Executive Summary  |   Portfolio  |   Guru Analysis  |   Watch List

Executive Summary	June 24, 2011

The Economy As any good climber knows, scaling a mountain doesn't involve a straight, easy, upward climb. Sometimes you have to go sideways, or even downward, taking a pause before you can continue back up toward the summit. Right now, the economy seems to be doing just that -- pausing and trying to get its feet back under it before it hopefully heads back upward. The strongest evidence of the slowdown may be coming from the manufacturing sector. The New York Federal Reserve Bank reported last week that its general business conditions index fell into negative territory in June, indicating a contraction in New York area manufacturing activity for the first time since last November. The Philadelphia Fed's manufacturing index, which covers several mid-Atlantic states, also fell into contraction territory. But it's important to remember that periodic manufacturing sector contractions aren't unusual during economic expansions. In fact, based on the past 30 years, it would be odd if they didn't occur. After the double-dip recession of the early 1980s, for example, the manufacturing sector began expanding in February 1983, according to the Institute for Supply Management's data. It expanded for two years straight (with the exception of one month when activity was flat), but then contracted for eight straight months. It caught a second wind, however, and manufacturing activity increased in 41 of the next 43 months. The economic expansion that ran from April 1991 through February 2001, meanwhile, featured numerous months when the manufacturing sector contracted, including a 13-month stretch in which only one month featured an expansion in the sector. Another stretch featured seven straight months of contraction. In the 2001-2007 economic expansion, manufacturing activity picked up in February 2002. After eight months of relatively minor expansion, the manufacturing sector then contracted in seven of the next nine months. (All data from ISM.) How about today? Well, manufacturing activity started expanding in August 2009; since then, we've had 22 straight months of increasing activity in the sector. Keep that longer-term trend in mind if ISM's June figures turn out to indicate a slight contraction for the month. All of that's not to say that the soft patch isn't a concern, especially since data from other areas of the economy has been on the weaker side. New unemployment claims remain well below their recessionary highs, but are still above where they were earlier this year, and above the level that would signal significant job growth. Retail and food service sales also declined in May for the first time in 11 months, falling 0.2%, the Commerce Department reported. But, as the retail sales figures showed, a significant factor in the recent slowdown seems to be supply chain disruptions caused by the earthquake and tsunami in Japan, a major world manufacturing hub. Japan is of course a big player in the auto industry, for example, and not including automobile-related sales, retail and food service sales actually increased 0.3% in May. As I've mentioned before, Japan is a resilient nation, and I expect that it will recover from the recent tragedy and continue to be one of the world's leading economies. That being said, the devastation caused by the natural disaster will of course lead to short-term problems, which we're now feeling in the U.S. On the bright side, U.S. companies are continuing to report solid earnings, even amid the economic slowdown. Big bellwethers Walgreen, FedEx, and Oracle all reported strong quarterly profit growth over the past week (all of their quarters ended May 31). Companies appear to have streamlined operations during the recession, and are continuing to take advantage of low interest rates to boost their bottom line. Given all of the concerns -- which also include a renewed round of Greek debt fears -- the market has overall help up reasonably well over the past couple weeks. Since our last newsletter, the S&P 500 returned -0.4%, while the Hot List returned 0.7%. So far in 2011, the portfolio has returned 3.3% vs. 2.1% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 178.8% vs. the S&P's 28.3% gain. Diversification: How Many Stocks Is Enough? Over the past month, the Hot List has seen a couple of its holdings get hit quite hard. One was shoe and apparel manufacturer Skechers USA, which between our May 27 and June 10 newsletters tumbled about 23%. The main factor seemed to be one analyst firm decreasing its price target for the company's shares. Given how often analysts are wrong, the big decline was surprising in terms of its magnitude. Research in Motion, meanwhile, has fallen about 33% in the period covered by our last two newsletters. It announced second-quarter earnings and sales guidance that were well below expectations, and said it would be embarking on a job-cutting restructuring plan. You might expect that having two holdings experience such big dips would be a huge problem for a 10-stock portfolio. But, while the Hot List's performance relative to the S&P has fallen a bit over the past month, it really hasn't taken that big of a hit. A month ago, the portfolio was up 2.5 percentage points on the index year-to-date; as of today the portfolio has returned 3.3% for the year, while the S&P has returned 2.1%. That data supports something that I've found to be true during the nearly eight years since we started tracking the Hot List: You don't need to hold hundreds of stocks to properly diversify your equity portfolio. Most fund managers won't tell you that. In fact, average mutual funds hold close to 200 stocks, according to one study from investment research firm Morningstar. In the study, Morningstar looked at how focused funds (those with no more than 40 stocks) fared compared to those 200-stock behemoths. Discussing the study's findings in late 2009, The Wall Street Journal's Larry Light wrote that "as a group, these funds haven't consistently outperformed or underperformed funds with more diverse holdings. [And] based on recent performance