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Executive Summary	August 6, 2010

The Economy While it may not be faring quite as well as some would like, the economy is continuing to push forward. One of the pieces of economic news bearing that out since our last newsletter was the announcement of the U.S.'s second-quarter gross domestic product. While many headlines portrayed the results as a disappointment, the numbers really weren't bad when put in a broader context. Yes, the 2.4% increase in GDP was less than economists expected, but it fell short by a mere tenth of a percentage point. And while GDP growth in the second quarter was lower than first-quarter growth (which was revised upward to 3.7%), it nonetheless marked the fourth straight quarter of growth for the economy -- no small feat given how bleak the future looked during the "Great Recession". Another positive came from the manufacturing sector. The Institute for Supply Management reported that its manufacturing index showed an expansion in the sector for the 12th straight month in July. Like the GDP reading, it showed a slowing of growth -- the July figure was slightly lower than the June reading -- but the index remained well in expansion territory. It also indicated the sector is still expanding more rapidly than it was at any time during 2009. The group's manufacturing employment sub-index showed that employment increased in the sector for the eighth straight month. ISM's service sector index, meanwhile, showed strong growth in July. It was the seventh straight month of service sector expansion, and the expansion was more rapid than it was in June, the data showed. The service sector employment sub-index also showed growth for the second time in three months, after more than two years of contraction. While ISM's data showed gains in employment in July, the broader employment picture remains a big concern. New claims for unemployment rose unexpectedly last week, and, while ADP's July employment report showed that the private sector employment increased, the gains were fairly tepid. Today, the government will release its July employment report, and investors are sure to be watching with much anticipation. Another concern -- one that is related to unemployment -- is the U.S. consumer. While reports initially showed that consumer spending increased by 3% in the first quarter, the Commerce Department's recent GDP report revised that figure downward to 1.9%. And, it showed that consumer spending increased by 1.6% in the second quarter -- a significant, but unspectacular, gain. Retailers did report decent July sales, however -- though the headlines seemed to give a much bleaker picture. Same-store sales (sales from stores open at least a year) growth for July fell short of analysts' 3.1% expectations, according to Thomson Reuters, but it still came in at 2.9% -- a pretty healthy figure. With consumer spending making up about 70% of the U.S. economy, continued gains will be key to sustaining the economic recovery. As it digested the latest economic reports, the market remained fairly volatile, but all in all it was a positive fortnight. The S&P returned 2.9%, while the Hot List has returned 2.0%. For the year, the portfolio stands at -3.8% vs. 1.0% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 132.0% vs. the S&P's 12.5% gain. Major Shakeup The Hot List is really shaking things up on today's regularly scheduled rebalancing. It's dropping six of its ten holdings, and replacing them with six new stocks that get better ratings from my Guru Strategies. On the whole, the six departing stocks fared pretty well during their tenures in the portfolio. AstraZeneca, AIXTRON, Sterlite Industries, and Cosan Limited were all solidly in the black as of yesterday's close, with AstraZeneca leading the way with a gain of close to 25%. Raytheon was down slightly, while Oshkosh Corporation took a fairly big hit. As for the newcomers, they seem to reflect the Hot List's penchant for contrarian-type value plays, with all of them coming from sectors or industries that have been hit by fear recently. Three of them -- Aeropostale, Ross Stores, and lululemon -- are retail clothing/apparel firms, which are dealing with fears about the state of the U.S. consumer. But these companies have excellent long-term track records, through both good times and bad. Aeropostale has upped earnings per share in every year of the past decade (even in the trying times of 2008 and 2009); lululemon has upped EPS in each of the past five years; and Ross has increased EPS in all but one year of the past decade (and that was back in 2004). These are companies that found a way to succeed during the rough recession that began in late 2007, and their strong balance sheets (of the three, Ross is the only one carrying any long-term debt) have them in good position to continue their success. Two of the other newcomers come from another sector still dogged by fears -- the financial sector. And, interestingly, both specialize in a bit of an unusual type of finance: pawn loans. EZCORP and Cash America both do what they do very well -- over the