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Executive Summary	March 29, 2013

The Economy Like a pesky bee that just won't go away, the European debt crisis has once again been buzzing threateningly around the global economy. But while many investors have been preoccupied with the short-term pain its stinger could cause, the U.S. economy has been continuing to show signs of a slow and steady long-term recovery. Case in point: the housing market. Housing starts rose 0.8% in February, while permit issuance for new home construction rose 4.6%, according to new government data. That puts starts more than 25% above their year-ago level, and permit issuance more than 28% above its year -ago level. In addition, existing home sales rose 0.8% in February, according to the National Association of Realtors, putting them 6.3% above where they were last February. Sales prices were up 10%. Pending home sales, a forward-looking indicator, fell slightly (0.4%), but that was mostly due to constrained inventory, the Realtor group said. Pending sales are still at their second-highest level in three years, and are 5% above where they were a year ago. Industrial production also increased in February, rising 0.7%, according to the Federal Reserve. Part of the gain was due to weather, as the unseasonably warm temperatures of the previous couple months gave way to more typical conditions, increasing utility output by 1.6%. But, manufacturing output was also up significantly, gaining 0.8% for the month. New claims for unemployment, meanwhile, were up slightly since our last newsletter, but the four-week moving average has actually declined. New claims are 2.4% below where they were a year ago. While that's not as big a year-over-year decrease as we've seen in many recent weeks, part of that is due to tougher year-ago comparisons as the jobs recovery progresses. Continuing claims remained about even since our last newsletter. They are down nearly 9% from year-ago levels. Mixed news came from the most recent durable goods report. Overall, durable goods increased 5.7% in February, according to the Commerce Department, a nice reversal from January's 3.8% decline. But, orders for core capital goods -- the type of goods that indicate businesses are investing more in equipment and facilities -- fell 2.7%, the biggest decrease in seven months. The decline did follow a big January, however, when orders jumped nearly 7%, so companies may simply have not needed to order as much given what they had done the previous month. Finally, there is Cyprus. The tiny Mediterranean island nation's debt problems have been the focal point of the financial news for the past week or two. Investors were worried that the country's troubles could lead to a domino effect that would decimate the Euro zone, and spread to the rest of the world (haven't we heard this song before?). The country was able to negotiate a Euro zone-financed bailout, however, and on Thursday, Cyprus banks finally reopened. As of this writing the run on banks that some feared would occur had not transpired. Since our last newsletter, the S&P 500 returned 0.4%, while the Hot List returned 1.6%. So far in 2013, the portfolio has returned 12.1% vs. 10.0% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 204.1% vs. the S&P's 56.9% gain.		Editor-in-Chief: John Reese Since Inception   Hot List 204.1% S&P 500 56.9% Accuracy 56.4% Beta 1.2 YTD   Hot List 12.1% S&P 500 10.0% Since Last Issue   Hot List 1.6% S&P 500 0.4% Avg. Fundamentals   Market Cap (mil) $32,099 PE Ratio 9.4 5 Yr EPS Growth 21.6% Yield 2.0% Rel. Strength 62 Portfolio Sectors Services 5 Energy 2 Financial 1 Conglomerates 1 Consumer Cyclical 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. Portfolio Update For much of the past two weeks, despite the Cyprus fears, the broader market has hung in there, with the S&P 500 actually surpassing its all-time high during trading on Thursday. And for much of these two weeks, the Hot List portfolio has been outpacing the market. It's been led by newcomer Dollar Tree, which join the portfolio on our March 15 rebalancing. Through March 27, its shares were up more than 8%. Several other Hot List holdings, including USANA Health Sciences, Starz, World Acceptance, and TJX Companies, had posted gains in the 4% to 5% range since our last newsletter (also through March 27). Most of the losing positions involve relatively minor losses, with the exception of Jos. A. Bank Clothiers, which was down more than 6% since it joined the portfolio on March 15. Its fundamentals are still strong, however, so it remains a good bounce-back candidate. News about Validea Hot List Stocks USANA Health Sciences (USNA): USANA announced plans to expand operations into Colombia during the third quarter of 2013, which will give the firm operations in 19 markets worldwide. Part of the plans involve having an office in Colombia's capital, Bogota, the company said. Dollar Tree