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Executive Summary	March 2, 2012

The Economy A number of new reports are showing that the US economy continues to strengthen, though reminders remain about the headwinds it is facing. Since our last newsletter, one of the most positive signs has come from the labor market. New claims for unemployment have remained around the 350,000 mark, and the four-week moving average has reached a four-year low. The four-week average is about 10% below where it was a year ago, and more than 46% lower than it was at the height of the Great Recession. Manufacturing activity also continues to expand. The Institute for Supply Management's manufacturing index showed that the sector grew in January for the 31st straight month, though the rate of growth declined a bit. The index's employment and new orders sub-indices also decelerated a bit, but nevertheless remained comfortably in expansion territory. Industrial production, meanwhile was flat in January, according to a new report from the Federal Reserve. The report also showed that production increased much more significantly than initially thought in December, however, rising 1.0% rather than the 0.4% initially reported. A big part of the flat reading in January was due to utility output falling 2.5%, thanks to unseasonably warm temperatures. Mixed news came on the housing front. On the positive side, existing home sales rose 4.3% in January, according to the National Association of Realtors, while pending home sales rose 2.0%. But home prices, which had seemed to have been moderating, fell in December and for the 4th quarter as a whole, according to new data from the S&P/Case-Shiller Housing Indices. The national index, as well as the 10 city and 20 city composite indices, all hit their lowest points since the housing crisis started in 2006. The national index fell 3.8% in the 4th quarter compared to the 3rd quarter, while the 10 city and 20 city composite indices both fell 1.1% in December versus November. The seasonally adjusted numbers weren't as bad as the headline figures, however, with the nationwide reading falling 1.7% in the 4th quarter versus the 3rd quarter, and the 10 city and 20 city indices both falling 0.5% in December versus November. All in all, the housing market remains fragile, as most signs of hope seem to be matched with equally significant causes for concern. The other big headwind pushing against the US economy -- the European debt crisis -- also remains on investors' minds. Unemployment in the eurozone reach 10.7% in January, according to a new report, the high for the euro-era. And manufacturing activity for the region continued to contract in January, another report showed. It has now been in contraction mode since last July. Since our last newsletter, the S&P 500 returned 1.2%, while the Hot List returned 3.3%. So far in 2012, the portfolio has returned 15.7% vs. 9.3% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 161.6% vs. the S&P's 37.4% gain. The Bull Turns Three The continued improvement in the US economy is helping push stocks higher as the bull market that began in March 2009 nears its three-year mark. The third year of the bull has been a weak one, marked, of course, by some wild volatility. Through the end of February, the S&P 500 had gained just 3.5% in its third year, after gaining more than 95% over the first two years. So, as we enter the fourth year of the bull, what should we expect? Well, every bull is different, of course. But by examining the past, we can at least get an idea first of how many bulls have made it through a fourth year, and, second, how those that have made it that far have tended to fare. With that in mind, I recently looked back at all of the bull markets since 1957, the year that the S&P 500 benchmark came into its current form. The current bull is the tenth bull market since then. For the previous nine, the average duration was right at 48 months -- four years. Five of the nine lasted longer than four years, and one -- the bull that ran from mid-1962 to early-1966 -- came within about three-and-a-half months of doing so. That gives us six past bulls whose fourth years we can examine. Before doing that, however, let's take a quick look at how the current bull has fared so far compared to past bulls. In the nine previous bulls since 1957 (all of which lasted at least two years), the S&P made big gains in the first two years, on averaged jumping 52.1%. The current bull continued that trend in an even bigger way, jumping 95.1%. But post-1957 bulls that made it through a third year gained an average of just 3.9% in their third years. The worst of those third years (in the 1974-1980 bull) involved a 7.0% loss, and the best (the 1982-1987 bull) involved a 13.4% gain -- in other words, it's quite common for a bull market to start strong before stalling a bit in its third year, which is just what happened this time around. So, what tends to happen in the fourth year, for those bulls that make it that far? The six post-1957 bulls that did make it prior to this one gained an average of 13.2% -- not as dramatic as the gains of the first