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Executive Summary	January 18, 2013

The Economy With fiscal cliff fears behind us, a new fear is now worrying investors: a potential debt ceiling imbroglio. But, just as it did amid the fiscal cliff fears, the economy continues to improve despite the worries. Case in point: Housing starts jumped 12.1% in December, putting them 44% above their year-ago level, according to a new government report. Permit issuance for new homes, meanwhile, rose slightly, gaining 0.3% for the month. They are now 24% above year-ago levels. (Here and below, all month-over-month or week-over week figures are seasonally adjusted; year-over-year numbers are not.) The December jobs report was also pretty good. It showed that the private sector added 168,000 jobs during the month. That brought the total number of private sector jobs added in 2012 to about 2 million, or 160,000 or so a month. That's not tremendous job growth by any means, but it's a continuation of the slow and steady improvement we've seen over the past couple years. The unemployment rate ended 2012 at 7.8%, 0.7 percentage points below where it ended 2011. The so-called "U-6" rate, which unlike the headline figure includes part-time workers who want a full-time job and those who have given up looking for work, was unchanged in December at a still-high 14.4%. It dipped nearly a full percentage point in 2012 however, another sign that things are going in the right direction. Industrial production, meanwhile, increased 0.3% in December, according to a new Federal Reserve report. The gains came despite a 4.8% drop in utility output, which was due to unseasonably warm weather. Manufacturing output increased 0.8%, while mining output rose 0.6%. Production of business equipment was particularly strong for the second straight month, increasing 1.3%. Good news also came from the service sector, which expanded for the 36th straight month, according to the Institute for Supply Management. And it did so at an accelerating pace: ISM's service sector index in December notched its highest reading since February, and its employment and new orders sub-indices also both were at their highest levels in several months. The Federal Reserve also recently released the latest data on Americans' Debt Service Ratio (which looks at debt obligations as a percentage of disposable personal income), and the news was quite good. For the third quarter, the DSR came in at 10.61% -- the lowest it has been since the fourth quarter of 1983. When the Great Recession hit in late 2007, the figure was all the way up over 14%. Consumers, who saw a big rise in personal income in November, increased their spending at a healthy level in December. Retail and food service sales were up 0.5% for the month. However, the year-over-year non-seasonally-adjusted gain was just 2.5%, less than half of what it had been in the previous two months. Since our last newsletter, the S&P 500 returned 1.5%, while the Hot List returned 3.2%. So far in 2013, the portfolio has returned 6.5% vs. 3.8% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 188.8% vs. the S&P's 48.0% gain. Fear Factor The 2013 year has started off with a bang for investors, with the S&P 500 already up about 4% (through yesterday). In many cases, a 4% gain over two weeks would be a sign that investors are feeling pretty good about things. Not so with this 4% gain, however. Clouds continue to hover over the investment world -- some fear that the U.S. debt ceiling battle won't be resolved, causing America to default on its debt for the first time ever; some say earnings estimates are still too high, and that growth is going to grind to a halt at some point this year; and some fear that turmoil in the Middle East will jolt markets sometime soon. Those issues are all legitimate and must be dealt with. But, frankly, from an investment perspective, their presence is probably a bullish factor. All you have to do is look at the past few years to understand why. Since 2008, the financial world has jumped from fears of a global economic and financial system collapse, to fears of Middle East turmoil causing major oil market disruptions, to fears of a Eurozone demise, to fears of a U.S. default, to fears of the U.S. fiscal cliff, and now back to fears of a U.S. default. And, while all of those issues were serious ones, each time the fear turned out to be worse than the reality. We have not fallen into a depression; the Eurozone has not collapsed; the U.S. did not belly flop off the fiscal cliff. In fact, things have improved quite a bit in recent years. Unemployment has fallen from a peak of 10% down to 7.8%; the service sector has expanded every month for the past three years; housing starts are way up, as are home prices; and the stock market is up nearly 120% from its March 2009 low. Fears being worse than reality isn't anything new in the investment