Inc. (DLTR): Shares of Dollar Tree were up more than 8% since our last newsletter (through March 27). The catalyst for the strong performance seemed to be optimism about bargain retailers in general, after Dollar General and Ross Stores both posted strong quarterly results. Guru Spotlight: Martin Zweig Today's Guru Spotlight is a bittersweet one. While it's always interesting and worthwhile to examine the great Martin Zweig's approach, we're also commemorating the recent passing of the investment guru, who died in February at the age of 70. Zweig was an intriguing character known for putting his fortune to use in some pretty fun, flashy ways. He owned what Forbes reported was the most expensive apartment in New York City, a penthouse atop Manhattan's Pierre Hotel that was at one time valued at more than $70 million. He was also an avid collector of a variety of different kinds of memorabilia. The Wall Street Journal has reported that he owned such one-of-a-kind items as Buddy Holly's guitar, the gun from Dirty Harry, the motorcycle from Easy Rider, and Michael Jordan's jersey from his rookie season with the Chicago Bulls. (Zweig also used his money for some very noble purposes -- in 2011, he and his wife, Barbara, pledged $5 million gift to Mount Sinai Hospital, which went toward the Zweig Family Center for Living Donation, a facility that focuses on providing medical, surgical, and psychological care to living organ donors.) Zweig became well known back in the 1980s as a frequent guest on PBS's Wall $treet Week with Louis Rukeyser, where he famously called the 1987 market crash. Just one trading day before the crash, he said he expected "a brief decline, but a vicious one" that would be similar to the 1929 crash. Stocks tumbled more than 20% on "Black Monday", but -- just as he predicted -- made a quick comeback, reaching pre-crash levels in just about a year. Zweig was a growth investor, and his methodology was dominated by earnings-based criteria. He looked at a stock's earnings from a myriad of angles, wanting to ensure that he was getting stocks that had been producing strong growth over the long haul and even better growth recently -- and he wanted their growth to be coming from the right sources. Zweig's thoroughness paid off. His Zweig Forecast was one of the most highly regarded investment newsletters in the country, ranking number one for risk-adjusted returns during the 15 years that Hulbert Financial Digest monitored it. It produced an impressive 15.9% annualized return during that time. Zweig also managed several mutual funds, and was co-founder of Zweig Dimenna Partners, a multibillion-dollar New York-based firm that has been ranked in the top 15 of Barron's list of the most successful hedge funds. A Serious Strategy Zweig may have spent his cash on some flashy, fun items, but the strategy he used to compile that cash was a disciplined, methodical approach. His earnings examination of a firm spanned several categories, and I've incorporated them into the Zweig-inspired model I base on his book, Winning on Wall Street. They include: Trend of Earnings: Earnings should be higher in the current quarter than they were a year ago in the same quarter. Earnings Persistence: Earnings per share should have increased in each year of the past five-year period; EPS should also have grown in each of the past four quarters (vs. the respective year-ago quarters). Long-Term Growth: EPS should be growing by at least 15% over the long term; a growth rate over 30% is exceptional. Earnings Acceleration: EPS growth for the current quarter (vs. the same quarter last year) should be greater than the average growth for the previous three quarters (vs. the respective three quarters from a year ago). EPS growth in the current quarter also should be greater than the long-term growth rate. These criteria made sure that Zweig wasn't getting in late on a stock that had great long-term growth numbers, but which was coming to the end of its growth run. While Zweig's EPS focus certainly put him on the "growth" side of the growth/value spectrum, his approach was by no means a growth-at-all-costs strategy. Like all of the gurus I follow, he included a key value-based component in his method. He made sure that a stock's price/earnings ratio was no greater than three times the market average, and no greater than 43, regardless of what the market average was. (He also didn't like stocks with P/Es less than 5, because they could be indicative of an outright dog that investors were wisely avoiding.) In addition, Zweig wanted to know that a firm's earnings growth was sustainable over the long haul. And that meant that the growth was coming primarily from sales -- not cost-cutting or other non-sales measures. My Zweig model requires a firm's revenue growth to be at least 85% of EPS growth. If a stock fails that test but its revenues are growing by at least 30% a year, it passes, however, since that is still a