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Executive Summary	March 15, 2013

The Economy As the Dow Jones Industrial Average continues to make new all-time highs and the S&P 500 edges closer to its record high, their gains are being backed by some solid improvement in the U.S. economy. In February, for example, the private sector added a net of 246,000 jobs, according to the Labor Department, over 100,000 more than were added in January. That pushed the unemployment rate down to 7.7% -- the lowest it's been since December 2008. That's still too high for a healthy economy, as is the 14.3% rate for the broader "U-6" measure of unemployment, which also takes into account workers who have given up looking for a job and those working part-time who wish to work full-time. (That figure fell 0.1% in February.) Still, we're definitely seeing continued gains in the labor market. Improvement also came in the weekly unemployment claims data. New claims fell more than 4% since our last newsletter, and are more than 7% below their year-ago level. The seasonally adjusted 332,000 claims was the second-lowest the figure has been since mid-January 2008. Continuing claims have also fallen since our last newsletter, and are now more than 10% below their year-ago level. Good news also came from the manufacturing sector. Manufacturing activity expanded for the third straight month in February, according to the Institute for Supply Management, and it did so at its fastest pace since June 2011. The group's new orders sub-index reached its highest level since April 2011, a sign that production could continue to be strong in coming months. ISM's service sector index, meanwhile, stayed well in expansion territory in February, the 38th straight month it has done so. Its new orders sub-index also made a nice jump, and its employment sub-index stayed well in expansion territory. Consumer data continues to be quite volatile, thanks to the late 2012 push by many companies to pay dividends out early in order to distribute them before the fiscal cliff tax hikes went into effect. That helped push personal income and the personal savings rate much higher in December, but created a bounce back effect in January. According to the Bureau of Economic Analysis, disposable personal income decreased 3.6% in January. Excluding seasonal factors, however, like the dividend payouts, the decrease was just 0.3%. The seasonal factors have also had a big impact on the personal savings rate, which in December had jumped to 6.4%, its highest level in about three years. In January, it fell to 2.4%, the lowest it's been since the start of the Great Recession. It's hard to draw too much of a conclusion from the December and January figures, however, given the seasonal factors. Consumers have apparently picked up their spending more recently, with retail and food service sales jumping 1.1% in February, according to a new Census Bureau report. That was, however, just 1.2% above the February 2012 level, a much smaller year-over-year gain than was seen in January, when the year-over-year increase was more than 6%. Since our last newsletter, the S&P 500 returned 3.2%, while the Hot List returned 3.2%. So far in 2013, the portfolio has returned 10.3% vs. 9.6% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 199.2% vs. the S&P's 56.3% gain. The Trouble With Timing As stocks continue to head higher and higher, it gets more and more tempting to try to call a market top. After all, the last time stocks were this high, few investors realized they were about to be hit by one of the sharpest, most painful bear markets of their lifetime. It's thus natural to think back on those events and fear that similar pain is going to follow again this time. That, however, is a very, very dangerous game, and a couple recent studies showed just how difficult -- and detrimental to your portfolio -- trying to time the market can be. One came from Dalbar, Inc., the research group that tracks how well mutual fund investors actually do compared to the funds in which they invest. Dalbar has found that investors have a strong tendency to make bad market timing decisions, jumping into overheated markets and selling when prices are low, and the latest data from the firm is sobering. Over the past 20 years through December, the average individual stock mutual fund investor earned 4.25% per year, while the S&P 500 returned 8.21%, The New York Times reported. A $10,000 investment at 4.25% annualized would be worth $22,989 after 20 years; at 8.2%, it would be worth $48,456 after 20 years. The gap in performance is due in part to the fees mutual funds charge, but also to investors making emotional decisions to jump in and out of the market at inopportune times. "They get excited or they panic, and they hurt themselves," Dalbar President Louis S. Harvey said. His advice: Unless you can time the market (and who can?), Harvey says to "make sure that you select a reasonably