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Executive Summary	May 27, 2011

The Economy If the economy were a boxer, this past fortnight wouldn't have been his best round. But he's showing he can take a punch or two, and overall he appears to be winning the fight. One of the punches taken since our last newsletter came in the form of industrial production data. Industrial and manufacturing activity has been a strength during the post-Great-Recession recovery, but in April industrial production was flat, only the third time in the past 22 months it hadn't increased. March's increase was also revised slightly downward, and February's figure was changed from a 0.1% increase to a 0.3% decrease. The figures do not indicate a major slump, however, and slight monthly declines aren't out of the ordinary in the course of a lengthy economic expansion. Regional manufacturing reports for May, meanwhile, have been decent, but activity was below that of previous months. The Philadelphia Federal Reserve Bank's business activity index fell substantially from April, but still indicated the manufacturing sector was expanding in the mid-Atlantic region. The New York Fed's Empire State Manufacturing Survey also fell, but remained well in expansion territory. The slowdown in industrial and manufacturing growth may be due in part -- perhaps in large part -- to the fallout from the Japan earthquake and tsunami, and its impact on the global economy. On the employment front, the latest data was mixed. Over the past two weeks, new claims for unemployment have fallen slightly (by about 3%), but remain above levels associated with strong job growth. Continuing claims, however, neared their lowest point since September 2008 in the latest week for which data is available (ending May 14). As for the housing market, it continues to struggle. Existing-home sales fell 0.8% in April, the National Association of Realtors said. Housing starts experienced a sharper decline, by 10.6%, according to the Commerce Department. Compared to a year ago, residential construction was down nearly 24%. On the bright side, gas prices are waning a bit, giving consumers a bit of a reprieve. Unleaded regular prices were down about 9 cents as of yesterday vs. a week earlier, according to AAA, Wright Express, and the Oil Price Information Service. They're expected to fall further as lower oil prices work their way into gas prices. Other good news came from Corporate America. With 468 of the S&P 500 companies reporting first-quarter earnings, 72% had beaten analysts' expectations, according to Bloomberg. As for the markets, since our last newsletter, the S&P 500 returned -1.7%, while the Hot List returned -2.7%. So far in 2011, the portfolio is up 7.9% vs. 5.4% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 191.2% vs. the S&P's 32.5% gain. Beware the 'Summer Blockbuster' With the weather finally starting to warm, it's summer blockbuster time for the movie industry, the time of year when throngs of people line up to see the latest big-budget, big-hype films. Even if you're not a movie-goer, it's hard to escape the Hollywood blitz, what with the onslaught of television commercials touting the "most action-packed"/"funniest"/"can't-miss" hits of 2011. If you're like me, you've probably had the experience of going to one of these types of overhyped movies and walking away less than thrilled. The movie might not have been bad -- in fact, it might have been quite good. But once the buzz surrounding a film reaches a certain level, it's just hard to live up to the hype. Similarly, you may have been to a movie that didn't get much hype, or even one that critics had bashed. And a lot of the time you may walk away from such a movie being pleasantly surprised. The movie may not have been a great film, but it was better than you thought it would be, and that leaves you in a pretty good mood. If you've ever had similar movie-going experiences, you know something about what it's like to be a value investor. That's because, just as they play a huge role in a movie you see or a restaurant you visit or a vacation you take, expectations play a huge role in how and why value investing works. That's what Joel Greenblatt -- the hedge fund guru upon whose writings I base one of my best-performing strategies -- recently discussed in an interview with Barron's. "The way we make money as a group," Greenblatt explained, "is that we don't pay a lot for anything, and most of the stocks we buy have low expectations. So if the future is a little better or a lot better than the low expectations -- it doesn't have to be great -- you have the chance for asymmetric returns on the upside. And, hopefully, you don't lose much on the ones that don't do better than the low expectations, because you didn't pay much for them in the first place." While Greenblatt has used this mindset to great success, he's not the first to embrace it. Benjamin Graham, the man known as the "Father of Value Investing" (and another of the gurus upon whom I base one of my best-performing strategies) recognized more than half a century ago that expectations were a