Executive Summary  |   Portfolio  |   Guru Analysis  |   Watch List

Executive Summary	March 1, 2013

The Economy After months of faring better than expected, the economy appears to have slowed, or perhaps plateaued, in recent weeks, and policymakers' continuing failure to act on the country's budget issues is threatening to exacerbate the slowdown. Signs of the economy plateauing have come from several sources since our last newsletter. The Federal Reserve, for example, reported that industrial production dipped 0.1% in January, thanks in large part to a 0.4% decrease in manufacturing production. On the bright side, however, the Fed revised its estimate of fourth-quarter industrial production growth much higher, from 0.2% to 1.9%. Existing home sales, meanwhile, crept up 0.4% in January, according to the National Association of Realtors. The slight improvement meant that sales are now nearly 12% above their year-ago level. Pending home sales, a forward-looking indicator, made a nice jump, rising 4.5%, according to the Realtor group. They are now more than 10% above year-ago levels. January's home-building data was mixed. Permit issuance for new construction rose about 2% during the month, while housing starts dipped 8.5%. Both figures are still far ahead of their year-ago levels, with permit issuance up more than 41%, and housing starts up about 24%. Good news came on the home prices front. Prices in 20 major U.S. cities rose an average of 0.9% in December, according to the S&P/Case-Shiller Home Price Indices. For the fourth quarter, prices were up a full 2% versus the third quarter. The data also showed that for the full 2012 year, prices jumped 7.3%. Despite the nice gains, prices are still well below their housing bubble peaks; both the 10-and 20-city composite indices are about 30% below those 2006 levels. Continuing claims for unemployment have stayed about the same over the past two weeks. The most recent week's numbers were, however, about 8% below the year-ago level, a nice improvement over the previous week, when claims were almost exactly equal to the year-ago level. One area of concern: gas prices. The national average for a gallon of regular unleaded gas has jumped from $3.35 a month ago to $3.79, as of Feb. 27. Rising gas prices, of course, are a drag on the consumer, whose spending makes up about two-thirds of U.S. economic activity. It remains to be seen whether the recent spike is short-term, or a sign of things to come. The issue certainly bears watching. As for the U.S. budget issues, legisRobotors are continuing to steer the country ever closer to the sequestration that few seem to want, but even fewer seem willing to do anything about. With all the rhetoric, it's unclear just how much impact the budget cuts involved in the sequestration could have. If it does occur, there would certainly be some short-term impacts. But with Corporate America and the U.S. consumer having improved their financial situations dramatically in recent years, and the housing market continuing to improve, there should be several positive factors that will hopefully limit the budget cuts' impact on the economy. Since our last newsletter, the S&P 500 has returned -0.4%, while the Hot List has returned -0.2%. So far in 2013, the portfolio has returned 6.9% vs. 6.2% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 190.0% vs. the S&P's 51.4% gain.		Editor-in-Chief: John Reese Since Inception   Hot List 190.0% S&P 500 51.4% Accuracy 56.1% Beta 1.2 YTD   Hot List 6.9% S&P 500 6.2% Since Last Issue   Hot List -0.2% S&P 500 -0.4% Avg. Fundamentals   Market Cap (mil) $12,546 PE Ratio 9.3 5 Yr EPS Growth 22.1% Yield 2.0% Rel. Strength 70 Portfolio Sectors Services 3 Financial 2 Healthcare 1 Conglomerates 1 Consumer Cyclical 1 Energy 1 Technology 1
Advertisement Validea Capital Management - Private Portfolio Management Based on Strategies of Legends Are you looking for an alternative to your underperforming mutual funds or financial advisor? Click here to download Validea Capital's investment kit and learn more about the firm's guru-based portfolios. Get More Information on Validea Capital! ** Validea Capital Management is a separate investment advisory firm managed by Validea.com founder John Reese. Thre information above in not intended as personal investment advice and should not be interpreted as such. Portfolio Update It's continuing to be a solid year for the Hot List, which has been running slightly ahead of the broader market for much of the past couple weeks. Since our last newsletter, the portfolio has been helped by strong earnings announcements from both The TJX Companies and Questcor Pharmaceuticals. Questcor has had a particularly good fortnight, gaining about 20% since our last rebalancing two weeks ago (through Feb. 27). Questcor is a great example of a very unloved, very feared stock that the Hot List was able to find because of its quantitative nature. While fears about insurance reimbursement changes had been keeping many investors away from the stock, my models were focused on the firm's financials and fundamentals, which were quite attractive, and the pick has paid off quite nicely.