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Executive Summary	September 2, 2011

The Economy Last weekend, Hurricane Irene battered parts of the east coast. But while certain areas were no doubt hit quite hard, the overall damage -- particularly in large cities -- ended up being much less severe than the dire forecasts had indicated in the days leading up to the storm. The current economic picture seems to be a similar one. The economy has taken its hits in the past couple months, with sluggish growth at home and crisis in Europe. But the dire predictions we've been hearing have yet to play out, and the data coming in is far better than many have feared. Take, for example, consumer spending and the retail sector. Consumer spending makes up about 70% of the U.S. economy, and U.S. consumers are continuing to show that they are far from dead. In July, personal consumption expenditures rose 0.8%, according to a new Bureau of Economic Analysis report. Personal income increased 0.3%. Retailers also have been reporting strong August sales numbers, despite Hurricane Irene's impact. Costco's same-store sales rose 11%, more than analysts expected. While you might be able to attribute some of that to customers buying up batteries and other emergency supplies in advance of the storm, other retailers that sell non-essential items also saw strong growth. Limited Brands' sales rose 11%, beating estimates, and Macy's sales were up a greater-than-expected 5% -- despite the fact that the chain closed more than 100 stores the Saturday afternoon that Irene was making her way up the coast, according to Reuters. The manufacturing picture also remains better than many expected. The sector expanded in August, according to the Institute for Supply Management, and while the expansion was slight, it was better than many anticipated. It also marked the 25th straight month that the sector expanded, a remarkable run. Unemployment, meanwhile, remains quite high by historical standards. But we haven't seen the sort of layoffs and job cuts that many feared would accompany this summer's market and economic turbulence. According to Challenger, Gray & Christmas, layoffs fell 23% in August, and hiring plans jumped 42% (albeit from a low July total). Less than two-thirds of the layoffs came from the private sector, as government job cuts jumped. ADP's August jobs report confirmed that the private sector employment picture improved in August. The group said the sector added 91,000 jobs for the month. New claims for unemployment, meanwhile, have dipped slightly since our last newsletter, according to the Labor Department. They remain high by historical standards, but are about 13% lower than they were a year ago. As for the housing market, it continues to struggle. Pending home sales fell 1.3% in July, according to the National Association of Realtors. The figure was, however, 14.4% above year-ago levels, which offers some encouragement. And good news came on housing prices. The S&P/Case-Shiller home price index jumped 3.6 percent in the second quarter (vs. the first quarter), new data showed. The increase was just 0.1% when seasonally adjusted, however. All in all, investors seem to be beginning to think that their early summer fears were overblown. Since our last newsletter, the S&P 500 returned 5.6%, while the Hot List returned 6.2%. So far in 2011, the portfolio has returned -10.5% vs. -4.2% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 141.5% vs. the S&P's 20.4% gain. Volatility = Opportunity Over the past month, we've seen stock market volatility reach levels that, with the exception of late 2008/early 2009, were the highest since 1990 (and it may be longer than that -- the Chicago Board Options Exchange Volatility Index started using its current methodology back in 1990, so data prior to that is hard to use as a comparison). What's interesting about the recent market volatility (which appears to have peaked in early to mid-August) and market declines is that they weren't precipitated by a major downward shift in the economy -- nor have they been followed by one. Remember, while macroeconomic factors -- i.e., the financial crisis and the fear that the global economy was going to be obliterated -- were a huge factor in the late-2008/early-2009 market plunge, the economy had started to scuffle well before the September 2008 collapse of Lehman Brothers triggered the major market plunge. In the year leading up to September 2008, new claims for unemployment surged 41%. ISM's manufacturing index began to signal a contraction in the sector in February 2008, and remained in slight contraction territory right up until September, when the index really tumbled. And home prices had been dropping rapidly for more than two years. Then, once the macro fears exploded in September 2008, the economy really took it on the chin. Unemployment claims surged, manufacturing data was dismal, and home prices kept plummeting. Today, we have none of that. New claims for unemployment are actually below where they were in mid-June, and are about 13% below where they were a year ago. The manufacturing sector is continuing to expand -- granted, the expansion has now slowed quite a bit, but it's still growth. And home prices have been bouncing around the same level since 2009, and actually jumped