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Executive Summary	July 31, 2015

The Economy Strong gains in the homebuilding industry, a 40-year low in new unemployment claims, falling oil prices -- US economic data has looked quite promising over the past fortnight. According to the Labor Department, initial claims for unemployment fell to their lowest level since November 1973 in the week ending July 18, before rising slightly in the most recent week. They are more than 10% below year-ago levels. Continuing claims, the data for which lag new claims by a week, have moved slightly higher since our last newsletter but are 11% below year-ago levels.. Good news also came from the housing market. Housing starts jumped almost 10% in June,, according to the Census Bureau, putting them about 26% above year-ago levels. Permit issuance for new construction rose 7.4%, and is more than 40% above where it stood a year ago. On the negative side, new home sales fell 6.8% in June, according to the Census Bureau. Compared to a year ago, however, they are 18% higher. Median sale prices were about 2% below where they were a year ago. Inflation picked up in June. The Consumer Price Index rose 0.3% , according to the Labor Department. That put it just 0.1% ahead of its year-ago pace, mostly because of the oil and gas price declines. But if you strip out volatile food and energy prices, so-called "core" inflation, which was up 0.2% in June, is 1.8% ahead of its year-ago pace. Oil and gas prices, meanwhile, have slid recently. As of July 28, a gallon of regular unleaded on average cost $2.70, down from $2.78 a month earlier. That's far below the year-ago level of $3.52. Finally, the Federal Reserve held interest rates steady at its July meeting. There had been some speculation that the Fed might at long last start raising rates at the meeting, but most observers seem to be forecasting that the first increases will be announced in September. Since our last newsletter, the S&P 500 returned -0.7%, while the Hot List returned -2.7%. So far in 2015, the portfolio has returned 7.3% vs. 2.4% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 246.9% vs. the S&P's 110.8% gain. Beyond Value I often talk about value investing and the importance of buying attractively priced stocks in this space. That's because history shows that value investing works over the long haul, and many of the top performing investing greats upon whose writings I base my strategies embraced value-centric approaches. Over the long term, I believe that the Hot List's value tilt has played a big role in its significant outperformance of the broader market. But another big key to the portfolio's performance is momentum. If you are a dyed-in-the-wool value investor, the notion of using momentum to pick stocks -- that is, looking for stocks that have been red-hot -- is sacrilege. After all, value investors try to buy stocks that are cheap compared to business fundamentals like earnings, sales, and book value. They get excited when a stock of a good company is falling in price, because it means that, all things being equal, they can get a better deal. In fact, John Neff -- one of the most successful value investors of all-time -- said scouring the financial pages for stocks making new 52-week lows was one way he found investment ideas. But remember, "cheap" and "falling" are two separate concepts (just as "expensive" and "rising" are). Sometimes a stock is so cheap that it can go on a tear and still be undervalued. Other times, a firm's business will excel as its shares surge, and earnings, sales, and/or book values keep up with (or outpace) the stock's price gain. That keeps valuations low. In those situations, having strong momentum behind a stock isn't a negative -- it's actually an added boost. Some of history's best stock-pickers have found that stocks with strong momentum are often good bets to continue rising -- if they're still attractively valued. While buying a hot stock with an exorbitant valuation can be the equivalent of jumping on a rocket ship that's almost out of gas and about to plummet