(See the "News" section below for more on its earnings announcement.) The same can be said of USANA Health Sciences, the portfolio's top current performer. Investors in recent months have begun to see the value in the stock, which had been a victim of guilt by association because of its similarities to Herbalife (which has taken some big hits over the past year). USANA is up about 30% since joining the portfolio back in December. As we move deeper into 2013, the Hot List will continue to look for fundamentally sound, attractively priced stocks like these, and over the long haul that should help the portfolio continue its strong performance. News about Validea Hot List Stocks The TJX Companies (TJX): TJX said on Feb. 27 that fiscal fourth-quarter earnings came in at $604.8 million, or $0.82 per share, up more than 30% from the year-ago period. Sales were up 15% to $7.7 billion. Both figures beat analysts' expectations. TJX also said it will buy back $1.3 billion to $1.4 billion of its stock this fiscal year, which began on Feb. 2. And it said it will raise its dividend payout by 26%. Shares rose about 2.5% the day of the announcement. Questcor Pharmaceuticals (QCOR): Questcor announced big jumps in earnings and revenues for the fourth quarter, beating analysts' expectations. Net income was $61.9 million, or $1.03 per share, more than doubling the year-ago period's per-share earnings of 48 cents. Revenue more than doubled to $160.5 million from $75.5 million. The results were well ahead of analysts' projections of 93 cents in net income per share and $142.2 million in revenue. Questcor also announced that it would be raising its dividend from $0.20 per share to $0.25. The gains in revenue and earnings were largely due to an 88% increase in shipments of the firm's main product, H.P. Acthar gel. Since our last newsletter, the stock is up about 20%. Guru Spotlight: Joseph Piotroski If you haven't heard of Joseph Piotroski, you're not alone. He's probably the least well-known of the investment "gurus" who inspired my strategies. Actually, he's not even a professional investor, but instead an accountant and college professor. In 2000, however, Piotroski showed that you don't need to be a smooth-talking Wall Street hotshot to make it big in the market. While teaching at the University of Chicago, he authored a research paper that showed how assessing stocks with simple accounting-based methods could produce excellent returns over the long haul. No fancy formulas, no insider knowledge -- just a straightforward assessment of a company's balance sheet. His study turned quite a few heads on Wall Street. It focused on companies that had high book/market ratios -- i.e. the type of unpopular stocks whose book values (total assets minus total liabilities) were high compared to the value investors ascribed to them (their share price multiplied by their number of shares). These are stocks that have very low expectations. Quite often, such firms have low book/market ratios because they are in financial distress, and investors wisely stay away from them. On certain occasions, however, high book/market firms may be good companies that are being overlooked by investors for one reason or another. These firms can be great investment opportunities, because their stock prices will likely jump once Wall Street realizes it's been shunning a winner. Through his research, Piotroski developed a methodology to separate the solid but overlooked high book/market firms from high book/market ratio firms that were in financial distress. He found that this method, which included a number of balance-sheet-based criteria, increased the return of a high book/market investor's portfolio by at least 7.5 percentage points annually. In addition, he found that buying the high book/market firms that passed his strategy and shorting those that didn't would have produced an impressive 23% average annual return from 1976 and 1996. Since I started tracking it in late February 2004, a 10-stock portfolio picked using my Piotroski-based model has outperformed the market, returning 48.5% (4.5% annualized) vs. 32.2% (3.1% annualized) for the S&P 500 (through Feb. 27). But it's not for the faint of heart, as it can be very volatile -- in fact, its beta of 1.36 is the highest of any of my 10-stock portfolios. It fared very well in 2004, 2005, and 2006, before struggling in 2007, 2008, and 2009. Then it roared back in 2010, gaining 55.9% -- more than four times the S&P 500's 12.8% gain. Over the past couple years, it has lagged the market. The big swings are likely a result of the strategy keying on smaller, beaten-down stocks at a time when investors have been prone to bouts of fear -- primarily about macroeconomic issues. When those macro issues spark anxiety, investors dump smaller unloved stocks; then, when the fears subside, they dive back into the smaller value plays. So while you can make some nice profits over the long haul following a strategy like this, you have to have discipline -- or else you'll end up buying high, like after 2010, and selling low, like after 2011. Let's take a look at how Piotroski's approach, and the model I base on it, work. Diving into The Balance Sheet Piotroski wasn't the first to study high book/market stocks. But his research took things a step further than many past studies. He noted that the majority of high book/market stocks ended up being losers, and that the success of high book/market portfolios was usually dependent on the big gains of a small number of winners. Much as low price/earnings ratio investors like John Neff used a variety of tests to make sure low P/E stocks weren't rightfully being