and an earlier Morningstar study, concentrated funds aren't more volatile than more diversified funds, on average, and some are surprisingly steady despite their small number of holdings." Some of the world's most successful investors have put the idea of concentrated portfolios into practice. One is Joel Greenblatt, whose writings form the basis of one of my most successful Guru Strategies. In a recent article written for RegisteredRep.com, Greenblatt said portfolio size is one big reason most fund managers lag the broader market indices. Many fund managers, he says, tend to put together funds with dozens of stocks that end up mirroring their benchmarks. That's because, while holding a more concentrated portfolio gives you a better chance to beat the benchmark over time, it can also lead to short-term underperformance, which many investors can't handle. "Even a very talented manager who makes excellent stock picks over the long term can trail the market averages for years at a time. In fact, this is almost a certainty with a concentrated portfolio," Greenblatt writes. "Yet the reality is that a manager who significantly underperforms the market averages for two or three years has a good chance of losing most of his or her investors. And no investors means no business" In my book, The Guru Investor, I looked at some other data that has similar implications. A 2003 study performed by California State University-Chico Professor H. Christine Hsu and H. Jeffrey Wei found, for example, that "the benefit of risk diversification is somewhat limited when the number of stocks in the portfolio goes beyond 50." With the Hot List, we of course use a 10-stock portfolio. (We also track a 20-stock version of the portfolio that has been very successful, returning more than 11% annually since inception vs. 3.2% for the S&P.) And, in the eight years we've been tracking it, we've found that the 10-stock portfolio is a bit more volatile than the broader market -- but it's far from a roller coaster. Through Wednesday, its beta was 1.19 vs. the S&P, hardly a sky-high figure. Its frequency and magnitude of bad months also hasn't been all that much greater than that of the broader market. From its inception date in July 2003 through the end of 2010, the Hot List posted a monthly loss of 5% or more 14 times; the S&P 500 has lost 5% or more 9 times. The worst of those monthly intervals for the Hot List was a 22.89% decline in October 2008; the worst for the S&P was a 16.83% decline in the same period. When you consider that the Hot List has returned about 175% over its eight years or so while the S&P has returned less than 30%, that extra risk and volatility seems well worth it, if you ask me. To be sure, you need to have some limits on how concentrated a portfolio you should hold. (A five-stock portfolio that includes four financial stocks, for example, is probably not a good idea.) But over the long haul, I think the Hot List's concentrated nature has been a big reason for its excellent returns. Yes, occasionally it will run into sizeable losses on picks like Research in Motion or Skechers. But by using rigorous fundamental-based strategies that do a good job of digging deep into a company's balance sheet, such major tumbles are rare -- and even a 10-stock portfolio can provide enough diversification that any big losses on a single position don't hurt the portfolio too much. (Think of it this way: Skechers 23% loss that I referenced above is essentially a 2.3% loss for the portfolio when spread over ten positions -- not exactly a catastrophic loss.) And, of course, the ability of these strategies to find strong, undervalued companies offers far more upside potential than the broader market offers, as the past eight years or so have borne out. Just over the past few months, several of the Hot List's other positions have helped absorb Skechers' and RIM's losses. GameStop is up more than 30% since our March 4 newsletter; Bridgepoint Education has gained more than 30% since joining the portfolio in mid-March; and GT Solar International is up more than 21% since it joined the portfolio just two weeks ago (all returns through yesterday). To me, the long-term results clearly show that a focused system offers rewards that are well worth a limited amount of extra risk and short-term volatility. That's why we'll continue to allow the portfolio to focus on its best ideas, rather than holding hundreds of stocks, which would just serve to make the portfolio look like the indexes that it is trying to beat.		Editor-in-Chief: John Reese Since Inception   Hot List 178.8% S&P 500 28.3% Accuracy 56.6% Beta 1.2 YTD   Hot List 3.3% S&P 500 2.1% Since Last Issue   Hot List 0.7% S&P 500 -0.4% Avg. Fundamentals   Market Cap (mil) $31,657 PE Ratio 14.1 5 Yr EPS Growth 28.4% Yield 5.1% Rel. Strength 65 Portfolio Sectors Services 4 Technology 4 Consumer Cyclical 1 Healthcare 1
Advertisement Validea Capital Management - Private Portfolio Management Based on Strategies of Legends Are you looking for an alternative to your underperforming mutual funds or financial advisor? Click here to download Validea Capital's investment kit and learn more about the firm's guru-based portfolios. Get More Information on Validea Capital! ** Validea Capital Management is a separate investment advisory firm managed by Validea.com founder John Reese. Thre information above in not intended as personal investment advice and should not be interpreted as such. Guru Spotlight: Martin Zweig Generally, my Guru Strategies have a distinct value bias. The majority of these models -- ranging from my Benjamin Graham approach to my Warren Buffett model to my Joseph Piotroski strategy -- are focused on finding good, often beaten-down stocks selling at bargain prices; that is, they target value stocks. But that doesn't mean that all of my gurus were cemented on the value side of the growth/value pendulum. In fact, the guru we'll examine today, Martin Zweig, used a methodology that was dominated by earnings-based criteria. He looked at a stock's earnings from a myriad of angles, wanting to ensure that he was getting stocks that had been producing strong