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Executive Summary	November 26, 2010

The Economy After another fortnight of solid economic data, the U.S. economy is showing signs of improvement that even the bears shouldn't be able to ignore. For starters, new claims for unemployment fell almost 8% in the week ending Nov. 20, hitting the lowest level since mid-July of 2008. Continuing claims also fell by more than 3% in the most recent week data is available for them (ending Nov. 13), hitting their lowest level since November of 2008, according to the Labor Department. As a reminder of how far we've come, new claims are 15% lower than they were a year ago; continuing claims are 24% lower. With fewer Americans out of work, spending is on the rise. Retail sales rose 1.2% in October, according to the Census Bureau, reaching their highest level since August 2008. It was the fourth straight monthly increase. The latest revisions to the third-quarter GDP report also showed a U.S. consumer who is more willing to spend than many had thought. Real consumer spending jumped by 2.8%, the fastest pace in almost four years. Overall, GDP growth was revised upward for the quarter, to a respectable 2.5%. The latest industrial production report also showed positive signs. While overall production was level in October, according to the Federal Reserve, the decline was largely due to unseasonably warm weather, which reduced demand for heating and impacted output in the utility sector. Manufacturing production actually rose by 0.5%, while business equipment output rose 1.1%. There are still plenty of issues that remain. The housing market's status and future are very uncertain. Existing-home sales fell 2.2% in October, and a couple issues -- including foreclosure stoppage in certain states and inflated year-ago comparisons that involve periods in which buyers were rushing to meet tax credit deadlines -- continue to make is hard to tell exactly what to make of the housing market. The U.S.'s huge deficit spending and debt burden also continue to be a source of concern. But for now, while the Fed's latest quantitative easing program has upped inflation fears, the dollar has actually been showing some signs of strength, gaining against the Euro, Yen, Canadian dollar, and Pound in the past couple weeks. Corporate America, meanwhile, continues to make big strides. In October, 196 companies increased profit expectations above analysts' estimates vs. 130 that decreased expectations. That's the widest gap since Bloomberg started tracking the figures in 1999. Overall, the generally positive economic news in the U.S. was countered by fear of the Irish debt crisis, and concerns that China is going to take steps to curb its dramatic growth so its economy doesn't overheat. Overall for the fortnight, the S&P 500 returned -1.7%, while the Hot List returned -2.2%. For the year, the portfolio is up 9.7% vs. 7.5% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 164.5% vs. the S&P's 19.8% gain. Looking Past the Fear Back in late summer, most "experts" were saying that the economic recovery was in serious jeopardy, and that the market was headed for trouble. We'd had our stimulus sugar high, they said; now it was fading fast. Since then, retail sales have increased in each of the past three months, rising a total of nearly 3% and reaching post-financial-crisis levels. The manufacturing sector has also continued its expansion, stretching its streak to 15 straight months of growth. The service sector has kept expanding, pushing its streak to 10 straight months. New claims for unemployment have fallen by 19.2% since mid-August, and continuing claims are down more than 11% since early July. And, the market has bounced back, with the S&P 500 up more than 10% since Sept. 1, and the Nasdaq Composite posting gains in the 15% range. But despite significant improvement from the economy -- including improvement in two areas expected to be its downfall (unemployment and consumer spending) -- the overall mood about the economy and stock market is one of pessimism. All you need to do is read the papers to see how much fear is out there. Just last week, an article from Reuters said that "what's clear is that whatever love affair many Americans may have had with stocks is over, at least for the moment". It featured interviews with several individual investors who said they'd had enough of the stock market, after dealing with two crashes in the past decade. And the numbers continue to bear out the notion that individual investors are sour on stocks -- particularly U.S. stocks. According to the Investment Company Institute, since the end of September, investors have pulled close to $14 billion out of U.S. equity mutual funds. They've been much less pessimistic on non-U.S. equities, putting more than $11 billion into foreign equity mutual funds in the same period. But that's still a net negative flow into equity funds -- in a period in which investors were pumping more than $28 billion into bond mutual funds, according to ICI. I think they're making a mistake. With so many expecting so little from the economy -- even as we continue to see significant signs of continued recovery -- valuations are quite attractive. Stocks are trading for about 12 times 2011 projected earnings, according to recent Thomson Reuters data, and many individual companies' shares are even more attractive. Of the 10 