Executive Summary  |   Portfolio  |   Guru Analysis  |   Watch List

Executive Summary	June 5, 2015

The Economy Just as the International Monetary Fund is urging the Federal Reserve to hold off on increasing interest rates because of a subpar US economy, America's economic data seems to be improving. The manufacturing sector expanded in May for the 29th straight month, according to the Institute for Supply Management, for example, doing so at an accelerating pace. New orders picked up and are at a strong pace, and employment conditions improved during the month as well, according to ISM. ISM also said the service sector expanded in May for the 64nd straight month, doing so at a slower, but still very solid, pace than it did in April. The group's new orders and employment sub-indices also weren't quite as strong as they were in April, but they were still very solid. New claims for unemployment remain at very low levels, having stayed about flat since our last newsletter. They are almost 13% below year-ago levels. Continuing claims, the data for which lag new claims by a week, have moved slightly lower since our last newsletter and are 16% below year-ago levels. Inflation remains tame, but there are signs that could be changing. The Consumer Price Index rose 0.1% in April, according to the Labor Department. That put it 0.2% behind its year-ago pace. But if you strip out volatile food and energy prices, so-called "core" inflation rose 0.3% in April, and is 1.8% ahead of its year-ago pace. In addition, ISM's prices indices for both the manufacturing and services sectors jumped sharply in May. They are coming off of very low levels, however, and collectively don't paint a picture of major inflation -- yet. After being flat in March, personal income jumped 0.4% in April, according to the Commerce Department. Real disposable personal income rose 0.3%. Real personal consumption expenditures were flat for the month. More income and flat spending meant that the personal savings rate rose from 5.2% to a very solid 5.6%. Earnings season is just about done, meanwhile, and the results have been mixed. With all but 6 of the S&P 500 companies having reported, 71% have beaten earnings estimates, according to FactSet. Top-line results have been much weaker, with 45% of firms beating sales estimates. Overall, earnings are up 0.7% for the quarter. That's the lowest since the third quarter of 2012. Energy sector declines amid the oil price plunge were the reason for the weak performance -- excluding energy companies, S&P firms' earnings are up on average by 8.5% in Q1. The results are also better than expected. In late March, analysts had expected S&P earnings to decline at a 4.7% pace in the quarter. Revenues are down 2.9% for the quarter, slightly worse than the late-March estimate of -2.6%. Gas prices keep rebounding. As of June 2, a gallon of regular unleaded on average cost $2.75, up from $2.61 a month earlier. That's still far below the year-ago level of $3.67, however. As for the IMF, the group urged the Fed to hold off on raising rates until next year, saying in its annual report on the U.S. economy that "the underpinnings for continued growth and job creation remain in place." But it added that America's "momentum was sapped in recent months by a series of negative shocks" that include a tough winter and an export-sapping strong dollar. It now expects the U.S. economy to grow 2.4% in 2015. That's down from the 3.1% prediction it made in April. Since our last newsletter, the S&P 500 returned -1.6%, while the Hot List returned -3.5%. So far in 2015, the portfolio has returned 9.1% vs. 1.8% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 252.8% vs. the S&P's 109.5% gain. The Rate Hikes Are Coming, The Rate Hikes Are Coming! (Some Day. Honest ... ) While the IMF wants the Federal Reserve to hold off on increasing interest rates until next year, it's still anyone's guess as to what the Fed will do. The consensus seems to be that rate hikes will begin in September, but a lot can happen between now and then. Still, given what we've seen in the economy over the past couple years, and given the language in the Fed's own statements, it seems more likely than not that rates will start to increase sooner rather than later. With that in mind, I spent a lot of time this week researching the impact of interest rates on equities -- after all, the specter of rising rates seems to be one of the main concerns among investors these days. So, what did I find? Well, I can tell you with certainty that if rates start rising, stocks will go down. That is, unless they go up. I don't mean to be glib. But the reality is that, while many believe that higher rates in and of themselves are negative for stocks, history has shown that what happens after rate hikes is far from certain. For example, Robert Johnson, Gerald Jensen and Luis Garcia-Feijoo, authors of the book Invest With the Fed, looked at returns of U.S. stocks and other assets in relation to Federal Reserve rate moves going back to 1966. Earlier this year, The Wall Street Journal's Jason Zweig said that they found that "stocks typically aren't devastated when rates rise. But on average, they show, U.S. stocks barely keep pace with inflation during periods of tightening Fed policy -- and, surprisingly, Treasury bonds outperform stocks during such periods." In restrictive periods -- when the Fed was raising rates -- stocks returned just 0.8% annualized after inflation, according to the research. That's disconcerting. But according to another researcher, Javier