world. We humans are emotional creatures, and we tend to overreact to news (both on the downside and the upside. And in late 2008 and early 2009, things got so scary that many have become particularly prone to thinking that the worst is going to happen whenever problems emerge. The media doesn't help -- doom and gloom has been dominating the headlines for years now, drowning out the many positive signs that have emerged. Having been caught with their pants down when the 2008 crisis hit, I think most news outlets are leaning toward the negative side, fearing that they will lose more credibility if they fail to see another crisis coming. Plus, let's face it: Negative news attracts more viewers and readers. But remember, fear is an investor's ally. Warren Buffett has famously said that "if [investors] insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful." His fellow investing great, Peter Lynch, has also stressed the importance of not giving into fear, once saying that "the real key to making money in stocks is not to get scared out of them." That advice goes for both the broader market, and individual stocks. In a September 2011 interview on CNBC, Joel Greenblatt, another of the great investors upon whom I base my strategies, explained the common thread among the companies that his quantitative system tends to target: "Each one of those companies is hated brutally by people," he said. At the time, Greenblatt was very bullish on stocks, even though the marketplace was filled with fear. "It's a very scary time to invest," he said, "and that's when you get your best bargains." In the 16 months since that interview, the S&P 500 is up about 26%. The Hot List has often benefited from other investors' fears over the years. Perhaps most recently, it did so with its pick of Nu Skin Enterprises. Nu Skin shares were been pummeled for much of 2012, taking a particularly big hit in December. Part of the reason probably involved the fact that it's a more economically sensitive small-cap, the sort of stock hit hard by the fiscal cliff/recession fears. Part of it was also probably the fact that Nu Skin is a similar business to Herbalife, a firm that hedge fund guru David Einhorn recently said he is extremely bearish on. Nu Skin was likely thus hurt by guilt by association. But the Hot List was more focused on Nu Skin's fundamentals, which were quite good when it added the firm to the portfolio on Dec. 21. Since then, its shares have rebounded forcefully, gaining about 35%. On today's rebalancing, the Hot List is selling Nu Skin and three other positions and replacing them with four new stocks that now rate higher. This new quartet has its fair share of clouds hanging over it. Three of the stocks -- Hibbett Sports, rue21, and Guess? -- are retailers. And with the debt ceiling issue and other economic concerns dogging investors, many fear retailers -- which have excelled since the March 2009 bottom -- have come to the end of their run. But look at the numbers: Guess? has upped earnings per share in 8 of the past 10 years. Hibbett has done so in 9 of the last 10. Rue21 has done so in all 10. All of them increased EPS in 2008 and 2009, when the Great Recession was occurring. Together, the three companies are averaging a return on equity of nearly 20% over the past 10 years. Among them, they have a total of just $8.7 million in debt, and more than $1 billion in net current assets. Those are some great fundamentals. But because of the economic fears, the prices of these three stocks are quite reasonable. The fourth addition to the portfolio, meanwhile, is downright dirt-cheap. Despite having about five times as much annual earnings as debt and $3.85 in free cash flow per share, Northrop Grumman shares trade for 8.6 times trailing 12-month EPS, 9 times projected 12-month EPS, and 0.65 times sales. The reason? The big budget cuts that would go into effect if Congress and the President can't reach a compromise on the budget aspects of the fiscal cliff, which weren't addressed by the deal reached earlier this month. Budget cuts, with or without a deal, are no doubt a legitimate threat, but current estimates for Grumman in 2013 already include a significant profit cut. In fact, even if profits fell by 40% in 2013, at its current price Grumman would be trading at a very reasonable P/E of about 15. Investors certainly seem to be overreacting. All in all, fears may not be as intense right now as they've been at other points in the past four years. They remain, however, and no doubt will wax and wane at different points in 2013. But fear in and of itself isn't a reason to sell a stock or jump out of the market altogether. Good investors have rational, systematic approaches that determine when to sell, or when to lighten up on an asset class. And, after more than a dozen years studying history's most successful investors, I can tell you this: Far more often than not, the greatest strategists saw times of fear, or stocks that were feared, as some of the biggest sources of opportunity. However events unfold in 2013, that's something to keep in the forefront of your mind.		Editor-in-Chief: John Reese Since Inception   Hot List 188.8% S&P 500 48.0% Accuracy 56.5% Beta 1.2 YTD   Hot List 6.5% S&P 500 3.8% Since Last Issue   Hot List 3.2% S&P 500 1.5% Avg. Fundamentals   Market Cap (mil) $23,303 PE Ratio 14.3 5 Yr EPS Growth 17.5% Yield 1.5% Rel. Strength 64 Portfolio Sectors Services 6 Technology 1 Capital Goods 1 Conglomerates 1 Financial 1