overlooked because of poor financials, Piotroski sought to separate the high book/market winners from the high book/market losers. The first step in this approach is, of course, to find high book/market ratio stocks. In his study, Piotroski focused on the stocks whose book/market ratios were in the top 20 percent of the market, so that's the figure I use. That's the easy part. The harder part is determining whether investors are avoiding a low-B/M stock because it is in financial trouble, or whether the company is a solid one that is simply being overlooked. The Piotroski-based model looks at a variety of factors to determine this, including return on assets and cash flow from operations, both of which should be positive. Piotroski also thought that good companies had cash from operations that was greater than net income. Such companies are making money because of their business -- not because of accounting changes, lawsuits, or other one-time gains. Several of Piotroski's other financial criteria don't necessarily look for fundamental excellence, but instead for improvement. This makes a lot of sense; a company whose return on assets had declined from 10 percent to 1 percent and whose cash flow from operations had dwindled from $10 million to $10,000 would pass the above ROA and cash flow tests, for example, but it certainly wouldn't be the type of strong performer Piotroski was targeting. Looking at how a company's fundamentals had been changing allowed him to not only get an idea of the firm's financial position, but also of whether that position was improving or declining. Among the other "change" criteria Piotroski examined were the long-term debt/assets ratio, which he wanted to be steady or declining; the current ratio (current assets/current liabilities), which he wanted to be steady or increasing; gross margin, which should be steady or rising; and asset turnover, which measures productivity by comparing how much sales a company is making in relation to the amount of assets it owns (That should be steady or increasing). As you can see, the Piotroski-based approach is a stringent one. Here are the stocks currently in its 10-stock portfolio. Keep in mind that some of these companies could see changes in their ratings soon because they haven't yet reported full-year 2012 results. Monster Worldwide (MWW) Lukoil (LUKOY) Harmony Gold Mining Co. (HMY) Resolute Forest Products (RFP) Ecopetrol S.A. (EC) Norwegian Cruise Line Holdings (NCLH) Iamgold Corporation (IAG) Diana Containerships (DCIX) Digitial River Inc. (DRIV) Starz (STRZA) Think Small -- And Boring One final note on the Piotroski-based strategy: It usually ends up focusing on small stocks. Piotroski found that smaller high book/market firms were more likely to produce high returns than their larger counterparts, because small stocks are more likely to fly under the radar of analysts and investors. That means you are more likely to uncover winners using fundamental analysis of these smaller, less-followed stocks. For the same reason, the stocks that my Piotroski-based model usually chooses tend to be from boring industries or make boring products, though it will go into more "interesting" areas when valuations are right. But while they're not the flashiest firms, they're quite often the type of stocks that can pay excellent returns over the long haul. 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 USNA USANA HEALTH SCIENCES, INC. Conglomerates 100 LUKOY LUKOIL (ADR) Oil & Gas - Integrated 93 TJX THE TJX COMPANIES, INC. Retail (Apparel) 83 WDC WESTERN DIGITAL CORP. Computer Storage Devices 71 LEA LEAR CORPORATION Auto & Truck Parts 64 WRLD WORLD ACCEPTANCE CORP. Consumer Financial Services 59 MAIN MAIN STREET CAPITAL CORPORATION Misc. Financial Services 45 QCOR QUESTCOR PHARMACEUTICALS, INC. Biotechnology & Drugs 41 ROST ROSS STORES, INC. Retail (Apparel) 35 STRZA STARZ Broadcasting & Cable TV 28 Ticker Market Cap Date Added Start Price Current Price Return USNA $639 12/21/2012 $33.83 $44.29 30.9% LUKOY $56,519 2/15/2013 $66.54 $64.50 -3.1% TJX $32,794 10/26/2012 $40.73 $44.97 10.4% WDC $11,350 2/15/2013 $48.59 $47.16 -2.9% LEA $5,113 2/15/2013 $55.41 $53.42 -3.6% WRLD $971 2/15/2013 $78.66 $78.70 0.1% MAIN $1,011 11/23/2012 $30.13 $31.93 6.0% QCOR $1,909 2/15/2013 $28.65 $32.60 13.8% ROST $12,898 10/26/2012 $60.92 $58.00 -4.8% STRZA $2,258 2/15/2013 $18.74 $18.56 -1.0%

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 USNA   |   LUKOY   |   TJX   |   WDC   |   LEA   |   WRLD   |   MAIN   |   QCOR   |   ROST   |   STRZA   |   USANA HEALTH SCIENCES, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy USANA Health Sciences, Inc. develops and manufactures science-based nutritional and personal care products. The Company has operations in 15 markets worldwide, where it distributes and sells its products by way of direct selling. The Company reports operations in two geographic regions: North America and Asia Pacific, which is further divided into three sub-regions; Southeast Asia/Pacific, Greater China, and North Asia. North America includes the United States, Canada, Mexico, and direct sales from the United States to the United Kingdom and the Netherlands. Southeast Asia/Pacific includes Australia, New Zealand, Singapore, Malaysia, and the Philippines; Greater China includes Hong Kong, Taiwan and China; and North Asia includes Japan and South Korea. The Company's customer base consists of two types of customers: Associates and Preferred Customers. As of December 31, 2011, the Company had 222,000 active Associates and 64,000 active Preferred Customers worldwide. 