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Executive Summary	March 16, 2012

The Economy Despite a chorus of doubters, the U.S. economy is continuing to build on the solid turnaround that began last fall, with good news coming from two key and inextricably linked areas: the job market and the consumer sector. The private sector added 233,000 jobs in February, the Labor Department announced last week, and the January figure was revised significantly upward (to 285,000 from 257,000), as was the December figure (to 234,000 from 220,000). The headline unemployment rate held steady at 8.3% -- it's now declined or stayed the same in eight straight months. The so-called "U-6" unemployment rate (which takes into account some categories that the headline number does not, like discouraged workers who have given up looking for a job) declined for the fifth straight month, falling to 14.9%. That's still very high, but it marks the first time the figure has fallen below 15% in three years. Employers are also indicating that they are going to continue to step up hiring. For the coming second quarter, Manpower Inc.'s employment index -- which is based on a survey that asks employers whether they plan to increase, decrease, or hold steady their payrolls -- reached its highest mark since 2008. Nine out of ten firms said they are planning to keep payrolls steady or increase them. With more Americans employed, retail and food service sales are not surprisingly continuing to rise. They increased 1.1% in February, according to the Commerce Department, the biggest increase in five months. The January figure was also revised upward to 0.6% (from 0.4%). Retail and food service sales have now increased for nine straight months, a good sign for our consumer- and service-driven economy. Speaking of the service sector, it grew in February for the 26th straight month, and it did so at the fastest rate in a year, according to the Institute for Supply Management. A sub-index indicated that new orders also grew at the fastest pace in a year. Inventories and prices both jumped, however, which is something to keep an eye on. Another area to keep an eye on: inflation, particularly in commodities. A revised report from the Bureau of Labor Statistics showed that the overall consumer price index rose a very reasonable 0.2% in January vs. the previous month, putting it an also reasonable 2.9% above the year-ago level. But food prices were up 4.4% year-over-year, and fuel oil was up more than 12% year-over-year. And as you probably know all too well, gas prices have only increased since then. A gallon of unleaded regular gas was selling on average for $3.81 in the U.S. as of March 13, up more than 8% in the past month alone. So far, the rise in gas prices hasn't kept the economy from moving forward, but continued increases will at some point act as a drag on growth. Overseas, Greece finally reached a deal regarding its debt. The markets haven't had a whole lot to say about that, perhaps because many seemed to expect a deal would be reached sooner or later. How the deal plays out will of course be intently watched. Since our last newsletter, the S&P 500 returned 2.1%, while the Hot List returned 3.8%. So far in 2012, the portfolio has returned 20.1% vs. 11.5% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 171.5% vs. the S&P's 40.2% gain. Assets and Inflation With the economy showing solid improvement and gas and food prices continuing to rise, concerns about inflation have again come to the forefront of many investors' minds. Actually, they've been at or near the top of the list of concerns for many investors ever since the Federal Reserve and U.S. government unleashed their efforts to combat the financial crisis of 2008-09. Since the last week of August 2008, the Fed's balance sheet has more than tripled, with the total factors supplying reserve funds surging from about $939 billion to more than $2.9 trillion. The Fed's purchasing of Treasury bonds as part of its quantitative easing plans has been a big factor in the increase, with the amount of its Treasury holdings nearly doubling. But an even bigger factor has been the amount of money banks are parking at the Fed -- that figure has soared from $9.75 billion in late August 2008 to nearly $1.6 trillion today. A few factors seem to be behind the huge increase. For one thing, the Fed is paying a quarter of a percent in interest on funds parked with it, which doesn't seem like much but is actually not bad considering how low it is keeping interest rates overall. Some have also posited that a lack of loan demand has led banks to keep their funds with the Fed. And some banks that were burned badly in the commercial real estate market seem unwilling or unable to lend. Whatever the reasons, the bottom line is that the government has created large sums of money in response to the financial crisis, and hordes of that cash are sitting at the Fed. If and when they start to trickle into the real economy, some significant inflation should come. That raises the question of how investors should guard against inflation, a topic I've touched on several times before given the explosion of the Fed's balance sheet in recent years. I thought it would be a good time to re-examine the issue given a couple of things that caught my eye recently. One was a new study recently highlighted by MarketWatch columnist Howard Gold. The study was performed by Elroy Dimson, Paul Marsh, and Mike Staunton of the London Business School, who over the years have performed some of the most in-depth research ever on asset prices. Their latest effort looks at 19 different markets since 1900, examining how different assets performed during periods of "marked" inflation. They found that bonds -- not surprisingly -- get crushed in such periods, averaging