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Executive Summary	March 18, 2011

The Economy The markets have been shaken over the past couple weeks by the continued turmoil in the Middle East and the tragic tsunami and earthquake that rocked Japan, but the global worries have yet to quash the U.S. economic recovery. The economy continues to be driven by manufacturing sector growth. Last week, the Institute for Supply Management announced that its manufacturing index jumped to 61.4% in February, hitting its highest level in nearly seven years. It was the 19th straight month ISM's index indicated an expansion in the manufacturing sector. The employment index of ISM's manufacturing report, meanwhile, not only improved -- it reached its highest level since January 1973. Overall, the economy added 192,000 jobs in February -- and, because 30,000 government jobs were cut, the private sector actually added 222,000, according to the Labor Department. The unemployment rate, which is based on a separate survey from the jobs-added report, fell only slightly to 8.9%, but nonetheless came in below 9% for the first time in almost two years. The broader, so-called "U-6" unemployment rate -- which includes discouraged workers who've given up looking for work and those who are working part time but want to work full time -- fell from 16.1% to 15.9%, dropping below 16% for the first time in nearly two years. The weekly unemployment numbers also continue to show things are looking up. New claims are 15% below the year-ago level, while continuing claims are 21% below their year-ago level. Retail sales, meanwhile, are continuing their impressive rebound. Retail and food service sales increased another 1.0% in February, according to the Census Bureau, and the January increase was also revised upward to 0.7% from 0.3%. Retail sales are now more than 15% off their December 2008 recessionary lows, and over $7 billion greater than their pre-recession high. Of course, there are a number of concerns about the economy, including oil prices, which remain near $100 despite having dipped on the Japan-related economic fears. I continue to think that oil prices won't throttle the recovery, with a good deal of the price increases coming from fear, not fundamentals. As I've noted before, Libya exports only about 80,000 barrels of oil a day to the U.S. -- a pretty insignificant figure. And while it exports a much more significant amount of oil to some of our trading partners like Italy and France, the domino effect on the U.S. shouldn't by itself be enough to halt growth here. Perhaps more concerning is the continuing surge in food prices. Producer prices for finished goods -- that is, prices paid by companies that sell the food to consumers -- jumped nearly 4% in February, the Labor Department reported this week. Crude producer food prices rose 6.7%. Weather, once again, was a big factor, with unusually cold temperatures the culprit this time. But rising global population and demand is also playing a role. As for the tragedy in Japan, much remains unknown. The human toll has been terrible; what the economic impact will be is unclear. About 10% of U.S. exports go to Japan; in the short-term, that figure would seem likely to decline. But looking further out, it's unclear, especially if the country takes on big stimulus efforts in order to spur a recovery. As for the fallout from the nuclear reactor trouble, I won't pretend to be a nuclear expert. We'll have to wait and see and hope for the best. But overall, despite its economic trouble in the past decade or two, Japan has proven to be a resilient nation with a strong, productive workforce. While there will be plenty of short-term impact on the markets and economy, I expect that over the longer term it will recover from these terrible losses. When all is said and done, the world's third-largest economy will remain an economic power. For the market, the past fortnight was a volatile one. Overall, the S&P 500 returned -4.3%, while the Hot List returned -1.8%. For the year, the portfolio stands at -0.6% vs. 1.3% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 168.3% vs. the S&P's 27.3% gain. The Myth of "Normal" Times It's been quite a month or two. So far in 2011, we've seen the downfall of multiple Middle East governments, including Tunisia and Egypt; mass uprisings in several other countries in the region, most notably Libya, where Muammar Gaddafi's forces are engaged in a violent conflict with anti-government forces; and now a horrific earthquake and tsunami that have devastated Japan, the world's third-largest economy. The events have certainly come as a shock to most. As often happens when crises hit, these global shockwaves have sent investors running for the door. And, as often happens in turbulent times, they've led pundits and members of the media saying that we're in a completely new era, one in which all the old rules go out the window. These are more examples of how these aren't the easy, happy-go-lucky times of the past, they say; we're now dealing with big problems and crises that very well may doom us. Consider one article that appeared this week on Yahoo! Finance, via CNBC. It was entitled, "Black Swans Now a Regular Part of Market Landscape", a reference to Nassim Taleb's book The Black Swan. "For global financial markets, once-in-a-lifetime events are happening with such regularity that black swans may as well be white swans," the article stated. "Such supposedly rare occurrences have dominated the markets for more than a decade. They include the Internet explosion in the late 1990s, the ensuing dotcom bubble burst and stock market selloff a few years later, the 2001 terrorist attacks, the collapse of the real estate market that began five years ago, and now, the events in the Middle East and Japan." Without getting into the exact definition Taleb used for a "black