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. USNA, with a market cap of $639 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. USNA, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.85, 2.17, 2.86, 3.26 and 4.45, 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. USNA's Price/Sales ratio of 0.98, 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. USNA, whose relative strength is 74, is in the top 50 and would pass this last criterion.   LUKOIL (ADR) Profile Strategy: P/E/Growth Investor Based on: Peter Lynch NK Lukoil OAO (Neftyanaya Kompaniya LUKOIL OAO or NK LUKOIL OJSC) is a Russia-based integrated oil and gas company. The Company is engaged in the business of oil exploration, production, refining, marketing and distribution. It is an owner of refineries, gas processing, petrochemical plants and gas stations network located in Russia, Eastern and Western Europe. The Company's petroleum products are sold in the Russian Federation, the Commonwealth of Independent States (CIS) countries, Eastern and Western Europe, Asia and the United States. NK Lukoil OAO operates through numerous subsidiaries and affiliated companies. As of December 31, 2011, the Company's major shareholder was ING Bank (Eurasia) ZAO with a stake of 75.93%. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: According to this methodology, LUKOY is a "Slow Grower", based on its single digit earnings growth of 5.66%, based on the average of the 3, 4 and 5 year historical eps growth rates. SALES: [PASS] LUKOY would fall into the "Dividend Payers" category according to this methodology. The first requirement of a Slow Grower is that its sales exceed one billion. LUKOY's sales are $137,701 million. It passes the test. 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 LUKOY was 5.94% last year, while for this year it is 5.64%. Since inventory to sales has decreased from last year by -0.30%, LUKOY passes this test. YIELD COMPARED TO THE S&P 500: [PASS] This methodology also maintains that the Yield of a "Slow Grower" should be high, which includes being higher than the S&P average (currently 2.43%), and at least 3%. This yield is required because dividends are the main reason for investing in "Slow Growers". The yield for LUKOY is 5.64% so it passes this test. YIELD ADJUSTED P/E/GROWTH (PEG) RATIO: [PASS] This methodology would consider the Yield-adjusted P/E/G ratio for LUKOY of 0.46, based on the average of the 3, 4 and 5 year historical eps growth rates, to be excellent. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for LUKOY (9.03%) 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 LUKOY (10.71%) 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 LUKOY (-5.52%) 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.   THE TJX COMPANIES, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch The TJX Companies, Inc. (TJX) is the off-price apparel and home fashions retailer in the United States and worldwide. As of January 28, 2012, the Company operated in four business segments. It has two segments in the United States, Marmaxx (T.J. Maxx and Marshalls) and HomeGoods; one in Canada, TJX Canada (Winners, Marshalls and HomeSense) and one in Europe, TJX Europe (T.K. Maxx and HomeSense). As a result of the consolidation of the A.J. Wright chain, all A.J. Wright stores ceased operations by the end of February 2011. It completed the consolidation of A.J. Wright, converting 90 of the A.J. Wright stores to T.J. Maxx, Marshalls or HomeGoods banners and closed the remaining 72 stores, two distribution centers and home office. In December 2012, the Company acquired Sierra Trading Post, an off-price Internet retailer. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: This methodology would consider TJX a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (17.61) relative to the growth rate (23.77%), 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 TJX (0.74) 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. TJX, whose sales are $25,878.4 million, needs to have a P/E below 40 to pass this criterion. TJX's P/E of (17.61) is considered acceptable. 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 TJX is 23.8%, 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 TJX (21.13%) 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 TJX (5.18%) 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 TJX (3.84%) 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.   