past decade, EZCORP has upped EPS every single year, while Cash America has just one dip (and that was a minor 3-cent dip back in 2002). Pawn loans may sound a bit risky, but they may actually be one of the safer types of loans for the lender, since such firms collect tangible collateral to hold against the loans. The final company added to the Hot List is a familiar one: Chevron. Like the financial and retail firms, Chevron comes from an area of the market that has been dogged by concerns; in Chevron's case, the big spill in the Gulf has cast a shadow over the oil industry, though oil stocks have made some nice rebound gains in the past few weeks. Chevron has a solid long-term track record, however, and it is producing a ton of cash ($7.20 in free cash per share). It's also cheap, selling for less than 10 times trailing 12-month earnings and 0.8 times sales. Double Trouble? The Hot List newcomers all present some great stories of individual companies that are performing well, and have reasonably priced shares. They're not the only ones out there, to be sure. But much of the market talk of late has focused not on specific firms, but instead on macroeconomic factors. It's not surprising, given how strong an impact the macroeconomic headwinds and tailwinds have alternately had on the market over the past couple years. Lately, one of the biggest macro fears is the specter of a "double-dip" recession. The economic recovery has slowed, unemployment remains high, and the U.S. consumer is tapped out, the "double-dippers" say. In the past couple weeks, those fearing a double-dip have pointed to the slowdown in second-quarter GDP, and the slowing of growth in the manufacturing sector, as reasons to be fearful. To be sure, the recovery has slowed in the past couple months, and there are still very legitimate concerns about the economy. But before you get caught up in the headlines announcing the slowing GDP and manufacturing growth, there are a few pieces of data you should consider. First, let's take GDP growth. Yes, the gains in GDP have slowed over each of the past two quarters, with the 5.0% increase in last year's fourth quarter slowing to a 3.7% gain in this year's first quarter, and then to 2.4% in the most recent quarter. But that isn't so different than some past recession rebounds. Nor is the magnitude of the rebound any worse than some past rebounds. In the first three full quarters following the end of the 1990-91 recession, for example, GDP rose (from earliest to latest) by 2.7%, 1.7%, and 1.6%. In the first three quarters following the 2001 recession, the gains were 3.5%, 2.1%, and 2.0%. If, as some top strategists say, the most recent recession ended in the summer of 2009, the three full quarters that have followed featured GDP growth of 5.0%, 3.7%, and 2.4% -- figures that actually compare quite favorably with those two previous post-recession turnarounds. That's not to say that other recoveries haven't been stronger. The first three full quarters following the 1981-82 recession averaged 7.5% growth; the first three following the 1973-75 recession averaged 5.1%, both of which are greater than the 3.7% average we've seen in the last three quarters. But I'm not trying to argue that the current recovery has been going gangbusters. I am trying to point out, rather, that in a historical context, the growth we've seen since mid-2009 hasn't been "tepid", as some have argued -- and the slowing of growth we've seen this year is by no means anomalous when compared to past recessions. A similar picture can be found when looking at manufacturing data. Double-dip forecasters can point to the fact that the Institute for Supply Management's manufacturing index has declined in each of the past three months. But that shouldn't be a surprise. The index can't go up forever, and the reality of the situation is that, even after declining these past three months, the index still shows that the manufacturing sector is expanding -- and doing so at a faster rate than it did at anytime in 2009. Also consider this: according to ISM, the manufacturing sector has been expanding for 12 straight months now. Once it got back into expansion territory following the 2001 recession, the sector expanded for eight months; then, it proceeded to contract in seven of the next nine months -- while the broader economy was in an expansion. Once the sector started expanding following the 1990-91 recession, it posted just five straight months of expansion. Then it went through three straight months of contraction. As for the recessions that ended in early 1975 and late 1982, in both of those cases, once the manufacturing sector started expanding, it went on a lengthy streak of expansion (48 straight months for the former and 24 straight months for the latter). But in both those cases, the rate of expansion peaked and then slowed within a year after the expansions began -- just as it has in the current recovery. In the end, every recession is different. But the bottom line is that the sort of growth we're seeing, both in manufacturing and the broader economy, isn't out of whack with what we've seen historically in the early stages of economic recoveries. Does that guarantee that a double-dip recession won't happen? Of course not -- no one knows for sure what will happen, and trying to predict where the economy will head is a dangerous game. What all of this does mean, however, is that the fearful "growth is slowing" story you see in headlines and hear from pundits is not a signal that a double-dip recession is imminent. And the "growth is slowing" fears are by no means a reason to flee stocks. In fact, with interest rates low, plenty of companies sporting strong balance sheets, and valuations reasonable, the facts and data point toward this being a good buying opportunity for long-term investors.		