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Executive Summary	May 13, 2011

The Economy The economy keeps plugging along, slowly and steadily continuing its recovery despite several concerns that have weighed on the market over the past fortnight. The manufacturing sector continues to be a bright spot. It grew for the 21st straight month in April, according to the Institute for Supply Management. And while the rate of expansion wasn't quite as great as it was in the first three months of the year, it was still as great as any other month since June 2004. Growth in the service sector, on the other hand, slowed significantly, according to ISM. Its service sector index indicated that the sector expanded for the 17th straight month in April, but at a significantly slower pace than the past several months. The group's New Orders sub-index fell sharply from March, though it still indicated growth in new orders. The jobs market, meanwhile, continues to be a mixed bag. New claims for unemployment, which had fallen below 400,000 through most of February and March, jumped to 478,000 in the last week of April, before falling back down to 434,000 in the first week of May. That's still well below the recessionary high of 650,000-plus, however. The latest monthly employment report was somewhat more encouraging, showing that the private sector added 268,000 jobs in April, according to the Labor Department, the most since February 2006. That didn't translate into a decrease in the unemployment rate, however, which rose to 9.0%, up from 8.8% in March. As I've noted before, the jobs created number and unemployment rate are calculated from different surveys -- the jobs created from a survey of about 140,000 businesses and government agencies, and the unemployment rate from a survey of about 60,000 households. Discrepancies often occur, therefore. The bottom line for the longer-term trend, however, seems to be that the private sector is creating a decent amount of new jobs, but overall unemployment remains quite high by historical standards. The lingering high unemployment rate hasn't stopped consumers from spending, a good sign for our consumer-driven economy. Retail and food service sales rose 0.5% in April, according to the Commerce Department, the 10th straight month they've increased. The March figures were also revised upward to a 0.9% gain, more than twice the initial 0.4% estimate. Retail and food service sales now stand nearly 3% above pre-recession highs. Commodities have been a big story over the past couple weeks. Oil prices, which had climbed up around $115 a week or two ago, had tumbled to below $99 by Thursday. Other commodities, like gold, silver, and copper, dropped, too. A big part of the commodities slump seems to be that investors are growing concerned that inflation will soon cause some central banks around the world to start (or continue) to tighten monetary policy, with interest rates moving upward. Two examples: China, whose inflation rate stayed above 5% in April, according to Bloomberg, and England, where officials said inflation is "uncomfortably high", and indicated rates could be increased later in 2011. Finally, first-quarter earnings reports continue to roll in, and thus far the results have been strong. As of Thursday, 324 of the S&P 500 companies had reported, with 73% beating analysts' expectations, according to Thomson Reuters. As for the market, it's been a volatile couple weeks. Overall for the fortnight, the S&P 500 returned -0.9%, while the Hot List returned -1.3%. For the year, the portfolio is up 11.0% vs. 7.2% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 199.4% vs. the S&P's 34.8% gain. Sell in May and Go Away? Since ending April at 1,363.61, the S&P 500 has been in the red, leaving many investors wondering whether the old adage "Sell in May and go away" is playing out. If you're not familiar with it, the adage's basic tenet is that the stock market fares best from the start of November through the end of April, and then generates much weaker returns for the warmer months. (The idea is thus also referred to as the "Halloween Indicator".) There are a variety of theories as to why this is, including that many investors head off on vacation in the warmer months and are less likely to be putting money into the market. Whatever the reason, history shows that the phenomenon is real. According to Stock Trader's Almanac, from 1950-2008, the Dow Jones Industrial Average gained an average of 7.3% during the November-through-April period; in the May-through-October period, it averaged gains of just 0.1%. (The trend reversed in 2008-09, with the market falling sharply from November through April and then soaring from May through October. In 2009-10, it held true, rising sharply from November through April and being slightly in the red from May through October.) But while the pattern seems to be strong, it's not one that we use in managing the Hot List. And perhaps the greatest reason is a critical one for