very strong revenue growth rate. Like earnings growth, Zweig believed sales growth should be increasing. My model thus requires that a stock's sales growth for the most recent quarter (vs. the year-ago quarter) to be greater than the previous quarter's sales growth rate (vs. the year-ago quarter). Finally, Zweig also wanted to makes sure a firm's growth wasn't driven by unsustainable amounts of leverage (a key observation given all that's happened in recent years). Realizing that different industries require different debt loads, he looked for stocks whose debt/equity ratios were lower than their industry average. Macro Issues There's one more thing you should know about Zweig. He relied a good amount on technical factors to adjust how much of his portfolio he put into stocks, and the indicators he used are quite relevant given today's environment. Some included the Federal Reserve's discount rate; installment debt levels; and the prime rate. His mottos included "Don't fight the Fed" (meaning investors should be more bullish when interest rates were low or falling) and "Don't fight the tape" (which related to his practice of getting more bullish or bearish based on market trends). Those rules are tough for an individual investor to put into practice; Zweig used what he called a "Super Model" that meshed all of his indicators into a system that determined how bullish or bearish he was. But over the years, I've found that using only the quantitative, fundamental-based criteria Zweig outlined in his book can produce very strong results. My Zweig-inspired 10-stock portfolio has been a very strong performer since its July 2003 inception, returning 118.6%, or 8.4% per year, while the S&P 500 has gained just 56.3%, or 4.7% per year (through March 26). The portfolio is having a strong start to 2013, already up nearly 15%. It tends to choose stocks from a variety of areas -- it goes where the growth is. Here are the portfolio's current holdings: USANA Health Sciences (USNA) Sturm, Ruger & Company (RGR) Lululemon Athletica (LULU) World Acceptance Corp. (WRLD) First Cash Financial Services (FCFS) The TJX Companies (TJX) Netease, Inc. (NTES) Questcor Pharmaceuticals (QCOR) Oracle Corporation (ORCL) V.F. Corporation (VFC) What I really like about the Zweig strategy is that, while it certainly would qualify as a growth approach, it doesn't look at growth in a vacuum. As you've seen, it examines earnings growth from a variety of angles, making sure that it is strong, improving, and sustainable. In doing so, it allows you to find some fast-growing growth stocks that are not paper tigers, but instead solid prospects for continued long-term success. The Next Issue In two weeks, we will publish another issue of the Hot List, at which time we will rebalance the portfolio. If you have any questions, please feel free to contact us at hotlist@validea.com.

Current Portfolio Ticker Company Name Industry Guru Score USNA USANA HEALTH SCIENCES, INC. Conglomerates 100 STRZA STARZ Broadcasting & Cable TV 83 TJX THE TJX COMPANIES, INC. Retail (Apparel) 76 TEO TELECOM ARGENTINA S.A. (ADR) Communications Services 59 LEA LEAR CORPORATION Auto & Truck Parts 55 WRLD WORLD ACCEPTANCE CORP. Consumer Financial Services 54 RDS.A ROYAL DUTCH SHELL PLC (ADR) Oil & Gas - Integrated 53 DLTR DOLLAR TREE, INC. Retail (Department & Discount) 43 JOSB JOS. A. BANK CLOTHIERS INC Retail (Apparel) 37 LUKOY LUKOIL (ADR) Oil & Gas - Integrated 30 Ticker Market Cap Date Added Start Price Current Price Return USNA $652 12/21/2012 $33.83 $48.33 42.9% STRZA $2,676 2/15/2013 $18.74 $22.15 18.2% TJX $34,093 10/26/2012 $40.73 $46.75 14.8% TEO $2,311 3/15/2013 $15.19 $14.51 -4.5% LEA $5,251 2/15/2013 $55.41 $54.87 -1.0% WRLD $1,060 2/15/2013 $78.66 $85.87 9.2% RDS.A $208,216 3/15/2013 $66.20 $65.16 -1.6% DLTR $10,877 3/15/2013 $44.24 $48.43 9.5% JOSB $1,115 3/15/2013 $43.04 $39.90 -7.3% LUKOY $54,737 2/15/2013 $66.54 $64.50 -3.1%

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 USNA   |   STRZA   |   TJX   |   TEO   |   LEA   |   WRLD   |   RDS.A   |   DLTR   |   JOSB   |   LUKOY   |   USANA HEALTH SCIENCES, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch USANA Health Sciences, Inc. develops and manufactures science-based nutritional and personal care products. The Company has operations in 15 markets worldwide, where it distributes and sells its products by way of direct selling. The Company reports operations in two geographic regions: North America and Asia Pacific, which is further divided into three sub-regions; Southeast Asia/Pacific, Greater China, and North Asia. North America includes the United States, Canada, Mexico, and direct sales from the United States to the United Kingdom and the Netherlands. Southeast Asia/Pacific includes Australia, New Zealand, Singapore, Malaysia, and the Philippines; Greater China includes Hong Kong, Taiwan and China; and North Asia includes Japan and South Korea. The Company's customer base consists of two types of customers: Associates and Preferred Customers. As of December 31, 2011, the Company had 222,000 active Associates and 64,000 active Preferred Customers worldwide. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: This methodology would consider USNA a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (10.84) relative to the growth rate (20.73%), 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 USNA (0.52) makes it 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. USNA, whose sales are $648.7 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for USNA was 6.35% last year, while for this year it is 5.62%. Since inventory to sales has decreased from last year by -0.73%, USNA 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 USNA is 20.7%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for USNA (0.00%) to be wonderfully low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company.   STARZ Profile Strategy: Value Investor Based on: Benjamin Graham Starz, formerly Liberty Media Corporation, is an integrated global media and entertainment company with operating units that provide subscription video programming on domestic United States pay television channels (Starz Channels), global content distribution (Starz Distribution) and animated television and movie production (Starz Animation). As of January 14, 2013, its network included Starz, Encore, and Movieplex, Retroplex and Indieplex. Its businesses included Anchor Bay Entertainment, Starz Worldwide Distribution, and Starz Digital Media. Starz Animation produces animated television (TV) and movie content for studios and networks. Starz Distribution develops, produces and acquires entertainment content, distributing it to consumers globally on digital versatile disk (DVD). On January 11, 2013, Liberty Media Corporation (Liberty) and Starz announced the completion of the spin-off of Liberty from Starz. Analysis Guru Score: 86% SECTOR: [PASS] STRZA is neither a technology nor financial Company, and therefore this methodology is applicable. SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than $340 million. STRZA's sales of $2,505.0 million, based on trailing 12 month sales, pass this test. CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. STRZA's current ratio of 4.52 passes the test. LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for STRZA is $537.0 million, while the net current assets are $1,657.0 million. STRZA passes this test. LONG-TERM EPS GROWTH: [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. EPS for STRZA were negative within the last 5 years and therefore the company fails this criterion. P/E RATIO: [PASS] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. STRZA's P/E of 3.80 (using the 3 year PE) passes this test. PRICE/BOOK RATIO: [PASS] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. STRZA's Price/Book ratio is 0.42, while the P/E is 3.80. STRZA passes the Price/Book test.   THE TJX COMPANIES, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy The TJX Companies, Inc. (TJX) is the off-price apparel and home fashions retailer in the United States and worldwide. As of January 28, 2012, the Company operated in four business segments. It has two segments in the United States, Marmaxx (T.J. Maxx and Marshalls) and HomeGoods; one in Canada, TJX Canada (Winners, Marshalls and HomeSense) and one in Europe, TJX Europe (T.K. Maxx and HomeSense). As a result of the consolidation of the A.J. Wright chain, all A.J. Wright stores ceased operations by the end of February 2011. It completed the consolidation of A.J. Wright, converting 90 of the A.J. Wright stores to T.J. Maxx, Marshalls or HomeGoods banners and closed the remaining 72 stores, two distribution centers and home office. In December 2012, the Company acquired Sierra Trading Post, an off-price Internet retailer. Analysis Guru Score: 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. TJX, with a market cap of $34,093 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. TJX, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.04, 1.42, 1.65, 1.93 and 2.55, 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. TJX's Price/Sales ratio of 1.32, 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. TJX has a relative strength of 71. 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.   