Editor-in-Chief: John Reese Since Inception   Hot List 132.0% S&P 500 12.5% Accuracy 56.3% Beta 1.2 YTD   Hot List -3.8% S&P 500 1.0% Since Last Issue   Hot List 2.0% S&P 500 2.9% Avg. Fundamentals   Market Cap (mil) $18,108 PE Ratio 13.7 5 Yr EPS Growth 27.4% Yield 1.8% Rel. Strength 69 Portfolio Sectors Financial 3 Services 3 Consumer Cyclical 2 Energy 1 Technology 1
Advertisement Validea Capital Management - Private Portfolio Management Based on Strategies of Legends Are you looking for an alternative to your underperforming mutual funds or financial advisor? Click here to download Validea Capital's investment kit and learn more about the firm's guru-based portfolios. Get More Information on Validea Capital! ** Validea Capital Management is a separate investment advisory firm managed by Validea.com founder John Reese. Thre information above in not intended as personal investment advice and should not be interpreted as such. The Fallen As we rebalance the Validea Hot List, 6 stocks leave our portfolio. These include: Oshkosh Corporation (OSK), Astrazeneca Plc (Adr) (AZN), Raytheon Company (RTN), Aixtron Ag (Adr) (AIXG), Sterlite Industries India Limited (Adr) (SLT) and Cosan Limited (CZZ). The Keepers 4 stocks remain in the portfolio. They are: Western Digital Corp. (WDC), Jos. A. Bank Clothiers, Inc. (JOSB), China Automotive Systems, Inc. (CAAS) and Healthspring, Inc (HS). The Newbies We are adding 6 stocks to the portfolio. These include: Ross Stores, Inc. (ROST), Cash America International, Inc. (CSH), Ezcorp, Inc. (EZPW), Chevron Corporation (CVX), Aeropostale, Inc. (ARO) and Lululemon Athletica Inc. (LULU). Portfolio Changes Additions   ROSS STORES, INC. ROST CASH AMERICA INTERNATIONAL, INC. CSH EZCORP, INC. EZPW CHEVRON CORPORATION CVX AEROPOSTALE, INC. ARO LULULEMON ATHLETICA INC. LULU Deletions   OSHKOSH CORPORATION OSK ASTRAZENECA PLC (ADR) AZN RAYTHEON COMPANY RTN AIXTRON AG (ADR) AIXG STERLITE INDUSTRIES INDIA LIMITED (ADR) SLT COSAN LIMITED CZZ Newcomers to the Validea Hot List Aeropostale, Inc. (ARO): Headquartered in New York, this mall-based clothing retailer targets youngsters age 14 to age 17 through more than 900 stores in 49 states, Puerto Rico, and Canada. Its new P.S. from Aeropostale stores also are aimed at 7- to 12-year-olds. Aeropostale, which gained more than 36% while in the Hot List from Nov. 27, 2009 to July 9 of this year, has a market cap of about $2.6 billion. It gets approval from my Peter Lynch-, Warren Buffett-, and Joel Greenblatt-based models. To read more about the stock, see the "Detailed Stock Analysis" section below. Cash America International, Inc. (CSH) : Based in Texas, Cash America operates in more than 1,000 locations in the U.S. and Mexico, providing secured non-recourse loans -- pawn loans. It also offers short-term cash advances and check cashing services. The firm has a market cap of just under $1 billion. Cash America gets approval from my James O'Shaughnessy-based strategy. To read more about its fundamentals, see the "Detailed Stock Analysis" section below. Chevron Corporation (CVX) : This California-based oil and natural gas giant does business in more than a hundred countries. It has a market cap of about $160 billion, and has taken in close to $200 billion in sales in the past year. Chevron gets high marks from the value-stock model I base on the writings of James O'Shaughnessy, as well as my Joel Greenblatt-based approach. To read more about the stock, see the "Detailed Stock Analysis" section below. Ross Stores, Inc. (ROST) : California-based Ross is a clothing apparel and home goods retailer, which operates under the Ross Dress for Less and dd's DISCOUNTS names. It's the nation's second-largest off-price retailer, and has taken in about $7.4 billion in sales in the past year. Ross, which has a $6.5 billion market cap, gets approval from my Peter Lynch-, Warren Buffett-, and James O'Shaughnessy-based models. To read more about it, scroll down to the "Detailed Stock Analysis" section below. lululemon athletica inc. (LULU): This Vancouver-based firm makes clothing for a variety of athletics, focusing largely on technical athletic apparel for yoga, running, and dancing. It has more than 100 stores across Canada, the U.S., Australia, and Hong Kong. lululemon, which has a market cap of about $3 billion, It gets strong interest from two of my growth strategies, my Martin Zweig-based model and the model I