in the second quarter. The recent volatility thus seems tied not to major economic deterioration, but instead to fear -- fear of the European debt crisis, fear of a tapped-out consumer, fear of ... well, fear itself, which (merited or not) can cause consumers and businesses to tighten their wallets, leading to economic downturns of the self-fulfilling-prophecy sort. Any serious volatility is tough to stomach as an investor. But this sort of volatility -- that is, volatility that is not tied to fundamentals -- is also exciting for long-term investors. That's because, as equity prices swing wildly without much regard to intrinsic value, mispricings become rampant. And disciplined investors with long-term horizons (really, should there be any other kind?) can jump on the myriad of opportunities that present themselves. There's no better example of that than the Hot List, which, following all of this recent volatility, is undergoing a huge shakeup in today's rebalancing. The portfolio is selling 9 of its 10 holdings and replacing them with new stocks that, after the market's big moves, now look more attractive. It's the first time in the portfolio's eight-plus year history that it's changed that many of its holdings at one time. Five of the departing stocks leave as winners (as of Wednesday's close), while four leave as losers. Most of the new holdings are smaller-sized stocks, with six of the nine having market caps of $3 billion or less, and the other three all under $10 billion. It's not surprising -- as is the case in most significant downdrafts, small-caps were hit harder than larger stocks in the recent market decline. Many were likely hit too hard as investors fled to the perceived safety of larger stocks, and now look like bargains to my strategies. One area of the market that the portfolio is particularly high on: for-profit education companies. It's adding three to the fold today: Capella Education, DeVry, and Career Education. They join Bridgepoint -- the portfolio's lone holdover this month -- in composing 40% of the Hot List's holdings. These for-profits have been much-maligned over the past year-and-a-half, as reguRobotors questioned and cracked down on their loan practices. And they were hit hard this summer as the market shifted toward stocks that appeared less risky. But even amid the regulatory scrutiny, which has caused many for-profits to alter their recruiting practices, many are putting up solid results. Capella increased earnings per share 7% in the first half of 2011, and its revenues also grew. Career Education increased EPS 15% in the first half, as revenues remained stable; Bridgepoint upped EPS 68% and revenues 42% in the first half; and DeVry significantly upped both earnings and revenues in the first half. These companies are a microcosm of the broader economy recently: surrounded by fear, but performing better than expected -- though few investors seem to be able to see reality amid all the sky-is-falling talk. That's why I think it's so important to use a disciplined, unemotional system like the Hot List. It acts on facts, not fear; data, not speculation. That's how gurus like Warren Buffett, Peter Lynch, and Joel Greenblatt made their fortunes, and it's how the Hot List has stayed so far ahead of the market since its inception more than eight years ago.		Editor-in-Chief: John Reese Since Inception   Hot List 141.5% S&P 500 20.4% Accuracy 55.9% Beta 1.2 YTD   Hot List -10.5% S&P 500 -4.2% Since Last Issue   Hot List 6.2% S&P 500 5.6% Avg. Fundamentals   Market Cap (mil) $2,922 PE Ratio 10.5 5 Yr EPS Growth 27.7% Yield 1.6% Rel. Strength 50 Portfolio Sectors Services 4 Technology 3 Basic Materials 1 Financial 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, 9 stocks leave our portfolio. These include: Amtech Systems, Inc. (ASYS), Amtrust Financial Services, Inc. (AFSI), Banco Macro Sa (Adr) (BMA), Astrazeneca Plc (Adr) (AZN), Cash America International, Inc. (CSH), Acme Packet, Inc. (APKT), Dollar Tree, Inc. (DLTR), Conocophillips (COP) and Quality Systems, Inc. (QSII). The Keepers 1 stocks remain in the portfolio. They are: Bridgepoint Education, Inc. (BPI). The Newbies We are adding 9 stocks to the portfolio. These include: Forest Laboratories, Inc. (FRX), Micron Technology, Inc. (MU), Devry Inc. (DV), Career Education Corp. (CECO), Asiainfo-linkage, Inc. (ASIA), Marketaxess Holdings Inc. (MKTX), Ternium S.a. (Adr) (TX), Capella Education Company (CPLA) and Gt Advanced Technologies Inc (GTAT). Portfolio Changes Additions   FOREST LABORATORIES, INC. FRX MICRON TECHNOLOGY, INC. MU DEVRY INC. DV CAREER EDUCATION CORP. CECO ASIAINFO-LINKAGE, INC. ASIA MARKETAXESS HOLDINGS INC. MKTX TERNIUM S.A. (ADR) TX CAPELLA EDUCATION COMPANY CPLA GT ADVANCED TECHNOLOGIES INC GTAT Deletions   AMTECH SYSTEMS, INC. ASYS AMTRUST FINANCIAL SERVICES, INC. AFSI BANCO MACRO SA (ADR) BMA ASTRAZENECA PLC (ADR) AZN CASH AMERICA INTERNATIONAL, INC. CSH ACME PACKET, INC. APKT DOLLAR TREE, INC. DLTR CONOCOPHILLIPS COP QUALITY SYSTEMS, INC. QSII Newcomers to the Validea Hot List AsiaInfo-Linkage, Inc. (ASIA): Based in Beijing, this company provides software solutions and I/T services that help China's telecom operators improve efficiency. The small-cap ($820 million market cap) has taken in about $455 million in sales in the past year. AsiaInfo