two years, but still very solid gains. The individual fourth years ranged from a high of 29.7% (the 1957-1961 bull) to a low of -0.4% (the 1990-2000 bull). In examining past bull markets, I also came across a New York Times article written before the fourth year of the 2002-2007 bull offered some insight into what types of stocks tend to fare best as bull markets mature. "A study of bull markets going back to 1900 by Ned Davis Research ... showed that in the first third of bull markets, stocks that pay dividends tend to trail those that don't pay them," wrote the Times' Paul Lim. "In the middle third, the dividend payers lead slightly, but in the final third, dividend payers, on average, win handily." Ned Davis Research also found that larger stocks tend to dramatically cut the advantage that smaller stocks have on them in the latter stages of bull runs. All of this isn't to say you should expect 13% to 14% returns from the market in the coming year; as I noted above, while that has been the average, the individual fourth years have returned anywhere from 0% to almost 30%. This one might even be beyond that range, on one side or the other. But I think there are two broader takeaways that are important here. The first is that just because a bull is entering its fourth year, it doesn't mean that it's getting long in the tooth and is nearing an end. Indeed, of the last five bulls, two have lasted just over five years, one lasted more than six years, and another lasted nearly ten years (the fifth, from 1987-1990, lasted about two-and-a-half years). The other key takeaway is that in most bulls, after an initial junk rally, market-wide gains become less dramatic and fundamentals tend to win out. In addition to the data from Ned Davis Research I mentioned above, James O'Shaughnessy's firm has also done some extensive work into what types of stocks fare best at various stages of bulls. It found that generally, choosing stocks based on the fundamentals it examines -- book/price ratios, shareholder yield (which is dividend yield plus share buyback yield), and momentum -- has resulted in underperformance of the broader market in the first year of bulls, and then outperformance in the second and third years. The implication is that lower-quality stocks get pounded during bear markets, and then experience a big bounce-back early in the bull that follows as fears subside; then, the bull matures and fundamentals start to win out again. While O'Shaughnessy's firm didn't include research on fourth years of bulls, it stands to reason that fundamentals would fare well in a bull that continues to mature beyond a third year. That bodes well for the Hot List as this bull's fourth year approaches. It is driven by a wide array of fundamentals, from valuation ratios like the price/book, price/sales, and price/earnings ratios to return on equity and capital to dividend yield and relative strength. Of course, there's no guarantee this bull will last another year. But given that overall valuations remain reasonable, and that the economy is continuing to show resilience, I think things are shaping up well as we approach the bull's third birthday, and I think the Hot List is well positioned to take advantage.		Editor-in-Chief: John Reese Since Inception   Hot List 161.6% S&P 500 37.4% Accuracy 57.3% Beta 1.2 YTD   Hot List 15.7% S&P 500 9.3% Since Last Issue   Hot List 3.3% S&P 500 1.2% Avg. Fundamentals   Market Cap (mil) $4,155 PE Ratio 12.4 5 Yr EPS Growth 32.4% Yield 0.7% Rel. Strength 65 Portfolio Sectors Services 4 Technology 2 Basic Materials 1 Capital Goods 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. 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." Two-In-One O'Shaughnessy has revamped his strategies over the years, most recently in his new, updated version of What Works on Wall Street (which I reviewed in the Nov. 25, 2011 edition of the Hot List). I've chosen not to tinker with my O'Shaughnessy-based models, however, given the exceptional performance they've had over the long term. The models discussed here are thus based on O'Shaughnessy's 1996 version of What Works on Wall Street. So, let's start with the value stock strategy. O'Shaughnessy's 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 very solid performer since its inception back in 2003, with my 10-stock O'Shaughnessy-based portfolio gaining 145.0% (10.9% annualized) since inception, while the S&P 500 has gained just 37.2% (3.7% annualized; figures through Feb. 28). The O'Shaughnessy-based portfolio will pick stocks using both the growth and value methods I described above. It picks whatever the best-rated stocks are at the time, regardless of growth/value distinction, meaning the portion of the portfolio made up of growth and value stocks can vary over time. For a long time, the portfolio has been leaning strongly to the growth side. But it's begun to shift back toward a neutral stance in 2012, with six of its holdings chosen using the growth method and four picked with the value model. Here's a look at the portfolio's holdings: CACI -- CACI International Inc. (Growth) ROST -- Ross Stores, Inc. (Growth) TJX -- The TJX