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Executive Summary	August 7, 2009

The Economy The economic picture has continued to get a bit brighter over the past two weeks, though the economy is still far from healthy. One big sign that things have started to stabilize came in last week's gross domestic product numbers, which showed that the economy shrank at a 1.0% pace in the second quarter. The fact that U.S. economic output continues to decline isn't exactly great news. But when you consider the precipitous drops in GDP over the past several quarters -- -2.7% in last year's third quarter, -5.4% in the fourth quarter, and -6.4% in 2009's first quarter -- the second quarter numbers were an indication that we may be reaching a bottom. Within the overall GDP figures were some interesting notes. The bulk of the decrease in the second quarter output came from weakness in consumer spending, which declined 1.2%. Business investment also fell, but the 8.9% drop was less than one-fourth of the second quarter's 39.2% plunge, and less than half the decline we saw in last year's final quarter. Keeping the numbers from being much worse: the government. Government consumption and spending jumped 5.6% in the quarter -- almost 11% at the federal level. Just as the overall economy is slowly creeping back toward growth, so too is the manufacturing sector. Last week, the Institute for Supply Management said its manufacturing index rose to 48.9 from 44.8 the previous month, falling just a bit short of the 50 reading that is the dividing line between growth and contraction. The 48.9 figure is now comfortably ahead of the levels associated with a broader economic recession, however. Construction spending, meanwhile, unexpectedly increased in June, the Commerce Department reported this week. The increase was helped by a 0.5% increase in residential construction, marking the second time in three months that residential construction spending increased, according to the Associated Press -- a sign that the housing market may be stabilizing. Another sign of housing stabilization came from the National Association of Realtors, which said this week that its Pending Home Sales Index rose in June for the fifth consecutive month, the first time that has occurred in six years. The index is up almost 7% since one year ago. Of course, while signs of stabilization across the economy are encouraging given the free fall we experienced in late 2008 and early 2009, the overall picture remains troubling. While new claims for unemployment dipped more than expected in the most recent week, the total number of people filing for unemployment continues to climb (though at a slower pace), according to the latest government data -- and that doesn't include those whose benefits have run out but remain unemployed. July job loss data will be revealed today, and the overall unemployment rate is expected to rise slightly from the 9.5% June figure. With unemployment that high, it's not surprising that consumer spending remains down. Retail sales fell 5.0 percent in July vs. the year-ago period, continuing a lengthy trend of year-over-year declines, according to the International Council of Shopping Centers. With consumer spending making up about two-thirds of the U.S. economy, that's a problem. For the stock market, however, it's all about expectations. And over the past two weeks, companies have by and large continued to exceed expectations with their second-quarter earnings announcements. With three-quarters of S&P 500 companies having reported, positive surprises were outnumbering negative ones by five to one, according to Dow Jones Newswires (citing data from Brown Brothers Harriman). The companies averaged a 13% surprise to the upside. The continued positive earnings surprises and better-than-expected GDP and manufacturing numbers helped the market continue its surge over the past fortnight. Since our last newsletter, the S&P 500 is up 2.1%, while the Hot List has gained 1.2%. For the year, the portfolio remains well ahead of the S&P, up 31.8% vs. the index's 10.4% gain. And since its inception more than six years ago, the Hot List is up 116.2%, while the S&P has returned -0.3%. The portfolio is making some major changes this week, taking profits on six stocks and adding six new holdings. The new bunch is a diverse group, with three small-caps and three large-caps that span six different industries. For more details on the new holdings, see the "Newcomers to the Validea Hot List" section below. The Economy & The Market: Dueling Data The seeming disconnect between the stock market's continued rapid climb and the tiny steps forward that the economy is making has been pretty stark. After all, two of the more encouraging signs I mentioned above weren't even true forward steps -- the GDP and manufacturing numbers are signs that things haven't been getting worse as quickly as they were before, but they've still been getting worse nonetheless. Given that, it's no wonder that many in the bearish camp are continuing to point to the economic weakness, high unemployment rate, sluggish consumer spending, and uneasy housing market as reasons to stay away from stocks. What's critical to remember, however, is that while the stock market and economy are certainly intertwined, their relationship is not one of side-by-side running mates. And, more importantly, economic success today doesn't mean