a real return of -23.2%. Stocks, however, also struggle, they found, losing an average of 12% in real terms. That sounds troubling, especially given how stocks are generally considered to be good inflation fighters. But if you look at Dimson, Marsh, and Staunton's analysis (which is part of a Credit Suisse report), there's a lot more to the story. For one thing, in their study, "marked" inflation signified inflation of at least 18% annually -- a very steep figure that the U.S. didn't even reach during the sky-high inflation of the late '70s/early '80s. So how have stocks fared when inflation has been high, but not at that 18% mark? Well, according to the professors, when inflation has been between 8% and 18%, stocks haven't fared great, but they've remained ahead of inflation, with 1.8% average annual real returns. Bonds, on the other hand, have averaged real annual losses of 4.6% in those periods. And, when inflation has run between 4.5% and 8%, stocks have produced annual real returns of 5.2%, while bonds have barely eked out a positive return. Gold, meanwhile, has been a good hedge in those periods when inflation has been at least 18%, with real returns that were just in positive territory. In the 8% to 18% inflation range, gold has also outperformed stocks, with real returns of 4.4%. In that 4.5% to 8% inflation range, however, gold has produced real returns of just 2.8%. So when inflation has gotten very high, gold has certainly been a better option than stocks; when inflation has been high but below that 18% mark, the results are mixed. But Dimson, Marsh, and Staunton warn against using inflation data as a timing signal, particularly since investors don't know what the inflation rate is for a particular period until the period is over, and asset prices have already moved. "This is not a market timing tool," they write. "High inflation may look like a sell signal, but our model is derived with hindsight and could not be known in advance; there is clustering of observations, so many of the signals may occur at some past date (e.g. the 1920s); and it is not clear where sales proceeds should be parked. In particular, real interest rates tend to be lower in inflationary times, the expected real return on Treasury bills will be smaller after an inflation hit, and other safe-haven assets like inflation-linked bonds are likely to provide a reduced expected return in real terms." I'd add a couple other points, one being that in general, trying to time your participation in any asset class is dangerous. It's now been more than three years since the Fed's balance sheet started to balloon -- a sign that inflation should be coming -- and we've yet to see the sort of inflation that many (including myself) thought was on the horizon. Yes, had you bought up gold when the Fed's balance sheet began to balloon in the fall of 2008, you'd have made some excellent profits to-date -- but not because gold protected you against inflation. Inflation has been quite moderate, and at times tepid, since then. Instead, the profits you'd have made were because of fears of inflation -- speculation, in other words. And gold investing is often rife with speculation, thanks to the fact that gold has no true underlying value -- it produces no earnings, as the company behind a stock does, and it comes with no guaranteed coupon rate, like a bond does. In addition, the data above on stocks and bonds and inflation looks at the stock market as a whole. But during inflationary times, certain types of firms -- commodity producers and those that have enough of a durable competitive advantage that they can pass costs on to consumers -- should perform much better than others. That will show up in their fundamentals, and a fundamental-focused system like ours should pick up fairly quickly on that and be able to profit from buying such stocks. To me, basing your investment decisions on short-term inflationary changes is a dangerous endeavor. I think the more important issue is assessing how inflation impacts your portfolio over the long term. I've often cited David Dreman's exceptional work on that topic, and now, because Dreman recently revised his Contrarian Investment Strategies, we have new updated data on the subject. In his revised book, Dreman says that the introduction of permanent inflation to the U.S. economy following World War II was something of a game-changer. "By far the most dangerous new risk over the past sixty years has been inflation, which can attack our savings in many ways," he writes. "Nothing is safe from this virulent virus, although its major victims are the supposedly safest investments we own: savings accounts, T-bills, Treasuries, corporate bonds, and other types of fixed-income securities." Essentially, inflation eats away at the value of everything. And because the Federal Reserve has said that it sees one of its mandates as promoting an inflationary environment of 2% or so per year, inflation is essentially hardwired into our system, though it can vary widely from year to year. Over the long haul, that means that everything -- stocks, bonds, bills, gold, real estate -- has 2 or 3 percentage points chopped from its nominal returns. For stocks, it's bad news, but far from terrible. Because equities have averaged returns in the 9% to 10% range over the long haul, after-inflation annualized compound returns still have come in at a very respectable 6.5% in the 1946-2010 period, according to Dreman's research. But for Treasury bonds and bills, which have averaged much lower nominal returns, the few percentage points that inflation eats away is a death knell. In that same 1946-2010 period, bonds averaged annual compound returns of just 1.6% after inflation; for T-Bills, it was even worse, at just 0.4%. Over time, the difference is staggering: In