Companies, Inc. (Growth) AZN -- AstraZeneca PLC (Value) CSTR -- CoinStar, Inc. (Growth) BP -- BP Plc (Value) PBR -- Petroleo Brasileiro (Value) MDF -- Metropolitan Health Networks (Growth) STO -- Statoil ASA (Value) ABC -- AmerisourceBergen Corp. (Growth) Not Just 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 Tech Data Corp. (TECD): On Feb. 28, Tech Data said fourth-quarter net income fell 30% thanks to the cost of closing down its operations in Brazil and Colombia, the Associated Press reported. Excluding the costs of shutting down its Brazil and Colombia operations, earnings per share were $1.75, which beat analysts' expectations of $1.59 per share. Revenue was about flat at $7.11 billion; analysts had expected $7.16 billion, AP reported. Ternium SA (TX): Ternium reported net income attributable to shareholders of $104.7 million, or 53 cents per American depositary share, up from $77.5 million, or 39 cents, a year earlier, according to Bloomberg. The earnings of 53 cents per ADR included a 25 cent foreign-exchange loss, a big reason why the firm fell short of analysts estimates of 59 cents a share, Bloomberg reported. Earnings before interest, taxes, depreciation and amortization rose to $369.6 million, which topped analysts' estimates of $315.8 million. Ternium also said it expects operating income to be lower this quarter than it was last quarter, with shipments remaining "relatively stable" and costs rising. 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 CACI CACI INTERNATIONAL INC Software & Programming 83 FRX FOREST LABORATORIES, INC. Biotechnology & Drugs 81 BIG BIG LOTS, INC. Retail (Specialty) 73 BPI BRIDGEPOINT EDUCATION, INC. Schools 69 CSTR COINSTAR, INC. Recreational Activities 68 NOC NORTHROP GRUMMAN CORPORATION Aerospace & Defense 67 ARO AEROPOSTALE, INC. Retail (Apparel) 57 ASPS ALTISOURCE PORTFOLIO SOLUTIONS S.A. Consumer Financial Services 57 TX TERNIUM S.A. (ADR) Iron & Steel 34 TECD TECH DATA CORP Computer Hardware 15 Ticker Market Cap Date Added Start Price Current Price Return CACI $1,575 2/17/2012 $59.21 $59.45 0.4% FRX $8,675 9/2/2011 $33.10 $32.67 -1.3% BIG $2,919 2/17/2012 $44.12 $44.49 0.8% BPI $1,241 3/18/2011 $18.02 $24.04 33.4% CSTR $1,887 2/17/2012 $56.23 $60.97 8.4% NOC $15,211 2/17/2012 $60.08 $60.21 0.2% ARO $1,485 10/28/2011 $14.30 $18.39 28.6% ASPS $1,489 1/20/2012 $50.64 $63.60 25.6% TX $4,833 9/2/2011 $24.48 $24.11 -1.5% TECD $2,238 1/20/2012 $52.33 $54.23 3.6%

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 CACI   |   FRX   |   BIG   |   BPI   |   CSTR   |   NOC   |   ARO   |   ASPS   |   TX   |   TECD   |   CACI INTERNATIONAL INC Profile Strategy: P/E/Growth Investor Based on: Peter Lynch CACI International Inc (CACI) along with its wholly owned subsidiaries and joint ventures, is an international information systems, high technology services, and professional services corporation. It delivers professional services and information technology solutions to its clients, primarily the United States government. Other customers include state and local governments, commercial enterprises and agencies of foreign governments. The Company operates two units: domestic operations and international operations. CACI delivers professional services and information technology (IT) solutions to its clients. Its services are primarily targeted to the areas of defense, intelligence, homeland security and IT modernization. In November 2010, the Company acquired TechniGraphics, Inc. and Applied Systems Research Inc. In July 2011, it acquired Pangia Technologies, LLC. In September 2011, CACI acquired Paradigm Holdings, Inc. In October 2011, the Company acquired Advanced Programs Group, LLC. Analysis Guru Score: 72% DETERMINE THE CLASSIFICATION: CACI is considered a "True Stalwart", according to this methodology, as its earnings growth of 16.37% lies within a moderate 10%-19% range and its annual sales of $3,774 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. CACI is attractive if CACI can hold its own during a recession. INVENTORY TO SALES: [FAIL] When inventories increases faster than sales, it is a red flag. Unfortunately we do not have sufficient data for CACI to evaluate this criterion. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for CACI (0.66), 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. CACI's EPS ($5.52) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for CACI (50.41%) to be mediocre. If the Debt/Equity ratio is this high, the other ratios and financial statistics for CACI 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 CACI (11.37%) 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 CACI (-26.46%) 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.   