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Executive Summary	November 7, 2014

The Economy Stocks are continuing to bounce back from their early fall doldrums, and more good data from the US economy has been supporting their rebound. Private payroll processor ADP said the private sector added 230,000 jobs in October, the second highest figure of 2014. ADP also revised its September jobs-added estimate from 213,000 to 225,000. The Labor Department is slated to announce its October jobs numbers today, and investors will no doubt be keeping a close eye on the report. New claims for unemployment have declined over the past two weeks, and in the most recent week were an impressive 20% lower than they were in the year-ago period. The four-week moving average of new claims continues to make long-term lows; in the most recent week it was the lowest it has been since April 2000. Continuing claims, the data for which lag new claims by a week, edged very slightly upward since our last newsletter but are 18.9% below year-ago levels. Manufacturing and service sector data also remains strong. The Institute for Supply Management said manufacturing activity increased in October for the 17th straight month, doing so at an accelerating rate. In fact, the rate of increase was tied for the highest monthly reading since March 2011.The sub-indices for new orders and employment both increased, with new orders in particular making a big jump. The prices sub-index, meanwhile, declined rather sharply. It still remained at a level that indicated prices are rising, and given how high the prices sub-index has been, the decline may well be good news. ISM also said the service sector expanded in October for the 57th straight month. The rate of expansion was down for the second straight month since August's record high, but was still at a very strong level. The new orders sub-index and the employment sub-index both remained at high levels. The prices sub-index, which had been quite elevated over the summer, fell but remained at a level indicative of price increases. New home sales, meanwhile, edged higher by 0.2% in September, according to a new government report. While the monthly gain was minor, the year-over-year gain of 22.6% was quite impressive. The latest consumer data from the Commerce Department showed that personal income rose 0.2% in September. Real disposable personal income was flat, while real personal consumption expenditures fell 0.2% as consumers tightened their wallets a bit after increasing expenditures sharply in August. That pushed the personal savings rate higher, to a very solid 5.6%. Gas prices continue to tumble. A gallon of regular unleaded on average cost $2.96 as of Nov. 6, down 33 cents from a month earlier, according to AAA. In an environment in which wage growth has been meager, the gas price declines should give consumers a bit of a boost. Last but not least, after six years, the Federal Reserve announced that it is ending its quantitative easing efforts. Citing "a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program" and "sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability," the Fed decided to end its asset purchase program in October. It is, however, maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities, and of rolling over maturing Treasury securities at auction. In other words, while the Fed won't be buying up huge piles of new bonds, its balance sheet will remain quite large, leaving monetary conditions quite accommodative. Since our last newsletter, the S&P 500 returned 4.1%, while the Hot List returned 4.6%. So far in 2014, the portfolio has returned -12.7% vs. 9.9% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 217.8% vs. the S&P's 103.0% gain. Portfolio Update It's been a good fortnight for both the Hot List and the broader market. As of late morning trading on November 6, eight of the portfolio's ten holdings were in the black, with the two losers down less than 1%. Leading the way were real estate operations firm Jones Lang LaSalle, which was up 10.2%, and Credit Acceptance Corp., which was up 10.1%. Both reported strong earnings, helping drive shares up. Jones Lang LaSalle reported profit of $104.3 million in its third quarter, or $2.30 per share. Earnings, adjusted for amortization costs, were $2.31 per share. Analysts were expecting earnings of $1.77 per share, the Associated Press said. Revenue was $1.37 billion, beating estimates of $1.15 billion. Credit Acceptance, meanwhile, announced consolidated net income of $74.0 million, or $3.38 per diluted share, up from $65.1 million, or $2.75 per diluted share, for the same period in 2013. Total revenue was $181.7 million, up from $172.7 million a year ago. Another big gainer was generic drugmaker Lannett Company, which was up just over 9%. It also reported strong earnings. Fiscal first-quarter net income was $34.9 million, or 94 cents per share, beating analysts' expectations of 83 cents per share, according to AP. It posted net sales of $93.4 million in the period, more than doubling its year-ago net sales. With the economy continuing to improve and a number of its holdings putting up strong earnings results, the Hot List is hopefully turning the corner after a rough first three quarters of 2014. We'll see which of its holdings remain in the portfolio when we rebalance two weeks from now.		Editor-in-Chief: John Reese Since Inception   Hot List 217.8% S&P 500 103.0% Accuracy 54.7% Beta 1.2 YTD   Hot List -12.7% S&P 500 9.9% Since Last Issue   Hot List 4.6% S&P 500 4.1% Avg. Fundamentals   Market Cap (mil) $6,579 PE Ratio 17.1 5 Yr EPS Growth 27.3% Yield 0.6% Rel. Strength 78 Portfolio Sectors Financial 2 Healthcare 2 Services 2 Technology 1 Capital Goods 1 Consumer/Non-Cyclical 1 Energy 1
