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Executive Summary	August 21, 2009

The Economy The economic news has fluctuated over the past two weeks between hope that we are in the early stages of recovery, and pessimism that another wave of pain is coming. And as it has, the market has made its own stops and starts, with investors now seeming to be looking for more than the minor "green shoots" that have helped push stocks higher over the past few months. Perhaps the greatest economic problem has been unemployment, and the past fortnight has provided some mixed data in that area. Shortly after our last newsletter, the Labor Department reported that the unemployment rate fell in July for the first time in more than a year. The drop was minor, however, with the rate falling from 9.5% to 9.4% -- and that doesn't include workers have given up looking for work. Indeed, the economy actually lost almost 250,000 jobs for the month. All in all, however, the number of lost jobs was much better than it has been in recent months, and part of why many economists now see the recession as being over, or about to end. Last week, 27 of the 47 economists surveyed by The Wall Street Journal said they think the recession has ended; another 11 said the trough would hit this month or next month. The respondents, on average, said they expect U.S. gross domestic product to increase by 2.4% this quarter, which would mark the first increase in output since the second quarter of 2008. Whether or not the recession is over is still up for debate; what's not debatable is that the downturn has forced companies to become more productive. Last quarter, nonfarm business productivity jumped at a 6.4% annualized rate, the Labor Department reported last week, the biggest increase in almost six years. That means businesses could be laying the foundation for some major profit gains once the economy really turns around and demand increases. And last week the economy gave a solid sign that demand is increasing. Industrial production increased 0.5% in July, the Federal Reserve reported -- which, aside from a hurricane-rebound month last October, was the first increase since December 2007. That's certainly good news, though the Fed also reported that a lot of slack remains in the economy, with capacity utilization 12.4 percentage points below its 1972-2008 average. Manufacturing activity is also starting to show gains in various regions of the country, with the Philadelphia Federal Reserve Bank reporting this week that factory activity in the mid-Atlantic region grew in August for the first time in 10 months, the Associated Press reported, adding that the report echoed recent findings for the New York region. The Federal Reserve also sounded some positive signals, announcing that it will finish its $300 billion purchase program of U.S. government debt by the end of October, an indication that the Fed sees the worst of the economic downturn as having passed. The housing market, which many thought was leveling out, is now showing signs that it may not have bottomed, however. Housing starts -- which were expected to rise almost 3% -- actually dipped 1.0% in July, the Commerce Department reported. New building permits, also expected to rise, dropped almost 2%. In several areas outside the U.S., signs of life are stronger. Both France and Germany last week reported positive GDP growth for the second quarter, and Japan followed that up by announcing its Q2 GDP grew by an impressive 3.7%. As for what happens next, the economy seems to be at a sort of crossroads. One road has us continuing to build on the small forward steps (or, in some cases, smaller backward steps) we've seen recently; the other sees the U.S. running into roadblocks that will stall a recovery, with the biggest one being a beaten-up consumer. Last week, the Commerce Department reported that retail sales fell in July, an indication that U.S. consumers aren't yet feeling the pain of the recession lift. When consumers will feel less constrained is a major debate. The Journal noted this week that household indebtedness has fallen slightly since its peak of 132% in late 2007. But the current level of 124% is still well above historical norms, and some say the consumer's continued need to pay down debt will lead to higher savings rates -- and lower spending rates, which will mean a slow recovery from the recession. Others disagree, including Joel Naroff, who was named the top economic forecaster in 2008 by Bloomberg Business News. Naroff says he thinks minor recent upticks in consumer spending will grow stronger in the fall -- even if unemployment remains high. "It's not that there is going to be a huge growth in income, or jobs are going to start growing," he told Forbes.com. "It's just that an awful lot of people were so fearful about the future that that they were spending as if they'd already lost their jobs, even if they had jobs." With the economy not providing conclusive signs that it's headed one way or the other, stocks fluctuated over the past two weeks. The S&P 500 ended up slightly, by 1.0%, while the Hot