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Executive Summary April 3, 2009

The Economy

Make no mistake: The economy is still in bad shape. But as April begins, signs of improvement -- or, at least, signs that things are "less bad" than many expected -- are continuing to trickle in.

For starters, new orders for manufactured goods rose 1.8 percent in February, the first increase in six months, according to a preliminary report from the Commerce Department. Businesses appeared to be more optimistic about the future, with durable goods orders -- which include big-ticket, plan-ahead items like machinery and computers, jumped 3.4 percent. That increase also followed six months of declines, and was far better than economists' forecasts of a 2.5 percent decrease.

The much-maligned housing market also offered some slivers of hope. The National Association of Realtors reported that its Pending Home Sales Index increased 2.1 percent in February. While the housing market remains weak, the Realtor group's chief economist said more buyers are getting into the market to take advantage of stimulus incentives and lower prices, though he said it could take a few months before a really meaningful increase occurs.

But reminders of how rough the economy is remain. Yesterday, the Labor Department reported that initial unemployment claims jumped by 12,000 -- almost 2 percent -- in the week ending March 28, the largest increase since 1982. And a new report showed that continuing claims rose again in the week before that (the most recent week the data covers), this time by almost 3 percent.

Keep in mind, however, that the overall unemployment rate still remains below the levels associated with the 1973-74 and 1980-82 recessions. And, as JPMorgan Chase noted in its quarterly update, unemployment traditionally remains higher even after the economy turns. "Businesses typically are very cautious about adding to their staff levels in the early years of recovery," the banking giant stated. "That hiring caution in the early expansion years usually generates talk about jobless recoveries. Unemployment is likely to move higher into early next year, even if the economy gains momentum late this year, as expected." JPM -- which was ahead of the curve when it came to the subprime crisis -- expects the economy to stabilize and move into recovery over the next six months.

Finally, there is, of course, the financial sector. Things are still grim, but the Treasury Department is revealing more and more details about its plan to help financial firms deal with the toxic debt that has burdened their balance sheets. The latest plan calls for the use of $75 billion to $100 billion in TARP funds and funds from private investors, which will generate $500 billion to $1 trillion that will be used to buy up the financial firms' bad debt. The debt will then be auctioned off to the highest bidder.

How the plan works out remains to be seen, but investors were certainly heartened. Stocks surged the day the plan was announced, and they've continued a choppy climb upward. That bullish run was punctuated by yesterday's solid gains, which were driven in part by news that market-to-market policies would be eased, and reports that the G20 summit was resulting in another trillion dollars in rescue and stimulus funding for the global economy. One issue to keep an eye on: how the Treasury's plan to buy up toxic debt is impacted (perhaps hampered) but the relaxing of mark-to-market rules, which could give banks reason to hold onto those same assets.

Since our last newsletter, the S&P 500 is up 6.4 percent, while the Hot List has risen an even-better 13.2 percent. For the year, the portfolio is in the red but ahead of the S&P, having lost 3.6 percent compared to the index's 7.6 percent loss. Since its inception almost six years ago, the Hot List remains well in the black, up 58.1 percent, while the S&P is well in the red, down 16.6 percent.

Stay Focused -- Bear or Bull

The market's surge over the past four weeks -- the S&P 500 is up more than 23 percent since March 9 -- is certainly a welcomed development, as has been the less-than-terrible economic news that has accompanied it.

But don't assume that we're out of the woods yet. While this may well be the start of a lengthy bull market, it could be another head-fake -- no one knows for sure. While we all hope we have seen the bottom, be prepared just in case this isn't the real deal -- and definitely be prepared for more volatility, at the very least. If this run doesn't hold, keep in mind that valuations are still low using even the most conservative metrics (like the 10-year P/E ratio), so don't be scared out of the market.

There's another side to this coin, however. Just as it's important not to let a downturn scare you out of stocks, so too is it important not to let your emotions run wild when things are looking up. With the market breathing some sighs of relief in recent weeks (most notably the announcement that Citigroup and some other troubled financials are turning profits, and the disclosure of the Treasury's plan to deal with toxic assets), it can be tempting to dive back into stocks that have been crushed in the past year or two -- especially given the urge to make up big recent losses -- with the hope that they'll rebound as quickly as they fell.