gets a perfect 100% score from my Peter Lynch-inspired strategy. To read more about it, see the "Detailed Stock Analysis" section below. Capella Education Company (CPLA): Minneapolis-based Capella is the parent of Capella University, a regionally accredited online school that offers bachelor's and graduate degree programs in numerous areas. It has almost 40,000 students from across the U.S. and dozens of other countries. Capella has a market cap of about $500 million, and has taken in close to $440 million in sales in the past year. It gets strong interest from the strategies I base on the writings of Peter Lynch and Joel Greenblatt. To learn more about it, scroll down to the "Detailed Stock Analysis" section below. Career Education Corp. (CECO): Another for-profit education firm, this Illinois-based company has more than 90 campuses across the U.S., France, Italy and the United Kingdom and Monaco. It serves more than 116,000 students in a variety of career-oriented disciplines. Career Education ($1.3 billion market cap) has taken in more than $2.1 billion in sales in the past 12 months. It gets strong interest from my Peter Lynch- and Joel Greenblatt-based models. To read more about its fundamentals, see the "Detailed Stock Analysis" section below. DeVry Inc. (DV): The third and final for-profit education stock added to the portfolio this week, DeVry is also based in Illinois. It's the parent of several universities that focus on business, healthcare, and technology, and it also offers programs for middle and high schoolers. DeVry ($3 billion market cap) gets strong interest from my Peter Lynch, Joel Greenblatt-, and James O'Shaughnessy-based models. For more on the stock, see the "Detailed Stock Analysis" section below. Forest Laboratories, Inc. (FRX): Forest partners with biotech and pharma companies to develop pharmaceutical products. Its offerings focus on the central nervous and cardiovascular systems. New York City-based Forest ($9.4 billion market cap) has taken in more than $4.5 billion in sales in the past 12 months. It gets strong interest from my Benjamin Graham-, Peter Lynch-, and Joel Greenblatt-based models. To read more about its fundamentals, see the "Detailed Stock Analysis" section below. GT Advanced Technologies (GTAT): Based in Merrimack, New Hampshire, GT recently changed its name from GT Solar International. It has been in the solar power business for 17 years now, and is a leader in polysilicon production technology, and sapphire and silicon crystalline growth systems. Its products might not ring a bell, but they are key technologies involved in solar cell and panel and LED production. The firm has taken in almost $1 billion in sales in the past year. GT ($1.5 billion market cap) surged 33% while in the Hot List from June 10-July 8, and my models are bringing it back this rebalancing. It gets very high marks from my Peter Lynch- and Joel Greenblatt-inspired models. See the "Detailed Stock Analysis" section below to learn more about the stock. MarketAxess Holdings Inc. (MKTX): New York City-based MarketAxess operates an electronic trading platform that lets investment industry professionals trade corporate bonds and other fixed-income instruments. It has a $1.1 billion market cap, and has taken in about $165 million in sales in the past year. MarketAxess gets strong interest from my Peter Lynch-based model, and high scores from several of my other models. See the "Detailed Stock Analysis" section below to learn more about the stock. Micron Technology Inc. (MU): Based in Boise, Idaho, Micron is a semiconductor company that makes DRAM components, modules, and flash memory products used in a variety of applications. It's raked in more than $9 billion in sales in the past 12 months. Micron ($5.9 billion market cap) gets strong interest from my Peter Lynch- and Joseph Piotroski-based models. To read more about its fundamentals, see the "Detailed Stock Analysis" section below. Ternium S.A. (TX): Ternium is a Luxembourg-based steel company that makes and processes flat and long steel products for the construction, home appliances, capital goods, container, food, energy and automotive industries. About 57% of its sales are generated in North America, with about 41% generated in Latin America. In the past year, the $5.1-billion-market-cap firm has taken in $8.3 billion in sales. Ternium gets strong interest from my Peter Lynch- and Kenneth Fisher-based strategies. See the "Detailed Stock Analysis" section below to learn more about the stock. News about Validea Hot List Stocks Forest Laboratories Inc. (FRX): Forest has thwarted activist investor Carl Icahn's bid to restructure its board. Shareholders elected the firm's full slate of board candidates at its annual meeting "by a significant margin" based on preliminary estimates, Bloomberg reported on Aug. 18, adding that three new directors were among the 10-member slate. Icahn, who is the firm's second-largest investor, had nominated four directors to the board. 