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Executive Summary	September 25, 2015

The Economy While concerns about global growth -- which the Federal Reserve highlighted in its announcement that it would not raise interest rates -- continue to weigh on markets, US economic news has been decent since our last newsletter. New claims for unemployment have fallen, for example, and are now about 8% below where they were a year ago. Continuing claims, the data for which lag new claims by a week, also moved lower since our last newsletter and are also 8% below year-ago levels.. Retail sales edged higher by 0.2% in August, according to a new report from the Census Bureau. That's just 1.6% higher than the year-ago level, however, which is not a particularly strong increase. Still, gains are gains. Housing starts fell 3%, in August, meanwhile, according to the Census Bureau, but are about 16% above year-ago levels. Permit issuance for new construction rose 3.5%, and is 10% above where it stood a year ago. New home sales jumped 5.7% in August, according to the Census Bureau. Compared to a year ago, they are an impressive 25% higher. Median sale prices were about 0.3% above where they were a year ago. Inflation continues to be sluggish. The Consumer Price Index slid 0.1% in August, according to the Labor Department. That put it just 0.2% ahead of its year-ago pace, mostly because of the oil and gas price declines. But if you strip out volatile food and energy prices, so-called "core" inflation, which was up 0.1% in July, is 1.8% ahead of its year-ago pace. As for oil and gas prices, they keep tumbling. As of Sept. 22, a gallon of regular unleaded on average cost $2.28, down from $2.62 a month earlier. That's 32% below where it was one year ago. Since our last newsletter, the S&P 500 returned -1.0%, while the Hot List returned -0.2%. So far in 2015, the portfolio has returned -5.4% vs. -6.2% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 206.0% vs. the S&P's 93.1% gain. How Many Stocks Is Enough? Amid the volatility that the market experienced in the second half of the summer, the Hot List has, unfortunately, had its fair share of fairly sizable losers. I've noted before that these short-term periods of trouble are to be expected when running a concentrated portfolio like the 10-stock Hot List. But perhaps you're asking, if that's the case, why run a concentrated portfolio at all? It's a good question. After all, a bad apple in a 10-stock portfolio is going to have a much more dramatic impact than a bad apple in, say, a 500-stock index fund. And the truth is that in the stock market, there are lots of bad apples. From 1980 through 2014, about 40% of all Russell 3000 companies suffered a decline from their peaks of at least 70% and failed to rebound significantly, according to a report from J.P. Morgan. The report also found that, over the same period (or over its lifetime, if the stock did not exist for the full period), the median stock in the Russell 3000 underperformed the index by 54%, and that 40% of Russell 3000 stocks had negative returns. Those are daunting numbers, and the thrust of the J.P. Morgan report was that, given how many companies fail in capitalism's competitive "creative destruction" environment, investors should make sure they are properly diversified. But Morgan did not seem to be saying that investors should be holding hundreds of stocks -- indeed, one standard the report used to determine whether a concentrated holder of a particular stock would have benefited from diversification was whether risk/reward metrics indicated that, in an optimal portfolio, that stock should have a weighting of no more than 20%. That's twice the target weighting for Hot List holdings. So what does the research show about portfolio size and risk management? Well, much of the prevailing research indicates that you can get enough diversification without having to get anywhere near the couple hundred stocks that most mutual funds own. Nobel Prize-winning researcher William Sharpe wrote in a 1972 article, for example, that once you have 25 to 30 stocks in a portfolio, the addition of more stocks offers only a very minor decrease in risk. Edwin Elton and Martin Gruber published a paper five years later showing that most of the advantages of diversification are reached once you hold 15 or so stocks, though going beyond that amount did appear to offer "significant" additional benefit. In their later book Modern Portfolio Theory and Investment Analysis, Elton and Gruber found that if you own 1,000 stocks, your portfolio will be 61% less volatile than if you own just one stock, James Glassman recently noted in a piece for Kiplinger. But, they found that if you own just 20 stocks, your risk decreases almost as much -- 59%. A 2003 study that I highlighted in my book, The Guru Investor, meanwhile, was performed by California State University-Chico Professor H. Christine Hsu and H. Jeffrey Wei. They found that "the benefit of risk diversification is somewhat limited when the number of stocks in the portfolio goes beyond 50." So, if these studies show that portfolios of 15 to 50 stocks provided optimal diversification, why do we have only 10 stocks in the Hot List? Well, keep in mind that most of those studies are operating under the premise of randomly