swan" event (and whether all the events listed above truly fit that definition), let's focus on the broader idea -- which seems to be that things are different now, and that we're experiencing shocks to the economic, political, and investing world on a level we've never before experienced. It's a scary idea, for sure, and one that probably leads many investors to consider ditching stocks and stuffing their money in their mattresses. The problem is, it's just not true. Yes, we've experienced some truly unexpected, remarkable events over the past 15 years or so, many of which have been anxiety-provoking, or downright scary. To the list above, you can add Hurricane Katrina, the devastating tsunami in the Indian Ocean in 2004, and the demise of Long-Term Capital Management and the subsequent fallout in the financial world. But go back another 15 years, from 1981 to 1996. In that timeframe, we went through the Iran hostage crisis, a presidential assassination attempt that left the president wounded; the invasion of Grenada; a nasty double-dip recession and accompanying double-digit inflation; the Chernobyl disaster; the terrorist bombing of Pan Am 103; the stock market crash of 1987; the first Gulf War, the Exxon Valdez oil spill, the eruption of war in the Balkans, the savings and loan scandal, and the first World Trade Center attack. And if you think the turmoil in the Middle East is a game-changer, how about the collapse of the USSR? The world's largest country, and one of its only two superpowers, completely imploded, and soon ceased to exist. "Normal", easy times? Hardly. Of course, the 15-year period before that was pretty uneventful. Except, that is, for man setting foot for the first time on a celestial body besides Earth; a major escalation of the Vietnam War that resulted in tens of thousands of U.S. casualties; the most widespread displays of civil disobedience that we've seen in our lifetimes in this country; the only resignation of a sitting president in American history; an oil crisis that led to skyrocketing gas prices and shortages; inflation that nearly touched 15%; the Six-Day War, Yom Kippur War, and explosion of the Israel-Palestine conflict; the Afghan-Soviet war; the overthrow of the government in Iran, and the opening up and modernization of communist China. This is becoming dangerously close to a remake of Billy Joel's "We Didn't Start the Fire", so I'll stop here. You get the picture, though. There always have been -- and always will be -- crises in America and throughout the world. There always have been -- and always will be -- threats to our safety, security, stability, and prosperity. (Quick -- since 1900, what's the longest America has gone without being involved in a war or major, prolonged international conflict? A mere 23 years -- the period between the end of World War I and our entrance into World War II, a "calm" era that featured the worst stock market crash in history and the only depression in our nation's history.) The grass of times past has a way of looking oh-so-green, but the reality is that it's strewn with just as many weeds and brown spots as it is today. None of this is to dismiss any of the current crises. The natural disasters, political conflicts, and financial disasters we've witnessed in recent years are all very serious issues, and will require a great deal of hard work and diligence to deal with. What's important to note, however, is that we as a society have a remarkable record of dealing with crises very similar to these, and moving past them. As Warren Buffett wrote in his recent letter to Berkshire Hathaway shareholders: "Commentators often talk of "Great Uncertainty." But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain. Don't let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential - a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War - remains alive and effective." In fact, in some ways, we are more stable than we were 20 or 30 or 50 years ago. Consider the way technology has improved the response time fire, police, and military forces in terms of responding to emergencies or natural disasters. Think of how advances in transportation and communication have led to the continuing globalization of world markets, which, in turn, has made major world powers more mutually dependent -- and, perhaps, less likely to enter into major wars. Even the stability of our leadership has been greater in recent years than the past; since 1840, the longest the U.S. has gone without a president dying (either of natural causes or assassination) or being wounded while in office is 30 years -- these past 30 years. Staying Disciplined Amid Crises What does all this mean for investors? Well, when crises hit, I often keep in mind the work of David Dreman, one of the gurus upon whose writings I base my strategies. In his Contrarian Investment Strategies, Dreman wrote a lot about "crisis investing". He explained what tends to happen in a crisis: "In each case, the crisis is the major news of the day. Legions of experts are interviewed, most making dour forecasts of structural damage to the nation. A common theme is 'things will never be the same again.' Because the nation, if not the world, is focused on the crisis, the media is in its glory. A crisis sells newspapers, builds ratings, and peddles advertising." Sound familiar? Well, with investors being bombarded with negative news, many inevitably head for the door. Such climates "let loose overreaction at its wildest," Dreman wrote. "People no longer examine what a stock is worth; instead, they are fixated by prices cascading ever lower." And, he notes, people always seem to think this crisis is different: "The event triggering the crisis is always considered to be something entirely new; nothing in our experience shows us how to cope with the current catastrophe," he writes. "'Sell, sell, sell,' the