But be careful. Take, for example, financials. Citigroup, Bank of America, UBS, U.S. Bancorp, Lloyds, Credit Suisse, JPMorgan, Goldman Sachs -- none of these beaten-down big names, many of which have gotten a nice bounce in recent weeks, get the least bit of interest from my models right now. That means that, despite the sudden burst of optimism, these firms' long-term prospects remain highly questionable. Yes, some of the big banks, like Wells Fargo and Barclays, do get approval from one or two of my strategies, and yes, the bailout money could end up lifting some less-than-stellar stocks out of the doldrums. But overall, the sector is still looking somewhat dangerous, even with all those single-digit or low-teen prices, and no one is sure just how the bailout will impact these firms in the long run. Pouring speculative money into those that don't have strong fundamentals is asking for trouble.

Keep in mind the research of James O'Shaughnessy, the growth/value guru I examine below in this week's Guru Spotlight. Earlier this year, O'Shaughnessy's firm examined which stocks have excelled coming out of every recession since 1962. What they found was that stocks with the best fundamentals -- not speculative stocks -- enjoyed the biggest gains, particularly in the first year after the recession. Stocks in the best decile ranked by price/sales ratio (meaning those with the lowest P/S ratios), for example, outperformed the highest decile of P/S stocks by an average of almost 22 percentage points in the first post-recession year, 16.57 points (annualized) in the first three years, and 13.95 points (annualized) in the first five years.

The bottom line is that it is critical to pick a good strategy and stick to it -- through bad times, through good times, through any times. O'Shaughnessy was a staunch believer in that concept. He knew that many investors allow their emotions to push them off their investment strategy track, far more often than not for the worse. "We are a bundle of inconsistencies," he writes in What Works on Wall Street, "and while that may make us interesting, it plays havoc with our ability to invest our money successfully." His advice: "Consistently, patiently, and slavishly stick with a strategy, even when it's performing poorly relative to other methods."

There are certainly critics of such a mindset, many of whom have popped up as the market has tanked in the past year. They will say that quantitative strategies tell you what worked on Wall Street, not what will work. Their premise is correct -- even quantitative methods that have been highly successful for lengthy periods of time don't come with a guarantee of strong future results. But those critics are missing two key points. The first is simple: that hunch-based, emotional stock-picking doesn't come with a guarantee of success, either.

The second point involves the issue of why certain strategies have performed well over time. To say that successful quantitative strategies simply tell you what has previously worked well implies that such methods used some sort of hocus-pocus, gimmicky approach. In reality, nothing could be further from the truth. The quantitative methods used by people like O'Shaughnessy, Peter Lynch, Marty Zweig, John Neff, and the other gurus I follow measure concepts that are, when it comes to the world of business, both critical and timeless. Debt levels, profit margins, consistency of earnings, sales volume -- it's hard to imagine an economy and stock market that wouldn't over the long term value companies that scored well in these areas.

Joel Greenblatt, who inspired my most recently developed Guru Strategy, does a great job of succinctly explaining the notion of why a good quantitative strategy like his works in The Little Book that Beats the Market. In the book, Greenblatt refers to his two-variable strategy "The Magic Formula", but he makes it clear that the formula is anything but "magic". The two variables he uses -- return on capital and earnings yield -- serve two simple purposes: Return on capital identifies strong companies, and earnings yield identifies which of those strong companies' shares are selling at a discount. In doing so, the variables help Greenblatt follow a simple, timeless tenet: "Buying good companies at bargain prices makes sense."

In one way or another, that's just what all the gurus I follow do. Their quantitative criteria measure how strong a company's balance sheet is -- that's the "good companies" part of Greenblatt's mantra -- and then use any of several valuation measures (price/earnings, price/sales, price/book, etc.) to compare the firm's financial position to its stock's market value. Yes, this concept of investing in firms with strong balance sheets and low valuation ratios will sometimes falter in the short term. But over the long haul it will endure, because it is based not on trickery or "magic", but on concepts that are at the heart of how business and markets inherently function. That's a point not to be forgotten, no matter whether you think we're at the start of a new bull run, or merely at the top of another bear market rally.