growth over the long haul and even better growth recently -- and that their growth was coming from the right sources. Zweig's thoroughness paid off. His Zweig Forecast was one of the most highly regarded investment newsletters in the country, ranking number one for risk-adjusted returns during the 15 years that Hulbert Financial Digest monitored it. It produced an impressive 15.9 percent annualized return during that time. Zweig has also managed several mutual funds, and was co-founder of Zweig Dimenna Partners, a multibillion-dollar New York-based firm that has been ranked in the top 15 of Barron's list of the most successful hedge funds. Before we delve into Zweig's strategy, a few words about the man himself. While some of the gurus we've looked at in recent Guru Spotlights -- Buffett and John Neff in particular come to mind -- lived modest lifestyles, Zweig put his fortune to use in some pretty fun, flashy ways. He has owned what Forbes reported was the most expensive apartment in New York City, a penthouse atop Manhattan's Pierre Hotel that was at one time valued at more than $70 million. He's also an avid collector of a variety of different kinds of memorabilia. The Wall Street Journal has reported that he's owned such one-of--a-kind items as Buddy Holly's guitar, the gun from Dirty Harry, the motorcycle from Easy Rider, and Michael Jordan's jersey from his rookie season with the Chicago Bulls. A Serious Strategy Zweig may spend his cash on some flashy, fun items, but the strategy he used to compile that cash was a disciplined, methodical approach. His earnings examination of a firm spanned several categories: Trend of Earnings: Earnings should be higher in the current quarter than they were a year ago in the same quarter. Earnings Persistence: Earnings per share should have increased in each year of the past five-year period; EPS should also have grown in each of the past four quarters (vs. the respective year-ago quarters). Long-Term Growth: EPS should be growing by at least 15 percent over the long term; a growth rate over 30 percent is exceptional. Earnings Acceleration: EPS growth for the current quarter (vs. the same quarter last year) should be greater than the average growth for the previous three quarters (vs. the respective three quarters from a year ago). EPS growth in the current quarter also should be greater than the long-term growth rate. These criteria made sure that Zweig wasn't getting in late on a stock that had great long-term growth numbers, but which was coming to the end of its growth run. While Zweig's EPS focus certainly puts him on the "growth" side of the growth/value spectrum, his approach was by no means a growth-at-all-costs strategy. Like all of the gurus I follow, he included a key value-based component in his method. He made sure that a stock's price/earnings ratio was no greater than three times the market average, and no greater than 43, regardless of what the market average was. (He also didn't like stocks with P/Es less than 5, because they could be indicative of an outright dog that investors were wisely avoiding.) In addition, Zweig wanted to know that a firm's earnings growth was sustainable over the long haul. And that meant that the growth was coming primarily from sales -- not cost-cutting or other non-sales measures. My Zweig model requires a firm's revenue growth to be at least 85 percent of EPS growth. If a stock fails that test but its revenues are growing by at least 30 percent a year, it passes, however, since that is still a very strong revenue growth rate. Like earnings growth, Zweig believed sales growth should be increasing. My model thus requires that a stock's sales growth for the most recent quarter (vs. the year-ago quarter) to be greater than the previous quarter's sales growth rate (vs. the year-ago quarter). Finally, Zweig also wanted to makes sure a firm's growth wasn't driven by unsustainable amounts of leverage (a key observation given all that's happened recently). Realizing that different industries require different debt loads, he looked for stocks whose debt/equity ratios were lower than their industry average. Macro Issues There's one more thing you should know about Zweig. He relied a good amount on technical factors to adjust how much of his portfolio he put into stocks. Some of the indicators he used to move in and out of the market included the Federal Reserve's discount rate; installment debt levels; and the prime rate. His mottos included "Don't fight the Fed" (meaning investors should be more bullish when interest rates were low or falling) and "Don't fight the tape" (which related to his practice of getting more bullish or bearish based on market trends). Those rules are tough for an individual investor to put into practice; Zweig used what he called a "Super Model" that meshed all of his indicators into a system that determined how bullish or bearish he was. But over the years, I've found that using only the quantitative, fundamental-based criteria Zweig outlined in his book can produce very strong results. My Zweig-inspired 10-stock portfolio has been a very strong performer since its July 2003 inception, returning 103.9%, or 9.4% per year, while the S&P 500 has gained just 28.7%, or 3.2% per year. This year, the Zweig portfolio has been a particularly strong performer, gaining 8.2% while the S&P is up just 2.3% (through June 22). The model tends to choose stocks from a variety of areas. Currently, my 10-stock Zweig-based portfolio has three tech stocks (not surprising for a growth strategy), but it also holds a healthcare firm, a restaurant, a chemical firm, and a printing company. Here are all of the portfolio's current holdings: Quality Systems Inc. (QSII) Bridgepoint Education, Inc. (BPI) Apple Inc. (AAPL) Amtech Systems, Inc. (ASYS) Buffalo Wild Wings (BWLD) Vistaprint NV (VPRT) Balchem Corporation (BCPC) IPC The Hospitalist Company, Inc. (IPCM) Coinstar, Inc. (CSTR) IntercontinentalExchange, Inc. (ICE) As you might expect with a growth strategy, the Zweig portfolio tends not to hold on to stocks for a long time. Usually it will hold a stock for a few months, though it is not averse