base on the writings of Tom and David Gardner, the creators of The Motley Fool investment web site. The "Detailed Stock Analysis" section below has more on the stock. EZCORP, Inc. (EZPW): Like Cash America, EZCORP is based in Texas and is involved in pawn loans. The firm, which has more than 670 shops in 13 states and Mexico, also offers some other options for obtaining short-term cash, and sells used merchandise (usually property that was forfeited as collateral). It has a market cap of about $1 billion. EZCORP gets approval from my Peter Lynch- and James O'Shaughnessy-based models. To read more about the stock, see the "Detailed Stock Analysis" section below. News about Validea Hot List Stocks HealthSpring (HS): HealthSpring's profits jumped 75% in the second quarter, the Nashville Business Journal reported last week. Earnings were $55.8 million ($0.98 per diluted share) on revenue of $768.5 million. Analysts estimated $0.58 in earnings per share on revenue of $754.8 million, the NBJ reported. The firm also upped its earning guidance to $3.15 to $3.25 a share, from $2.60 to $2.75. Ross Stores (ROST): Ross announced this week that its sales increased 7% to $573 million for the four weeks ended July 31, 2010, compared to the year-ago weeks. Comparable store sales for the month were up 2%. Comparable store sales for the quarter ended July 31, 2010 were up 4%, the firm said. The Next Issue In two weeks, we will publish another issue of the Hot List, at which time we will examine one of my individual Guru Strategies in greater depth. If you have any questions, please feel free to contact us at hotlist@validea.com.

Current Portfolio Ticker Company Name Industry Guru Score JOSB JOS. A. BANK CLOTHIERS, INC. Retail (Apparel) 85 ARO AEROPOSTALE, INC. Retail (Apparel) 81 HS HEALTHSPRING, INC Insurance (Accident & Health) 75 WDC WESTERN DIGITAL CORP. Computer Storage Devices 72 ROST ROSS STORES, INC. Retail (Apparel) 68 CAAS CHINA AUTOMOTIVE SYSTEMS, INC. Auto & Truck Parts 67 CVX CHEVRON CORPORATION Oil & Gas - Integrated 60 LULU LULULEMON ATHLETICA INC. Apparel/Accessories 56 CSH CASH AMERICA INTERNATIONAL, INC. Misc. Financial Services 54 EZPW EZCORP, INC. Consumer Financial Services 54 Ticker Market Cap Date Added Start Price Current Price Return JOSB $1,077 6/11/2010 $60.24 $58.69 -2.6% ARO $2,420 8/6/2010 TBD $25.88 TBD HS $1,104 5/14/2010 $17.18 $19.30 12.3% WDC $6,156 7/9/2010 $31.59 $26.86 -15.0% ROST $6,180 8/6/2010 TBD $50.62 TBD CAAS $536 4/16/2010 $21.39 $19.80 -7.4% CVX $158,831 8/6/2010 TBD $79.07 TBD LULU $2,813 8/6/2010 TBD $39.75 TBD CSH $952 8/6/2010 TBD $32.38 TBD EZPW $1,008 8/6/2010 TBD $19.32 TBD

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 JOSB   |   ARO   |   HS   |   WDC   |   ROST   |   CAAS   |   CVX   |   LULU   |   CSH   |   EZPW   |   JOS. A. BANK CLOTHIERS, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Jos. A. Bank Clothiers, Inc. (Jos. A. Bank) is a designer, manufacturer, retailer and direct marketer (through stores, catalog and Internet) of men's tailored and casual clothing and accessories. The Company sells substantially all of its products exclusively under the Jos. A. Bank label through its 473 retail stores (as of January 30, 2010, which includes seven outlet stores and 13 franchise stores) located throughout 42 states and the District of Columbia in the United States, as well as through the Company's nationwide catalog and Internet (www.josbank.com) operations. Jos. A. Bank operates through two segments: Stores and Direct Marketing. The Company's Stores segment consists of its 453 Full-line Stores. The Company opened 14 stores (and closed one store) during the fiscal year ended January 30, 2010 (fiscal 2009). The Company's Direct Marketing segment consists of its Internet and catalog channels. Analysis Guru Score: 89% 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. JOSB's P/E is 14.41, based on trailing 12 month earnings, while the current market PE is 14.00. 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. JOSB's revenue growth is 13.70%, while it's earnings growth rate is 19.48%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, JOSB 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 (10%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (12.4%) of the current year. Sales growth for the prior must be greater than the latter. For JOSB 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. JOSB's EPS ($0.85) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. JOSB's EPS for this quarter last year ($0.62) 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. JOSB's growth rate of 37.10% 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 JOSB is 9.74%. This should be less than the growth rates for the 3 previous quarters, which are 41.67%, 26.00%, and 15.76%. JOSB 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, 22.43%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 37.10%, (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, 37.10% must be greater than or equal to the historical growth which is 19.48%. JOSB 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. JOSB, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 1.96, 2.36, 2.72, 3.17 and 3.84, 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. JOSB's long-term growth rate of 19.48%, 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. JOSB's Debt/Equity (0.00%) is not considered high relative to its industry (31.32%) 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. For JOSB, this criterion has been met, indicating an insider buy signal.   