investors to remember: The stock market is a market of individual stocks, not a monolithic entity. So while the broader market may historically struggle in the warmer months, there are almost always individual stocks that can still produce excellent gains. Look no further than last year for proof. On May 14, the Hot List picked up shares of HealthSpring, Inc., a Medicare-focused managed care firm. From then through the end of October, the stock soared 69.9%. It then slid a bit before being sold in late November for a 61% profit. Another example: AstraZeneca. The portfolio also picked up shares of the pharma giant on May 14, and, when it sold them on Aug. 6, had earned a 24.4% profit. Of course, there are examples of stocks that lost ground for the portfolio during the warmer months last year and in other years. But since its July 2003 inception, the Hot List has been well in the black during the May through October months, generating annualized returns in the 6.5% range. (Take away the May-October period from 2008, and the annualized returns are in the 17% range.) That's too much money to leave on the table, especially when the rationale for doing so involves theories about investors' vacation habits. The broader point here is you should always remember that "the market" is not your portfolio -- regardless of what month it happens to be. In fact, what most people call "the market" isn't really "the market" While most refer to the S&P 500 or the Dow Jones Industrial Average as "the market" (I myself may at times be guilty of that), those indices are far, far from the complete spectrum of stocks in which you can invest. The S&P holds 500 stocks; the Dow just 30. Our database, meanwhile, includes more than 6,000 stocks listed in the U.S. With that many opportunities, good strategies that focus on financially solid, fundamentally sound companies can produce very strong returns during very rough periods for the broader market indices. Just look at the Hot List. Had someone told you back in July 2003 that it was likely that the next eight or so years would involve a terrible recession and near-collapse of the global financial system, and that the S&P 500 would likely return about 4% per year during that period, you'd probably have steered clear of stocks, or at the least significantly cut back your equity exposure. But since then, the Hot List has gained an average of about 15% per year. In fact, all but one of my original 10-stock portfolios has gained at least 9% annualized (with the lone exception, the Momentum Investor portfolio, gaining about 5% per year). Results like that are why the Hot List won't be selling in May and going anywhere. Instead, we'll continue to search for the best opportunities out there, whether they're big, steady value plays like Hot List newcomer AT&T, or lesser-known, fast-growing (but still reasonably priced) smaller stocks like fellow newcomer Tech Data Corporation. These types of stocks are good investments, whether it's January, July, or any other month of the year.		Editor-in-Chief: John Reese Since Inception   Hot List 199.4% S&P 500 34.8% Accuracy 56.9% Beta 1.2 YTD   Hot List 11.0% S&P 500 7.2% Since Last Issue   Hot List -1.3% S&P 500 -0.9% Avg. Fundamentals   Market Cap (mil) $33,790 PE Ratio 10.2 5 Yr EPS Growth 33.4% Yield 3.8% Rel. Strength 51 Portfolio Sectors Services 4 Technology 3 Consumer Cyclical 1 Financial 1 Healthcare 1
Advertisement Validea Capital Management - Private Portfolio Management Based on Strategies of Legends Are you looking for an alternative to your underperforming mutual funds or financial advisor? Click here to download Validea Capital's investment kit and learn more about the firm's guru-based portfolios. Get More Information on Validea Capital! ** Validea Capital Management is a separate investment advisory firm managed by Validea.com founder John Reese. Thre information above in not intended as personal investment advice and should not be interpreted as such. The Fallen As we rebalance the Validea Hot List, 5 stocks leave our portfolio. These include: Zhongpin Inc. (HOGS), Astrazeneca Plc (Adr) (AZN), Pre-paid Legal Services, Inc. (PPD), Acme Packet, Inc. (APKT) and Opentable Inc (OPEN). The Keepers 5 stocks remain in the portfolio. They are: Skechers Usa, Inc. (SKX), Aeropostale, Inc. (ARO), Sanofi-aventis Sa (Adr) (SNY), Gamestop Corp. (GME) and Bridgepoint Education, Inc. (BPI). The Newbies We are adding 5 stocks to the portfolio. These include: Humana Inc. (HUM), Amtech Systems, Inc. (ASYS), Tech Data Corporation (TECD), Research In Motion Limited (Usa) (RIMM) and At&t Inc. (T). Portfolio Changes Additions   HUMANA INC. HUM AMTECH SYSTEMS, INC. ASYS TECH DATA CORPORATION TECD RESEARCH IN MOTION LIMITED (USA) RIMM AT&T INC. T Deletions   ZHONGPIN INC. HOGS ASTRAZENECA PLC (ADR) AZN PRE-PAID LEGAL SERVICES, INC. PPD ACME PACKET, INC. APKT OPENTABLE INC OPEN Newcomers to the Validea Hot List AT&T Inc. (T): This Dallas-based telecom giant ($186 billion market cap) recently