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 BPI BRIDGEPOINT EDUCATION, INC. Schools 83 FRX FOREST LABORATORIES, INC. Biotechnology & Drugs 74 TX TERNIUM S.A. (ADR) Iron & Steel 68 CPLA CAPELLA EDUCATION COMPANY Schools 67 GTAT GT ADVANCED TECHNOLOGIES INC Semiconductors 61 DV DEVRY INC. Schools 58 MU MICRON TECHNOLOGY, INC. Semiconductors 58 ASIA ASIAINFO-LINKAGE, INC. Software & Programming 57 CECO CAREER EDUCATION CORP. Schools 55 MKTX MARKETAXESS HOLDINGS INC. Investment Services 51 Ticker Market Cap Date Added Start Price Return BPI $1,096 3/18/2011 $18.02 $20.86 15.8% FRX $9,294 9/2/2011 TBD $33.85 TBD TX $5,064 9/2/2011 TBD $25.26 TBD CPLA $469 9/2/2011 TBD $30.88 TBD GTAT $1,485 9/2/2011 TBD $11.73 TBD DV $2,909 9/2/2011 TBD $42.52 TBD MU $5,763 9/2/2011 TBD $5.74 TBD ASIA $801 9/2/2011 TBD $11.14 TBD CECO $1,223 9/2/2011 TBD $16.04 TBD MKTX $1,115 9/2/2011 TBD $29.35 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 BPI   |   FRX   |   TX   |   CPLA   |   GTAT   |   DV   |   MU   |   ASIA   |   CECO   |   MKTX   |   BRIDGEPOINT EDUCATION, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Bridgepoint Education, Inc. (Bridgepoint) is a provider of postsecondary education services. The Company's wholly owned subsidiaries, Ashford University and the University of the Rockies, are regionally accredited academic institutions that offer associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences. These institutions deliver programs online, as well as at its traditional campuses located in Clinton, Iowa, and Colorado Springs, Colorado. As of December 31, 2010, it offered approximately 1,345 courses, 71 degree programs and 134 specializations. As of December 31, 2010, it had 77,892 students enrolled in its institutions, 99% of whom were attending classes online. 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. BPI's P/E is 7.24, based on trailing 12 month earnings, while the current market PE is 14.00. Therefore, it passes the first test. REVENUE GROWTH IN RELATION TO EPS GROWTH: [PASS] Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. BPI's revenue growth is 112.33%, while it's earnings growth rate is 33.34%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate. Therefore, BPI 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 (38%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (47%) of the current year. Sales growth for the prior must be greater than the latter. For BPI 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. BPI's EPS ($0.90) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. BPI's EPS for this quarter last year ($0.58) pass this test. POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: [PASS] The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. BPI's growth rate of 55.17% 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 BPI is 16.67%. This should be less than the growth rates for the 3 previous quarters, which are 64.86%, 36.36%, and 87.76%. BPI 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, 66.39%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 55.17%, (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 BPI is 55.2%, 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, 55.17% must be greater than or equal to the historical growth which is 33.34%. BPI 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. BPI, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were -2.15, 0.32, 3.15, 0.74, and 2.14, 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. BPI's long-term growth rate of 33.34%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate, 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. BPI's Debt/Equity (0.00%) is not considered high relative to its industry (58.39%) 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 BPI, this criterion has not been met (insider sell transactions are 91, while insiders buying number 82). 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.   FOREST LABORATORIES, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Forest Laboratories, Inc. (Forest) develops, manufactures and sells branded forms of ethical drug products, most of which requires a physician's prescription. The Company also focuses on the development and introduction of new products, including products developed in collaboration with licensing partners. Its products include those developed by the Company and those acquired from other pharmaceutical companies and integrated into its marketing and distribution systems. The Company's principal products include Lexapro, Namenda, Bystolic, Savella and Teflaro. On April 13, 2011, the Company acquired Clinical Data Inc. (Clinical Data), a specialty pharmaceutical company. Analysis Guru Score: 98% DETERMINE THE CLASSIFICATION: FRX is considered a "True Stalwart", according to this methodology, as its earnings growth of 14.50% lies within a moderate 10%-19% range and its annual sales of $4,505 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. FRX is attractive if FRX 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 FRX was 11.16% last year, while for this year it is 10.21%. Since inventory to sales has decreased from last year by -0.94%, FRX passes this test. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for FRX (0.57), based on the average of the 3, 4 and 5 year historical eps growth rates, is O.K. EARNINGS PER SHARE: [PASS] The EPS for a stalwart company must be positive. FRX's EPS ($4.11) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for FRX (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 FRX (8.33%) 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: [BONUS PASS] 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 FRX (39.78%) is high enough to add to the attractiveness of this company.   