big factor in stock returns. The "margin of safety" concept that guided his investment philosophy was based on the idea that stocks with high valuations (i.e., high expectations) would be hit much harder if something went wrong than would stocks with low valuations (i.e., low expectations). The Wall Street Journal's Jason Zweig, who provided commentary in Graham's revised version of The Intelligent Investor, had this to say in discussing expectations and margin of safety: "Great expectations lead to great disappointment if they are not met; a failure to meet moderate expectations leads to a much milder reaction. Thus, one of the biggest risks in owning growth stocks is not that their growth will stop, but merely that it will slow down. And in the long run, that is not merely a risk, but a virtual certainty." History does indeed show that value stocks -- which usually have low expectations -- as a group have outperformed growth stocks -- which usually have higher expectations -- over the long haul. From 1927 through 2009, U.S. large-cap growth stocks averaged a 9.08% annual compound return, according to the data of Dartmouth College Professor and noted stock researcher Kenneth French. Small-cap growth stocks, meanwhile, averaged 9.23%. On the value side, large-cap value plays averaged 11.21%, and well ahead of the pack were small-cap value stocks, which returned an average of 14.17% per year. (For the breakpoint between small and large stocks, French and colleague Eugene Fama use the mean market equity of New York Stock Exchange stocks. Growth stocks are defined as those in the bottom 30% of the market based on book/market ratios; value stocks are those in the top 30%.) Contrarian Mindset Perhaps more than any of the gurus I follow, David Dreman put great emphasis on investor expectations, and their impact on investment strategy. Dreman believed that investors' penchant for overreaction often makes popular stocks overpriced and unpopular stocks underpriced. Because of that, popular stocks have a long way to fall if they don't meet expectations, and little room to climb in the event they meet or exceed expectations. Because unpopular stocks are often already undervalued, however, they have a lot of room to climb if the company meets or exceeds expectations, and not much room to fall if the company disappoints. "Negative surprises are like water off a duck's back for [stocks with the lowest valuations]," Dreman wrote in Contrarian Investment Strategies. "Investors have low expectations for what they consider lackluster or bad stocks, and when they do disappoint, few eyebrows are raised. Consider the 'best' companies, however. Investors expect only glowing prospects for these stocks. After all, they confidently -- overconfidently -- believe that they can divine the future of a 'good' stock with precision. These stocks are not supposed to disappoint; people pay top dollar for them for exactly this reason. So when the negative surprise arrives, the results are devastating." Dreman believed, moreover, that surprises occurred a lot in the stock market, in part because analysts so often miss the mark with their earnings estimates. "There is only a 1 in 130 change that the analysts' consensus forecast will be within 5 percent for any four consecutive quarters," he wrote. "To put this in perspective, your odds are ten times greater of being the big winner of the New York State Lottery than of pinpointing earnings five years ahead. "Because of the frequent surprises in the market, focusing on unloved stocks could net you big rewards over the long run", his extensive research on historical stock returns found. Having the conviction to buy stocks when expectations are low is how Dreman and other value-focused gurus I follow fared so well coming out of bear markets. The bear of 1973-74 ended in October of 1974. In 1975, when the S&P bounced back 37.2%, John Neff's Windsor Fund returned 54.5%, and James O'Shaughnessy produced back-tested returns of 47.9%. Neff and O'Shaughnessy again handily beat the market in 1976, as did the back-tested book/market method Joseph Piotroski used (1976 was the first year his study covered). Warren Buffett was the only one of our gurus to underperform in one of those two years -- and he followed his 5% loss in 1975 with a whopping 134.2% gain in 1976. The gurus also performed exceptionally after the bear market that ended in August of 1982. While the S&P gained 22.4% in 1983, the gurus' returns for the year were as follows: Neff, 30.1%; Buffett, 69%; Peter Lynch, 82.8%; O'Shaughnessy, 35.6%; Piotroski, 32.4%. Only Martin Zweig lagged the S&P, producing returns of 17.4%. The Guru Strategies I base on the writings of these investment greats also performed exceptionally well coming off the last two recessions and bear markets. The eight individual ten-stock portfolios we began tracking in July 2003 (shortly after the market began its post-bear market turnaround) each gained between 20% and 52% for the remainder of that year, while the S&P rose 11.1%. In 2004, seven of those eight portfolios more than doubled the S&P's return. In 2009, meanwhile, 11 