stocks in the Hot List, only two have trailing 12-month price/earnings ratio greater than 11 -- despite the fact that they've been producing exceptional growth, and the fact that only two have debt that is more than 23% of their equity. In a climate in which pessimism continues to reign, good stock-pickers should be particularly rewarded. Signs of strong growth will likely be prized even more than usual, with companies that show an ability to grow sales and profits likely to capture the attention of investors. The Hot List picked up a quintet of such stocks in today's rebalancing. Several have managed to post very strong growth in a very tough environment over the past couple years. Millicom Cellular, which provides phone service to underserved parts of the world, grew sales by almost 30% and earnings per share by about 17% in 2008, when many firms were struggling to survive. It then went on to increase both sales and EPS in 2009, and it's on pace to do so again this year. Another newcomer, Aeropostale, grew EPS by 28% and sales by 19% in 2008, a terrible year for most retailers. Then last year, it upped EPS by more than 50% while growing sales by close to 20%. This year it's been more of the same. lululemon athletica, which sells specialized athletic apparel, largely for yoga, dance, and running, has also excelled. The firm increased sales by more than 30% in 2008 and close to 30% in 2009, while upping EPS from $0.46 to $0.82 over that two-year period. This year, sales and EPS have continued to skyrocket. Fidelity fund manager Anthony Bolton, whose exceptional long-term track record as a fund manager makes him something of a British Peter Lynch, recently said that he thinks the bull market has entered a second phase. In the first phase, "junk"-type stocks that were hit hardest during the financial crisis fared best. Now, Bolton says, we're in a phase in which investors, clamoring for growth, will focus on companies that can deliver it. The theory makes sense (in fact, it's typical of post-recession rebounds), and the Hot List is focusing on just those sort of companies. The portfolio's ten holdings sport long-term growth rates as high as 150%, and no lower than 18% -- and those growth rates have been compiled over a period that included the worst recession in decades, and the supposedly "tepid" recovery that has followed Just as importantly, these stocks are selling at attractive valuations -- in many cases, extremely attractive valuations. Despite its rapid growth, for example, Millicom's shares trade for only about six times trailing 12-month earnings. Aeropostale's shares trade for just 11 times trailing 12-month earnings, despite the fact the firm has proven it can produce excellent growth in even the darkest of times. Keying on stocks like these have helped the Hot List stay ahead of the broader market this year, building on its exceptional long-term track record even while many investors continue to wait on the sidelines. They won't stay there forever, especially with bonds so pricey and yields so low. And as more and more return to stocks, the portfolio should benefit even more.		Editor-in-Chief: John Reese Since Inception   Hot List 164.5% S&P 500 19.8% Accuracy 56.8% Beta 1.2 YTD   Hot List 9.7% S&P 500 7.5% Since Last Issue   Hot List -2.2% S&P 500 -1.7% Avg. Fundamentals   Market Cap (mil) $23,524 PE Ratio 13.3 5 Yr EPS Growth 45.0% Yield 5.2% Rel. Strength 59 Portfolio Sectors Services 6 Capital Goods 1 Consumer Cyclical 1 Energy 1 Healthcare 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, 5 stocks leave our portfolio. These include: Eli Lilly & Co. (LLY), Western Digital Corp. (WDC), World Acceptance Corp. (WRLD), China Automotive Systems, Inc. (CAAS) and Healthspring, Inc (HS). The Keepers 5 stocks remain in the portfolio. They are: Sanofi-aventis Sa (Adr) (SNY), Gamestop Corp. (GME), Dollar Tree, Inc. (DLTR), China Mediaexpress Holdings Inc (CCME) and L&l Energy, Inc. (LLEN). The Newbies We are adding 5 stocks to the portfolio. These include: Telefonica S.a. (Adr) (TEF), Millicom International Cellular Sa (Usa) (MICC), Raytheon Company (RTN), Aeropostale, Inc. (ARO) and Lululemon Athletica Inc. (LULU). Portfolio Changes Additions   TELEFONICA S.A. (ADR) TEF MILLICOM INTERNATIONAL CELLULAR SA (USA) MICC RAYTHEON COMPANY RTN AEROPOSTALE, INC. ARO LULULEMON ATHLETICA INC. LULU Deletions   ELI LILLY & CO. LLY WESTERN DIGITAL CORP. WDC WORLD ACCEPTANCE CORP. WRLD CHINA AUTOMOTIVE SYSTEMS, INC. CAAS HEALTHSPRING, INC HS 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 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 $2.5 billion. It gets approval from my Peter Lynch-, Warren Buffett-, James O'Shaughnessy-, and Joel Greenblatt-based models. To read more about the stock, see the "Detailed Stock Analysis" section below. Telefonica S.A.(TEF): This Spain-based telecom giant ($105 billion market cap) has major operations in both Europe and Latin America. Over the past year, it has taken in almost $80 billion in sales. Telefonica gets approval from my James O'Shaughnessy-based growth model. To read more about it, check out the "Detailed Stock Analysis" section below. Raytheon Company (RTN): This Massachusetts-based aerospace & defense firm provides state-of-the-art electronics, products, and services in a variety of areas, including integrated defense systems, missile systems, space and airborne systems, and intelligence and information systems. It also provides a variety of mission support services. It has a market cap of about $17 billion, and has taken in almost $25 billion in sales in the past year. Raytheon gets approval from my Joel Greenblatt-, Peter Lynch- and Kenneth Fisher-based models. The "Detailed Stock Analysis" section below has more on the firm. 