defensive asset allocation strategy first," adding, "The most important thing, once you have a strategy is to find a way to actually stick with it." The other study came from Mark Hulbert, who for decades has been monitoring the performance of dozens of investment newsletters through his Hulbert Financial Digest. In a recent Barron's column, Hulbert looked at returns since October 2007 of the more than 100 market-timing newsletters and web-based advisors monitored by HFD, looking to see who correctly called both the market top in 2007 and the market bottom in 2009. No one called the top and bottom on the exact days, he found, but that's an incredibly tough standard. So he used a relaxed standard -- a much relaxed standard -- and he found that the results were still very poor. Hulbert considered an advisor to have called both the top and bottom if they had decreased their allocation to stocks by at least 25% within a month of the October 9, 2007 top, and increased their stock allocation by at least 25% within a month of the March 9, 2009 bottom. He found that of 140 strategies tracked by HFD, only 15 had significantly lower equity exposure a month after the 2007 top. Of those, just six had markedly higher equity exposure a month after the bottom. "In other words," Hulbert said, "96% of the market-timing strategies monitored by the HFD failed to jump over these seemingly modest hurdles." What's more, the six that did meet the timing criteria had other issues. Each gave a number of other buy and sell signals in the intervening periods "that had the unfortunate effect of frittering away the gains they otherwise would have realized if they had left well enough alone," Hulbert says. He did say that about 25% of the market-timers he tracks have beaten the market since stocks hit their 2007 high, but "none of them did so by getting out at or near the top and getting in at or near the bottom." Like Harvey, Hulbert also says discipline is crucial when following a market-timing approach. And he says investors shouldn't expect they'll come close to timing market tops and bottoms correctly. "Realistic expectations are crucial," he says. "Without them, you are more likely to try something rash and end up losing even more money. For example, you should give up hoping to both catch anything like the top and the subsequent bottom." I agree completely. There are some effective market-timing strategies out there, and if you do feel strongly about using one, a few words of advice: Make sure the approach you choose is quantitative in nature; do not try to jump in and out of the market based on hunches or guesswork. In addition, the approach should have a proven, long-term track record of success. And, most importantly, once you find that approach, stick with it, no matter how rocky the road gets in the short term. For most investors, however, market-timing is best left alone. As Warren Buffett noted in his latest letter to Berkshire Hathaway shareholders, "Periodic setbacks will occur [for the market], yes, but investors and managers are in a game that is heavily stacked in their favor. Since the basic game is so favorable, Charlie [Munger, his partner at Berkshire] and I believe it's a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of 'experts,' or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it." The Hot List, as always, will continue to stay in the game. While others will try to jump in and out of the market in an impossible quest to catch market tops and market bottoms, the Hot List will keep focusing on strong companies with attractively valued shares. On today's regularly scheduled rebalancing, for example, the portfolio is adding four new stocks, including Royal Dutch Shell. Though it has taken in nearly a half-trillion dollars in sales over the past 12 months, sports a 15% return on equity, and has a 5.2% dividend yield, Shell trades at exceptionally cheap valuations: just 7.8 times trailing 12-month earnings, 8.2 times projected 12-month earnings, 0.46 times TTM sales, and 1.1 times book value. It seems that lingering fears of an economic catastrophe in Europe that has not materialized are keeping investors away from very attractively priced stock in a solid company. Those types of stocks -- good companies whose shares are trading on the cheap -- are what the Hot List portfolio has focused and will continue to focus on. In the short term, as emotions drive investors' actions, that can lead to some big ups and downs. But over the long term (and the long term is the only thing you should be concerned about), value wins out more often than not, and stocks follow the businesses behind them. If you focus on good companies with cheap shares and stay disciplined, you should produce some very strong long-term returns, without ever having to call a single market top or bottom.		Editor-in-Chief: John Reese Since Inception   Hot List 199.2% S&P 500 56.3% Accuracy 56.4% Beta 1.2 YTD   Hot List 10.3% S&P 500 9.6% Since Last Issue   Hot List 3.2% S&P 500 3.2% Avg. Fundamentals   Market Cap (mil) $32,538 PE Ratio 9.2 5 Yr EPS Growth 21.6% Yield 1.9% Rel. Strength 59 Portfolio Sectors Services 5 Energy 2 Financial 1 Conglomerates 1 Consumer Cyclical 1