savants chorus." The reality, however, is that we have a history of recovering from crises. And because of investors' short memories, times of crisis often actually make for good investment opportunities. In his book, Dreman looked at 11 major postwar crises, which included the Berlin blockade, Korean War, Kennedy assassination, Gulf of Tonkin crisis, 1979-1980 oil crisis, and 1990 Persian Gulf War. He showed how, one year after all but one (the Berlin Blockade, when the market dropped), the market was up between 22.9 percent and 43.6 percent, except for a 7.2 percent rise after the Gulf of Tonkin crisis. The average gain was 25.8 percent. Two years after the crisis, the average gain was 37.5 percent. It's worth noting that following the September 11 terrorist attacks, which occurred after Dreman wrote Contrarian Investment Strategies, it took just one month for the S&P 500 to climb back to pre-September 11 levels; a year after the attacks, however, the index had fallen below pre-September 11 levels, the dot-com meltdown no doubt being a factor. Dreman's analysis isn't completely comprehensive, but he provides enough data to support his broader point: Bad news often gives the market the jitters, only to have it recover when the bad news turns out not to be as devastating as first feared, and the savvy investor can take advantage of that knowledge. Does that mean you should run out and buy up every stock you can when a crisis hits? No. But, to me, it means that you should not cash in all your chips and head for the hills -- too often, that leads to selling low and buying high. If you have a disciplined, proven investing system, you should stick to it. That's what we'll continue to do with the Hot List, focusing on proven, solid firms with good fundamentals and financials, whose shares are selling at attractive prices. And over time, I believe that will continue to leave us far ahead of those who bail on stocks every time trouble hits.		Editor-in-Chief: John Reese Since Inception   Hot List 168.3% S&P 500 27.3% Accuracy 56.4% Beta 1.2 YTD   Hot List -0.6% S&P 500 1.3% Since Last Issue   Hot List -1.8% S&P 500 -4.3% Avg. Fundamentals   Market Cap (mil) $11,216 PE Ratio 34.9 5 Yr EPS Growth 27.6% Yield 2.5% Rel. Strength 53 Portfolio Sectors Services 5 Technology 3 Consumer Cyclical 1 Healthcare 1
Advertisement Validea Capital Management - Private Portfolio Management Based on Strategies of Legends Are you looking for an alternative to your underperforming mutual funds or financial advisor? Click here to download Validea Capital's investment kit and learn more about the firm's guru-based portfolios. Get More Information on Validea Capital! ** Validea Capital Management is a separate investment advisory firm managed by Validea.com founder John Reese. Thre information above in not intended as personal investment advice and should not be interpreted as such. The Fallen As we rebalance the Validea Hot List, 6 stocks leave our portfolio. These include: Lincoln Educational Services Corporation (LINC), Telefonica S.a. (Adr) (TEF), Tower Group, Inc. (TWGP), Dollar Tree, Inc. (DLTR), Ensco Plc (ESV) and Lululemon Athletica Inc. (LULU). The Keepers 4 stocks remain in the portfolio. They are: Western Digital Corp. (WDC), Aeropostale, Inc. (ARO), Gamestop Corp. (GME) and Acme Packet, Inc. (APKT). The Newbies We are adding 6 stocks to the portfolio. These include: Pre-paid Legal Services, Inc. (PPD), Tractor Supply Company (TSCO), Skechers Usa, Inc. (SKX), Sanofi-aventis Sa (Adr) (SNY), Bridgepoint Education, Inc. (BPI) and Opentable Inc (OPEN). Portfolio Changes Additions   PRE-PAID LEGAL SERVICES, INC. PPD TRACTOR SUPPLY COMPANY TSCO SKECHERS USA, INC. SKX SANOFI-AVENTIS SA (ADR) SNY BRIDGEPOINT EDUCATION, INC. BPI OPENTABLE INC OPEN Deletions   LINCOLN EDUCATIONAL SERVICES CORPORATION LINC TELEFONICA S.A. (ADR) TEF TOWER GROUP, INC. TWGP DOLLAR TREE, INC. DLTR ENSCO PLC ESV LULULEMON ATHLETICA INC. LULU Newcomers to the Validea Hot List Pre-Paid Legal Services (PPD):: Oklahoma-based Pre-Paid ($640 million market cap) offers a variety of plans through which customers gain access to legal services for a monthly fee, which can be as low as $26. The services include help with both traditional legal problems and with everyday endeavors like buying a car or dealing with a problem with an insurance company. The firm serves more than 1.4 million families in the U.S. and Canada through a network of independent law firms. Pre-Paid gets high marks from my Joel Greenblatt- and Peter Lynch-based models. To read more about it, check out the "Detailed Stock Analysis" section below. Tractor Supply Company (TSCO): Tractor Supply is the largest retail farm and ranch store chain in the U.S., with more than 1,000 retail stores in 44 states. The Brentwood, Tenn.-based firm has a $3.9 billion market cap, and has taken in more than $3.6 billion in sales in the past year. Tractor Supply gets strong interest from my Warren Buffett- and James O'Shaughnessy-based approaches. See the "Detailed Stock Analysis" section below to learn more about it. OpenTable, Inc. (OPEN): Based in San Francisco, OpenTable works with more than 20,000 restaurants and their customers, allowing customers to make real-time online reservations. It also offers restaurants an electronic reservation book, which allows the eateries to streamline their reservation process, and build a database of customers that can be used to enhance service and for marketing purposes. OpenTable has operations in the U.S., Canada, Germany, Japan, Mexico, and the United Kingdom. OpenTable ($2.1 billion market cap) gets solid scores from several of my growth stock approaches, including my Motley Fool- and Martin Zweig-inspired models. Scroll down to the "Detailed Stock Analysis" section to learn more about the stock. Sanofi-Aventis SA (SNY): Headquartered in Paris with operations in more than 