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 $3.8 billion, gets strong interest from 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. Millicom International Cellular SA (MICC): Based in Luxembourg, Millicom provides prepaid cellular telephone services to more than 30 million customers in 13 emerging markets in Latin America and Africa. It provides that service in areas where the basic telephone service is often inadequate to handle increasing demand that has resulted from economic development and rising personal income levels. Millicom gets strong interest from my Joel Greenblatt-inspired strategy. To read more about it, see the "Detailed Stock Analysis" section below. News about Validea Hot List Stocks China MediaExpress Holdings (CCME): China MediaExpress, which operates a television advertising network on Chinese buses, announced on Nov. 23 that it has signed two new long-term agreements that will add a total of 2,067 inter-city buses to its network. One deal gives the firm exclusive rights to provide advertising and entertainment programming on 635 inter-city express buses originating from the province of Henan. The deal starts on Dec. 1, and runs for five years. The other gives it the exclusive rights to provide programming and advertising on l1,432 inter-city express buses originating from the province of Hunan. It starts Jan. 1and runs five years. Aeropostale Inc. (ARO): Aeropostale announced on Nov. 15 that its Board of Directors has authorized a $300 million increase to its share repurchase program. The company now has about $364 million of repurchase authorization remaining under its repurchase program (as of November 12). 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 ARO AEROPOSTALE, INC. Retail (Apparel) 100 MICC MILLICOM INTERNATIONAL CELLULAR SA (USA) Communications Services 83 TEF TELEFONICA S.A. (ADR) Communications Services 82 RTN RAYTHEON COMPANY Aerospace & Defense 81 LULU LULULEMON ATHLETICA INC. Apparel/Accessories 80 CCME CHINA MEDIAEXPRESS HOLDINGS INC Advertising 71 LLEN L&L ENERGY, INC. Coal 60 SNY SANOFI-AVENTIS SA (ADR) Biotechnology & Drugs 58 GME GAMESTOP CORP. Retail (Technology) 57 DLTR DOLLAR TREE, INC. Retail (Department & Discount) 57 Ticker Market Cap Date Added Start Price Current Price Return ARO $2,496 11/26/2010 TBD $27.00 TBD MICC $10,078 11/26/2010 TBD $93.40 TBD TEF $105,626 11/26/2010 TBD $69.43 TBD RTN $17,137 11/26/2010 TBD $47.01 TBD LULU $3,820 11/26/2010 TBD $53.88 TBD CCME $588 10/29/2010 $15.46 $17.15 10.9% LLEN $299 10/1/2010 $8.35 $9.98 19.5% SNY $85,094 9/3/2010 $30.20 $32.61 8.0% GME $3,080 9/3/2010 $19.01 $20.35 7.0% DLTR $7,024 9/3/2010 $46.03 $56.09 21.9%

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 ARO   |   MICC   |   TEF   |   RTN   |   LULU   |   CCME   |   LLEN   |   SNY   |   GME   |   DLTR   |   AEROPOSTALE, INC. Profile Strategy: Patient Investor Based on: Warren Buffett 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: 100% STAGE 1: "Is this a Buffett type company?" A bedrock principle for Buffett is that his type of company has a "durable competitive advantage" as compared to being a "price competitive" or "commodity" type of business. Companies with a "durable competitive advantage" are more likely to be found in these sub-industries: Brand Name Fast Food Restaurants, Brand Name Beverages, Brand Name Foods, Brand Name Toiletries and Household Products, Brand Name Clothing, Brand Name Prescription Drugs, Advertising, Advertising Agencies, TV, Newspapers, Magazines, Direct Mail, Repetitive Services for Businesses, Low Cost Producers of Insurance, furniture, or Low Cost Retailers. While you should be easily able to explain where the company's pricing power comes from (i.e. a strong regional brand image, a business tollgate, its main products are #1 or # 2 in its field and has been on the market for years and hasn't changed at all, a consumer or business ends up buying the same product many times in a year, etc. or having the lowest production cost among its competition), there are certain figures that one can look at that can qualify the company as having a durable competitive advantage. LOOK FOR EARNINGS PREDICTABILITY: [PASS] Buffett likes companies to have solid, stable earnings that are continually expanding. This allows him to accurately predict future earnings. Annual earnings per share from earliest to most recent were 0.08, 0.23, 0.24, 0.41, 0.65, 0.67, 0.88, 1.15, 1.47, 2.27. Buffett would consider ARO's earnings predictable. In fact EPS have increased every year. ARO's long term historical EPS growth rate is 33.6%, based on the average of the 3, 4 and 5 year historical eps growth rates, and it is expected to grow earnings 14.0% per year in the future, based on the analysts' consensus estimated long term growth rate. For the purposes of our analysis, we will use the more conservative of the two EPS growth numbers. LOOK AT THE ABILITY TO PAY OFF DEBT [PASS] Buffett likes companies that are conservatively financed. Nonetheless, he has invested in companies with large financing divisions