back to Earth, buying a hot stock that's still cheap is like jumping on a ship that has plenty of fuel left in the tank. So, while commentators often try to play them off as opposites, momentum and value can -- and do -- peacefully coexist. Some of my Guru Strategies use both momentum and value metrics in choosing stocks. For example, the growth model I base on the writings of James O'Shaughnessy (whose study of quantitative investing approaches may be the most extensive ever performed) looks for stocks that have market capitalizations of at least $150 million; increased earnings per share in each year of the past half-decade; and price/sales ratios under 1.5. It then takes all stocks that pass those tests and ranks them by their 12-month relative strength -- a measure of how they've performed compared to all stocks in the market over the last year. Those with the highest relative strengths are then chosen. My Motley Fool-inspired model, meanwhile, has an even tougher momentum criterion. It targets stocks with 12-month relative strengths of at least 90, meaning that they have outperformed at least 90% of all other stocks over that period. The Fool strategy, which is based on an approach laid out by Fool co-creators Tom and David Gardner, also uses a key valuation criterion: the PE-to-growth ratio, which mutual fund legend Peter Lynch pioneered. The "PEG" divides a firm's price/earnings ratio by its historical earnings growth rate; the Fool-based model looks for PEGs of 0.5 or below. This strategy has been my top performer over the long haul -- a 10-stock portfolio picked using the approach has averaged annualized returns of 16.0% since its mid-2003 inception. Over the same stretch, the S&P 500 has returned 6.4% annualized. My O'Shaughnessy-based growth portfolio has also beaten the S&P since its inception. There is a side benefit to using a momentum component in your investment strategy: It can actually serve as a risk management tool -- stocks whose RSs drop significantly aren't viewed as highly by the strategy, and are likely to be removed from the portfolio. That essentially means the RS criterion acts as a stop-loss. Research supports this idea. In a 2001 paper for the Journal of Technical Analysis, William K.N. Chan of HSBC Asset Management found that using stop-losses could add value to a portfolio, depending on what kind of strategy you used. For mean-reversion trading strategies -- that is, value approaches -- he found that there was a 73% probability that stop-losses improved performance. When it came to using stop-losses in trend-following strategies, Chan found "no significant evidence that it either improves or undermines performance in a consistent manner." The bottom line here is to not let conventional thinking and overly simplistic commentators put you in a box. The false debate of value versus momentum isn't the only context in which conventional thinking gets you in trouble. "Market commentators and investment managers who glibly refer to 'growth' and 'value' styles as contrasting approaches to investment are displaying their ignorance, not their sophistication," Warren Buffett explained in his 2000 annual letter to Berkshire Hathaway shareholders. "Growth is simply a component -- usually a plus, sometimes a minus -- in the value equation." To Buffett, all investing is about value, and assessing a company's growth prospects is simply one part of gauging value. Growth (and a myriad of other factors) can add a ton of value to companies whose shares may at first glance look on the pricey side. Investing isn't just about growth or value or momentum; it's about all of them and more. Focus on just one, and you will be like a baseball team that focuses only on offense and does nothing to build a good defense or pitching staff. Just as such a team will likely fall short of its goals, you'll likely fall short of your investment goals if you fixate solely on one aspect of what makes an attractive stock while turning a blind eye to the others.		Editor-in-Chief: John Reese Since Inception   Hot List 246.9% S&P 500 110.8% Accuracy 54.8% Beta 1.2 YTD   Hot List 7.3% S&P 500 2.4% Since Last Issue   Hot List -2.7% S&P 500 -0.7% Avg. Fundamentals   Market Cap (mil) $73,523 PE Ratio 13.3 5 Yr EPS Growth 29.2% Yield 0.9% Rel. Strength 68 Portfolio Sectors Financial 4 Services 3 Technology 1 Capital Goods 1 Consumer/Non-Cyclical 1