100 countries, Sanofi makes a wide array of drugs, including Allegra (allergies) and Ambien CR (a prescription sleeping aid). The $85 billion market cap firm -- which recently took over biotech firm Genzyme -- has taken in more than $44 billion in sales in the past year. Sanofi-Aventis gets strong interest from my Benjamin Graham-, Peter Lynch-, and James O'Shaughnessy-based models. To read more about the stock, check out the "Detailed Stock Analysis" section below. Skechers USA (SKX): This trendy California-based retailer specializes in casual footwear for men, women, and children, and also sells some other clothing and apparel. It sells its products through its own retail stores, and through department stores, specialty stores, and the Internet. The firm also uses a network of distributors and subsidiaries in Canada, Brazil, Asia, and Europe to sell its merchandise in more than 100 countries and territories. Skechers, which has a market cap of $912 million, also owns such brands as Unltd. By Marc Ecko and Zoo York. Skechers gets approval from two of my guru-based strategies, those that I base on the writings of Benjamin Graham and Peter Lynch. To read more about it, scroll down to the "Detailed Stock Analysis" section below. Bridgepoint Education, Inc. (BPI): For-profit education companies have gotten a lot of negative press over the past year, but my models think this San Diego-based firm, which owns and operates Ashford University and University of the Rockies, has been hit too hard. Two of my models, those I base on the writings of Joel Greenblatt and Peter Lynch, have strong interest in Bridgepoint, which has a market cap just below $1 billion. Scroll down to the "Detailed Stock Analysis" section to find out more about the stock. News about Validea Hot List Stocks Western Digital Corp. (WDC): Western reached a deal last week to acquire Hitachi Global Storage Technologies in a cash and stock transaction valued at approximately $4.3 billion. Company officials said the deal is expected to enhance R&D capabilities, expand product portfolio, and offer economies of scale. The deal has been approved by the board of directors of each company and is expected to close during the third calendar quarter of 2011. Western said the transaction should immediately add to its earnings per share on a non-GAAP basis, excluding acquisition-related expenses, restructuring charges, and amortization of intangibles. Aeropostale, Inc. (ARO): On March 10, Aeropostale reported that fourth-quarter earnings fell 13%, as costs rose and sales came in weaker than expected. Net earnings for the three months ending Jan. 29 were $83.8 million, or 95 cents per share, down from $96.6 million, or 99 cents per share, for the year-ago period, the Associated Press reported. Removing a higher-than-expected tax rate that Aeropostale said took 3 cents from per-share earnings, the firm had EPS of 98 cents for the quarter, 1 cent better than what analysts expected but below the firm's own expectations, AP reported. Revenue was up almost 5%, however, and beat analysts' expectations. For the full 2011 fiscal year, Aeropostale reported net income of $231.3 million, or $2.49 per share, up from $229.5 million, or $2.27 per share, in the year-ago period. Revenue increased almost 8% to $2.4 billion. Shares took a big dip on the news, but recouped much of the losses over the next couple days. 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 ARO AEROPOSTALE, INC. Retail (Apparel) 100 WDC WESTERN DIGITAL CORP. Computer Storage Devices 89 BPI BRIDGEPOINT EDUCATION, INC. Schools 83 APKT ACME PACKET, INC. Communications Equipment 69 PPD PRE-PAID LEGAL SERVICES, INC. Personal Services 64 OPEN OPENTABLE INC Software & Programming 63 TSCO TRACTOR SUPPLY COMPANY Retail (Home Improvement) 63 SNY SANOFI-AVENTIS SA (ADR) Biotechnology & Drugs 58 GME GAMESTOP CORP. Retail (Technology) 57 SKX SKECHERS USA, INC. Footwear 56 Ticker Market Cap Date Added Start Price Return ARO $2,077 11/26/2010 $26.90 $23.61 -12.2% WDC $7,793 2/18/2011 $33.24 $33.64 1.2% BPI $960 3/18/2011 TBD $18.08 TBD APKT $4,485 2/18/2011 $72.92 $68.87 -5.6% PPD $638 3/18/2011 TBD $65.39 TBD OPEN $2,119 3/18/2011 TBD $90.33 TBD TSCO $3,889 3/18/2011 TBD $53.42 TBD SNY $86,130 3/18/2011 TBD $33.06 TBD GME $3,176 9/3/2010 $19.01 $20.98 10.4% SKX $894 3/18/2011 TBD $18.55 TBD

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 ARO   |   WDC   |   BPI   |   APKT   |   PPD   |   OPEN   |   TSCO   |   SNY   |   GME   |   SKX   |   AEROPOSTALE, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Aeropostale, Inc. is a mall-based specialty retailer of casual apparel and accessories. The Company designs, markets and sells its own brand of merchandise principally targeting 14 to 17 year-old young women and young men. The Company also sells Aropostale merchandise through its e-commerce Website, www.aeropostale.com. During the fiscal year ended January 30, 2010 (fiscal 2009), the Company launched P.S. from Aeropostale, which offers casual clothing and accessories focused on elementary school children between the ages of 7 and 12. During fiscal 2009, the Company completed the closure of its 14 store Jimmy'Z concept. Jimmy'Z Surf Co., Inc., a wholly owned subsidiary of Aeropostale, Inc., was a contemporary lifestyle brand targeting young women and men aged 18 to 25. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider ARO a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (9.39) relative to the growth rate (29.59%), 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 ARO (0.32) 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. ARO, whose sales are $2,400.4 million, needs to have a P/E below 40 to pass this criterion. ARO's P/E of (9.39) is considered acceptable. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for ARO is 29.6%, 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 ARO (0.00%) to be wonderfully low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for ARO (-2,407,394.84%) 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 ARO (12.64%) 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.   WESTERN DIGITAL CORP. Profile Strategy: Value Investor Based on: Benjamin Graham Western Digital Corporation (WD) designs, develops, manufactures and sells hard drives. It sells its products worldwide to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) for use in computer systems, subsystems or consumer electronics (CE) devices, and to distributors, resellers and retailers. Its hard drives are used in desktop computers, notebook computers, and enterprise applications such as servers, workstations, network attached storage, storage area networks and video surveillance equipment. Its hard drives are used in CE applications, such as digital video recorders (DVRs), and satellite and cable set-top boxes (STBs). It also sells its hard drives as stand-alone storage products by integrating them into finished enclosures, embedding application software and offering the products as WD-branded external storage appliances for personal data backup and portable or expanded storage of digital music, video and other digital data. Analysis Guru Score: 71% SECTOR: [FAIL] WDC is in the Technology sector, which is one sector that this methodology avoids. Technology and financial stocks were considered too risky to invest in when this methodology was published. At that time they were not the driving force of the market as they are today. Although this methodology would avoid WDC, we will provide the rest of the analysis, as we feel times have changed. SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than $340 million. WDC's sales of $9,894.0 million, based on trailing 12 month sales, pass this test. CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. WDC's current ratio of 2.39 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 WDC is $231.0 million, while the net current assets are $2,976.0 million. WDC passes this test. LONG-TERM EPS GROWTH: [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. EPS for WDC were negative within the last 5 years and therefore the company fails this criterion. P/E RATIO: [PASS] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. WDC's P/E of 8.50 (using the 3 year PE) passes this test. PRICE/BOOK RATIO: [PASS] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. WDC's Price/Book ratio is 1.51, while the P/E is 8.50. WDC passes the Price/Book test.   BRIDGEPOINT EDUCATION, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Bridgepoint Education, Inc. (Bridgepoint) is a accredited provider of postsecondary education services. The Company offers associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences. It delivers its programs online, as well as at its traditional campuses located in Clinton, Iowa, and Colorado Springs, Colorado. As of December 31, 2009, it offered approximately 1,150 courses, 60 degree programs and 125 specializations and concentrations. As of December 31, 2009, it had 53,688 students enrolled in its institutions, 99% of whom were attending classes online. Analysis Guru Score: 90% PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical (non-Smokestack) companies with Price/Sales ratio between .75 and 1.5 are good values. BPI's P/S ratio of 1.35 based on trailing 12 month sales, falls within the "good values" range for non-cyclical companies and is considered attractive. TOTAL DEBT/EQUITY RATIO: [PASS] Less debt equals less risk according to this methodology. BPI's Debt/Equity of 0.00% is exceptional, thus passing the test. PRICE/RESEARCH RATIO: [PASS] This methodology considers companies in the Technology and Medical sectors to be attractive if they have low Price/Research ratios. BPI 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 BPI At this Point Is BPI a "Super Stock"? NO PRICE/SALES RATIO: [FAIL] The prospective company should have a low Price/Sales ratio. To be considered a "Super Stock", non-cyclical (non-Smokestack) companies should have Price/Sales ratios below .75. However, BPI, who has a P/S of 1.35, does not fall within the "Super Stock" range. It does fall between 0.75 and 1.5, which is considered the "good values" range for non-cyclical companies. Nonetheless, it does not pass this "Super Stock" criterion. LONG-TERM EPS GROWTH RATE: [PASS] This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. BPI's inflation adjusted EPS growth rate of 24.24% 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. BPI's free cash per share of 2.74 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. BPI, whose three year net profit margin averages 13.46%, passes this evaluation.   ACME PACKET, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Acme Packet, Inc., incorporated on August 3, 2000, provides session border controllers (SBCs) that enable service providers, enterprises, government agencies and contact centers to deliver interactive communications, such as voice, video and other real-time multimedia sessions, across Internet protocol (IP) network borders. The Company's Net-Net product supports a range of communications applications at multiple network border points and also supports service architectures, such as IP Multimedia Subsystem (IMS). The Company's Net-Net family of products consists of the Net-Net OS software platform, the 2600, 3800, 4250, 4500 and 9200 platforms; 4500 Advanced Telecommunications Computing Architecture blade (ATCA blade); and Element Management System (EMS), Session Analysis System (SAS), and Route Manager Central (RMC), management applications. On April 30, 2009, the Company acquired Covergence Inc. Analysis Guru Score: 85% P/E RATIO: [FAIL] The P/E of a company must be greater than 5 to eliminate weak companies, not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. APKT's