the average 10-year post-WWII period, stocks have produced compound after-inflation returns of 87.9%. Bonds have returned just 17.2%, and T-bills a mere 4.5%. The longer your holding period, the more dramatic the differences become. Of course, stocks can fluctuate greatly from year to year, and are thus considered "riskier" than bonds or bills. But Dreman provides some interesting data on how that "risk" plays out if you're a long-term investor. For example, in the post-WWII era, stocks have beaten bonds in 74% of five-year periods, 84% of ten-year periods, 94% of 15-year periods, and 98% of 20-year periods. Compared to bills, stocks have won in 75% of five-year periods, 82% of ten-year periods, 88% of 15-year periods, and 100% of 20-year periods. In other words, if you ride out the short-term volatility of stocks, the odds become overwhelmingly in your favor. The real risk for investors isn't volatility, it's inflation's impact on your portfolio over the long term. (Dreman also includes data on how taxes eat away at even more of your portfolio's nominal returns, which only further bolsters the case for stocks over the long haul.) Dreman doesn't include gold price data, which is less extensive given that the U.S. only let the free market begin to drive gold prices in the mid-1970s. But according to data from The London Bullion Market Association, gold has increased in price from about $185 per ounce at the start of 1975 to about $1575 at the end of 2011. That makes for an annual compound nominal return of about 6.1%. Inflation averaged about 4% over that period, according to the Labor Department, which means gold has averaged just over 2% in real terms. (Stocks have averaged 8.4% nominal and 4.4% real over the same period.) Bonds and gold can certainly be good investments. Bonds should be a part of your portfolio, especially as you get closer to retirement. And gold offers benefits that can make it a good choice for a piece of your portfolio, too. But for me, the bottom line is this: Stocks are the best long-term investment vehicle, and timing asset allocation based on short-term inflation expectations is a risk -- a big risk. Even if you think we'll get the sort of runaway inflation in which gold has historically been a much better hedge than stocks, consider this: Investors have bid up the price of gold by 100% or so over the past three-plus years in anticipation of major inflation; if we eventually do get major inflation, isn't it quite possible that the lag time has led a good chunk of gold's inflation-fighting ability to already be baked into its price? Rather than taking on the risk associated with trying to use inflation to time asset allocation, I think investors are better off focusing on managing the greater risk of inflation's long-term impact on their portfolios. History has shown that risk to be great, and often overlooked. And over the long haul, stocks have proved the best way to counter that risk -- the best antibody for that return-eating "virus", as Dreman so vividly put it. As such, they should be a major component of your portfolio in just about any inflationary and economic climate.		Editor-in-Chief: John Reese Since Inception   Hot List 171.5% S&P 500 40.2% Accuracy 57.5% Beta 1.2 YTD   Hot List 20.1% S&P 500 11.5% Since Last Issue   Hot List 3.8% S&P 500 2.1% Avg. Fundamentals   Market Cap (mil) $6,812 PE Ratio 14.7 5 Yr EPS Growth 18.4% Yield 0.5% Rel. Strength 82 Portfolio Sectors Services 5 Financial 2 Healthcare 1 Technology 1 Capital Goods 1
Advertisement Validea Capital Management - Private Portfolio Management Based on Strategies of Legends Are you looking for an alternative to your underperforming mutual funds or financial advisor? Click here to download Validea Capital's investment kit and learn more about the firm's guru-based portfolios. Get More Information on Validea Capital! ** Validea Capital Management is a separate investment advisory firm managed by Validea.com founder John Reese. Thre information above in not intended as personal investment advice and should not be interpreted as such. The Fallen As we rebalance the Validea Hot List, 4 stocks leave our portfolio. These include: Aeropostale, Inc. (ARO), Ternium S.a. (Adr) (TX), Big Lots, Inc. (BIG) and Tech Data Corp (TECD). The Keepers 6 stocks remain in the portfolio. They are: Caci International Inc (CACI), Forest Laboratories, Inc. (FRX), Northrop Grumman Corporation (NOC), Coinstar, Inc. (CSTR), Bridgepoint Education Inc (BPI) and Altisource Portfolio Solutions S.a. (ASPS). The Newbies We are adding 4 stocks to the portfolio. These include: The Tjx Companies, Inc. (TJX), Cash America International, Inc. (CSH), Advance Auto Parts, Inc. (AAP) and Body Central Corp (BODY). Portfolio Changes Additions   THE TJX COMPANIES, INC. TJX CASH AMERICA INTERNATIONAL, INC. CSH ADVANCE AUTO PARTS, INC. AAP BODY CENTRAL CORP BODY Deletions   AEROPOSTALE, INC. ARO TERNIUM S.A. (ADR) TX BIG LOTS, INC. BIG TECH DATA CORP TECD Newcomers to the Validea Hot List The TJX Companies (TJX): As the parent of Marshalls, T.J. Maxx, and HomeGoods, TJX offers brand-named clothing and merchandise at discount prices -- making it attractive when times are good or bad. The $29-billion-market-cap firm has taken in about $23 billion in sales in the past year. TJX's ability to succeed in a variety of economic climates is clear by looking at its earnings history. It has increased EPS in each year of the past decade, one of the reasons that it impresses my Warren Buffett-based model. My Peter Lynch- and James O'Shaughnessy-based models are also high on TJX. To read more about the stock, scroll down to the "Detailed Stock Analysis" section below. Cash America International Inc. (CSH): Cash America operates in more than 1,000 locations in the U.S. and Mexico, providing secured non-recourse loans -- pawn loans. It also offers short-term cash advances and check cashing services. The Fort Worth, Tex.