Editor-in-Chief: John Reese


Guru Spotlight: James O'Shaughnessy

To say that James O'Shaughnessy has written the book on quantitative investing strategies might be an exaggeration -- but not much of one. Over the years, O'Shaughnessy has compiled an anthology of research on the historical performance of various stock selection strategies rivaling that of just about anyone. He first published his findings back in 1996, in the first edition of his bestselling What Works on Wall Street, using Standard & Poor's Compustat database to back-test a myriad of quantitative approaches. He has continued to periodically update his findings since then, and today he also serves as a money manager and the manager of several Canadian mutual funds.

In addition to finding out how certain strategies had performed in terms of returns over the long term, O'Shaughnessy's study also allowed him to find out how risky or volatile each strategy he examined was. So after looking at all sorts of different approaches, he was thus able to find the one that produced the best risk-adjusted returns -- what he called his "United Cornerstone" strategy.

The United Cornerstone approach, the basis for my O'Shaughnessy-based Guru Strategy, is actually a combination of two separate models that O'Shaughnessy tested, one growth-focused and one value-focused. His growth method -- "Cornerstone Growth" -- produced better returns than his "Cornerstone Value" approach, and was a little more risky. The Cornerstone Value strategy, meanwhile, produced returns that were a bit lower, but with less volatility. Together, they formed an exceptional one-two punch, averaging a compound return of 17.1 percent from 1954 through 1996, easily beating the S&P 500s 11.5 percent compound return during that time while maintaining relatively low levels of risk.

That 5.6 percent spread is enormous when compounded over 42 years: If you'd invested $10,000 using the United Cornerstone approach on the first day of the period covered by O'Shaughnessy's study, you'd have had almost $7.6 million by the end of 1996 -- more than $6.6 million more than you'd have ended up with if you'd invested $10,000 in the S&P for the same period! That seems powerful evidence that stock prices do not -- as efficient market believers suggest -- move in a "random walk," but instead, as O'Shaughnessy writes, with a "purposeful stride."

The Two-Pronged O'Shaughnessy Attack

Let's start with O'Shaughnessy's value stock strategy. His Cornerstone Value approach targeted "market leaders" -- large, well-known firms with sales well above those of the average company -- because he found that these firms' stocks are considerably less volatile than the broader market. He believed that all investors-even the youngest of the bunch -- should hold some value stocks.

To find these firms, O'Shaughnessy required stocks to have a market cap greater than $1 billion, a number of shares outstanding greater than the market mean, and trailing 12-month sales that were at least 1.5 times the market mean.

Size and market position weren't enough to make a value stock attractive for O'Shaughnessy, however. Another key factor that was a great predictor of a stock's future, he found, was cash flow. My O'Shaughnessy-based value model calls for companies to have cash flows per share greater than the market average.

O'Shaughnessy found that, when it came to market leaders, another criterion was even more important than cash flow: dividend yield. He found that high dividend yields were an excellent predictor of success for large, well-known stocks (though not for smaller stocks); large market-leaders with high dividends tended to outperform during bull markets, and didn't fall as far as other stocks during bear markets. The Cornerstone Value model takes all of the stocks that pass the four aforementioned criteria (market cap, shares outstanding, sales, and cash flow) and ranks them according to dividend yield. The 50 stocks with the highest dividend yields get final approval.

The Cornerstone Growth approach, meanwhile, isn't strictly a growth approach. That's because one of the interesting things O'Shaughnessy found in his back-testing was that all of the successful strategies he studied -- even growth approaches -- included at least one value-based criterion. The value component of his Cornerstone Growth strategy was the price/sales ratio, a variable that O'Shaughnessy found -- much to the surprise of Wall Street -- was the single best indication of a stock's value, and predictor of its future.

The Cornerstone Growth model allows for smaller stocks, using a market cap minimum of $150 million, and requires stocks to have price/sales ratios below 1.5. To avoid outright dogs, the strategy also looks at a company's last five years of earnings, requiring that its earnings per share have increased each year since the first year of that period.

The final criterion of this approach is relative strength, the measure of how a stock has performed compared to all other stocks over the past year. A key part of why the growth stock model works so well, according to O'Shaughnessy, is the combination of high relative strengths and low P/S ratios. By targeting stocks with high relative strengths, you're looking for companies that the market is embracing. But by also making sure that a firm has a low P/S ratio, you're ensuring that you're not getting in too late on these popular stocks, after they've become too expensive. "This strategy will never buy a Netscape or Genentech or Polaroid at 165 times earnings," O'Shaughnessy wrote, referring to some of history's well-known momentum-driven, overpriced stocks. "It forces you to buy stocks just when the market realizes the companies have been overlooked."