Advertisement Validea Capital Management - Private Portfolio Management Based on Strategies of Legends Are you looking for an alternative to your underperforming mutual funds or financial advisor? Click here to download Validea Capital's investment kit and learn more about the firm's guru-based portfolios. Get More Information on Validea Capital! ** Validea Capital Management is a separate investment advisory firm managed by Validea.com founder John Reese. Thre information above in not intended as personal investment advice and should not be interpreted as such. The Fallen As we rebalance the Validea Hot List, 4 stocks leave our portfolio. These include: Statoil Asa(Adr) (STO), Nu Skin Enterprises, Inc. (NUS), Western Digital Corp. (WDC) and Hollyfrontier Corp (HFC). The Keepers 6 stocks remain in the portfolio. They are: Oracle Corporation (ORCL), Ross Stores, Inc. (ROST), The Tjx Companies, Inc. (TJX), Jos. A. Bank Clothiers Inc (JOSB), Usana Health Sciences, Inc. (USNA) and Main Street Capital Corporation (MAIN). The Newbies We are adding 4 stocks to the portfolio. These include: Guess?, Inc. (GES), Northrop Grumman Corporation (NOC), Hibbett Sports, Inc. (HIBB) and Rue21, Inc. (RUE). Portfolio Changes Additions   GUESS?, INC. GES NORTHROP GRUMMAN CORPORATION NOC HIBBETT SPORTS, INC. HIBB RUE21, INC. RUE Deletions   STATOIL ASA(ADR) STO NU SKIN ENTERPRISES, INC. NUS WESTERN DIGITAL CORP. WDC HOLLYFRONTIER CORP HFC Newcomers to the Validea Hot List rue21 Inc. (RUE): This trendy Pennsylvania-based specialty apparel retailer caters to 11- to 17-year-olds. It recently opened its 700th store in the U.S., and operates in 46 states. Rue21 ($713 million market cap) gets strong interest from my James O'Shaughnessy-based growth strategy and my Peter Lynch-based model. For more on the stock, see the "Detailed Stock Analysis" section below. Hibbett Sports, Inc. (HIBB): Alabama-based Hibbett operates sporting goods stores in small and mid-sized markets, mostly in the South, Southwest, Mid-Atlantic and Midwest. It has about 850 retail stores across 26 states, mostly under the Hibbett Sports name but with some also under the Sports Additions and Sports & Co. names. Hibbett gets strong interest from my Warren Buffett-based model and high marks from some other strategies as well. To read more about it, scroll down to the "Detailed Stock Analysis" section. Northrop Grumman Corporation (NOC): One of the country's largest defense contractors, this Virginia-based firm is involved in the aerospace, electronics, information systems, and technical services arenas, serving government and commercial customers across the globe. Its products include unmanned aircraft systems, B-2 stealth bombers, the James Webb space telescope, radar systems, 911 public safety systems, and cybersecurity solutions, to name just a few. Grumman has a $16 billion market cap, and gets strong interest from my Peter Lynch-, Joel Greenblatt-, and Kenneth Fisher-based models. To read more about it, see the "Detailed Stock Analysis" section below. Guess?, Inc. (GES): Los Angeles-based Guess makes trendy apparel, denim, handbags, watches, footwear and other related consumer products. It directly operates about 500 retail stores in the United States and Canada and 264 retail stores in Europe, Asia and Latin America. Its licensees and distributors operate more than 800 more retail stores outside of the U.S. and Canada. Guess is a previous Hot List pick that is returning to the portfolio, thanks to the strong interest rating it gets from my Peter Lynch-based model and the some interest rating it gets from two other models. See the "Detailed Stock Analysis" section below to learn more about the stock. News about Validea Hot List Stocks Nu Skin Enterprises, Inc. (NUS): Since joining the portfolio on Dec. 21, Nu Skin shares were up nearly 35% (through late morning trading on Jan. 17). There was no clear catalyst for the jump, though the allaying of fiscal cliff concerns probably had some impact, as did Nu Skin's strong fundamentals. Nu Skin shares have also correlated quite a bit with fellow multi-level-marketing firm Herbalife, which has come under great scrutiny in recent months. Herbalife's recent rebound may thus have helped Nu Skin shares. The Hot List is taking the profits, selling off Nu Skin this rebalancing because other stocks are now rated more highly than it is. 