stock gains tomorrow; nor does economic struggle today mean stock woes tomorrow. Take GDP. Market history is littered with examples of periods when strong GDP readings were followed by anything but strong stock returns. A few examples: In the late 1950s, the economy bounced back strong from the recession of 1957-1958, ending 1958 with back-to-back quarters of 9.7% GDP growth. When the year closed, the S&P 500 sat at about 55. With the economy about to put up two more big growth quarters in the first half of 1959 (+8.3% and +10.5%), early 1959 may in retrospect have seemed a good time to invest. But while the economy was booming, the market still hadn't crossed 60 by the year's midway point. A year after that, in mid-1960, it was just below 57. The early 1970s provide what may be an even better example. In the first two quarters of 1972, the sluggish economy revived, posting GDP gains of 7.3% and 9.8%. But had you jumped into stocks in mid-1972, you'd have enjoyed just six months of moderate gains (about 12% in all) before entering one of the worst bear markets in history -- a bear whose first two quarters featured GDP readings of +10.6% and +4.7%. One more example that unfortunately hits a bit closer to home: After a sluggish first quarter of 2007, GDP growth in the second and third quarters was a solid 3.2% and 3.6%. Had you jumped into the stocks immediately after the third quarter, however, you'd have entered the market just eight days before the start of the worst bear since the Great Depression. Similarly, bull markets often begin amid periods of poor GDP readings. While the 1973-74 bear ended in October of '74, GDP growth didn't turn positive until the second quarter of 1975. And while the 1980-82 bear ended in August of '82, meaningful GDP growth didn't start until the first quarter of 1983. Unemployment also often remains high -- or even increases -- in the first couple quarters of a bull market. Following the 1973-74 and 1980-82 bears -- the two downturns to which the current one is most often compared -- unemployment peaked well after the market turned upward. In the first case, a bull market began Oct. 3, 1974, and unemployment didn't peak until May 1975. In the second case, the bull run began Aug. 12, 1982, and the jobless rate didn't start declining until January 1983. Now, all of this isn't to say that you shouldn't pay attention to the economy. But for an investor, to put a lot of weight on lagging indicators like GDP, which shows what has happened in the past three months (and in fact the lag is even longer by the time the numbers are announced) can be very counterproductive. All of this also shows just how complicated and erratic the relationship between the economy and stock market can be -- sometimes, like in 1987, bull markets will start when GDP is indeed strong, and unemployment has already peaked; other times, like in 1974, it starts when GDP is negative, and unemployment has a ways to go before peaking. In terms of the current market, such discrepancies show that the continued economic weakness is not by itself a reason to avoid stocks. But there's a broader point, too. The examples I've mentioned are yet another indication of how hard it is to time the market. You can analyze reams of economic data all you want, and you still could end up losing your shirt trying to jump in and out of the market based on GDP, unemployment, factory orders, or any other metric you can find. For me, it thus always comes back to values and discipline -- the ability to find good values in the market regardless of economic conditions, and the discipline to stick with stocks through the inevitable ups and downs because, historically, they've been far and away the best investment vehicles out there. That will sometimes lead to short-term pain, as we saw last year. But over the long run, I believe this kind of systematic approach will pay off. While 2008 was the worst year for the Hot List and one of the worst years ever for stocks, the portfolio has already made up more than half of its '08 losses this year, and has more than doubled since its inception six years ago while the S&P has essentially been flat. Whatever the short term brings for the market or the economy, I expect that outperformance to continue over the long haul.		Editor-in-Chief: John Reese Since Inception   Hot List 116.2% S&P 500 -0.3% Accuracy 56.3% Beta 1.2 YTD   Hot List 31.8% S&P 500 10.4% Since Last Issue   Hot List 1.2% S&P 500 2.1% Avg. Fundamentals   Market Cap (mil) $22,398 PE Ratio 14.1 5 Yr EPS Growth 34.4% Yield 6.7% Rel. Strength 69 Portfolio Sectors Energy 3 Services 2 Transportation 1 Financial 1 Basic Materials 1 Capital Goods 1 Consumer Cyclical 1