Estrada of the IESE Business School in Barcelona, data shows that there is no consistent historical relationship between interest rates and the stock market, MarketWatch reported in 2013. (Estrada also found that the so-called "Fed Model" -- the idea that equities should command higher P/E ratios when rates are low, and vice versa -- is likely based on coincidence. While the theory has fit in the U.S. over the past few decades, Estrada found that in the 100 years before 1980, it didn't hold up. He also found no consistent relationship between P/Es and interest rates in 19 other countries.) Further muddying the waters, in any given period involving rising rates, stock returns have varied wildly. In a 2013 piece for Financial Advisor magazine, Rob Brown looked at S&P 500 returns during 12 month periods in economic expansions when interest rates rose the most, going back to the 1920s. As a proxy for interest rates, he used the 10-year Treasury yield. To get an idea of how different the results can be, we need look no further than the three most recent rising-rate periods on his list. In the 12-month stretch ending May 31, 2004, the S&P jumped 18.3%; in the 12 months ending October 31, 1994, the index posted much more moderate gains of 3.9%; and in the 12 months ending May 31, 1984, the results were flat-out poor, with the S&P losing 3.1%. The lack of consistency in how stocks behave when rates rise is partly because not every rate hike is the same. Investors will certainly view a 1% rate increase differently if the starting point for the increase is 1.5% as opposed to 6%, for example. Then there is the fact that it is extremely hard to isolate the impact of rate increases. Increasing rates may be a drag on stock returns, but if the reason rates are being increased is that the economy is strengthening, investors may see that as a net positive. And that's an incredibly simplistic example. So many factors influence stocks on a day to day and week to week basis that it's nearly impossible to look at stock market performance after a rate increase and say with certainty that the performance is directly attributable first and foremost to the rate changes. That being said, with regard to today's environment, when rates do rise, they will be rising from historically low levels. That's significant, according to Doug Ramsey of the Leuthold Group. He has studied stock valuations and bond yield data going back to 1878, according to The New York Times, and he's found that while bond yields do impact equity valuations, stocks don't seem to run into big trouble until 10-year Treasury yields hit 6%. At those levels, Ramsey said, bonds "are truly thought of as potential replacements or substitutes for long-term stock returns." Currently, we're nowhere near 6% Treasury yields -- the 10-year is yielding 2.31% (as of June 4). Ramsey's research intrigued me because it echoed that of Martin Zweig, one of the gurus of whom I base my investment models. In addition to his fundamental stockpicking criteria, Zweig also did extensive research on how interest rate changes impact stocks. Generally, he found that rising rates were a bearish signal, and falling rates were a bullish signal. But when it came to the indicator that he based on the prime rate (the rate banks charge their best clients), Zweig made a distinction: In general, rate increases that occurred when the prime rate was already above 8% were considered more bearish than when the prime rate was below 8%. (Currently, the prime rate is just 3.25%.) It makes sense that rate hikes have a more negative impact when rates are already high, as Zweig and Ramsey suggest. If Treasurys are yielding, say, 2.5%, and over the course of a year they go up a full percentage point, the new 3.5% yield still doesn't offer stocks much competition. For Corporate America, meanwhile, interest rates are the cost of capital. While corporations would certainly want those costs to be as low as possible, it stands to reason that their businesses would not be devastated by rates rising slightly off of very low levels. Is that the key, then? Are rate hikes bad for stocks when rates are already high, and not that bad when the starting point is low? For a moment I thought that might really be the key, especially when you consider those three periods I mentioned above from Rob Brown's piece. In that 12-month stretch ending May 31, 2004, when the S&P jumped 18.3% as rates were rising, the starting point was low -- the 10-year Treasury yield was in the 4% range. In the 12 months ending October 31, 1994, when the index posted ho-hum gains of 3.9%, the 10-year Treasury started out in the moderate 6% range; and in the 12 months ending May 31, 1984, when the stock returns were flat-out poor (-3.1%), the rate increases occurred at a time when the 10-year was already yielding double-digits. The theory fits! Not so fast. If you dig deeper, you'll find plenty of exceptions. In the 12 months ending Jan. 31, 1980, for example, stocks rose more than 20%, even though rates were rising off a double-digit starting point. In the 12 months ending July 31, 1957, meanwhile, stocks returned less than 1% amid rate hikes that brought the effective Federal Funds rate to a still-low 3.25%. And those aren't the only exceptions. So much for the rising-rate silver bullet. A Bullish Takeaway? When I started writing this I had hoped to reach some sort of definitive (or close to definitive) conclusion about what interest rate hikes would mean in the current environment. But after looking at a good deal of data, all