To apply the RS criterion, the Cornerstone Growth model takes all the stocks that pass the three growth criteria I mentioned (market cap, earnings persistence, P/S ratio) and ranks them by RS. The top 50 stocks then get final approval.

The Growth/Value Investor model I base on O'Shaughnessy's two-pronged approach has been a solid performer since its inception back in 2003, though it's been hit hard by the market's plunge. My 10-stock O'Shaughnessy-based portfolio has gained 6.9 percent since inception, while the S&P 500 has lost about 19 percent. My 20-stock O'Shaughnessy portfolio has fared better, gaining almost 21 percent in that time.

The O'Shaughnessy-based portfolios will pick stocks using both the growth and value methods I described above. They pick whatever the best-rated stocks are at the time, regardless of growth/value distinction, meaning the portion of the portfolios made up of growth and value stocks can vary over time. Currently, the strategy is finding more buys using the growth approach, which is responsible for picking nine of the stocks in the 10-stock portfolio and 14 of the stocks in the 20-stock portfolio. Here's a look at the 10-stock portfolio's holdings (growth/value distinction in parentheses):

NPK -- National Presto Industries (Growth)
JOSB -- Jos. A. Bank Clothiers (Growth)
GWW -- W.W. Grainger, Inc. (Growth)
EZPW -- EZCorp, Inc. (Growth)
INT -- World Fuel Services Corporation (Growth )
WW -- Watson Wyatt Worldwide Inc. (Growth)
ASF -- Administaff, Inc. (Growth)
PTR -- Petrochina Company Limited (Value)
ACN -- Accenture Ltd. (Growth)
ATR -- AptarGroup (Growth)

Beyond The Numbers

O'Shaughnessy is a pure quant, but you should be aware that some of his most critical lessons are less about specific criteria and numbers than they are about the general mindset an investor must have. Perhaps more than anything else, O'Shaughnessy believes in picking a good strategy and sticking with it -- no matter what. In What Works on Wall Street, he writes that in order to beat the market, it is crucial that you stay disciplined: "[C]onsistently, patiently, and slavishly stick with a strategy, even when it's performing poorly relative to other methods."

The reason involved human emotions, which cause many investors to bail on a good approach and jump onto hot stocks or strategies that are often overhyped and overpriced. "We are a bundle of inconsistencies," he writes, "and while that may make us interesting, it plays havoc with our ability to invest our money successfully. Disciplined implementation of active strategies is the key to performance." Wise words, whether you follow O'Shaughnessy's approach or another proven method.

News about Validea Hot List Stocks

Schnitzer Steel Industries Inc. (SCHN): Hurt by the troubled global economy, Schnitzer on Thursday reported a fiscal second-quarter loss of about $7 million, or 25 cents per share, compared with a profit of $35.9 million, or $1.25 per share, in the year-ago period, the Associated Press reported. Revenue for the quarter, which ended Feb. 28, was $433.6 million, down 42 percent from the year-ago period. Analysts had expected earnings of 5 cents per share on revenue of $426.6 million, AP stated.

World Fuel Services (INT): On April 2, World Fuel announced that it had completed its previously announced acquisition of select assets of TGS Petroleum, Inc., which distributes gasoline and diesel fuel under long-term contracts to over 160 retail petroleum operators. The deal is expected to be $0.03 to $0.05 accretive to earnings in the first full year, World Fuel stated.

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

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

LUFK   |   FOSL   |   INT   |   CRDN   |   AMN   |   OIS   |   DBRN   |   SCHN   |   XOM   |   JOSB   |  

Lufkin Industries, Inc., is a supplier of oil field and power transmission products. The Company is divided into two operating segments: Oil Field and Power Transmission. Through its Oil Field segment, the Company manufactures and services artificial reciprocating rod lift equipment and related products, which are used to extract crude oil and other fluids from wells. Through its Power Transmission segment, the Company manufactures and services high-speed and low-speed increasing and reducing gearboxes for industrial applications. In January 2008, the Company announced the decision to suspend its participation in the commercial trailer markets and to develop a plan to run-out existing inventories, fulfil contractual obligations and close all trailer facilities. In March 2009, the Company acquired International Lift Systems, LLC (ILS), a manufacturer of artificial lift systems serving oil and gas companies.