Guru Investor Editor John Reese Announces Publication of New Book The Guru Investor shows you how to implement the strategies of Wall Street legends like Warren Buffett, Peter Lynch and Benjamin Graham in your own portfolio. Buy Your Copy Now! The Fallen As we rebalance the Validea Hot List, 6 stocks leave our portfolio. These include: The Dress Barn, Inc. (DBRN), Pfizer Inc. (PFE), Bj Services Company (BJS), Ceradyne, Inc. (CRDN), Lufkin Industries, Inc. (LUFK) and Oil States International, Inc. (OIS). The Keepers 4 stocks remain in the portfolio. They are: Jos. A. Bank Clothiers, Inc. (JOSB), Frontier Oil Corporation (FTO), Chevron Corporation (CVX) and Fuqi International, Inc. (FUQI). The Newbies We are adding 6 stocks to the portfolio. These include: Astec Industries, Inc. (ASTE), Sociedad Quimica Y Minera (Adr) (SQM), Lloyds Banking Group Plc (Adr) (LYG), Marathon Oil Corporation (MRO), Capella Education Company (CPLA) and Allegiant Travel Company (ALGT). Portfolio Changes Additions   ASTEC INDUSTRIES, INC. ASTE SOCIEDAD QUIMICA Y MINERA (ADR) SQM LLOYDS BANKING GROUP PLC (ADR) LYG MARATHON OIL CORPORATION MRO CAPELLA EDUCATION COMPANY CPLA ALLEGIANT TRAVEL COMPANY ALGT Deletions   THE DRESS BARN, INC. DBRN PFIZER INC. PFE BJ SERVICES COMPANY BJS CERADYNE, INC. CRDN LUFKIN INDUSTRIES, INC. LUFK OIL STATES INTERNATIONAL, INC. OIS Newcomers to the Validea Hot List Allegiant Travel Company (ALGT): This low-cost airline offers commercial stops in such major cities as Orlando, Phoenix, Las Vegas, and Los Angeles, as well as in a number of smaller cities across the U.S. All its flights are nonstop, and the firm also offers vacation package deals that include hotel stays, rental cars, and activities. In addition, Allegiant has charter services in the U.S., Mexico, Canada, and Cuba. The Las Vegas-based firm has a market cap of $833 million, and has taken in about $529 million in sales in the past year. Allegiant gets high marks from the Guru Strategies I base on the writings of Peter Lynch, Joel Greenblatt, and Tom and David Gardner of The Motley Fool. To see why, check out the "Detailed Stock Analysis" section below. Astec Industries, Inc. (ASTE): This Chattanooga, Tenn.-based firm makes equipment used in asphalt road building, pipeline and utility trenching, concrete plants, gas and oil drilling rigs, and wood processing, making it the type of company that could benefit from the government's infrastructure-focused stimulus package. It has a market cap of about $644 million, and has taken in about $827 million in sales in the past 12 months. Astec gets approval from my Kenneth Fisher- and James O'Shaughnessy-based models. See the "Detailed Stock Analysis" section below to learn why those models are high on the stock. Capella Education Company (CPLA): Based in Minneapolis, Minn., Capella is the parent of Capella University, a regionally accredited online school that offers graduate degree programs in business, information technology, education, human services, public health, public safety, and psychology, as well as bachelor's degree programs in business, information technology, and public safety. It has almost 30,000 students from all 50 states and 56 countries. Capella has a market cap of $1.1 billion, and has taken in close to $300 million in sales in the past year. It gets strong interest from the strategy I base on the writings of Martin Zweig. Scroll down to the "Detailed Stock Analysis" section to find out why. Lloyds Banking Group PLC (LYG): After its acquisition of HBOS PLC earlier this year, this London-based banking giant became the largest retail bank in the U.K., serving one in three people in the country. It is also involved in commercial banking and insurance. The firm has a market cap of about $44.7 billion, and has taken in more than $43 billion in sales in the past year. Lloyds was hit hard like most financial firms during the credit crisis, but it has rebounded in recent months, and two of my strategies -- those I base on the writings of David Dreman and James O'Shaughnessy -- think it's a bargain. Find out why in the "Detailed Stock Analysis" section below. Marathon Oil Corporation (MRO): This Houston-based integrated energy company has activities in the U.S., Canada, Angola, Equatorial Guinea, Gabon, Indonesia, Libya, Norway, and the U.K. It is the fourth-largest U.S.-based integrated oil firm, and the fifth-largest refiner. The $22.3 billion market cap company has brought in $61.9 billion in sales in the past year. Marathon gets strong interest from three of my Guru Strategies, those I base on the writings of Peter Lynch, Joel Greenblatt, and James O'Shaughnessy. To find out why, see the "Detailed Stock Analysis" section below. Sociedad Quimica y Minera de Chile S.A. (SQM): Based in Chile, SQM is involved in making specialty plant nutrition products, and is also the largest lithium producer in the world and a major iodine producer. It has offices in more than 20 countries, and has customers in 110 countries throughout Europe, America, Asia and Oceania. SQM has a market cap of $9.6 billion, and has trailing 12-month sales of $1.7 billion. SQM gets approval from both my Peter Lynch-based strategy and my Momentum Investor approach. Scroll down to the "Detailed Stock Analysis" section to find out why. News about Validea Hot List Stocks Frontier Oil Corp. (FTO): On Aug. 6, Frontier announced second-quarter net income of $49.8 million, or 47 cents per share, down 16 percent from $59.3 million, or 57 cents per share, in the year-ago quarter, the Associated Press reported. Revenue was $1.1 billion, down 38 percent from $1.77 billion a year earlier. The results were impacted by decreased demand due to the recession, AP stated. Fuqi International (FUQI): On Aug. 6, Fuqi reported second-quarter earnings of $0.45 per share, $0.14 better than estimates, according to Briefing.com. Revenues were up more than 50% to $100.8 million, beating estimates of $92.8 million. The firm also issued upside guidance for the third quarter and full year, Briefing.com reported. Shares jumped more than 12% for the day. 