P/E is 108.46, based on trailing 12 month earnings, while the current market P/E is 15.00. Therefore, it fails 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. APKT's revenue growth is 27.71%, while it's earnings growth rate is 16.85%, based on the average of the 3 and 4 year historical eps growth rates. Therefore, APKT 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 (70.2%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (55.7%) of the current year. Sales growth for the prior must be greater than the latter. For APKT 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. APKT's EPS ($0.21) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. APKT's EPS for this quarter last year ($0.14) 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. APKT's growth rate of 50.00% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [PASS] Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for APKT is 8.42%. This should be less than the growth rates for the 3 previous quarters, which are 160.00%, 366.67%, and 150.00%. APKT passes this test, which means that it has good, reasonably steady earnings. This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: [PASS] If the growth rate of the prior three quarter's earnings, 200.00%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 50.00%, (versus the same quarter one year ago) then the stock fails, with one exception: if the growth rate in earnings between the current quarter and the same quarter one year ago is greater than 30%, then the stock would pass. The growth rate over this period for APKT is 50.0%, and it would therefore pass this test. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 50.00% must be greater than or equal to the historical growth which is 16.85%. APKT would therefore pass this test. EARNINGS PERSISTENCE: [FAIL] Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. APKT, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.50, 0.30, 0.18, 0.28, and 0.63, fails 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. APKT's long-term growth rate of 16.85%, based on the average of the 3 and 4 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. APKT's Debt/Equity (0.00%) is not considered high relative to its industry (33.61%) 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 APKT, this criterion has not been met (insider sell transactions are 146, while insiders buying number 43). Despite the fact that insider sells out number insider buys for this company, Zweig considers even one insider buy transaction enough to prevent an insider sell signal, therefore there is not an insider sell signal and the stock passes this criterion.   PRE-PAID LEGAL SERVICES, INC. Profile Strategy: Value Investor Based on: Benjamin Graham Pre-Paid Legal Services, Inc. designs, underwrites and markets legal expense plans. The Company's life events legal plans (referred to as Memberships) provide for a range of legal services.The identity theft related benefits include a credit report and related instructional guide, a credit score and related instructional guide, credit report monitoring with daily online and monthly offline notification of any changes in credit information and identity theft restoration services. As of December 31, 2009, the Company had 1,547,585 Memberships in force with members in all 50 states, the District of Columbia and the Canadian provinces of Ontario, British Columbia, Alberta and Manitoba. Approximately 90% of such Memberships were in 29 states and provinces. Analysis Guru Score: 71% SECTOR: [PASS] PPD 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. PPD's sales of $453.9 million, based on trailing 12 month sales, pass this test. CURRENT RATIO: [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. PPD's current ratio of 1.50 fails 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 PPD is $0.9 million, while the net current assets are $27.7 million. PPD 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. PPD's EPS growth over that period of 319.9% 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. PPD's P/E of 11.60 (using the 3 year PE) passes this test. PRICE/BOOK RATIO: [FAIL] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. PPD's Price/Book ratio is 6.99, while the P/E is 11.60. PPD fails the Price/Book test.   OPENTABLE INC Profile Strategy: Growth Investor Based on: Martin Zweig OpenTable, Inc. (OpenTable) provides solution that forms an online network connecting reservation-taking restaurants and people who dine at those restaurants. Its solutions include its Electronic Reservation Book (ERB), for restaurant customers and www.opentable.com, a restaurant reservation Website for diners. The OpenTable network includes approximately 12,000 OpenTable restaurant customers spanning all 50 states, as well as select markets outside of the United States. During the year ended December 31, 2009, the Company seated an average of approximately four million diners per month. Restaurants pays OpenTable an one-time installation fee for onsite installation and training, a monthly subscription fee for the use of its software and hardware and a fee for each restaurant guest seated through online reservations. Analysis Guru Score: 85% P/E RATIO: [FAIL] The P/E of a company must be greater than 5 to eliminate weak companies, not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. OPEN's P/E is 155.07, based on trailing 12 month earnings, while the current market P/E is 15.00. Therefore, it fails 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. OPEN's revenue growth is 35.88%, while it's earnings growth rate is 61.38%, based on the average of the 3 and 4 year historical eps growth rates. Sales growth is not at least 85% of EPS growth so the initial part of this criteria is not met, however, since both sales growth and eps growth are greater than 30%, that requirement is waived and the company