AEROPOSTALE, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Aeropostale, Inc. is a mall-based specialty retailer of casual apparel and accessories. The Company designs, markets and sells its own brand of merchandise principally targeting 14 to 17 year-old young women and young men. The Company also sells Aropostale merchandise through its e-commerce Website, www.aeropostale.com. During the fiscal year ended January 30, 2010 (fiscal 2009), the Company launched P.S. from Aeropostale, which offers casual clothing and accessories focused on elementary school children between the ages of 7 and 12. During fiscal 2009, the Company completed the closure of its 14 store Jimmy'Z concept. Jimmy'Z Surf Co., Inc., a wholly owned subsidiary of Aeropostale, Inc., was a contemporary lifestyle brand targeting young women and men aged 18 to 25. Analysis Guru Score: 75% 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. ARO, with a market cap of $2,420 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. ARO, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 0.67, 0.88, 1.15, 1.47 and 2.27, 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. ARO's Price/Sales ratio of 1.06, based on trailing 12 month sales, passes this criterion. RELATIVE STRENGTH: [FAIL] 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. ARO has a relative strength of 47. This does not pass the final criterion. As a result, this methodology would not consider the stock even though it passed the previous three criteria.   HEALTHSPRING, INC Profile Strategy: Growth Investor Based on: Martin Zweig HealthSpring, Inc. (HealthSpring) is a managed care organization with a primary focus on Medicare, the federal government-sponsored health insurance program for United States citizens aged 65 and older, qualifying disabled persons and persons suffering from end-stage renal disease. As of December 31, 2009, the Company operated coordinated care Medicare Advantage plans in Alabama, Florida, Illinois, Mississippi, Tennessee, and Texas. As of January 1, 2010, it also commenced operations of Medicare Advantage plans in three counties in Northern Georgia. As of December 31, 2009, the Company's Medicare Advantage plans had over 189,000 members. The Company also offers prescription drug benefits in accordance with Medicare Part D to its Medicare Advantage plan members, in addition to providing other medical benefits (MA-PD) plans. It also offers prescription drug benefits nationally on a stand-alone basis in accordance with Medicare Part D (PDP). Analysis Guru Score: 92% P/E RATIO: [PASS] The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. HS's P/E is 6.40, based on trailing 12 month earnings, while the current market PE is 14.00. Therefore, it passes the first test. REVENUE GROWTH IN RELATION TO EPS GROWTH: [PASS] Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. HS's revenue growth is 31.35%, while it's earnings growth rate is 46.12%, based on the average of the 3, 4 and 5 year historical eps growth rates. Sales growth is not at least 85% of EPS growth so the initial part of this criteria is not met, however, since both sales growth and eps growth are greater than 30%, that requirement is waived and the company passes this test. 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 (12.6%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (17.7%) of the current year. Sales growth for the prior must be greater than the latter. For HS 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. HS's EPS ($0.98) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. HS'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. HS's growth rate of 68.97% 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 HS is 23.06%. This should be less than the growth rates for the 3 previous quarters, which are 45.28%, 33.33%, and 55.26%. HS 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, 43.66%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 68.97%, (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, 68.97% must be greater than or equal to the historical growth which is 46.12%. HS 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. HS, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.24, 1.44, 1.51, 2.12 and 2.41, 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. HS's long-term growth rate of 46.12%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test. INSIDER TRANSACTIONS: [PASS] A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For HS, this criterion has not been met (insider sell transactions are 8, while insiders buying number 15). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion.   