Advertisement Validea Capital Management - Private Portfolio Management Based on Strategies of Legends Are you looking for an alternative to your underperforming mutual funds or financial advisor? Click here to download Validea Capital's investment kit and learn more about the firm's guru-based portfolios. Get More Information on Validea Capital! ** Validea Capital Management is a separate investment advisory firm managed by Validea.com founder John Reese. Thre information above in not intended as personal investment advice and should not be interpreted as such. The Fallen As we rebalance the Validea Hot List, 4 stocks leave our portfolio. These include: Questcor Pharmaceuticals Inc (QCOR), Main Street Capital Corporation (MAIN), Western Digital Corp. (WDC) and Ross Stores, Inc. (ROST). The Keepers 6 stocks remain in the portfolio. They are: The Tjx Companies, Inc. (TJX), World Acceptance Corp. (WRLD), Usana Health Sciences, Inc. (USNA), Lukoil (Adr) (LUKOY), Lear Corporation (LEA) and Starz (STRZA). The Newbies We are adding 4 stocks to the portfolio. These include: Jos. A. Bank Clothiers Inc (JOSB), Telecom Argentina S.a. (Adr) (TEO), Royal Dutch Shell Plc (Adr) (RDS.A) and Dollar Tree, Inc. (DLTR). Portfolio Changes Additions   JOS. A. BANK CLOTHIERS INC JOSB TELECOM ARGENTINA S.A. (ADR) TEO ROYAL DUTCH SHELL PLC (ADR) RDS.A DOLLAR TREE, INC. DLTR Deletions   QUESTCOR PHARMACEUTICALS INC QCOR MAIN STREET CAPITAL CORPORATION MAIN WESTERN DIGITAL CORP. WDC ROSS STORES, INC. ROST Newcomers to the Validea Hot List Royal Dutch Shell PLC (RDS.A): This Netherlands-based energy giant is one of the largest firms in the world, with a $213 billion market cap and close to half a trillion dollars in sales over the past 12 months. Its shares are cheap -- they trade for just 7.8 times trailing 12-month earnings -- and come with a 5.2% dividend yield. Fundamentals like those help it earn strong interest from my Peter Lynch- and James O'Shaughnessy-based models. To read more about the stock, see the "Detailed Stock Analysis" section below. Jos. A. Bank Clothiers (JOSB): This Maryland-based men's dress and casual apparel retailer ($1.2 billion market cap) has had some very successful stints in the Hot List over the years, and it's back again. The firm took some hits recently when it announced it will likely fail to increase annual EPS in the 2012 fiscal year for the first time in a decade, but that's made it a big bargain, according to my models. My Warren Buffet-based model, for one, gives it very high marks. For more on the stock, see the "Detailed Stock Analysis" section below. Telecom Argentina S.A. (TEO): This Argentine firm ($2.4 billion market cap) also offers cellular services in Paraguay. It is majority-owned by Nortel SA. Telecom Argentina's shares took a big hit after its mixed late-February earnings report, but quickly rebounded and have made up all of their lost ground. Both my Kenneth Fisher- and Peter Lynch-based model think it has more room to run, and give it very high ratings. To read more about the stock, see the "Detailed Stock Analysis" section below. Dollar Tree, Inc. (DLTR): This Virginia-based company sells a variety of products (food, household goods, toys, and more) -- all at the price of $1 or less. It actually increased sales and earnings throughout the "Great Recession", and has continued to do so since the recession ended. Dollar Tree gets strong interest from my Peter Lynch- and Warren Buffett-based models. For more on the stock, see the "Detailed Stock Analysis" section below. News about Validea Hot List Stocks The TJX Companies Inc. (TJX): TJX said that consolidated same-store sales increased 1% year over year in the four-week period ending March 2, Zacks Equity Research reported. Total sales were up 7% to $1.8 billion. Severe winter storms in some parts of the U.S. and Canada negatively impacted sales in the first part of the month, but comparable store sales exceeded management's expectations. Main Street Capital Corporation (MAIN): Main Street announced net investment income per share of $0.56 for the fourth quarter, up from $0.45 a year earlier. For the year, net investment income per share was $2.01, up from $1.69 in 2011. The firm also said it would be increasing its dividend payout by 11%. Shares moved upward sharply on the news, gaining 7% since our last newsletter (through March 12). The portfolio is taking the profit and selling the position on today's rebalancing. The Next Issue In two weeks, we will publish another issue of the Hot List, at which time we will take a closer look at my strategies and investment approach. If you have any questions, please feel free to contact us at hotlist@validea.com.