Have Your Portfolio Managed Using Validea's Investing System Many users know about our research services but are unaware that money management services based on our system are also offered through a separate registered investment advisory firm, Validea Capital Management. If you are thinking about switching advisors or no longer have the time or inclination to manage your investments yourself, find out more about Validea Capital, its portfolio offerings, and its performance below. Request an Investment Consultation Today! ** Validea Capital Management is a separate investment advisory firm managed by Validea.com founder John Reese. The information above is not intended as personal investment advice and should not be interpreted as such. Guru Spotlight: John Neff Most investors wouldn't give a fund described as "relatively prosaic, dull, conservative" a second glance. That, however, is exactly how John Neff described the Windsor Fund that he headed for more than three decades. And, while his style may not have been flashy or eye-catching, the returns he generated for clients were dazzling -- so dazzling that Neff's track record may be the greatest ever for a mutual fund manager. By focusing on beaten down, unloved stocks, Neff was able to find value in places that most investors overlooked. And when the rest of the market caught on to his finds, he and his clients reaped the rewards. Over his 31-year tenure (1964-1995), Windsor averaged a 13.7 percent annual return, beating the market by an average of 3.1 percent per year. Looked at another way, a $10,000 investment in the fund the year Neff took the reins would have been worth more than $564,000 by the time he retired (with dividends reinvested); that same $10,000 invested in the S&P 500 (again with dividends reinvested) would have been worth less than half that after 31 years, about $233,000. That type of track record made the understated, low-key Neff a favorite manager of many other professional fund managers -- an "investor's investor", if you will. How did Neff do it? By focusing first and foremost on value, and a key part of how he found value involved the Price/Earnings Ratio. While others have called him a "contrarian" or "value investor", Neff writes in John Neff on Investing that, "Personally, I prefer a different label: 'low price-earnings investor.' It describes succinctly and accurately the investment style that guided Windsor while I was in charge." To Neff, the P/E ratio was key because it involved expectations. If investors were willing to buy stocks with high P/E ratios, they must be expecting a lot from them, because they are willing to pay more for each dollar of future earnings per share; conversely, if a stock has a low P/E ratio, investors aren't expecting much from it. Much like David Dreman, the great contrarian guru who we examined a few newsletters back, Neff found that stocks with lower P/E ratios -- and lower expectations -- tended to outperform, because any hint of improvement exceeded the low expectations investors had for them. Similarly, stocks with high P/Es often flopped, because even strong results couldn't match investors' expectations. To Neff, however, the P/E wasn't always a lower-is-better ratio. If investors knew that a firm was a dog, they'd rightly avoid its stock, giving it a low P/E ratio but little in the way of future growth prospects. Because of that, he wrote that Windsor targeted stocks with P/E ratios between 40 and 60 percent of the market average. While it was at the heart of his investment philosophy, the P/E ratio was also by no means the only metric Neff used to judge stocks. He wanted to see earnings growth, but here again it was not a case of more-is-better. A stock with too high a growth rate -- more than 20 percent -- could have trouble sustaining that growth over the long haul. He thus preferred to see growth between 7 and 20 percent per year, the kind of steady, unspectacular growth that could be sustained. Sustainable growth also meant growth that was driven by sales -- not one-time gains or cost-cutting measures. Neff thus liked to see companies whose earnings growth and sales growth were rising at similar rates. (My Neff-based model interprets this as sales growth needing to be at least 7 percent per year, or at least 70 percent of EPS growth.) One more key aspect of Neff's strategy involved dividends. He believed that many investors valued stocks strictly on their price appreciation potential, meaning that you can often essentially get their dividend payouts for free. He estimated that about two-thirds of Windsor's 3 percent per year market outperformance during his tenure came from dividends. To make sure that his analysis captured dividend payments, Neff used the Total Return/PE ratio. This measure divides a stock's total return (that is, its EPS growth rate plus its dividend yield) by its P/E ratio. He looked for stocks whose Total Return/PE ratios doubled either the market average or their industry average. In recent years, very few companies have passed all of my Neff-inspired model's tests. In fact, only one stock in the U.S. market currently gets a 100% score on the model. Here's a look at the stocks that currently make up my 10-stock Neff-based portfolio: United Insurance Holdings Corp. (UIHC) Banco Bradesco SA (BBD) Itau Unibanco Holding SA (ITUB) Home Loan Servicing Solutions (HLSS) Starwood Property Trust (STWD) Canadian Imperial Bank of Commerce (CM) ResMed Inc. (RMD) Franklin Resources (BEN) Valero Energy Corporation (VLO) AXIS Capital Holdings Limited (AXS) I began tracking my Neff-based portfolio at the start of 2004, and it's had some significant ups and downs. In the past few years it was mostly downs, but it's started to rebound -- it's my top performer this year, returning 19.0% vs. 8.9% for the S&P 500. All in all, it is averaging annualized returns of 5.7% since inception, just ahead of the S&P 500's 5.6% annualized return (through Nov. 4). Keep in mind that while Neff believed dividends were very important (as do we), our system only can track returns without dividends. Just like Neff himself, the Neff-based model often treads into the most unloved parts of the market. As it was when we last checked in on it in January, the portfolio is heavily concentrated in the financial sector, with seven of its ten holdings being financials. Most of them are dirt-cheap thanks to lingering fears about the economy and financial sector. By treading into such unloved areas, a value-focused strategy can languish for lengthy periods of time, and the Neff-based portfolio has indeed struggled in recent years. But Neff succeeded by staying disciplined, focusing on value, and having the patience to wait for others to recognize the value in his picks. That's what we've tried to do, and