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Executive Summary	March 5, 2010

The Economy Despite a rough stretch of winter weather that was expected to put a damper on the recovery, new data has been showing that, while not without problems, the economy continues to improve. One indication of continued growth comes from manufacturers. The Institute for Supply Management's latest Report on Business indicated that the U.S. manufacturing sector expanded in February for the seventh straight month, and that the broader economy grew for the tenth straight month. In addition, the group's manufacturers' employment index showed expansion for the third straight month. "With these levels of activity, manufacturers are seemingly willing to hire where they have orders to support higher employment," said an ISM official. ISM's non-manufacturing, or service, index also showed growth in February, the second straight month it has increased. Another good sign was that, despite the trying weather conditions, consumers opened up their wallets at retailers in February. A Thomson Reuters survey showed that same-store retail sales jumped 4% during the month (compared to the year-ago period), the sixth straight monthly increase, and the biggest in more than two years. Of course, not all the economic news has been positive. The latest data from the housing market, for example, was weak. The National Association of Realtors' latest figures show that existing home sales dropped 7.2% in January compared to the prior month, and pending home sales fell 7.6%. The Realtors group said bad weather was partly to blame for the declines. Compared to a year ago, however, existing sales are up 11.5% and pending sales are up 12.3%. Then there's the employment picture. Overall, the job market remains fairly weak, with the economy losing more jobs than it gained again in February, according to two reports released this week. But the data also showed that job losses are continuing to slow. According to CNNMoney, Automatic Data Processing reported that the private sector job losses were 20,000 for the month, the best figure in two years. Challenger, Gray & Christmas reported, meanwhile, that about 42,000 jobs were cut, the lowest figure in its monthly report in about three-and-a-half years. Another sign of hope in the jobs market comes from Intuit's Small Business Employment Index, a new survey that monitors activity at companies with fewer than 20 employees, which, according to Intuit, comprise 87 percent of the total U.S. private employer base. The group said that its index rose slightly in February, continuing an upward trend that started in mid-2009. An economist who helped create the index said small businesses generally start hiring sooner than larger firms, and called the upward trend "very heartening". Finally, there's been a lot of talk about interest rates. The Federal Reserve recently upped the Discount Rate, the first time it has done so in more than three-and-a-half years. Some worried that would be a precursor to soon-to-follow hikes in the Federal Funds rate, and trouble for stocks. But it's important to note that the Discount Rate is essentially an emergency rate at which banks can borrow money from the Fed. And, now that the worst of the financial crisis has past and the economic recovery is moving forward, it's no surprise that the Fed is upping the rate. As Charles Schwab's Liz Ann Sonders noted this week, "The treatment prescription for an emergency room patient in severe distress is entirely different than the treatment prescription for a patient that's in the recovery room." And, right now, the patient that is the U.S. economy appears to be out of the emergency room and in recovery. Sonders is one of several top strategists who have said they believe the Fed will hold off on hiking the Fed Funds rate for some time (the Fed itself continues to say it will keep the rate low for an extended period), until the economy is strong enough to handle such increases. All in all, it hasn't been a particularly eventful fortnight for the stock market, with the S&P 500 returning 1.5% since our last newsletter. The Hot List, meanwhile, has returned 4.1%, and is now up 4.3% for the year vs. 0.7% for the S&P. Since its inception in July 2003, the portfolio has gained 151.4%, while the S&P is up just 12.2%. Old Principles, New Features Since our last newsletter, we've added a couple new premium features to Validea.com, and I wanted to take some time to explain these new tools, and how I think they relate to broader investment strategy. The features, part of our new Validea Professional product, include Trade Alerts, Stock Reports, and industry- and country-based portfolios. These features will be free to Validea.com subscribers until the official launch of Validea Professional on March 15th. After that, subscriptions will be limited to the first 250 people, in order to keep the ideas within this new product exclusive. You can access Validea Professional here . Trade Alerts, developed after extensive historical testing, are issued when my Guru Strategies issue a series of high-conviction signals that have tended to lead to strong performance in the past. For instance, on Feb. 26, a Trade Alert was issued on aerospace & defense firm AAR Corp. The alert was triggered because AAR was receiving strong scores from my Benjamin Graham-, Peter Lynch-, and James O'Shaughnessy-based models. Our testing shows that when these strategies have demonstrated a similar level of interest in a stock in the past, the stock has on average returned 39.3% in the following three-month period, and that the trade has made money 91% of the time. The Trade Alerts section of the Validea Professional site lists