to longer periods if the stock continues to be a prospect for more growth. What I really like about the Zweig strategy is that, while it certainly would qualify as a growth approach, it doesn't look at growth in a vacuum. As you've seen, it examines earnings growth from a variety of angles, making sure that it is strong, improving, and sustainable. In doing so, it allows you to find some fast-growing growth stocks that are not paper tigers, but instead solid prospects for continued long-term success. News about Validea Hot List Stocks Skechers USA, Inc. (SKX): Skechers announced last week that it has signed a multi-year licensing agreement with LF USA, a subsidiary of Hong Kong-based Li & Fung Limited, to produce a collection of Skechers Fitness apparel and accessories for men and women. LF USA's Regatta division will design, produce, distribute and market the collection, which will include Shape-ups, Tone-ups and Skechers Resistance-branded activewear; outerwear and performance-related accessories. Plans call for a 2012 launch in department store, sporting goods and independent retailers in the U.S. AT&T Inc. (T): The U.S. Department of Justice has asked AT&T to supply additional information pertaining to the telecom giant's proposed $39 billion buyout of T-Mobile USA, Inc., company officials said, according to Bloomberg. The company officials said the government was looking for data that included market shares and customer counts. AT&T officials said they have responded to the request. The proposed deal has led some to raise antitrust concerns, as it would involve merging the U.S.'s second- and fourth-largest wireless carriers. AT&T officials said the deal is still on track for approval. The Next Issue In two weeks, we will publish another issue of the Hot List, at which time we will rebalance the portfolio. If you have any questions, please feel free to contact us at hotlist@validea.com.

Current Portfolio Ticker Company Name Industry Guru Score ASYS AMTECH SYSTEMS, INC. Semiconductors 93 BPI BRIDGEPOINT EDUCATION, INC. Schools 92 DLTR DOLLAR TREE, INC. Retail (Department & Discount) 65 GME GAMESTOP CORP. Retail (Technology) 64 T AT&T INC. Communications Services 64 SNY SANOFI-AVENTIS SA (ADR) Biotechnology & Drugs 59 SKX SKECHERS USA, INC. Footwear 57 ACOM ANCESTRY.COM INC Computer Services 51 SOLR GT SOLAR INTERNATIONAL, INC. Semiconductors 20 RIMM RESEARCH IN MOTION LIMITED (USA) Communications Equipment 16 Ticker Market Cap Date Added Start Price Return ASYS $184 5/13/2011 $23.34 $19.25 -17.5% BPI $1,248 3/18/2011 $18.02 $23.61 31.0% DLTR $8,063 6/10/2011 $61.75 $65.94 6.8% GME $3,714 9/3/2010 $19.01 $26.26 38.1% T $181,924 5/13/2011 $31.41 $30.72 -2.2% SNY $101,395 3/18/2011 $33.37 $37.68 12.9% SKX $692 3/18/2011 $18.46 $13.90 -24.7% ACOM $1,852 6/10/2011 $36.35 $40.09 10.3% SOLR $1,892 6/10/2011 $12.40 $15.03 21.2% RIMM $15,608 5/13/2011 $43.24 $29.77 -31.2%

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 ASYS   |   BPI   |   DLTR   |   GME   |   T   |   SNY   |   SKX   |   ACOM   |   SOLR   |   RIMM   |   AMTECH SYSTEMS, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Amtech Systems, Inc. (Amtech), incorporated in October 1981, through its wholly owned subsidiaries, supplies horizontal diffusion furnace systems used for solar (photovoltaic) cell and semiconductor manufacturing. The Company provides products and services to two industries: the solar industry and the semiconductor industry. The Company's solar and semiconductor equipment is sold under brand names of Tempress Systems and Bruce Technologies, which have customers in both the solar industry and the semiconductor industry. Within the solar industry, its provide diffusion and automation equipment to solar cell manufacturers and it also offers plasma enhanced chemical vapor deposition (PECVD) and phosphocilicate glass (PSG) equipment. Within the semiconductor industry, it provides equipment to manufacturers of analog, power, automotive and microcontroller chips with geometries greater than 0.3 micron. 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. ASYS's P/E is 8.44, 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. ASYS's revenue growth is 34.25%, while it's earnings growth rate is 31.23%, based on the average of the 3 and 4 year historical eps growth rates. Therefore, ASYS 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 (280.9%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (247.4%) of the current year. Sales growth for the prior must be greater than the latter. For ASYS 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. ASYS's EPS ($0.77) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. ASYS's EPS for this quarter last year ($0.02) 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. ASYS's growth rate of 3,750.00% passes this test. EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: [PASS] Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for ASYS is 15.61%. This should be less than the growth rates for the 3 previous quarters, which are 1,500.00%, 2,950.00%, and 5,100.00%. ASYS 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, 3,875.00%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 3,750.00%, (versus the same quarter one year ago) then the stock fails, with one exception: if the growth rate in earnings between the current quarter and the same quarter one year ago is greater than 30%, then the stock would pass. The growth rate over this period for ASYS is 3,750.0%, and it would therefore pass this test. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 3,750.00% must be greater than or equal to the historical growth which is 31.23%. ASYS 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. ASYS, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.36, 0.44, 0.32, -0.18, and 1.03, 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. ASYS's long-term growth rate of 31.23%, based on the average of the 3 and 4 year historical eps growth rates, passes this test. TOTAL DEBT/EQUITY RATIO: [PASS] A final criterion is that a company must not have a high level of debt. A high level of total debt, due to high interest expenses, can have a very negative effect on earnings if business moderately turns down. If a company does have a high level, an investor may want to avoid this stock altogether. ASYS's Debt/Equity (0.00%) is not considered high relative to its industry (10.38%) 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 ASYS, this criterion has not been met (insider sell transactions are 136, 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.   