in 2014 it has paid off, as investors have begun to recognize the value in the Neff portfolio. Over the long term, I expect the strategy's picks will continue to demonstrate their value. News about Validea Hot List Stocks Zumiez Inc. (ZUMZ): On Nov. 5, Zumiez announced that total net sales for the four-week period ended November 1, 2014 increased 11.7% to $51.7 million, compared to $46.3 million for the year-ago period. The Company's comparable sales increased 3.1% vs. 1.2% for the year-ago period. The news helped Zumiez shares climb 5.5% since our last newsletter (as of late morning trading on November 6). Valero Energy (VLO): On Nov. 4, Valero said third-quarter earnings more than tripled, amid strong results from its refining and ethanol segments, The Wall Street Journal reported. Profit was $1.06 billion, or $2 a share, up from $312 million, or 57 cents a share, a year earlier. Revenue declined 4.8% to $34.41 billion, but was well ahead of the $31.6 billion analysts polled by Thomson Reuters had projected. 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 AFSI AMTRUST FINANCIAL SERVICES INC Insurance (Prop. & Casualty) 98 VLO VALERO ENERGY CORPORATION Oil & Gas Operations 81 ZUMZ ZUMIEZ INC. Retail (Apparel) 74 AGCO AGCO CORPORATION Constr. & Agric. Machinery 66 CACC CREDIT ACCEPTANCE CORP. Consumer Financial Services 61 OVTI OMNIVISION TECHNOLOGIES, INC. Semiconductors 47 LCI LANNETT COMPANY, INC. Biotechnology & Drugs 43 MNST MONSTER BEVERAGE CORP Beverages (Non-Alcoholic) 43 JLL JONES LANG LASALLE INC Real Estate Operations 40 ANIK ANIKA THERAPEUTICS, INC. Biotechnology & Drugs 8 Ticker Market Cap Date Added Start Price Current Price Return AFSI $3,816 10/24/2014 $49.37 $50.47 2.2% VLO $26,525 4/11/2014 $50.96 $50.24 -1.4% ZUMZ $1,024 10/24/2014 $32.97 $35.06 6.3% AGCO $4,187 12/20/2013 $57.62 $44.64 -22.5% CACC $3,150 10/24/2014 $135.39 $152.94 13.0% OVTI $1,561 9/26/2014 $27.02 $27.10 0.3% LCI $1,823 10/24/2014 $49.32 $50.99 3.4% MNST $16,844 10/24/2014 $97.89 $100.48 2.6% JLL $6,270 9/26/2014 $126.57 $139.91 10.5% ANIK $592 5/9/2014 $47.62 $40.90 -14.1%

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 AFSI   |   VLO   |   ZUMZ   |   AGCO   |   CACC   |   OVTI   |   LCI   |   MNST   |   JLL   |   ANIK   |   AMTRUST FINANCIAL SERVICES INC Profile Strategy: Patient Investor Based on: Warren Buffett Amtrust Financial Services, Inc. is a holding company. The Company is a multinational specialty property and casualty insurer focused on generating consistent underwriting profits. The Company operates in four business segments: small commercial business, specialty program and personal lines reinsurance. The Company transacts business through 11 insurance company subsidiaries: Technology Insurance Company, Inc. (TIC), Rochdale Insurance Company (RIC), Wesco Insurance Company (WIC), Associated Industries Insurance Company, Inc. (AIIC), Milwaukee Casualty Insurance Company (MCIC), Security National Insurance Company (SNIC), AmTrust Insurance Company of Kansas, Inc. (AICK) and AmTrust Lloyd's Insurance Company of Texas (ALIC). In December 2013, the Company announced that it its wholly owned subsidiary completed the acquisition of Sagicor Europe Limited. In January 2014, the Company acquired Insco Dico Group. Analysis Guru Score: 77% STAGE 1: "Is this a Buffett type company?" A bedrock principle for Buffett is that his type of company has a "durable competitive advantage" as compared to being a "price competitive" or "commodity" type of business. Companies with a "durable competitive advantage" are more likely to be found in these sub-industries: Brand Name Fast Food Restaurants, Brand Name Beverages, Brand Name Foods, Brand Name Toiletries and Household Products, Brand Name Clothing, Brand Name Prescription Drugs, Advertising, Advertising Agencies, TV, Newspapers, Magazines, Direct Mail, Repetitive Services for Businesses, Low Cost Producers of Insurance, furniture, or Low Cost Retailers. While you should be easily able to explain where the company's pricing power comes from (i.e. a strong regional brand image, a business tollgate, its main products are #1 or # 2 in its field and has been on the market for years and hasn't changed at all, a consumer or business ends up buying the same product many times in a year, etc. or having the lowest production cost among its competition), there are certain figures that one can look at that can qualify the company as having a durable competitive advantage. LOOK FOR EARNINGS PREDICTABILITY: [PASS] Buffett likes companies to have solid, stable earnings that are continually expanding. This allows him to accurately predict future earnings. Annual earnings per share from earliest to most recent were 0.11, 0.73, 0.78, 1.35, 1.24, 1.56, 1.95, 2.29, 2.34, 3.67. Buffett would consider AFSI's earnings predictable, although earnings have declined 1 time(s) in the past seven years, with the most recent decline 6 years ago. The dips have totaled 8.1%. AFSI's long term historical EPS growth rate is 23.8%, based on the average of the 3, 4 and 5 year historical eps growth rates, and it is expected to grow earnings 15.0% per year in the future, based on the analysts' consensus estimated long term growth rate. For the purposes of our analysis, we will use the more conservative of the two EPS growth numbers. LOOK FOR CONSISTENTLY HIGHER THAN AVERAGE RETURN ON EQUITY: [FAIL] Buffett likes companies with above average return on equity of at least 15% or better, as this is an indicator that the company has a durable competitive advantage. US corporations have, on average, returned about 12% on equity over the last 30 years. The average ROE for AFSI, over the last ten years, is 19.2%, which is high enough to pass. It is not enough that the average be at least 15%. For each of the last 10 years, with the possible exception of the last fiscal year, the ROE must be at least 10% for Buffett to feel comfortable that the ROE is consistent. In addition, the average ROE over the last 3 years must also exceed 15%. The ROE for the last 10 years, from earliest to latest, is 6.1%, 40.6%, 15.2%, 22.8%, 20.9%, 17.9%, 17.8%, 17.0%, 15.1%, 19.1%, and the average ROE over the last 3 years is 17.1%, thus failing this criterion. LOOK FOR CONSISTENTLY HIGHER THAN AVERAGE RETURN ON ASSETS: [PASS] Buffett also requires, for financial companies, that the average Return On Assets (ROA) be at least 1% and consistent. Return On Assets is defined as the net earnings of the business divided by the total assets of the business. The average ROA for AFSI, over the last ten years, is 3.3%, which is high enough to pass. It is not enough that the average be at least 1%. For each of the last 10 years, with the possible exception of the last fiscal year, the ROA must be at least 1% for Buffett to feel comfortable that the ROA is consistent. The ROA for the last 10 years, from earliest to latest, is 1.4%, 7.8%, 4.2%, 3.8%, 2.6%, 3.0%, 3.1%, 2.6%, 2.3%, 2.4%, thus passing this criterion. LOOK AT CAPITAL EXPENDITURES: [PASS] Buffett likes companies that do not have major capital expenditures. That is, he looks for companies that do not need to spend a ton of money on major upgrades of plant and equipment or on research and development to stay competitive. AFSI's free cash flow per share of $10.80 is positive, indicating that the company is generating more cash that it is consuming. This is a favorable sign, and so the company passes this criterion. LOOK AT MANAGEMENT'S USE OF RETAINED EARNINGS: [PASS] Buffett likes to see if management has spent retained earnings in a way that benefits shareholders. To figure this out, Buffett takes the total amount of retained earnings over the previous ten years of $14.19 and compares it to the gain in EPS over the same period of $3.56. AFSI's management has proven it can earn shareholders a 25.1% return on the earnings they kept. This return is more than acceptable to Buffett. Essentially, management is doing a great job putting the retained earnings to work. HAS THE COMPANY BEEN BUYING BACK SHARES: [NEUTRAL] Buffett likes to see falling shares outstanding, which indicates that the company has been repurchasing shares. This indicates that management has been using excess capital to increase shareholder value. AFSI's shares outstanding have not fallen in either the current year or the last 3 or 5 years and so it fails this criterion. This is a bonus criterion and will not adversely affect the ability of a stock to pass the strategy as a whole if it is failed. The preceding concludes Buffett's qualitative analysis. If and when he gets positive responses to all the above criteria, he would then proceed with a price analysis. The price analysis will determine whether or not the stock should be bought. The following is how he would evaluate AFSI quantitatively. STAGE 2: "Should I buy at this price?" Although a firm may be a Buffett type company, he won't invest in it unless he can get a favorable price that allows him a great long term return. CALCULATE THE INITIAL RATE OF RETURN: [No Pass/Fail] Buffett compares his type of stocks to bonds, and likes to see what a company's initial rate of return is. To calculate the initial rate of return, take the trailing 12-month EPS of $5.39 and divide it by the current market price of $50.47. An investor, purchasing AFSI, could expect to receive a 10.68% initial rate of return. Furthermore, he or she could expect the rate to increase 15.0% per year, based on the analysts' consensus estimated long term growth rate, as this is how fast earnings are growing. COMPARE THE INITIAL RATE OF RETURN WITH THE LONG-TERM TREASURY YIELD: [PASS] Buffett favors companies in which the initial rate of return is around the long-term treasury yield. Nonetheless, he has invested in companies with low initial rates of return, as long as the yield is expected to expand rapidly. Currently, the long-term treasury yield is about 2.75%. Compare this with AFSI's initial yield of 10.68%, which will expand at an annual rate of 15.0%, based on the analysts' consensus estimated long term growth rate. The company is the better choice, as the initial rate of return is close to or above the long term bond yield and is expanding. CALCULATE THE FUTURE EPS: [No Pass/Fail] AFSI currently has a book value of $18.24. It is safe to say that if AFSI can preserve its average rate of return on equity of 17.1% and continues to retain 89.50% of its earnings, it will be able to sustain an earnings growth rate of 15.3% and it will have a book value of $75.54 in ten years. If it can still earn 17.1% on equity in ten years, then expected EPS will be $12.89. CALCULATE THE FUTURE STOCK PRICE BASED ON THE AVERAGE ROE METHOD: [No Pass/Fail] Now take the expected future EPS of $12.89 and multiply them by the lower of the 5 year average P/E ratio or current P/E ratio (9.4) (5 year average P/E in this case), which is 8.7 and you get AFSI's projected future stock price of $111.86. CALCULATE THE EXPECTED RATE OF RETURN BASED ON THE AVERAGE ROE METHOD: [No Pass/Fail] Now add in the total expected dividend pool to be paid over the next ten years, which is $13.21. This gives you a total dollar amount of $125.07. These numbers indicate that one could expect to make a 9.5% average annual return on AFSI's stock at the present time. The return is unacceptable to Buffett. CALCULATE THE EXPECTED FUTURE STOCK PRICE BASED ON AVERAGE EPS GROWTH: [No Pass/Fail] If you take the EPS growth of 15.0%, based on the analysts' consensus estimated long term growth rate, you can project EPS in ten years to be $21.81. Now multiply EPS in 10 years by the lower of the 5 year average P/E ratio or current P/E ratio (9.4) (5 year average P/E in this case), which is 8.7. This equals the future stock price of $189.27. Add in the total expected dividend pool of $13.21 to get a total dollar amount of $202.48. CALCULATE THE EXPECTED RETURN USING THE AVERAGE EPS GROWTH METHOD: [No Pass/Fail] Now you can figure out your expected return based on a current price of $50.47 and the future expected stock price, including the dividend pool, of $202.48. If you were to invest in AFSI at this time, you could expect a 14.90% average annual return on your money. Buffett likes to see a 15% return, but nonetheless would accept this return. LOOK AT THE RANGE OF EXPECTED RATE OF RETURN: [PASS] Based on the two different methods, you could expect an annual compounding rate of return somewhere between 9.5% and 14.9%. To pinpoint the average return a little better, we have taken an average of the two different methods. Investors could expect an average return of 12.2% on AFSI stock for the next ten years, based on the current fundamentals. Buffett likes to see a 15% return, but nonetheless would accept this return, thus passing the criterion.   