purchased T-Mobile in a deal that would make it the largest wireless company in the U.S. The firm has taken in about $125 billion in sales in the past year. Telecoms have really lagged during the market rebound as investors have turned to smaller growth-type stocks, and that's making AT&T a bargain. It gets high marks from my James O'Shaughnessy-, Peter Lynch-, David Dreman-, and John Neff-based models To read more about it, check out the "Detailed Stock Analysis" section below. Humana Inc. (HUM): A health benefits company might not seem like good growth fodder, but Louisville-based Humana ($13.2 billion market cap) has been growing earnings at a 20.4% clip over the long term, and 2008 was the only year it hasn't upped EPS in the past decade. The company has a lot of cash on hand -- its net cash/price ratio is an impressive 51.6% -- part of the reason it gets a perfect 100% score from my Peter Lynch-based model. It's also got momentum behind it, earning a solid 89% score from my Momentum Investor model. See the "Detailed Stock Analysis" section below to learn more about the stock. Research in Motion Limited (RIMM): Ontario-based Research in Motion ($23 billion market cap) is the creator of the BlackBerry smartphone and its operating system. It's been producing tremendous growth in recent years, increasing EPS at a 51% rate over the long term and sales at a 55% rate. But it's been losing some market share to Google's Android smartphone and the iPhone recently, which has spooked many investors and driven shares down in recent months. But my models don't think RIMM was a flash in the pan. It's upped EPS in eight straight years and has no long-term debt, and the recent price declines have made it a big-time bargain, according to my Joel Greenblatt- and David Dreman-inspired models. Scroll down to the "Detailed Stock Analysis" section to learn more about the stock. Tech Data Corporation (TECD): Based in Clearwater, Fla., Tech Data is one of the largest wholesale I/T distributors in the U.S. It works as a sort of middle man, bringing products from such tech giants as Apple, Cisco, IBM, and Microsoft to the market. It's a smaller mid-cap ($2.5 billion), but does a high-volume, low-margin business -- last year it took in nearly $25 billion in sales. Tech Data has the combination of high growth and cheap shares that catches the eyes of my James O'Shaughnessy- and Peter Lynch-based models. Read more about its fundamentals in the "Detailed Stock Analysis" section below. Amtech Systems, Inc. (ASYS): Based in Tempe, Ariz., Amtech makes capital equipment used in fabricating solar cells and semiconductor devices. It supplies horizontal diffusion furnace systems, related automation, and polishing supplies that are used in the manufacturing process for both solar cells and semiconductor chips. It's a small-cap, with a market capitalization just over $200 million, and it's been growing rapidly, more than doubling its sales in its last fiscal year (ended Sept. 30), and more than tripling sales in the first two quarters of its 2011 fiscal year (vs. the year-ago quarters). Amtech's strong growth earns it strong interest from my Martin Zweig-based growth model and my Peter Lynch-based strategy, but it also gets solid scores from my John Neff-inspired value model. To find out more about the stock, see the "Detailed Stock Analysis" section below. News about Validea Hot List Stocks Sanofi-Aventis (SNY): Sanofi said Tuesday that it has gained U.S. approval to market its Fluzone Intradermal vaccine for adults, which can be delivered in needles one-tenth the size of normal needles, according to Reuters. The vaccine was created in concert with syringe maker Becton Dickinson. Sanofi says it may hurt less than standard vaccines, and do a better job of stimulating protection against influenza while requiring one-fifth of the active ingredient, Reuters reported. The vaccine will be available to U.S. healthcare providers for the 2011-2012 flu season, Sanofi said Aeropostale Inc. (ARO): Aeropostale cut earnings guidance for the first quarter last week, causing shares to tumble. The firm said same-store revenue fell 7% in the February to April period, though overall net sales increased 1% from the year-ago period. Analysts were expecting same-store revenue to fall 3.2%, according to data provided by FactSet, the Associated Press reported. The firm also cut first-quarter guidance to 20 cents per share, down sharply from its March forecast of 35 to 38 cents per share. Shares tumbled about 15% on the news, but bounced back a bit in the subsequent days. My models remain quite high on the stock, which has an exceptional long-term track record and has found a way to up EPS in every year of the past decade (even throughout the Great Recession). The Next Issue In two weeks, we will publish another issue of the Hot List, at which time we will take a closer look at my strategies and investment approach. If you have any questions, please feel free to contact us at hotlist@validea.com.