The Fallen As we rebalance the Validea Hot List, 10 stocks leave our portfolio. These include: Sasol Limited (Adr) (SSL), Marcus & Millichap Inc (MMI), World Acceptance Corp. (WRLD), Credit Acceptance Corp. (CACC), . The Keepers 6 stocks remain in the portfolio. They are: Sanderson Farms, Inc. (SAFM), Chart Industries, Inc. (GTLS), Amtrust Financial Services Inc (AFSI), Lumber Liquidators Holdings Inc (LL), Santander Consumer Usa Holdings Inc (SC) and Heritage Insurance Holdings Inc (HRTG). The Newbies We are adding 10 stocks to the portfolio. These include: Apple Inc. (AAPL), Jones Lang Lasalle Inc (JLL), Eagle Bancorp, Inc. (EGBN), Foot Locker, Inc. (FL), . Portfolio Changes Additions   APPLE INC. AAPL JONES LANG LASALLE INC JLL EAGLE BANCORP, INC. EGBN FOOT LOCKER, INC. FL Deletions   SASOL LIMITED (ADR) SSL MARCUS & MILLICHAP INC MMI WORLD ACCEPTANCE CORP. WRLD CREDIT ACCEPTANCE CORP. CACC Newcomers to the Validea Hot List Apple, Inc. (AAPL): The largest publicly traded company in the world is rejoining the Hot List this week. The tech sector giant has taken in nearly $225 billion in sales over the past year, and has a $700 billion market cap. Its fundamentals are impeccable: a 41% return on equity, 23% profit margins, 27% long-term revenue growth, and a 0.49 PE-to-Growth ratio. Apple gets strong interest from my Warren Buffett- and Peter Lynch-based models. To read more about it, scroll down to the "Detailed Stock Analysis" section. Foot Locker (FL): This specialty athletic retailer operates nearly 3,500 stores in 23 countries in North America, Europe, Australia, and New Zealand, offering athletic footwear and apparel. Foot Locker ($10 billion market cap) gets strong interest from my James O'Shaughnessy- and Peter Lynch-based models. To read more about its fundamentals, check out the "Detailed Stock Analysis" section below. Jones Lang LaSalle (JLL): Like Apple and Foot Locker, JLL is another former Hot List favorite. It's a financial and professional services firm specializing in real estate. It has over 200 corporate offices worldwide and operations in more than 1,000 locations in 80 countries, offering integrated real estate and investment management services on a local, regional and global basis to owner, occupier and investor clients. JLL ($8 billion market cap) gets strong interest from my Peter Lynch- and James O'Shaughnessy-based strategies. To read more about it, scroll down to the "Detailed Stock Analysis" section. Eagle Bancorp, Inc. (EGBN): This $1.5 billion market cap firm is the parent of EagleBank, a local community business bank with twenty-two offices in Maryland, Northern Virginia and Washington, DC. It also offers a complete line of competitive personal banking products and services. Eagle is another favorite of my Lynch-based model. To read more about its fundamentals, check out the "Detailed Stock Analysis" section below. News about Validea Hot List Stocks World Acceptance Corp. (WRLD): World Acceptance reported fiscal first-quarter profit of $23.6 million, or $2.71 per share, beating Wall Street expectations. Analysts surveyed by Zacks Investment Research on average forecast EPS of $2.38. Revenue was $137.2 million in the period, which fell short of the $142.5 million analysts expected, according to the Associated Press, however. Investors seemed to react more to the revenue miss than the earnings beat. Shares fell 11% the day of the announcement, though they began to bounce back in the following days. The Hot List is selling the position today, as others stocks' fundamentals now rate higher than Worlds'. The Next Issue In two weeks, we will publish another issue of the Hot List, at which time we will take a closer look at my strategies and investment approach. If you have any questions, please feel free to contact us at hotlist@validea.com.