TELECOM ARGENTINA S.A. (ADR) Profile Strategy: Contrarian Investor Based on: David Dreman Telecom Argentina SA, (Telecom), is an Argentina-based company primarily engaged in the provision of national fixed-line telecommunication services, international long-distance service, data transmission and Internet services, as well as mobile telephony. The Company also offers such solutions as online business and Web hosting, virtual private network (VPN), mobile operating systems developed by Microsoft and Blackberry, toll-free telephone numbers, call centers and voice over Internet protocol (VoIP) line, as well as other services mainly aimed at corporate clients. As of December 31, 2012, the Company owned its subsidiaries structured in two business segments, Fixed Telephony, which comprised Telecom Argentina USA Inc and Micro Sistemas SA; and Mobile Services, with Telecom Personal SA, Nucleo SA and Springville SA. Analysis Guru Score: 90% MARKET CAP: [PASS] Medium to large-sized companies (the largest 1500 companies) should be chosen, because they are more in the public eye. Furthermore, the investor is exposed to less risk of "accounting gimmickry", and companies of this size have more staying power. TEO has a market cap of $2,311 million, therefore passing the test. EARNINGS TREND: [PASS] A company should show a rising trend in the reported earnings for the most recent quarters. TEO's EPS for the past 2 quarters, (from earliest to most recent quarter) 0.13, 0.61 have been increasing, and therefore the company passes this test. EPS GROWTH RATE IN THE IMMEDIATE PAST AND FUTURE: [PASS] This methodology likes to see companies with an EPS growth rate higher than the S&P in the immediate past and a likelihood that this trend will continue in the near future. TEO passes this test as its EPS growth rate over the past 6 months (408.33%) has beaten that of the S&P (-5.39%). TEO's estimated EPS growth for the current year is (437.25%), which indicates the company is expected to experience positive earnings growth. As a result, TEO passes this test. This methodology would utilize four separate criteria to determine if TEO is a contrarian stock. In order to eliminate weak companies we have stipulated that the stock should pass at least two of the following four major criteria in order to receive "Some Interest". P/E RATIO: [PASS] The P/E of a company should be in the bottom 20% of the overall market. TEO's P/E of 5.86, based on trailing 12 month earnings, meets the bottom 20% criterion (below 9.70), and therefore passes this test. PRICE/CASH FLOW (P/CF) RATIO: [FAIL] The P/CF of a company should be in the bottom 20% of the overall market. TEO's P/CF of 7.37 does not meet the bottom 20% criterion (below 5.35), and therefore fails this test. PRICE/BOOK (P/B) VALUE: [FAIL] The P/B value of a company should be in the bottom 20% of the overall market. TEO's P/B is currently 1.60, which does not meet the bottom 20% criterion (below 0.78), and it therefore fails this test. PRICE/DIVIDEND (P/D) RATIO: [PASS] The P/D ratio for a company should be in the bottom 20% of the overall market (that is the yield should be in the top 20%). TEO's P/D of 15.72 meets the bottom 20% criterion (below 20.12 or yield above 3.7% ), and it therefore passes this test. This methodology maintains that investors should look for as many healthy financial ratios as possible to ascertain the financial strength of the company. These criteria are detailed below. CURRENT RATIO: [PASS] A prospective company must have a strong Current Ratio (greater than or equal to the average of it's industry [1.11] or greater than 2). This is one identifier of financially strong companies, according to this methodology. TEO's current ratio of 1.15 passes the test. PAYOUT RATIO: [FAIL] A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for TEO is 69.02%, while its historical payout ratio has been 18.22%. Therefore, it fails the payout criterion. RETURN ON EQUITY: [PASS] The company should have a high ROE, as this helps to ensure that there are no structural flaws in the company. This methodology feels that the ROE should be greater than the top one third of ROE from among the top 1500 large cap stocks, which is 16.85%, and would consider anything over 27% to be staggering. The ROE for TEO of 30.57% is high enough to pass this criterion. PRE-TAX PROFIT MARGINS: [PASS] This methodology looks for pre-tax profit margins of at least 8%, and considers anything over 22% to be phenomenal. TEO's pre-tax profit margin is 18.48%, thus passing this criterion. YIELD: [PASS] The company in question should have a yield that is high and that can be maintained or increased. TEO's current yield is 6.36%, while the market yield is 2.63%. TEO passes this test. LOOK AT THE TOTAL DEBT/EQUITY: [PASS] The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry of 100.88%. TEO's Total Debt/Equity of 1.51% is considered acceptable.   