VALERO ENERGY CORPORATION Profile Strategy: Contrarian Investor Based on: David Dreman Valero Energy Corporation (Valero) is an independent petroleum refining and marketing company. Valero's refineries can produce conventional gasoline's, distillates, jet fuel, asphalt, petrochemicals, lubricants, and other refined products, as well as a slate of premium products, including conventional blendstock for oxygenate blending and reformulated gasoline blendstock for oxygenate blending, gasoline meeting the specifications of the California Air Resources Board, a diesel fuel, and low-sulfur and ultra-low-sulfur diesel fuel. It also owns 10 ethanol plants in the central plains region of the United States with a combined ethanol nameplate production capacity of about 1.1 billion gallons per year. It operates in three business segments: refining, ethanol, and retail. In May 2013, CST Brands Inc announced that the Company which includes Corner Store and Depanneur du Coin, spun off from Valero Energy Corporation. Analysis Guru Score: 76% 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. VLO has a market cap of $26,525 million, therefore passing the test. EARNINGS TREND: [PASS] A company should show a rising trend in the reported earnings for the most recent quarters. VLO's EPS for the past 2 quarters, (from earliest to most recent quarter) 1.22, 2.00 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. VLO passes this test as its EPS growth rate over the past 6 months (29.87%) has beaten that of the S&P (8.81%). VLO's estimated EPS growth for the current year is (16.73%), which indicates the company is expected to experience positive earnings growth. As a result, VLO passes this test. This methodology would utilize four separate criteria to determine if VLO 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. VLO's P/E of 7.05, based on trailing 12 month earnings, meets the bottom 20% criterion (below 12.27), 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. VLO's P/CF of 4.78 meets the bottom 20% criterion (below 7.30) 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. VLO's P/B is currently 1.37, which does not meet the bottom 20% criterion (below 1.00), 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%). VLO's P/D of 45.66 does not meet the bottom 20% criterion (below 20.62), and it therefore fails this test. 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 [1.18] or greater than 2). This is one identifier of financially strong companies, according to this methodology. VLO's current ratio of 1.47 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 VLO is 10.01%, while its historical payout ratio has been 15.43%. Therefore, it passes the payout criterion. RETURN ON EQUITY: [FAIL] 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 largest cap stocks, which is 17.18%, and would consider anything over 27% to be staggering. The ROE for VLO of 13.65% is not high enough to pass this criterion. PRE-TAX PROFIT MARGINS: [FAIL] This methodology looks for pre-tax profit margins of at least 8%, and considers anything over 22% to be phenomenal. VLO's pre-tax profit margin is 4.11%, thus failing this criterion. YIELD: [FAIL] The company in question should have a yield that is high and that can be maintained or increased. VLO's current yield is 2.19%, while the market yield is 2.56%. VLO fails this test. LOOK AT THE TOTAL DEBT/EQUITY: [PASS] The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry of 39.77%. VLO's Total Debt/Equity of 33.73% is considered acceptable.   ZUMIEZ INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Zumiez Inc. (Zumiez) is a specialty retailer of action sports related apparel, footwear, equipment and accessories operating under the Zumiez brand name. As of January 28, 2012, the Company operated 434 stores in the United States and 10 stores in Canada. In addition, the Company operates a Website that sells merchandise online. At January 28, 2012, its stores averaged approximately 2,900 square feet. Its apparel offerings include tops, bottoms, outerwear and accessories, such as caps, bags and backpacks, belts, jewelry and sunglasses. Zumiez's footwear offerings primarily consist of action sports related athletic shoes and sandals. Its equipment offerings, or hardgoods, include skateboards, snowboards and ancillary gear, such as boots and bindings. The Company also offers a selection of other items, such as miscellaneous novelties. Analysis Guru Score: 100% MARKET CAP: [PASS] The first requirement of the Cornerstone Growth Strategy is that the company has a market capitalization of at least $150 million. This will screen out the companies that are too illiquid for most investors, but still include a small growth company. ZUMZ, with a market cap of $1,024 million, passes this criterion. EARNINGS PER SHARE PERSISTENCE: [PASS] The Cornerstone Growth methodology looks for companies that show persistent earnings growth without regard to magnitude. To fulfill this requirement, a company's earnings must increase each year for a five year period. ZUMZ, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 0.30, 0.79, 1.20, 1.35 and 1.52, passes this test. PRICE/SALES RATIO: [PASS] The Price/Sales ratio should be below 1.5. This value criterion, coupled with the growth criterion, identify growth stocks that are still cheap to buy. ZUMZ's Price/Sales ratio of 1.35, based on trailing 12 month sales, passes this criterion. RELATIVE STRENGTH: [PASS] The final criterion for the Cornerstone Growth Strategy requires that the Relative Strength of the company be among the top 50 of the stocks screened using the previous criterion. This gives you the opportunity to buy the growth stocks you are searching for just as the market is embracing them. ZUMZ, whose relative strength is 74, is in the top 50 and would pass this last criterion.   