of my 14 10-stock portfolios beat the market, and they did so handily, by between 6.7 and 39.6 percentage points. These gurus and portfolios beat the market by so much because they did what few investors can do: buy solid stocks when expectations are very low, which they always are as bear markets wear on. Similarly, those investors who jump onto hot stocks with high expectations -- or who jump into the market when broader expectations for stocks are high, as they were in early 2000 and 2007 -- usually end up getting hit hard. That's why I actually find the copious amount of negative news stories swirling around the stock market to be a good sign. Yesterday afternoon, for example, the top stories on CNBC.com included one about banking giant UBS "falling apart"; one on the FDIC chief saying a U.S. debt default would be "calamitous"; and one on how foreclosures are becoming a bigger part of the U.S. housing market. That's not to mention the lingering EuroZone debt crisis, the continued fallout from the Japan earthquake and tsunami, and fears about what will happen when the Federal Reserve's latest round of quantitative easing ends. To be sure, all of those issues are legitimate and must be dealt with. But while these problems may inspire fear, they also lower expectations -- and investors' tendency to be myopic often leads those expectations to become unrealistically low. And, for disciplined investors, that signals opportunity. Don't Forget Quality Of course, low expectations -- whether it's for the market or individual stocks -- aren't inherently a bullish sign. Sometimes, for example, expectations are low for a stock for good reason -- the company is a dog, and everyone knows it. That's why my models look not only for attractively valued shares, but also for companies that meet a variety of quality tests. My Buffett-based model, for example, looks back ten years into a firm's historical returns on equity and total capital. Several of my models look at how much free cash a firm is generating per share. And the most popular variable my models examine -- more than earnings growth, more than price/earnings ratios -- is the level of a company's debt. Right now, I see a lot of quality in the U.S. market. And despite the market's two-year bull run, I also see a lot of lingering fears and low expectations, which are holding down the valuations of some quality investments. Through Wednesday, the ten holdings in the Hot List were trading for an average of 9.8 times trailing 12-month earnings, and yielding almost 4%. The nine non-financials also had average debt/equity ratios of just 12.7%. Those are the types of shares the Hot List will continue to focus on as we move deeper into 2011.		Editor-in-Chief: John Reese Since Inception   Hot List 191.2% S&P 500 32.5% Accuracy 56.8% Beta 1.2 YTD   Hot List 7.9% S&P 500 5.4% Since Last Issue   Hot List -2.7% S&P 500 -1.7% Avg. Fundamentals   Market Cap (mil) $33,034 PE Ratio 9.9 5 Yr EPS Growth 33.4% Yield 3.8% Rel. Strength 51 Portfolio Sectors Services 4 Technology 3 Consumer Cyclical 1 Financial 1 Healthcare 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. 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, though with some big ups and downs. It fared very well in 2004, 2005, and 2006, before being hit hard in 2008 and 2009. But it roared back in 2010, gaining 55.9% -- more than four times the S&P 500's 12.8% gain. In the seven-plus years since its inception, it has returned 76.6%, or 8.2% annualized, during a period in which the S&P has gained just 15.2%, or 2.0% annually. 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' 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 ten stocks currently in its 10-stock portfolio: SkyWest, Inc. (SKYW) Smith Micro Software Inc. (SMSI) Benchmark Electronics, Inc. (BHE) AU Optronics Corp. (AUO) Iridium Communications Inc. (IRDM) Xyratex Ltd. (XRTX) Hanwha SolarOne Co. Ltd. (HSOL) Fushi Copperweld, Inc. (FSIN) SunTech Power Holdings Co., Ltd. (STP) The E.W. Scripps Company (SSP) 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. Of the 10 current holdings in my Piotroski portfolio, only one (AU Optronics) has a market cap above $1.4 billion. 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 (as it is right now, with a few tech stocks among its holdings). 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. News about Validea Hot List Stocks Bridgepoint Education Inc. (BPI): Bridgepoint shares jumped this week after the stock was upgraded by a Piper Jaffray analyst. As of Wednesday afternoon, shares were up more than 11% for the day and more than 27% since the Hot List picked up the stock in mid-March. Aeropostale (ARO): On May 19, Aeropostale announced first-quarter earnings in line with analysts' estimates, but second-quarter guidance well below estimates. Earnings per share were $0.20 for the first quarter, down 64% from the year-ago period, while sales rose 1%. For the second quarter, the company expects to earn 11 to 16 cents per share, compared with analysts' expectations of 27 cents a share, according to Thomson Reuters I/B/E/S. The firm said the second quarter guidance reflects plans to aggressively clear through spring inventories to position itself for the important back to school selling season. It also said costs have been increasing across the industry. Shares of Aeropostale tumbled on the news, falling 14% from May 19-20. 