-based firm has a market cap of about $1.4 billion. Cash America gets strong interest from my James O'Shaughnessy- and John Neff-based models. To read more about the stock, see the "Detailed Stock Analysis" section below. Advance Auto Parts (AAP): Virginia-based Advance Auto ($6.5 billion market cap) is an aftermarket retailer of auto parts. It has more than 3,500 stores across 39 states and some U.S. territories. Advance Auto is a favorite of my James O'Shaughnessy growth- and Peter Lynch-based models. To read more about it, see the "Detailed Stock Analysis" section below. Body Central Corp. (BODY): This Florida-based retailer sells young women's apparel. It has about 220 stores located across 24 states in the South, Mid-Atlantic and Midwest of the U.S. Body Central has a market cap of about $440 million, and gets approval from my Lynch- and O'Shaughnessy-based models. For more information on the stock, scroll down to the "Detailed Stock Analysis" section below. News about Validea Hot List Stocks Bridgepoint Education (BPI): Bridgepoint beat analysts' estimates for fourth-quarter profit, announcing net income of $22.9 million, or 41 cents a share, compared with $26.3 million, or 45 cents a share, a year ago, according to Reuters. Revenue rose 15 percent to $221.3 million. Analysts forecast EPS of 38 cents a share on revenue of 216.8 million. Bridgepoint said it is now expecting 2012 earnings of $2.45 to $2.55 a share, on revenue of $1.01 billion to $1.03 billion. That EPS projection fell short of analysts expectations of $2.84, according to Thomson Reuters I/B/E/S, but the revenue projection was above analysts' expectations of $966.8 million. 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 BPI BRIDGEPOINT EDUCATION INC Schools 83 CSH CASH AMERICA INTERNATIONAL, INC. Misc. Financial Services 83 BODY BODY CENTRAL CORP Retail (Apparel) 80 CSTR COINSTAR, INC. Recreational Activities 78 NOC NORTHROP GRUMMAN CORPORATION Aerospace & Defense 77 CACI CACI INTERNATIONAL INC Software & Programming 75 FRX FOREST LABORATORIES, INC. Biotechnology & Drugs 74 TJX THE TJX COMPANIES, INC. Retail (Department & Discount) 71 AAP ADVANCE AUTO PARTS, INC. Retail (Specialty) 68 ASPS ALTISOURCE PORTFOLIO SOLUTIONS S.A. Consumer Financial Services 60 Ticker Market Cap Date Added Start Price Current Price Return BPI $1,271 3/18/2011 $18.02 $24.40 35.4% CSH $1,395 3/16/2012 TBD $47.53 TBD BODY $433 3/16/2012 TBD $27.03 TBD CSTR $1,941 2/17/2012 $56.23 $62.72 11.5% NOC $15,656 2/17/2012 $60.08 $61.97 3.1% CACI $1,644 3/16/2012 TBD $62.06 TBD FRX $8,978 9/2/2011 $33.10 $33.81 2.1% TJX $28,806 3/16/2012 TBD $38.19 TBD AAP $6,509 3/16/2012 TBD $89.25 TBD ASPS $1,487 1/20/2012 $50.64 $63.53 25.5%

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 BPI   |   CSH   |   BODY   |   CSTR   |   NOC   |   CACI   |   FRX   |   TJX   |   AAP   |   ASPS   |   BRIDGEPOINT EDUCATION INC Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Bridgepoint Education, Inc. (Bridgepoint) is a provider of postsecondary education services. The Company's wholly owned subsidiaries, Ashford University and the University of the Rockies, are regionally accredited academic institutions that offer associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences. These institutions deliver programs online, as well as at its traditional campuses located in Clinton, Iowa, and Colorado Springs, Colorado. As of December 31, 2010, it offered approximately 1,345 courses, 71 degree programs and 134 specializations. As of December 31, 2010, it had 77,892 students enrolled in its institutions, 99% of whom were attending classes online. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider BPI a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (8.11) relative to the growth rate (36.97%), 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 BPI (0.22) is very favorable. SALES AND P/E RATIO: [NEUTRAL] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. BPI, whose sales are $933.4 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. 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 BPI is 37.0%, based on the average of the 3 and 4 year historical eps growth rates, which is considered 'OK'. However, it may be difficult to sustain such a high growth rate. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for BPI (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 BPI (13.36%) 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 BPI (21.06%) 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.   CASH AMERICA INTERNATIONAL, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Cash America International, Inc. provides specialty financial services to individuals through retail services locations and through electronic distribution platforms known as e-commerce activities. These services include secured non-recourse loans, commonly referred to as pawn loans and unsecured consumer loans. The Company's consumer loan portfolio includes short-term single payment loans, longer-term multi-payment installment loans, credit services and participation interests purchased from third parties in the micro line of credit (MLOC) services channel. Through the Credit Services Organization program (the CSO program), it provides a third-party lender's consumer loan product in some markets by acting as a credit services organization on behalf of consumers. As of December 31, 2010, it operated in two segments: retail services and e-commerce. During the year ended December 31, 2010, the Company renamed its Internet Services Division as the E-Commerce Division. Analysis Guru Score: 100% MARKET CAP: [PASS] The first requirement of the Cornerstone Growth Strategy is that the company has a