that seems clear to me is that there is no clarity. (In fact, I haven't even touched on another factor that makes the looming rate hikes hard to figure. That is the fact that rates are usually increased as a way to cool off an overheating economy, but in the current situation, the increases would simply be a normalizing process following a financial crisis.) All of that reinforces my belief that investing systematically and not letting macroeconomic factors sway you is the best way to go. Think about it: Even if there were a clear answer as to how interest rate hikes impact equities, it wouldn't really do us any good as investors. That's because there are so many other factors at work in the market. Interest rates could be giving a clear, unequivocal bullish or bearish signal, and that signal would be one of dozens, perhaps hundreds directing stocks. So many pundits and strategists seem to talk about interest rate hikes with both fearfulness and certainty that after examining the issue I was a bit taken aback at how inconclusive the data actually is. But the more I think about it, the more I think that's a good thing. The more people talk about how rate increases are going to derail the bull market, the more stable becomes the "Wall of Worry" that keeps equity prices from getting too bloated, which is good for bull markets. I'm not saying the rate-increase fears are "false fears", as Kenneth Fisher would say; when the Fed finally does start increasing rates, it may turn out to be a negative. But history shows that it's far from a slam-dunk case -- and there's certainly not enough evidence for us to alter our long-term approach. We'll stay disciplined, focus on undervalued stocks of solid companies, and leave the rate-hike guessing-game to others.		Editor-in-Chief: John Reese Since Inception   Hot List 252.8% S&P 500 109.5% Accuracy 55.0% Beta 1.2 YTD   Hot List 9.1% S&P 500 1.8% Since Last Issue   Hot List -3.5% S&P 500 -1.6% Avg. Fundamentals   Market Cap (mil) $4,234 PE Ratio 12.8 5 Yr EPS Growth 23.7% Yield 1.2% Rel. Strength 62 Portfolio Sectors Financial 3 Services 3 Technology 1 Basic Materials 1 Capital Goods 1 Consumer/Non-Cyclical 1
The Fallen As we rebalance the Validea Hot List, 4 stocks leave our portfolio. These include: Lannett Company, Inc. (LCI), Eplus Inc. (PLUS), World Acceptance Corp. (WRLD) and Credit Acceptance Corp. (CACC). The Keepers 6 stocks remain in the portfolio. They are: Sanderson Farms, Inc. (SAFM), Jones Lang Lasalle Inc (JLL), Universal Insurance Holdings, Inc. (UVE), Chart Industries, Inc. (GTLS), Amtrust Financial Services Inc (AFSI) and Trueblue Inc (TBI). The Newbies We are adding 4 stocks to the portfolio. These include: Sasol Limited (Adr) (SSL), Silicon Motion Technology Corp. (Adr) (SIMO), Lumber Liquidators Holdings Inc (LL) and Heritage Insurance Holdings Inc (HRTG). Portfolio Changes Additions   SASOL LIMITED (ADR) SSL SILICON MOTION TECHNOLOGY CORP. (ADR) SIMO LUMBER LIQUIDATORS HOLDINGS INC LL HERITAGE INSURANCE HOLDINGS INC HRTG Deletions   LANNETT COMPANY, INC. LCI EPLUS INC. PLUS WORLD ACCEPTANCE CORP. WRLD CREDIT ACCEPTANCE CORP. CACC Newcomers to the Validea Hot List Silicon Motion Technology Corporation (SIMO): Silicon Motion is a fabless semiconductor company that makes high-performance, low-power semiconductor solutions for the multimedia consumer electronics market. Its products include mobile storage, mobile communications, multimedia systems-on-a-chip (SoCs) and other products. Silicon Motion ($1.2 billion market cap) gets strong interest from my Peter Lynch-based model and high marks from several other strategies. To read more about it, scroll down to the "Detailed Stock Analysis" section. Sasol Limited (SSL): This South Africa-based firm ($23 billion market cap) is an international integrated energy and chemicals company which has more than 33,000 people working in 37 countries. It develops and commercializes technologies, and builds and operates world-scale facilities to produce a range of product streams, including liquid fuels, high-value chemicals and low-carbon electricity. Sasol, a former Hot List member, was hit hard by the oil price declines in 2014 and earlier this year, but its strong fundamentals earn it strong interest from my Peter Lynch- and Benjamin Graham-based models. For more on the stock, see the "Detailed Stock Analysis" section below. Heritage Insurance Holdings, Inc. (HRTG): This property and casualty insurance holding company provides personal residential insurance for single-family homeowners and condominium owners in Florida. Its subsidiary, Heritage Property & Casualty Insurance Company, writes approximately $500 million of personal and commercial residential premium through a large network of agents. Heritage ($650 million market cap) gets strong interest from my Motley Fool- and Peter Lynch-based models. For more on the stock, see the "Detailed Stock Analysis" section below. Lumber Liquidators Holdings (LL): It's been a horrible stretch for this Virginia-based hardwood flooring retailer, whose CEO and CFO of both resigned in the wake of allegations that the firm used wood products that had excessive levels of potentially dangerous chemicals in them. Investors have fled the stock in droves. But my models think that investors have done what they often do when scandal or bad news hits: overreact. My Warren Buffett- and Peter Lynch-based models think the stock has sunk to levels that now make it attractive. Stocks like Lumber Liquidators create a real challenge for quantitative investors. With these