Current Portfolio Ticker Company Name Industry Guru Score LUKOY LUKOIL (ADR) Oil & Gas - Integrated 100 USNA USANA HEALTH SCIENCES, INC. Conglomerates 85 STRZA STARZ Broadcasting & Cable TV 69 TEO TELECOM ARGENTINA S.A. (ADR) Communications Services 65 LEA LEAR CORPORATION Auto & Truck Parts 62 RDS.A ROYAL DUTCH SHELL PLC (ADR) Oil & Gas - Integrated 61 WRLD WORLD ACCEPTANCE CORP. Consumer Financial Services 60 DLTR DOLLAR TREE, INC. Retail (Department & Discount) 55 JOSB JOS. A. BANK CLOTHIERS INC Retail (Apparel) 51 TJX THE TJX COMPANIES, INC. Retail (Apparel) 43 Ticker Market Cap Date Added Start Price Current Price Return LUKOY $55,133 2/15/2013 $66.54 $65.10 -2.2% USNA $620 12/21/2012 $33.83 $45.96 35.9% STRZA $2,513 2/15/2013 $18.74 $20.69 10.4% TEO $2,441 3/15/2013 TBD $15.40 TBD LEA $5,360 2/15/2013 $55.41 $56.01 1.1% RDS.A $213,967 3/15/2013 TBD $66.58 TBD WRLD $975 2/15/2013 $78.66 $79.01 0.4% DLTR $10,215 3/15/2013 TBD $44.96 TBD JOSB $1,196 3/15/2013 TBD $42.81 TBD TJX $32,962 10/26/2012 $40.73 $45.20 11.0%

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 LUKOY   |   USNA   |   STRZA   |   TEO   |   LEA   |   RDS.A   |   WRLD   |   DLTR   |   JOSB   |   TJX   |   LUKOIL (ADR) Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher NK Lukoil OAO (Neftyanaya Kompaniya LUKOIL OAO or NK LUKOIL OJSC) is a Russia-based integrated oil and gas company. The Company is engaged in the business of oil exploration, production, refining, marketing and distribution. It is an owner of refineries, gas processing, petrochemical plants and gas stations network located in Russia, Eastern and Western Europe, as well as Africa. The Company's petroleum products are sold in the Russian Federation, the Commonwealth of Independent States (CIS) countries, Eastern and Western Europe, Asia and the United States. NK Lukoil OAO operates through numerous subsidiaries and affiliated companies. As of December 31, 2011, the Company's major shareholder was ING Bank (Eurasia) ZAO with a stake of 75.93%. Analysis Guru Score: 90% PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical (non-Smokestack) companies with Price/Sales ratios below 0.75 are tremendous values and should be sought. LUKOY's P/S of 0.40 based on trailing 12 month sales, is below 0.75 which is considered quite attractive. It passes this methodology's P/S ratio test with flying colors. TOTAL DEBT/EQUITY RATIO: [PASS] Less debt equals less risk according to this methodology. LUKOY's Debt/Equity of 9.04% is acceptable, thus passing the test. PRICE/RESEARCH RATIO: [PASS] This methodology considers companies in the Technology and Medical sectors to be attractive if they have low Price/Research ratios. LUKOY is neither a Technology nor Medical company. Therefore the Price/Research ratio is not available and, hence, not much emphasis should be placed on this particular variable. PRELIMINARY GRADE: Some Interest in LUKOY At this Point Is LUKOY a "Super Stock"? NO PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical(non-Smokestack) companies with Price/Sales ratios below .75 are tremendous values and should be sought.LUKOY's P/S ratio of 0.40 is below .75 which is considered extremely attractive. It passes this methodology's P/S ratio test with flying colors. LONG-TERM EPS GROWTH RATE: [FAIL] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. LUKOY's inflation adjusted EPS growth rate of 7.86% fails the test. FREE CASH PER SHARE: [PASS] This methodology looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses. This is based on the premise that companies without cash will soon be out of business. LUKOY's free cash per share of 4.65 passes this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [PASS] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. LUKOY, whose three year net profit margin averages 8.08%, passes this evaluation.   USANA HEALTH SCIENCES, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy USANA Health Sciences, Inc. develops and manufactures science-based nutritional and personal care products. The Company has operations in 15 markets worldwide, where it distributes and sells its products by way of direct selling. The Company reports operations in two geographic regions: North America and Asia Pacific, which is further divided into three sub-regions; Southeast Asia/Pacific, Greater China, and North Asia. North America includes the United States, Canada, Mexico, and direct sales from the United States to the United Kingdom and the Netherlands. Southeast Asia/Pacific includes Australia, New Zealand, Singapore, Malaysia, and the Philippines; Greater China includes Hong Kong, Taiwan and China; and North Asia includes Japan and South Korea. The Company's customer base consists of two types of customers: Associates and Preferred Customers. As of December 31, 2011, the Company had 222,000 active Associates and 64,000 active Preferred Customers worldwide. Analysis Guru Score: 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. USNA, with a market cap of $620 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. USNA, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.85, 2.17, 2.86, 3.26 and 4.45, 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. USNA's Price/Sales ratio of 0.96, 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. USNA, whose relative strength is 75, is in the top 50 and would pass this last criterion.   