AGCO CORPORATION Profile Strategy: Value Investor Based on: Benjamin Graham AGCO Corporation (AGCO) is a manufacturer and distributor of agricultural equipment and related replacement parts globally. The Company sells a range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment and implements. It also manufactures and distributes grain storage and handling equipment systems, as well as protein production systems. Its products are recognized in the agricultural equipment industry and are marketed under a range of brands, including Challenger, Fendt, Massey Ferguson and Valtra. The Company distributes its products through a combination of approximately 3,100 independent dealers and distributors in more than 140 countries. In September 2013, Grain Systems, Inc. (GSI), a global brand of the Company announced that it has purchased Johnson System Inc. (JSI), manufacturer of catwalks, towers and support structures based in Marshall, Michigan. Analysis Guru Score: 86% SECTOR: [PASS] AGCO 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. AGCO's sales of $10,098.2 million, based on trailing 12 month sales, pass this test. CURRENT RATIO: [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. AGCO's current ratio of 1.78 fails 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 AGCO is $1,332.8 million, while the net current assets are $1,841.8 million. AGCO 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. AGCO's EPS growth over that period of 467.8% 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. AGCO's P/E of 9.13 (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. AGCO's Price/Book ratio is 1.12, while the P/E is 9.13. AGCO passes the Price/Book test.   CREDIT ACCEPTANCE CORP. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Credit Acceptance Corporation (Credit Acceptance) is a provider of auto loans to consumers. The Company offers auto loans and related products and services to consumers through its network of Dealer-Partners. It refers to dealers who participate in the Company's programs as Dealer-Partners. Credit Acceptance has two programs: the Portfolio Program and the Purchase Program. Under the Portfolio Program, it advances money to Dealer-Partners (referred to as a Dealer Loan) in exchange for the right to service the underlying Consumer Loans. Under the Purchase Program, Credit Acceptance buys the Consumer Loans from the Dealer-Partners (referred to as a Purchased Loan) and keeps all amounts collected from the consumer. Dealer Loans and Purchased Loans are collectively referred to as Loans. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider CACC a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (13.47) relative to the growth rate (27.66%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for CACC (0.49) is very favorable. SALES AND P/E RATIO: [NEUTRAL] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. CACC, whose sales are $713.7 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for CACC is 27.7%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is acceptable. TOTAL DEBT/EQUITY RATIO: [NEUTRAL] CACC is a financial company so debt to equity rules are not applied to determine the company's financial soundness. EQUITY/ASSETS RATIO: [PASS] This methodology uses the Equity/Assets Ratio as a way to determine a financial intermediary's health, as it is a better measure than the Debt/Equity Ratio. CACC's Equity/Assets ratio (27.00%) is extremely healthy and above the minimum 5% this methodology looks for, thus passing the criterion. RETURN ON ASSETS: [PASS] This methodology uses Return on Assets as a way to measure a financial intermediary's profitability. CACC's ROA (10.14%) 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 CACC (8.72%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for CACC (-49.21%) 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.   OMNIVISION TECHNOLOGIES, INC. Profile Strategy: Growth Investor Based on: Martin Zweig OmniVision Technologies, Inc. (OmniVision) designs, develops and markets integrated and semiconductor image-sensor devices. The Company's main products, image-sensing devices, which the Company refers to as CameraChip image sensors, capture an image electronically and is used in a number of consumer and commercial mass-market applications. The Company's CameraChip image sensors are manufactured using the complementary metal oxide semiconductor (CMOS), fabrication process and are single-chip solutions that integrate several distinct functions, including image capture, image processing, color processing, signal conversion and output of a fully processed image or video stream. The Company has also integrated its CameraChip image sensors with wafer-level optics, which the Company refers to as CameraCubeChip imaging devices. The Company's CameraCubeChip imaging device is a small footprint, total camera solution. 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. OVTI's P/E is 13.13, 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. OVTI's revenue growth is 19.72%, while it's earnings growth rate is 42.07%, based on the average of the 3 and 4 year historical eps growth rates. Therefore, OVTI 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 (8.8%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (-1.6%) of the current year. Sales growth for the prior must be greater than the latter. For OVTI 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. OVTI's EPS ($0.78) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. OVTI's EPS for this quarter last year ($0.42) 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. OVTI's growth rate of 85.71% 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 OVTI is 21.03%. This should be less than the growth rates for the 3 previous quarters, which are 147.37%, 35.00%, and 68.75%. OVTI 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, 70.67%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 85.71%, (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, 85.71% must be greater than or equal to the historical growth which is 42.07%. OVTI 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. OVTI, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.13, 2.11, 1.13, 0.80, and 1.70, 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. OVTI's long-term growth rate of 42.07%, 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. OVTI's Debt/Equity (3.42%) is not considered high relative to its industry (39.42%) 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 OVTI, this criterion has not been met (insider sell transactions are 184, while insiders buying number 69). Despite the fact that insider sells out number insider buys for this company, Zweig considers even one insider buy transaction enough to prevent an insider sell signal, therefore there is not an insider sell signal and the stock passes this criterion.   