Current Portfolio Ticker Company Name Industry Guru Score ARO AEROPOSTALE, INC. Retail (Apparel) 100 ASYS AMTECH SYSTEMS, INC. Semiconductors 92 BPI BRIDGEPOINT EDUCATION, INC. Schools 83 T AT&T INC. Communications Services 63 TECD TECH DATA CORPORATION Computer Hardware 61 RIMM RESEARCH IN MOTION LIMITED (USA) Communications Equipment 58 SNY SANOFI-AVENTIS SA (ADR) Biotechnology & Drugs 58 GME GAMESTOP CORP. Retail (Technology) 57 SKX SKECHERS USA, INC. Footwear 56 HUM HUMANA INC. Insurance (Accident & Health) 52 Ticker Market Cap Date Added Start Price Return ARO $1,755 11/26/2010 $26.90 $21.74 -19.2% ASYS $216 5/13/2011 TBD $22.52 TBD BPI $1,119 3/18/2011 $18.02 $21.17 17.5% T $187,372 5/13/2011 TBD $31.64 TBD TECD $2,491 5/13/2011 TBD $53.50 TBD RIMM $22,954 5/13/2011 TBD $43.79 TBD SNY $104,210 3/18/2011 $33.37 $38.27 14.7% GME $3,648 9/3/2010 $19.01 $25.93 36.4% SKX $911 3/18/2011 $18.46 $18.30 -0.9% HUM $13,219 5/13/2011 TBD $78.50 TBD

Detailed Stock Analysis Disclaimer: The analysis is from Validea's selection and interpretation of content from the guru's book or published writings, and is not from nor endorsed by the guru. See Full Disclaimer ARO   |   ASYS   |   BPI   |   T   |   TECD   |   RIMM   |   SNY   |   GME   |   SKX   |   HUM   |   AEROPOSTALE, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Aeropostale, Inc. is a mall-based specialty retailer of casual apparel and accessories. The Company designs, markets and sells its own brand of merchandise principally targeting 14 to 17 year-old young women and young men. The Company also sells Aropostale merchandise through its e-commerce Website, www.aeropostale.com. During the fiscal year ended January 30, 2010 (fiscal 2009), the Company launched P.S. from Aeropostale, which offers casual clothing and accessories focused on elementary school children between the ages of 7 and 12. During fiscal 2009, the Company completed the closure of its 14 store Jimmy'Z concept. Jimmy'Z Surf Co., Inc., a wholly owned subsidiary of Aeropostale, Inc., was a contemporary lifestyle brand targeting young women and men aged 18 to 25. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider ARO a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (8.64) relative to the growth rate (29.59%), 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 ARO (0.29) 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. ARO, whose sales are $2,400.4 million, needs to have a P/E below 40 to pass this criterion. ARO's P/E of (8.64) is considered acceptable. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for ARO is 29.6%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is acceptable. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for ARO (0.00%) to be wonderfully low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for ARO (8.10%) 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 ARO (13.72%) 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.   AMTECH SYSTEMS, INC. Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Amtech Systems, Inc. (Amtech), incorporated in October 1981, through its wholly owned subsidiaries, supplies horizontal diffusion furnace systems used for solar (photovoltaic) cell and semiconductor manufacturing. The Company provides products and services to two industries: the solar industry and the semiconductor industry. The Company's solar and semiconductor equipment is sold under brand names of Tempress Systems and Bruce Technologies, which have customers in both the solar industry and the semiconductor industry. Within the solar industry, its provide diffusion and automation equipment to solar cell manufacturers and it also offers plasma enhanced chemical vapor deposition (PECVD) and phosphocilicate glass (PSG) equipment. Within the semiconductor industry, it provides equipment to manufacturers of analog, power, automotive and microcontroller chips with geometries greater than 0.3 micron. Analysis Guru Score: 87% PROFIT MARGIN: [PASS] This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. ASYS's profit margin of 10.70% passes this test. RELATIVE STRENGTH: [PASS] The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. ASYS, with a relative strength of 95, satisfies this test. COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [PASS] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for ASYS (3,750.00% for EPS, and 280.91% for Sales) are good enough to pass. INSIDER HOLDINGS: [FAIL] ASYS's insiders should own at least 10% (they own 0.53%) of the company's outstanding shares. This does not satisfy the minimum requirement, and companies that do not pass this criteria are less attractive. CASH FLOW FROM OPERATIONS: [PASS] A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. ASYS's free cash flow of $1.39 per share passes this test. PROFIT MARGIN CONSISTENCY: [FAIL] The profit margin in the past must be consistently increasing. The profit margin of ASYS has been inconsistent in the past three years (Current year: 7.97%, Last year: -3.00%, Two years ago: 3.56%), which is unacceptable. This inconsistency will carryover directly to the company's bottom line, or earnings per share. R&D AS A PERCENTAGE OF SALES: [PASS] ASYS is either maintaining the same levels of R&D expenditures(currently $2.1 million) or increasing these levels which is a good sign. This allows the company to develop the superior technology and new products that will put everyone else out of business. This criterion is particularly important for high-tech and medical stocks because they are so R&D dependant. CASH AND CASH EQUIVALENTS: [PASS] ASYS's level of cash $56.8 million passes this criteria. If a company is a cash generator, like ASYS, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash. INVENTORY TO SALES: [PASS] This methodology strongly believes that companies, especially small ones, should have tight control over inventory. It's