STARZ Profile Strategy: Value Investor Based on: Benjamin Graham Starz, formerly Liberty Media Corporation, is an integrated global media and entertainment company with operating units that provide subscription video programming on domestic United States pay television channels (Starz Channels), global content distribution (Starz Distribution) and animated television and movie production (Starz Animation). As of January 14, 2013, its network included Starz, Encore, and Movieplex, Retroplex and Indieplex. Its businesses included Anchor Bay Entertainment, Starz Worldwide Distribution, and Starz Digital Media. Starz Animation produces animated television (TV) and movie content for studios and networks. Starz Distribution develops, produces and acquires entertainment content, distributing it to consumers globally on digital versatile disk (DVD). On January 11, 2013, Liberty Media Corporation (Liberty) and Starz announced the completion of the spin-off of Liberty from Starz. Analysis Guru Score: 86% SECTOR: [PASS] STRZA is neither a technology nor financial Company, and therefore this methodology is applicable. SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than $340 million. STRZA's sales of $2,505.0 million, based on trailing 12 month sales, pass this test. CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. STRZA's current ratio of 4.52 passes the test. LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for STRZA is $537.0 million, while the net current assets are $1,657.0 million. STRZA passes this test. LONG-TERM EPS GROWTH: [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. EPS for STRZA were negative within the last 5 years and therefore the company fails this criterion. P/E RATIO: [PASS] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. STRZA's P/E of 3.60 (using the 3 year PE) passes this test. PRICE/BOOK RATIO: [PASS] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. STRZA's Price/Book ratio is 0.39, while the P/E is 3.60. STRZA passes the Price/Book test.   TELECOM ARGENTINA S.A. (ADR) Profile Strategy: Contrarian Investor Based on: David Dreman Telecom Argentina SA, (Telecom), is an Argentina-based company primarily engaged in the provision of national fixed-line telecommunication services, international long-distance service, data transmission and Internet services, as well as mobile telephony. The Company also offers such solutions as online business and Web hosting, virtual private network (VPN), mobile operating systems developed by Microsoft and Blackberry, toll-free telephone numbers, call centers and voice over Internet protocol (VoIP) line, as well as other services mainly aimed at corporate clients. As of December 31, 2012, the Company owned its subsidiaries structured in two business segments, Fixed Telephony, which comprised Telecom Argentina USA Inc and Micro Sistemas SA; and Mobile Services, with Telecom Personal SA, Nucleo SA and Springville SA. Analysis Guru Score: 90% MARKET CAP: [PASS] Medium to large-sized companies (the largest 1500 companies) should be chosen, because they are more in the public eye. Furthermore, the investor is exposed to less risk of "accounting gimmickry", and companies of this size have more staying power. TEO has a market cap of $2,441 million, therefore passing the test. EARNINGS TREND: [PASS] A company should show a rising trend in the reported earnings for the most recent quarters. TEO's EPS for the past 2 quarters, (from earliest to most recent quarter) 0.13, 0.62 have been increasing, and therefore the company passes this test. EPS GROWTH RATE IN THE IMMEDIATE PAST AND FUTURE: [PASS] This methodology likes to see companies with an EPS growth rate higher than the S&P in the immediate past and a likelihood that this trend will continue in the near future. TEO passes this test as its EPS growth rate over the past 6 months (416.66%) has beaten that of the S&P (-6.45%). TEO's estimated EPS growth for the current year is (433.33%), which indicates the company is expected to experience positive earnings growth. As a result, TEO passes this test. This methodology would utilize four separate criteria to determine if TEO is a contrarian stock. In order to eliminate weak companies we have stipulated that the stock should pass at least two of the following four major criteria in order to receive "Some Interest". P/E RATIO: [PASS] The P/E of a company should be in the bottom 20% of the overall market. TEO's P/E of 6.17, based on trailing 12 month earnings, meets the bottom 20% criterion (below 9.73), and therefore passes this test. PRICE/CASH FLOW (P/CF) RATIO: [FAIL] The P/CF of a company should be in the bottom 20% of the overall market. TEO's P/CF of 7.82 does not meet the bottom 20% criterion (below 5.33), and therefore fails this test. PRICE/BOOK (P/B) VALUE: [FAIL] The P/B value of a company should be in the bottom 20% of the overall market. TEO's P/B is currently 1.68, which does not meet the bottom 20% criterion (below 0.78), and it therefore fails this test. PRICE/DIVIDEND (P/D) RATIO: [PASS] The P/D ratio for a company should be in the bottom 20% of the overall market (that is the yield should be in the top 20%). TEO's P/D of 16.67 meets the bottom 20% criterion (below 20.16 or yield above 3.7% ), and it therefore passes this test. This methodology maintains that