WESTERN DIGITAL CORP. Profile Strategy: Value Investor Based on: Benjamin Graham Western Digital Corporation (WD) designs, develops, manufactures and sells hard drives. The Company sells its products worldwide to original equipment manufacturers and original design manufacturers for use in computer systems, subsystems or consumer electronics devices, and to distributors, resellers and retailers. Its hard drives are used in desktop computers, notebook computers, and enterprise applications, such as servers, storage area networks and video surveillance equipment. Additionally, its hard drives are used in CE applications, such as digital video recorders, and satellite and cable set-top boxes. WD also sells its hard drives as stand-alone storage products and integrates them into finished enclosures, embedding application software and offering the products as WD-branded external storage appliances. In July 2010, Western Digital Corporation acquired the magnetic media sputtering operations of Hoya Corporation and Hoya Magnetics Singapore Pte. Ltd. Analysis Guru Score: 71% SECTOR: [FAIL] WDC is in the Technology sector, which is one sector that this methodology avoids. Technology and financial stocks were considered too risky to invest in when this methodology was published. At that time they were not the driving force of the market as they are today. Although this methodology would avoid WDC, we will provide the rest of the analysis, as we feel times have changed. SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than $340 million. WDC's sales of $9,850.0 million, based on trailing 12 month sales, pass this test. CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. WDC's current ratio of 2.33 passes the test. LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for WDC is $294.0 million, while the net current assets are $2,697.0 million. WDC passes this test. LONG-TERM EPS GROWTH: [FAIL] 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. EPS for WDC were negative within the last 5 years and therefore the company fails this criterion. P/E RATIO: [PASS] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. WDC's P/E of 6.80 (using the 3 year PE) passes this test. PRICE/BOOK RATIO: [PASS] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. WDC's Price/Book ratio is 1.31, while the P/E is 6.80. WDC passes the Price/Book test.   ROSS STORES, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Ross Stores, Inc. operates two chains of off-price retail apparel and home accessories stores. As of January 30, 2010, the Company operated a total of 1,005 stores, of which 953 were Ross Dress for Less (Ross) locations in 27 states and Guam and 52 were dd's DISCOUNTS stores in four states. Both chains target women and men between the ages of 18 and 54. Ross target customers are primarily from middle income households, while the dd's DISCOUNTS target customer is from more moderate income households. Ross offers name brand and designer apparel, accessories, footwear, and home fashions for the entire family at everyday savings of 20% to 60% off department and specialty store regular prices. dd's DISCOUNTS features a moderately-priced assortment of name brand apparel, accessories, footwear, and home fashions for the entire family at everyday savings of 20% to 70% off moderate department and discount store regular prices. 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. ROST, with a market cap of $6,180 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. ROST, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.36, 1.70, 1.90, 2.33 and 3.54, 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. ROST's Price/Sales ratio of 0.83, 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. ROST, whose relative strength is 62, is in the top 50 and would pass this last criterion.   CHINA AUTOMOTIVE SYSTEMS, INC. Profile Strategy: Growth Investor Based on: Martin Zweig China Automotive Systems, Inc. (China Automotive) is a holding company and has no significant business operations or assets other than its interest in Great Genesis Holdings Limited (Genesis). Through Genesis, the Company manufactures power steering systems and other component parts for automobiles. All operations are conducted through eight Sino-foreign joint ventures in China and a wholly owned subsidiary in the United States. The Company has business relations with more than 60 vehicle manufacturers, including FAW Group and Dongfeng Auto Group, automobile manufacturers in China; Shenyang Brilliance Jinbei Co., Ltd., light vehicle manufacturer in China; Chery Automobile Co., Ltd, state-owned car manufacturer in China, and Xi'an BYD Auto Co., Ltd and Zhejiang Geely Automobile Co., Ltd., car manufacturers. 