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 JOSB JOS. A. BANK CLOTHIERS, INC. Retail (Apparel) 88 FTO FRONTIER OIL CORPORATION Oil & Gas Operations 72 FUQI FUQI INTERNATIONAL, INC. Jewelry & Silverware 71 CPLA CAPELLA EDUCATION COMPANY Schools 71 ASTE ASTEC INDUSTRIES, INC. Constr. - Supplies & Fixtures 65 LYG LLOYDS BANKING GROUP PLC (ADR) Money Center Banks 63 ALGT ALLEGIANT TRAVEL COMPANY Airline 60 SQM SOCIEDAD QUIMICA Y MINERA (ADR) Chemical Manufacturing 60 MRO MARATHON OIL CORPORATION Oil & Gas - Integrated 60 CVX CHEVRON CORPORATION Oil & Gas - Integrated 39 Ticker Market Cap Date Added Start Price Current Price Return JOSB $681 2/20/2009 $23.85 $37.25 56.2% FTO $1,448 6/12/2009 $14.67 $13.82 -5.8% FUQI $757 6/12/2009 $16.80 $27.39 63.0% CPLA $1,060 8/7/2009 TBD $63.39 TBD ASTE $635 8/7/2009 TBD $28.21 TBD LYG $48,219 8/7/2009 TBD $7.08 TBD ALGT $839 8/7/2009 TBD $41.50 TBD SQM $9,509 8/7/2009 TBD $36.13 TBD MRO $21,947 8/7/2009 TBD $31.01 TBD CVX $138,882 5/15/2009 $65.88 $69.25 5.1%

Detailed Stock Analysis Disclaimer: The analysis is from Validea's selection and interpretation of content from the guru's book or published writings, and is not from nor endorsed by the guru. See Full Disclaimer JOSB   |   FTO   |   FUQI   |   CPLA   |   ASTE   |   LYG   |   ALGT   |   SQM   |   MRO   |   CVX   |   JOS. A. BANK CLOTHIERS, INC. Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Jos. A. Bank Clothiers, Inc. (Jos. A. Bank) is a designer, retailer and direct marketer (through stores, catalog and Internet) of men's tailored and casual clothing and accessories. It sells all of its products exclusively under the Jos. A. Bank label through its 460 retail stores (as of January 31, 2009, which includes seven outlet stores and 12 franchise stores) located throughout 42 states and the District of Columbia in the United States, as well as through the Company's nationwide catalog and Internet (www.josbank.com) operations. Its products are targeted at the male career professional and emphasize the Jos. A. Bank brand of tailored and casual clothing and accessories. The Company's products, which range from the original Jos. A. Bank Executive collection to the more luxurious Jos. A. Bank Signature collection to the exclusive Jos. A. Bank Signature Gold collection. Jos. A. Bank operates through two segments: Stores and Direct Marketing. 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. JOSB's profit margin of 8.43% passes this test. RELATIVE STRENGTH: [PASS] The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. JOSB, with a relative strength of 95, satisfies this test. COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [FAIL] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for JOSB (16.98% for EPS, and 11.37% for Sales) are not good enough to pass. INSIDER HOLDINGS: [FAIL] JOSB's insiders should own at least 10% (they own 2.68%) of the company's outstanding shares. This does not satisfy the minimum requirement, and companies that do not pass this criteria are less attractive. CASH FLOW FROM OPERATIONS: [PASS] A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. JOSB's free cash flow of $2.08 per share passes this test. PROFIT MARGIN CONSISTENCY: [PASS] JOSB's profit margin has been consistent or even increasing over the past three years (Current year: 8.39%, Last year: 8.31%, Two years ago: 7.91%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise. R&D AS A PERCENTAGE OF SALES: [NEUTRAL] This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in JOSB's case. CASH AND CASH EQUIVALENTS: [PASS] JOSB's level of cash $122.9 million passes this criteria. If a company is a cash generator, like JOSB, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash. INVENTORY TO SALES: [PASS] This methodology strongly believes that companies, especially small ones, should have tight control over inventory. It's a warning sign if a company's inventory relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Inventory to Sales for JOSB was 34.24% last year, while for this year it is 30.07%. Since the inventory to sales is decreasing by -4.17% the stock passes this criterion. ACCOUNT RECEIVABLE TO SALES: [PASS] This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for JOSB was 2.15% last year, while for this year it is 1.67%. Since the AR to sales is decreasing by -0.49% the stock passes this criterion. LONG TERM DEBT/EQUITY RATIO: [PASS] JOSB'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's Fool Ratio is between 0.5 and 0.65 (JOSB's is 0.51), the company demonstrates excellence in its fundamentals and have soundly beat the earnings estimates. JOSB passes this test. The following criteria for JOSB are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] JOSB has not been significantly increasing the number of shares outstanding within recent years which is a good sign. JOSB currently has 18.0 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. JOSB's sales of $712.4 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] JOSB passes the Daily Dollar Volume (DDV of $24.7 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. JOSB with a price of $37.25 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] JOSB's income tax paid expressed as a percentage of pretax income this year was (39.14%) and last year (40.51%) 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.   