passes this test. SALES GROWTH RATE: [PASS] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (60.5%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (43.9%) of the current year. Sales growth for the prior must be greater than the latter. For OPEN 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. OPEN's EPS ($0.21) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. OPEN's EPS for this quarter last year ($0.13) 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. OPEN's growth rate of 61.54% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [PASS] Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for OPEN is 30.69%. This should be less than the growth rates for the 3 previous quarters, which are 450.00%, 266.67%, and 300.00%. OPEN passes this test, which means that it has good, reasonably steady earnings. This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: [PASS] If the growth rate of the prior three quarter's earnings, 322.22%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 61.54%, (versus the same quarter one year ago) then the stock fails, with one exception: if the growth rate in earnings between the current quarter and the same quarter one year ago is greater than 30%, then the stock would pass. The growth rate over this period for OPEN is 61.5%, and it would therefore pass this test. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 61.54% must be greater than or equal to the historical growth which is 61.38%. OPEN would therefore pass this test. EARNINGS PERSISTENCE: [FAIL] Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. OPEN, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.02, 0.84, -0.10, 0.22, and 0.58, fails 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. OPEN's long-term growth rate of 61.38%, based on the average of the 3 and 4 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. OPEN's Debt/Equity (0.00%) is not considered high relative to its industry (25.91%) 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 OPEN, this criterion has not been met (insider sell transactions are 78, while insiders buying number 38). Despite the fact that insider sells out number insider buys for this company, Zweig considers even one insider buy transaction enough to prevent an insider sell signal, therefore there is not an insider sell signal and the stock passes this criterion.   TRACTOR SUPPLY COMPANY Profile Strategy: Growth Investor Based on: Martin Zweig Tractor Supply Company is an operator of retail farm and ranch stores in the United States. The Company operates retail stores under the names Tractor Supply Company and Del's Farm Supply and operate a Website under the name TractorSupply.com. Its stores are located in towns outlying metropolitan markets and in rural communities, and offer a selection of merchandise, which include equine, pet and small animal products, including items necessary for their health, care, growth and containment; hardware and seasonal products, including lawn and garden power equipment; truck, towing and tool products; work/recreational clothing and footwear for the entire family; maintenance products for agricultural and rural use, and home decor, candy, snack food and toys. 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. TSCO's P/E is 23.69, based on trailing 12 month earnings, while the current market PE is 15.00. Therefore, it passes the first test. REVENUE GROWTH IN RELATION TO EPS GROWTH: [FAIL] 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. TSCO's revenue growth is 11.19%, while it's earnings growth rate is 18.90%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, TSCO fails 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 (19.7%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (11.1%) of the current year. Sales growth for the prior must be greater than the latter. For TSCO 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. TSCO's EPS ($0.67) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. TSCO's EPS for this quarter last year ($0.51) 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. TSCO's growth rate of 31.37% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [PASS] Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for TSCO is 9.45%. This should be less than the growth rates for the 3 previous quarters, which are 1,200.00%, 36.00%, and 40.71%. TSCO passes this test, which means that it has good, reasonably steady earnings. This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: [PASS] If the growth rate of the prior three quarter's earnings, 44.97%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 31.37%, (versus the same quarter one year ago) then the stock fails, with one exception: if the growth rate in earnings between the current quarter and the same quarter one year ago is greater than 30%, then the stock would pass. The growth rate over this period for TSCO is 31.4%, and it would therefore pass this test. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 31.37% must be greater than or equal to the historical growth which is 18.90%. TSCO 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. TSCO, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 1.15, 1.24, 1.44, 1.63 and 2.25, 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. TSCO's long-term growth rate of 18.90%, 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. TSCO's Debt/Equity (0.15%) is not considered high relative to its industry (70.37%) 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 TSCO, this criterion has not been met (insider sell transactions are 38, while insiders buying number 47). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion.   