all open trade alerts, the expected end date for the buy signal, as well as historical performance data for that particular alert signal. I want to be clear that, while we're calling these "Trade Alerts", they are not short-term, market-timing instruments. The 14 open alerts as of Thursday had expected end dates that were all between approximately three months and six months after their start dates. And, because they are based on interest from my Guru Strategies, they are triggered when a stock has certain fundamental characteristics -- it's not a charting or technical analysis approach. The second feature, Stock Reports, offer the same in-depth, guru-strategy-based analysis of a particular stock that you'll see on Validea.com or in the Hot List. But in addition, these reports combine the hundreds of data points that my models analyze to give each stock a simple letter grade, ranging from A to F. We've found that historically, stocks receiving an "A" grade have significantly outperformed the market over time. The final Validea Professional feature -- the region and industry portfolios -- is particularly interesting given the current market environment. In 2008, equities were pummeled across the board; in 2009, the broad sense of relief that the financial crisis had passed and that another depression had been averted sent most stocks surging upward. But as we move deeper into 2010, many top strategists are saying that making profits in the market will be more about good old stock-picking than macro trends. I tend to agree, and we're already seeing evidence of this. According to Morningstar, as of Thursday, the 20 best-performing industries so far in 2010 had returned between 10% and 32%; the 20 worst performers were down between 7% and 57%. Within the best performing industry, radio broadcasting, 6 of the 22 stocks were down at least 16%, while 9 were up at least 11%. And of 27 stocks in the worst-performing industry (reinsurance), 7 had gained 6% or more (and as much as 26.2%), while 9 were in the red (by as much as 21.6%). More often than not, that's going to be the case -- something that may have been easy to lose sight of given what has been an unusually macro-driven past couple of years. In any region, country, sector, or industry, you're going to get some good companies, and some bad ones. Similarly, you're going to find some stocks that are good buys, and others that aren't. So while at any given time you can read stories about how Chinese stocks are the place to be, or how commodity stocks are going to take off, or how European stocks should be avoided, don't fall prey to such generalizations when it comes to building your portfolio. My industry and region portfolios are examples of why good stock-picking within an industry or region is as important, if not more important, than the industry or region you pick. These portfolios hold only the 10 highest-rated stocks in their particular industry or region, according to my Guru Strategies. I started tracking them in late 2006, and since then the majority of them have significantly outperformed the S&P 500 and MSCI EAFE. For example, 5 of the 7 regional portfolios are generating positive annualized returns in a period in which the S&P and MSCI EAFE have both been losing more than 7% annually. Several of the regional portfolios have also outperformed their respective market indices by wide margins. The China portfolio, for example, is up about 47% since inception, during which time the Hang Seng Index is barely in the black and the Shanghai Stock Exchange Composite Index is up less than 20%. To be sure, specific economic conditions always vary from country to country or industry to industry, and looking at a region or area of the market that you think is particularly strong can be a good jumping off point. But in the end, the tenets of good business and good investing cross borders and industries. And that means that, whatever region or industry you're looking at, companies that have such characteristics as long-term track records of increasing earnings, strong returns on equity, good profit margins, and low debt and healthy balance sheets tend to do better than those that don't. And the stocks of such companies, if bought at attractive prices relative to underlying fundamentals, tend to perform better than others over the long haul. Those are the beliefs that the gurus I follow -- from Benjamin Graham more than half a century ago to investors like Joel Greenblatt in this century-- espoused, and they are tenets that investors should keep in mind, no matter what region or industry they are keying in on.		Editor-in-Chief: John Reese Since Inception   Hot List 151.4% S&P 500 12.2% Accuracy 56.7% Beta 1.2 YTD   Hot List 4.3% S&P 500 0.7% Since Last Issue   Hot List 4.1% S&P 500 1.5% Avg. Fundamentals   Market Cap (mil) $12,805 PE Ratio 13.3 5 Yr EPS Growth 34.3% Yield 2.7% Rel. Strength 53 Portfolio Sectors Services 4 Capital Goods 3 Consumer Cyclical 1 Energy 1 Basic Materials 1