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 BPI BRIDGEPOINT EDUCATION, INC. Schools 100 ASYS AMTECH SYSTEMS, INC. Semiconductors 91 ARO AEROPOSTALE, INC. Retail (Apparel) 88 T AT&T INC. Communications Services 63 RIMM RESEARCH IN MOTION LIMITED (USA) Communications Equipment 58 SNY SANOFI-AVENTIS SA (ADR) Biotechnology & Drugs 58 SKX SKECHERS USA, INC. Footwear 56 HUM HUMANA INC. Insurance (Accident & Health) 52 TECD TECH DATA CORPORATION Computer Hardware 40 GME GAMESTOP CORP. Retail (Technology) 38 Ticker Market Cap Date Added Start Price Return BPI $1,164 3/18/2011 $18.02 $22.02 22.2% ASYS $207 5/13/2011 $23.34 $21.65 -7.2% ARO $1,522 11/26/2010 $26.90 $18.86 -29.9% T $184,233 5/13/2011 $31.41 $31.11 -1.0% RIMM $22,885 5/13/2011 $43.24 $43.57 0.8% SNY $100,023 3/18/2011 $33.37 $38.41 15.1% SKX $881 3/18/2011 $18.46 $17.70 -4.1% HUM $13,350 5/13/2011 $78.33 $79.28 1.2% TECD $2,159 5/13/2011 $53.04 $46.36 -12.6% GME $3,920 9/3/2010 $19.01 $27.75 46.0%

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 BPI   |   ASYS   |   ARO   |   T   |   RIMM   |   SNY   |   SKX   |   HUM   |   TECD   |   GME   |   BRIDGEPOINT EDUCATION, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Bridgepoint Education, Inc. (Bridgepoint) is a accredited provider of postsecondary education services. The Company offers associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences. It delivers its programs online, as well as at its traditional campuses located in Clinton, Iowa, and Colorado Springs, Colorado. As of December 31, 2009, it offered approximately 1,150 courses, 60 degree programs and 125 specializations and concentrations. As of December 31, 2009, it had 53,688 students enrolled in its institutions, 99% of whom were attending classes online. Analysis Guru Score: 92% 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. BPI's P/E is 8.59, based on trailing 12 month earnings, while the current market PE is 17.00. 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. BPI's revenue growth is 112.33%, while it's earnings growth rate is 31.31%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate. Therefore, BPI 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 (47%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (46%) of the current year. Sales growth for the prior must be greater than the latter. For BPI 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. BPI's EPS ($0.92) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. BPI's EPS for this quarter last year ($0.49) 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. BPI's growth rate of 87.76% 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 BPI is 15.65%. This should be less than the growth rates for the 3 previous quarters, which are 2,800.00%, 64.86%, and 36.36%. BPI 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, 127.78%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 87.76%, (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 BPI is 87.8%, 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, 87.76% must be greater than or equal to the historical growth which is 31.31%. BPI 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. BPI, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were -2.15, 0.32, 3.15, 0.74, and 2.14, 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. BPI's long-term growth rate of 31.31%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate, 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. BPI's Debt/Equity (0.00%) is not considered high relative to its industry (40.37%) 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 BPI, this criterion has not been met (insider sell transactions are 57, while insiders buying number 54). 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.   AMTECH SYSTEMS, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Amtech Systems, Inc. (Amtech), incorporated in October 1981, through its wholly owned subsidiaries, supplies horizontal diffusion furnace systems used for solar (photovoltaic) cell and semiconductor manufacturing. The Company provides products and services to two industries: the solar industry and the semiconductor industry. The Company's solar and semiconductor equipment is sold under brand names of Tempress Systems and Bruce Technologies, which have customers in both the solar industry and the semiconductor industry. Within the solar industry, its provide diffusion and automation equipment to solar cell manufacturers and it also offers plasma enhanced chemical vapor deposition (PECVD) and phosphocilicate glass (PSG) equipment. Within the semiconductor industry, it provides equipment to manufacturers of analog, power, automotive and microcontroller chips with geometries greater than 0.3 micron. Analysis Guru Score: 92% 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. ASYS's P/E is 9.49, based on trailing 12 month earnings, while the current market PE is 17.00. 