a warning sign if a company's inventory relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Inventory to Sales for ASYS was 25.41% last year, while for this year it is 20.26%. Since the inventory to sales is decreasing by -5.15% the stock passes this criterion. ACCOUNT RECEIVABLE TO SALES: [PASS] This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for ASYS was 25.60% last year, while for this year it is 20.40%. Since the AR to sales is decreasing by -5.20% the stock passes this criterion. LONG TERM DEBT/EQUITY RATIO: [PASS] ASYS's trailing twelve-month Debt/Equity ratio (0.00%) is at a great level according to this methodology because the superior companies that you are looking for don't need to borrow money in order to grow. "THE FOOL RATIO" (P/E TO GROWTH): [PASS] The "Fool Ratio" is an extremely important aspect of this analysis. If the company has attractive fundamentals and its Fool Ratio is 0.5 or less (ASYS's is 0.32), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. ASYS passes this test. The following criteria for ASYS are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] ASYS has not been significantly increasing the number of shares outstanding within recent years which is a good sign. ASYS currently has 10.0 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock. SALES: [PASS] Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. ASYS's sales of $203.5 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". ASYS passes the sales test. DAILY DOLLAR VOLUME: [PASS] ASYS passes the Daily Dollar Volume (DDV of $7.3 million) test. It is required that this number be less than $25 million because these are the stocks that remain relatively undiscovered by institutions. "You'll be scoring touchdowns against the big guys on your turf." PRICE: [PASS] This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. ASYS with a price of $22.52 passes the price test, even though it doesn't fall in the preferred range. The price should be above $7 in order to eliminate penny stocks and below $20 since most stocks in this price range are undiscovered by the institutions. INCOME TAX PERCENTAGE: [PASS] ASYS's income tax paid expressed as a percentage of pretax income this year was (39.15%) and last year (20.90%) are greater than 20% which is an acceptable level. If the tax rate is below 20% this could mean that the earnings that were reported were unrealistically inflated due to the lower level of income tax paid. This is a concern.   BRIDGEPOINT EDUCATION, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Bridgepoint Education, Inc. (Bridgepoint) is a accredited provider of postsecondary education services. The Company offers associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences. It delivers its programs online, as well as at its traditional campuses located in Clinton, Iowa, and Colorado Springs, Colorado. As of December 31, 2009, it offered approximately 1,150 courses, 60 degree programs and 125 specializations and concentrations. As of December 31, 2009, it had 53,688 students enrolled in its institutions, 99% of whom were attending classes online. Analysis Guru Score: 85% P/E RATIO: [PASS] The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. BPI's P/E is 9.91, based on trailing 12 month earnings, while the current market PE is 18.00. Therefore, it passes the first test. REVENUE GROWTH IN RELATION TO EPS GROWTH: [PASS] Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. BPI's revenue growth is 112.33%, while it's earnings growth rate is 30.79%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate. Therefore, BPI passes this criterion. SALES GROWTH RATE: [FAIL] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (46%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (49.9%) of the current year. Sales growth for the prior must be greater than the latter. For BPI this criterion has not been met and fails this test. The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria. CURRENT QUARTER EARNINGS: [PASS] The first of these criteria is that the current EPS be positive. BPI's EPS ($0.45) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. BPI's EPS for this quarter last year ($0.33) pass this test. POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: [PASS] The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. BPI's growth rate of 36.36% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [PASS] Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for BPI is 15.39%. This should be less than the growth rates for the 3 previous quarters, which are 19.51%, 2,800.00%, and 64.86%. BPI passes this test, which means that it has good, reasonably steady earnings. This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: [PASS] If the growth rate of the prior three quarter's earnings, 110.00%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 36.36%, (versus the same quarter one year ago) then the stock fails, with one exception: if the growth rate in earnings between the current quarter and the same quarter one year ago is greater than 30%, then the stock would pass. The growth rate over this period for BPI is 36.4%, and it would therefore pass this test. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 36.36% must be greater than or equal to the historical growth which is 30.79%. BPI would therefore pass this test. EARNINGS PERSISTENCE: [FAIL] Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. BPI, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were -2.15, 0.32, 3.15, 1.03, and 2.14, fails this test. LONG-TERM EPS GROWTH: [PASS] One final earnings test required is that the long-term earnings growth rate must be at least 15% per year. BPI's long-term growth rate of 30.79%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate, passes this test. TOTAL DEBT/EQUITY RATIO: [PASS] A final criterion is that a company must not have a high level of debt. A high level of total debt, due to high interest expenses, can have a very negative effect on earnings if business moderately turns down. If a company does have a high level, an investor may want to avoid this stock altogether. BPI's Debt/Equity (0.00%) is not considered high relative to its industry (40.97%) and passes this test. INSIDER TRANSACTIONS: [PASS] A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For BPI, this criterion has not been met (insider sell transactions are 57, while insiders buying number 54). Despite the fact that insider sells out number insider buys for this company, Zweig considers even one insider buy transaction enough to prevent an insider sell signal, therefore there is not an insider sell signal and the stock passes this criterion.   AT&T INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch AT&T Inc. is a holding company. The Company is a provider of telecommunications services in the United States and worldwide. These include wireless communications, local exchange services, long-distance services, data/broadband and Internet services, video services, managed networking, wholesale services and directory advertising and publishing. It operates in four segments: wireless, which provides both wireless voice and data communications services across the United States and, through roaming agreements, in foreign countries; wireline, which provides landline voice and data communication services, AT&T U-Verse TV, high-speed broadband and voice services (U-Verse) and managed networking to business customers; advertising solutions, which publishes Yellow and White Pages directories and sells directory advertising and Internet-based advertising and local search, and other, which provides results from customer information services and all corporate and other operations. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: T is considered a "True Stalwart", according to this methodology, as its earnings growth of 16.75% lies within a moderate 10%-19% range and its annual sales of $124,997 million are greater than the multi billion dollar level. This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. T is attractive if T can hold its own during a recession. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for T (0.42), based on the average of the 3, 4 and 5 year historical eps growth rates, is excellent. EARNINGS PER SHARE: [PASS] The EPS for a stalwart company must be positive. T's EPS ($3.38) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for T (57.78%) to be mediocre. If the Debt/Equity ratio is this high, the other ratios and financial statistics for T 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 T (2.94%) 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 T (-30.14%) 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.   TECH DATA CORPORATION Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Tech Data Corporation (Tech Data) is a distributor of information technology (IT) products, logistics management and other value-added services. The Company serves approximately 125,000 value-added resellers (VARs), direct marketers, retailers and corporate resellers in more than 100 countries throughout North America, Latin America and Europe. During the fiscal year ended January 31, 2010 (fiscal 2009), the Company acquired certain assets of Scribona, AB. In February 2011, the Company announced that it had created two new business divisions: HP Solutions Division And Networking Solutions Group. 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. TECD, with a market cap of $2,491 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. TECD, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were -1.83, 1.85, 2.28, 3.54 and 4.36, 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. TECD's Price/Sales ratio of 0.10, 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. TECD, whose relative strength is 71, is in the top 50 and would pass this last criterion.   RESEARCH IN MOTION LIMITED (USA) Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Research In Motion Limited (RIM) is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information, including e-mail, phone, short message service (SMS), Internet and intranet-based applications. RIM's portfolio of products, services and embedded technologies are used by organizations worldwide and include the BlackBerry wireless solution, the RIM Wireless Handheld product line, software development tools and other software and hardware. Its subsidiaries include Research In Motion Corporation, Research In Motion UK Limited and RIM Finance, LLC. On June 2, 2010, Harman International sold its software operating systems unit, QNX Software Systems, to the Company. Analysis Guru Score: 74% DETERMINE THE CLASSIFICATION: This methodology would consider RIMM a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (6.89) relative to the growth rate (51.23%), 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 RIMM (0.13) 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. RIMM, whose sales are $19,907.2 million, needs to have a P/E below 40 to pass this criterion. RIMM's P/E of (6.89) 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 RIMM was 4.41% last year, while for this year it is 3.10%. Since inventory to sales has decreased from last year by -1.31%, RIMM passes this test. EPS GROWTH RATE: [FAIL] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for RIMM is 51.2%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered too fast. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for RIMM (0.00%) to be wonderfully low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for RIMM (10.23%) 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 RIMM (9.24%) 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.   