FOREST LABORATORIES, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Forest Laboratories, Inc. (Forest) develops, manufactures and sells branded forms of ethical drug products, most of which requires a physician's prescription. The Company also focuses on the development and introduction of new products, including products developed in collaboration with licensing partners. Its products include those developed by the Company and those acquired from other pharmaceutical companies and integrated into its marketing and distribution systems. The Company's principal products include Lexapro, Namenda, Bystolic, Savella and Teflaro. On April 13, 2011, the Company acquired Clinical Data Inc. (Clinical Data), a specialty pharmaceutical company. Analysis Guru Score: 98% DETERMINE THE CLASSIFICATION: FRX is considered a "True Stalwart", according to this methodology, as its earnings growth of 14.50% lies within a moderate 10%-19% range and its annual sales of $4,669 million are greater than the multi billion dollar level. This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. FRX is attractive if FRX can hold its own during a recession. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for FRX was 11.16% last year, while for this year it is 10.21%. Since inventory to sales has decreased from last year by -0.94%, FRX passes this test. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for FRX (0.57), based on the average of the 3, 4 and 5 year historical eps growth rates, is O.K. EARNINGS PER SHARE: [PASS] The EPS for a stalwart company must be positive. FRX's EPS ($3.97) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for FRX (0.00%) to be wonderfully low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for FRX (8.63%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [BONUS PASS] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for FRX (43.99%) is considered favorable.   BIG LOTS, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Big Lots, Inc. is a closeout retailer. The Company's merchandising categories include Consumables, Furniture, Home, Hardlines, Seasonal, and Other. The Consumables category includes the food, health and beauty, plastics, paper, chemical, and pet departments. The Furniture category includes the upholstery, mattresses, ready-to-assemble, and case goods departments. Case goods consist of bedroom, dining room, and occasional furniture. The Home category includes the domestics, stationery, and home decorative departments. The Hardlines category includes the electronics, appliances, tools, and home maintenance departments. The Seasonal category includes the lawn and garden, Christmas, summer, and other holiday departments. The Other category includes the toy, jewelry, infant accessories, and apparel departments. At January 29, 2011, it operated a total of 1,398 stores in 48 states. In July 2011, the Company acquired Liquidation World Inc. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider BIG a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (16.33) relative to the growth rate (45.32%), 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 BIG (0.36) 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. BIG, whose sales are $5,051.6 million, needs to have a P/E below 40 to pass this criterion. BIG's P/E of (16.33) 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 BIG is 45.3%, 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 BIG (38.00%) to be normal (equity is approximately twice debt). 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 BIG (5.93%) 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 BIG (-3.66%) 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.   BRIDGEPOINT EDUCATION, INC. Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Bridgepoint Education, Inc. (Bridgepoint) is a provider of postsecondary education services. The Company's wholly owned subsidiaries, Ashford University and the University of the Rockies, are regionally accredited academic institutions that offer associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences. These institutions deliver programs online, as well as at its traditional campuses located in Clinton, Iowa, and Colorado Springs, Colorado. As of December 31, 2010, it offered approximately 1,345 courses, 71 degree programs and 134 specializations. As of December 31, 2010, it had 77,892 students enrolled in its institutions, 99% of whom were attending classes online. Analysis Guru Score: 83% 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. BPI's profit margin of 19.48% passes this test. RELATIVE STRENGTH: [FAIL] 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. Although BPI's relative strength of 85 is below the acceptable level, yet it is very close. Keep an eye on the stock as it could move into the acceptable range. 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 BPI (27.87% for EPS, and 27.16% for Sales) are good enough to pass. INSIDER HOLDINGS: [PASS] BPI's insiders should own at least 10% (they own 66.22% ) of the company's outstanding shares which is extremely attractive since the minimum requirement is 10%. A high percentage indicates that the insiders are confident that the company will do well. 