Validea Announces New Professional Product - Limited Availability Validea Professional offers proven trade alerts based on a series of high conviction guru signals that, when met, typically lead to significant market outperformance, as well as industry and country based portfolios, and detailed professional stock reports. This exclusive new product is being offered free to Validea.com subscribers until its March 15th launch, but will be limited to 250 subscribers after that. Reserve your slot to get in on this new offering before all available openings are filled. Give Validea Professional a Try! Guru Spotlight: Warren Buffett With his humble Midwest beginnings, plainspoken wisdom and wit, and incredible wealth, Warren Buffett has become the most-watched investor in the world -- just look at all the hubbub surrounding the release of his latest shareholder letter this past week. But as interesting a character as Buffett is, the more important piece of the Buffett puzzle for investors is this: How did he do it? My Buffett-based Guru Strategy attempts to answer that question. Based on the approach Buffett reportedly used to build his fortune, it tries to use the same conservative, stringent criteria to choose stocks that the "Oracle of Omaha" has used in evaluating businesses. Before we get into exactly how this strategy works, a couple notes about Buffett and my Buffett-based strategy: First, while most of my Guru Strategies are based on published writings of the gurus themselves, Buffett has not publicly disclosed his exact strategy (though he has hinted at pieces of it). My Buffett-inspired model is based on the book Buffettology, written by Mary Buffett, Warren's ex-daughter-in-law, and David Clark, a Buffett family friend, both of whom worked closely with Buffett. Second, while most of my Buffett-based method centers on a company's fundamentals, there are a few non-statistical criteria to keep in mind. For example, Buffett likes to invest in companies that have very recognizable brand names, to the point that it is difficult for competitors to take away their market share, no matter how much capital they have. One example of a current Berkshire holding that meets this criterion is Coca-Cola, whose name is engrained in the culture of America, as well as other parts of the world. In addition, Buffett also likes firms whose products are simple for an investor to understand -- food, diapers, razors, to name a few examples. In the end, however, for Buffett, it comes down to the numbers -- those on a company's balance sheet and those that represent the price of its stock. In terms of the numbers on the balance sheet, one theme of the Buffett approach is solid results over a long period of time. He likes companies that have a lengthy history of steady earnings growth, and, in most cases, the model I base on his philosophy requires companies to have posted increasing earnings per share each year for the past ten years. There are a few exceptions to this, one of which is that a company's EPS can be negative or be a sharp loss in the most recent year, because that could signal a good buying opportunity (if the rest of the company's long-term earnings history is solid). Another part of Buffett's conservative approach: targeting companies with manageable debt. My model calls for companies to have the ability to pay off their debt within five years, based on their current earnings. It really likes stocks that could pay off their debts in less than two years. Smart Management, and an Advantage Two qualities Buffett is known to look for in his buys are strong management and a "durable competitive advantage". Both of those are qualitative things, but Buffett has used certain quantitative measures to get an idea of whether a firm has those qualities. Two of those measures are return on equity and return on total capital. The model I base on Buffett's approach likes firms to have posted an average ROE of at least 15% over the past 10 years and the past three years, and an ROTC of at least 12% over those time frames. Another way Buffett examines a firm's management is by looking at how the it spends the company's retained earnings -- that is, the earnings a company keeps rather than paying out in dividends. My Buffett-based model takes the amount a company's earnings per share have increased in the past decade and divides it by the total amount of retained earnings over that time. The result shows how much profit the company has generated using the money it has reinvested in itself -- in other words, how well management is using retained earnings to increase shareholders' wealth. The Buffett method requires a firm to have generated a return of 12% or more on its retained earnings over the past decade. The Price: Is It Right? The criteria we've covered so far all are used to identify "Buffett-type" stocks. But there's a second critical part to Buffett's analysis: price -- can he get the stock of a quality company at a good price? One way my Buffett-based model answers this question is by comparing a company's initial expected yield to the long-term treasury yield. (If it's not going to earn you more than a nice, safe T-Bill, why take the risk involved in a stock?) To predict where a stock will be in the future, Buffett uses not just one, but two different methods to estimate what the company's earnings and stock's rate of return will be 10 years from now. One method involves using the firm's historical return on equity figures, while another uses earnings per share data. (You can find details on these methods by viewing an individual stock's scores on the Buffett model on Validea.com, or in my new book, The Guru Investor.) This notion of predicting what a company's earnings will be in 10 years may seem to run counter to Buffett's nonspeculative ways. But while using these methods to predict a company's earnings for the next 10 years in her book, Mary Buffett notes: "In most situations this would be an act of insanity. However, as Warren has found, if the company is one of sufficient earning power and earns high rates of return on shareholders' equity, created by some kind of consumer monopoly, chances are good that accurate long-term projections of earnings can be made." A Strong Rebounder My Buffett-based 10-stock portfolio is well ahead of the S&P 500 since its December 2003 inception. Where the model has really excelled, however, is coming out of downturns. In 2004, as we were emerging from