and in firms with rather high levels of debt. ARO has no long term debt and therefore would pass this criterion. LOOK FOR CONSISTENTLY HIGHER THAN AVERAGE RETURN ON EQUITY: [PASS] Buffett likes companies with above average return on equity of at least 15% or better, as this is an indicator that the company has a durable competitive advantage. US corporations have, on average, returned about 12% on equity over the last 30 years. The average ROE for ARO, over the last ten years, is 32.9%, which is high enough to pass. It is not enough that the average be at least 15%. For each of the last 10 years, with the possible exception of the last fiscal year, the ROE must be at least 10% for Buffett to feel comfortable that the ROE is consistent. In addition, the average ROE over the last 3 years must also exceed 15%. The ROE for the last 10 years, from earliest to latest, is 24.3%, 34.7%, 22.5%, 28.0%, 34.1%, 28.5%, 32.8%, 58.4%, 41.7%, 49.1%, and the average ROE over the last 3 years is 49.7%, thus passing this criterion. LOOK FOR CONSISTENTLY HIGHER THAN AVERAGE RETURN ON TOTAL CAPITAL: [PASS] Because some companies can be financed with debt that is many times their equity, they can show a consistently high ROE, yet still be in unattractive price competitive businesses. To screen this out, for non-financial companies Buffett also requires that the average Return On Total Capital (ROTC) be at least 12% and consistent. In addition, the average ROTC over the last 3 years must also exceed 12%. Return On Total Capital is defined as the net earnings of the business divided by the total capital in the business, both equity and debt. The average ROTC for ARO, over the last ten years, is 35.4% and the average ROTC over the past 3 years is 49.7%, which is high enough to pass. It is not enough that the average be at least 12%. For each of the last 10 years, with the possible exception of the last fiscal year, the ROTC must be at least 9% for Buffett to feel comfortable that the ROTC is consistent. The ROTC for the last 10 years, from earliest to latest, is 24.3%, 34.7%, 22.5%, 28.0%, 34.1%, 28.5%, 32.8%, 58.4%, 41.7%, 49.1%, thus passing this criterion. LOOK AT CAPITAL EXPENDITURES: [PASS] Buffett likes companies that do not have major capital expenditures. That is, he looks for companies that do not need to spend a ton of money on major upgrades of plant and equipment or on research and development to stay competitive. ARO's free cash flow per share of $2.78 is positive, indicating that the company is generating more cash that it is consuming. This is a favorable sign, and so the company passes this criterion. LOOK AT MANAGEMENT'S USE OF RETAINED EARNINGS: [PASS] Buffett likes to see if management has spent retained earnings in a way that benefits shareholders. To figure this out, Buffett takes the total amount of retained earnings over the previous ten years of $8.05 and compares it to the gain in EPS over the same period of $2.19. ARO's management has proven it can earn shareholders a 27.2% return on the earnings they kept. This return is more than acceptable to Buffett. Essentially, management is doing a great job putting the retained earnings to work. HAS THE COMPANY BEEN BUYING BACK SHARES: [BONUS PASS] Buffett likes to see falling shares outstanding, which indicates that the company has been repurchasing shares. This indicates that management has been using excess capital to increase shareholder value. ARO's shares outstanding have fallen over the past five years from 121,610,001 to 95,000,000, thus passing this criterion. This is a bonus criterion and will not adversely affect the ability of a stock to pass the strategy as a whole if it is failed. The preceding concludes Buffett's qualitative analysis. If and when he gets positive responses to all the above criteria, he would then proceed with a price analysis. The price analysis will determine whether or not the stock should be bought. The following is how he would evaluate ARO quantitatively. STAGE 2: "Should I buy at this price?" Although a firm may be a Buffett type company, he won't invest in it unless he can get a favorable price that allows him a great long term return. CALCULATE THE INITIAL RATE OF RETURN: [No Pass/Fail] Buffett compares his type of stocks to bonds, and likes to see what a company's initial rate of return is. To calculate the initial rate of return, take the trailing 12-month EPS of $2.54 and divide it by the current market price of $27.00. An investor, purchasing ARO, could expect to receive a 9.41% initial rate of return. Furthermore, he or she could expect the rate to increase 14.0% per year, based on the analysts' consensus estimated long term growth rate, as this is how fast earnings are growing. COMPARE THE INITIAL RATE OF RETURN WITH THE LONG-TERM TREASURY YIELD: [PASS] Buffett favors companies in which the initial rate of return is around the long-term treasury yield. Nonetheless, he has invested in companies with low initial rates of return, as long as the yield is expected to expand rapidly. Currently, the long-term treasury yield is about 3.47%. Compare this with ARO's initial yield of 9.41%, which will expand at an annual rate of 14.0%, based on the analysts' consensus estimated long term growth rate. The company is the better choice, as the initial rate of return is close to or above the long term bond yield and is expanding. CALCULATE THE FUTURE EPS: [No