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. BPI's free cash flow of $2.74 per share passes this test. PROFIT MARGIN CONSISTENCY: [FAIL] The profit margin in the past must be consistently increasing. The profit margin of BPI has been inconsistent in the past three years (Current year: 17.89%, Last year: 10.37%, Two years ago: 12.11%), 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: [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 BPI's case. CASH AND CASH EQUIVALENTS: [PASS] BPI's level of cash $279.1 million passes this criteria. If a company is a cash generator, like BPI, 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 BPI was 9.52% last year, while for this year it is 8.19%. Since the AR to sales is decreasing by -1.32% the stock passes this criterion. LONG TERM DEBT/EQUITY RATIO: [PASS] BPI'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 (BPI's is 0.22), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. BPI passes this test. The following criteria for BPI are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] BPI has not been significantly increasing the number of shares outstanding within recent years which is a good sign. BPI currently has 56.0 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. BPI's sales of $904.5 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: [PASS] BPI passes the Daily Dollar Volume (DDV of $7.9 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. BPI with a price of $24.04 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] BPI's income tax paid expressed as a percentage of pretax income this year was (41.42%) and last year (42.73%) 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.   COINSTAR, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Coinstar, Inc. (Coinstar) is a provider of automated retail solutions, which offers convenient products and services. the Company's offerings in automated retail include its Redbox business, where consumers can rent or purchase movies and video games from self-service kiosks (Redbox segment), and its Coin business, where consumers can convert their coin to cash or stored value products at self-service coin counting kiosks (Coin segment). Its New Ventures business (New Ventures segment) is focused on identifying, evaluating, building, and developing self-service concepts in the marketplace. On June 9, 2011, the Company completed the sale transaction of the Money Transfer Business to Sigue Corporation (Sigue). Analysis Guru Score: 92% 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. CSTR's P/E is 16.88, 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. CSTR's revenue growth is 41.92%, while it's earnings growth rate is 44.45%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, CSTR passes this criterion. SALES GROWTH RATE: [PASS] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (33.2%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (22.5%) of the current year. Sales growth for the prior must be greater than the latter. For CSTR this criterion has been met. The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria. CURRENT QUARTER EARNINGS: [PASS] The first of these criteria is that the current EPS be positive. CSTR's EPS ($1.00) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. CSTR's EPS for this quarter last year ($0.68) 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. CSTR's growth rate of 47.06% 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 CSTR is 22.22%. This should be less than the growth rates for the 3 previous quarters, which are 53.33%, 151.28%, and 78.79%. CSTR 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, 94.07%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 47.06%, (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 CSTR is 47.1%, 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, 47.06% must be greater than or equal to the historical growth which is 44.45%. CSTR would therefore pass this test. EARNINGS PERSISTENCE: [PASS] Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. CSTR, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.82, 1.10, 1.31, 2.03 and 3.61, passes 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. CSTR's long-term growth rate of 44.45%, based on the average of the 3, 4 and 5 year historical eps growth rates, 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. CSTR's Debt/Equity (74.78%) is not considered high relative to its industry (182.55%) 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 CSTR, this criterion has not been met (insider sell transactions are 49, while insiders buying number 35). 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.   NORTHROP GRUMMAN CORPORATION Profile Strategy: Value Investor Based on: Benjamin Graham Northrop Grumman Corporation (Northrop Grumman) provides products, services, and integrated solutions in aerospace, electronics, information and services to its global customers. As of December 31, 2011, the Company operated in four segments: Aerospace Systems, Electronic Systems, Information Systems and Technical Services. The Company conducts most of its business with the United States Government, principally the Department of Defense (DoD) and intelligence community. It also conducts business with local, state, and foreign Governments and domestic and international commercial customers. Effective as of March 31, 2011, the company completed the spin-off of Huntington Ingalls Industries, Inc. (HII). HII operates the Company's former shipbuilding business. Analysis Guru Score: 71% SECTOR: [PASS] NOC 