selected portfolios -- essentially, they are saying that if you were to randomly pick stocks, you should pick 15 to 50 to get proper diversification. It's not accidental that these studies focus on random picks - efficient market hypothesis thinking is prevalent in the academic world, and the EMH stipulates that the market is too efficient for any stockpicker to consistently do better than a randomly selected portfolio. I respectfully disagree, as I think that successful investors like Warren Buffett, Peter Lynch, Joel Greenblatt, and Benjamin Graham have proven that you can use careful stock analysis to beat the market. This issue has a big impact on optimal portfolio size, and helps explain why the Hot List has 10 stocks. The idea of diversification is that you need to have enough holdings so that a bad apple (or a few bad apples) won't ruin your whole basket. And there are more bad apples out there than you might think -- think about the J.P. Morgan study I mentioned above, which showed that over a three-decade-plus span, 40% of all stocks in the Russell 3000 sustained a decline of at least 70% from which they did not recover. But let's talk about what sort of stocks sustain those kind declines. Generally, stocks that suffer that type of terrible loss are likely to be companies that go through significant financial distress, or stocks that are so greatly overvalued that much of their market valuation is just fluff. If you are randomly selecting stocks for your portfolio, you are bound to get a few of these - in fact, based on J.P. Morgan's research, you're likely to get more than a few. You better have a good amount of stocks in your portfolio to diversify away the risk that risk. But these types of stocks -- those in financial distress and those that are wildly overvalued -- are just the types of stocks that the Hot List is designed to avoid. Its rigorous financial and valuation tests analyze companies and their stocks from numerous different angles to make sure that the company is both financially healthy and trading a reasonable valuation. It's always possible that a small number of high-risk stocks might slip through the cracks if their financials are misleading. But from the outset, the Hot List take steps to remove from consideration many of the most risky stocks in the market -- stocks you very well might end up with in a randomly chosen portfolio, which would require you to have a greater number of holdings to offset those risky positions. In addition, the Hot List uses a dynamic stop-loss that starts at 40% and moves up or down depending on what the broader market is doing while a particular stock is in the portfolio. So even if the portfolio does buy a problem stock, the downside is going to be minimized much more than it would be in a randomly selected portfolio with no stop-loss system. You're not going to see a Hot List position fall 80% or 90%. By limiting the potential loss for any one holding, we can hold a smaller number of stocks. That's important because it means we can put more of our portfolio into our best ideas. The numbers bear all of this out. As you probably know, while the 10-stock Hot List portfolio is our flagship portfolio, we also track a 20-stock version. And we track both 10- and 20-stock portfolios for each of my individual Guru Strategies, as well as for the Top 5 Gurus strategy (which selects the same number of stocks from each of five top-performing strategies). The data shows that 10-stock portfolio performance versus 20-stock portfolio performance can vary widely from strategy to strategy. (All of the performance data here and below is through September 22, 2015.) On average, however, the results for the 10-and 20-stock portfolios have been remarkably similar over the long term. The fourteen 10-stock portfolios have averaged annualized returns of 8.16% since their inceptions; the fourteen 20-stock portfolios have averaged 8.08%. When you look strategy by strategy, in six cases the 10-stock version has performed better, while in eight cases, the 20-stock version has performed better. What's also very interesting is the betas for the different size portfolios. (Beta is a measure of volatility, and shows how closely a portfolio tracks the broader market.) For six of the strategies, the 10-stock version has a lower beta. For seven of them, the 20-stock version has the lower beta. (In one case, the betas are the same.) Overall, the fourteen 10-stock portfolios have an average beta of 1.12. The average beta on the fourteen 20-stock portfolios? It's 1.12. In other words, on average, the larger portfolios have performed no better than the 10-stock portfolios, and have offered no less volatility. I also looked at the worst year for each portfolio, wondering if the 10-stock portfolios may have been more susceptible to a big down year. I found that for 8 of the 14 strategies the 20-stock version's worst annual loss was better than the 10-stock version's worst annual loss. But the averages were extremely close. The worst year on average for a 10-stock portfolio involved a 38.64% loss; the worst year on average for a 20-stock portfolio involved a 38.57% loss. Again, bumping the portfolio size up to 20 hasn't offered much more protection. (What it would do, however -- and this is important -- is add to trading