the lengthy recession associated with the tech stock bust, the Buffett portfolio surged 37.3%, more than quadrupling the S&P's 9% gain. In addition, after struggling in 2007 and 2008 amid the latest recession and bear market, the portfolio bounced back strong in 2009 -- very strong. It gained 50.3%, more than doubling the gains of the broader market. And it's faring well out of the gate in 2010. This strong performance out of downturns is no surprise, given Buffett's penchant for pouncing on good, beaten down stocks, which usually abound during tough times as investors let fear get the best of them. (One of Buffett's mantras is that investors "should try to be fearful when others are greedy and greedy only when others are fearful.") In the end, Buffett-type stocks are not the kind of sexy, flavor-of-the-month picks that catch most investors' eyes; instead, they are proven businesses selling at good prices. That approach, combined with a long-term perspective, tremendous discipline, and an ability to keep emotions at bay (allowing him to buy when others are fearful), is how Buffett has become the world's greatest investor. Whatever the size of your portfolio, those qualities are worth emulating. News about Validea Hot List Stocks Triumph Group Inc. (TGI): On March 1, Triumph Group said it had acquired Fabritech Inc., an Illinois-based firm that repairs and makes parts for military helicopters, the Associated Press reported. Financial terms of the deal were not disclosed, but the new company is expected to add $25 million in revenue for fiscal 2011 and will immediately add to profits, AP reported. The business will operate as Triumph Fabrications-St. Louis and will be part of Triumph Aftermarket Services Group, according to AP. Aeropostale Inc. (ARO): Aeropostale announced on March 3 that its 3-for-2 stock split on shares of its common stock, which will be effected in the form of a stock dividend, will become effective on March 5, 2010. The previously announced split affects shareholders of record at the close of business on February 24, 2010. The additional shares were to be distributed to shareholders on or about March 4, 2010, the company said. The Hot List has owned shares of Aeropostale since Nov. 27, 2009. 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 FUQI FUQI INTERNATIONAL, INC. Jewelry & Silverware 100 ARO AEROPOSTALE, INC. Retail (Apparel) 77 ESI ITT EDUCATIONAL SERVICES, INC. Schools 75 EME EMCOR GROUP, INC. Construction Services 65 NEU NEWMARKET CORPORATION Chemical Manufacturing 57 GME GAMESTOP CORP. Retail (Technology) 55 TGI TRIUMPH GROUP, INC. Aerospace & Defense 53 TEF TELEFONICA S.A. (ADR) Communications Services 41 DRC DRESSER-RAND GROUP INC. Misc. Capital Goods 18 OIS OIL STATES INTERNATIONAL, INC. Oil Well Services & Equipment 0 Ticker Market Cap Date Added Start Price Current Price Return FUQI $517 10/30/2009 $20.49 $18.70 -8.7% ARO $2,478 11/27/2009 $31.49 $37.51 19.1% ESI $3,893 10/30/2009 $90.35 $109.80 21.5% EME $1,560 1/22/2010 $24.55 $23.66 -3.6% NEU $1,497 2/19/2010 $90.64 $98.44 8.6% GME $2,931 1/22/2010 $20.03 $17.79 -11.2% TGI $892 2/19/2010 $51.74 $53.49 3.4% TEF $109,490 1/22/2010 $75.11 $71.97 -4.2% DRC $2,570 11/27/2009 $28.46 $31.14 9.4% OIS $2,218 2/19/2010 $37.67 $44.49 18.1%

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 FUQI   |   ARO   |   ESI   |   EME   |   NEU   |   GME   |   TGI   |   TEF   |   DRC   |   OIS   |   FUQI INTERNATIONAL, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Fuqi International, Inc. (Fuqi) is a designer of precious metal jewelry in China, developing, promoting, and selling a range of products in the Chinese luxury goods market. The Company's products consist of a range of styles and designs made from gold and other precious metals, such as platinum and Karat gold (K-gold). The Company also produce jewelry items that contain diamonds and other precious stones on a custom-order basis. Its design database contains over 30,000 products. The Company operates through its wholly owned subsidiary Fuqi International Holdings Co., Ltd. (Fuqi BVI) and its wholly owned subsidiary, Shenzhen Fuqi Jewelry Co., Ltd. (Fuqi China). As of December 31, 2008, the Company had 69 jewelry retail counters and stores in China. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider FUQI a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (8.96) relative to the growth rate (42.99%), 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 FUQI (0.21) 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. FUQI, whose sales are $466.9 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. 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 FUQI was 20.36% last year, while for this year it is 12.08%. Since inventory to sales has decreased from last year by -8.28%, FUQI 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 FUQI is 43.0%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered 'OK'. However, it may be difficult to sustain such a high growth rate. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for FUQI (16.74%) 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 FUQI (-2.25%) 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 FUQI (11.93%) 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.   