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. NOC's sales of $26,412.0 million, based on trailing 12 month sales, pass this test. CURRENT RATIO: [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. NOC's current ratio of 1.26 fails the test. LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for NOC is $3,935.0 million, while the net current assets are $1,611.0 million. NOC fails 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. NOC's EPS growth over that period of 183.5% passes the EPS growth test. P/E RATIO: [PASS] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. NOC's P/E of 9.90 (using the 3 year PE) passes this test. PRICE/BOOK RATIO: [PASS] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. NOC's Price/Book ratio is 1.48, while the P/E is 9.90. NOC passes the Price/Book test.   AEROPOSTALE, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Aeropostale, Inc. is a mall-based, specialty retailer of casual apparel and accessories, principally targeting 14 to 17 year-old young women and men through its Aeropostale stores and 7 to 12 year-old kids through its P.S. from Aeropostale stores. The Company designs, sources, markets and sells all of its own merchandise. P.S. from Aeropostale products can be purchased in P.S. from Aeropostale stores, in certain Aeropostale stores, including its new Times Square store in New York City and online at www.ps4u.com. As of January 29, 2011, it operated 965 Aeropostale stores, consisting of 906 stores in 49 states and Puerto Rico, 59 stores in Canada, as well as 47 P.S. from Aeropostale stores in 13 states. In addition, pursuant to a Licensing Agreement, one of its international licensees operated 10 Aeropostale stores in the United Arab Emirates as of January 29, 2011. During March 2011, it announced that it had signed a second licensing agreement. Analysis Guru Score: 100% 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. ARO's P/S of 0.63 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. ARO's Debt/Equity of 0.00% is exceptional, thus passing the test. PRICE/RESEARCH RATIO: [PASS] This methodology considers companies in the Technology and Medical sectors to be attractive if they have low Price/Research ratios. ARO 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 ARO At this Point Is ARO a "Super Stock"? YES 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.ARO's P/S ratio of 0.63 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%. ARO's inflation adjusted EPS growth rate of 27.27% 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. ARO's free cash per share of 1.76 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. ARO, whose three year net profit margin averages 9.28%, passes this evaluation.   ALTISOURCE PORTFOLIO SOLUTIONS S.A. Profile Strategy: Growth Investor Based on: Martin Zweig Altisource Portfolio Solutions S.A.( Altisource), together with its subsidiaries, is a provider of services focused on technology-enabled, knowledge-based functions related to real estate and mortgage portfolio management, asset recovery and customer relationship management. The Company operates in three segments: Mortgage Services, Financial Services and Technology Services. In April 2011, the Company acquired Springhouse, LLC (Springhouse). In July 2011, the Company acquired the assembled workforce of a sub-contractor (Tracmail) in India. 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. ASPS's P/E is 22.81, 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. ASPS's revenue growth is 35.11%, while it's earnings growth rate is 78.64%, based on the average of the 3, 4 and 5 year historical eps growth rates. Sales growth is not at least 85% of EPS growth so the initial part of this criteria is not met, however, since both sales growth and eps growth are greater than 30%, that requirement is waived and the company passes this test. SALES GROWTH RATE: [PASS] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (44.3%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (41.5%) of the current year. Sales growth for the prior must be greater than the latter. For ASPS this criterion has been met. The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria. CURRENT QUARTER EARNINGS: [PASS] The first of these criteria is that the current EPS be positive. ASPS's EPS ($1.02) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. ASPS's EPS for this quarter last year ($0.64) 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. ASPS's growth rate of 59.38% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [FAIL] 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 ASPS is 39.32%. This should be less than the growth rates for the 3 previous quarters which are 128.00%, -16.13% and 81.08%. ASPS does not pass this test, which means that it does not have 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, 41.94%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 59.38%, (versus the same quarter one year ago) then the stock passes. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [FAIL] The EPS growth rate for the current quarter, 59.38% must be greater than or equal to the historical growth which is 78.64%. Since this is not the case ASPS would therefore fail this test. EARNINGS PERSISTENCE: [PASS] Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. ASPS, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.28, 0.38, 1.07, 1.88 and 2.77, passes 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. ASPS's long-term growth rate of 78.64%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test. INSIDER TRANSACTIONS: [PASS] A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For ASPS, this criterion has not been met (insider sell transactions are 6, while insiders buying number 13). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion.   TERNIUM S.A. (ADR) Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Ternium SA is a steel company in Latin America that manufactures and processes flat and long steel products for the construction, home appliances, capital goods, container, food, energy and automotive industries. The Company operates in three segments: Flat Steel Products, comprising the manufacturing and marketing of hot rolled coils and sheets, cold rolled coils and sheets, tin plate, welded pipes, hot dipped galvanized and electro-galvanized sheets and pre-painted sheets; Long Steel Products, comprising the manufacturing and marketing of billets (steel in its basic, semi-finished state), wire rod and bars; Others, comprising mainly pig iron, pellets and pre-engineered metal buildings. During the year ended December 31, 2010, Flat Steel Products accounted to 86% of the Company's overall revenues. Approximately 57% of Ternium's sales were generated in North America and 41% in South and Central America. Analysis Guru Score: 80% PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Smokestack (cyclical) companies with a Price/Sales ratio between .4 and .8 represent good values according to this methodology. TXpasses this test as its P/S of 0.53 based on trailing 12 month sales, falls within the "good values" range for cyclical companies. TOTAL DEBT/EQUITY RATIO: [PASS] Less debt equals less risk according to this methodology. TX's Debt/Equity of 34.57% is acceptable, thus passing the test. PRICE/RESEARCH RATIO: [PASS] This methodology considers companies in the Technology and Medical sectors to be attractive if they have low Price/Research ratios. TX is neither a Technology nor Medical company. Therefore the Price/Research ratio is not available and, hence, not much emphasis should be placed on this particular variable. PRELIMINARY GRADE: Some Interest in TX At this Point Is TX a "Super Stock"? NO PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-Smokestack(non-cyclical) companies with a Price/Sales ratio between .75 and 1.5 are good values. Otherwise, Smokestack(cyclical) companies with a Price/Sales ratio between .4 and .8 represent good values. TX's P/S ratio of 0.53 falls within the "good values " range for cyclical industries and is considered attractive. LONG-TERM EPS GROWTH RATE: [FAIL] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. TX's inflation adjusted EPS growth rate of 8.45% fails the test. FREE CASH PER SHARE: [FAIL] This methodology looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses. This is based on the premise that companies without cash will soon be out of business. TX's free cash per share of -0.52 fails this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [PASS] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. TX, whose three year net profit margin averages 9.50%, passes this evaluation.   TECH DATA CORP Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Tech Data Corporation (Tech Data) is a distributor of technology products. 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. In February 2011, the Company announced that it had created two new business divisions: HP Solutions Division And Networking Solutions Group. On October 1, 2010, the Company completed the acquisition of Triade Holding B.V. (Triade). On October 1, 2010, Brightstar Europe Limited (BEL), a consolidated joint venture between the Company and Brightstar Corporation, acquired Mobile Communication Company B.V. and Mobile Communications Company Belgium N.V. In October 2011, Mensch und Maschine Software SE sold its complete distribution business to the Company. 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 $2,238 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 1.85, 2.28, 3.54, 4.36 and 4.66, 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 0.08, 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.   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 INT WORLD FUEL SERVICES CORPORATION Oil & Gas Operations 70 TEO TELECOM ARGENTINA S.A. (ADR) Communications Services 66 TJX THE TJX COMPANIES, INC. Retail (Department & Discount) 62 AAP ADVANCE AUTO PARTS, INC. Retail (Specialty) 60 LKQX LKQ CORPORATION Auto & Truck Parts 55 GTAT GT ADVANCED TECHNOLOGIES INC Semiconductors 54 LULU LULULEMON ATHLETICA INC. Retail (Apparel) 53 DFS DISCOVER FINANCIAL SERVICES Consumer Financial Services 51 ROST ROSS STORES, INC. Retail (Apparel) 49 KLIC KULICKE AND SOFFA INDUSTRIES INC. Semiconductors 48

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