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 MAIN MAIN STREET CAPITAL CORPORATION Misc. Financial Services 100 USNA USANA HEALTH SCIENCES, INC. Conglomerates 85 JOSB JOS. A. BANK CLOTHIERS INC Retail (Apparel) 62 ORCL ORACLE CORPORATION Software & Programming 61 GES GUESS?, INC. Retail (Apparel) 49 HIBB HIBBETT SPORTS, INC. Retail (Specialty) 47 NOC NORTHROP GRUMMAN CORPORATION Aerospace & Defense 46 RUE RUE21, INC. Retail (Apparel) 45 ROST ROSS STORES, INC. Retail (Apparel) 43 TJX THE TJX COMPANIES, INC. Retail (Apparel) 43 Ticker Market Cap Date Added Start Price Current Price Return MAIN $1,002 11/23/2012 $30.13 $31.65 5.0% USNA $516 12/21/2012 $33.83 $35.77 5.7% JOSB $1,238 12/21/2012 $42.63 $44.31 3.9% ORCL $163,901 12/21/2012 $33.76 $34.62 2.5% GES $2,274 1/18/2013 TBD $26.70 TBD HIBB $1,419 1/18/2013 TBD $54.99 TBD NOC $16,479 1/18/2013 TBD $67.14 TBD RUE $711 1/18/2013 TBD $29.91 TBD ROST $12,958 10/26/2012 $60.92 $58.27 -4.3% TJX $32,532 10/26/2012 $40.73 $44.61 9.5%

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 MAIN   |   USNA   |   JOSB   |   ORCL   |   GES   |   HIBB   |   NOC   |   RUE   |   ROST   |   TJX   |   MAIN STREET CAPITAL CORPORATION Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Main Street Capital Corporation is a United States-based principal investment firm that primarily provides long-term debt and equity capital to lower middle market companies. The Firm targets investments associated with ownership transitions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives for later stage businesses. In addition to providing companies with necessary capital, Main Street provides management with expertise in corporate finance, operations and growth strategy implementation. Analysis Guru Score: 91% PROFIT MARGIN: [PASS] This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. MAIN's profit margin of 120.82% passes this test. RELATIVE STRENGTH: [FAIL] The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. Although MAIN's relative strength of 86 is below the acceptable level, yet it is very close. Keep an eye on the stock as it could move into the acceptable range. COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [PASS] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for MAIN (62.90% for EPS, and 34.29% for Sales) are good enough to pass. INSIDER HOLDINGS: [PASS] MAIN's insiders should own at least 10% (they own 11.48% ) of the company's outstanding shares which is the minimum required. A high percentage typically indicates that the insiders are confident that the company will do well. CASH FLOW FROM OPERATIONS: [PASS] A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. MAIN's free cash flow of $1.34 per share passes this test. PROFIT MARGIN CONSISTENCY: [PASS] MAIN's profit margin has been consistent or even increasing over the past three years (Current year: 95.06%, Last year: 92.71%, Two years ago: 74.75%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise. R&D AS A PERCENTAGE OF SALES: [NEUTRAL] This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in MAIN's case. CASH AND CASH EQUIVALENTS: [PASS] MAIN's level of cash $42.7 million passes this criteria. If a company is a cash generator, like MAIN, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash. "THE FOOL RATIO" (P/E TO GROWTH): [PASS] The "Fool Ratio" is an extremely important aspect of this analysis. If the company has attractive fundamentals and its Fool Ratio is 0.5 or less (MAIN's is 0.23), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. MAIN passes this test. The following criteria for MAIN are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] MAIN has not been significantly increasing the number of shares outstanding within recent years which is a good sign. MAIN currently has 32.0 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock. SALES: [PASS] Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. MAIN's sales of $84.0 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". MAIN passes the sales test. DAILY DOLLAR VOLUME: [PASS] MAIN passes the Daily Dollar Volume (DDV of $10.3 million) test. It is required that this number be less than $25 million because these are the stocks that remain relatively undiscovered by institutions. "You'll be scoring touchdowns against the big guys on your turf." PRICE: [PASS] This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. MAIN with a price of $31.65 passes the price test, even though it doesn't fall in the preferred range. The price should be above $7 in order to eliminate penny stocks and below $20 since most stocks in this price range are undiscovered by the institutions. INCOME TAX PERCENTAGE: [FAIL] MAIN's income tax paid expressed as a percentage of pretax income either this year (8.94%) or last year (2.61%) is below 20% which is cause for concern. Because the tax rate is below 20% this could mean that the earnings that were reported are unrealistically inflated due to the lower level of income tax paid. However, we have utilized a sophisticated formula so that the appropriate figures reflect a 'normal' tax rate (35%).   