Fossil, Inc. is a global design, marketing and distribution company that specializes in consumer fashion accessories. The Company's principal offerings include a line of men's and women's fashion watches and jewelry sold under licensed brands, handbags, small leather goods, belts, sunglasses, footwear, cold weather accessories and apparel. In the watch and jewelry product category, Fossil, Inc. has a diverse portfolio of owned and licensed brand names, under which its products are marketed. The Company's products are distributed globally through various distribution channels, including wholesale, export and direct to the consumer at varying price points to service the needs of its customers. The Company sells its products through diversified distribution networks that includes department stores, specialty retail locations, specialty watch and jewelry stores, owned retail and factory outlet stores, mass market stores, owned and affiliate Internet sites and through its FOSSIL catalog.

World Fuel Services Corporation is engaged in the marketing and sale of marine, aviation and land fuel products and related services on a worldwide basis. The Company operates in three segments: marine, aviation and land. In its marine segment it offers fuel and related services to maritime customers, including international container and tanker fleets, commercial cruise lines and time-charter operators. In its aviation segment, it offers fuel and related services to major commercial airlines, second and third-tier airlines, cargo carriers, regional and low-cost carriers, corporate fleets, fractional operators, private aircraft, military fleets. In its land segment, it offers fuel and related services to petroleum distributors operating in the land transportation market. In June 2008, it acquired certain assets of Texor Petroleum Company, Inc..

Ceradyne, Inc. develops, manufactures and markets advanced technical ceramic products, ceramic powders and components for defense, industrial, automotive/diesel and commercial applications. The Company's products include lightweight ceramic armor for soldiers and other military applications; ceramic industrial components for erosion and corrosion resistant applications; ceramic powders, including boron carbide, boron nitride, titanium diboride, calcium hexaboride, zirconium diboride, and fused silica, which are used in manufacture of armor and a range of industrial products and consumer products; evaporation boats for metallization of materials for food packaging and other products; reduced friction, ceramic diesel engine components; functional and frictional coatings primarily for automotive applications; translucent ceramic orthodontic brackets, and ceramic-impregnated dispenser cathodes for microwave tubes, lasers and cathode ray tubes.

Ameron International Corporation (Ameron) is a multinational manufacturer of engineered products and materials for the chemical, industrial, energy, transportation and infrastructure markets. It has three segments: Fiberglass-Composite Pipe Group, Water Transmission Group and Infrastructure Products Group. The Fiberglass-Composite Pipe Group manufactures and markets filament-wound and molded fiberglass pipe, tubing, fittings and well screens.The Water Transmission Group manufactures and supplies concrete and steel pressure pipe, concrete non-pressure pipe, protective linings for pipe and fabricated steel products, such as large-diameter wind towers. The Infrastructure Products Group consists of two operating segments, which are aggregated: the Hawaii Division and the Pole Products Division. In October 2007, Ameron acquired the business of Polyplaster, Ltda., a Brazilian fiberglass-pipe operation.

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 worldwide. The Company operates in a number of oil and gas producing regions, including the Gulf of Mexico, United States onshore, West Africa, the North Sea, Canada, South America and Southeast and Central Asia. Its customers include many of the national oil companies, major and independent oil and gas companies and other oilfield service companies. Oil States operates in three principal business segments: offshore products, tubular services and well site services. The Company's well site services segment includes the accommodations, rental tools and drilling services businesses. On February 1, 2008, Oil States purchased all of Christina Lake Enterprises Ltd., the owners of an accommodations lodge (Christina Lake Lodge) in the Conklin area of Alberta, Canada.