List fell 3.6%. For the year, the portfolio is still up 29.7% compared to the S&P's 11.5% gain, and since its inception more than six years ago the Hot List is far, far ahead of the index, having gained 112.7% while the S&P has gained .7%. A Changing Look While the Hot List has leveled off over the past fortnight, the portfolio has still had an extremely strong bounce-back year so far in 2009. Given that it's nearly tripling the broader market for the year, it's easy to forget that as recently as our March 6 rebalancing, the portfolio was lagging the S&P and down more than 26%. But while stocks were tanking and some were heralding the "end of equities", the Hot List was building up a number of positions in beaten-down, fundamentally strong, bargain-priced stocks. Among them were clothing retailer The Dress Barn, a 70% gainer from late January to mid-April; Schnitzer Steel, a 66% gainer from late January to mid-June; and another clothing retailer, Jos. A. Bank, that from mid-February to the present is up more than 60%. With the rebound still young and many doubting its legs, the Hot List kept digging into beaten-down areas, adding oil services firms like Oil States International (a 59% gainer from mid-March to mid-May) and World Fuel Services (a 28% gainer in the same span), as well as consumer companies like Deckers Outdoor (which jumped 46% in just one month) and Fossil Inc. (a 34% gainer over a two-month period). Of course, such figures are satisfying. But as always, the important question is not where the portfolio has been, but where it is going. And with the lazy days of summer drawing to a close and the usually more active fall months coming, I thought it would be a good time to examine exactly where the Hot List is finding value right now -- and the answers involve a few areas that differ from where it's made hay so far this year. For starters, all of the stocks I just highlighted were essentially small-caps when added to the portfolio (the largest had market caps just over $1 billion). That followed a trend I highlighted back in May: that following bear markets since 1980, small-caps on average have outperformed large-caps by a 39.23% to 27.23% margin in the first six months of a bull market (data from Legg Mason). In mid-May, however, the portfolio began adding some very large stocks into the mix, and today it has become a mix of small-caps and very-large-caps. Six of its ten holdings have caps of $1.4 billion or less; three -- Chevron, Lloyd's Banking, and Marathon Oil -- have caps of more than $20 billion. Only Sociedad Quimica y Minera -- an interesting Chilean firm that makes plant nutrition products, iodine, and lithium -- falls in mid-range territory, with a cap of about $9 billion. One thing to note about the addition of the three very large firms is that all are value stocks. So far this year, large-cap value stocks have been by far the weakest of the nine style-box categories, according to Morningstar; over the past three months, they're second-to-last. That makes intuitive sense -- during the market meltdown, small stocks were hit hard as liquidity concerns led to questions about their survival possibilities. But as the economy has stabilized, investors have moved back into those smaller plays, or focused on larger growth stocks, leaving larger value plays behind. My models appear to be picking up on the values created by that phenomenon. The Hot List is also diversifying in terms of the types of companies it is focusing on. Back in February, 70% of its holdings fell into two sectors, capital goods and services. In March, it moved 40% into energy stocks, and in April 70% of the portfolio was again in two sectors (capital goods and energy). As recently as July, half the Hot List was made up of energy stocks. Today, however, the portfolio features seven different sectors. The largest portion still comes from energy stocks, but to a lesser degree, with three of the ten holdings coming from that sector. This also seems to make intuitive sense. During the crisis and steep declines of late 2008 and early 2009, certain sectors were particularly maligned. Some, like financials, deserved their beatings, but others, like energy stocks and consumer services firms, included a lot of good companies that were unfairly battered because of fears of economic disaster -- an economic disaster that appears to have been averted. The Hot List thus focused on some of these unfairly beaten-up areas of the market because they offered the best values. Now that the market has moved upward and some of those pockets of extreme sector fear have begun to dissipate, my models are seeing top values spread across a broader swath of areas, which you'd expect in a more normal market climate. Two to Watch Among those values are a couple holdings that are particularly interesting: Jos. A. Bank Clothiers, and Fuqi International. Bank has been in the portfolio for a full six months now, and while it's jumped about 60%, my models remain extremely high on it, with my Peter Lynch- and James O'Shaughnessy-based approaches still giving it strong interest and three