BRIDGEPOINT EDUCATION, INC. Profile Strategy: Growth Investor Based on: Martin Zweig Bridgepoint Education, Inc. (Bridgepoint) is a accredited provider of postsecondary education services. The Company offers associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences. It delivers its programs online, as well as at its traditional campuses located in Clinton, Iowa, and Colorado Springs, Colorado. As of December 31, 2009, it offered approximately 1,150 courses, 60 degree programs and 125 specializations and concentrations. As of December 31, 2009, it had 53,688 students enrolled in its institutions, 99% of whom were attending classes online. Analysis Guru Score: 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. BPI's P/E is 9.21, 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. BPI's revenue growth is 112.33%, while it's earnings growth rate is 31.44%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate. Therefore, BPI 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 (47%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (46%) of the current year. Sales growth for the prior must be greater than the latter. For BPI 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. BPI's EPS ($0.92) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. BPI's EPS for this quarter last year ($0.49) 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. BPI's growth rate of 87.76% 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 BPI is 15.72%. This should be less than the growth rates for the 3 previous quarters, which are 2,800.00%, 64.86%, and 36.36%. BPI 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, 127.78%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 87.76%, (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 BPI is 87.8%, 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, 87.76% must be greater than or equal to the historical growth which is 31.44%. BPI 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. BPI, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were -2.15, 0.32, 3.15, 0.74, and 2.14, 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. BPI's long-term growth rate of 31.44%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate, 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. BPI's Debt/Equity (0.00%) is not considered high relative to its industry (40.37%) and passes this test. INSIDER TRANSACTIONS: [PASS] A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For BPI, this criterion has not been met (insider sell transactions are 69, while insiders buying number 63). 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.   DOLLAR TREE, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Dollar Tree, Inc. is an operator of discount variety stores offering merchandise at the fixed price of $1. At January 29, 2011, the Company operated 4,101 discount variety retail stores. Its stores operate under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant and Dollar Bills. Approximately 3,935 of these stores sell substantially all items for $1 or less in the United States and $1.25 or less in Canada. Substantially all of the remaining stores, operating as Deal$, sell items for $1 or less but also sell items for more than $1. The Company's optimal store is between 8,000 and 10,000 selling square feet. This store size provides the appropriate amount of space for its merchandise offerings while allowing it to provide service. At January 29, 2011, it operated 4,015 stores in 48 states and the District of Columbia, as well as 86 stores in Canada. In November 2010, it acquired 86 Dollar Giant stores based in Vancouver, British Columbia. 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. DLTR, with a market cap of $8,063 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. DLTR, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.23, 1.39, 1.68, 2.37 and 3.10, 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. DLTR's Price/Sales ratio of 1.33, 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. DLTR, whose relative strength is 86, is in the top 50 and would pass this last criterion.   GAMESTOP CORP. Profile Strategy: Value Investor Based on: Benjamin Graham GameStop Corp. (GameStop) is a retailer of video game products and personal computer (PC) entertainment software. The Company sells new and used video game hardware, video game software and accessories, as well as PC entertainment software, and related accessories and other merchandise. As of January 30, 2010, the Company operated 6,450 stores in the United States, Australia, Canada and Europe, primarily under the names GameStop and EB Games. GameStop also operates the electronic commerce Website www.gamestop.com and publish Game Informer, a multi-platform video game magazine in the United States based on circulation, with approximately 4 million subscribers. During the fiscal year ended January 30, 2010 (fiscal 2009), GameStop operated its business in four segments: United States, Canada, Australia and Europe. Analysis Guru Score: 86% SECTOR: [PASS] GME 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. GME's sales of $9,672.4 million, based on trailing 12 month sales, pass this test. CURRENT RATIO: [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. GME's current ratio of 1.25 fails the test. LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for GME is $249.2 million, while the net current assets are $381.5 million. GME passes this test. LONG-TERM EPS GROWTH: [PASS] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. GME's EPS growth over that period of 1,815.8% passes the EPS growth test. P/E RATIO: [PASS] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. GME's P/E of 10.80 (using the 3 year PE) passes this test. PRICE/BOOK RATIO: [PASS] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. GME's Price/Book ratio is 1.24, while the P/E is 10.80. GME passes the Price/Book test.   