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. CAAS's P/E is 19.14, based on trailing 12 month earnings, while the current market PE is 14.00. Therefore, it passes the first test. REVENUE GROWTH IN RELATION TO EPS GROWTH: [PASS] Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. CAAS's revenue growth is 38.10%, while it's earnings growth rate is 42.09%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, CAAS passes this criterion. SALES GROWTH RATE: [FAIL] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (88.4%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (118.9%) of the current year. Sales growth for the prior must be greater than the latter. For CAAS 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. CAAS's EPS ($0.34) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. CAAS's EPS for this quarter last year ($0.08) 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. CAAS's growth rate of 325.00% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [FAIL] Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for CAAS is 21.04%. This should be less than the growth rates for the 3 previous quarters which are 5.56%, 170.00% and 1,050.00%. CAAS does not pass this test, which means that it does not have good, reasonably steady earnings. This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: [PASS] If the growth rate of the prior three quarter's earnings, 130.00%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 325.00%, (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, 325.00% must be greater than or equal to the historical growth which is 42.09%. CAAS 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. CAAS, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.15, 0.21, 0.37, 0.46 and 0.78, 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. CAAS's long-term growth rate of 42.09%, 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. CAAS's Debt/Equity (63.88%) is considered high relative to its industry (40.01%) 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 CAAS, this criterion has not been met (insider sell transactions are 2, while insiders buying number 0). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion.   CHEVRON CORPORATION Profile Strategy: Value Investor Based on: Benjamin Graham Chevron Corporation (Chevron) manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to United States and international subsidiaries that engage in fully integrated petroleum operations, chemicals operations, mining operations, power generation and energy services. Exploration and production (upstream) operations consist of exploring for, developing and producing crude oil and natural gas, and also marketing natural gas. Refining, marketing and transportation (downstream) operations relate to refining crude oil and converting natural gas into finished petroleum products; marketing crude oil and the many products derived from petroleum, and transporting crude oil, natural gas and petroleum products by pipeline, marine vessel, motor equipment and rail car. Chemicals operations include the manufacture and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant oil additives. Analysis Guru Score: 86% SECTOR: [PASS] CVX 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. CVX's sales of $196,484.0 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. CVX's current ratio of 1.42 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 CVX is $10,083.0 million, while the net current assets are $11,005.0 million. CVX 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. CVX's EPS growth over that period of 268.8% 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. CVX's P/E of 9.40 (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. CVX's Price/Book ratio is 1.73, while the P/E is 9.40. CVX passes the Price/Book test.   LULULEMON ATHLETICA INC. Profile Strategy: Growth Investor Based on: Martin Zweig lululemon athletica inc. is a designer and retailer of technical athletic apparel primarily in North America. Its yoga-inspired apparel is marketed under the lululemon athletica brand name. The Company offers a line of apparel and accessories, including fitness pants, shorts, tops and jackets designed for athletic pursuits, such as yoga, running and general fitness. As of January 31, 2010, its branded apparel was principally sold through 124 stores that are primarily located in Canada and the United States. As of January 31, 2010, its retail footprint included 45 stores in Canada, 70 stores in the United States and nine franchise stores in Australia. Analysis Guru Score: 92% P/E RATIO: [PASS] The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. LULU's P/E is 39.68, based on trailing 12 month earnings, while the current market PE is 14.00. Therefore, it passes the first test. REVENUE GROWTH IN RELATION TO EPS GROWTH: [PASS] Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. LULU's revenue growth is 48.49%, while it's earnings growth rate is 120.80%, based on the average of the 3 and 4 year historical eps growth rates. Sales growth is not at least 85% of EPS growth so the initial part of this criteria is not met, however, since both sales growth and eps growth are greater than 30%, that requirement is waived and the company passes this test. 