LANNETT COMPANY, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Lannett Company, Inc. is engaged in developing, manufacturing, marketing and distributing generic versions of branded pharmaceutical products. All of the Company's products manufactured and/or sold are prescription products. The Company's products containing Levo are produced and marketed with 12 varying potencies. In addition to generic Levo tablets, the Company also markets and distributes Unithroid tablets, a branded version of Levo, which is produced and marketed with 11 varying potencies. The Company's Levo tablets are used to treat hypothyroidism and other thyroid disorders. The Company's generic Levo tablets and Unithroid tablets are manufactured by Jerome Stevens Pharmaceuticals (JSP). As of June 30, 2012, the Company manufactured and/or distributed 30 products. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider LCI a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (18.85) relative to the growth rate (47.15%), based on the average of the 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for LCI (0.40) is very favorable. SALES AND P/E RATIO: [NEUTRAL] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. LCI, whose sales are $321.3 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for LCI was 21.54% last year, while for this year it is 16.38%. Since inventory to sales has decreased from last year by -5.16%, LCI passes this test. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for LCI is 47.2%, based on the average of the 4 and 5 year historical eps growth rates, which is considered 'OK'. However, it may be difficult to sustain such a high growth rate. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for LCI (0.33%) to be exceptionally low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for LCI (1.06%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for LCI (7.70%) 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.   MONSTER BEVERAGE CORP Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Monster Beverage Corporation is a holding company. The Company develops, markets, sells and distributes alternative beverage, such as non-carbonated ready-to-drink iced teas, lemonades, juice cocktails, single-serve juices and fruit beverages, ready-to-drink dairy and coffee drinks, energy drinks, sports drinks, and single-serve still water (flavored and unflavored) with beverages, including sodas that are considered natural, sparkling juices and flavored sparkling beverages. It has two reportable segments, namely Direct Store Delivery (DSD), whose principal products comprise energy drinks, and Warehouse (Warehouse), whose principal products comprise juice-based and soda beverages. The DSD segment develops, markets and sells products primarily through an exclusive distributor network. The Warehouse segment develops, markets and sells products directly to retailers. Analysis Guru Score: 72% 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. MNST's profit margin of 17.18% 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. MNST, with a relative strength of 91, 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 MNST (32.79% for EPS, and 8.92% for Sales) are not good enough to pass. INSIDER HOLDINGS: [PASS] MNST's insiders should own at least 10% (they own 16.76% ) of the company's outstanding shares which is the minimum required. A high percentage typically indicates that the insiders are confident that the company will do well. CASH FLOW FROM OPERATIONS: [PASS] A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. MNST's free cash flow of $1.74 per share passes this test. PROFIT MARGIN CONSISTENCY: [FAIL] The profit margin in the past must be consistently increasing. The profit margin of MNST has been inconsistent in the past three years (Current year: 15.08%, Last year: 16.50%, Two years ago: 16.80%), 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 MNST's case. CASH AND CASH EQUIVALENTS: [PASS] MNST's level of cash $613.6 million passes this criteria. If a company is a cash generator, like MNST, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash. INVENTORY TO SALES: [PASS] This methodology strongly believes that companies, especially small ones, should have tight control over inventory. It's a warning sign if a company's inventory relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Inventory to Sales for MNST was 9.86% last year, while for this year it is 9.86%. Since the inventory to sales has been flat, MNST passes this test. ACCOUNT RECEIVABLE TO SALES: [PASS] This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for MNST was 11.49% last year, while for this year it is 13.18%. Although the AR to sales is rising, it is below the max 30% that is allowed. The investor can still consider the stock if all other criteria appear very attractive. LONG TERM DEBT/EQUITY RATIO: [PASS] MNST's trailing twelve-month Debt/Equity ratio (0.00%) is at a great level according to this methodology because the superior companies that you are looking for don't need to borrow money in order to grow. "THE FOOL RATIO" (P/E TO GROWTH): [FAIL] The "Fool Ratio" is an extremely important aspect of this analysis. The methodology says consider shorting shares when the company's Fool Ratio is greater than 1.30. MNST's PEG Ratio of 2.04 is excessively high. The following criteria for MNST are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] MNST has not been significantly increasing the number of shares outstanding within recent years which is a good sign. MNST currently has 174.0 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. MNST's sales of $2,354.6 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] MNST does not pass the Daily Dollar Volume (DDV of $177.7 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. MNST with a price of $100.48 passes the price test, even though it doesn't fall in the preferred range. The price should be above $7 in order to eliminate penny stocks and below $20 since most stocks in this price range are undiscovered by the institutions. INCOME TAX PERCENTAGE: [PASS] MNST's income tax paid expressed as a percentage of pretax income this year was (39.94%) and last year (38.08%) are greater than 20% which is an acceptable level. If the tax rate is below 20% this could mean that the earnings that were reported were unrealistically inflated due to the lower level of income tax paid. This is a concern.   