AEROPOSTALE, INC. Profile Strategy: Value Investor Based on: Benjamin Graham Aeropostale, Inc. is a mall-based specialty retailer of casual apparel and accessories. The Company designs, markets and sells its own brand of merchandise principally targeting 14 to 17 year-old young women and young men. The Company also sells Aeropostale merchandise through its e-commerce Website, www.aeropostale.com. As of January 31, 2009, it operated 914 stores, consisting of 874 Aeropostale stores in 48 states and Puerto Rico, 29 Aeropostale stores in Canada, and 11 Jimmy'Z stores in 10 states. The Company locates its stores primarily in shopping malls, outlet centers and, to a much lesser degree, lifestyle and off-mall shopping centers. The Company has developed a new retail store concept called P.S. from Aeropostale, which will offer casual clothing and accessories focusing on elementary school children between the ages of seven and 12. It offers a focused collection of apparel, including graphic t-shirts, tops, bottoms, sweaters, jeans, outerwear and accessories. Analysis Guru Score: 71% SECTOR: [PASS] ARO 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. ARO's sales of $2,118.9 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. ARO's current ratio of 2.06 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 ARO is $0.0 million, while the net current assets are $283.8 million. ARO passes this test. LONG-TERM EPS GROWTH: [PASS] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. ARO's EPS growth over that period of 1,713.8% passes the EPS growth test. P/E RATIO: [FAIL] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. ARO's P/E of 21.40 (using the 3 year PE) fails this test. PRICE/BOOK RATIO: [FAIL] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. ARO's Price/Book ratio is 5.53, while the P/E is 21.40. ARO fails the Price/Book test.   ITT EDUCATIONAL SERVICES, INC. Profile Strategy: Patient Investor Based on: Warren Buffett ITT Educational Services, Inc. (ITT/ESI) is a provider of postsecondary degree programs in the United States. As of December 31, 2009, the Company offered master, bachelor and associate degree programs to approximately 80,000 students. As of December 31, 2009, it had 125 locations (including 121 campuses and four learning sites) in 38 states. All of its institutions are authorized by the applicable education authorities of the states, in which they operate, and are accredited by an accrediting commission recognized by the United States Department of Education (ED). It designs its education programs, after consultation with employers and other constituents, to help graduates prepare for careers in various fields involving their areas of study. On June 10, 2009, it acquired Daniel Webster College (DWC). DWC offers programs of study at the master, bachelor and associate degree levels both in residence and through distance education. Analysis Guru Score: 100% STAGE 1: "Is this a Buffett type company?" A bedrock principle for Buffett is that his type of company has a "durable competitive advantage" as compared to being a "price competitive" or "commodity" type of business. Companies with a "durable competitive advantage" are more likely to be found in these sub-industries: Brand Name Fast Food Restaurants, Brand Name Beverages, Brand Name Foods, Brand Name Toiletries and Household Products, Brand Name Clothing, Brand Name Prescription Drugs, Advertising, Advertising Agencies, TV, Newspapers, Magazines, Direct Mail, Repetitive Services for Businesses, Low Cost Producers of Insurance, furniture, or Low Cost Retailers. While you should be easily able to explain where the company's pricing power comes from (i.e. a strong regional brand image, a business tollgate, its main products are #1 or # 2 in its field and has been on the market for years and hasn't changed at all, a consumer or business ends up buying the same product many times in a year, etc. or having the lowest production cost among its competition), there are certain figures that one can look at that can qualify the company as having a durable competitive advantage. LOOK FOR EARNINGS PREDICTABILITY: [PASS] Buffett likes companies to have solid, stable earnings that are continually expanding. This allows him to accurately predict future earnings. Annual earnings per share from earliest to most recent were 0.57, 0.70, 0.94, 1.27, 1.61, 2.33, 2.72, 3.72, 5.14, 7.91. Buffett would consider ESI's earnings predictable. In fact EPS have increased every year. ESI's long term historical EPS growth rate is 32.3%, based on the 10 year average EPS growth rate, and it is expected to grow earnings 17.1% per year in the future, based on the analysts' consensus estimated long term growth rate. For the purposes of our analysis, we will use the more conservative of the two EPS growth numbers. LOOK AT THE ABILITY TO PAY OFF DEBT [PASS] Buffett likes companies that are conservatively financed. Nonetheless, he has invested in companies with large financing divisions and in firms with rather high levels of debt. ESI has a debt of 150.0 million and earnings of 289.3 million, which could be used to pay off the debt in less than two years, which is considered exceptional. 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 ESI, over the last ten years, is 39.3%, 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 41.3%, 41.4%, 47.5%, 39.6%, 31.5%, 34.5%, 107.2%, 209.5%, 114.4%, 179.2%, and the average ROE over the last 3 years is 167.7%, thus passing this criterion. LOOK FOR CONSISTENTLY HIGHER THAN AVERAGE RETURN ON TOTAL CAPITAL: [PASS] Because some companies can be financed with debt that is many times their equity, they can show a consistently high ROE, yet still be in unattractive price competitive businesses. To screen this out, for non-financial companies Buffett also requires that the average Return On Total Capital (ROTC) be at least 12% and consistent. In addition, the average ROTC over the last 3 years must also exceed 12%. Return On Total Capital is defined as the net earnings of the business divided by the total capital in the business, both equity and debt. The average ROTC for ESI, over the last ten years, is 49.9% and the average ROTC over the past 3 