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. ASYS's revenue growth is 34.25%, while it's earnings growth rate is 31.23%, based on the average of the 3 and 4 year historical eps growth rates. Therefore, ASYS 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 (280.9%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (247.4%) of the current year. Sales growth for the prior must be greater than the latter. For ASYS 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. ASYS's EPS ($0.77) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. ASYS's EPS for this quarter last year ($0.02) 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. ASYS's growth rate of 3,750.00% 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 ASYS is 15.61%. This should be less than the growth rates for the 3 previous quarters, which are 1,500.00%, 2,950.00%, and 5,100.00%. ASYS 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, 3,875.00%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 3,750.00%, (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 ASYS is 3,750.0%, 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, 3,750.00% must be greater than or equal to the historical growth which is 31.23%. ASYS 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. ASYS, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.36, 0.44, 0.32, -0.18, and 1.03, 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. ASYS's long-term growth rate of 31.23%, 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. ASYS's Debt/Equity (0.00%) is not considered high relative to its industry (10.38%) 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 ASYS, this criterion has not been met (insider sell transactions are 136, while insiders buying number 35). 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.   AEROPOSTALE, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Aeropostale, Inc. is a mall-based specialty retailer of casual apparel and accessories. The Company designs, markets and sells its own brand of merchandise principally targeting 14 to 17 year-old young women and young men. The Company also sells Aropostale merchandise through its e-commerce Website, www.aeropostale.com. During the fiscal year ended January 30, 2010 (fiscal 2009), the Company launched P.S. from Aeropostale, which offers casual clothing and accessories focused on elementary school children between the ages of 7 and 12. During fiscal 2009, the Company completed the closure of its 14 store Jimmy'Z concept. Jimmy'Z Surf Co., Inc., a wholly owned subsidiary of Aeropostale, Inc., was a contemporary lifestyle brand targeting young women and men aged 18 to 25. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider ARO a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (8.45) relative to the growth rate (29.59%), 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 ARO (0.29) is very 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. ARO, whose sales are $2,406.0 million, needs to have a P/E below 40 to pass this criterion. ARO's P/E of (8.45) 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 ARO is 29.6%, 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 ARO (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 ARO (11.88%) 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 ARO (16.96%) 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.   AT&T INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch AT&T Inc. is a holding company. The Company is a provider of telecommunications services in the United States and worldwide. These include wireless communications, local exchange services, long-distance services, data/broadband and Internet services, video services, managed networking, wholesale services and directory advertising and publishing. It operates in four segments: wireless, which provides both wireless voice and data communications services across the United States and, through roaming agreements, in foreign countries; wireline, which provides landline voice and data communication services, AT&T U-Verse TV, broadband and voice services (U-Verse) and managed networking to business customers; advertising solutions, which publishes Yellow and White Pages directories and sells directory advertising and Internet-based advertising and local search, and other, which provides results from customer information services and all corporate and other operations. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: T is considered a "True Stalwart", according to this methodology, as its earnings growth of 16.75% lies within a moderate 10%-19% range and its annual sales of $124,997 million are greater than the multi billion dollar level. This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. T is attractive if T can hold its own during a recession. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for T (0.41), based on the average of the 3, 4 and 5 year historical eps growth rates, is excellent. EARNINGS PER SHARE: [PASS] The EPS for a stalwart company must be positive. T's EPS ($3.38) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for T (57.78%) to be mediocre. If the Debt/Equity ratio is this high, the other ratios and financial statistics for T should be good enough to compensate. 