The Dress Barn, Inc. operates women's apparel specialty stores, principally under the names dressbarn, dressbarn woman and maurices. As of July 26, 2008, the Company operated 1,503 stores in 48 states and the District of Columbia, including 656 dressbarn Combo stores (a combination of its dressbarn and dressbarn woman brands), 677 maurices stores, 134 dressbarn stores and 36 dressbarn woman stores. Its dressbarn stores are typically operated as Combo stores, offering both dressbarn and larger-sized dressbarn woman merchandise. The Dress Barn, Inc. also operates stand-alone dressbarn and dressbarn woman stores in certain markets. Its dressbarn brands cater to 35 to 55 year-old women, sizes 4 to 24. The dressbarn stores offer in-season and casual fashion located primarily in convenient strip shopping centers in major trading and markets and surrounding suburban areas. As of July 26, 2008, the Company operated 1,503 stores in 48 states.

Schnitzer Steel Industries, Inc. is a recycler of ferrous and non-ferrous metals. The Company is a recycler of used and salvaged vehicles, and a manufacturer of finished steel products. The Company provides an end of life cycle solution for a variety of products through its vertically integrated businesses, including sale of used auto parts, procuring autobodies and other metal products and manufacturing them into finished steel products. It operates in three business segments: the Metals Recycling Business (MRB), the Auto Parts Business (APB) and the Steel Manufacturing Business (SMB). In September 2007, the Company acquired a mobile metals recycling business that provides additional sources of scrap metal to the Everett, Massachusetts facility. In February 2008, it acquired the remaining 50% equity interest in Pick-N-Pull Auto Dismantlers, LLC Nevada. In August 2008, the Company acquired a self-service used auto parts business with three locations in the Southern United States.

Exxon Mobil Corporation (Exxon Mobil) through its divisions and affiliates is engaged in exploration for, and production of, crude oil and natural gas, manufacture of petroleum products and transportation and sale of crude oil, natural gas and petroleum products. ExxonMobil is a manufacturer and marketer of commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a wide variety of specialty products. It also has interests in electric power generation facilities. Affiliates of ExxonMobil conduct research programs in support of these businesses. Exxon Mobil Corporation has several divisions and affiliates, many with names that include Exxon Mobil, Exxon, Esso or Mobil. The Company operates in three segments: Upstream, Downstream and Chemicals. In November 2008, Sunoco Logistics Partners L.P. completed the acquisition of the MagTex refined products pipeline system located in Texas, from affiliates of Exxon Mobil Corporation.

Jos. A. Bank Clothiers, Inc. (Jos. A. Bank) is a designer, retailer and direct marketer of men's tailored and casual clothing and accessories through stores, catalog and Internet. The Company sells substantially all of its products exclusively under the Jos. A. Bank label through its retail stores, as well as through the Company's nationwide catalog and Internet (www.josbank.com) operations. As of February 2, 2008, Jos. A. Bank operated 422 retail stores, which included seven outlet stores and 12 franchise stores located throughout 42 states and the District of Columbia in the United States. The Company's product are offering include the Jos. A. Bank Executive collection, as well as the Jos. A. Bank Signature and Jos. A. Bank Signature Gold collections. The Company sources substantially all of its products through third-party suppliers, manufacturers and/or agents using Jos. A. Bank designs and specifications. Jos. A. Bank operates through two segments: Stores and Direct Marketing.

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.


The names of individuals (i.e., the 'gurus') appearing in this report are for identification purposes of his methodology only, as derived by Validea.com from published sources, and are not intended to suggest or imply any affiliation with or endorsement or even agreement with this report personally by such gurus, or any knowledge or approval by such persons of the content of this report. All trademarks, service marks and tradenames appearing in this report are the property of their respective owners, and are likewise used for identification purposes only.

Validea is not registered as a securities broker-dealer or investment advisor either with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. Validea is not responsible for trades executed by users of this site based on the information included herein. The information presented on this website does not represent a recommendation to buy or sell stocks or any financial instrument nor is it intended as an endorsement of any security or investment. The information on this website is generic by nature and is not personalized to the specific situation of any individual. The user therefore bears complete responsibility for their own investment research and should seek the advice of a qualified investment professional prior to making any investment decisions.

Performance results are based on model portfolios and do not reflect actual trading. Actual performance will vary based on a variety of factors, including market conditions and trading costs. Past performance is not necessarily indicative of future results. Individual stocks mentioned throughout this web site may be holdings in the managed portfolios of Validea Capital Management, a separate asset management firm founded by Validea.com founder John Reese. Validea Capital Management, which is a separate legal entity and an SEC registered investment advisory firm, uses, in part, the strategies on the web site to select stocks for its clients.