AT&T INC. Profile Strategy: Contrarian Investor Based on: David Dreman AT&T Inc. is a holding company. The Company is a provider of telecommunications services in the United States and worldwide. These include wireless communications, local exchange services, long-distance services, data/broadband and Internet services, video services, managed networking, wholesale services and directory advertising and publishing. It operates in four segments: wireless, which provides both wireless voice and data communications services across the United States and, through roaming agreements, in foreign countries; wireline, which provides landline voice and data communication services, AT&T U-Verse TV, broadband and voice services (U-Verse) and managed networking to business customers; advertising solutions, which publishes Yellow and White Pages directories and sells directory advertising and Internet-based advertising and local search, and other, which provides results from customer information services and all corporate and other operations. Analysis Guru Score: 83% MARKET CAP: [PASS] Medium to large-sized companies (the largest 1500 companies) should be chosen, because they are more in the public eye. Furthermore, the investor is exposed to less risk of "accounting gimmickry", and companies of this size have more staying power. T has a market cap of $181,924 million, therefore passing the test. EARNINGS TREND: [PASS] A company should show a rising trend in the reported earnings for the most recent quarters. T's EPS for the past 2 quarters, (from earliest to most recent quarter) 0.18, 0.57 have been increasing, and therefore the company passes this test. EPS GROWTH RATE IN THE IMMEDIATE PAST AND FUTURE: [FAIL] 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. T fails this test as its EPS growth rate for the past 6 months (-70.61%) does not beat that of the S&P (8.57%). This methodology would utilize four separate criteria to determine if T 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: [FAIL] The P/E of a company should be in the bottom 20% of the overall market. T's P/E of 9.10, based on trailing 12 month earnings, is higher than the bottom 20% criterion (below 9.05), and therefore fails this test. PRICE/CASH FLOW (P/CF) RATIO: [PASS] The P/CF of a company should be in the bottom 20% of the overall market. T's P/CF of 4.60 meets the bottom 20% criterion (below 5.38) and therefore passes this test. PRICE/BOOK (P/B) VALUE: [FAIL] The P/B value of a company should be in the bottom 20% of the overall market. T's P/B is currently 1.62, which does not meet the bottom 20% criterion (below 0.77), and it therefore fails this test. PRICE/DIVIDEND (P/D) RATIO: [PASS] The P/D ratio for a company should be in the bottom 20% of the overall market (that is the yield should be in the top 20%). T's P/D of 17.86 meets the bottom 20% criterion (below 20.53 or yield above 3.7% ), and it therefore passes this test. This methodology maintains that investors should look for as many healthy financial ratios as possible to ascertain the financial strength of the company. These criteria are detailed below. CURRENT RATIO: [FAIL] A prospective company must have a strong Current Ratio (greater than or equal to the average of it's industry [1.06] or greater than 2). This is one identifier of financially strong companies, according to this methodology. T's current ratio of 0.59 fails 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 T is 50.13%, while its historical payout ratio has been 55.42%. Therefore, it passes the payout criterion. RETURN ON EQUITY: [PASS] The company should have a high ROE, as this helps to ensure that there are no structural flaws in the company. This methodology feels that the ROE should be greater than the top one third of ROE from among the top 1500 large cap stocks, which is 17.84%, and would consider anything over 27% to be staggering. The ROE for T of 18.68% 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. T's pre-tax profit margin is 14.49%, thus passing this criterion. YIELD: [PASS] The company in question should have a yield that is high and that can be maintained or increased. T's current yield is 5.60%, while the market yield is 2.73%. T passes this test. LOOK AT THE TOTAL DEBT/EQUITY: [PASS] The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry of 90.75%. T's Total Debt/Equity of 57.78% is considered acceptable.   SANOFI-AVENTIS SA (ADR) Profile Strategy: Value Investor Based on: Benjamin Graham Sanofi-Aventis is a pharmaceutical group engaged in the research, development, manufacture and marketing of healthcare products. The Company's business includes two main activities: pharmaceuticals and human vaccines through sanofi pasteur. It is also present in animal health products through Merial Limited (Merial). In its pharmaceutical activity, it specializes in six therapeutic areas: diabetes, oncology, thrombosis and cardiovascular, central nervous system (CNS), and internal medicine. The global portfolio of sanofi-aventis also consists of a range of other pharmaceutical products. It offers vaccines in five areas: pediatric combination vaccines, influenza vaccines, adult and adolescent booster vaccines, meningitis vaccines and travel and endemic vaccines. In October 2010, Siegfried Holding AG sold its PulmoJet Inhalation Project to the Company. In February 2011, the Company acquired BMP Sunstone Corp. In April 2011, the Company acquired Genzyme Corporation. Analysis Guru Score: 100% SECTOR: [PASS] SNY is neither a technology nor financial Company, and therefore this methodology is applicable. SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than $340 million. SNY's sales of $46,266.8 million, based on trailing 12 month sales, pass this test. CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. SNY's current ratio of 2.30 passes the test. LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for SNY is $9,892.6 million, while the net current assets are $21,919.2 million. SNY passes this test. LONG-TERM EPS GROWTH: [PASS] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. SNY's EPS growth over that period of 142.0% passes the EPS growth test. P/E RATIO: [PASS] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. SNY's P/E of 13.91 (using the current PE) passes this test. PRICE/BOOK RATIO: [PASS] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. SNY's Price/Book ratio is 1.29, while the P/E is 13.91. SNY passes the Price/Book test.   