TERNIUM S.A. (ADR) Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Ternium SA is a steel company in Latin America that manufactures and processes flat and long steel products for the construction, home appliances, capital goods, container, food, energy and automotive industries. The Company operates in three segments: Flat Steel Products, comprising the manufacturing and marketing of hot rolled coils and sheets, cold rolled coils and sheets, tin plate, welded pipes, hot dipped galvanized and electro-galvanized sheets and pre-painted sheets; Long Steel Products, comprising the manufacturing and marketing of billets (steel in its basic, semi-finished state), wire rod and bars; Others, comprising mainly pig iron, pellets and pre-engineered metal buildings. During the year ended December 31, 2010, Flat Steel Products accounted to 86% of the Company's overall revenues. Approximately 57% of Ternium's sales were generated in North America and 41% in South and Central America. Analysis Guru Score: 100% PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Smokestack (cyclical) companies with a Price/Sales ratio between .4 and .8 represent good values according to this methodology. TXpasses this test as its P/S of 0.61 based on trailing 12 month sales, falls within the "good values" range for cyclical companies. TOTAL DEBT/EQUITY RATIO: [PASS] Less debt equals less risk according to this methodology. TX's Debt/Equity of 33.06% 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. TX 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 TX At this Point Is TX a "Super Stock"? YES PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-Smokestack(non-cyclical) companies with a Price/Sales ratio between .75 and 1.5 are good values. Otherwise, Smokestack(cyclical) companies with a Price/Sales ratio between .4 and .8 represent good values. TX's P/S ratio of 0.61 falls within the "good values " range for cyclical industries and is considered attractive. LONG-TERM EPS GROWTH RATE: [PASS] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. TX's inflation adjusted EPS growth rate of 27.59% 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. TX's free cash per share of 1.78 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. TX, whose three year net profit margin averages 10.45%, passes this evaluation.   CAPELLA EDUCATION COMPANY Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Capella Education Company is an online postsecondary education services company. Through its wholly owned subsidiary, Capella University, the Company offers a range of doctoral, master's and bachelor's programs. As December 31, 2010, it offered over 1,250 online courses and 43 academic programs with 136 specializations to over 39,000 learners. It also offers certificate programs, which consist of a series of courses focused on a particular area of study. In addition, Capella Education Company also offers academic services, such as new learner orientation, technical support, academic advising, research services (particularly for doctoral degree candidates), writing services and online tutoring. It also provides appropriate educational accommodations to learners with documented disabilities through its disability support services team. During the year ended December 31, 2010, it formed the joint-venture Sophia Learning, LLC, as majority owner. Analysis Guru Score: 75% MARKET CAP: [PASS] The first requirement of the Cornerstone Growth Strategy is that the company has a market capitalization of at least $150 million. This will screen out the companies that are too illiquid for most investors, but still include a small growth company. CPLA, with a market cap of $469 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. CPLA, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.06, 1.33, 1.66, 2.51 and 3.64, 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. CPLA's Price/Sales ratio of 1.07, based on trailing 12 month sales, passes this criterion. RELATIVE STRENGTH: [FAIL] The final criterion for the Cornerstone Growth Strategy requires that the Relative Strength of the company be among the top 50 of the stocks screened using the previous criterion. This gives you the opportunity to buy the growth stocks you are searching for just as the market is embracing them. CPLA has a relative strength of 11. This does not pass the final criterion. As a result, this methodology would not consider the stock even though it passed the previous three criteria.   GT ADVANCED TECHNOLOGIES INC Profile Strategy: Growth Investor Based on: Martin Zweig GT Advanced Technologies Inc., formerly GT Solar International, Inc., through its subsidiaries, is a global provider of polysilicon production technology and multicrystalline ingot growth systems and related photovoltaic manufacturing services for the solar industry, and sapphire growth systems and material for the light emitting diode (LED) and other specialty markets. The Company's customers include solar companies, as well as companies in the chemical industry. It operates in three segments: polysilicon business, photovoltaic (PV) business and sapphire business. On July 29, 2010, it acquired Crystal Systems, Inc. (Crystal Systems), a crystal growth technology company that produces sapphire material used for LED applications, as well as other specialty markets, such as medical, research, aerospace industries and defense. In August 2011, the Company acquired Confluence Solar, Inc. 