investors should look for as many healthy financial ratios as possible to ascertain the financial strength of the company. These criteria are detailed below. CURRENT RATIO: [PASS] A prospective company must have a strong Current Ratio (greater than or equal to the average of it's industry [1.10] or greater than 2). This is one identifier of financially strong companies, according to this methodology. TEO's current ratio of 1.15 passes the test. PAYOUT RATIO: [FAIL] A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for TEO is 69.02%, while its historical payout ratio has been 18.22%. Therefore, it fails the payout criterion. RETURN ON EQUITY: [PASS] The company should have a high ROE, as this helps to ensure that there are no structural flaws in the company. This methodology feels that the ROE should be greater than the top one third of ROE from among the top 1500 large cap stocks, which is 17.03%, and would consider anything over 27% to be staggering. The ROE for TEO of 30.57% is high enough to pass this criterion. PRE-TAX PROFIT MARGINS: [PASS] This methodology looks for pre-tax profit margins of at least 8%, and considers anything over 22% to be phenomenal. TEO's pre-tax profit margin is 18.48%, thus passing this criterion. YIELD: [PASS] The company in question should have a yield that is high and that can be maintained or increased. TEO's current yield is 6.00%, while the market yield is 2.64%. TEO passes this test. LOOK AT THE TOTAL DEBT/EQUITY: [PASS] The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry of 101.30%. TEO's Total Debt/Equity of 1.51% is considered acceptable.   LEAR CORPORATION Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Lear Corporation is a tier 1 supplier to the global automotive industry. The Company supplies its products to automotive manufacturers with automotive seat systems and related components, as well as electrical distribution systems and related components. The Company has two segments: seating and electrical power management systems (EPMS). The seating segment includes seat systems and related components, such as seat frames, recliner mechanisms, seat tracks, seat trim covers, headrests and seat foam. The EPMS segment includes electrical distribution systems for traditional powertrain vehicles, as well as for hybrid and electric vehicles. As of December 31, 2011, it had 20 joint ventures located throughout Asia, as well as five in North America, two in Europe and Africa and one with operations in all three regions. Analysis Guru Score: 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. LEA's P/S of 0.37 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. LEA's Debt/Equity of 17.96% 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. LEA 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 LEA At this Point Is LEA 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.LEA's P/S ratio of 0.37 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%. LEA's inflation adjusted EPS growth rate of 20.53% 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. LEA's free cash per share of 2.17 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. LEA, whose three year net profit margin averages 5.43%, passes this evaluation.   ROYAL DUTCH SHELL PLC (ADR) Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Royal Dutch Shell plc (Shell) is an independent oil and gas company. The Company owns, directly or indirectly, investments in the numerous companies constituting Shell. Shell is engaged worldwide in the principal aspects of the oil and gas industry and also has interests in chemicals and other energy-related businesses. The Company operates in three segments: Upstream, Downstream and Corporate. Upstream combines the operating segments Upstream International and Upstream Americas, which are engaged in searching for and recovering crude oil and natural gas; the liquefaction and transportation of gas; the extraction of bitumen from oil sands that is converted into synthetic crude oil, and wind energy. Downstream is engaged in manufacturing; distribution and marketing activities for oil products and chemicals. Corporate represents the key support functions, comprising holdings and treasury, headquarters, central functions and Shells self-insurance activities. Analysis Guru Score: 100% MARKET CAP: [PASS] The Cornerstone Value Strategy looks for large, well known companies whose market cap is greater than $1 billion. These companies exhibit solid and stable earnings. RDS.A's market cap of $213,967 million passes this test. CASH FLOW PER SHARE: [PASS] The second criterion requires that the company exhibit strong cash flows. Companies with strong cash flow are typically the value oriented investments that this strategy looks for. The company's cash flow per share must be greater than the mean of the market cash flow per share ($1.40). RDS.A's cash flow per share of $12.90 passes this test. SHARES OUTSTANDING: [PASS] This particular strategy looks for companies whose total number of outstanding shares are in excess of the market average (622 million shares). These are the more well known and highly traded companies. RDS.A, who has 3,145 million shares outstanding, passes this test. TRAILING 12 MONTH SALES: [PASS] A company's trailing 12 month sales ($467,153 million) are required to be 1.5 times greater than the mean of the market's trailing 12 month sales ($20,660 million). RDS.A passes this test. DIVIDEND: [PASS] The final step in the Cornerstone Value strategy is to select the 50 companies from the market leaders group (those that have passed the previous four criteria) that have the highest dividend yield. RDS.A, with a dividend yield of 5.17%, is one of the 50 companies that satisfy this last criterion.   