costs.) As for the Hot List itself, its 10-stock version has outperformed the 20-stock version over the long haul, producing annualized returns of 9.6% versus 9.1% for the larger portfolio. It's done so with almost exactly the same beta (1.18 for the 10-stock and 1.17 for the 20-stock), and its worst year was actually better than the worst year for the 20-stock version (2008, when the 10-stock fell 35.0% and the 20-stock lost 38.9%). And it may be worth noting that the other multi-strategy approach we track, the Top 5 Gurus strategy, has produced much better results over the long term with its smaller portfolio. The 10-stock version has averaged 14.1% annualized returns, while the 20-stock version has averaged 6.7%. The 10-stock version also has a lower beta than the 20-stock portfolio (1.07 to 1.08), and it lost significantly less in its worst year (31.0%) than the 20-stock portfolio lost in its worst year (39.1%). In the short term, running a 10-stock focused portfolio like the Hot List means that a big loss on an individual position will of course be felt more than it would in a larger portfolio. But our data shows that even if we double the portfolio size, we don't get any real benefit in terms of risk or performance over the long haul. In fact, our testing shows that a 100-stock portfolio picked using the Hot List system wouldn't have produced significantly better risk-adusted returns than the 10-stock portfolio since the Hot List's July 2003 inception. This doesn't necessarily mean that a 10-stock portfolio is the right option for you. As is often the case in investing, your personal temperament should drive a lot of your portfolio management style. If you are the type of investor -- and many people are -- who would become extremely agitated if you only held 10 stocks and one of them took a tumble, you very well may want to have a somewhat larger portfolio in terms of the number of holdings. The important thing is that you feel comfortable enough that short-term losses don't lead you to scrap your strategy and bail on the market. What I'm saying here is that, if you have the right temperament, a portfolio of just 10 stocks can work over the long haul. The bottom line is that risk management comes in a variety of forms, and diversification in terms of your number of holdings is just one of those forms. With the portfolios we run, the rigorous stock-selection methodologies we use serve as another form of risk management, by screening out financially troubled stocks or those that are wildly overvalued. And our stop-loss system adds another layer of risk management. Over the long-term, our results have shown that this multifaceted approach to risk management can, indeed, allow us to run fairly concentrated portfolios without adding high amounts of risk. That doesn't mean we won't have some sizable losers from time, as we have in recent months. But I'm confident that over the long haul, this system will allow us to continue to beat the market.		Editor-in-Chief: John Reese Since Inception   Hot List 206.0% S&P 500 93.1% Accuracy 54.3% Beta 1.2 YTD   Hot List -5.4% S&P 500 -6.2% Since Last Issue   Hot List -0.2% S&P 500 -1.0% Avg. Fundamentals   Market Cap (mil) $5,135 PE Ratio 16.6 5 Yr EPS Growth 26.1% Yield 0.9% Rel. Strength 71 Portfolio Sectors Financial 5 Services 3 Capital Goods 1 Consumer/Non-Cyclical 1
The Fallen As we rebalance the Validea Hot List, 4 stocks leave our portfolio. These include: Forum Energy Technologies Inc (FET), Myr Group Inc (MYRG), G-iii Apparel Group, Ltd. (GIII) and South State Corp (SSB). The Keepers 6 stocks remain in the portfolio. They are: Sanderson Farms, Inc. (SAFM), Universal Insurance Holdings, Inc. (UVE), Foot Locker, Inc. (FL), Bofi Holding, Inc. (BOFI), Chart Industries, Inc. (GTLS) and Travelers Companies Inc (TRV). The Newbies We are adding 4 stocks to the portfolio. These include: Zumiez Inc. (ZUMZ), Wisdomtree Investments, Inc. (WETF), Marcus & Millichap Inc (MMI) and Heritage Insurance Holdings Inc (HRTG). Portfolio Changes Additions   ZUMIEZ INC. ZUMZ WISDOMTREE INVESTMENTS, INC. WETF MARCUS & MILLICHAP INC MMI HERITAGE INSURANCE HOLDINGS INC HRTG Deletions   FORUM ENERGY TECHNOLOGIES INC FET MYR GROUP INC MYRG G-III APPAREL GROUP, LTD. GIII SOUTH STATE CORP SSB Newcomers to the Validea Hot List Heritage Insurance Holdings, Inc. (HRTG): This property and casualty insurance holding company provides personal residential insurance for single-family homeowners and condominium owners in Florida. Its subsidiary, Heritage Property & Casualty Insurance Company, writes approximately $500 million of personal and commercial residential premium through a large network of agents. Heritage ($575 million market cap) gets interest from my Motley Fool-, Martin Zweig-, and Peter Lynch-based models. For more on the stock, see the "Detailed Stock Analysis" section below. Marcus & Millichap (MMI): This $1.7-billion-market-cap brokerage firm specializes in commercial real estate investment sales, financing, research and advisory services. The company also offers market research, consulting and advisory services to developers, lenders, owners and investors. M&M gets strong interest from my Peter Lynch-based model and my Momentum Investor approach. Scroll down to the "Detailed Stock Analysis" section to learn more