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. GTAT's P/E is 7.55, based on trailing 12 month earnings, while the current market PE is 14.00. Therefore, it passes the first test. REVENUE GROWTH IN RELATION TO EPS GROWTH: [PASS] Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. GTAT's revenue growth is 75.21%, while it's earnings growth rate is 49.84%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate. Therefore, GTAT 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 (71%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (39.5%) of the current year. Sales growth for the prior must be greater than the latter. For GTAT 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. GTAT's EPS ($0.40) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. GTAT's EPS for this quarter last year ($0.11) 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. GTAT's growth rate of 263.64% 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 GTAT is 24.92%. This should be less than the growth rates for the 3 previous quarters, which are 366.67%, 84.00%, and 78.26%. GTAT 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, 112.96%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 263.64%, (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, 263.64% must be greater than or equal to the historical growth which is 49.84%. GTAT 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. GTAT, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were -0.13, 0.25, 0.61, 0.60, and 1.24, 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. GTAT's long-term growth rate of 49.84%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate, 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. GTAT's Debt/Equity (38.95%) is considered high relative to its industry (15.22%) and fails this test. INSIDER TRANSACTIONS: [PASS] A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For GTAT, this criterion has not been met (insider sell transactions are 99, while insiders buying number 34). 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.   DEVRY INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher DeVry Inc. (DeVry) is a provider of educational services and the parent organization of Advanced Academics, Becker Professional Education, Carrington College and Carrington College California, Chamberlain College of Nursing, DeVry Brasil, DeVry University, and Ross University. These institutions offer a range of programs in business, healthcare and technology and serve students in middle school through postsecondary education, as well as accounting and finance professionals. In August 2011, the Company acquired he business operations of privately held American University of the Caribbean. 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. DV's P/S ratio of 1.33 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. DV'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. DV 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 DV At this Point Is DV 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, DV, who has a P/S of 1.33, 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%. DV's inflation adjusted EPS growth rate of 42.28% passes the test. FREE CASH PER SHARE: [PASS] This methodology looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses. This is based on the premise that companies without cash will soon be out of business. DV's free cash per share of 3.64 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. DV, whose three year net profit margin averages 13.70%, passes this evaluation.   MICRON TECHNOLOGY, INC. Profile Strategy: Book/Market Investor Based on: Joseph Piotroski Micron Technology, Inc. is a manufacturer and marketer of semiconductor devices, principally dynamic random access memory (DRAM), Nandi Flash memory (NAND Flash and NOR Flash memory, as well as other innovative memory technologies, packaging solutions and semiconductor systems for use in leading-edge computing, consumer, networking, embedded and mobile products. In addition, the Company manufacture semiconductor components for complementary metal-oxide semiconductor (CMOS) image sensors and other semiconductor products. During the fiscal year ended September 2, 2010, the Company had two segments: Memory and Numonyx. On May 7, 2010, the Company acquired Numonyx Holdings B.V. (Numonyx), which manufactures and sells NOR Flash, NAND Flash, DRAM and Phase Change memory technologies and products. Analysis Guru Score: 90% BOOK/MARKET RATIO: [PASS] The first criteria of this strategy requires that a company be in the top 20% of the market based on the Book/Market ratio (which is the inverse of the Price/Book ratio). MU, which has a book to market ratio of 1.49, meets this criterion and thus this strategy will use the following rules to determine if it is a financially distressed firm or is unfairly trading at a discount to its book value. The study conducted by Piotroski found that excess returns can be earned by holding a portfolio of high Book/Market stocks. He also found, however, that it is very important to