market capitalization of at least $150 million. This will screen out the companies that are too illiquid for most investors, but still include a small growth company. CSH, with a market cap of $1,395 million, passes this criterion. EARNINGS PER SHARE PERSISTENCE: [PASS] The Cornerstone Growth methodology looks for companies that show persistent earnings growth without regard to magnitude. To fulfill this requirement, a company's earnings must increase each year for a five year period. CSH, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 2.61, 2.70, 3.17, 3.66 and 4.25, passes this test. PRICE/SALES RATIO: [PASS] The Price/Sales ratio should be below 1.5. This value criterion, coupled with the growth criterion, identify growth stocks that are still cheap to buy. CSH's Price/Sales ratio of 0.91, based on trailing 12 month sales, passes this criterion. RELATIVE STRENGTH: [PASS] The final criterion for the Cornerstone Growth Strategy requires that the Relative Strength of the company be among the top 50 of the stocks screened using the previous criterion. This gives you the opportunity to buy the growth stocks you are searching for just as the market is embracing them. CSH, whose relative strength is 75, is in the top 50 and would pass this last criterion.   BODY CENTRAL CORP Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Body Central Corp. is a specialty retailer of young women's apparel and accessories operating retail stores in the South, Mid-Atlantic and Midwest regions of the United States. In addition, the Company operates a direct business through its e-commerce Website, www.bodyc.com, and Body Central catalog. It operates specialty apparel stores under the Body Central and Body Shop banners. It targets women in their late teens and twenties from diverse cultural backgrounds who seek the latest fashions and a flattering fit. Its stores feature a variety of tops, dresses, bottoms, jewellery, accessories and shoes sold primarily under Body Central and Lipstick labels. As of January 1, 2011, it had 209 stores located in fashion retail venues across 23 states in the South, Mid-Atlantic and Midwest. Its average store size is 4,300 square feet. During the fiscal year ended January 2, 2010 (fiscal 2010), the Company opened 27 stores. From fiscal year 2009 through January 1, 2011, it closed 13 stores. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider BODY a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (22.16) relative to the growth rate (47.27%), based on the average of the 2 and 5 year historical and the current year 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 BODY (0.47) is very favorable. SALES AND P/E RATIO: [NEUTRAL] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. BODY, whose sales are $296.5 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. EPS GROWTH RATE: [PASS] This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for BODY is 47.3%, based on the average of the 2 and 5 year historical and the current year eps growth rates, which is considered 'OK'. However, it may be difficult to sustain such a high growth rate. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for BODY (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 BODY (4.48%) 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 BODY (9.71%) 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.   COINSTAR, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Coinstar, Inc. (Coinstar) is a provider of automated retail solutions, which offers convenient products and services. the Company's offerings in automated retail include its Redbox business, where consumers can rent or purchase movies and video games from self-service kiosks (Redbox segment), and its Coin business, where consumers can convert their coin to cash or stored value products at self-service coin counting kiosks (Coin segment). Its New Ventures business (New Ventures segment) is focused on identifying, evaluating, building, and developing self-service concepts in the marketplace. On June 9, 2011, the Company completed the sale transaction of the Money Transfer Business to Sigue Corporation (Sigue). Analysis Guru Score: 92% 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. CSTR's P/E is 17.36, based on trailing 12 month earnings, while the current market PE is 19.00. 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. CSTR's revenue growth is 41.92%, while it's earnings growth rate is 44.45%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, CSTR 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 (33.2%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (22.5%) of the current year. Sales growth for the prior must be greater than the latter. For CSTR 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. CSTR's EPS ($1.00) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. CSTR's EPS for this quarter last year ($0.68) 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. CSTR's growth rate of 47.06% 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 CSTR is 22.22%. This should be less than the growth rates for the 3 previous quarters, which are 53.33%, 151.28%, and 78.79%. CSTR 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, 94.07%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 47.06%, (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 CSTR is 47.1%, 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, 47.06% must be greater than or equal to the historical growth which is 44.45%. CSTR 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. CSTR, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.82, 1.10, 1.31, 2.03 and 3.61, 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. CSTR's long-term growth rate of 44.45%, 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. CSTR's Debt/Equity (74.78%) is not considered high relative to its industry (166.77%) 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 CSTR, this criterion has not been met (insider sell transactions are 56, while insiders buying number 35). 