about the stock. Zumiez (ZUMZ): This Washington State-based retailer sells skateboards, snowboards, and a variety of other "action sports" clothing and accessories. It has a market cap of about $415 million. Zumiez gets strong interest from my Peter Lynch-, Benjamin Graham-, and Kenneth Fisher-based models. To read more about its fundamentals, scroll down to the "Detailed Stock Analysis" section below. WisdomTree Investments (WETF): This asset management company ($2.4 billion market cap) focuses on exchange-traded funds, offering a family of ETFs that includes fundamentally weighted funds that track its own indexes, funds that track third party indexes and actively managed funds. WisdomTree gets strong interest from my Motley Fool- and Martin Zweig-based models. To read more about its fundamentals, scroll down to the "Detailed Stock Analysis" section below. News about Validea Hot List Stocks Sanderson Farms, Inc. (SAFM): Sanderson announced that its Board of Directors has declared a regular quarterly cash dividend of $0.22 per share. The board has also authorized a special cash dividend payment of $0.50 per share. Both the regular quarterly cash dividend and the special cash dividend are payable on October 13, 2015, to stockholders of record on September 29, 2015. Payment of the regular quarterly cash dividend will remain subject to board approval each quarter. 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 BOFI BOFI HOLDING, INC. Regional Banks 93 GTLS CHART INDUSTRIES, INC. Misc. Capital Goods 85 UVE UNIVERSAL INSURANCE HOLDINGS, INC. Insurance (Prop. & Casualty) 82 TRV TRAVELERS COMPANIES INC Insurance (Prop. & Casualty) 77 SAFM SANDERSON FARMS, INC. Food Processing 76 FL FOOT LOCKER, INC. Retail (Apparel) 76 ZUMZ ZUMIEZ INC. Retail (Apparel) HRTG HERITAGE INSURANCE HOLDINGS INC Insurance (Prop. & Casualty) MMI MARCUS & MILLICHAP INC Real Estate Operations WETF WISDOMTREE INVESTMENTS, INC. Investment Services Ticker Market Cap Date Added Start Price Current Price Return BOFI $1,950 8/28/2015 $117.62 $124.66 6.0% GTLS $610 3/13/2015 $33.50 $19.97 -40.4% UVE $997 8/28/2015 $24.08 $27.90 15.9% TRV $30,766 8/28/2015 $100.43 $98.86 -1.6% SAFM $1,568 1/16/2015 $80.96 $69.98 -13.6% FL $10,367 7/31/2015 $70.55 $74.38 5.4% ZUMZ $415 9/25/2015 TBD $15.54 TBD HRTG $581 9/25/2015 TBD $19.35 TBD MMI $1,736 9/25/2015 TBD $46.77 TBD WETF $2,356 9/25/2015 TBD $17.07 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 BOFI   |   GTLS   |   UVE   |   TRV   |   SAFM   |   FL   |   ZUMZ   |   HRTG   |   MMI   |   WETF   |   BOFI HOLDING, INC. Profile Strategy: Growth Investor Based on: Martin Zweig BofI HOLDING, INC., is the holding company for BofI Federal Bank. The Bank has deposit and loan customers nationwide including consumer and business checking, savings and time deposit accounts and financing for single family and multifamily residential properties, small-to-medium size businesses in target sectors, and selected specialty finance receivables. The Bank provides consumer and business banking products through the branchless distribution channels and affinity partners. The Bank's deposit products are demand accounts, savings accounts and time deposits marketed to consumers and businesses located in all 50 states. The Bank's primary lending products are residential single family and multifamily mortgage loans. The Bank's business is primarily concentrated in the state of California and is subject to the general economic conditions of that state. 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. BOFI's P/E is 23.28, based on trailing 12 month earnings, while the current market PE is 18.00. 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. BOFI's revenue growth is 26.22%, while it's earnings growth rate is 27.01%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, BOFI 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 (34.8%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (39.3%) of the current year. Sales growth for the prior must be greater than the latter. For BOFI 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. BOFI's EPS ($1.55) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. BOFI's EPS for this quarter last year ($1.09) 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. BOFI's growth rate of 42.20% 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 BOFI is 13.51%. This should be less than the growth rates for the 3 previous quarters, which are 41.18%, 36.96%, and 35.00%. BOFI 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, 37.55%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 42.20%, (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, 42.20% must be greater than or equal to the historical growth which is 27.01%. BOFI 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. BOFI, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 1.87, 2.34, 2.89, 3.85 and 5.37, 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. BOFI's long-term growth rate of 27.01%, 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 BOFI, this criterion has not been met (insider sell transactions are 182, while insiders buying number 152). Despite the fact that insider sells out number insider buys for this company, Zweig considers even one insider buy transaction enough to prevent an insider sell signal, therefore there is not an insider sell signal and the stock passes this criterion.   