separate companies that trade at a discount because they are financially distressed from companies that are unfairly trading at a discount. The following criteria are used to help provide this distinction. RETURN ON ASSETS: [PASS] As a first step to determining whether a firm is not financially distressed, this methodology requires that the return on assets for the most recent fiscal year be positive. MU's return on assets was 12.52% in the most recent year, therefore it passes this test. CHANGE IN RETURN ON ASSETS: [PASS] The next requirement is that the return on assets for the most recent fiscal year must be greater than the return on assets for the previous fiscal year. MU's return on assets was 12.52% in the most recent year and -17.41% in the previous year, therefore it passes this test. CASH FLOW FROM OPERATIONS: [PASS] In addition to the return on assets, the cash flow from operations for the most recent fiscal year must also be positive. This eliminates companies that are burning cash and therefore are more likely to be financially distressed. MU's cash flow from operations was $3,096.00 million in the most recent year, therefore it passes this test. CASH COMPARED TO NET INCOME: [PASS] This methodology requires that cash from operations for the most current fiscal year must be greater than net income for the most current fiscal year. MU's cash from operations was $3,096.00 million in the most recent year, while its net income was $1,839.82 million, therefore it passes this test. CHANGE IN LONG TERM DEBT/ASSETS: [PASS] The long term debt to assets ratio for the most recent fiscal year must be less than or equal to the previous fiscal year. MU's LTD/Assets was 0.11 in the most recent year and 0.21 in the previous year, therefore it passes this test. CHANGE IN CURRENT RATIO: [PASS] As an additional test of firm solvency, the current ratio for the most recent fiscal year must be greater than the current ratio for the previous fiscal year. MU's current ratio was 2.34 in the most recent year and 1.77 in the previous year, therefore it passes this test. CHANGE IN SHARES OUTSTANDING: [FAIL] The issuance of new stock is considered by this methodology to be a sign that a company is not able to generate enough internal cash to fund its business. Therefore, shares outstanding for the most recent fiscal year must be less than or equal to shares outstanding for the previous fiscal year. MU's shares outstanding was 994.5 million in the most recent year and 848.7 million in the previous year, therefore it fails this test. CHANGE IN GROSS MARGIN: [PASS] As a sign that a company is expanding its profitability, this strategy requires that gross margin for the most recent fiscal year be greater than gross margin for the previous fiscal year. MU's gross margin was 32.00% in the most recent year and -9.00% in the previous year, therefore it passes this test. CHANGE IN ASSET TURNOVER: [PASS] The final criterion of this strategy requires that asset turnover for the most recent fiscal year be greater than asset turnover for the previous fiscal year. MU's asset turnover was 0.58 in the most recent year and 0.42 in the previous year, therefore it passes this test.   ASIAINFO-LINKAGE, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch AsiaInfo-Linkage, Inc. (AsiaInfo-Linkage), formerly AsiaInfo Holdings, Inc., is a provider of telecommunications software solutions and information technology products and services in China. The Company's software and services enables its customers to build, maintain, operate, manage and improve their communications infrastructure. It's products and services in telecom business include business operation support systems, including billing and partnership relationship management applications; business intelligence systems, including data warehousing platforms and data mining applications; operating support systems (OSS) package, including protocol adaptor, service fulfilment, process management and service activation; service and data applications, such as mail centers, mobile device management and mobile e-commerce platforms, and network infrastructure services, including network design and implementation, integrated network management and professional maintenance and support. Analysis Guru Score: 100% DETERMINE THE CLASSIFICATION: This methodology would consider ASIA a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (11.42) relative to the growth rate (46.95%), based on the average of the 3 and 4 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 ASIA (0.24) 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. ASIA, whose sales are $455.5 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for ASIA was 4.46% last year, while for this year it is 2.88%. Since inventory to sales has decreased from last year by -1.58%, ASIA passes this test. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for ASIA is 46.9%, based on the average of the 3 and 4 year historical eps growth rates, which is considered 'OK'. However, it may be difficult to sustain such a high growth rate. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for ASIA (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 ASIA (6.55%) 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: [BONUS PASS] 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 ASIA (33.98%) is high enough to add to the attractiveness of this company.   