USANA HEALTH SCIENCES, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch USANA Health Sciences, Inc. develops and manufactures science-based nutritional and personal care products. The Company has operations in 15 markets worldwide, where it distributes and sells its products by way of direct selling. The Company reports operations in two geographic regions: North America and Asia Pacific, which is further divided into three sub-regions; Southeast Asia/Pacific, Greater China, and North Asia. North America includes the United States, Canada, Mexico, and direct sales from the United States to the United Kingdom and the Netherlands. Southeast Asia/Pacific includes Australia, New Zealand, Singapore, Malaysia, and the Philippines; Greater China includes Hong Kong, Taiwan and China; and North Asia includes Japan and South Korea. The Company's customer base consists of two types of customers: Associates and Preferred Customers. As of December 31, 2011, the Company had 222,000 active Associates and 64,000 active Preferred Customers worldwide. Analysis Guru Score: 72% DETERMINE THE CLASSIFICATION: USNA is considered a "Stalwart", according to this methodology, for its earnings growth of 11.35%. This is based on based on the average of the 3, 4 and 5 year historical eps growth rates, which lies within a moderate 10%-19% range. 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. However, USNA is not considered a "True Stalwart" for its sales of $626 million are less than the multi-billion dollar level. 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 USNA was 6.58% last year, while for this year it is 6.35%. Since inventory to sales has decreased from last year by -0.23%, USNA passes this test. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for USNA (0.78), 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. USNA's EPS ($4.05) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for USNA (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 USNA (10.68%) 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 USNA (9.38%) 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.   JOS. A. BANK CLOTHIERS INC Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Jos. A. Bank Clothiers, Inc. (Jos. A. Bank) is a designer, manufacturer, retailer and direct marketer (through stores, catalog call center and Internet) of men's tailored and casual clothing and accessories and is a retailer of tuxedo rental products. Jos. A. Bank sells all of its products under the Jos. A. Bank label through 556 retail stores (as of January 28, 2012, which includes 25 outlet and factory stores and 15 franchise stores) located throughout 43 states and the District of Columbia in the United States, as well as through its catalog call center and Internet (www.josbank.com) operations. It sources substantially all of its merchandise from suppliers and manufacturers or through buying agents using Jos. A. Bank designs and specifications. It has two segments: Stores and Direct Marketing. The Stores segment includes all Company-owned stores, excluding outlet and factory stores (full-line stores). The Direct Marketing segment includes the catalog call center and the Internet. Analysis Guru Score: 72% DETERMINE THE CLASSIFICATION: JOSB is considered a "Stalwart", according to this methodology, for its earnings growth of 17.68%. This is based on based on the average of the 3, 4 and 5 year historical eps growth rates, which lies within a moderate 10%-19% range. 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. However, JOSB is not considered a "True Stalwart" for its sales of $1,041 million are less than the multi-billion dollar level. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for JOSB (0.74), 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. JOSB's EPS ($3.41) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for JOSB (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 JOSB (4.38%) 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 JOSB (26.40%) 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.   ORACLE CORPORATION Profile Strategy: Growth Investor Based on: Martin Zweig Oracle Corporation is a provider of enterprise software and computer hardware products and services. The Company's software, hardware systems, and services businesses develops, manufactures, markets, hosts and supports database and middleware software, applications software, and hardware systems, with the latter consisting primarily of computer server and storage products. It is organized into three businesses: software, hardware systems and services. Its software business consists of two segments: new software licenses and software license updates and product support. Its hardware systems business consists of two segments: hardware systems products and hardware systems support. The Company's services business consists of the remainder of its segments and offers consulting services, managed cloud services, and education services. On January 25, 2012, it acquired RightNow Technologies, Inc. (RightNow). On April 5, 2012, the Company acquired Taleo Corporation (Taleo). 