CHART INDUSTRIES, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Chart Industries, Inc. (Chart) is a diversified manufacturer of engineered equipment engineered equipment for the industrial gas, energy, and biomedical industries. The Company's equipment and engineered systems are used for low-temperature and cryogenic applications. It operates through three segments: Energy & Chemicals (E&C), Distribution & Storage (D&S) and BioMedical. Its products include vacuum insulated containment vessels, heat exchangers, cold boxes and other cryogenic components. Its E&C and D&S segments manufacture products used in energy-related and industrial applications, such as the separation, liquefaction, distribution and storage of hydrocarbon and industrial gases. Through its BioMedical segment, it supplies cryogenic and other equipment used in the medical, biological research and animal breeding industries. The Company, through Thermax, Inc., provides cryogenic fluid vaporizers utilized in industrial gas, petro-chemical and liquefied natural gas applications. Analysis Guru Score: 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. GTLS's P/S of 0.54 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. GTLS's Debt/Equity of 25.03% is acceptable, thus passing the test. PRICE/RESEARCH RATIO: [PASS] This methodology considers companies in the Technology and Medical sectors to be attractive if they have low Price/Research ratios. GTLS 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 GTLS At this Point Is GTLS 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.GTLS's P/S ratio of 0.54 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%. GTLS's inflation adjusted EPS growth rate of 19.99% 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. GTLS's free cash per share of 1.84 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. GTLS, whose three year net profit margin averages 6.98%, passes this evaluation.   UNIVERSAL INSURANCE HOLDINGS, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Universal Insurance Holdings, Inc. (UIH), with its wholly owned subsidiaries, is a vertically integrated insurance holding company performing all aspects of insurance underwriting, distribution and claims. The Company's offers homeowners' insurance through the Insurance Entities, Universal Property & Casualty Insurance Company (UPCIC) and American Platinum Property and Casualty Insurance Company (APPCIC). Substantially all aspects of insurance underwriting, distribution and claims processing are performed by the Company's subsidiaries. UPCIC, a wholly owned subsidiary of the Company, is a writer of homeowners insurance in Florida and has commenced its operations in North Carolina, South Carolina, Hawaii, Georgia, Massachusetts, Maryland, Delaware, and Indiana. APPCIC, also a wholly owned subsidiary, writes homeowners multi-peril insurance on Florida homes valued in excess of $1 million, which are limits and coverages currently not targeted through its affiliate UPCIC. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider UVE a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (11.11) relative to the growth rate (35.56%), 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 UVE (0.31) 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. UVE, whose sales are $435.4 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 UVE is 35.6%, 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] UVE 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. UVE's Equity/Assets ratio (24.00%) 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. UVE's ROA (8.94%) 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 UVE (9.68%) 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 UVE (9.04%) 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.   TRAVELERS COMPANIES INC Profile Strategy: P/E/Growth Investor Based on: Peter Lynch The Travelers Companies, Inc. is a holding company. Through its subsidiaries, the Company is engaged in providing a range of commercial and personal property and casualty insurance products and services to businesses, Government units, associations and individuals. The Company has three operating segments: Business and International Insurance segment, Bond & Specialty Insurance segment and the Personal Insurance segment. Business and International Insurance segment offers a range of property and casualty insurance and insurance related services to its customers, primarily in the United States, as well as in Canada, the United Kingdom, the Republic of Ireland and throughout other parts of the world. Bond & Specialty Insurance segment provides surety, crime, management and professional liability coverages, and related risk management services. Personal Insurance segment includes a range of property and casualty insurance covering individuals' personal risks. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: TRV is considered a "True Stalwart", according to this methodology, as its earnings growth of 16.57% lies within a moderate 10%-19% range and its annual sales of $27,010 million are greater than the multi billion dollar level. This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. TRV is attractive if TRV can hold its own during a recession. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for TRV (0.48), based on the average of the 3 and 4 year historical eps growth rates, is excellent. EARNINGS PER SHARE: [PASS] The EPS for a stalwart company must be positive. TRV's EPS ($10.91) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [NEUTRAL] TRV 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. TRV's Equity/Assets ratio (18.00%) 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. TRV's ROA (3.49%) 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 TRV (8.75%) 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 TRV (-16.15%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.   SANDERSON FARMS, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Sanderson Farms, Inc. is a poultry processing company which is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared chicken items. In addition, the Company is engaged in the processing, marketing and distribution of prepared chicken through its wholly owned subsidiary, Sanderson Farms, Inc. (Foods Division). It produces a range of processed chicken products and prepared chicken items. It sells ice pack, chill pack, bulk pack and frozen chicken, in whole, cut-up and boneless form, under the Sanderson Farms brand name to retailers, distributors, and casual dining operators in the south-eastern, south-western, north-eastern and western United States and to customers who resell frozen chicken into export markets. During the fiscal year ended October 31, 2013 (fiscal 2013), it processed 452 million chickens, or over 3.0 billion dressed pounds. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: SAFM is considered a "True Stalwart", according to this methodology, as its earnings growth of 18.92% lies within a moderate 10%-19% range and its annual sales of $2,885 million are greater than the multi billion dollar level. This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. SAFM is attractive if SAFM can hold its own during a recession. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for SAFM was 7.67% last year, while for this year it is 6.88%. Since inventory to sales has decreased from last year by -0.80%, SAFM passes this test. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for SAFM (0.28), based on the average of the 4 and 5 year historical eps growth rates, is excellent. EARNINGS PER SHARE: [PASS] The EPS for a stalwart company must be positive. SAFM's EPS ($12.38) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for SAFM (0.98%) 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 SAFM (6.64%) 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 SAFM (10.76%) 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.   FOOT LOCKER, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Foot Locker, Inc. is a retailer of shoes and apparel. The Company operates in two segments: Athletic Stores and Direct-to-Customers. The Athletic Stores segment is an athletic footwear and apparel retailer whose formats include Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Footaction and SIX:02, as well as the retail stores of Runners Point Group, including Runners Point and Sidestep. The Direct-to-Customers segment includes Footlocker.com, Inc. and other affiliates, including Eastbay, Inc., and the direct-to-customer subsidiary of Runners Point Group, which sell to customers through their Internet and mobile sites and catalogs. As of January 31, 2015, the Company operated 3,423 primarily mall-based stores in the United States, Canada, Europe, Australia and New Zealand. As of January 31, 2015, the Company operated a total of 78 franchised stores, of which 31 are in the Middle East, 27 in Germany and Switzerland, and 20 in the Republic of Korea. Analysis Guru Score: 90% PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical (non-Smokestack) companies with Price/Sales ratio between .75 and 1.5 are good values. FL's P/S ratio of 1.43 based on trailing 12 month sales, falls within the "good values" range for non-cyclical companies and is considered attractive. TOTAL DEBT/EQUITY RATIO: [PASS] Less debt equals less risk according to this methodology. FL's Debt/Equity of 5.12% is acceptable, thus passing the test. PRICE/RESEARCH RATIO: [PASS] This methodology considers companies in the Technology and Medical sectors to be attractive if they have low Price/Research ratios. FL is neither a Technology nor Medical company. Therefore the Price/Research ratio is not available and, hence, not much emphasis should be placed on this particular variable. PRELIMINARY GRADE: Some Interest in FL At this Point Is FL a "Super Stock"? NO PRICE/SALES RATIO: [FAIL] The prospective company should have a low Price/Sales ratio. To be considered a "Super Stock", non-cyclical (non-Smokestack) companies should have Price/Sales ratios below .75. However, FL, who has a P/S of 1.43, does not fall within the "Super Stock" range. It does fall between 0.75 and 1.5, which is considered the "good values" range for non-cyclical companies. Nonetheless, it does not pass this "Super Stock" criterion. LONG-TERM EPS GROWTH RATE: [PASS] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. FL's inflation adjusted EPS growth rate of 39.01% passes the test. FREE CASH PER SHARE: [PASS] This methodology looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses. This is based on the premise that companies without cash will soon be out of business. FL's free cash per share of 2.70 passes this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [PASS] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. FL, whose three year net profit margin averages 6.76%, passes this evaluation.   