Current Portfolio Ticker Company Name Industry Guru Score JLL JONES LANG LASALLE INC Real Estate Operations 100 AFSI AMTRUST FINANCIAL SERVICES INC Insurance (Prop. & Casualty) 96 HRTG HERITAGE INSURANCE HOLDINGS INC Insurance (Prop. & Casualty) 90 GTLS CHART INDUSTRIES, INC. Misc. Capital Goods 85 SAFM SANDERSON FARMS, INC. Food Processing 76 FL FOOT LOCKER, INC. Retail (Apparel) 76 LL LUMBER LIQUIDATORS HOLDINGS INC Retail (Home Improvement) 72 AAPL APPLE INC. Communications Equipment 67 EGBN EAGLE BANCORP, INC. Regional Banks 63 SC SANTANDER CONSUMER USA HOLDINGS INC Consumer Financial Services 57 Ticker Market Cap Date Added Start Price Current Price Return JLL $7,909 7/31/2015 TBD $176.30 TBD AFSI $5,700 5/8/2015 $58.12 $69.15 19.0% HRTG $734 6/5/2015 $22.00 $24.63 12.0% GTLS $856 3/13/2015 $33.50 $28.02 -16.4% SAFM $1,600 1/16/2015 $80.96 $71.39 -11.8% FL $9,792 7/31/2015 TBD $70.29 TBD LL $518 6/5/2015 $21.37 $19.14 -10.4% AAPL $697,842 7/31/2015 TBD $122.37 TBD EGBN $1,497 7/31/2015 TBD $44.86 TBD SC $8,783 7/2/2015 $26.20 $24.55 -6.3%

Detailed Stock Analysis Disclaimer: The analysis is from Validea's selection and interpretation of content from the guru's book or published writings, and is not from nor endorsed by the guru. See Full Disclaimer JLL   |   AFSI   |   HRTG   |   GTLS   |   SAFM   |   FL   |   LL   |   AAPL   |   EGBN   |   SC   |   JONES LANG LASALLE INC Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Jones Lang LaSalle Incorporated (JLL) is a financial and professional services firm specializing in real estate. The Company operates through four business segments. JLL provides real estate services through three business segments: the Americas, Europe, the Middle East and Africa (EMEA), and Asia Pacific. JLL's fourth business segment is LaSalle Investment Management (LaSalle). The Company provides a range of integrated property, project management and transaction services locally, regionally and globally through its Americas, EMEA and Asia Pacific operating segments. The Company manages its investment management business globally as LaSalle. The Company provides a range of real estate services to real estate owners, occupiers, investors and developers for a range of property types. The Company offers its products and services under the JLL, LaSalle Investment Management and Tetris brands. 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 ratio between .75 and 1.5 are good values. JLL's P/S ratio of 1.39 based on trailing 12 month sales, falls within the "good values" range for non-cyclical companies and is considered attractive. TOTAL DEBT/EQUITY RATIO: [PASS] Less debt equals less risk according to this methodology. JLL's Debt/Equity of 25.45% 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. JLL 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 JLL At this Point Is JLL a "Super Stock"? NO PRICE/SALES RATIO: [FAIL] The prospective company should have a low Price/Sales ratio. To be considered a "Super Stock", non-cyclical (non-Smokestack) companies should have Price/Sales ratios below .75. However, JLL, who has a P/S of 1.39, does not fall within the "Super Stock" range. It does fall between 0.75 and 1.5, which is considered the "good values" range for non-cyclical companies. Nonetheless, it does not pass this "Super Stock" criterion. LONG-TERM EPS GROWTH RATE: [PASS] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. JLL's inflation adjusted EPS growth rate of 26.07% 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. JLL's free cash per share of 10.54 passes this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [PASS] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. JLL, whose three year net profit margin averages 6.15%, passes this evaluation.   AMTRUST FINANCIAL SERVICES INC Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Amtrust Financial Services, Inc. is an insurance holding company. Through its wholly owned subsidiaries, the Company provides specialty property and casualty insurance focusing on workers' compensation and commercial package coverage for small business, specialty risk and extended warranty coverage, and property and casualty coverage for middle market business. The Company operates through three segments. The Small Commercial Business segment provides workers' compensation and commercial package and other property and casualty insurance products. The Specialty Risk and Extended Warranty segment provides coverage for consumer and commercial goods and custom designed coverages, such as accidental damage plans and payment protection plans. The Specialty Program segment provides workers' compensation, package products, general liability, commercial auto liability, excess and surplus lines programs and other specialty commercial property and casualty insurance. Analysis Guru Score: 75% 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. AFSI's profit margin of 11.64% passes this test. RELATIVE STRENGTH: [PASS] 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. AFSI, with a relative strength of 92, satisfies 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 AFSI (46.83% for EPS, and 16.62% for Sales) are not good enough to pass. INSIDER HOLDINGS: [PASS] AFSI's insiders should own at least 10% (they own 41.25% ) of the company's outstanding shares which is extremely attractive since the minimum requirement is 10%. A high percentage 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. AFSI's free cash flow of $12.70 per share passes this test. PROFIT MARGIN CONSISTENCY: [FAIL] The profit margin in the past must be consistently increasing. The profit margin of AFSI has been inconsistent in the past three years (Current year: 10.92%, Last year: 10.45%, Two years ago: 10.67%), which is unacceptable. This inconsistency will carryover directly to the company's bottom line, or earnings per share. 