JONES LANG LASALLE INC Profile Strategy: Growth Investor Based on: Martin Zweig Jones Lang LaSalle Incorporated (Jones Lang LaSalle), is a financial and professional services firm specializing in real estate. Jones Lang LaSalle has over 200 corporate offices worldwide and operations in more than 1,000 locations in 70 countries. The Company offers integrated real estate and investment management services on a local, regional and global basis to owner, occupier and investor clients. It delivers an array of Real Estate Services (RES) across its three geographic business segments: the Americas, Europe, Middle East and Africa (EMEA), and Asia Pacific. LaSalle Investment Management, a wholly owned member of the Jones Lang LaSalle group that consists of its fourth business segment, is a diversified real estate investment management company. In July 2014, Jones Lang LaSalle Inc acquired CLEO Construction Management (CLEO), a construction project management services firm that specializes in medical facilities. Analysis Guru Score: 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. JLL's P/E is 18.64, 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. JLL's revenue growth is 12.77%, while it's earnings growth rate is 19.60%, based on the average of the 3 and 5 year historical eps growth rates. Therefore, JLL fails 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 (23.4%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (29.1%) of the current year. Sales growth for the prior must be greater than the latter. For JLL 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. JLL's EPS ($2.30) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. JLL's EPS for this quarter last year ($1.40) 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. JLL's growth rate of 64.29% 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 JLL is 9.80%. This should be less than the growth rates for the 3 previous quarters, which are 36.97%, 20.69%, and 54.90%. JLL 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, 40.65%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 64.29%, (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, 64.29% must be greater than or equal to the historical growth which is 19.60%. JLL 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. JLL, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were -0.11, 3.48, 3.70, 4.63 and 5.98, 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. JLL's long-term growth rate of 19.60%, based on the average of the 3 and 5 year historical eps growth rates, passes this test. TOTAL DEBT/EQUITY RATIO: [PASS] A final criterion is that a company must not have a high level of debt. A high level of total debt, due to high interest expenses, can have a very negative effect on earnings if business moderately turns down. If a company does have a high level, an investor may want to avoid this stock altogether. JLL's Debt/Equity (24.46%) is not considered high relative to its industry (157.66%) 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 JLL, this criterion has not been met (insider sell transactions are 195, while insiders buying number 207). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion.   ANIKA THERAPEUTICS, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Anika Therapeutics, Inc. (Anika) develops, manufactures and commercializes therapeutic products for tissue protection, healing and repair. These products are based on hyaluronic acid (HA), a naturally occurring, biocompatible polymer found throughout the body. As of December 31, 2011, Anika's wholly owned subsidiary, Anika Therapeutics S.r.l., had over 20 products commercialized, primarily in Europe. These products are also all made from hyaluronic acid, based on two technologies: HYAFF, which is a solid form of HA, and ACP gel, an autocross-linked polymer of HA. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider ANIK a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (16.96) relative to the growth rate (46.96%), 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 ANIK (0.36) is very favorable. SALES AND P/E RATIO: [NEUTRAL] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. ANIK, whose sales are $103.6 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. 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 ANIK was 11.60% last year, while for this year it is 14.65%. 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 (3.05%) 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 ANIK is 47.0%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered 'OK'. However, it may be difficult to sustain such a high growth rate. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for ANIK (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 ANIK (4.08%) 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 ANIK (10.32%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.   Watch List The Watch List contains the highest scoring stocks according to our guru consensus system that are not currently in the Hot List portfolio. We provide this list both for informational purposes and for investors who are not comfortable with a portfolio of ten stocks. Ticker Company Name Industry Guru Score UVE UNIVERSAL INSURANCE HOLDINGS, INC. Insurance (Prop. & Casualty) 79 PJC PIPER JAFFRAY COMPANIES Investment Services 66 FL FOOT LOCKER, INC. Retail (Apparel) 52 SIMO SILICON MOTION TECHNOLOGY CORP. (ADR) Semiconductors 49 CBI CHICAGO BRIDGE & IRON COMPANY N.V. Construction Services 44 RGR STURM, RUGER & COMPANY Recreational Products 44 SSL SASOL LIMITED (ADR) Chemical Manufacturing 43 HIBB HIBBETT SPORTS, INC. Retail (Specialty) 41 PII POLARIS INDUSTRIES INC. Recreational Products 39 VDSI VASCO DATA SECURITY INTERNATIONAL, INC. Software & Programming 38

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