LEAR CORPORATION Profile Strategy: Value Investor Based on: Benjamin Graham Lear Corporation is a tier 1 supplier to the global automotive industry. The Company supplies its products to automotive manufacturers with automotive seat systems and related components, as well as electrical distribution systems and related components. The Company has two segments: seating and electrical power management systems (EPMS). The seating segment includes seat systems and related components, such as seat frames, recliner mechanisms, seat tracks, seat trim covers, headrests and seat foam. The EPMS segment includes electrical distribution systems for traditional powertrain vehicles, as well as for hybrid and electric vehicles. As of December 31, 2011, it had 20 joint ventures located throughout Asia, as well as five in North America, two in Europe and Africa and one with operations in all three regions. Analysis Guru Score: 71% SECTOR: [PASS] LEA is neither a technology nor financial Company, and therefore this methodology is applicable. SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than $340 million. LEA's sales of $14,567.0 million, based on trailing 12 month sales, pass this test. CURRENT RATIO: [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. LEA's current ratio of 1.52 fails the test. LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for LEA is $626.3 million, while the net current assets are $1,656.6 million. LEA passes this test. LONG-TERM EPS GROWTH: [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. EPS for LEA were negative within the last 5 years and therefore the company fails this criterion. P/E RATIO: [PASS] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. LEA's P/E of 7.50 (using the 3 year PE) passes this test. PRICE/BOOK RATIO: [PASS] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. LEA's Price/Book ratio is 1.51, while the P/E is 7.50. LEA passes the Price/Book test.   WORLD ACCEPTANCE CORP. Profile Strategy: Patient Investor Based on: Warren Buffett World Acceptance Corporation operates a small-loan consumer finance business in 12 states and Mexico. The Company is engaged in the small-loan consumer finance business, offering short-term small loans, medium-term larger loans, related credit insurance and ancillary products and services to individuals. As of March 31, 2012, the Company offered standardized installment loans through 1,137 offices in South Carolina, Georgia, Texas, Oklahoma, Louisiana, Tennessee, Illinois, Missouri, New Mexico, Kentucky, Alabama, Wisconsin, and Mexico. The Company serves individuals with limited access to consumer credit from banks, credit unions, other consumer finance businesses and credit card lenders. In the United States offices, the Company also offers income tax return preparation services to its customers and others. 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 1.25, 1.49, 1.74, 2.02, 2.51, 2.89, 3.43, 4.45, 5.63, 6.59. Buffett would consider WRLD's earnings predictable. In fact EPS have increased every year. WRLD's long term historical EPS growth rate is 20.8%, based on the 10 year average EPS growth rate. 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 WRLD, over the last ten years, is 19.2%, 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 19.0%, 17.9%, 17.4%, 17.6%, 20.4%, 20.1%, 18.8%, 19.2%, 20.0%, 21.9%, and the average ROE over the last 3 years is 20.3%, thus passing this criterion. LOOK FOR CONSISTENTLY HIGHER THAN AVERAGE RETURN ON ASSETS: [PASS] Buffett also requires, for financial companies, that the average Return On Assets (ROA) be at least 1% and consistent. Return On Assets is defined as the net earnings of the business divided by the total assets of the business. The average ROA for WRLD, over the last ten years, is 11.2%, which is high enough to pass. It is not enough that the average be at least 1%. For each of the last 10 years, with the possible exception of the last fiscal year, the ROA must be at least 1% for Buffett to feel comfortable that the ROA is consistent. The ROA for the last 10 years, from earliest to latest, is 9.7%, 10.7%, 11.2%, 11.1%, 10.7%, 9.7%, 10.6%, 12.4%, 13.3%, 12.5%, 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. WRLD's free cash flow per share of $13.84 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 $32.00 and compares it to the gain in EPS over the same period of $5.34. WRLD's management has proven it can earn shareholders a 16.7% 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. WRLD's shares outstanding have fallen over the past five years from 16,280,001 to 13,000,000, 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 WRLD 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 $7.47 and divide it by the current market price of $85.87. An investor, purchasing WRLD, could expect to receive a 8.70% initial rate of return. Furthermore, he or she could expect the rate to increase 20.8% per year, based on the 10 year average EPS 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 2.20%. Compare this with WRLD's initial yield of 8.70%, which will expand at an annual rate of 20.8%, based on the 10 year average EPS 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] WRLD currently has a book value of $28.62. It is safe to say that if WRLD can preserve its average rate of return on equity of 19.2% and continues to retain 100.00% of its earnings, it will be able to sustain an earnings growth rate of 19.2% and it will have a book value of $166.00 in ten years. If it can still earn 19.2% on equity in ten years, then expected EPS will be $31.90. CALCULATE THE FUTURE STOCK PRICE BASED ON THE AVERAGE ROE METHOD: [No Pass/Fail] Now take the expected future EPS of $31.90 and multiply them by the lower of the 5 year average P/E ratio or current P/E ratio (11.5) (5 year average P/E in this case), which is 9.2 and you get WRLD's projected future stock price of $293.48. 