WESTERN DIGITAL CORP. Profile Strategy: Value Investor Based on: Benjamin Graham Western Digital Corporation (WD) is a provider of solutions for the collection, storage, management, protection and use of digital content, including audio and video. Its principal products are hard drives, which are devices that use one or more rotating magnetic disks (magnetic media) to store and allow access to data. Its hard drives are used in desktop and notebook computers, corporate and cloud computing data centers, home entertainment equipment and stand-alone consumer storage devices. In addition to hard drives, its other products include solid-state drives and home entertainment and networking products. Effective March 8, 2012, it acquired Viviti Technologies Ltd. In May 2012, the Company completed the divestiture of certain 3.5-inch hard drive assets to Toshiba Corporation. As part of its deal with Toshiba, WD also completed its purchase of Toshiba Storage Device (Thailand) Company Limited (TSDT), which manufactured hard drives. Analysis Guru Score: 86% SECTOR: [FAIL] WDC is in the Technology sector, which is one sector that this methodology avoids. Technology and financial stocks were considered too risky to invest in when this methodology was published. At that time they were not the driving force of the market as they are today. Although this methodology would avoid WDC, we will provide the rest of the analysis, as we feel times have changed. SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than $340 million. WDC's sales of $15,648.0 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. WDC's current ratio of 2.16 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 WDC is $1,840.0 million, while the net current assets are $3,849.0 million. WDC 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. WDC's EPS growth over that period of 738.7% 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. WDC's P/E of 9.10 (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. WDC's Price/Book ratio is 1.38, while the P/E is 9.10. WDC passes the Price/Book test.   LEAR CORPORATION Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Lear Corporation is a tier 1 supplier to the global automotive industry. The Company supplies its products to automotive manufacturers with automotive seat systems and related components, as well as electrical distribution systems and related components. The Company has two segments: seating and electrical power management systems (EPMS). The seating segment includes seat systems and related components, such as seat frames, recliner mechanisms, seat tracks, seat trim covers, headrests and seat foam. The EPMS segment includes electrical distribution systems for traditional powertrain vehicles, as well as for hybrid and electric vehicles. As of December 31, 2011, it had 20 joint ventures located throughout Asia, as well as five in North America, two in Europe and Africa and one with operations in all three regions. 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. LEA, with a market cap of $5,113 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. LEA, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were -4.47, -2.66, 4.05, 5.08 and 12.85, 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. LEA's Price/Sales ratio of 0.35, 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. LEA, whose relative strength is 73, is in the top 50 and would pass this last criterion.   WORLD ACCEPTANCE CORP. Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool World Acceptance Corporation operates a small-loan consumer finance business in 12 states and Mexico. The Company is engaged in the small-loan consumer finance business, offering short-term small loans, medium-term larger loans, related credit insurance and ancillary products and services to individuals. As of March 31, 2012, the Company offered standardized installment loans through 1,137 offices in South Carolina, Georgia, Texas, Oklahoma, Louisiana, Tennessee, Illinois, Missouri, New Mexico, Kentucky, Alabama, Wisconsin, and Mexico. The Company serves individuals with limited access to consumer credit from banks, credit unions, other consumer finance businesses and credit card lenders. In the United States offices, the Company also offers income tax return preparation services to its customers and others. Analysis Guru Score: 76% PROFIT MARGIN: [PASS] This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. WRLD's profit margin of 18.19% passes this test. RELATIVE STRENGTH: [FAIL] The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. WRLD, with a relative strength of 77, fails this test. COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [FAIL] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for WRLD (21.54% for EPS, and 10.07% for Sales) are not good enough to pass. INSIDER HOLDINGS: [PASS] WRLD's insiders should own at least 10% (they own 24.66% ) of the company's outstanding shares which is the minimum required. A high percentage typically indicates that the insiders are confident that the company will do well. CASH FLOW FROM OPERATIONS: [PASS] A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. WRLD's free cash flow of $13.84 per share passes this test. PROFIT MARGIN CONSISTENCY: [PASS] WRLD's profit margin has been consistent or even increasing over the past three years (Current year: 18.64%, Last year: 18.57%, Two years ago: 16.72%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise. R&D AS A PERCENTAGE OF SALES: [NEUTRAL] This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in WRLD's case. CASH AND CASH EQUIVALENTS: [FAIL] WRLD's level of cash and cash equivalents per sales, 1.89 %, does not pass this criteria of roughly 20%(a number we determined to be appropriate based on various examples). WRLD will have a more difficult time paying off debt (if it has any) or acquiring other companies than a company that passes this criteria. ACCOUNT RECEIVABLE TO SALES: [PASS] This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for WRLD was 121.63% last year, while for this year it is 122.29%. Although the AR to sales is rising, it is below the max 30% that is allowed. The investor can still consider the stock if