other models giving it some interest. The stock has been a major short play by many investors for some time now, but the business just keeps putting up strong numbers. Bank has upped earnings per share in every year of the past decade, including 2008 (in part because of some very aggressive and creative promotions). It's been the same story in '09, with EPS and sales increasing in both of the first two quarters. Fuqi, meanwhile, has gained about 40% since joining the Hot List in mid-June. The Chinese jewelry maker has upped EPS in seven straight years, but it's the firm's recent performance that is really remarkable. Its EPS have grown (year over year) in each of the past four quarters, and sales went through the roof even during the most difficult economic climate in decades -- more than doubling in last year's fourth quarter and rising 40% and 51%, respectively, in this year's Q1 and Q2. Fuqi still gets approval from my Lynch model and solid marks from two other strategies, though at this point its no longer the buy it once was. That could mean the portfolio will take those nice profits when our next rebalancing occurs in two weeks. It's in the Numbers Finally, I'd like to return to the portfolio's shifting size/sector makeup in recent months. One of the things that I find fascinating about quantitative analysis is that many of the trends that emerge over the course of market history aren't by chance; they are statistical manifestations of very real patterns of investor behavior. The small-cap example I discussed above is a great example. Small-caps tend to struggle in very rough periods because fears about their ability to remain liquid and viable run wild, while their larger peers are considered safer bets; when the crisis ends, investors realize they've overreacted and unfairly punished many good small stocks, and they dive back into them, leading to strong performance for that area of the market. I didn't design my models specifically to incorporate such broader market patterns, but I always find it interesting that their reading of fundamental stock data will often lead them to respond to or anticipate such trends, as they did when they piled into those beaten-down small-caps. They recognize where the best values are at a given time, and by gravitating toward those areas of the market, they can adapt quickly and often end up ahead of the curve on broader market trends. Of course, that's not always the case, as we saw in 2008. But the portfolio's long-term track record indicates that these quantitative approaches often hone in not only on strong individual stocks, but also broader categories of stocks that are poised for outperformance -- if you are disciplined enough to let them do so. As we move forward, I expect my models will continue to adapt to the ever-changing market conditions, and take advantage of them more often than not. By focusing on the numbers and on valuations, they'll help keep the portfolio out of the emotional traps into which many undisciplined investors fall, and keep it on the road to continued market outperformance.		Editor-in-Chief: John Reese Since Inception   Hot List 112.7% S&P 500 0.7% Accuracy 55.9% Beta 1.2 YTD   Hot List 29.7% S&P 500 11.5% Since Last Issue   Hot List -3.6% S&P 500 1.0% Avg. Fundamentals   Market Cap (mil) $22,100 PE Ratio 14.0 5 Yr EPS Growth 34.4% Yield 2.9% Rel. Strength 66 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! Guru Spotlight: John Neff Most investors wouldn't give a fund described as "relatively prosaic, dull, conservative" a second glance. That, however, is exactly how John Neff described the Windsor Fund that he headed for more than three decades. And, while his style may not have been flashy or eye-catching, the returns he generated for clients were dazzling -- so dazzling that Neff's track record may be the greatest ever for a mutual fund manager. By focusing on beaten down, unloved stocks, Neff was able to find value in places that most investors overlooked. And when the rest of the market caught on to his finds, he and his clients reaped the rewards. Over his 31-year tenure (1964-1995), Windsor averaged a 13.7 percent annual return, beating the market by an average of 3.1 percent per year. Looked at another way, a $10,000 investment in the fund the year Neff took the reins would have been worth more than $564,000 by the time he retired (with dividends reinvested); that same $10,000 invested in the S&P 500 (again with dividends reinvested) would have been worth less than half that after 31 years, about $233,000. That type of track record made the understated, low-key Neff a favorite manager of many other professional fund managers -- an "investor's investor", if you will. How did Neff do it? By focusing first and foremost on value, and a key part of how he found value involved the Price/Earnings Ratio. While others have called him a "contrarian" or "value investor", Neff writes in John Neff on Investing that, "Personally, I prefer a different label: 'low price-earnings investor.' It describes succinctly and accurately the investment style that guided Windsor