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 AFSI's case. CASH AND CASH EQUIVALENTS: [PASS] AFSI's level of cash $902.8 million passes this criteria. If a company is a cash generator, like AFSI, 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 (AFSI's is 0.38), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. AFSI passes this test. The following criteria for AFSI are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] AFSI has not been significantly increasing the number of shares outstanding within recent years which is a good sign. AFSI currently has 83.0 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. AFSI's sales of $4,242.8 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: [FAIL] AFSI does not pass the Daily Dollar Volume (DDV of $30.9 million) test. It exceeds the maximum requirement of $25 million. Stocks that fail the test are too liquid for a small individual investor and many institutions have already discovered it. 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. AFSI with a price of $69.15 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] AFSI's income tax paid expressed as a percentage of pretax income either this year (11.38%) or last year (26.70%) 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%).   HERITAGE INSURANCE HOLDINGS INC Profile Strategy: Growth Investor Based on: Martin Zweig Heritage Insurance Holdings, Inc. (Heritage Insurance), formerly Heritage Insurance Holdings, LLC, is a property and casualty insurance holding company. The Company is engaged in providing personal and commercial residential insurance. Through Its subsidiary, Heritage Property & Casualty Insurance Company (Heritage P&C), it provides personal residential insurance for single-family homeowners and condominium owners, rental property insurance and commercial residential insurance in the state of Florida. The Company is vertically integrated and control or manage all aspects of insurance underwriting, actuRoboto analysis, distribution and claims processing, and adjusting. It has approximately 207,000 personal residential policies in force and approximately 2,400 commercial residential policies in force. Analysis Guru Score: 77% P/E RATIO: [PASS] The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. HRTG's P/E is 10.44, 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. HRTG's revenue growth is 163.60%, while it's earnings growth rate is 44.14%, based on the average of the 3 and 4 year historical eps growth rates. Therefore, HRTG 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 (139.6%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (157.9%) of the current year. Sales growth for the prior must be greater than the latter. For HRTG 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. HRTG's EPS ($1.00) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. HRTG's EPS for this quarter last year ($0.27) 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. HRTG's growth rate of 270.37% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [FAIL] Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for HRTG is 22.07%. This should be less than the growth rates for the 3 previous quarters which are -73.19%, 83.33% and 2,066.67%. HRTG does not pass this test, which means that it does not have good, reasonably steady earnings. This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: [PASS] If the growth rate of the prior three quarter's earnings, -15.09%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 270.37%, (versus the same quarter one year ago) then the stock passes. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 270.37% must be greater than or equal to the historical growth which is 44.14%. HRTG 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. HRTG, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.21, 1.14, -0.19, 1.17, and 1.82, 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. HRTG's long-term growth rate of 44.14%, based on the average of the 3 and 4 year historical eps growth rates, passes this test. INSIDER TRANSACTIONS: [PASS] A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For HRTG, this criterion has not been met (insider sell transactions are 47, while insiders buying number 5). 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.   CHART INDUSTRIES, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Chart Industries, Inc. (Chart) is a diversified manufacturer of engineered equipment engineered equipment for the industrial gas, energy, and biomedical industries. The Company's equipment and engineered systems are used for low-temperature and cryogenic applications. It operates through three segments: Energy & Chemicals (E&C), Distribution & Storage (D&S) and BioMedical. Its products include vacuum insulated containment vessels, heat exchangers, cold boxes and other cryogenic components. Its E&C and D&S segments manufacture products used in energy-related and industrial applications, such as the separation, liquefaction, distribution and storage of hydrocarbon and industrial gases. Through its BioMedical segment, it supplies cryogenic and other equipment used in the medical, biological research and animal breeding industries. The Company, through Thermax, Inc., provides cryogenic fluid vaporizers utilized in industrial gas, petro-chemical and liquefied natural gas applications. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: This methodology would consider GTLS a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (11.48) relative to the growth rate (22.31%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for GTLS (0.51) makes it favorable. SALES AND P/E RATIO: [PASS] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth high enough to support a P/E above this threshold. GTLS, whose sales are $1,171.8 million, needs to have a P/E below 40 to pass this criterion. GTLS's P/E of (11.48) is considered acceptable. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for GTLS was 18.09% last year, while for this year it is 18.08%. Since inventory to sales has not changed appreciably, GTLS passes this test. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for GTLS is 22.3%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for GTLS (24.01%) to be acceptable (equity is three to ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for GTLS (6.57%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for GTLS (-11.89%) 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.   SANDERSON FARMS, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Sanderson Farms, Inc. is a poultry processing company which is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared chicken items. In addition, the Company is engaged in the processing, marketing and distribution of prepared chicken through its wholly owned subsidiary, Sanderson Farms, Inc. (Foods Division). It produces a range of processed chicken products and prepared chicken items. It sells ice pack, chill pack, bulk pack and frozen chicken, in whole, cut-up and boneless form, under the Sanderson Farms brand name to retailers, distributors, and casual dining operators in the south-eastern, south-western, north-eastern and western United States and to customers who resell frozen chicken into export markets. During the fiscal year ended October 31, 2013 (fiscal 2013), it processed 452 million chickens, or over 3.0 billion dressed pounds. Analysis Guru Score: 100% PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical (non-Smokestack) companies with Price/Sales ratios below 0.75 are tremendous values and should be sought. SAFM's P/S of 0.55 based on trailing 12 month sales, is below 0.75 which is considered quite attractive. It passes this methodology's P/S ratio test with flying colors. TOTAL DEBT/EQUITY RATIO: [PASS] Less debt equals less risk according to this methodology. SAFM's Debt/Equity of 1.03% is acceptable, thus passing the test. PRICE/RESEARCH RATIO: [PASS] This methodology considers companies in the Technology and Medical sectors to be attractive if they have low Price/Research ratios. SAFM is neither a Technology nor Medical company. Therefore the Price/Research ratio is not available and, hence, not much emphasis should be placed on this particular variable. PRELIMINARY GRADE: Some Interest in SAFM At this Point Is SAFM a "Super Stock"? YES PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical(non-Smokestack) companies with Price/Sales ratios below .75 are tremendous values and should be sought.SAFM's P/S ratio of 0.55 is below .75 which is considered extremely attractive. It passes this methodology's P/S ratio test with flying colors. LONG-TERM EPS GROWTH RATE: [PASS] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. SAFM's inflation adjusted EPS growth rate of 16.60% passes the test. FREE CASH PER SHARE: [PASS] This methodology looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses. This is based on the premise that companies without cash will soon be out of business. SAFM's free cash per share of 4.65 passes this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [PASS] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. SAFM, whose three year net profit margin averages 5.37%, passes this evaluation.   FOOT LOCKER, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Foot Locker, Inc. is a retailer of shoes and apparel. The Company operates in two segments: Athletic Stores and Direct-to-Customers. The Athletic Stores segment is an athletic footwear and apparel retailer whose formats include Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Footaction and SIX:02, as well as the retail stores of Runners Point Group, including Runners Point and Sidestep. The Direct-to-Customers segment includes Footlocker.com, Inc. and other affiliates, including Eastbay, Inc., and the direct-to-customer subsidiary of Runners Point Group, which sell to customers through their Internet and mobile sites and catalogs. As of January 31, 2015, the Company operated 3,423 primarily mall-based stores in the United States, Canada, Europe, Australia and New Zealand. As of January 31, 2015, the Company operated a total of 78 franchised stores, of which 31 are in the Middle East, 27 in Germany and Switzerland, and 20 in the Republic of Korea. 