all other criteria appear very attractive. "THE FOOL RATIO" (P/E TO GROWTH): [PASS] The "Fool Ratio" is an extremely important aspect of this analysis. If the company has attractive fundamentals and its Fool Ratio is 0.5 or less (WRLD's is 0.46), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. WRLD passes this test. The following criteria for WRLD are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] WRLD has not been significantly increasing the number of shares outstanding within recent years which is a good sign. WRLD currently has 13.0 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock. SALES: [FAIL] Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. WRLD's sales of $570.8 million based on trailing 12 month sales, are too high and would therefore fail the test. It is companies with $500 million or less in sales that are most likely to double or triple in size in the next few years. DAILY DOLLAR VOLUME: [PASS] WRLD passes the Daily Dollar Volume (DDV of $9.9 million) test. It is required that this number be less than $25 million because these are the stocks that remain relatively undiscovered by institutions. "You'll be scoring touchdowns against the big guys on your turf." PRICE: [PASS] This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. WRLD with a price of $78.70 passes the price test, even though it doesn't fall in the preferred range. The price should be above $7 in order to eliminate penny stocks and below $20 since most stocks in this price range are undiscovered by the institutions. INCOME TAX PERCENTAGE: [PASS] WRLD's income tax paid expressed as a percentage of pretax income this year was (37.02%) and last year (36.30%) are greater than 20% which is an acceptable level. If the tax rate is below 20% this could mean that the earnings that were reported were unrealistically inflated due to the lower level of income tax paid. This is a concern.   MAIN STREET CAPITAL CORPORATION Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Main Street Capital Corporation is a United States-based principal investment firm that primarily provides long-term debt and equity capital to lower middle market companies. The Firm targets investments associated with ownership transitions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives for later stage businesses. In addition to providing companies with necessary capital, Main Street provides management with expertise in corporate finance, operations and growth strategy implementation. Analysis Guru Score: 76% PROFIT MARGIN: [PASS] This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. MAIN's profit margin of 120.82% passes this test. RELATIVE STRENGTH: [FAIL] The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. MAIN, with a relative strength of 83, fails this test. COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [PASS] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for MAIN (62.90% for EPS, and 34.29% for Sales) are good enough to pass. INSIDER HOLDINGS: [PASS] MAIN's insiders should own at least 10% (they own 11.48% ) of the company's outstanding shares which is the minimum required. A high percentage typically indicates that the insiders are confident that the company will do well. CASH FLOW FROM OPERATIONS: [PASS] A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. MAIN's free cash flow of $1.34 per share passes this test. PROFIT MARGIN CONSISTENCY: [PASS] MAIN's profit margin has been consistent or even increasing over the past three years (Current year: 95.06%, Last year: 92.71%, Two years ago: 74.75%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise. R&D AS A PERCENTAGE OF SALES: [NEUTRAL] This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in MAIN's case. CASH AND CASH EQUIVALENTS: [PASS] MAIN's level of cash $42.7 million passes this criteria. If a company is a cash generator, like MAIN, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash. "THE FOOL RATIO" (P/E TO GROWTH): [PASS] The "Fool Ratio" is an extremely important aspect of this analysis. If the company has attractive fundamentals and its Fool Ratio is 0.5 or less (MAIN's is 0.23), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. MAIN passes this test. The following criteria for MAIN are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] MAIN has not been significantly increasing the number of shares outstanding within recent years which is a good sign. MAIN currently has 32.0 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock. SALES: [PASS] Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. MAIN's sales of $84.0 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". MAIN passes the sales test. DAILY DOLLAR VOLUME: [PASS] MAIN passes the Daily Dollar Volume (DDV of $10.3 million) test. It is required that this number be less than $25 million because these are the stocks that remain relatively undiscovered by institutions. "You'll be scoring touchdowns against the big guys on your turf." PRICE: [PASS] This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. MAIN with a price of $31.93 passes the price test, even though it doesn't fall in the preferred range. The price should be above $7 in order to eliminate penny stocks and below $20 since most stocks in this price range are undiscovered by the institutions. INCOME TAX PERCENTAGE: [FAIL] MAIN's income tax paid expressed as a percentage of pretax income either this year (8.94%) or last year (2.61%) is below 20% which is cause for concern. Because the tax rate is below 20% this could mean that the earnings that were reported are unrealistically inflated due to the lower level of income tax paid. However, we have utilized a sophisticated formula so that the appropriate figures reflect a 'normal' tax rate (35%).   