WORLD ACCEPTANCE CORP. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch World Acceptance Corporation operates a small-loan consumer finance business in 12 states and Mexico. The Company is engaged in the small-loan consumer finance business, offering short-term small loans, medium-term larger loans, related credit insurance and ancillary products and services to individuals. As of March 31, 2012, the Company offered standardized installment loans through 1,137 offices in South Carolina, Georgia, Texas, Oklahoma, Louisiana, Tennessee, Illinois, Missouri, New Mexico, Kentucky, Alabama, Wisconsin, and Mexico. The Company serves individuals with limited access to consumer credit from banks, credit unions, other consumer finance businesses and credit card lenders. In the United States offices, the Company also offers income tax return preparation services to its customers and others. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider WRLD a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (10.58) relative to the growth rate (22.74%), 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 WRLD (0.47) is very favorable. SALES AND P/E RATIO: [NEUTRAL] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. WRLD, whose sales are $570.8 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. 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 WRLD is 22.7%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good. TOTAL DEBT/EQUITY RATIO: [NEUTRAL] WRLD is a financial company so debt to equity rules are not applied to determine the company's financial soundness. EQUITY/ASSETS RATIO: [PASS] This methodology uses the Equity/Assets Ratio as a way to determine a financial intermediary's health, as it is a better measure than the Debt/Equity Ratio. WRLD's Equity/Assets ratio (41.00%) is extremely healthy and above the minimum 5% this methodology looks for, thus passing the criterion. RETURN ON ASSETS: [PASS] This methodology uses Return on Assets as a way to measure a financial intermediary's profitability. WRLD's ROA (12.35%) is above the minimum 1% that this methodology looks for, thus passing the criterion. 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 WRLD (17.52%) 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 WRLD (-46.92%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.   DOLLAR TREE, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Dollar Tree, Inc. (Dollar Tree) is an operator of discount variety stores offering merchandise at the fixed price. As of January 28, 2012, the Company operated 4,351 discount variety retail stores. Its stores operate under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant and Dollar Bills. As of January 28, 2012, it operated 4,252 stores in 48 states and the District of Columbia, as well as 99 stores in Canada. It buys approximately 58% to 60% of its merchandise domestically and imports the remaining 40% to 42%. Its domestic purchases include basic, seasonal, closeouts and promotional merchandise. It maintains a selection of products within variety store categories. During the fiscal year ended January 28, 2012 (fiscal 2011), the Company opened 278 new stores. Analysis Guru Score: 90% PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical (non-Smokestack) companies with Price/Sales ratio between .75 and 1.5 are good values. DLTR's P/S ratio of 1.38 based on trailing 12 month sales, falls within the "good values" range for non-cyclical companies and is considered attractive. TOTAL DEBT/EQUITY RATIO: [PASS] Less debt equals less risk according to this methodology. DLTR's Debt/Equity of 16.27% is acceptable, thus passing the test. PRICE/RESEARCH RATIO: [PASS] This methodology considers companies in the Technology and Medical sectors to be attractive if they have low Price/Research ratios. DLTR is neither a Technology nor Medical company. Therefore the Price/Research ratio is not available and, hence, not much emphasis should be placed on this particular variable. PRELIMINARY GRADE: Some Interest in DLTR At this Point Is DLTR a "Super Stock"? NO PRICE/SALES RATIO: [FAIL] The prospective company should have a low Price/Sales ratio. To be considered a "Super Stock", non-cyclical (non-Smokestack) companies should have Price/Sales ratios below .75. However, DLTR, who has a P/S of 1.38, does not fall within the "Super Stock" range. It does fall between 0.75 and 1.5, which is considered the "good values" range for non-cyclical companies. Nonetheless, it does not pass this "Super Stock" criterion. LONG-TERM EPS GROWTH RATE: [PASS] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. DLTR's inflation adjusted EPS growth rate of 29.40% passes the test. FREE CASH PER SHARE: [PASS] This methodology looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses. This is based on the premise that companies without cash will soon be out of business. DLTR's free cash per share of 1.58 passes this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [PASS] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. DLTR, whose three year net profit margin averages 7.50%, passes this evaluation.   