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 T (2.99%) 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 T (-30.65%) 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.   RESEARCH IN MOTION LIMITED (USA) Profile Strategy: Contrarian Investor Based on: David Dreman Research In Motion Limited (RIM) is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information, including e-mail, phone, short message service (SMS), Internet and intranet-based applications. RIM's portfolio of products, services and embedded technologies are used by organizations worldwide and include the BlackBerry wireless solution, the RIM Wireless Handheld product line, software development tools and other software and hardware. Its subsidiaries include Research In Motion Corporation, Research In Motion UK Limited and RIM Finance, LLC. On June 2, 2010, Harman International sold its software operating systems unit, QNX Software Systems, to the Company. Analysis Guru Score: 90% MARKET CAP: [PASS] Medium to large-sized companies (the largest 1500 companies) should be chosen, because they are more in the public eye. Furthermore, the investor is exposed to less risk of "accounting gimmickry", and companies of this size have more staying power. RIMM has a market cap of $22,885 million, therefore passing the test. EARNINGS TREND: [PASS] A company should show a rising trend in the reported earnings for the most recent quarters. RIMM's EPS for the past 2 quarters, (from earliest to most recent quarter) 1.74, 1.78 have been increasing, and therefore the company passes this test. EPS GROWTH RATE IN THE IMMEDIATE PAST AND FUTURE: [PASS] This methodology likes to see companies with an EPS growth rate higher than the S&P in the immediate past and a likelihood that this trend will continue in the near future. RIMM passes this test as its EPS growth rate over the past 6 months (21.91%) has beaten that of the S&P (7.90%). RIMM's estimated EPS growth for the current year is (2.21%), which indicates the company is expected to experience positive earnings growth. As a result, RIMM passes this test. This methodology would utilize four separate criteria to determine if RIMM is a contrarian stock. In order to eliminate weak companies we have stipulated that the stock should pass at least two of the following four major criteria in order to receive "Some Interest". P/E RATIO: [PASS] The P/E of a company should be in the bottom 20% of the overall market. RIMM's P/E of 6.86, based on trailing 12 month earnings, meets the bottom 20% criterion (below 9.45), and therefore passes this test. PRICE/CASH FLOW (P/CF) RATIO: [PASS] The P/CF of a company should be in the bottom 20% of the overall market. RIMM's P/CF of 5.51 meets the bottom 20% criterion (below 5.68) and therefore passes this test. PRICE/BOOK (P/B) VALUE: [FAIL] The P/B value of a company should be in the bottom 20% of the overall market. RIMM's P/B is currently 2.55, which does not meet the bottom 20% criterion (below 0.81), and it therefore fails this test. PRICE/DIVIDEND (P/D) RATIO: [FAIL] The P/D ratio for a company should be in the bottom 20% of the overall market (that is the yield should be in the top 20%). RIMM's P/D is not available, and hence an opinion cannot be rendered at this time. This methodology maintains that investors should look for as many healthy financial ratios as possible to ascertain the financial strength of the company. These criteria are detailed below. CURRENT RATIO: [PASS] A prospective company must have a strong Current Ratio (greater than or equal to the average of it's industry [2.33] or greater than 2). This is one identifier of financially strong companies, according to this methodology. RIMM's current ratio of 2.06 passes the test. PAYOUT RATIO: [PASS] A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for RIMM is 0.00%. Unfortunately, its historical payout ratio is not available. Nonetheless it passes the payout criterion, as this is a very low payout. RETURN ON EQUITY: [PASS] The company should have a high ROE, as this helps to ensure that there are no structural flaws in the company. This methodology feels that the ROE should be greater than the top one third of ROE from among the top 1500 large cap stocks, which is 17.79%, and would consider anything over 27% to be staggering. The ROE for RIMM of 41.24% is high enough to pass this criterion. PRE-TAX PROFIT MARGINS: [PASS] This methodology looks for pre-tax profit margins of at least 8%, and considers anything over 22% to be phenomenal. RIMM's pre-tax profit margin is 23.33%, thus passing this criterion. YIELD: [FAIL] The company in question should have a yield that is high and that can be maintained or increased. RIMM's current yield is not available (or one is not paid) at the present time, while the market yield is 2.62%. Hence, this criterion cannot be evaluated. LOOK AT THE TOTAL DEBT/EQUITY: [PASS] The company must have a low debt to equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should be less than 20% or less than the industry average. RIMM's Total Debt/Equity of 0.00% is considered exceptional.   