SKECHERS USA, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Skechers U.S.A., Inc. (Skechers) design and market Skechers-branded contemporary footwear for men, women and children under several lines. addition to Skechers-branded lines, the Company also offers several designer, fashion and street-focused footwear lines for men, women and children. These lines are branded and marketed separately from Skechers and appeal to specific audiences. Its brands are sold through department stores, specialty stores, athletic retailers, and boutiques as well as catalog and Internet retailers. Along with wholesale distribution, its footwear is available at its e-commerce Website and its own retail stores. Skechers operates 90 concept stores, 92 factory outlet stores and 37 warehouse outlet stores in the United States, and 22 concept stores and five factory outlets internationally. The Company operates in four reportable segments: domestic wholesale sales, international wholesale sales, retail sales, and e-commerce sales. Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: SKX is considered a "True Stalwart", according to this methodology, as its earnings growth of 18.98% lies within a moderate 10%-19% range and its annual sales of $1,990 million are greater than the multi billion dollar level. This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. SKX is attractive if SKX can hold its own during a recession. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for SKX was 15.60% last year, while for this year it is 19.86%. Since inventory has been rising, this methodology would not look favorably at the stock but would not completely eliminate it from consideration as the inventory increase (4.26%) is below 5%. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for SKX (0.39), based on the average of the 3, 4 and 5 year historical eps growth rates, is excellent. EARNINGS PER SHARE: [PASS] The EPS for a stalwart company must be positive. SKX's EPS ($1.86) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for SKX (9.68%) to be exceptionally low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for SKX (-18.99%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for SKX (26.89%) 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.   ANCESTRY.COM INC Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Ancestry.com Inc. is an online resource for family history. It has developed systems for digitizing handwritten historical documents, and has established relationships with national, state and local government archives, historical societies, religious institutions and private collectors of historical content around the world. These digital records and documents, combined with the online search technologies and tools, enable the subscribers to research their family history, build their family trees and make meaningful discoveries about the lives of their ancestors. As of February 10, 2010, the registered users have created over 14 million family trees containing nearly 1.5 billion profiles. They have uploaded and attached to their trees a combination of nearly 32 million photographs, scanned documents and written stories. In addition, the Company continues to deploy tools and technologies to facilitate social networking and crowd sourcing, a means of leveraging collaborative efforts. Analysis Guru Score: 76% 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. ACOM's profit margin of 12.78% 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. ACOM, with a relative strength of 95, 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 ACOM (125.00% for EPS, and 41.31% for Sales) are good enough to pass. INSIDER HOLDINGS: [FAIL] ACOM's insiders should own at least 10% (they own 0.71%) of the company's outstanding shares. This does not satisfy the minimum requirement, and companies that do not pass this criteria are less attractive. CASH FLOW FROM OPERATIONS: [PASS] A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. ACOM's free cash flow of $1.91 per share passes this test. PROFIT MARGIN CONSISTENCY: [PASS] ACOM's profit margin has been consistent or even increasing over the past three years (Current year: 12.24%, Last year: 9.47%, Two years ago: 1.20%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise. R&D AS A PERCENTAGE OF SALES: [FAIL] ACOM has reduced their R&D expenditures(currently $42.3 million) over the past two years which is unacceptable. ACOM is jeopardizing the future in order to boost current EPS numbers. This criterion is particularly important for high-tech and medical stocks because they are so R&D dependant. CASH AND CASH EQUIVALENTS: [PASS] ACOM's level of cash $65.5 million passes this criteria. If a company is a cash generator, like ACOM, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash. ACCOUNT RECEIVABLE TO SALES: [PASS] This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for ACOM was 3.50% last year, while for this year it is 5.01%. Although the AR to sales is rising, it is below the max 30% that is allowed. The investor can still consider the stock if all other criteria appear very attractive. LONG TERM DEBT/EQUITY RATIO: [PASS] ACOM's trailing twelve-month Debt/Equity ratio (0.00%) is at a great level according to this methodology because the superior companies that you are looking for don't need to borrow money in order to grow. "THE FOOL RATIO" (P/E TO GROWTH): [FAIL] The "Fool Ratio" is an extremely important aspect of this analysis. The methodology says consider selling the shares when the company's Fool Ratio is between 1.0 and 1.30. (ACOM's is 1.08). This is considered to be high. The following criteria for ACOM are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] ACOM has not been significantly increasing the number of shares outstanding within recent years which is a good sign. ACOM currently has 50.0 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. ACOM's sales of $327.5 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". ACOM passes the sales test. DAILY DOLLAR VOLUME: [FAIL] ACOM does not pass the Daily Dollar Volume (DDV of $38.1 million) test. It exceeds the maximum requirement of $25 million. Stocks that fail the test are too liquid for a small individual investor and many institutions have already discovered it. 