while I was in charge." To Neff, the P/E ratio was key because it involved expectations. If investors were willing to buy stocks with high P/E ratios, they must be expecting a lot from them, because they are willing to pay more for each dollar of future earnings per share; conversely, if a stock has a low P/E ratio, investors aren't expecting much from it. Much like David Dreman, the great contrarian guru who we examined a few newsletters back, Neff found that stocks with lower P/E ratios -- and lower expectations -- tended to outperform, because any hint of improvement exceeded the low expectations investors had for them. Similarly, stocks with high P/Es often flopped, because even strong results couldn't match investors' expectations. To Neff, however, the P/E wasn't always a lower-is-better ratio. If investors knew that a firm was a dog, they'd rightly avoid its stock, giving it a low P/E ratio but little in the way of future growth prospects. Because of that, he wrote that Windsor targeted stocks with P/E ratios between 40 and 60 percent of the market average. While it was at the heart of his investment philosophy, the P/E ratio was also by no means the only metric Neff used to judge stocks. He wanted to see earnings growth, but here again it was not a case of more-is-better. A stock with too high a growth rate -- more than 20 percent -- could have trouble sustaining that growth over the long haul. He thus preferred to see growth between 7 and 20 percent per year, the kind of steady, unspectacular growth that could be sustained. Sustainable growth also meant growth that was driven by sales -- not one-time gains or cost-cutting measures. Neff thus liked to see companies whose earnings growth and sales growth were rising at similar rates. (My Neff-based model interprets this as sales growth needing to be at least 7 percent per year, or at least 70 percent of EPS growth.) One more key aspect of Neff's strategy involved dividends. He believed that many investors valued stocks strictly on their price appreciation potential, meaning that you can often essentially get their dividend payouts for free. He estimated that about two-thirds of Windsor's 3 percent per year market outperformance during his tenure came from dividends. To make sure that his analysis captured dividend payments, Neff used the Total Return/PE ratio. This measure divides a stock's total return (that is, its EPS growth rate plus its dividend yield) by its P/E ratio. He looked for stocks whose Total Return/PE ratios doubled either the market average or their industry average. Now, here's a look at the stocks that currently make up my 10-stock Neff-based portfolio: Becton, Dickinson and Co. (BDX) EZCorp, Inc. (EZPW) Universal Corporation (UVV) Molina Healthcare, Inc. (MOH) AmeriGroup Corporation (AGP) UniFirst Corporation (UNF) Fresenius Medical Care AG & Co. (FMS) UGI Corporation (UGI) Comfort Systems USA, Inc. (FIX) Barclays PLC (BCS) Just like Neff himself, the Neff-based model often treads into the most unloved parts of the market. These are often the kind of picks that take time to turn around. Because of that, last year was a particularly tough one for the Neff portfolio, as it lost about 48%. This year, however, patience is paying off for the portfolio, which is already up more than 30%. It's found big winners this year in a number of financial firms like Cash America International, Capstead Mortgage Corporation, Hatteras Financial, Banco Santander, State Street Corp., as well as printing & publishing firm Meredith Corporation -- all of which were the type of stocks many investors were fleeing earlier this year. I began tracking my Neff-based portfolio at the start of 2004, and despite its rough '08, it's still significantly ahead of the market. The portfolio, which had strong years in 2004, 2005, 2006, and is back on track this year, has gained about 14% since inception (2.4% annualized), not bad when you consider that the S&P has dropped more than 10% (about -2% annualized) in that period. And by continuing to snatch up those unloved, bargain stocks while others remain on the sidelines, I think it will extend its outperformance of the broader market over the long run. News about Validea Hot List Stocks Chevron Corp. (CVX): On Aug. 19, the Associated Press reported that Chevron said a subsidiary made two discoveries of natural gas off the coast of western Australia. The discoveries are in the Carnarvon Basin. Sociedad Quimica y Minera de Chile S.A. (SQM): On Aug. 11, SQM reported second-quarter net income of $83.1 million ($0.32 per ADR), down 34% from $125.7 million ($0.48 per ADR) in the year-ago period. Revenues were $344.8 million, a decrease of about 25% from a year earlier. Sales declined as the economy struggled, but have begun to recover, and the company expects volume for the second half of the year to be higher than it was in the first half of the year. The Next Issue In two weeks, we will publish another issue of the Hot List, at which time we will rebalance the portfolio. If you have any questions, please feel free to contact us at hotlist@validea.com.