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 $293.48. These numbers indicate that one could expect to make a 13.1% average annual return on WRLD's stock at the present time. Although, the return is slightly below the liking of Buffett, the return would still be somewhat acceptable. CALCULATE THE EXPECTED FUTURE STOCK PRICE BASED ON AVERAGE EPS GROWTH: [No Pass/Fail] If you take the EPS growth of 20.8%, based on the 10 year average EPS growth rate, you can project EPS in ten years to be $49.23. Now multiply EPS in 10 years by the lower of the 5 year average P/E ratio or current P/E ratio (11.5) (5 year average P/E in this case), which is 9.2. This equals the future stock price of $452.89. Add in the total expected dividend pool of $0.00 to get a total dollar amount of $452.89. 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 $85.87 and the future expected stock price, including the dividend pool, of $452.89. If you were to invest in WRLD at this time, you could expect a 18.09% average annual return on your money. Buffett would consider this a great 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 13.1% and 18.1%. 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 15.6% on WRLD stock for the next ten years, based on the current fundamentals. Buffett would consider this a great return, thus passing the criterion.   ROYAL DUTCH SHELL PLC (ADR) Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Royal Dutch Shell plc (Shell) is an independent oil and gas company. The Company owns, directly or indirectly, investments in the numerous companies constituting Shell. Shell is engaged worldwide in the principal aspects of the oil and gas industry and also has interests in chemicals and other energy-related businesses. The Company operates in three segments: Upstream, Downstream and Corporate. Upstream combines the operating segments Upstream International and Upstream Americas, which are engaged in searching for and recovering crude oil and natural gas; the liquefaction and transportation of gas; the extraction of bitumen from oil sands that is converted into synthetic crude oil, and wind energy. Downstream is engaged in manufacturing; distribution and marketing activities for oil products and chemicals. Corporate represents the key support functions, comprising holdings and treasury, headquarters, central functions and Shells self-insurance activities. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: According to this methodology, RDS.A is a "Slow Grower", based on its single digit earnings growth of 8.12%, based on the average of the 3, 4 and 5 year historical eps growth rates. SALES: [PASS] RDS.A would fall into the "Dividend Payers" category according to this methodology. The first requirement of a Slow Grower is that its sales exceed one billion. RDS.A's sales are $467,153 million. It passes the test. 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 RDS.A was 6.16% last year, while for this year it is 6.59%. 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 (0.43%) is below 5%. YIELD COMPARED TO THE S&P 500: [PASS] This methodology also maintains that the Yield of a "Slow Grower" should be high, which includes being higher than the S&P average (currently 2.31%), and at least 3%. This yield is required because dividends are the main reason for investing in "Slow Growers". The yield for RDS.A is 5.28% so it passes this test. YIELD ADJUSTED P/E/GROWTH (PEG) RATIO: [PASS] This methodology would consider the Yield-adjusted P/E/G ratio for RDS.A of 0.57, based on the average of the 3, 4 and 5 year historical eps growth rates, to be good. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for RDS.A (20.03%) 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 RDS.A (3.02%) 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 RDS.A (-3.74%) 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.   DOLLAR TREE, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Dollar Tree, Inc. (Dollar Tree) is an operator of discount variety stores offering merchandise at the fixed price. As of January 28, 2012, the Company operated 4,351 discount variety retail stores. Its stores operate under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant and Dollar Bills. As of January 28, 2012, it operated 4,252 stores in 48 states and the District of Columbia, as well as 99 stores in Canada. It buys approximately 58% to 60% of its merchandise domestically and imports the remaining 40% to 42%. Its domestic purchases include basic, seasonal, closeouts and promotional merchandise. It maintains a selection of products within variety store categories. During the fiscal year ended January 28, 2012 (fiscal 2011), the Company opened 278 new stores. 