Pass/Fail] ARO currently has a book value of $5.33. It is safe to say that if ARO can preserve its average rate of return on equity of 32.9% and continues to retain 100.00% of its earnings, it will be able to sustain an earnings growth rate of 32.9% and it will have a book value of $91.32 in ten years. If it can still earn 32.9% on equity in ten years, then expected EPS will be $30.02. CALCULATE THE FUTURE STOCK PRICE BASED ON THE AVERAGE ROE METHOD: [No Pass/Fail] Now take the expected future EPS of $30.02 and multiply them by the lower of the 5 year average P/E ratio (13.2) or current P/E ratio (current P/E in this case), which is 10.6 and you get ARO's projected future stock price of $319.39. CALCULATE THE EXPECTED RATE OF RETURN BASED ON THE AVERAGE ROE METHOD: [No Pass/Fail] Now add in the total expected dividend pool to be paid over the next ten years, which is $0.00. This gives you a total dollar amount of $319.39. These numbers indicate that one could expect to make a 28.0% average annual return on ARO's stock at the present time. Buffett would consider this an absolutely fantastic expected return. CALCULATE THE EXPECTED FUTURE STOCK PRICE BASED ON AVERAGE EPS GROWTH: [No Pass/Fail] If you take the EPS growth of 14.0%, based on the analysts' consensus estimated long term growth rate, you can project EPS in ten years to be $9.40. Now multiply EPS in 10 years by the lower of the 5 year average P/E ratio (13.2) or current P/E ratio (current P/E in this case), which is 10.6. This equals the future stock price of $100.01. Add in the total expected dividend pool of $0.00 to get a total dollar amount of $100.01. CALCULATE THE EXPECTED RETURN USING THE AVERAGE EPS GROWTH METHOD: [No Pass/Fail] Now you can figure out your expected return based on a current price of $27.00 and the future expected stock price, including the dividend pool, of $100.01. If you were to invest in ARO at this time, you could expect a 14.0% average annual return on your money. Buffett likes to see a 15% return, but nonetheless would accept this return. LOOK AT THE RANGE OF EXPECTED RATE OF RETURN: [PASS] Based on the two different methods, you could expect an annual compounding rate of return somewhere between 14.0% and 28.0%. To pinpoint the average return a little better, we have taken an average of the two different methods. Investors could expect an average return of 21.0% on ARO stock for the next ten years, based on the current fundamentals. Buffett would consider this a great return, thus passing the criterion.   MILLICOM INTERNATIONAL CELLULAR SA (USA) Profile Strategy: Growth Investor Based on: Martin Zweig Millicom International Cellular S.A. (Millicom) is a global mobile telecommunications operator. The Company also operates fixed telephony, cable and broadband businesses in five countries in Central America. As of December 31, 2009, the Company had 14 mobile operations in 14 countries focusing on emerging markets in Central America, South America, Africa and Asia. Millicom operates its mobile businesses in El Salvador, Guatemala and Honduras in Central America; in Bolivia, Colombia and Paraguay in South America; in Chad, the Democratic Republic of Congo, Ghana, Mauritius, Rwanda, Senegal and Tanzania in Africa; and in Laos in Asia. In November 2009, the Company announced that it has completed the sale of its Cambodian operations to The Royal Group. In October 2009, the Company announced the sale of Tigo (Private) Limited, its Sri Lanka operation, to Etisalat. 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. MICC's P/E is 6.23, based on trailing 12 month earnings, while the current market PE is 16.00. 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. MICC's revenue growth is 35.10%, while it's earnings growth rate is 33.39%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, MICC passes this criterion. SALES GROWTH RATE: [PASS] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (12.6%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (-39.9%) of the current year. Sales growth for the prior must be greater than the latter. For MICC 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. MICC's EPS ($11.07) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. MICC's EPS for this quarter last year ($1.34) 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. MICC's growth rate of 726.12% 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 MICC is 16.69%. This should be less than the growth rates for the 3 previous quarters which are 82.19%, 9.38% and -49.79%. MICC 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, -10.68%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 726.12%, (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, 726.12% must be greater than or equal to the historical growth which is 33.39%. MICC 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. MICC, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 1.09, 2.52, 4.07, 4.75 and 5.06, 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. MICC's long-term growth rate of 33.39%, 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. MICC's Debt/Equity (95.17%) is considered high relative to its industry (84.55%) and fails this test.   