QUESTCOR PHARMACEUTICALS, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Questcor Pharmaceuticals, Inc. (Questcor) is a biopharmaceutical company. The Company's primary product is H.P. Acthar Gel (repository corticotropin injection) (Acthar), an injectable drug that is approved by the United States Food and Drug Administration, for the treatment of 19 indications. As of December 31, 2011, H.P. Acthar Gel was approved for the treatment of acute exacerbations of multiple sclerosis in adults, and as monotherapy for the treatment of infantile spasms in infants and children under two years of age. It is also indicated to induce a diuresis or a remission of proteinuria in the nephrotic syndrome without uremia of the idiopathic type or that due to lupus erythematosus, as well as indicated for the treatment of a number of other diseases and disorders. Its other product is Doral (quazepam), which is indicated for the treatment of insomnia. 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. QCOR's P/E is 12.49, 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. QCOR's revenue growth is 38.08%, while it's earnings growth rate is 29.44%, based on the average of the 3 and 4 year historical eps growth rates. Therefore, QCOR passes this criterion. SALES GROWTH RATE: [FAIL] 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 (134.6%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (144.6%) of the current year. Sales growth for the prior must be greater than the latter. For QCOR this criterion has not been met and fails this test. 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. QCOR's EPS ($0.91) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. QCOR's EPS for this quarter last year ($0.35) 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. QCOR's growth rate of 160.00% 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 QCOR is 14.72%. This should be less than the growth rates for the 3 previous quarters, which are 380.00%, 241.18%, and 209.52%. QCOR 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, 256.25%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 160.00%, (versus the same quarter one year ago) then the stock fails, with one exception: if the growth rate in earnings between the current quarter and the same quarter one year ago is greater than 30%, then the stock would pass. The growth rate over this period for QCOR is 160.0%, and it would therefore pass this test. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 160.00% must be greater than or equal to the historical growth which is 29.44%. QCOR 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. QCOR, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.51, 0.49, 0.40, 0.54, and 1.21, 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. QCOR's long-term growth rate of 29.44%, based on the average of the 3 and 4 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. QCOR's Debt/Equity (0.00%) is not considered high relative to its industry (46.17%) 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 QCOR, this criterion has not been met (insider sell transactions are 41, while insiders buying number 71). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion.   ROSS STORES, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Ross Stores, Inc., along with its subsidiaries, operates two brands of off-price retail apparel and home fashion stores. As of January 28, 2012, the Company operated a total of 1,125 stores, of which 1,037 were Ross Dress for Less (Ross) locations in 29 states, the District of Columbia, and Guam, and 88 were dd's DISCOUNTS stores in seven states: 48 in California, 19 in Texas, 12 in Florida, four in Arizona, two in Georgia, two in Nevada, and one in Maryland. Ross focuses on customers primarily from middle income households, while dd's DISCOUNTS focuses on customers from more moderate income households. During the fiscal year ended January 28, 2012 (fiscal 2012), it opened 59 new Ross stores and closed ten existing stores. During fiscal 2011, it opened 21 new dd's DISCOUNTS stores. The average approximate dd's DISCOUNTS store size is 23,900 square feet. In April 2011, it purchased a 449,000 square foot warehouse for packaway storage in Riverside, California. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: This methodology would consider ROST a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (17.54) relative to the growth rate (31.29%), 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 ROST (0.56) 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. ROST, whose sales are $9,358.3 million, needs to have a P/E below 40 to pass this criterion. ROST's P/E of (17.54) is considered acceptable. 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 ROST is 31.3%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is acceptable. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for ROST (8.84%) 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 ROST (2.26%) 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 ROST (3.89%) 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.   