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.   NORTHROP GRUMMAN CORPORATION Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Northrop Grumman Corporation (Northrop Grumman) provides products, services, and integrated solutions in aerospace, electronics, information and services to its global customers. As of December 31, 2011, the Company operated in four segments: Aerospace Systems, Electronic Systems, Information Systems and Technical Services. The Company conducts most of its business with the United States Government, principally the Department of Defense (DoD) and intelligence community. It also conducts business with local, state, and foreign Governments and domestic and international commercial customers. Effective as of March 31, 2011, the company completed the spin-off of Huntington Ingalls Industries, Inc. (HII). HII operates the Company's former shipbuilding business. Analysis Guru Score: 100% PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical (non-Smokestack) companies with Price/Sales ratios below 0.75 are tremendous values and should be sought. NOC's P/S of 0.59 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. NOC's Debt/Equity of 38.20% 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. NOC 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 NOC At this Point Is NOC a "Super Stock"? YES PRICE/SALES RATIO: [PASS] The prospective company should have a low Price/Sales ratio. Non-cyclical(non-Smokestack) companies with Price/Sales ratios below .75 are tremendous values and should be sought.NOC's P/S ratio of 0.59 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%. NOC's inflation adjusted EPS growth rate of 16.28% 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. NOC's free cash per share of 3.85 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. NOC, whose three year net profit margin averages 7.14%, passes this evaluation.   CACI INTERNATIONAL INC Profile Strategy: Growth Investor Based on: Martin Zweig CACI International Inc (CACI) along with its wholly owned subsidiaries and joint ventures, is an international information systems, high technology services, and professional services corporation. It delivers professional services and information technology solutions to its clients, primarily the United States government. Other customers include state and local governments, commercial enterprises and agencies of foreign governments. The Company operates two units: domestic operations and international operations. CACI delivers professional services and information technology (IT) solutions to its clients. Its services are primarily targeted to the areas of defense, intelligence, homeland security and IT modernization. In November 2010, the Company acquired TechniGraphics, Inc. and Applied Systems Research Inc. In July 2011, it acquired Pangia Technologies, LLC. In September 2011, CACI acquired Paradigm Holdings, Inc. In October 2011, the Company acquired Advanced Programs Group, LLC. Analysis Guru Score: 92% 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. CACI's P/E is 11.24, based on trailing 12 month earnings, while the current market PE is 19.00. 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. CACI's revenue growth is 15.21%, while it's earnings growth rate is 16.37%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, CACI 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 (12.2%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (10.8%) of the current year. Sales growth for the prior must be greater than the latter. For CACI 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. CACI's EPS ($1.51) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. CACI's EPS for this quarter last year ($1.08) 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. CACI's growth rate of 39.81% 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 CACI is 8.19%. This should be less than the growth rates for the 3 previous quarters, which are 33.33%, 50.00%, and 53.26%. CACI 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, 45.82%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 39.81%, (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 CACI is 39.8%, 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, 39.81% must be greater than or equal to the historical growth which is 16.37%. CACI 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. CACI, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 2.51, 2.55, 2.95, 3.47 and 4.61, 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. CACI's long-term growth rate of 16.37%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test. TOTAL DEBT/EQUITY RATIO: [FAIL] 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. CACI's Debt/Equity (50.41%) is considered high relative to its industry (19.92%) and fails 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 CACI, this criterion has not been met (insider sell transactions are 147, while insiders buying number 76). 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.   