years is 73.3%, which is high enough to pass. It is not enough that the average be at least 12%. For each of the last 10 years, with the possible exception of the last fiscal year, the ROTC must be at least 9% for Buffett to feel comfortable that the ROTC is consistent. The ROTC for the last 10 years, from earliest to latest, is 41.3%, 41.4%, 47.5%, 39.6%, 31.5%, 34.5%, 43.9%, 67.0%, 61.4%, 91.5%, 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. ESI's free cash flow per share of $7.20 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 $26.91 and compares it to the gain in EPS over the same period of $7.34. ESI's management has proven it can earn shareholders a 27.3% 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. ESI's shares outstanding have fallen over the past five years from 45,689,999 to 37,000,000, 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 ESI 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 $7.82 and divide it by the current market price of $109.80. An investor, purchasing ESI, could expect to receive a 7.12% initial rate of return. Furthermore, he or she could expect the rate to increase 17.1% per year, based on the analysts' consensus estimated long term growth rate, as this is how fast earnings are growing. COMPARE THE INITIAL RATE OF RETURN WITH THE LONG-TERM TREASURY YIELD: [PASS] Buffett favors companies in which the initial rate of return is around the long-term treasury yield. Nonetheless, he has invested in companies with low initial rates of return, as long as the yield is expected to expand rapidly. Currently, the long-term treasury yield is about 4.60%. Compare this with ESI's initial yield of 7.12%, which will expand at an annual rate of 17.1%, based on the analysts' consensus estimated long term growth rate. The company is the better choice, as the initial rate of return is close to or above the long term bond yield and is expanding. CALCULATE THE FUTURE EPS: [No Pass/Fail] ESI currently has a book value of $4.42. It is safe to say that if ESI can preserve its average rate of return on equity of 39.3% and continues to retain 100.00% of its earnings, it will be able to sustain an earnings growth rate of 39.3% and it will have a book value of $121.23 in ten years. If it can still earn 39.3% on equity in ten years, then expected EPS will be $47.61. CALCULATE THE FUTURE STOCK PRICE BASED ON THE AVERAGE ROE METHOD: [No Pass/Fail] Now take the expected future EPS of $47.61 and multiply them by the lower of the 5 year average P/E ratio (18.4) or current P/E ratio (current P/E in this case), which is 14.1 and you get ESI's projected future stock price of $668.87. 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 $668.87. These numbers indicate that one could expect to make a 19.8% average annual return on ESI's stock at the present time. Buffett would consider this a great return. CALCULATE THE EXPECTED FUTURE STOCK PRICE BASED ON AVERAGE EPS GROWTH: [No Pass/Fail] If you take the EPS growth of 17.1%, based on the analysts' consensus estimated long term growth rate, you can project EPS in ten years to be $37.85. Now multiply EPS in 10 years by the lower of the 5 year average P/E ratio (18.4) or current P/E ratio (current P/E in this case), which is 14.1. This equals the future stock price of $531.75. Add in the total expected dividend pool of $0.00 to get a total dollar amount of $531.75. 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 $109.80 and the future expected stock price, including the dividend pool, of $531.75. If you were to invest in ESI at this time, you could expect a 17.1% 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 17.1% and 19.8%. 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 18.4% on ESI stock for the next ten years, based on the current fundamentals. Buffett would consider this a great return, thus passing the criterion.   EMCOR GROUP, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy EMCOR Group, Inc. is an electrical and mechanical construction and facilities services company. It has six segments: United States electrical construction and facilities services, which involves systems for electrical power transmission and distribution, premises electrical and lighting systems, low-voltage systems, such as fire alarm, security and process control, voice and data communication, and fiber optic lines); United States mechanical construction and facilities services, which involves systems for heating, ventilation, air conditioning, refrigeration and clean-room process ventilation, fire protection, plumbing, process and high-purity piping, water and wastewater treatment, and central plant heating and cooling; United States facilities services; Canada construction and facilities services; United Kingdom construction and facilities services, and other international construction and facilities services. In February 2010, the Company acquired Scalise Industries. 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. EME, with a market cap of $1,560 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. EME, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 0.53, 0.93, 1.30, 1.86 and 2.72, 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. EME's Price/Sales ratio of 0.27, 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. EME has a relative strength of 48. 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.   