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 (69.3%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (54.6%) of the current year. Sales growth for the prior must be greater than the latter. For LULU 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. LULU's EPS ($0.27) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. LULU's EPS for this quarter last year ($0.09) 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. LULU's growth rate of 200.00% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [FAIL] Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for LULU is 60.40%. This should be less than the growth rates for the 3 previous quarters which are -55.17%, 66.67% and 150.00%. LULU does not pass this test, which means that it does not have good, reasonably steady earnings. This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: [PASS] If the growth rate of the prior three quarter's earnings, 28.07%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 200.00%, (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, 200.00% must be greater than or equal to the historical growth which is 120.80%. LULU 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. LULU, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.02, 0.12, 0.46, 0.57 and 0.82, 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. LULU's long-term growth rate of 120.80%, 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. LULU's Debt/Equity (0.00%) is not considered high relative to its industry (53.60%) 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 LULU, this criterion has not been met (insider sell transactions are 6, while insiders buying number 10). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion.   CASH AMERICA INTERNATIONAL, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Cash America International, Inc. provides specialty financial services to individuals through its Company-owned and franchised lending locations, and check cashing centers and via the Internet. These services include secured non-recourse loans (pawn loans), short-term unsecured cash advances and related financial services. It operates in three segments. As of December 31, 2009, the pawn lending segment offered pawn loans through 676 total pawn lending locations operating under the names of Cash America Pawn, SuperPawn and Prenda Facil. As of December 31, 2009, the cash advance operating segment included 246 cash advance storefront locations in six states in the United States operating under the names Cash America Payday Advance and Cashland. As of December 31, 2009, the check cashing operating segment consisted of 120 unconsolidated franchised and six consolidated Company-owned check cashing locations operating in 16 states in the United States under the name Mr. Payroll. 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. CSH, with a market cap of $952 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. CSH, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.48, 2.00, 2.61, 2.70 and 3.17, 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. CSH's Price/Sales ratio of 0.79, 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. CSH, whose relative strength is 64, is in the top 50 and would pass this last criterion.   EZCORP, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch EZCORP, Inc. lends or provides credit services to individuals who do not have cash resources or access to credit to meet their short-term cash needs. The Company operates pawn stores in the United States under the EZPAWN and Value Pawn brands, and in Mexico under the EMPENO FACIL and EMPENE SU ORO brands. It also operates short-term consumer loan stores in the United States principally under the EZMONEY brand and in Canada under the CASHMAX brand. The Company also owns approximately 30% interest in Albemarle and Bond Holdings PLC, with 115 stores, and Cash Converters International Limited, which franchises and operates approximately 500 locations worldwide. The Company operates in three segments: U.S. Pawn Operations, Empeno Facil and EZMONEY Operations. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider EZPW a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (10.57) relative to the growth rate (37.25%), 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 EZPW (0.28) 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. EZPW, whose sales are $699.7 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 EZPW is 37.2%, 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: [NEUTRAL] EZPW 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. EZPW's Equity/Assets ratio (86.00%) 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. EZPW's ROA (17.32%) 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 EZPW (6.63%) 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 EZPW (2.82%) 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 FSYS FUEL SYSTEMS SOLUTIONS, INC. Auto & Truck Parts 64 ARCC ARES CAPITAL CORPORATION Misc. Financial Services 55 AIXG AIXTRON AG (ADR) Semiconductors 54 APOL APOLLO GROUP, INC. Schools 53 NOV NATIONAL-OILWELL VARCO, INC. Oil Well Services & Equipment 52 EME EMCOR GROUP, INC. Construction Services 51 CLW CLEARWATER PAPER CORP Paper & Paper Products 50 RTN RAYTHEON COMPANY Aerospace & Defense 50 SLT STERLITE INDUSTRIES INDIA LIMITED (ADR) Misc. Fabricated Products 50 ESI ITT EDUCATIONAL SERVICES, INC. Schools 49

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