TELEFONICA S.A. (ADR) Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Telefonica S.A. (Telefonica) together with its subsidiaries and investees operates in the telecommunications, media and contact center industries. Telefonica basic purpose is the provision of all manner of public or private telecommunications services, including ancillary or complementary telecommunications services or related services. The Company operates in three business areas: Telefonica Spain, Telefonica Latin America and Telefonica Europe. During the year ended December 31, 2009, Telefonica Moviles Espana, S.A.U., a wholly owned subsidiary of the Company completed the sale of its 32.18% stake in Medi Telecom, S.A. In January 2010, the Telefonica Group, through its wholly owned subsidiary, Telef=nica Europe plc completed the acquisition of JAJAH. Analysis Guru Score: 74% DETERMINE THE CLASSIFICATION: This methodology would consider TEF a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (7.16) relative to the growth rate (22.37%), 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 TEF (0.32) is very favorable. SALES AND P/E RATIO: [PASS] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth high enough to support a P/E above this threshold. TEF, whose sales are $79,026.7 million, needs to have a P/E below 40 to pass this criterion. TEF's P/E of (7.16) is considered acceptable. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for TEF is 22.4%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good. TOTAL DEBT/EQUITY RATIO: [FAIL] TEF's Debt/Equity (272.71%) is above 80% and is considered very weak. Therefore, TEF fails this test. 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 TEF (4.70%) 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 TEF (-46.60%) 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.   RAYTHEON COMPANY Profile Strategy: Growth Investor Based on: Martin Zweig Raytheon Company, together with its subsidiaries, develops products, services and solutions in defense markets; sensing, effects, command, control, communications and intelligence (C3I), and mission support, as well as the cybersecurity and homeland security markets. The Company serves both domestic and international customers, principally as a prime contractor on a portfolio of defense and related programs for government customers. It operates in six business segments Integrated Defense Systems (IDS), Intelligence and Information Systems (IIS), Missile Systems (MS), Network Centric Systems (NCS), Space and Airborne Systems (SAS) and Technical Services (TS). In October 2009, the Company acquired BBN Technologies Corp. and related entities. In November 2010, the Company acquired Trusted Computer Solutions, a company that delivers a portfolio of cross-domain, operating system and network security solutions. 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. RTN's P/E is 9.92, based on trailing 12 month earnings, while the current market PE is 16.00. 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. RTN's revenue growth is 7.53%, while it's earnings growth rate is 29.99%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, RTN fails this criterion. SALES GROWTH RATE: [PASS] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (1.1%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (-2.5%) of the current year. Sales growth for the prior must be greater than the latter. For RTN 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. RTN's EPS ($1.71) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. RTN's EPS for this quarter last year ($1.25) 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. RTN's growth rate of 36.80% 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 RTN is 14.99%. This should be less than the growth rates for the 3 previous quarters which are 28.71%, 6.31% and -55.65%. RTN 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, -9.82%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 36.80%, (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, 36.80% must be greater than or equal to the historical growth which is 29.99%. RTN 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. RTN, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 1.98, 2.63, 3.78, 3.92 and 4.89, 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. RTN's long-term growth rate of 29.99%, 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. RTN's Debt/Equity (23.03%) is not considered high relative to its industry (83.90%) 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 RTN, this criterion has not been met (insider sell transactions are 12, while insiders buying number 20). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion.   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: 85% P/E RATIO: [FAIL] The P/E of a company must be greater than 5 to eliminate weak companies, 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 45.89, based on trailing 12 month earnings, while the current market P/E is 16.00. Therefore, it fails 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: [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 (55.8%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (69.3%) of the current year. Sales growth for the prior must be greater than the latter. For LULU 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. LULU's EPS ($0.30) 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 ($0.13) 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 130.77% 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 LULU is 60.40%. This should be less than the growth rates for the 3 previous quarters, which are 66.67%, 150.00%, and 200.00%. LULU 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, 135.14%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 130.77%, (versus the same quarter one year ago) then the stock fails, with one exception: if the growth rate in earnings between the current quarter and the same quarter one year ago is greater than 30%, then the stock would pass. The growth rate over this period for LULU is 130.8%, and it would therefore pass this test. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 130.77% 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 (54.72%) 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.   CHINA MEDIAEXPRESS HOLDINGS INC Profile Strategy: P/E/Growth Investor Based on: Peter Lynch China MediaExpress Holdings, Inc. (CME), through contractual arrangements with Fujian Fenzhong Media Co., Ltd. (Fujian Fenzhong), operates the television advertising network on inter-city express buses in China. The Company and its subsidiaries and variable interest entity (VIE) are engaged in the operation of mobile television advertising networks on passenger buses travelling on highways in the People's Republic of China. The Company does not conduct any substantive operations of its own, but conducts it primary business operations through Fujian Fenzhong, a VIE of a wholly owned subsidiary, Fujian Across Express Information Technology Co, Ltd. (Across Express). On October 15, 2009, CME acquired all of the issued and outstanding capital stock of Hong Kong Mandefu Holding Limited (the HKMDF), its subsidiary and VIE, and as a result, HKMDF became its direct wholly owned subsidiary. Analysis Guru Score: 74% DETERMINE THE CLASSIFICATION: This methodology would consider CCME a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (7.26) relative to the growth rate (125.51%), based on the average of the 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for CCME (0.06) 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. CCME, whose sales are $186.9 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: [FAIL] 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 CCME is 125.5%, based on the average of the 4 and 5 year historical eps growth rates, which is considered too fast. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for CCME (0.00%) to be wonderfully low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for CCME (6.76%) 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 CCME (8.77%) 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.   L&L ENERGY, INC. Profile Strategy: Growth Investor Based on: Martin Zweig L & L Energy, Inc. (L & L) is engaged in the businesses of coal mining, coal washing, coal coking and coal wholesaling. The Company's operations are conducted in Yunnan and Guizhou provinces in the southwest region of the People's Republic of China. As of April 30, 2010, the Company had three operating subsidiaries: KMC, which has coal wholesale operations and Ping Yi Coal Mine (mining operations PYC); two coal mining operations (DaPuAn Mine and SuTsong Mine), including DaPuAn's coal washing operations (the 2 Mines or LLC), and L&L Yunnan Tianneng Industry Co. Ltd. (including Hong Xing coal washing and ZoneLin coking operations) (TNI). Analysis Guru Score: 85% P/E RATIO: [PASS] The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. LLEN's P/E is 7.18, based on trailing 12 month earnings, while the current market PE is 16.00. 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. LLEN's revenue growth is 72.62%, while it's earnings growth rate is 149.55%, 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: [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 (394.5%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (238.9%) of the current year. Sales growth for the prior must be greater than the latter. For LLEN 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. LLEN's EPS ($0.36) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. LLEN's EPS for this quarter last year ($0.12) 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. LLEN's growth rate of 200.00% 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 LLEN is 74.78%. This should be less than the growth rates for the 3 previous quarters, which are 180.00%, 277.78%, and 150.00%. LLEN 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, 191.43%, (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 149.55%. LLEN would therefore pass this test. EARNINGS PERSISTENCE: [FAIL] Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. LLEN, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.03, 0.06, 0.01, 0.47, and 1.21, fails this test. LONG-TERM EPS GROWTH: [PASS] One final earnings test required is that the long-term earnings growth rate must be at least 15% per year. LLEN's long-term growth rate of 149.55%, 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. LLEN's Debt/Equity (4.57%) is not considered high relative to its industry (77.84%) 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 LLEN, this criterion has not been met (insider sell transactions are 2, while insiders buying number 1). 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.   