CAREER EDUCATION CORP. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Career Education Corporation (CEC), through colleges, schools and universities that are part of the CEC family, offers education to a diverse student population of over 116,000 students in a variety of career-oriented disciplines. The Company has more than 90 campuses that serve these students are located throughout the United States and in France, Italy and the United Kingdom and Monaco. Its institutions includes American InterContinental University (AIU), Brooks Institute; Colorado Technical University (CTU), Harrington College of Design, INSEEC Group (INSEEC) Schools, International University of Monaco (IUM), International Academy of Design & Technology (IADT), Istituto Marangoni, Le Cordon Bleu North America (LCB), and Sanford-Brown Institutes and Colleges. CEC organized its businesses across four segments: University, Health Education, Culinary Arts and International. On April 15, 2010, the Company acquired IUM, an international business university. 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. CECO's P/S of 0.58 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. CECO's Debt/Equity of 0.14% 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. CECO 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 CECO At this Point Is CECO 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.CECO's P/S ratio of 0.58 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: [FAIL] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. CECO's inflation adjusted EPS growth rate of 10.19% fails 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. CECO's free cash per share of 1.58 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. CECO, whose three year net profit margin averages 5.17%, passes this evaluation.   MARKETAXESS HOLDINGS INC. Profile Strategy: Growth Investor Based on: Martin Zweig MarketAxess Holdings Inc. operates an electronic trading platform for corporate bonds and other types of fixed-income instruments, through which the Company's institutional investor clients can access the liquidity provided by its broker-dealer clients. The Company offers its clients the ability to trade the United States corporate bonds, European corporate bonds, credit default swaps, agencies, high yield and emerging markets bonds and asset-backed and preferred securities. The Company also executes certain bond transactions between and among institutional investor and broker-dealer clients on a principal basis by serving as counterparty to both the buyer and the seller in matching back-to-back trades, which then settle through a third-party clearing organization. Through its Corporate BondTicker service, the Company provides fixed-income market data, analytics and compliance tools that help its clients make trading decisions. 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. MKTX's P/E is 28.48, based on trailing 12 month earnings, while the current market PE is 14.00. Therefore, it passes the first test. REVENUE GROWTH IN RELATION TO EPS GROWTH: [FAIL] Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. MKTX's revenue growth is 14.73%, while it's earnings growth rate is 38.69%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, MKTX 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 (29.6%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (25%) of the current year. Sales growth for the prior must be greater than the latter. For MKTX 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. MKTX's EPS ($0.30) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. MKTX's EPS for this quarter last year ($0.18) 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. MKTX's growth rate of 66.67% 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 MKTX is 19.34%. This should be less than the growth rates for the 3 previous quarters, which are 83.33%, 64.29%, and 58.82%. MKTX 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, 67.44%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 66.67%, (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 MKTX is 66.7%, 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, 66.67% must be greater than or equal to the historical growth which is 38.69%. MKTX 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. MKTX, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.16, 0.30, 0.22, 0.42, and 0.80, 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. MKTX's long-term growth rate of 38.69%, 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 MKTX, this criterion has not been met (insider sell transactions are 23, while insiders buying number 4). 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 ADVS ADVENT SOFTWARE, INC. Software & Programming 53 SWI SOLARWINDS, INC. Software & Programming 51 RUE RUE21, INC. Retail (Apparel) 49 CW CURTISS-WRIGHT CORP. Misc. Fabricated Products 48 HPQ HEWLETT-PACKARD COMPANY Computer Hardware 47 PLCE CHILDREN'S PLACE RETAIL STORES, INC. Retail (Apparel) 47 OZRK BANK OF THE OZARKS, INC. Regional Banks 47 BHP BHP BILLITON LIMITED (ADR) Metal Mining 45 CSH CASH AMERICA INTERNATIONAL, INC. Misc. Financial Services 45 QSII QUALITY SYSTEMS, INC. Software & Programming 45

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