FRONTIER OIL CORPORATION Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Frontier Oil Corporation (Frontier) is an independent energy company engaged in crude oil refining and the wholesale marketing of refined petroleum products. The Company operates refineries (the Refineries) in Cheyenne, Wyoming and El Dorado, Kansas with a total annual average crude oil capacity of approximately 182,000 barrels per day (bpd). Frontier's Cheyenne Refinery has a permitted crude oil capacity of 52,000 bpd on a 12-month average. The Company markets its refined products primarily in the eastern slope of the Rocky Mountain region, which encompasses eastern Colorado (including the Denver metropolitan area), eastern Wyoming and western Nebraska (the Eastern Slope). The Cheyenne Refinery has a coking unit, which allows the refinery to process amounts of heavy crude oil for use as a feedstock. During the year ended December 31, 2008, heavy crude oil constituted approximately 76% of the Cheyenne Refinery's total crude oil charge. 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. FTO's P/S of 0.24 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. FTO's Debt/Equity of 31.26% 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. FTO 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 FTO At this Point Is FTO 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.FTO's P/S ratio of 0.24 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%. FTO's inflation adjusted EPS growth rate of 23.59% 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. FTO's free cash per share of 0.62 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. FTO, whose three year net profit margin averages 6.25%, passes this evaluation.   FUQI INTERNATIONAL, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Fuqi International, Inc. (Fuqi) is a designer of precious metal jewelry in China, developing, promoting, and selling a range of products in the Chinese luxury goods market. The Company's products consist of a range of styles and designs made from gold and other precious metals, such as platinum and Karat gold (K-gold). The Company also produce jewelry items that contain diamonds and other precious stones on a custom-order basis. Its design database contains over 30,000 products. The Company operates through its wholly owned subsidiary Fuqi International Holdings Co., Ltd. (Fuqi BVI) and its wholly owned subsidiary, Shenzhen Fuqi Jewelry Co., Ltd. (Fuqi China). As of December 31, 2008, the Company had 69 jewelry retail counters and stores in China. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider FUQI a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (16.46) relative to the growth rate (42.99%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for FUQI (0.38) is very favorable. SALES AND P/E RATIO: [NEUTRAL] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. FUQI, whose sales are $433.4 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for FUQI was 20.36% last year, while for this year it is 12.08%. Since inventory to sales has decreased from last year by -8.28%, FUQI passes this test. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for FUQI is 43.0%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered 'OK'. However, it may be difficult to sustain such a high growth rate. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for FUQI (20.56%) to be acceptable (equity is three to ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for FUQI (-1.53%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for FUQI (9.63%) 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.   CAPELLA EDUCATION COMPANY Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Capella Education Company, is an online postsecondary education services company. Through its wholly owned subsidiary, Capella University (the University), the Company offers a variety of bachelor's, master's and doctoral degree programs primarily delivered to working adults. At December 31, 2008, Capella Education Company offered over 1,020 online courses and 22 academic programs with 111 specializations to approximately 26,800 learners. The Company also offers certificate programs, which consist of a series of courses focused on a particular area of study. In addition, Capella Education Company offers academic services, such as advising, writing and research services; administrative services, such as online class registration and transcript requests; library services; financial aid counseling and career counseling services. Analysis Guru Score: 87% PROFIT MARGIN: [PASS] This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. CPLA's profit margin of 11.70% passes this test. RELATIVE STRENGTH: [PASS] The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. CPLA, with a relative strength of 90, satisfies this test. COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [FAIL] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for CPLA (51.35% for EPS, and 21.27% for Sales) are not good enough to pass. INSIDER HOLDINGS: [PASS] CPLA's insiders should own at least 10% (they own 12.67% ) of the company's outstanding shares which is the minimum required. A high percentage typically 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. CPLA's free cash flow of $1.76 per share passes this test. PROFIT MARGIN CONSISTENCY: [PASS] CPLA's profit margin has been consistent or even increasing over the past three years (Current year: 10.57%, Last year: 10.07%, Two years ago: 7.45%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise. R&D