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 ratio between .75 and 1.5 are good values. FL's P/S ratio of 1.36 based on trailing 12 month sales, falls within the "good values" range for non-cyclical companies and is considered attractive. TOTAL DEBT/EQUITY RATIO: [PASS] Less debt equals less risk according to this methodology. FL's Debt/Equity of 5.20% 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. FL 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 FL At this Point Is FL a "Super Stock"? NO PRICE/SALES RATIO: [FAIL] The prospective company should have a low Price/Sales ratio. To be considered a "Super Stock", non-cyclical (non-Smokestack) companies should have Price/Sales ratios below .75. However, FL, who has a P/S of 1.36, does not fall within the "Super Stock" range. It does fall between 0.75 and 1.5, which is considered the "good values" range for non-cyclical companies. Nonetheless, it does not pass this "Super Stock" criterion. LONG-TERM EPS GROWTH RATE: [PASS] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. FL's inflation adjusted EPS growth rate of 39.01% 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. FL's free cash per share of 2.70 passes this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [PASS] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. FL, whose three year net profit margin averages 6.76%, passes this evaluation.   LUMBER LIQUIDATORS HOLDINGS INC Profile Strategy: Value Investor Based on: Benjamin Graham Lumber Liquidators Holdings, Inc. (Lumber Liquidators) is a retailer of hardwood flooring, and hardwood flooring enhancements and accessories in North America. The Company's product categories include Solid and Engineered Hardwood; Laminate; Bamboo, Cork and Vinyl Plank, and Moldings and Accessories. The Company sells its products primarily to homeowners or to contractors on behalf of homeowners. The Company offers wood flooring under18 brand names, led by Bellawood, a collection of solid and engineered hardwood flooring, bamboo flooring, moldings and accessories. The Company also offers a range of flooring enhancements and installation accessories, including moldings, noise-reducing underlay and tools. It offers around 400 different flooring product stock-keeping units. As of February 23, 2015, Lumber Liquidators operated around 354 stores located in 46 states of the United States and nine store locations in Canada. Analysis Guru Score: 100% SECTOR: [PASS] LL 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. LL's sales of $1,061.1 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. LL's current ratio of 2.54 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 LL is $0.0 million, while the net current assets are $221.9 million. LL 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. LL's EPS growth over that period of 436.5% 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. LL's P/E of 12.53 (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. LL's Price/Book ratio is 1.59, while the P/E is 12.53. LL passes the Price/Book test.   APPLE INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Apple Inc. designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players and sells a variety of related software, services, peripherals, networking solutions and third-party digital content and applications. The Company's products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud and a variety of accessory, service and support offerings. The Company offers a range of mobile communication and media devices, personal computing products and portable digital music players, as well as a variety of related software, services, peripherals, networking solutions and third-party hardware and software products. The Company's primary products include iPhone, iPad, Mac, iPod, iTunes, Mac App Store, iCloud, Operating System Software, Application Software and Other Application Software. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider AAPL a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (14.14) relative to the growth rate (28.92%), 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 AAPL (0.49) 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. AAPL, whose sales are $224,337.0 million, needs to have a P/E below 40 to pass this criterion. AAPL's P/E of (14.14) 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 AAPL was 1.03% last year, while for this year it is 1.15%. 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 (0.12%) 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 AAPL is 28.9%, 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 AAPL (43.30%) to be normal (equity is approximately twice debt). 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 AAPL (5.17%) 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: [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 AAPL (-3.16%) 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.   