NEWMARKET CORPORATION Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy NewMarket Corporation (NewMarket) is a holding company of Afton Chemical Corporation (Afton), Ethyl Corporation (Ethyl), NewMarket Services Corporation (NewMarket Services), and NewMarket Development Corporation (NewMarket Development). The Company has two primary segments: petroleum additives and real estate development. The petroleum additives segment is primarily represented by Afton and the real estate development segment is represented by Foundry Park I. Afton encompasses the petroleum additives business, while Ethyl represents the sale and distribution of tetraethyl lead (TEL) in North America and certain petroleum additives manufacturing operations. NewMarket Services provides various administrative services to NewMarket, Afton, Ethyl, and NewMarket Development. Analysis Guru Score: 100% MARKET CAP: [PASS] The first requirement of the Cornerstone Growth Strategy is that the company has a market capitalization of at least $150 million. This will screen out the companies that are too illiquid for most investors, but still include a small growth company. NEU, with a market cap of $1,497 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. NEU, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.60, 3.00, 4.63, 4.75 and 10.65, 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. NEU's Price/Sales ratio of 0.98, based on trailing 12 month sales, passes this criterion. RELATIVE STRENGTH: [PASS] The final criterion for the Cornerstone Growth Strategy requires that the Relative Strength of the company be among the top 50 of the stocks screened using the previous criterion. This gives you the opportunity to buy the growth stocks you are searching for just as the market is embracing them. NEU, whose relative strength is 87, is in the top 50 and would pass this last criterion.   GAMESTOP CORP. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy GameStop Corp. (GameStop) is a retailer of video game products and personal computer (PC) entertainment software. The Company sells new and used video game hardware, video game software and accessories, as well as PC entertainment software, and related accessories and other merchandise. As of January 31, 2009, the Company operated 6,207 stores in the United States, Australia, Canada and Europe, primarily under the names GameStop and EB Games. During the fiscal year ended January 31, 2009, GameStop operated its business in four segments: United States, Canada, Australia and Europe. On April 5, 2008, GameStop acquired Free Record Shop Norway AS. In July 2008, the Company purchased certain assets and Website operations from The Gamesman Limited, a video game and entertainment software retailer, including eight stores in New Zealand. On November 17, 2008, GameStop France SAS, a wholly owned subsidiary of the Company, acquired SFMI Micromania SAS. 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. GME, with a market cap of $2,931 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. GME, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 0.53, 0.81, 1.00, 1.75 and 2.38, 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. GME's Price/Sales ratio of 0.32, 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. GME has a relative strength of 10. 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.   TRIUMPH GROUP, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Triumph Group, Inc. (Triumph) designs, engineers, manufactures, repairs, overhauls and distributes aircraft components, such as hydraulic, mechanical and electromechanical control systems, aircraft and engine accessories, structural components and assemblies, non-structural composite components, auxiliary power units (APUs), avionics and aircraft instruments. The Company offers a variety of products and services to the aerospace industry through two groups of operating businesses: Triumph Aerospace Systems Group and Triumph Aftermarket Services Group. In March 2009, it acquired Merritt Tool Company, Inc., Saygrove Defence & Aerospace Group Limited, the aviation segment of Kongsberg Automotive Holdings ASA and The Mexmil Company, LLC. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider TGI a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (10.58) relative to the growth rate (39.86%), 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 TGI (0.27) is very favorable. SALES AND P/E RATIO: [PASS] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth high enough to support a P/E above this threshold. TGI, whose sales are $1,254.0 million, needs to have a P/E below 40 to pass this criterion. TGI's P/E of (10.58) is considered acceptable. 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 TGI was 30.49% last year, while for this year it is 31.39%. 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 (0.90%) is below 5%. 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 TGI is 39.9%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered 'OK'. However, it may be difficult to sustain such a high growth rate. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for TGI (60.68%) to be mediocre. If the Debt/Equity ratio is this high, the other ratios and financial statistics for TGI should be good enough to compensate. 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 TGI (9.80%) 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 TGI (-44.03%) 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.   