AS A PERCENTAGE OF SALES: [NEUTRAL] This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in CPLA's case. CASH AND CASH EQUIVALENTS: [PASS] CPLA's level of cash $123.6 million passes this criteria. If a company is a cash generator, like CPLA, 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 CPLA was 3.34% last year, while for this year it is 4.39%. Although the AR to sales is rising, it is below the max 30% that is allowed. The investor can still consider the stock if all other criteria appear very attractive. LONG TERM DEBT/EQUITY RATIO: [PASS] CPLA'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): [FAIL] The "Fool Ratio" is an extremely important aspect of this analysis. The methodology says consider shorting shares when the company's Fool Ratio is greater than 1.30. CPLA's PEG Ratio of 1.59 is very high. The following criteria for CPLA are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] CPLA has not been significantly increasing the number of shares outstanding within recent years which is a good sign. CPLA currently has 17.0 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock. SALES: [PASS] Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. CPLA's sales of $297.5 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". CPLA passes the sales test. DAILY DOLLAR VOLUME: [PASS] CPLA passes the Daily Dollar Volume (DDV of $14.2 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. CPLA with a price of $63.39 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] CPLA's income tax paid expressed as a percentage of pretax income this year was (34.83%) and last year (34.63%) 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.   ASTEC INDUSTRIES, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Astec Industries, Inc. designs, engineers, manufactures and markets equipment and components used primarily in road building, utility and related construction activities. The Company's products are used in each phase of road building, from quarrying and crushing the aggregate to application of the road surface. The Company also manufactures certain equipment and components unrelated to road construction, including trenching, auger boring, directional drilling, gas and oil drilling rigs, industrial heat transfer equipment, whole-tree pulpwood chippers, horizontal grinders and blower trucks. In addition to equipment sales, the Company manufactures and sells replacement parts for equipment in each of its product lines. Dillman Equipment, Inc., a manufacturer of asphalt production equipment was acquired by Astec, Inc. in October 2008. Analysis Guru Score: 100% 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. ASTEpasses this test as its P/S of 0.77 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. ASTE's Debt/Equity of 2.59% is acceptable, thus passing the test. PRICE/RESEARCH RATIO: [PASS] This methodology considers companies in the Technology and Medical sectors to be attractive if they have low Price/Research ratios. ASTE 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 ASTE At this Point Is ASTE a "Super Stock"? YES 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. ASTE's P/S ratio of 0.77 falls within the "good values " range for cyclical industries and is considered attractive. LONG-TERM EPS GROWTH RATE: [PASS] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. ASTE's inflation adjusted EPS growth rate of 34.33% 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. ASTE's free cash per share of 0.99 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. ASTE, whose three year net profit margin averages 6.20%, passes this evaluation.   LLOYDS BANKING GROUP PLC (ADR) Profile Strategy: Contrarian Investor Based on: David Dreman Lloyds Banking Group plc, formerly Lloyds TSB Group plc, is a United Kingdom-based financial services group providing a range of banking and financial services, primarily in the United Kingdom, to personal and corporate customers. The Company operates in three divisions: UK Retail Banking, Insurance and Investments, and Wholesale and International Banking. Its main business activities are retail, commercial and corporate banking, general insurance, and life, pensions and investment provision. The Company also operates an international banking business with a global footprint in 40 countries. Services are offered through a number of brands, including Lloyds TSB, Halifax, Bank of Scotland, Scottish Widows, Clerical Medical and Cheltenham & Gloucester. On January 16, 2009, Lloyds Banking Group plc acquired HBOS plc. Analysis Guru Score: 99% 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. LYG has a market cap of $48,219 million, therefore passing the test. EARNINGS TREND: [PASS] A company should show a rising trend in the reported earnings for the most recent quarters. LYG's EPS for the past 2 quarters, (from earliest to most recent quarter) 0.06, 0.71 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. LYG passes this test as its EPS growth rate over the past 6 months (317.64%) has beaten that of the S&P (6.89%). Unfortunately though, LYG's estimated EPS growth figures are unavailable and an opinion cannot be rendered on the second part of the test. This methodology would utilize four separate criteria to determine if LYG 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. LYG's P/E of 2.33, based on trailing 12 month earnings, meets the bottom 