SANOFI-AVENTIS SA (ADR) Profile Strategy: Value Investor Based on: Benjamin Graham Sanofi-Aventis is a pharmaceutical group engaged in the research, development, manufacture and marketing of healthcare products. The Company's business includes two main activities: pharmaceuticals and human vaccines through sanofi pasteur. It is also present in animal health products through Merial Limited (Merial). In its pharmaceutical activity, it specializes in six therapeutic areas: diabetes, oncology, thrombosis and cardiovascular, central nervous system (CNS), and internal medicine. The global portfolio of sanofi-aventis also consists of a range of other pharmaceutical products in Consumer Health Care (CHC) and other prescription drugs, including generics. It offers vaccines in five areas: pediatric combination vaccines, influenza vaccines, adult and adolescent booster vaccines, meningitis vaccines and travel and endemic vaccines. In October 2010, Siegfried Holding AG sold its PulmoJet Inhalation Project to the Company. In February 2011, the Company acquired BMP Sunstone Corp. Analysis Guru Score: 100% SECTOR: [PASS] SNY 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. SNY's sales of $44,919.2 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. SNY's current ratio of 2.30 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 SNY is $9,387.7 million, while the net current assets are $21,481.6 million. SNY 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. SNY's EPS growth over that period of 141.7% 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. SNY's P/E of 11.29 (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. SNY's Price/Book ratio is 1.16, while the P/E is 11.29. SNY passes the Price/Book test.   GAMESTOP CORP. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher GameStop Corp. (GameStop) is a retailer of video game products and personal computer (PC) entertainment software. The Company sells new and used video game hardware, video game software and accessories, as well as PC entertainment software, and related accessories and other merchandise. As of January 30, 2010, the Company operated 6,450 stores in the United States, Australia, Canada and Europe, primarily under the names GameStop and EB Games. GameStop also operates the electronic commerce Website www.gamestop.com and publish Game Informer, a multi-platform video game magazine in the United States based on circulation, with approximately 4 million subscribers. During the fiscal year ended January 30, 2010 (fiscal 2009), GameStop operated its business in four segments: United States, Canada, Australia and Europe. 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. GME's P/S of 0.34 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. GME's Debt/Equity of 8.98% 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. GME 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 GME At this Point Is GME 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.GME's P/S ratio of 0.34 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%. GME's inflation adjusted EPS growth rate of 28.78% 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. GME's free cash per share of 2.86 passes this criterion. THREE YEAR AVERAGE NET PROFIT MARGIN: [FAIL] This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. GME, whose three year net profit margin averages 4.25%, fails this evaluation.   SKECHERS USA, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Skechers U.S.A., Inc. (Skechers) design and market Skechers-branded contemporary footwear for men, women and children under several lines. addition to Skechers-branded lines, the Company also offers several designer, fashion and street-focused footwear lines for men, women and children. These lines are branded and marketed separately from Skechers and appeal to specific audiences. Its brands are sold through department stores, specialty stores, athletic retailers, and boutiques as well as catalog and Internet retailers. Along with wholesale distribution, its footwear is available at its e-commerce Website and its own retail stores. Skechers operates 90 concept stores, 92 factory outlet stores and 37 warehouse outlet stores in the United States, and 22 concept stores and five factory outlets internationally. The Company operates in four reportable segments: domestic wholesale sales, international wholesale sales, retail sales, and e-commerce sales. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: SKX is considered a "True Stalwart", according to this methodology, as its earnings growth of 18.98% lies within a moderate 10%-19% range and its annual sales of $2,007 million are greater than the multi billion dollar level. This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. SKX is attractive if SKX can hold its own during a recession. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for SKX was 15.60% last year, while for this year it is 19.86%. 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 (4.26%) is below 5%. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for SKX (0.35), based on the average of the 3, 4 and 5 year historical eps growth rates, is excellent. EARNINGS PER SHARE: [PASS] The EPS for a stalwart company must be positive. SKX's EPS ($2.78) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for SKX (9.03%) to be exceptionally low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for SKX (-14.23%) 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 SKX (20.01%) 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 MWIV MWI VETERINARY SUPPLY, INC. Biotechnology & Drugs 56 AZN ASTRAZENECA PLC (ADR) Biotechnology & Drugs 55 SBS COMPANHIA DE SANEAMENTO BASICO (ADR) Water Utilities 54 CHSI CATALYST HEALTH SOLUTIONS, INC. Insurance (Accident & Health) 50 LLY ELI LILLY & CO. Major Drugs 48 DECK DECKERS OUTDOOR CORPORATION Footwear 47 TI TELECOM ITALIA S.P.A. (ADR) Communications Services 46 HS HEALTHSPRING, INC Insurance (Accident & Health) 46 ASYS AMTECH SYSTEMS, INC. Semiconductors 45 VSH VISHAY INTERTECHNOLOGY Semiconductors 45

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