FOREST LABORATORIES, INC. Profile Strategy: Contrarian Investor Based on: David Dreman Forest Laboratories, Inc. (Forest) develops, manufactures and sells branded forms of ethical drug products, most of which requires a physician's prescription. The Company also focuses on the development and introduction of new products, including products developed in collaboration with licensing partners. Its products include those developed by the Company and those acquired from other pharmaceutical companies and integrated into its marketing and distribution systems. The Company's principal products include Lexapro, Namenda, Bystolic, Savella and Teflaro. On April 13, 2011, the Company acquired Clinical Data Inc. (Clinical Data), a specialty pharmaceutical company. Analysis Guru Score: 79% MARKET CAP: [PASS] Medium to large-sized companies (the largest 1500 companies) should be chosen, because they are more in the public eye. Furthermore, the investor is exposed to less risk of "accounting gimmickry", and companies of this size have more staying power. FRX has a market cap of $8,978 million, therefore passing the test. EARNINGS TREND: [PASS] A company should show a rising trend in the reported earnings for the most recent quarters. FRX's EPS for the past 2 quarters, (from earliest to most recent quarter) 0.91, 1.04 have been increasing, and therefore the company passes this test. EPS GROWTH RATE IN THE IMMEDIATE PAST AND FUTURE: [PASS] This methodology likes to see companies with an EPS growth rate higher than the S&P in the immediate past and a likelihood that this trend will continue in the near future. FRX passes this test as its EPS growth rate over the past 6 months (15.55%) has beaten that of the S&P (-9.58%). FRX's estimated EPS growth for the current year is (3.06%), which indicates the company is expected to experience positive earnings growth. As a result, FRX passes this test. This methodology would utilize four separate criteria to determine if FRX is a contrarian stock. In order to eliminate weak companies we have stipulated that the stock should pass at least two of the following four major criteria in order to receive "Some Interest". P/E RATIO: [PASS] The P/E of a company should be in the bottom 20% of the overall market. FRX's P/E of 8.51, based on trailing 12 month earnings, meets the bottom 20% criterion (below 9.17), and therefore passes this test. PRICE/CASH FLOW (P/CF) RATIO: [FAIL] The P/CF of a company should be in the bottom 20% of the overall market. FRX's P/CF of 7.36 does not meet the bottom 20% criterion (below 4.91), and therefore fails this test. PRICE/BOOK (P/B) VALUE: [FAIL] The P/B value of a company should be in the bottom 20% of the overall market. FRX's P/B is currently 1.64, which does not meet the bottom 20% criterion (below 0.72), and it therefore fails this test. PRICE/DIVIDEND (P/D) RATIO: [FAIL] The P/D ratio for a company should be in the bottom 20% of the overall market (that is the yield should be in the top 20%). FRX's P/D is not available, and hence an opinion cannot be rendered at this time. This methodology maintains that investors should look for as many healthy financial ratios as possible to ascertain the financial strength of the company. These criteria are detailed below. CURRENT RATIO: [PASS] A prospective company must have a strong Current Ratio (greater than or equal to the average of it's industry [2.03] or greater than 2). This is one identifier of financially strong companies, according to this methodology. FRX's current ratio of 3.96 passes the test. PAYOUT RATIO: [PASS] A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for FRX is 0.00%. Unfortunately, its historical payout ratio is not available. Nonetheless it passes the payout criterion, as this is a very low payout. RETURN ON EQUITY: [PASS] The company should have a high ROE, as this helps to ensure that there are no structural flaws in the company. This methodology feels that the ROE should be greater than the top one third of ROE from among the top 1500 large cap stocks, which is 18.23%, and would consider anything over 27% to be staggering. The ROE for FRX of 20.96% is high enough to pass this criterion. PRE-TAX PROFIT MARGINS: [PASS] This methodology looks for pre-tax profit margins of at least 8%, and considers anything over 22% to be phenomenal. FRX's pre-tax profit margin is 30.67%, thus passing this criterion. YIELD: [FAIL] The company in question should have a yield that is high and that can be maintained or increased. FRX's current yield is not available (or one is not paid) at the present time, while the market yield is 2.66%. Hence, this criterion cannot be evaluated. LOOK AT THE TOTAL DEBT/EQUITY: [PASS] The company must have a low debt to equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should be less than 20% or less than the industry average. FRX's Total Debt/Equity of 0.00% is considered exceptional.   THE TJX COMPANIES, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy The TJX Companies, Inc. (TJX) is an off-price apparel and home fashions retailer in the United States and worldwide. The Company operates multiple off-price retail chains in the United States, Canada and Europe. As of January 29, 2011, TJX operated five business segments: three in the United States and one in each of Canada and Europe. Each of its segments has its own administrative, buying and merchandising organization and distribution network. Of the United States-based chains, T.J. Maxx and Marshalls , referred to as Marmaxx, are managed together and reported as a single segment and HomeGoods and A.J. Wright each is reported as a separate segment. Outside the United States, its chains in Canada are managed together, and its chains in Europe are managed together. Thus, Canada is reported as a segment and Europe is reported as a segment. Analysis Guru Score: 100% MARKET CAP: [PASS] The first requirement of the Cornerstone Growth Strategy is that the company has a market capitalization of at least $150 million. This will screen out the companies that are too illiquid for most investors, but still include a small growth company. TJX, with a market cap of $28,806 million, passes this criterion. EARNINGS PER SHARE PERSISTENCE: [PASS] The Cornerstone Growth methodology looks for companies that show persistent earnings growth without regard to magnitude. To fulfill this requirement, a company's earnings must increase each year for a five year period. TJX, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 0.84, 1.04, 1.42, 1.65 and 1.93, passes this test. PRICE/SALES RATIO: [PASS] The Price/Sales ratio should be below 1.5. This value criterion, coupled with the growth criterion, identify growth stocks that are still cheap to buy. TJX's Price/Sales ratio of 1.24, based on trailing 12 month sales, passes this criterion. RELATIVE STRENGTH: [PASS] The final criterion for the Cornerstone Growth Strategy requires that the Relative Strength of the company be among the top 50 of the stocks screened using the previous criterion. This gives you the opportunity to buy the growth stocks you are searching for just as the market is embracing them. TJX, whose relative strength is 94, is in the top 50 and would pass this last criterion.   