sort of greatly maligned firms, just about any investor's first instinct is going to be to avoid the stock like the plague. But history has shown that sticking to the cold, hard numbers and not reacting to headlines and hype is the way to win over the long haul. Vetoing fear-inducing picks that a good strategy recommends is a slippery slope and can often lead to trouble. That is why we are sticking with our approach and adding Lumber Liquidators to the portfolio today. News about Validea Hot List Stocks Chart Industries (GTLS): Chart announced that it has entered into a definitive agreement to acquire vaporizer manufacturer Thermax, Inc. in a deal whose terms were not disclosed. Thermax, which will be operated as part of Chart's Distribution & Storage business segment, has annual revenue of approximately $25 million. The firm is a leading provider of cryogenic fluid vaporizers utilized in industrial gas, petro-chemical, and liquefied natural gas applications. Chart expects the acquisition to be accretive to future earnings within the first twelve months. 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 UVE UNIVERSAL INSURANCE HOLDINGS, INC. Insurance (Prop. & Casualty) 96 AFSI AMTRUST FINANCIAL SERVICES INC Insurance (Prop. & Casualty) 96 HRTG HERITAGE INSURANCE HOLDINGS INC Insurance (Prop. & Casualty) 90 GTLS CHART INDUSTRIES, INC. Misc. Capital Goods 85 SAFM SANDERSON FARMS, INC. Food Processing 76 LL LUMBER LIQUIDATORS HOLDINGS INC Retail (Home Improvement) 72 SSL SASOL LIMITED (ADR) Chemical Manufacturing 69 SIMO SILICON MOTION TECHNOLOGY CORP. (ADR) Semiconductors 64 JLL JONES LANG LASALLE INC Real Estate Operations 62 TBI TRUEBLUE INC Business Services 60 Ticker Market Cap Date Added Start Price Current Price Return UVE $928 3/13/2015 $24.58 $25.90 5.4% AFSI $5,062 5/8/2015 $58.12 $61.41 5.7% HRTG $655 6/5/2015 TBD $21.98 TBD GTLS $983 3/13/2015 $33.50 $32.17 -4.0% SAFM $1,741 1/16/2015 $80.96 $77.67 -4.1% LL $575 6/5/2015 TBD $21.23 TBD SSL $22,270 6/5/2015 TBD $33.88 TBD SIMO $1,186 6/5/2015 TBD $34.56 TBD JLL $7,732 2/13/2015 $161.15 $172.34 6.9% TBI $1,204 5/8/2015 $28.43 $28.70 0.9%

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 UVE   |   AFSI   |   HRTG   |   GTLS   |   SAFM   |   LL   |   SSL   |   SIMO   |   JLL   |   TBI   |   UNIVERSAL INSURANCE HOLDINGS, INC. Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Universal Insurance Holdings, Inc. (UIH) is a vertically integrated insurance holding company. The Company's insurance products are offered to its customers through Universal Property & Casualty Insurance Company (UPCIC) and American Platinum Property and Casualty Insurance Company (APPCIC), (collectively the Insurance Entities). Substantially all aspects of insurance underwriting, distribution and claims processing are covered through the Company's subsidiaries. Blue Atlantic Reinsurance Corporation (BARC), a wholly owned subsidiary of UIH, is a reinsurance intermediary broker. The Insurance Entities generate revenues primarily from the collection of premiums. Universal Risk Advisors, Inc. (URA), the Company's managing general agent, generates revenue through policy fee income and other administrative fees from the marketing of the Insurance Entities' insurance products through its distribution network of independent agents. Analysis Guru Score: 100% 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. UVE's profit margin of 20.50% 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. UVE, with a relative strength of 96, satisfies this test. COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [PASS] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for UVE (63.16% for EPS, and 39.70% for Sales) are good enough to pass. INSIDER HOLDINGS: [PASS] UVE's insiders should own at least 10% (they own 10.94% ) 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. UVE's free cash flow of $2.70 per share passes this test. PROFIT MARGIN CONSISTENCY: [PASS] UVE's profit margin has been consistent or even increasing over the past three years (Current year: 19.77%, Last year: 19.58%, Two years ago: 11.23%), 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 UVE's case. CASH AND CASH EQUIVALENTS: [PASS] UVE's level of cash $115.4 million passes this criteria. If a company is a cash generator, like UVE, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash. "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 (UVE's is 0.31), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. UVE passes this test. The following criteria for UVE are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] UVE has not been significantly increasing the number of shares outstanding within recent years which is a good sign. UVE currently has 36.0 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. UVE's sales of $398.8 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". UVE passes the sales test. DAILY DOLLAR VOLUME: [PASS] UVE passes the Daily Dollar Volume (DDV of $8.5 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. UVE with a price of $25.90 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] UVE's income tax paid expressed as a percentage of pretax income this year was (42.81%) and last year (41.35%) 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.   