SANOFI-AVENTIS SA (ADR) Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Sanofi-Aventis is a pharmaceutical group engaged in the research, development, manufacture and marketing of healthcare products. The Company's business includes two main activities: pharmaceuticals and human vaccines through sanofi pasteur. It is also present in animal health products through Merial Limited (Merial). In its pharmaceutical activity, it specializes in six therapeutic areas: diabetes, oncology, thrombosis and cardiovascular, central nervous system (CNS), and internal medicine. The global portfolio of sanofi-aventis also consists of a range of other pharmaceutical products. It offers vaccines in five areas: pediatric combination vaccines, influenza vaccines, adult and adolescent booster vaccines, meningitis vaccines and travel and endemic vaccines. In October 2010, Siegfried Holding AG sold its PulmoJet Inhalation Project to the Company. In February 2011, the Company acquired BMP Sunstone Corp. In April 2011, the Company acquired Genzyme Corporation. 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. SNY's market cap of $104,210 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 ($1.27). SNY's cash flow per share of $3.83 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 (616 million shares). These are the more well known and highly traded companies. SNY, who has 2,610 million shares outstanding, passes this test. TRAILING 12 MONTH SALES: [PASS] A company's trailing 12 month sales ($46,215 million) are required to be 1.5 times greater than the mean of the market's trailing 12 month sales ($18,656 million). SNY 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. SNY, with a dividend yield of 4.76%, is one of the 50 companies that satisfy this last criterion.   GAMESTOP CORP. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher GameStop Corp. (GameStop) is a retailer of video game products and personal computer (PC) entertainment software. The Company sells new and used video game hardware, video game software and accessories, as well as PC entertainment software, and related accessories and other merchandise. As of January 30, 2010, the Company operated 6,450 stores in the United States, Australia, Canada and Europe, primarily under the names GameStop and EB Games. GameStop also operates the electronic commerce Website www.gamestop.com and publish Game Informer, a multi-platform video game magazine in the United States based on circulation, with approximately 4 million subscribers. During the fiscal year ended January 30, 2010 (fiscal 2009), GameStop operated its business in four segments: United States, Canada, Australia and Europe. Analysis Guru Score: 90% PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical (non-Smokestack) companies with Price/Sales ratios below 0.75 are tremendous values and should be sought. GME's P/S of 0.38 based on trailing 12 month sales, is below 0.75 which is considered quite attractive. It passes this methodology's P/S ratio test with flying colors. TOTAL DEBT/EQUITY RATIO: [PASS] Less debt equals less risk according to this methodology. GME's Debt/Equity of 8.59% is acceptable, thus passing the test. PRICE/RESEARCH RATIO: [PASS] This methodology considers companies in the Technology and Medical sectors to be attractive if they have low Price/Research ratios. GME is neither a Technology nor Medical company. Therefore the Price/Research ratio is not available and, hence, not much emphasis should be placed on this particular variable. PRELIMINARY GRADE: Some Interest in GME At this Point Is GME a "Super Stock"? NO PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical(non-Smokestack) companies with Price/Sales ratios below .75 are tremendous values and should be sought.GME's P/S ratio of 0.38 is below .75 which is considered extremely attractive. It passes this methodology's P/S ratio test with flying colors. LONG-TERM EPS GROWTH RATE: [PASS] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. GME's inflation adjusted EPS growth rate of 20.68% passes the test. FREE CASH PER SHARE: [PASS] This methodology looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses. This is based on the premise that companies without cash will soon be out of business. GME's free cash per share of 2.56 passes this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [FAIL] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. GME, whose three year net profit margin averages 4.33%, fails this evaluation.   SKECHERS USA, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Skechers U.S.A., Inc. (Skechers) design and market Skechers-branded contemporary footwear for men, women and children under several lines. addition to Skechers-branded lines, the Company also offers several designer, fashion and street-focused footwear lines for men, women and children. These lines are branded and marketed separately from Skechers and appeal to specific audiences. Its brands are sold through department stores, specialty stores, athletic retailers, and boutiques as well as catalog and Internet retailers. Along with wholesale distribution, its footwear is available at its e-commerce Website and its own retail stores. Skechers operates 90 concept stores, 92 factory outlet stores and 37 warehouse outlet stores in the United States, and 22 concept stores and five factory outlets internationally. The Company operates in four reportable segments: domestic wholesale sales, international wholesale sales, retail sales, and e-commerce sales. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: SKX is considered a "True Stalwart", according to this methodology, as its earnings growth of 18.98% lies within a moderate 10%-19% range and its annual sales of $1,990 million are greater than the multi billion dollar level. This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. SKX is attractive if SKX can hold its own during a recession. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for SKX was 15.60% last year, while for this year it is 19.86%. 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 (4.26%) is below 5%. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for SKX (0.52), based on the average of the 3, 4 and 5 year historical eps growth rates, is O.K. EARNINGS PER SHARE: [PASS] The EPS for a stalwart company must be positive. SKX's EPS ($1.86) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for SKX (9.68%) to be exceptionally low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for SKX (11.91%) 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 SKX (20.43%) 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.   HUMANA INC. Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Humana Inc. (Humana) is a health and supplemental benefits company. The Company provides full-service benefits and wellness solutions, offering an array of health, pharmacy and supplemental benefit products for employer groups, Government benefit programs, and individuals, as well as primary and workplace care, through its medical centers and worksite medical facilities. Humana manages its business with two segments: Government and Commercial. The Government segment consists of beneficiaries of Government benefit programs, and includes three lines of business: Medicare, Military, and Medicaid. The Commercial segment consists of members enrolled in its medical and specialty products marketed to employer groups and individuals. The Company provides health insurance benefits under health maintenance organization (HMO), private fee-for-service (PFFS) and preferred provider organization (PPO) plans. On December 21, 2010, the Company acquired Concentra Inc. Analysis Guru Score: 72% PROFIT MARGIN: [FAIL] This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. HUM's profit margin of 3.34% fails this test. RELATIVE STRENGTH: [PASS] The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. HUM, with a relative strength of 91, satisfies this test. COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [FAIL] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for HUM (22.37% for EPS, and 9.67% for Sales) are not good enough to pass. INSIDER HOLDINGS: [FAIL] HUM's insiders should own at least 10% (they own 0.66%) of the company's outstanding shares. This does not satisfy the minimum requirement, and companies that do not pass this criteria are less attractive. CASH FLOW FROM OPERATIONS: [PASS] A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. HUM's free cash flow of $11.89 per share passes this test. PROFIT MARGIN CONSISTENCY: [PASS] HUM's profit margin has been consistent or even increasing over the past three years (Current year: 3.25%, Last year: 3.36%, Two years ago: 2.24%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise. R&D AS A PERCENTAGE OF SALES: [NEUTRAL] This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in HUM's case. CASH AND CASH EQUIVALENTS: [PASS] HUM's level of cash $8,545.9 million passes this criteria. If a company is a cash generator, like HUM, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash. ACCOUNT RECEIVABLE TO SALES: [PASS] This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for HUM was 2.66% last year, while for this year it is 2.83%. Although the AR to sales is rising, it is below the max 30% that is allowed. The investor can still consider the stock if all other criteria appear very attractive. "THE FOOL RATIO" (P/E TO GROWTH): [PASS] The "Fool Ratio" is an extremely important aspect of this analysis. If the company's Fool Ratio is between 0.5 and 0.65 (HUM's is 0.57), the company demonstrates excellence in its fundamentals and have soundly beat the earnings estimates. HUM passes this test. The following criteria for HUM are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] HUM has not been significantly increasing the number of shares outstanding within recent years which is a good sign. HUM currently has 170.0 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock. SALES: [FAIL] Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. HUM's sales of $34,618.3 million based on trailing 12 month sales, are too high and would therefore fail the test. It is companies with $500 million or less in sales that are most likely to double or triple in size in the next few years. DAILY DOLLAR VOLUME: [FAIL] HUM does not pass the Daily Dollar Volume (DDV of $133.9 million) test. It exceeds the maximum requirement of $25 million. Stocks that fail the test are too liquid for a small individual investor and many institutions have already discovered it. PRICE: [PASS] This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. HUM with a price of $78.50 passes the price test, even though it doesn't fall in the preferred range. The price should be above $7 in order to eliminate penny stocks and below $20 since most stocks in this price range are undiscovered by the institutions. INCOME TAX PERCENTAGE: [PASS] HUM's income tax paid expressed as a percentage of pretax income this year was (37.16%) and last year (35.09%) are greater than 20% which is an acceptable level. If the tax rate is below 20% this could mean that the earnings that were reported were unrealistically inflated due to the lower level of income tax paid. This is a concern.   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 NEU NEWMARKET CORPORATION Chemical Manufacturing 63 LULU LULULEMON ATHLETICA INC. Apparel/Accessories 53 ACOM ANCESTRY.COM INC Computer Services 50 GPS THE GAP INC. Retail (Apparel) 49 FCFS FIRST CASH FINANCIAL SERVICES, INC. Retail (Specialty) 49 HOGS ZHONGPIN INC. Food Processing 49 QSII QUALITY SYSTEMS, INC. Software & Programming 48 BAP CREDICORP LTD. (USA) Regional Banks 48 AZN ASTRAZENECA PLC (ADR) Biotechnology & Drugs 45 LPS LENDER PROCESSING SERVICES, INC. Software & Programming 45

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