SANOFI-AVENTIS SA (ADR) Profile Strategy: Value Investor Based on: Benjamin Graham Sanofi-Aventis is a pharmaceutical group engaged in the research, development, manufacture and marketing of healthcare products. The Company's business includes two main activities: pharmaceuticals and human vaccines through sanofi pasteur. It is also present in animal health products through Merial Limited (Merial). In its pharmaceutical activity, it specializes in six therapeutic areas: diabetes, oncology, thrombosis and cardiovascular, central nervous system (CNS), and internal medicine. The global portfolio of sanofi-aventis also consists of a range of other pharmaceutical products. It offers vaccines in five areas: pediatric combination vaccines, influenza vaccines, adult and adolescent booster vaccines, meningitis vaccines and travel and endemic vaccines. In October 2010, Siegfried Holding AG sold its PulmoJet Inhalation Project to the Company. In February 2011, the Company acquired BMP Sunstone Corp. In April 2011, the Company acquired Genzyme Corporation. Analysis Guru Score: 100% SECTOR: [PASS] SNY 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. SNY's sales of $45,880.9 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. SNY's current ratio of 2.30 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 SNY is $9,892.6 million, while the net current assets are $21,681.6 million. SNY 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. SNY's EPS growth over that period of 141.9% 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. SNY's P/E of 14.30 (using the current 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. SNY's Price/Book ratio is 1.33, while the P/E is 14.30. SNY passes the Price/Book test.   SKECHERS USA, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Skechers U.S.A., Inc. (Skechers) design and market Skechers-branded contemporary footwear for men, women and children under several lines. addition to Skechers-branded lines, the Company also offers several designer, fashion and street-focused footwear lines for men, women and children. These lines are branded and marketed separately from Skechers and appeal to specific audiences. Its brands are sold through department stores, specialty stores, athletic retailers, and boutiques as well as catalog and Internet retailers. Along with wholesale distribution, its footwear is available at its e-commerce Website and its own retail stores. Skechers operates 90 concept stores, 92 factory outlet stores and 37 warehouse outlet stores in the United States, and 22 concept stores and five factory outlets internationally. The Company operates in four reportable segments: domestic wholesale sales, international wholesale sales, retail sales, and e-commerce sales. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: SKX is considered a "True Stalwart", according to this methodology, as its earnings growth of 18.98% lies within a moderate 10%-19% range and its annual sales of $1,990 million are greater than the multi billion dollar level. This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. SKX is attractive if SKX can hold its own during a recession. 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 SKX was 15.60% last year, while for this year it is 19.86%. Since inventory has been rising, this methodology would not look favorably at the stock but would not completely eliminate it from consideration as the inventory increase (4.26%) is below 5%. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for SKX (0.50), based on the average of the 3, 4 and 5 year historical eps growth rates, is excellent. EARNINGS PER SHARE: [PASS] The EPS for a stalwart company must be positive. SKX's EPS ($1.86) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for SKX (9.68%) 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 SKX (-14.92%) 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 SKX (21.12%) 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.   HUMANA INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Humana Inc. (Humana) is a health and supplemental benefits company. The Company provides full-service benefits and wellness solutions, offering an array of health, pharmacy and supplemental benefit products for employer groups, Government benefit programs, and individuals, as well as primary and workplace care, through its medical centers and worksite medical facilities. Humana manages its business with two segments: Government and Commercial. The Government segment consists of beneficiaries of Government benefit programs, and includes three lines of business: Medicare, Military, and Medicaid. The Commercial segment consists of members enrolled in its medical and specialty products marketed to employer groups and individuals. The Company provides health insurance benefits under health maintenance organization (HMO), private fee-for-service (PFFS) and preferred provider organization (PPO) plans. On December 21, 2010, the Company acquired Concentra Inc. Analysis