ZUMIEZ INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Zumiez Inc. is a multi-channel specialty retailer of apparel, footwear, accessories and hardgoods. As of January 31, 2015, the Company operated 603 stores; 550 in the United States, 35 in Canada and 18 in Europe. The Company operates under the names Zumiez and Blue Tomato. Additionally, it operates e-commerce websites at www.zumiez.com and www.bluetomato.com. In apparel the Company offers t-shirts; baseball tees; hoodies and sweatshirts; tank tops; shorts; board shorts; joggers; shirts; jackets; jeans and pants; sweaters, and snow outerwear. The Company offers accessories, including hats, socks, watches, sunglasses, jewelry, backpacks, beanies, belts, wallets, underwear and bags. In addition it also offers cameras and tech; headphones; home; travel gear; hacky sacks; shoe laces; digital video discs (DVDs), scarves and gloves. 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. ZUMZ's P/S of 0.50 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. ZUMZ'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. ZUMZ 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 ZUMZ At this Point Is ZUMZ 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.ZUMZ's P/S ratio of 0.50 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%. ZUMZ's inflation adjusted EPS growth rate of 18.26% 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. ZUMZ's free cash per share of 1.85 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. ZUMZ, whose three year net profit margin averages 5.99%, passes this evaluation.   HERITAGE INSURANCE HOLDINGS INC Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Heritage Insurance Holdings, Inc. (Heritage Insurance), formerly Heritage Insurance Holdings, LLC, is a property and casualty insurance holding company. The Company is engaged in providing personal and commercial residential insurance. Through Its subsidiary, Heritage Property & Casualty Insurance Company (Heritage P&C), it provides personal residential insurance for single-family homeowners and condominium owners, rental property insurance and commercial residential insurance in the state of Florida. The Company is vertically integrated and control or manage all aspects of insurance underwriting, actuRoboto analysis, distribution and claims processing, and adjusting. It has approximately 207,000 personal residential policies in force and approximately 2,400 commercial residential policies in force. Analysis Guru Score: 87% 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. HRTG's profit margin of 24.48% 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 HRTG's relative strength of 89 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 HRTG (127.03% for EPS, and 112.91% for Sales) are good enough to pass. INSIDER HOLDINGS: [FAIL] HRTG's insiders ownership is not available at the current time. Insiders of a company should own at least 15% of the outstanding shares. 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. HRTG's free cash flow of $7.25 per share passes this test. PROFIT MARGIN CONSISTENCY: [PASS] HRTG's profit margin has been consistent or even increasing over the past three years (Current year: 20.14%, Last year: 27.41%, Two years ago: -97.16%), 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 HRTG's case. CASH AND CASH EQUIVALENTS: [PASS] HRTG's level of cash $160.5 million passes this criteria. If a company is a cash generator, like HRTG, 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 (HRTG's is 0.16), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. HRTG passes this test. The following criteria for HRTG are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] HRTG has not been significantly increasing the number of shares outstanding within recent years which is a good sign. HRTG currently has 30.0 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. HRTG's sales of $347.6 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". HRTG passes the sales test. DAILY DOLLAR VOLUME: [PASS] HRTG passes the Daily Dollar Volume (DDV of $8.5 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. HRTG with a price of $19.35 passes the price test. The price should be above $7 in order to eliminate penny stocks and below $20 since most stocks in this price range are undiscovered by the institutions. INCOME TAX PERCENTAGE: [PASS] HRTG's income tax paid expressed as a percentage of pretax income this year was (36.58%) and last year (38.32%) are greater than 20% which is an acceptable level. If the tax rate is below 20% this could mean that the earnings that were reported were unrealistically inflated due to the lower level of income tax paid. This is a concern.   