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. ORCL's P/E is 16.33, 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. ORCL's revenue growth is 15.23%, while it's earnings growth rate is 19.10%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, ORCL 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 (3.4%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (-2.3%) of the current year. Sales growth for the prior must be greater than the latter. For ORCL 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. ORCL's EPS ($0.53) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. ORCL's EPS for this quarter last year ($0.43) pass this test. POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: [PASS] The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. ORCL's growth rate of 23.26% 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 ORCL is 9.55%. This should be less than the growth rates for the 3 previous quarters, which are 19.51%, 11.29%, and 13.89%. ORCL 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, 14.39%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 23.26%, (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, 23.26% must be greater than or equal to the historical growth which is 19.10%. ORCL 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. ORCL, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 1.06, 1.09, 1.21, 1.67 and 1.96, 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. ORCL's long-term growth rate of 19.10%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test. TOTAL DEBT/EQUITY RATIO: [FAIL] 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. ORCL's Debt/Equity (45.96%) is considered high relative to its industry (21.82%) and fails 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 ORCL, this criterion has not been met (insider sell transactions are 154, while insiders buying number 177). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion.   GUESS?, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Guess?, Inc. (GUESS?) designs, markets, distributes and licenses apparel and accessories for men, women and children. The Company operates in five: Europe, North American Retail, Asia, North American Wholesale and Licensing. Its products are sold through retail, wholesale, e-commerce and licensing distribution channels. The lines include full collections of clothing, including jeans, pants, skirts, dresses, shorts, blouses, shirts, jackets, knitwear and intimate apparel. It also grant licenses to manufactures and distributes a range of products, including eyewear, watches, handbags, footwear, kids' and infants' apparel, leather apparel, swimwear, fragrance, jewelry and other fashion accessories. In fiscal 2012, it, along with its distributors and licensees, opened 224 stores in all concepts combined outside of the United Sates and Canada, which consisted of 120 stores in Europe and the Middle East, 89 stores in Asia and 15 stores in the combined area of Central and South America. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider GES a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (11.89) relative to the growth rate (39.29%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for GES (0.30) 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. GES, whose sales are $2,619.3 million, needs to have a P/E below 40 to pass this criterion. GES's P/E of (11.89) is considered acceptable. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for GES is 39.3%, 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 GES (0.96%) 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 GES (6.78%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for GES (21.46%) 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.   HIBBETT SPORTS, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Hibbett Sports, Inc. owns and operates sporting goods stores in small to mid-sized markets predominantly in the Southeast, Southwest, Mid- Atlantic and the Midwest. The companys stores provide footwear, athletic equipment, and apparel products to individual customers as well as for school, athletic, and youth programs through educational institutions and youth associations. 