20% criterion (below 9.07), and therefore passes this test. PRICE/CASH FLOW (P/CF) RATIO: [PASS] The P/CF of a company should be in the bottom 20% of the overall market. LYG's P/CF of 3.18 meets the bottom 20% criterion (below 4.77) and therefore passes 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. LYG's P/B is currently 0.86, which does not meet the bottom 20% criterion (below 0.64), 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%). LYG's P/D of 4.50 meets the bottom 20% criterion (below 17.30 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. PAYOUT RATIO: [PASS] A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for LYG is 0.00%, while its historical payout ratio has been 82.76%. Therefore, it passes 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 15.78%, and would consider anything over 27% to be staggering. The ROE for LYG of 33.01% 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. LYG's pre-tax profit margin is 22.57%, thus passing this criterion. YIELD: [PASS] The company in question should have a yield that is high and that can be maintained or increased. LYG's current yield is 22.22%, while the market yield is 3.03%. LYG passes this test.   ALLEGIANT TRAVEL COMPANY Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Allegiant Travel Company (Allegiant Travel) is a leisure travel company focused on transporting travelers in small cities to leisure destinations, such as Las Vegas, Nevada, Phoenix, Arizona, Orlando, Florida, Tampa/St. Petersburg, Florida and Ft. Lauderdale, Florida. It operates a low-cost passenger airline marketed to leisure travelers in small cities, allowing it to sell air travel both on a stand-alone basis and bundled with hotel rooms, rental cars and other travel related services. Analysis Guru Score: 91% 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. ALGT's profit margin of 14.19% passes this test. RELATIVE STRENGTH: [PASS] The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. ALGT, with a relative strength of 95, satisfies this test. COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [FAIL] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for ALGT (800.00% for EPS, and 12.49% for Sales) are not good enough to pass. INSIDER HOLDINGS: [PASS] ALGT's insiders should own at least 10% (they own 23.83% ) of the company's outstanding shares which is the minimum required. A high percentage typically 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. ALGT's free cash flow of $0.85 per share passes this test. PROFIT MARGIN CONSISTENCY: [PASS] ALGT's profit margin has been consistent or even increasing over the past three years (Current year: 7.03%, Last year: 8.74%, Two years ago: 3.59%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise. R&D AS A PERCENTAGE OF SALES: [NEUTRAL] This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in ALGT's case. CASH AND CASH EQUIVALENTS: [PASS] ALGT's level of cash $174.8 million passes this criteria. If a company is a cash generator, like ALGT, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash. INVENTORY TO SALES: [PASS] This methodology strongly believes that companies, especially small ones, should have tight control over inventory. It's a warning sign if a company's inventory relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Inventory to Sales for ALGT was 1.81% last year, while for this year it is 1.39%. Since the inventory to sales is decreasing by -0.42% the stock passes this criterion. ACCOUNT RECEIVABLE TO SALES: [PASS] This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for ALGT was 4.25% last year, while for this year it is 1.11%. Since the AR to sales is decreasing by -3.14% the stock passes this criterion. LONG TERM DEBT/EQUITY RATIO: [PASS] ALGT'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 (ALGT's is 0.31), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. ALGT passes this test. The following criteria for ALGT are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] ALGT has not been significantly increasing the number of shares outstanding within recent years which is a good sign. ALGT currently has 20.0 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. ALGT's sales of $529.4 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] ALGT passes the Daily Dollar Volume (DDV of $19.9 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. ALGT with a price of $41.50 passes the price test, even though it doesn't fall in the preferred range. The price should be above $7 in order to eliminate penny stocks and below $20 since most stocks in this price range are undiscovered by the institutions. INCOME TAX PERCENTAGE: [PASS] ALGT's income tax paid expressed as a percentage of pretax income this year was (35.91%) and last year (37.87%) 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.   SOCIEDAD QUIMICA Y MINERA (ADR) Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Sociedad Quimica y Minera de Chile S.A. (SQM) is a producer of specialty plant nutrients. The Company is also engaged in the commodity fertilizer market through its subsidiary, Soquimich Comercial S.A. The fertilizers sold by this subsidiary include granular, water soluble and foliar products. SQM's products are derived from two natural resources found in Chile's Tarapaca and Antofagasta Regions: caliche ore and salar brines. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: This methodology would consider SQM a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (22.34) relative to the growth rate (32.41%), 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 SQM (0.69) makes it 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. SQM, whose sales are $1,682.5 million, needs to have a P/E below 40 to pass this criterion. SQM's P/E of (22.34) is considered acceptable. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for SQM was 35.05% last year, while for this year it is 32.65%. Since inventory to sales has decreased from last year by -2.39%, SQM passes this test. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for SQM is 32.4%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is acceptable. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for SQM (35.73%) 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 SQM (0.53%) 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 SQM (-3.32%) 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.   MARATHON OIL CORPORATION Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Marathon Oil Corporation is engaged in exploration, development and production activities in ten countries: United States, Angola, Canada, Equatorial Guinea, Gabon, Indonesia, Ireland, Libya, Norway and the United Kingdom. The Company's operations consist of four segments: exploration and production, oil sands mining, refining, marketing and transportation and integrated gas. Exploration and production explores for, produces and markets liquid hydrocarbons and natural gas. Oil sands mining mines, extracts and transports bitumen from oil sands deposits and upgrades the bitumen to produce and market synthetic crude oil and by-products. Refining, marketing and transportation, refines, markets and transports crude oil and petroleum products. Integrated gas, markets and transports products manufactured from natural gas, such as liquefied natural gas and methanol. Its wholly owned subsidiary include Speedway SuperAmerica LLC and Western Oil Sands Inc. (Western), Marathon Pipe Line LLC (MPL). 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. MRO's P/S of 0.36 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. MRO's Debt/Equity of 39.52% 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. MRO 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 MRO At this Point Is MRO 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.MRO's P/S ratio of 0.36 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%. MRO's inflation adjusted EPS growth rate of 16.82% passes 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. MRO's free cash per share of -1.47 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. MRO, whose three year net profit margin averages 6.19%, passes this evaluation.   CHEVRON CORPORATION Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Chevron Corporation (Chevron) manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to the United States and International subsidiaries that engage in fully integrated petroleum operations, chemicals operations, mining operations of coal and other minerals, power generation and energy services. Exploration and production (upstream) operations consist of exploring for, developing and producing crude oil and natural gas, and also marketing natural gas. Refining, marketing and transportation (downstream) operations relate to refining crude oil into finished petroleum products; marketing crude oil and the many products derived from petroleum, and transporting crude oil, natural gas and petroleum products by pipeline, marine vessel, motor equipment and rail car. In April 2009, Reliance Industries Limited bought back Chevron Corporation's 5% stake in Reliance Petroleum Limited. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider CVX a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (8.57) relative to the growth rate (21.78%), 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 CVX (0.39) 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. CVX, whose sales are $200,405.0 million, needs to have a P/E below 40 to pass this criterion. CVX's P/E of (8.57) is considered acceptable. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for CVX was 2.40% last year, while for this year it is 2.51%. Since inventory has been rising, this methodology would not look favorably at the stock but would not completely eliminate it from consideration as the inventory increase (0.11%) is below 5%. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for CVX is 21.8%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for CVX (13.71%) to be acceptable (equity is three to ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for CVX (3.38%) 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 CVX (-1.18%) 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.   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 CRDN CERADYNE, INC. Aerospace & Defense 56 INT WORLD FUEL SERVICES CORPORATION Oil & Gas Operations 56 DBRN THE DRESS BARN, INC. Retail (Apparel) 49 CRS CARPENTER TECHNOLOGY CORPORATION Iron & Steel 49 OIS OIL STATES INTERNATIONAL, INC. Oil Well Services & Equipment 49 HUM HUMANA INC. Insurance (Accident & Health) 49 TDW TIDEWATER INC. Water Transportation 46 CMTL COMTECH TELECOMM. CORP. Communications Equipment 46 ESV ENSCO INTERNATIONAL INCORPORATED Oil Well Services & Equipment 46 ROST ROSS STORES, INC. Retail (Apparel) 43

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