MARCUS & MILLICHAP INC Profile Strategy: Value Investor Based on: Benjamin Graham Marcus & Millichap, Inc. is a brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services. The Company also offers market research, consulting and advisory services to developers, lenders, owners and investors. It also offers two services to its clients: commercial real estate investment brokerage and financing. The Company divides the commercial real estate market into three segments by investment: Private client segment, which include properties with prices under $10 million; Hybrid segment, which include properties with prices equal to or over $10 million and less than $20 million, and Institutional segment, which include properties with prices of $20 million and above. As of December 31, 2014, the Company had nearly 1,500 investment sales and financing professionals in 78 offices in the United States and Canada that provide investment brokerage and financing services to sellers and buyers of commercial real estate. Analysis Guru Score: 71% SECTOR: [PASS] MMI 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. MMI's sales of $643.4 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. MMI's current ratio of 2.78 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 MMI is $9.7 million, while the net current assets are $103.7 million. MMI 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. We have data for 9 years, and have adjusted this requirement to be a 27% gain over the 9 year period. Companies with this type of growth tend to be financially secure and have proven themselves over time. MMI's EPS growth over that period of 3,716.7% passes the EPS growth test. P/E RATIO: [FAIL] 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. MMI's P/E of 29.87 (using the current PE) fails this test. PRICE/BOOK RATIO: [FAIL] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. MMI's Price/Book ratio is 11.36, while the P/E is 29.87. MMI fails the Price/Book test.   WISDOMTREE INVESTMENTS, INC. Profile Strategy: Growth Investor Based on: Martin Zweig WisdomTree Investments, Inc. is an asset management company that focuses on exchange-traded funds (ETFs). The Company's family of ETFs includes fundamentally weighted funds that track its own indexes, funds that track third party indexes and actively managed funds. The Company distributes its ETFs through all major channels within the asset management industry, including brokerage firms, registered investment advisers, institutional investors, private wealth managers and discount brokers. Most of its index-based funds employ a fundamental weighted investment methodology, which weights securities on the basis of factors, such as dividends or earnings, whereas most other ETF industry indexes use a capitalization weighted methodology. In addition, it also offers actively managed ETFs, which are ETFs that are not-based on a particular index but rather are actively managed with complete transparency into the ETF's portfolio on a daily basis. 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. WETF's P/E is 41.72, based on trailing 12 month earnings, while the current market PE is 18.00. 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. WETF's revenue growth is 42.88%, while it's earnings growth rate is 117.25%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate. 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 (84.8%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (40.1%) of the current year. Sales growth for the prior must be greater than the latter. For WETF 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. WETF's EPS ($0.18) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. WETF'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. WETF's growth rate of 125.00% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [FAIL] Compare the earnings growth rate of the past four quarters with long-term EPS growth rate. Earnings growth in the past 4 quarters should be at least half of the long-term EPS growth rate. A stock should not be considered if it posted several quarters of skimpy earnings. WETF had 3 quarters of skimpy growth in the last 2 years. 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, -46.67%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 125.00%, (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, 125.00% must be greater than or equal to the historical growth which is 117.25%. WETF 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. WETF, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were -0.07, 0.02, 0.08, 0.37 and 0.44, 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. WETF's long-term growth rate of 117.25%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate, 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 WETF, this criterion has not been met (insider sell transactions are 218, while insiders buying number 58). 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.   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 FET FORUM ENERGY TECHNOLOGIES INC Oil Well Services & Equipment 57 PII POLARIS INDUSTRIES INC. Recreational Products 50 AAPL APPLE INC. Communications Equipment 50 EGBN EAGLE BANCORP, INC. Regional Banks 49 MYRG MYR GROUP INC Construction Services 49 AFSI AMTRUST FINANCIAL SERVICES INC Insurance (Prop. & Casualty) 46 AGO ASSURED GUARANTY LTD. Insurance (Prop. & Casualty) 45 CBI CHICAGO BRIDGE & IRON COMPANY N.V. Construction Services 42 GPS GAP INC Retail (Apparel) 42 GCI GANNETT CO INC Advertising 42

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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.