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. HIBB's P/E is 21.36, 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. HIBB's revenue growth is 8.44%, while it's earnings growth rate is 21.06%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, HIBB 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 (9.6%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (8%) of the current year. Sales growth for the prior must be greater than the latter. For HIBB 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. HIBB's EPS ($0.71) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. HIBB's EPS for this quarter last year ($0.58) 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. HIBB's growth rate of 22.41% 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 HIBB is 10.53%. This should be less than the growth rates for the 3 previous quarters, which are 34.09%, 28.95%, and 42.86%. HIBB 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: [FAIL] If the growth rate of the prior three quarter's earnings, 32.62%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 22.41%, (versus the same quarter one year ago) then the stock fails, with one exception: if the growth rate in earnings between the current quarter and the same quarter one year ago is greater than 30%, then the stock would pass. The growth rate over this period for HIBB is 22.4%, and it would therefore fail this test. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 22.41% must be greater than or equal to the historical growth which is 21.06%. HIBB 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. HIBB, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.96, 1.02, 1.12, 1.60 and 2.15, 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. HIBB's long-term growth rate of 21.06%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test. TOTAL DEBT/EQUITY RATIO: [PASS] A final criterion is that a company must not have a high level of debt. A high level of total debt, due to high interest expenses, can have a very negative effect on earnings if business moderately turns down. If a company does have a high level, an investor may want to avoid this stock altogether. HIBB's Debt/Equity (0.09%) is not considered high relative to its industry (79.05%) 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 HIBB, this criterion has not been met (insider sell transactions are 99, while insiders buying number 91). 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.   NORTHROP GRUMMAN CORPORATION Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Northrop Grumman Corporation (Northrop Grumman) provides products, services, and integrated solutions in aerospace, electronics, information and services to its global customers. As of December 31, 2011, the Company operated in four segments: Aerospace Systems, Electronic Systems, Information Systems and Technical Services. The Company conducts most of its business with the United States Government, principally the Department of Defense (DoD) and intelligence community. It also conducts business with local, state, and foreign Governments and domestic and international commercial customers. Effective as of March 31, 2011, the company completed the spin-off of Huntington Ingalls Industries, Inc. (HII). HII operates the Company's former shipbuilding business. In September 2012, it acquired M5 Network Security Pty Ltd. 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. NOC's P/S of 0.65 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. NOC's Debt/Equity of 35.91% 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. NOC 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 NOC At this Point Is NOC 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.NOC's P/S ratio of 0.65 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%. NOC's inflation adjusted EPS growth rate of 16.28% 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. NOC's free cash per share of 3.85 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. NOC, whose three year net profit margin averages 7.14%, passes this evaluation.   RUE21, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher rue21, inc. (rue21) is a specialty apparel retailer. As of January 28, 2012, the Company operated 713 stores in 46 states throughout the United States. It offers a line of apparel and accessories for girls and guys, including graphic t-shirts, denim, dresses, shirts, hoodies, belts, jewelry, handbags, footwear, intimate apparel and other accessories. Its apparel and accessory brands include rue21 (Girls apparel), rue21 etc! (Girls accessories), tarea by rue21 (Girls intimate apparel), Carbon and CJ Black (Guys apparel), and Carbon Elements (Guys accessories). During the fiscal year ended January 28, 2012 (fiscal 2011), the Company opened 120 new stores. Analysis Guru Score: 80% 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. RUE's P/S ratio of 0.83 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. RUE's Debt/Equity of 0.00% is exceptional, 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. RUE 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 RUE At this Point Is RUE 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, RUE, who has a P/S of 0.83, 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%. RUE's inflation adjusted EPS growth rate of 36.24% 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. RUE's free cash per share of 0.82 passes this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [FAIL] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. RUE, whose three year net profit margin averages 4.69%, fails this evaluation.   