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. ACOM with a price of $40.09 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] ACOM's income tax paid expressed as a percentage of pretax income this year was (34.61%) and last year (20.05%) 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.   GT SOLAR INTERNATIONAL, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch GT Solar International, Inc. through its subsidiaries is a global provider of polysilicon production technology, crystalline ingot growth systems and related photovoltaic manufacturing services for the solar industry. Its customers include various solar companies, as well as companies in the chemical industry. The Company's principal products include chemical vapor deposition (CVD) reactors and related equipment used to produce polysilicon, the key raw material used in silicon-based solar wafers and cells, and directional solidification systems (DSS) furnaces and related equipment used to cast multicrystalline ingots by melting and cooling polysilicon in a controlled process. These ingots are used to make photovoltaic (PV) wafers, which are, in turn, used to make solar cells. It operates under two segments: Polysilicon Business and Photovoltaic Business. Analysis Guru Score: 74% DETERMINE THE CLASSIFICATION: This methodology would consider SOLR a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (11.92) relative to the growth rate (50.36%), based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate, 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 SOLR (0.24) 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. SOLR, whose sales are $899.0 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate. INVENTORY TO SALES: [PASS] When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for SOLR was 12.65% last year, while for this year it is 14.19%. Since inventory has been rising, this methodology would not look favorably at the stock but would not completely eliminate it from consideration as the inventory increase (1.54%) is below 5%. EPS GROWTH RATE: [FAIL] 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 SOLR is 50.4%, based on the average of the 3 and 4 year historical eps growth rates using the current fiscal year eps estimate, which is considered too fast. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for SOLR (61.97%) to be mediocre. If the Debt/Equity ratio is this high, the other ratios and financial statistics for SOLR should be good enough to compensate. 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 SOLR (10.38%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for SOLR (13.58%) 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.   RESEARCH IN MOTION LIMITED (USA) Profile Strategy: Price/Sales Investor Based on: Kenneth Fisher Research In Motion Limited (RIM) is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information, including e-mail, phone, short message service (SMS), Internet and intranet-based applications. RIM's portfolio of products, services and embedded technologies are used by organizations worldwide and include the BlackBerry wireless solution, the RIM Wireless Handheld product line, software development tools and other software and hardware. Its subsidiaries include Research In Motion Corporation, Research In Motion UK Limited and RIM Finance, LLC. On June 2, 2010, Harman International sold its software operating systems unit, QNX Software Systems, to the Company. In June 2011, the Company acquired Scoreloop. 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. RIMM's P/S ratio of 0.76 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. RIMM's Debt/Equity of 0.00% is exceptional, thus passing the test. PRICE/RESEARCH RATIO: [PASS] This methodology considers Technology and Medical companies with low Price/Research ratios to be attractive. This ratio indicates how much a market values a company's Research and Development (R&D). Companies with Price/Research ratios between 10 and 15 are on the borderline. A Price/Research ratio above 15 indicates the company spends too little on R&D or is extremely overvalued. Investors should seek those between 5 and 10. RIMM's Price/Research ratio of 11.55 is considered "OK". PRELIMINARY GRADE: Some Interest in RIMM At this Point Is RIMM 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, RIMM, who has a P/S of 0.76, 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%. RIMM's inflation adjusted EPS growth rate of 48.91% 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. RIMM's free cash per share of 4.48 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. RIMM, whose three year net profit margin averages 16.89%, passes this evaluation.   Watch List The Watch List contains the highest scoring stocks according to our guru consensus system that are not currently in the Hot List portfolio. We provide this list both for informational purposes and for investors who are not comfortable with a portfolio of ten stocks. Ticker Company Name Industry Guru Score QSII QUALITY SYSTEMS, INC. Software & Programming 56 AZN ASTRAZENECA PLC (ADR) Biotechnology & Drugs 56 INTC INTEL CORPORATION Semiconductors 54 CECO CAREER EDUCATION CORP. Schools 54 HUM HUMANA INC. Insurance (Accident & Health) 53 FRX FOREST LABORATORIES, INC. Biotechnology & Drugs 52 CW CURTISS-WRIGHT CORP. Misc. Fabricated Products 51 ORCL ORACLE CORPORATION Software & Programming 49 FCFS FIRST CASH FINANCIAL SERVICES, INC. Retail (Specialty) 49 BAP CREDICORP LTD. (USA) Regional Banks 49

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.