SANOFI-AVENTIS SA (ADR) Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Sanofi-Aventis is a pharmaceutical group engaged in the research, development, manufacture and marketing of healthcare products. The Company's business includes two main activities: pharmaceuticals and human vaccines through sanofi pasteur. The Company is also present in animal health products through Merial Limited (Merial). In its pharmaceutical activity, the Company specializes in six therapeutic areas: diabetes, oncology, thrombosis and cardiovascular, central nervous system (CNS), and internal medicine. The global portfolio of sanofi-aventis also consists of a range of other pharmaceutical products in Consumer Health Care (CHC) and other prescription drugs, including generics. It offers vaccines in five areas: pediatric combination vaccines, influenza vaccines, adult and adolescent booster vaccines, meningitis vaccines and travel and endemic vaccines. In October 2010, Siegfried Holding AG sold its PulmoJet Inhalation Project to the Company. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: SNY is considered a "True Stalwart", according to this methodology, as its earnings growth of 17.65% lies within a moderate 10%-19% range and its annual sales of $42,592 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. SNY is attractive if SNY 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 SNY was 12.46% last year, while for this year it is 14.45%. Since inventory has been rising, this methodology would not look favorably at the stock but would not completely eliminate it from consideration as the inventory increase (1.99%) is below 5%. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for SNY (0.46), 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. SNY's EPS ($3.18) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for SNY (19.85%) to be acceptable (equity is three to ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for SNY (6.04%) 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 SNY (-1.00%) 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.   GAMESTOP CORP. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher GameStop Corp. (GameStop) is a retailer of video game products and personal computer (PC) entertainment software. The Company sells new and used video game hardware, video game software and accessories, as well as PC entertainment software, and related accessories and other merchandise. As of January 30, 2010, the Company operated 6,450 stores in the United States, Australia, Canada and Europe, primarily under the names GameStop and EB Games. GameStop also operates the electronic commerce Website www.gamestop.com and publish Game Informer, a multi-platform video game magazine in the United States based on circulation, with approximately 4 million subscribers. During the fiscal year ended January 30, 2010 (fiscal 2009), GameStop operated its business in four segments: United States, Canada, Australia and Europe. 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 ratios below 0.75 are tremendous values and should be sought. GME's P/S of 0.33 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. GME's Debt/Equity of 8.98% 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. GME 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 GME At this Point Is GME a "Super Stock"? NO 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.GME's P/S ratio of 0.33 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%. GME's inflation adjusted EPS growth rate of 28.78% 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. GME's free cash per share of 2.86 passes this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [FAIL] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. GME, whose three year net profit margin averages 4.25%, fails this evaluation.   DOLLAR TREE, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Dollar Tree, Inc. (Dollar Tree) is an operator of discount variety stores offering merchandise at the fixed price of one dollar. At January 30, 2010, the Company operated 3,806 discount variety retail stores. Approximately 3,650 of these stores sell substantially all items for one dollar or less. The remaining stores, operating as Deal$, sell items for one dollar or less but also sell items for more than one dollar. Dollar Tree's stores operate under the names of Dollar Tree, Deal$ and Dollar Bills. 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. DLTR, with a market cap of $7,024 million, passes this criterion. EARNINGS PER SHARE PERSISTENCE: [PASS] The Cornerstone Growth methodology looks for companies that show persistent earnings growth without regard to magnitude. To fulfill this requirement, a company's earnings must increase each year for a five year period. DLTR, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.07, 1.23, 1.39, 1.68 and 2.37, 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. DLTR's Price/Sales ratio of 1.23, 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. DLTR, whose relative strength is 86, is in the top 50 and would pass this last 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 CSH CASH AMERICA INTERNATIONAL, INC. Misc. Financial Services 77 FOSL FOSSIL, INC. Jewelry & Silverware 76 ADSK AUTODESK, INC. Software & Programming 73 T AT&T INC. Communications Services 73 AGP AMERIGROUP CORPORATION Healthcare Facilities 72 WDC WESTERN DIGITAL CORP. Computer Storage Devices 67 ATW ATWOOD OCEANICS, INC. Oil Well Services & Equipment 67 CHSI CATALYST HEALTH SOLUTIONS, INC. Insurance (Accident & Health) 64 ESV ENSCO PLC Oil Well Services & Equipment 64 JOSB JOS. A. BANK CLOTHIERS, INC. Retail (Apparel) 64

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