smokestack) companies with Price/Sales ratios below 0.75 are tremendous values and should be sought. SAFM's P/S of 0.63 based on trailing 12 month sales, is below 0.75 which is considered quite attractive. It passes this methodology's P/S ratio test with flying colors. TOTAL DEBT/EQUITY RATIO: [PASS] Less debt equals less risk according to this methodology. SAFM's Debt/Equity of 2.08% is acceptable, thus passing the test. PRICE/RESEARCH RATIO: [PASS] This methodology considers companies in the Technology and Medical sectors to be attractive if they have low Price/Research ratios. SAFM is neither a Technology nor Medical company. Therefore the Price/Research ratio is not available and, hence, not much emphasis should be placed on this particular variable. PRELIMINARY GRADE: Some Interest in SAFM At this Point Is SAFM a "Super Stock"? YES PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical(non-Smokestack) companies with Price/Sales ratios below .75 are tremendous values and should be sought.SAFM's P/S ratio of 0.63 is below .75 which is considered extremely attractive. It passes this methodology's P/S ratio test with flying colors. LONG-TERM EPS GROWTH RATE: [PASS] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. SAFM's inflation adjusted EPS growth rate of 16.60% passes the test. FREE CASH PER SHARE: [PASS] This methodology looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses. This is based on the premise that companies without cash will soon be out of business. SAFM's free cash per share of 4.65 passes this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [PASS] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. SAFM, whose three year net profit margin averages 5.37%, passes this evaluation.   SASOL LIMITED (ADR) Profile Strategy: Value Investor Based on: Benjamin Graham Sasol Limited (Sasol) is an integrated energy and chemicals company. Sasol mines coal in South Africa and produce natural gas and condensate in Mozambique, oil in Gabon and shale gas in Canada. In South Africa it refines imported crude oil and retail liquid fuels. It has chemical manufacturing and marketing operations in South Africa, Europe, the Middle East, Asia and the Americas. It operates in four segments: South African energy cluster, International Energy Cluster, Chemical Cluster and Other businesses. Effective March 31, 2013, Sasol Olefins & Surfactants sold G.D. Portbury Ltd. On 16 August 2013, Sasol Investment Company (Pty) Limited, a wholly owned subsidiary of Sasol, entered into a definitive sale and share purchase agreement pursuant to which Main Street 1095 (Pty) Limited, completed the acquisition of 100% of the interest of SPI International (Pty) Limited (SPII). SPII is the indirect owner of a 50% interest in the Iranian joint venture, Arya Sasol Polymer Company. Analysis Guru Score: 100% SECTOR: [PASS] SSL is neither a technology nor financial Company, and therefore this methodology is applicable. SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than $340 million. SSL's sales of $17,028.8 million, based on trailing 12 month sales, pass this test. CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. SSL's current ratio of 2.85 passes the test. LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for SSL is $2,701.0 million, while the net current assets are $5,505.4 million. SSL passes this test. LONG-TERM EPS GROWTH: [PASS] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. SSL's EPS growth over that period of 215.4% passes the EPS growth test. P/E RATIO: [PASS] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. SSL's P/E of 10.00 (using the 3 year PE) passes this test. PRICE/BOOK RATIO: [PASS] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. SSL's Price/Book ratio is 1.47, while the P/E is 10.00. SSL passes the Price/Book test.   CREDIT ACCEPTANCE CORP. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Credit Acceptance Corporation is a provider of financing programs to automobile dealers that enable them to sell vehicles to consumers, regardless of their credit history. The Company's financing programs are offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated by these same customers; and from sales to customers responding to advertisements. Credit Acceptance has two programs: the Portfolio Program and the Purchase Program. Under the Portfolio Program, it advances money to Dealer-Partners (referred to as a Dealer Loan) in exchange for the right to service the underlying Consumer Loans. Under the Purchase Program, Credit Acceptance buys the Consumer Loans from the Dealer-Partners (referred to as a Purchased Loan) and keeps all amounts collected from the consumer. Dealer Loans and Purchased Loans are collectively referred to as Loans. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: This methodology would consider CACC a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (16.04) relative to the growth rate (20.05%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for CACC (0.80) makes it favorable. SALES AND P/E RATIO: [NEUTRAL] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. CACC, whose sales are $723.5 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for CACC is 20.0%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good. TOTAL DEBT/EQUITY RATIO: [NEUTRAL] CACC is a financial company so debt to equity rules are not applied to determine the company's financial soundness. EQUITY/ASSETS RATIO: [PASS] This methodology uses the Equity/Assets Ratio as a way to determine a financial intermediary's health, as it is a better measure than the Debt/Equity Ratio. CACC's Equity/Assets ratio (25.00%) is extremely healthy and above the minimum 5% this methodology looks for, thus passing the criterion. RETURN ON ASSETS: [PASS] This methodology uses Return on Assets as a way to measure a financial intermediary's profitability. CACC's ROA (10.20%) is above the minimum 1% that this methodology looks for, thus passing the criterion. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for CACC (8.37%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for CACC (-43.07%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.   ZUMIEZ INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Zumiez Inc. is a multi-channel specialty retailer of action sports related apparel, footwear, accessories and hardgoods, focusing on skateboarding, snowboarding, surfing, motocross and bicycle motocross for young men and women. The Company operates under the names Zumiez and Blue Tomato. The Company operates ecommerce Websites at www.zumiez.com and www.blue-tomato.com. Its apparel offerings include tops, bottoms, outerwear and accessories, such as caps, bags and backpacks, belts, jewelry and sunglasses. Zumiez's footwear offerings primarily consist of action sports related athletic shoes and sandals. Its equipment offerings, or hardgoods, include skateboards, snowboards and ancillary gear, such as boots and bindings. The Company sources its private label merchandise from primarily foreign manufacturers around the world. Analysis Guru Score: 87% DETERMINE THE CLASSIFICATION: This methodology would consider ZUMZ a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (26.28) relative to the growth rate (20.58%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for ZUMZ (1.28) is on the high side, but is acceptable if all the other tests are met. SALES AND P/E RATIO: [NEUTRAL] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. ZUMZ, whose sales are $811.6 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for ZUMZ is 20.6%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for ZUMZ (0.00%) to be wonderfully low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for ZUMZ (4.78%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for ZUMZ (13.32%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.   Watch List The Watch List contains the highest scoring stocks according to our guru consensus system that are not currently in the Hot List portfolio. We provide this list both for informational purposes and for investors who are not comfortable with a portfolio of ten stocks. Ticker Company Name Industry Guru Score PLUS EPLUS INC. Software & Programming 71 UIHC UNITED INSURANCE HOLDINGS CORP.(NDA) Insurance (Prop. & Casualty) 70 PPC PILGRIM'S PRIDE CORPORATION Food Processing 68 BRLI BIO-REFERENCE LABORATORIES INC Healthcare Facilities 64 PII POLARIS INDUSTRIES INC. Recreational Products 56 LL LUMBER LIQUIDATORS HOLDINGS INC Retail (Home Improvement) 55 FL FOOT LOCKER, INC. Retail (Apparel) 54 MNST MONSTER BEVERAGE CORP Beverages (Non-Alcoholic) 54 NSM NATIONSTAR MORTGAGE HOLDINGS INC Consumer Financial Services 53 MA MASTERCARD INC Consumer Financial Services 52

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The names of individuals (i.e., the 'gurus') appearing in this report are for identification purposes of his methodology only, as derived by Validea.com from published sources, and are not intended to suggest or imply any affiliation with or endorsement or even agreement with this report personally by such gurus, or any knowledge or approval by such persons of the content of this report. All trademarks, service marks and tradenames appearing in this report are the property of their respective owners, and are likewise used for identification purposes only. Validea is not registered as a securities broker-dealer or investment advisor either with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. Validea is not responsible for trades executed by users of this site based on the information included herein. The information presented on this website does not represent a recommendation to buy or sell stocks or any financial instrument nor is it intended as an endorsement of any security or investment. The information on this website is generic by nature and is not personalized to the specific situation of any individual. The user therefore bears complete responsibility for their own investment research and should seek the advice of a qualified investment professional prior to making any investment decisions. Performance results are based on model portfolios and do not reflect actual trading. Actual performance will vary based on a variety of factors, including market conditions and trading costs. Past performance is not necessarily indicative of future results. Individual stocks mentioned throughout this web site may be holdings in the managed portfolios of Validea Capital Management, a separate asset management firm founded by Validea.com founder John Reese. Validea Capital Management, which is a separate legal entity and an SEC registered investment advisory firm, uses, in part, the strategies on the web site to select stocks for its clients.