TELEFONICA S.A. (ADR) Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Telefonica, S.A. (Telefonica), together with its subsidiaries and investees, operates in the telecommunications, media and contact center industries. The Company is also involved in the media and contact center activities through investments in Telefonica de Contenidos and Atento. The Company operates in three business areas: Telefonica Spain, Telefonica Europe and Telefonica Latin America. In Latin America, Telefonica provides service to more than 158 million customers in Brazil, Argentina, Chile and Peru, and has substantial operations in Colombia, Ecuador, El Salvador, Guatemala, Mexico, Morocco, Nicaragua, Panama, Puerto Rico, Uruguay and Venezuela. In Europe, it has operating companies in the United Kingdom, Ireland, Germany, Czech Republic and Slovakia. On April 3, 2008, Vivo Participacoes, S.A. completed the acquisition of 53.90% of Telemig Celular Participacoes, S.A. In December 2009, the Company acquired JAJAH. Analysis Guru Score: 100% MARKET CAP: [PASS] The Cornerstone Value Strategy looks for large, well known companies whose market cap is greater than $1 billion. These companies exhibit solid and stable earnings. TEF's market cap of $109,490 million passes this test. CASH FLOW PER SHARE: [PASS] The second criterion requires that the company exhibit strong cash flows. Companies with strong cash flow are typically the value oriented investments that this strategy looks for. The company's cash flow per share must be greater than the mean of the market cash flow per share ($0.71). TEF's cash flow per share of $15.12 passes this test. SHARES OUTSTANDING: [PASS] This particular strategy looks for companies whose total number of outstanding shares are in excess of the market average (645 million shares). These are the more well known and highly traded companies. TEF, who has 1,522 million shares outstanding, passes this test. TRAILING 12 MONTH SALES: [PASS] A company's trailing 12 month sales ($77,193 million) are required to be 1.5 times greater than the mean of the market's trailing 12 month sales ($16,279 million). TEF passes this test. DIVIDEND: [PASS] The final step in the Cornerstone Value strategy is to select the 50 companies from the market leaders group (those that have passed the previous four criteria) that have the highest dividend yield. TEF, with a dividend yield of 6.18%, is one of the 50 companies that satisfy this last criterion.   DRESSER-RAND GROUP INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Dresser-Rand Group Inc. is the global supplier of custom-engineered rotating equipment solutions for the applications in the oil, gas, petrochemical and process industries. The products and service applications include oil and gas production; high-pressure field injection, gas lift, and enhanced oil recovery; natural gas processing; gas liquefaction; gas transmission and storage; refining; petrochemical production; and general industrial markets, such as paper, steel, sugar, distributed power and United States Navy. The Company operates globally with manufacturing facilities in the United States, France, United Kingdom, Germany, Norway, China and India. It operates a range of products and clients to the global client base in over 140 countries from the global locations in 18 United States states and 26 countries. The Company operates in two business segments: new units, and aftermarket parts and services. 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. DRC's P/S ratio of 1.12 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. DRC's Debt/Equity of 36.55% 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. DRC 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 DRC At this Point Is DRC 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, DRC, who has a P/S of 1.12, 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%. DRC's inflation adjusted EPS growth rate of 53.95% 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. DRC's free cash per share of 1.08 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. DRC, whose three year net profit margin averages 8.21%, passes this evaluation.   OIL STATES INTERNATIONAL, INC. Profile Strategy: Value Investor Based on: Benjamin Graham Oil States International, Inc. (Oil States), through its subsidiaries, is a provider of specialty products and services to oil and gas drilling and production companies throughout the world. The Company operates in a number of the oil and gas producing regions, including Canada, onshore and offshore United States, West Africa, the North Sea, South America, and Southeast and Central Asia. Its customers include many of the national oil companies, major and independent oil and gas companies, onshore and offshore drilling companies, and other oilfield service companies. Oil States operates in three business segments: well site services, offshore products and tubular services. Analysis Guru Score: 71% SECTOR: [PASS] OIS 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. OIS's sales of $2,108.3 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. OIS's current ratio of 2.94 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 OIS is $164.1 million, while the net current assets are $610.4 million. OIS passes this test. LONG-TERM EPS GROWTH: [PASS] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. OIS's EPS growth over that period of 1,297.0% passes the EPS growth test. P/E RATIO: [FAIL] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. OIS's P/E of 38.40 (using the current PE) fails this test. PRICE/BOOK RATIO: [FAIL] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. OIS's Price/Book ratio is 1.60, while the P/E is 38.40. OIS fails the Price/Book test.   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 BCO THE BRINK'S COMPANY Security Systems & Services 56 AMED AMEDISYS, INC. Healthcare Facilities 55 JOSB JOS. A. BANK CLOTHIERS, INC. Retail (Apparel) 55 GRMN GARMIN LTD. Communications Equipment 53 NOV NATIONAL-OILWELL VARCO, INC. Oil Well Services & Equipment 53 ESV ENSCO INTERNATIONAL PLC Oil Well Services & Equipment 53 TDW TIDEWATER INC. Water Transportation 53 APOL APOLLO GROUP, INC. Schools 51 TRLG TRUE RELIGION APPAREL, INC. Apparel/Accessories 51 BKE THE BUCKLE, INC. Retail (Apparel) 49

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