EAGLE BANCORP, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Eagle Bancorp, Inc. is a bank holding company for EagleBank (the Bank). The Bank is the Company's principal operating subsidiary. The Bank is a chartered commercial bank. The Bank operates twenty two banking offices: seven in Montgomery County, Maryland; five located in the District of Columbia, and ten in Northern Virginia. The Bank offers a range of commercial banking services to its business and professional clients, as well as consumer banking services to individuals living or working in the service area. The Bank also provides commercial banking services to sole proprietorships, small, medium and large-sized businesses, partnerships, corporations, non-profit organizations and associations, and investors. The Bank offers a range of retail banking services to accommodate the individual needs of both corporate customers as well as the community the Bank serves. The Bank also offers online banking, mobile banking and a remote deposit service. 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. EGBN's P/E is 21.48, 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: [FAIL] Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. EGBN's revenue growth is 17.82%, while it's earnings growth rate is 24.78%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, EGBN fails this criterion. SALES GROWTH RATE: [PASS] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (38.8%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (34.7%) of the current year. Sales growth for the prior must be greater than the latter. For EGBN 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. EGBN's EPS ($0.60) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. EGBN's EPS for this quarter last year ($0.46) 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. EGBN's growth rate of 30.43% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [FAIL] Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for EGBN is 12.39%. This should be less than the growth rates for the 3 previous quarters which are 9.09%, 18.18% and 6.67%. EGBN does not pass this test, which means that it does not have good, reasonably steady earnings. This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: [PASS] If the growth rate of the prior three quarter's earnings, 11.28%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 30.43%, (versus the same quarter one year ago) then the stock passes. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 30.43% must be greater than or equal to the historical growth which is 24.78%. EGBN would therefore pass this test. EARNINGS PERSISTENCE: [PASS] Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. EGBN, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.77, 1.14, 1.46, 1.76 and 1.95, passes 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. EGBN's long-term growth rate of 24.78%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test. INSIDER TRANSACTIONS: [PASS] A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For EGBN, this criterion has not been met (insider sell transactions are 539, while insiders buying number 133). 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.   SANTANDER CONSUMER USA HOLDINGS INC Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Santander Consumer USA Holdings Inc. is a holding company. The Company is a specialized consumer finance company focused on vehicle finance and unsecured consumer lending products. The Company offers various auto financing products and services to Chrysler customers and dealers under the Chrysler Capital brand. These products and services include consumer retail installment contracts and leases, as well as dealer loans for inventory, construction, real estate, working capital and revolving lines of credit. The Company also originates vehicle loans through a Web-based direct lending program, purchases vehicle retail installment contracts and services automobile and recreational and marine vehicle portfolios for other lenders. Its products and services include vehicle finance, and origination and servicing. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: SC is considered a "True Stalwart", according to this methodology, as its earnings growth of 14.16% lies within a moderate 10%-19% range and its annual sales of $6,319 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. SC is attractive if SC can hold its own during a recession. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for SC (0.54), based on the average of the 3, 4 and 5 year historical eps growth rates, is O.K. EARNINGS PER SHARE: [PASS] The EPS for a stalwart company must be positive. SC's EPS ($2.74) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [NEUTRAL] SC 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. SC's Equity/Assets ratio (11.00%) is 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. SC's ROA (3.07%) 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 SC (-7.49%) 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 SC (-338.65%) 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.   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 UVE UNIVERSAL INSURANCE HOLDINGS, INC. Insurance (Prop. & Casualty) 80 ABMD ABIOMED, INC. Medical Equipment & Supplies 56 TRV TRAVELERS COMPANIES INC Insurance (Prop. & Casualty) 55 GIII G-III APPAREL GROUP, LTD. Apparel/Accessories 53 SSL SASOL LIMITED (ADR) Chemical Manufacturing 51 BOFI BOFI HOLDING, INC. Regional Banks 50 ECHO ECHO GLOBAL LOGISTICS, INC. Trucking 48 PII POLARIS INDUSTRIES INC. Recreational Products 47 CBI CHICAGO BRIDGE & IRON COMPANY N.V. Construction Services 42 REX REX AMERICAN RESOURCES CORP Chemical Manufacturing 42

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