AMTRUST FINANCIAL SERVICES INC Profile Strategy: Growth Investor Based on: Martin Zweig Amtrust Financial Services, Inc., (AmTrust) is a provider of property and casualty insurance. The Company operates in four business segments: small commercial business, Specialty Risk and Extended Warranty, specialty program and personal lines reinsurance. Small Commercial Business segment provides workers' compensation to small businesses. The Company's Specialty Risk and Extended Warranty segment provides coverage for consumer and commercial goods and custom designed coverages. The Company's Specialty Program segment provides workers' compensation, package products, general liability, commercial auto liability, excess and surplus lines programs and other specialty commercial property and casualty insurance. The Company subsidiaries include: Technology Insurance Company, Inc. (TIC), Rochdale Insurance Company (RIC), AmTrust Insurance Company of Kansas, Inc. (AICK), AmTrust Lloyd's Insurance Company of Texas (ALIC), Oryx Insurance Brokerage, Inc. and TMI Solutions, LLC. Analysis Guru Score: 77% 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. AFSI's P/E is 10.17, 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. AFSI's revenue growth is 44.22%, while it's earnings growth rate is 30.29%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, AFSI passes this criterion. SALES GROWTH RATE: [FAIL] 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 (16.6%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (28.3%) of the current year. Sales growth for the prior must be greater than the latter. For AFSI this criterion has not been met and fails this test. 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. AFSI's EPS ($1.85) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. AFSI's EPS for this quarter last year ($1.26) 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. AFSI's growth rate of 46.83% 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 AFSI is 15.14%. This should be less than the growth rates for the 3 previous quarters which are -32.83%, 166.22% and 7.32%. AFSI 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, 18.08%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 46.83%, (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, 46.83% must be greater than or equal to the historical growth which is 30.29%. AFSI 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. AFSI, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 1.95, 2.29, 2.34, 3.56 and 5.45, 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. AFSI's long-term growth rate of 30.29%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test.   HERITAGE INSURANCE HOLDINGS INC Profile Strategy: Growth Investor Based on: Martin Zweig Heritage Insurance Holdings, Inc., formerly Heritage Insurance Holdings, LLC., is a property and casualty insurance holding company. Through Its subsidiary, Heritage Property & Casualty Insurance Company (Heritage P&C), the Company provides personal residential insurance for single-family homeowners and condominium owners in Florida. The Company is vertically integrated and control or manage substantially all aspects of insurance underwriting, actuRoboto analysis, distribution and claims processing and adjusting. As of March 31, 2014, it had approximately 140,000 policies in force, approximately 89% of which were assumed from Citizens. As of March 31, 2014, Citizens had approximately 940,000 insurance policies, of which approximately 690,000 were personal residential policies. Analysis Guru Score: 77% 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. HRTG's P/E is 9.32, 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. HRTG's revenue growth is 163.60%, while it's earnings growth rate is 44.14%, based on the average of the 3 and 4 year historical eps growth rates. Therefore, HRTG passes this criterion. SALES GROWTH RATE: [FAIL] 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 (139.6%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (157.9%) of the current year. Sales growth for the prior must be greater than the latter. For HRTG this criterion has not been met and fails this test. 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. HRTG's EPS ($1.00) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. HRTG's EPS for this quarter last year ($0.27) 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. HRTG's growth rate of 270.37% 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 HRTG is 22.07%. This should be less than the growth rates for the 3 previous quarters which are -73.19%, 83.33% and 2,066.67%. HRTG 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, -15.09%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 270.37%, (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, 270.37% must be greater than or equal to the historical growth which is 44.14%. HRTG 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. HRTG, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.21, 1.14, -0.19, 1.17, and 1.82, 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. HRTG's long-term growth rate of 44.14%, based on the average of the 3 and 4 year historical eps growth rates, passes this test. INSIDER TRANSACTIONS: [PASS] A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For HRTG, this criterion has not been met (insider sell transactions are 29, while insiders buying number 5). 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.   CHART INDUSTRIES, INC. Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Chart Industries, Inc. is an independent global manufacturer of engineered equipment used in the production, storage and end-use of hydrocarbon and industrial gases. The Company supplies engineered equipment used throughout the global liquid gas supply chain. It operates in three segments: energy and chemicals (E&C), distribution and storage or (D&S), and biomedical. The E&C and D&S segments manufacture products used primarily in energy-related and general industrial applications, such as the separation, liquefaction, distribution and storage of hydrocarbon and industrial gases. Through its BioMedical segment, it supplies cryogenic and other equipment used in the storage and distribution of biological materials and oxygen, used primarily in the medical, biological research and animal breeding industries. 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. GTLS's P/S ratio of 0.84 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. GTLS's Debt/Equity of 24.01% 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. GTLS 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 GTLS At this Point Is GTLS 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, GTLS, who has a P/S of 0.84, 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%. GTLS's inflation adjusted EPS growth rate of 19.99% 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. GTLS's free cash per share of 1.84 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. GTLS, whose three year net profit margin averages 6.98%, passes this evaluation.   SANDERSON FARMS, INC. Profile Strategy: Value Investor Based on: Benjamin Graham Sanderson Farms, Inc. is a poultry processing company which is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared chicken items. In addition, the Company is engaged in the processing, marketing and distribution of prepared chicken through its wholly owned subsidiary, Sanderson Farms, Inc. (Foods Division). It produces a range of processed chicken products and prepared chicken items. It sells ice pack, chill pack, bulk pack and frozen chicken, in whole, cut-up and boneless form, under the Sanderson Farms brand name to retailers, distributors, and casual dining operators in the south-eastern, south-western, north-eastern and western United States and to customers who resell frozen chicken into export markets. During the fiscal year ended October 31, 2013 (fiscal 2013), it processed 452 million chickens, or over 3.0 billion dressed pounds. Analysis Guru Score: 71% SECTOR: [PASS] SAFM 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. SAFM's sales of $2,913.2 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. SAFM's current ratio of 3.47 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 SAFM is $0.0 million, while the net current assets are $374.8 million. SAFM 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 SAFM 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. SAFM's P/E of 12.40 (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. SAFM's Price/Book ratio is 1.79, while the P/E is 12.40. SAFM fails the Price/Book test.   LUMBER LIQUIDATORS HOLDINGS INC Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Lumber Liquidators Holdings, Inc. is a retailer of hardwood flooring in North America. The Company offers an extensive selection of premium hardwood flooring products under multiple proprietary brands at low prices designed to appeal to a diverse customer base. The Company and its subsidiaries operate through a network of around 318 Lumber Liquidators stores with 309 located throughout the United States and nine in Ontario, Canada. The Company offers an extensive assortment of exotic and domestic hardwood species, engineered hardwood, laminate, vinyl plank, bamboo and cork direct to the consumer. It also provides a wide selection of flooring enhancements and accessories, including moldings, noise-reducing underlay, adhesives and flooring tools. The Company's customer is the homeowner, or a contractor on behalf of a homeowner. The Company's subsidiaries include Lumber Liquidators, Inc., Lumber Liquidators Services, LLC and Lumber Liquidators Canada Inc. 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. LL's P/S of 0.54 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. LL'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. LL 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 LL At this Point Is LL 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.LL's P/S ratio of 0.54 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%. LL's inflation adjusted EPS growth rate of 24.18% 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. LL's free cash per share of -0.51 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. LL, whose three year net profit margin averages 6.53%, passes this evaluation.   SASOL LIMITED (ADR) Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Sasol Limited (Sasol) is a South Africa-based international integrated energy and chemicals company. The Company develops and commercializes technologies, builds and operates facilities to produce a range of product streams, including liquid fuels, high-value chemicals and low-carbon electricity. The Company's operations are organized into three focused business clusters: South African Energy Cluster; International Energy Cluster and Chemical Cluster. The South African Energy Cluster is involved in coal mining, gas production, synfuels manufacturing and oil refining. The International Energy Cluster manages the Company's oil and gas business outside South Africa. The Chemical Cluster is involved in making polymers, solvents, olefins and surfactants and other chemicals. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: SSL is considered a "True Stalwart", according to this methodology, as its earnings growth of 15.49% lies within a moderate 10%-19% range and its annual sales of $16,504 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. SSL is attractive if SSL 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 SSL was 13.31% last year, while for this year it is 13.20%. Since inventory to sales has decreased from last year by -0.11%, SSL passes this test. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for SSL (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. SSL's EPS ($4.71) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for SSL (19.57%) to be acceptable (equity is three to ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for SSL (1.98%) 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 SSL (-11.34%) 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.   SILICON MOTION TECHNOLOGY CORP. (ADR) Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Silicon Motion Technology Corporation is a Taiwan-based holding company. The Company develops microcontroller ICs for NAND flash storage devices and specialty RF ICs for mobile devices. The Company designs, develops and markets, low-power semiconductor solutions to OEMs and other customers in the mobile storage and mobile communications markets. For the mobile storage market, the Company's key products are microcontrollers used in solid state storage devices such as SSDs, eMMCs and other embedded flash applications, as well as removable storage products. For the mobile communications market, the Company's key products are handset transceivers and mobile TV IC solutions. The Company's products are used in smartphones, tablets, and industrial and commercial applications. 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. SIMO's profit margin of 17.69% 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. SIMO, with a relative strength of 95, satisfies this test. COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [FAIL] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for SIMO (340.00% for EPS, and 16.19% for Sales) are not good enough to pass. INSIDER HOLDINGS: [PASS] SIMO's insiders should own at least 10% (they own 11.33% ) 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. SIMO's free cash flow of $1.08 per share passes this test. PROFIT MARGIN CONSISTENCY: [FAIL] The profit margin in the past must be consistently increasing. The profit margin of SIMO has been inconsistent in the past three years (Current year: 15.37%, Last year: 12.15%, Two years ago: 16.78%), which is unacceptable. This inconsistency will carryover directly to the company's bottom line, or earnings per share. R&D AS A PERCENTAGE OF SALES: [PASS] SIMO is either maintaining the same levels of R&D expenditures(currently $61.0 million) or increasing these levels which is a good sign. This allows the company to develop the superior technology and new products that will put everyone else out of business. This criterion is particularly important for high-tech and medical stocks because they are so R&D dependant. CASH AND CASH EQUIVALENTS: [PASS] SIMO's level of cash $194.9 million passes this criteria. If a company is a cash generator, like SIMO, 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 SIMO was 14.94% last year, while for this year it is 15.24%. Although the inventory 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. 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 SIMO was 13.74% last year, while for this year it is 9.97%. Since the AR to sales is decreasing by -3.77% the stock passes this criterion. LONG TERM DEBT/EQUITY RATIO: [PASS] SIMO's trailing twelve-month Debt/Equity ratio (0.00%) is at a great level according to this methodology because the superior companies that you are looking for don't need to borrow money in order to grow. "THE FOOL RATIO" (P/E TO GROWTH): [PASS] The "Fool Ratio" is an extremely important aspect of this analysis. If the company has attractive fundamentals and its Fool Ratio is 0.5 or less (SIMO's is 0.47), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. SIMO passes this test. The following criteria for SIMO are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [FAIL] SIMO has either issued a significant amount of new shares over the past year or has been issuing more and more shares over the past five years. SIMO currently has 35.0 million shares outstanding. Neither of these are a good sign. Generally when a small-cap company issues more stock, the existing stock becomes devalued by the market, and hence diluted. 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. SIMO's sales of $317.1 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". SIMO passes the sales test. DAILY DOLLAR VOLUME: [PASS] SIMO passes the Daily Dollar Volume (DDV of $22.9 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. SIMO with a price of $34.56 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] SIMO's income tax paid expressed as a percentage of pretax income this year was (26.58%) and last year (26.30%) 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.   JONES LANG LASALLE INC Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Jones Lang LaSalle Incorporated (Jones Lang LaSalle), is a financial and professional services firm specializing in real estate. Jones Lang LaSalle has over 200 corporate offices worldwide and operations in more than 1,000 locations in 70 countries. The Company offers integrated real estate and investment management services on a local, regional and global basis to owner, occupier and investor clients. It delivers an array of Real Estate Services (RES) across its three geographic business segments: the Americas, Europe, Middle East and Africa (EMEA), and Asia Pacific. LaSalle Investment Management, a wholly owned member of the Jones Lang LaSalle group that consists of its fourth business segment, is a diversified real estate investment management company. In July 2014, Jones Lang LaSalle Inc acquired CLEO Construction Management (CLEO), a construction project management services firm that specializes in medical facilities. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: This methodology would consider JLL a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (18.96) relative to the growth rate (28.39%), based on the average of the 3 and 4 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 JLL (0.67) 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. JLL, whose sales are $5,595.7 million, needs to have a P/E below 40 to pass this criterion. JLL's P/E of (18.96) 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 JLL is 28.4%, based on the average of the 3 and 4 year historical eps growth rates, which is acceptable. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for JLL (27.13%) to be acceptable (equity is three to ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for JLL (6.12%) 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 JLL (-4.64%) 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.   TRUEBLUE INC Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher TrueBlue, Inc., is a provider of temporary blue-collar staffing. The Company provides blue-collar staffing services to industries that include construction, manufacturing, transportation, aviation, waste, hospitality, retail, energy, and many more. The Company has a network of 757 branches in all 50 states, Puerto Rico and Canada. The Company operates as labor ready for general labor through Spartan Staffing for light industrial, CLP Resources for skilled trades, PlaneTechs for aviation and transportation mechanics and technicians, and Centerline Drivers for drivers. The Company's service lines include Providing blue-collar temporary labor services; serve customers who have a need for temporary staff to perform blue-collar tasks which do not require a permanent employee; build a temporary workforce through recruiting, screening and on-boarding. Temporary workers are dispatched to customers where they work under the supervision of its customers. 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. TBI's P/S of 0.51 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. TBI's Debt/Equity of 23.31% 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. TBI 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 TBI At this Point Is TBI 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.TBI's P/S ratio of 0.51 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%. TBI's inflation adjusted EPS growth rate of 36.91% 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. TBI's free cash per share of 0.74 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. TBI, whose three year net profit margin averages 2.71%, fails 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 WRLD WORLD ACCEPTANCE CORP. Consumer Financial Services 64 PNFP PINNACLE FINANCIAL PARTNERS Regional Banks 57 ECPG ENCORE CAPITAL GROUP, INC. Regional Banks 56 AAPL APPLE INC. Communications Equipment 54 DG DOLLAR GENERAL CORP. Retail (Department & Discount) 52 BMA BANCO MACRO SA (ADR) Money Center Banks 51 HIMX HIMAX TECHNOLOGIES, INC. (ADR) Semiconductors 51 PII POLARIS INDUSTRIES INC. Recreational Products 48 PVTB PRIVATEBANCORP INC Regional Banks 48 NOV NATIONAL-OILWELL VARCO, INC. Oil Well Services & Equipment 42

Disclaimer

The names of individuals (i.e., the 'gurus') appearing in this report are for identification purposes of his methodology only, as derived by Validea.com from published sources, and are not intended to suggest or imply any affiliation with or endorsement or even agreement with this report personally by such gurus, or any knowledge or approval by such persons of the content of this report. All trademarks, service marks and tradenames appearing in this report are the property of their respective owners, and are likewise used for identification purposes only. Validea is not registered as a securities broker-dealer or investment advisor either with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. Validea is not responsible for trades executed by users of this site based on the information included herein. The information presented on this website does not represent a recommendation to buy or sell stocks or any financial instrument nor is it intended as an endorsement of any security or investment. The information on this website is generic by nature and is not personalized to the specific situation of any individual. The user therefore bears complete responsibility for their own investment research and should seek the advice of a qualified investment professional prior to making any investment decisions. Performance results are based on model portfolios and do not reflect actual trading. Actual performance will vary based on a variety of factors, including market conditions and trading costs. Past performance is not necessarily indicative of future results. Individual stocks mentioned throughout this web site may be holdings in the managed portfolios of Validea Capital Management, a separate asset management firm founded by Validea.com founder John Reese. Validea Capital Management, which is a separate legal entity and an SEC registered investment advisory firm, uses, in part, the strategies on the web site to select stocks for its clients.