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. DLTR's P/S ratio of 1.47 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. DLTR's Debt/Equity of 16.27% 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. DLTR 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 DLTR At this Point Is DLTR 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, DLTR, who has a P/S of 1.47, 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%. DLTR's inflation adjusted EPS growth rate of 29.40% 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. DLTR'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. DLTR, whose three year net profit margin averages 7.50%, passes this evaluation.   JOS. A. BANK CLOTHIERS INC Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Jos. A. Bank Clothiers, Inc. (Jos. A. Bank) is a designer, manufacturer, retailer and direct marketer (through stores, catalog call center and Internet) of men's tailored and casual clothing and accessories and is a retailer of tuxedo rental products. Jos. A. Bank sells all of its products under the Jos. A. Bank label through 556 retail stores (as of January 28, 2012, which includes 25 outlet and factory stores and 15 franchise stores) located throughout 43 states and the District of Columbia in the United States, as well as through its catalog call center and Internet (www.josbank.com) operations. It sources substantially all of its merchandise from suppliers and manufacturers or through buying agents using Jos. A. Bank designs and specifications. It has two segments: Stores and Direct Marketing. The Stores segment includes all Company-owned stores, excluding outlet and factory stores (full-line stores). The Direct Marketing segment includes the catalog call center and the Internet. Analysis Guru Score: 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. JOSB's P/S ratio of 1.07 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. JOSB'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. JOSB 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 JOSB At this Point Is JOSB 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, JOSB, who has a P/S of 1.07, 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%. JOSB's inflation adjusted EPS growth rate of 15.36% 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. JOSB's free cash per share of 1.94 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. JOSB, whose three year net profit margin averages 9.73%, passes this evaluation.   LUKOIL (ADR) Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher NK Lukoil OAO (Neftyanaya Kompaniya LUKOIL OAO or NK LUKOIL OJSC) is a Russia-based integrated oil and gas company. The Company is engaged in the business of oil exploration, production, refining, marketing and distribution. It is an owner of refineries, gas processing, petrochemical plants and gas stations network located in Russia, Eastern and Western Europe, as well as Africa. The Company's petroleum products are sold in the Russian Federation, the Commonwealth of Independent States (CIS) countries, Eastern and Western Europe, Asia and the United States. NK Lukoil OAO operates through numerous subsidiaries and affiliated companies. As of December 31, 2011, the Company's major shareholder was ING Bank (Eurasia) ZAO with a stake of 75.93%. 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. LUKOY's P/S of 0.39 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. LUKOY's Debt/Equity of 9.04% 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. LUKOY 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 LUKOY At this Point Is LUKOY 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.LUKOY's P/S ratio of 0.39 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%. LUKOY's inflation adjusted EPS growth rate of 7.86% 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. LUKOY's free cash per share of 4.65 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. LUKOY, whose three year net profit margin averages 8.08%, passes this evaluation.   Watch List The Watch List contains the highest scoring stocks according to our guru consensus system that are not currently in the Hot List portfolio. We provide this list both for informational purposes and for investors who are not comfortable with a portfolio of ten stocks. Ticker Company Name Industry Guru Score HFC HOLLYFRONTIER CORP Oil & Gas Operations 83 GES GUESS?, INC. Retail (Apparel) 69 CVX CHEVRON CORPORATION Oil & Gas - Integrated 59 SCL STEPAN COMPANY Chemicals - Plastics & Rubber 54 AN AUTONATION, INC. Retail (Specialty) 50 INTC INTEL CORPORATION Semiconductors 45 NTES NETEASE, INC (ADR) Business Services 45 HIBB HIBBETT SPORTS, INC. Retail (Specialty) 43 VLO VALERO ENERGY CORPORATION Oil & Gas Operations 42 AMTG APOLLO RESIDENTIAL MORTGAGE INC Consumer Financial Services 42

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