Current Portfolio Ticker Company Name Industry Guru Score JOSB JOS. A. BANK CLOTHIERS, INC. Retail (Apparel) 81 FTO FRONTIER OIL CORPORATION Oil & Gas Operations 80 CVX CHEVRON CORPORATION Oil & Gas - Integrated 80 CPLA CAPELLA EDUCATION COMPANY Schools 71 ALGT ALLEGIANT TRAVEL COMPANY Airline 39 FUQI FUQI INTERNATIONAL, INC. Jewelry & Silverware 38 SQM SOCIEDAD QUIMICA Y MINERA (ADR) Chemical Manufacturing 37 MRO MARATHON OIL CORPORATION Oil & Gas - Integrated 35 LYG LLOYDS BANKING GROUP PLC (ADR) Money Center Banks 21 ASTE ASTEC INDUSTRIES, INC. Constr. - Supplies & Fixtures 9 Ticker Market Cap Date Added Start Price Current Price Return JOSB $699 2/20/2009 $23.85 $38.23 60.3% FTO $1,369 6/12/2009 $14.67 $13.08 -10.8% CVX $137,618 5/15/2009 $65.88 $68.62 4.2% CPLA $1,081 8/7/2009 $64.16 $64.65 0.8% ALGT $791 8/7/2009 $42.29 $39.59 -6.4% FUQI $685 6/12/2009 $16.80 $24.80 47.6% SQM $9,438 8/7/2009 $36.31 $35.86 -1.2% MRO $21,862 8/7/2009 $30.65 $30.89 0.8% LYG $46,857 8/7/2009 $7.12 $6.88 -3.4% ASTE $600 8/7/2009 $29.29 $26.64 -9.0%

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 JOSB   |   FTO   |   CVX   |   CPLA   |   ALGT   |   FUQI   |   SQM   |   MRO   |   LYG   |   ASTE   |   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 93, 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 0.52), 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 $23.9 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. JOSB with a price of $38.23 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: Value Investor Based on: Benjamin Graham 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% SECTOR: [PASS] FTO 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. FTO's sales of $5,494.5 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. FTO's current ratio of 2.38 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 FTO is $350.7 million, while the net current assets are $745.1 million. FTO passes this test. LONG-TERM EPS GROWTH: [PASS] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. FTO's EPS growth over that period of 2,476.5% passes the EPS growth test. P/E RATIO: [PASS] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. FTO's P/E of 14.04 (using the current 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. FTO's Price/Book ratio is 1.17, while the P/E is 14.04. FTO passes the Price/Book test.   CHEVRON CORPORATION Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy 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: 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. CVX's market cap of $137,618 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 ($0.52). CVX's cash flow per share of $13.67 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 (601 million shares). These are the more well known and highly traded companies. CVX, who has 2,000 million shares outstanding, passes this test. TRAILING 12 MONTH SALES: [PASS] A company's trailing 12 month sales ($200,405 million) are required to be 1.5 times greater than the mean of the market's trailing 12 month sales ($16,688 million). CVX 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. CVX, with a dividend yield of 3.96%, is one of the 50 companies that satisfy this last criterion.   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 1.62 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 $12.8 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 $64.65 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.   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: 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. 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 92, 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 23.40% ) 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: [FAIL] ALGT's trailing twelve-month Debt/Equity ratio (12.53%) is too high, according to this methodology. You can find other more superior companies that do not have 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 0.29), 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 $17.2 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. ALGT with a price of $39.59 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.   FUQI INTERNATIONAL, INC. Profile Strategy: Growth Investor Based on: Martin Zweig 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: 85% P/E RATIO: [PASS] The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. FUQI's P/E is 14.90, based on trailing 12 month earnings, while the current market PE is 17.00. Therefore, it passes the first test. REVENUE GROWTH IN RELATION TO EPS GROWTH: [PASS] Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. FUQI's revenue growth is 65.32%, while it's earnings growth rate is 42.99%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, FUQI passes this criterion. SALES GROWTH RATE: [PASS] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (50.8%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (41%) of the current year. Sales growth for the prior must be greater than the latter. For FUQI this criterion has been met. The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria. CURRENT QUARTER EARNINGS: [PASS] The first of these criteria is that the current EPS be positive. FUQI's EPS ($0.46) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. FUQI's EPS for this quarter last year ($0.25) pass this test. POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: [PASS] The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. FUQI's growth rate of 84.00% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [FAIL] Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for FUQI is 21.49%. This should be less than the growth rates for the 3 previous quarters which are 121.43%, 15.38% and 45.16%. FUQI does not pass this test, which means that it does not have good, reasonably steady earnings. This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: [PASS] If the growth rate of the prior three quarter's earnings, 44.05%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 84.00%, (versus the same quarter one year ago) then the stock passes. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 84.00% must be greater than or equal to the historical growth which is 42.99%. FUQI would therefore pass this test. EARNINGS PERSISTENCE: [PASS] Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. FUQI, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.34, 0.48, 0.50, 0.86 and 1.32, passes this test. LONG-TERM EPS GROWTH: [PASS] One final earnings test required is that the long-term earnings growth rate must be at least 15% per year. FUQI's long-term growth rate of 42.99%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test. TOTAL DEBT/EQUITY RATIO: [PASS] A final criterion is that a company must not have a high level of debt. A high level of total debt, due to high interest expenses, can have a very negative effect on earnings if business moderately turns down. If a company does have a high level, an investor may want to avoid this stock altogether. FUQI's Debt/Equity (20.56%) is not considered high relative to its industry (29.75%) and passes this test. INSIDER TRANSACTIONS: [PASS] A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For FUQI, this criterion has not been met (insider sell transactions are 0, while insiders buying number 0). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion.   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 (22.17) 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 (0.68) 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 (22.17) 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 (-3.35%) 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 0.35 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 0.35 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.   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: 83% 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 $46,857 million, therefore passing the test. EARNINGS TREND: [FAIL] A company should show a rising trend in the reported earnings for the most recent quarters. Unfortunately sufficient data is not available on LYG, hence an opinion cannot be rendered at this time. 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 (1,050.00%) has beaten that of the S&P (11.87%). 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 2.31, based on trailing 12 month earnings, meets the bottom 20% criterion (below 9.35), 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 3.15 meets the bottom 20% criterion (below 4.95) 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 0.85, which does not meet the bottom 20% criterion (below 0.67), and it therefore fails this test. PRICE/DIVIDEND (P/D) RATIO: [FAIL] 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 is not available, and hence an opinion cannot be rendered at this time. 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 82.75%. 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 15.31%, 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: [FAIL] The company in question should have a yield that is high and that can be maintained or increased. LYG's current yield is not available (or one is not paid) at the present time, while the market yield is 3.13%. Hence, this criterion cannot be evaluated.   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: 90% 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 0.73 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"? NO PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-Smokestack(non-cyclical) companies with a Price/Sales ratio between .75 and 1.5 are good values. Otherwise, Smokestack(cyclical) companies with a Price/Sales ratio between .4 and .8 represent good values. ASTE's P/S ratio of 0.73 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: [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. ASTE's free cash per share of -2.13 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. ASTE, whose three year net profit margin averages 6.20%, passes this evaluation.   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 TWGP TOWER GROUP, INC. Insurance (Prop. & Casualty) 65 VIT VANCEINFO TECHNOLOGIES INC. Software & Programming 63 GD GENERAL DYNAMICS CORPORATION Aerospace & Defense 63 APOL APOLLO GROUP, INC. Schools 53 ROST ROSS STORES, INC. Retail (Apparel) 51 CALM CAL-MAINE FOODS, INC. Fish/Livestock 49 OIS OIL STATES INTERNATIONAL, INC. Oil Well Services & Equipment 49 GR GOODRICH CORPORATION Aerospace & Defense 49 HUM HUMANA INC. Insurance (Accident & Health) 49 GYMB THE GYMBOREE CORPORATION Retail (Apparel) 47

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