ADVANCE AUTO PARTS, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Advance Auto Parts, Inc. is a specialty retailer of automotive aftermarket parts, accessories, batteries and maintenance items primarily operating within the United States. The Company's stores carry a product line for cars, vans, sport utility vehicles and light trucks. It serves both do-it-yourself (DIY) and do-it-for-me Commercial, customers. It operates in two segments: Advance Auto Parts (AAP) and Autopart International, Inc. (AIP). The AAP segment consists of its operations within the Northeastern, Southeastern and Midwestern regions of the United States, Puerto Rico and the Virgin Islands. The AI segment primarily serves the Commercial market from its store locations in the Northeastern and Mid-Atlantic regions of the United States and Florida. At January 1, 2011, the Company operated 3,369 AAP stores within the United States, Puerto Rico and the Virgin Islands. At January 1, 2011, the Company operated 194 stores under the Autopart International trade name. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: This methodology would consider AAP a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (17.49) relative to the growth rate (22.64%), 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 AAP (0.77) 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. AAP, whose sales are $6,170.5 million, needs to have a P/E below 40 to pass this criterion. AAP's P/E of (17.49) 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 AAP is 22.6%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for AAP (49.06%) to be normal (equity is approximately twice debt). FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for AAP (7.89%) 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 AAP (-5.41%) 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.   ALTISOURCE PORTFOLIO SOLUTIONS S.A. Profile Strategy: Growth Investor Based on: Martin Zweig Altisource Portfolio Solutions S.A.( Altisource), together with its subsidiaries, is a provider of services focused on technology-enabled, knowledge-based functions related to real estate and mortgage portfolio management, asset recovery and customer relationship management. The Company operates in three segments: Mortgage Services, Financial Services and Technology Services. In April 2011, the Company acquired Springhouse, LLC (Springhouse). In July 2011, the Company acquired the assembled workforce of a sub-contractor (Tracmail) in India. 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. ASPS's P/E is 22.78, based on trailing 12 month earnings, while the current market PE is 19.00. 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. ASPS's revenue growth is 35.11%, while it's earnings growth rate is 78.64%, based on the average of the 3, 4 and 5 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 (44.3%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (41.5%) of the current year. Sales growth for the prior must be greater than the latter. For ASPS 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. ASPS's EPS ($1.02) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. ASPS's EPS for this quarter last year ($0.64) 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. ASPS's growth rate of 59.38% 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 ASPS is 39.32%. This should be less than the growth rates for the 3 previous quarters which are 128.00%, -16.13% and 81.08%. ASPS 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, 41.94%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 59.38%, (versus the same quarter one year ago) then the stock passes. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [FAIL] The EPS growth rate for the current quarter, 59.38% must be greater than or equal to the historical growth which is 78.64%. Since this is not the case ASPS would therefore fail 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. ASPS, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.28, 0.38, 1.07, 1.88 and 2.77, 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. ASPS's long-term growth rate of 78.64%, based on the average of the 3, 4 and 5 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 ASPS, this criterion has not been met (insider sell transactions are 7, while insiders buying number 15). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion.   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 TEO TELECOM ARGENTINA S.A. (ADR) Communications Services 75 TSCO TRACTOR SUPPLY COMPANY Retail (Home Improvement) 70 LKQX LKQ CORPORATION Auto & Truck Parts 63 GTAT GT ADVANCED TECHNOLOGIES INC Semiconductors 62 KLIC KULICKE AND SOFFA INDUSTRIES INC. Semiconductors 61 HITK HI-TECH PHARMACAL CO. Biotechnology & Drugs 60 LULU LULULEMON ATHLETICA INC. Retail (Apparel) 60 ROST ROSS STORES, INC. Retail (Apparel) 58 DFS DISCOVER FINANCIAL SERVICES Consumer Financial Services 58 MNST MONSTER BEVERAGE CORP Beverages (Non-Alcoholic) 58

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