JOS. A. BANK CLOTHIERS INC Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Jos. A. Bank Clothiers, Inc. (Jos. A. Bank) is a designer, manufacturer, retailer and direct marketer (through stores, catalog call center and Internet) of men's tailored and casual clothing and accessories and is a retailer of tuxedo rental products. Jos. A. Bank sells all of its products under the Jos. A. Bank label through 556 retail stores (as of January 28, 2012, which includes 25 outlet and factory stores and 15 franchise stores) located throughout 43 states and the District of Columbia in the United States, as well as through its catalog call center and Internet (www.josbank.com) operations. It sources substantially all of its merchandise from suppliers and manufacturers or through buying agents using Jos. A. Bank designs and specifications. It has two segments: Stores and Direct Marketing. The Stores segment includes all Company-owned stores, excluding outlet and factory stores (full-line stores). The Direct Marketing segment includes the catalog call center and the Internet. Analysis Guru Score: 75% MARKET CAP: [PASS] The first requirement of the Cornerstone Growth Strategy is that the company has a market capitalization of at least $150 million. This will screen out the companies that are too illiquid for most investors, but still include a small growth company. JOSB, with a market cap of $1,196 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. JOSB, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.82, 2.11, 2.56, 3.08 and 3.49, 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. JOSB's Price/Sales ratio of 1.15, based on trailing 12 month sales, passes this criterion. RELATIVE STRENGTH: [FAIL] The final criterion for the Cornerstone Growth Strategy requires that the Relative Strength of the company be among the top 50 of the stocks screened using the previous criterion. This gives you the opportunity to buy the growth stocks you are searching for just as the market is embracing them. JOSB has a relative strength of 34. This does not pass the final criterion. As a result, this methodology would not consider the stock even though it passed the previous three criteria.   THE TJX COMPANIES, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy The TJX Companies, Inc. (TJX) is the off-price apparel and home fashions retailer in the United States and worldwide. As of January 28, 2012, the Company operated in four business segments. It has two segments in the United States, Marmaxx (T.J. Maxx and Marshalls) and HomeGoods; one in Canada, TJX Canada (Winners, Marshalls and HomeSense) and one in Europe, TJX Europe (T.K. Maxx and HomeSense). As a result of the consolidation of the A.J. Wright chain, all A.J. Wright stores ceased operations by the end of February 2011. It completed the consolidation of A.J. Wright, converting 90 of the A.J. Wright stores to T.J. Maxx, Marshalls or HomeGoods banners and closed the remaining 72 stores, two distribution centers and home office. In December 2012, the Company acquired Sierra Trading Post, an off-price Internet retailer. Analysis Guru Score: 75% MARKET CAP: [PASS] The first requirement of the Cornerstone Growth Strategy is that the company has a market capitalization of at least $150 million. This will screen out the companies that are too illiquid for most investors, but still include a small growth company. TJX, with a market cap of $32,962 million, passes this criterion. EARNINGS PER SHARE PERSISTENCE: [PASS] The Cornerstone Growth methodology looks for companies that show persistent earnings growth without regard to magnitude. To fulfill this requirement, a company's earnings must increase each year for a five year period. TJX, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.04, 1.42, 1.65, 1.93 and 2.55, passes this test. PRICE/SALES RATIO: [PASS] The Price/Sales ratio should be below 1.5. This value criterion, coupled with the growth criterion, identify growth stocks that are still cheap to buy. TJX's Price/Sales ratio of 1.27, based on trailing 12 month sales, passes this criterion. RELATIVE STRENGTH: [FAIL] The final criterion for the Cornerstone Growth Strategy requires that the Relative Strength of the company be among the top 50 of the stocks screened using the previous criterion. This gives you the opportunity to buy the growth stocks you are searching for just as the market is embracing them. TJX has a relative strength of 71. This does not pass the final criterion. As a result, this methodology would not consider the stock even though it passed the previous three criteria.   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 NTES NETEASE, INC (ADR) Business Services 50 TBI TRUEBLUE INC Business Services 48 INTC INTEL CORPORATION Semiconductors 46 PII POLARIS INDUSTRIES INC. Recreational Products 46 HIBB HIBBETT SPORTS, INC. Retail (Specialty) 46 AFSI AMTRUST FINANCIAL SERVICES, INC. Insurance (Prop. & Casualty) 45 STO STATOIL ASA(ADR) Oil & Gas - Integrated 43 VLO VALERO ENERGY CORPORATION Oil & Gas Operations 42 DCM NTT DOCOMO INC (ADR) Communications Services 42 FCFS FIRST CASH FINANCIAL SERVICES, INC. Consumer Financial Services 41

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