STARZ Profile Strategy: Book/Market Investor Based on: Joseph Piotroski Starz, formerly Liberty Media Corporation, is an integrated global media and entertainment company with operating units that provide subscription video programming on domestic United States pay television channels (Starz Channels), global content distribution (Starz Distribution) and animated television and movie production (Starz Animation). As of January 14, 2013, its network included Starz, Encore, and Movieplex, Retroplex and Indieplex. Its businesses included Anchor Bay Entertainment, Starz Worldwide Distribution, and Starz Digital Media. Starz Animation produces animated television (TV) and movie content for studios and networks. Starz Distribution develops, produces and acquires entertainment content, distributing it to consumers globally on digital versatile disk (DVD). On January 11, 2013, Liberty Media Corporation (Liberty) and Starz announced the completion of the spin-off of Liberty from Starz. Analysis Guru Score: 80% BOOK/MARKET RATIO: [PASS] The first criteria of this strategy requires that a company be in the top 20% of the market based on the Book/Market ratio (which is the inverse of the Price/Book ratio). STRZA, which has a book to market ratio of 2.86, meets this criterion and thus this strategy will use the following rules to determine if it is a financially distressed firm or is unfairly trading at a discount to its book value. The study conducted by Piotroski found that excess returns can be earned by holding a portfolio of high Book/Market stocks. He also found, however, that it is very important to separate companies that trade at a discount because they are financially distressed from companies that are unfairly trading at a discount. The following criteria are used to help provide this distinction. RETURN ON ASSETS: [PASS] As a first step to determining whether a firm is not financially distressed, this methodology requires that the return on assets for the most recent fiscal year be positive. STRZA's return on assets was 9.66% in the most recent year, therefore it passes this test. CHANGE IN RETURN ON ASSETS: [PASS] The next requirement is that the return on assets for the most recent fiscal year must be greater than the return on assets for the previous fiscal year. STRZA's return on assets was 9.66% in the most recent year and 8.71% in the previous year, therefore it passes this test. CASH FLOW FROM OPERATIONS: [PASS] In addition to the return on assets, the cash flow from operations for the most recent fiscal year must also be positive. This eliminates companies that are burning cash and therefore are more likely to be financially distressed. STRZA's cash flow from operations was $276.00 million in the most recent year, therefore it passes this test. CASH COMPARED TO NET INCOME: [FAIL] This methodology requires that cash from operations for the most current fiscal year must be greater than net income for the most current fiscal year. STRZA's cash from operations was $276.00 million in the most recent year, while its net income was $746.40 million, therefore it fails this test. CHANGE IN LONG TERM DEBT/ASSETS: [PASS] The long term debt to assets ratio for the most recent fiscal year must be less than or equal to the previous fiscal year. STRZA's LTD/Assets was 0.07 in the most recent year and 0.19 in the previous year, therefore it passes this test. CHANGE IN CURRENT RATIO: [PASS] As an additional test of firm solvency, the current ratio for the most recent fiscal year must be greater than the current ratio for the previous fiscal year. STRZA's current ratio was 3.18 in the most recent year and 1.41 in the previous year, therefore it passes this test. CHANGE IN SHARES OUTSTANDING: [PASS] The issuance of new stock is considered by this methodology to be a sign that a company is not able to generate enough internal cash to fund its business. Therefore, shares outstanding for the most recent fiscal year must be less than or equal to shares outstanding for the previous fiscal year. STRZA's shares outstanding was 112.4 million in the most recent year and 115.8 million in the previous year, therefore it passes this test. CHANGE IN GROSS MARGIN: [FAIL] As a sign that a company is expanding its profitability, this strategy requires that gross margin for the most recent fiscal year be greater than gross margin for the previous fiscal year. STRZA's gross margin was 100.00% in the most recent year and 100.00% in the previous year, therefore it fails this test. CHANGE IN ASSET TURNOVER: [PASS] The final criterion of this strategy requires that asset turnover for the most recent fiscal year be greater than asset turnover for the previous fiscal year. STRZA's asset turnover was 0.39 in the most recent year and 0.19 in the previous year, therefore it passes this test.   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 HFC HOLLYFRONTIER CORP Oil & Gas Operations 56 NTES NETEASE, INC (ADR) Business Services 53 FCFS FIRST CASH FINANCIAL SERVICES, INC. Consumer Financial Services 47 JOSB JOS. A. BANK CLOTHIERS INC Retail (Apparel) 44 MKTX MARKETAXESS HOLDINGS INC. Investment Services 43 TBI TRUEBLUE INC Business Services 42 VALE VALE SA (ADR) Metal Mining 40 INTC INTEL CORPORATION Semiconductors 39 AN AUTONATION, INC. Retail (Specialty) 39 ECPG ENCORE CAPITAL GROUP, INC. Misc. Financial Services 39

Disclaimer

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.