Guru Score: 100% DETERMINE THE CLASSIFICATION: This methodology would consider HUM a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (11.64) relative to the growth rate (20.40%), 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 HUM (0.57) 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. HUM, whose sales are $34,618.3 million, needs to have a P/E below 40 to pass this criterion. HUM's P/E of (11.64) 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 HUM is 20.4%, 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] HUM 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. HUM's Equity/Assets ratio (42.00%) 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. HUM's ROA (7.14%) 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 HUM (15.00%) 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: [BONUS PASS] 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 HUM (51.04%) is considered very favorable.   TECH DATA CORPORATION Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Tech Data Corporation (Tech Data) is a distributor of information technology (IT) products, logistics management and other value-added services. The Company serves approximately 125,000 value-added resellers (VARs), direct marketers, retailers and corporate resellers in more than 100 countries throughout North America, Latin America and Europe. During the fiscal year ended January 31, 2010 (fiscal 2009), the Company acquired certain assets of Scribona, AB. In February 2011, the Company announced that it had created two new business divisions: HP Solutions Division And Networking Solutions Group. Analysis Guru Score: 100% DETERMINE THE CLASSIFICATION: This methodology would consider TECD a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (10.53) relative to the growth rate (47.38%), based on the average of the 3 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 TECD (0.22) is very 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. TECD, whose sales are $24,376.0 million, needs to have a P/E below 40 to pass this criterion. TECD's P/E of (10.53) 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 TECD was 7.71% last year, while for this year it is 9.05%. Since inventory has been rising, this methodology would not look favorably at the stock but would not completely eliminate it from consideration as the inventory increase (1.33%) is below 5%. 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 TECD is 47.4%, based on the average of the 3 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 TECD (23.39%) 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 TECD (3.17%) 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: [BONUS PASS] 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 TECD (35.79%) is high enough to add to the attractiveness of this company.   GAMESTOP CORP. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher GameStop Corp. (GameStop) is a retailer of video game products and personal computer (PC) entertainment software. The Company sells new and used video game hardware, video game software and accessories, as well as PC entertainment software, and related accessories and other merchandise. As of January 30, 2010, the Company operated 6,450 stores in the United States, Australia, Canada and Europe, primarily under the names GameStop and EB Games. GameStop also operates the electronic commerce Website www.gamestop.com and publish Game Informer, a multi-platform video game magazine in the United States based on circulation, with approximately 4 million subscribers. During the fiscal year ended January 30, 2010 (fiscal 2009), GameStop operated its business in four segments: United States, Canada, Australia and Europe. Analysis Guru Score: 90% 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. GME's P/S of 0.40 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. GME's Debt/Equity of 8.30% 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. GME 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 GME At this Point Is GME a "Super Stock"? NO 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.GME's P/S ratio of 0.40 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%. GME's inflation adjusted EPS growth rate of 20.68% 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. GME's free cash per share of 2.56 passes this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [FAIL] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. GME, whose three year net profit margin averages 4.33%, fails this evaluation.   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 DLTR DOLLAR TREE, INC. Retail (Department & Discount) 64 AZN ASTRAZENECA PLC (ADR) Biotechnology & Drugs 58 SOLR GT SOLAR INTERNATIONAL, INC. Semiconductors 57 WDC WESTERN DIGITAL CORP. Computer Storage Devices 50 CW CURTISS-WRIGHT CORP. Misc. Fabricated Products 50 ACOM ANCESTRY.COM INC Computer Services 50 FCFS FIRST CASH FINANCIAL SERVICES, INC. Retail (Specialty) 48 QSII QUALITY SYSTEMS, INC. Software & Programming 48 BAP CREDICORP LTD. (USA) Regional Banks 48 TX TERNIUM S.A. (ADR) Iron & Steel 48

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