ROSS STORES, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Ross Stores, Inc., along with its subsidiaries, operates two brands of off-price retail apparel and home fashion stores. As of January 28, 2012, the Company operated a total of 1,125 stores, of which 1,037 were Ross Dress for Less (Ross) locations in 29 states, the District of Columbia, and Guam, and 88 were dd's DISCOUNTS stores in seven states: 48 in California, 19 in Texas, 12 in Florida, four in Arizona, two in Georgia, two in Nevada, and one in Maryland. Ross focuses on customers primarily from middle income households, while dd's DISCOUNTS focuses on customers from more moderate income households. During the fiscal year ended January 28, 2012 (fiscal 2012), it opened 59 new Ross stores and closed ten existing stores. During fiscal 2011, it opened 21 new dd's DISCOUNTS stores. The average approximate dd's DISCOUNTS store size is 23,900 square feet. In April 2011, it purchased a 449,000 square foot warehouse for packaway storage in Riverside, California. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: This methodology would consider ROST a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (17.62) relative to the growth rate (31.29%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for ROST (0.56) makes it favorable. SALES AND P/E RATIO: [PASS] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth high enough to support a P/E above this threshold. ROST, whose sales are $9,358.3 million, needs to have a P/E below 40 to pass this criterion. ROST's P/E of (17.62) is considered acceptable. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for ROST is 31.3%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is acceptable. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for ROST (8.84%) to be exceptionally low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for ROST (2.25%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for ROST (3.87%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.   THE TJX COMPANIES, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher The TJX Companies, Inc. (TJX) is the off-price apparel and home fashions retailer in the United States and worldwide. As of January 28, 2012, the Company operated in four business segments. It has two segments in the United States, Marmaxx (T.J. Maxx and Marshalls) and HomeGoods; one in Canada, TJX Canada (Winners, Marshalls and HomeSense) and one in Europe, TJX Europe (T.K. Maxx and HomeSense). As a result of the consolidation of the A.J. Wright chain, all A.J. Wright stores ceased operations by the end of February 2011. It completed the consolidation of A.J. Wright, converting 90 of the A.J. Wright stores to T.J. Maxx, Marshalls or HomeGoods banners and closed the remaining 72 stores, two distribution centers and home office. In December 2012, the Company acquired Sierra Trading Post, an off-price Internet retailer. Analysis Guru Score: 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. TJX's P/S ratio of 1.31 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. TJX's Debt/Equity of 22.34% 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. TJX 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 TJX At this Point Is TJX 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, TJX, who has a P/S of 1.31, 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%. TJX's inflation adjusted EPS growth rate of 19.15% 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. TJX's free cash per share of 1.08 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. TJX, whose three year net profit margin averages 6.18%, passes this evaluation.   Watch List The Watch List contains the highest scoring stocks according to our guru consensus system that are not currently in the Hot List portfolio. We provide this list both for informational purposes and for investors who are not comfortable with a portfolio of ten stocks. Ticker Company Name Industry Guru Score HFC HOLLYFRONTIER CORP Oil & Gas Operations 86 WDC WESTERN DIGITAL CORP. Computer Storage Devices 46 SYNT SYNTEL, INC. Computer Services 45 BBBY BED BATH & BEYOND INC. Retail (Specialty) 42 BRLI BIO-REFERENCE LABORATORIES INC Healthcare Facilities 42 ABC AMERISOURCEBERGEN CORP. Biotechnology & Drugs 40 ECPG ENCORE CAPITAL GROUP, INC. Misc. Financial Services 38 WFM WHOLE FOODS MARKET, INC. Retail (Grocery) 37 TSCO TRACTOR SUPPLY COMPANY Retail (Home Improvement) 34 STO STATOIL ASA(ADR) Oil & Gas - Integrated 34

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