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Executive Summary	April 13, 2012

The Economy For the past several months, the economic data coming out of the U.S. has been painting one of the most positive pictures we've seen in quite a while. In the last two weeks, however, reminders have been popping up both at home and abroad of just what sorts of headwinds the economy is facing -- though for now, it is absorbing the blows and pushing forward. At home, the biggest news has been somewhat disappointing jobs numbers. The private sector added 121,000 jobs in March, well below expectations and less than half of the average that were added in January and February. The unemployment rate, which is based on the separate survey of households (as opposed to the survey of businesses used to determine the number of new jobs), fell, however, to 8.2%. It marked the ninth straight month that the rate has declined or held steady, and the 8.2% figure is the lowest monthly reading in more than three years. The so-called "U-6" unemployment rate, meanwhile, which also includes discouraged workers who have given up looking for a job, also fell, from 14.9% in February to 14.5% in March. That's still quite high, but it does represent the lowest reading in more than three years. Weekly unemployment claim figures were also somewhat disappointing. New claims rose about 3.5% in the week ending April 7, reaching their highest level since late January. Still, they are close to 9% below where they stood at this time last year. And continuing claims, the data for which lags new claims by a week, fell about 3%, hitting their lowest mark since July of 2008. Good news, meanwhile, came from both the manufacturing and service sectors. The Institute for Supply Management's manufacturing index showed that the sector expanded for the 32nd straight month in March, and that it did so at an accelerating pace. Sub-indexes for new orders and employment also both stayed comfortably in expansion territory, with the employment sub-index making a pretty significant gain. The service sector expanded for the 27th straight month in March, according to ISM. It did so at a slightly less rapid pace than it did in February, but the index was still very comfortably in expansion territory. And ISM's sub-indices for new orders and employment were both well in expansion territory. A couple of the big factors weighing on the economy over the past fortnight have come from overseas. First, rising bond yields in Italy and Spain stoked fears that the European debt crisis could still infect U.S. financials. Second, weak import data coming out of China generated fears that a hard landing could be in the offing for the Asian giant. But on Thursday, yields in Italy and Spain moved a bit lower after an Italian bond auction, a good sign. And also on Thursday, new data showed that lending jumped in China in March, a sign that growth may actually be starting to rebound there. Amid all of this, the S&P 500 returned -1.1% since our last newsletter, while the Hot List returned -3.2%. So far in 2012, the portfolio has returned 16.9% vs. 10.3% for the S&P. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 164.2% vs. the S&P's 38.7% gain. Data from a Different Angle While economic data has been impressive over the past several months, some analysts have been questioning whether it has been impacted by external factors -- namely, problems in the way the government makes seasonal adjustments to its numbers. If you're not familiar with the general process, most government data comes in two forms -- the raw numbers, and seasonally adjusted figures, the latter of which takes into account the nature of the business cycle over the course of the year -- hiring, for example, picks up leading into the holiday season every year, so an increase in the raw number of jobs added in the fall months shouldn't be interpreted as a broader, lasting economic change. Seasonal adjustments account for that. Perhaps the most notable group to raise questions about the seasonal adjustment process is the Economic Cycle Research Institute. It has said that after the sharp drop in the economy in the fourth quarter of 2008 and the first quarter of 2009, the algorithms used to determine the magnitude of seasonal adjustments began to view the data from those quarters "as a lasting change in seasonal patterns. So, according to these programs, data from Q4 and Q1 would be expected thereafter to be relatively weak, and therefore automatically adjusted upwards." The recent weakening of jobs data has thus raised some questions about whether the economic bounce we've seen over the past several months is as significant as it seems, or seasonal factors have skewed things. Now, I would hope that the government's process for making seasonal adjustments would be robust enough to avoid a situation in which one or two anomalous quarters trip up the whole system. But given ECRI's track record, I think it's worth considering the possibility. First, however, I'd like to note that the mere fact that people are now debating whether the strong recent numbers are inflated is a good sign. Not all that long ago, the debate was whether the U.S. economy would fall into a depression; now that the data shows things have been improving significantly, the debate has shifted to the legitimacy of the numbers and the magnitude of the recovery. (There does seem to be a hint of bears grasping at straws here.) But let's see what the data says. By using the unadjusted data and looking at year-over-year changes (i.e., this March vs. last March) rather than seasonally adjusted month-to-month figures, we can take out the seasonal factors. So let's take a look at the recent year-over-year changes in some key data points. We'll start with employment. Here are the year-over-year gains in jobs since last April. Each monthly figure is the amount of jobs added to the economy since the same month one year earlier: April 2011: +1.90 million May 2011: +1.92 million June 2011: +2.01 million July 2011: +1.95 million August 2011: +1.93 million September 2011: +2.01 million October 2011: +1.97 million November 2011: +1.98 million December 2011: +2.05 million January 2012: +2.24 million February 2012: +2.25 million March 2012: +2.13 million As you can see, while the pace dropped off a bit in March, job creation has accelerated over the past year, and the March gains were actually the third-most of the 12 months. Now, on to initial claims for unemployment. Again, this is unadjusted data from the Labor Department. Since these weekly figures can be volatile, I've taken four-week blocks and averaged them out. So, for example, the first entry takes the average number of weekly new claims filed for the four weeks ending May 7, 2011, and compares that to the average number of new claims filed in the four corresponding weeks one year earlier. Four Weeks Ending: May 7, 2011: -24,069 June 4, 2011: -39,142 July 2, 2011: -40,824 July 30, 2011: -44,879 Aug. 27, 2011: -54,248 Sept. 24, 2011: -29,801 Oct. 22, 2011: -41,459 Nov. 19, 2011: -43,192 Dec. 17, 2011: -56,890 Jan. 14, 2012: -54,604 Feb. 11, 2012: -52,571 March 10, 2012: -31,098 April 7, 2012: -42,417 The data indicates that there have been some ups and downs in the rate of decline for new claims, though the overall picture has been a solid downward trend. The most recent four-week period is almost exactly at the average for all of those other periods I cited above (42,707). So while recent figures haven't been as strong as at other times during the past year, they are still very solid. Next, let's look at industrial production, which is tracked by the Federal Reserve. The figures below show the rate of change for industrial production for each month versus the same month one year earlier. March 2011: +5.47% April 2011: +4.44% May 2011: +3.18% June 2011: +3.14% July 2011: +3.41% August 2011: +3.30% September 2011: +3.47% October 2011: +4.21% November 2011: +4.04% December 2011: +3.29% January 2012: +3.25% February 2012: +4.28% The data shows that industrial production over the past year has increased at a slower pace than it did during the previous year. (From April 2010 through March 2011 the rate of increase was at least 5% every month.) That shouldn't be a surprise as an expansion ages, however. Usually, the economy gets a strong bounce at the beginning of an expansion, and then growth slows a bit as the expansion matures. That being said, notice that the most recent reading, from February, is the highest in nearly a year. Finally, let's look at the U.S. consumer, via retail and food service sales data. Again, these are unadjusted numbers (from the Census Bureau), and the figures for each month represent the amount that sales increased over the same period a year earlier: April 2011: +7.51% May 2011: +7.94% June 2011: +8.81% July 2011: +6.36% August 2011: +8.85% September 2011: +8.72% October 2011: +7.06% November 2011: +6.95% December 2011: +6.01% January 2012: +6.10% Here we can see that the rate of increase has generally been declining since last summer. But there was a bit of an uptick in January (the most recent month for which data is available), and the 6% to 7% annual growth we've seen over the past four months is a healthy range. Fundamental Stars The metrics we looked at above are, of course, only a few of those used to analyze the economy. Still, they are important ones that give a look at three very important parts of our economy: the labor market, industrial production, and consumer spending. All in all, they paint a picture of an economy that, while perhaps not peaking, has been continuing to grow at a respectable pace -- and that's looking at the data in a way that sidesteps the seasonal adjustment process that some have brought into question. Between that picture of respectable economic growth and the plethora of attractively valued stocks out there right now, I find this environment filled with opportunities. For example, the Hot List is adding two stocks this week, retailer Finish Line Inc. and for-profit education company Apollo Group. Finish Line has been growing earnings at a 28% pace over the long term, yet trades for about 13 times earnings and 0.8 times sales. It also has a PE-to-growth ratio below 0.5, no long-term debt, and a return on equity of 17%. Apollo Group, meanwhile, trades for just 8 times earnings, thanks to fear about the for-profit education industry. But it has an impressive 51% return on equity and long-term debt that is less than a quarter of its net current assets. These are the types of fundamentally sound stocks that have helped the Hot List take a big lead on the market this year, and which have helped it leave the market in the dust over the long haul, and the portfolio will continue to focus on them as we move deeper into 2012.		Editor-in-Chief: John Reese Since Inception   Hot List 164.2% S&P 500 38.7% Accuracy 57.0% Beta 1.2 YTD   Hot List 16.9% S&P 500 10.3% Since Last Issue   Hot List -3.2% S&P 500 -1.1% Avg. Fundamentals   Market Cap (mil) $7,137 PE Ratio 13.4 5 Yr EPS Growth 12.7% Yield 0.6% Rel. Strength 74 Portfolio Sectors Services 7 Capital Goods 1 Financial 1 Healthcare 1
Advertisement Validea Capital Management - Private Portfolio Management Based on Strategies of Legends Are you looking for an alternative to your underperforming mutual funds or financial advisor? Click here to download Validea Capital's investment kit and learn more about the firm's guru-based portfolios. Get More Information on Validea Capital! ** Validea Capital Management is a separate investment advisory firm managed by Validea.com founder John Reese. Thre information above in not intended as personal investment advice and should not be interpreted as such. The Fallen As we rebalance the Validea Hot List, 2 stocks leave our portfolio. These include: Caci International Inc (CACI) and Altisource Portfolio Solutions S.a. (ASPS). The Keepers 8 stocks remain in the portfolio. They are: Forest Laboratories, Inc. (FRX), The Tjx Companies, Inc. (TJX), Cash America International, Inc. (CSH), Northrop Grumman Corporation (NOC), Coinstar, Inc. (CSTR), Advance Auto Parts, Inc. (AAP), Bridgepoint Education Inc (BPI) and Body Central Corp (BODY). The Newbies We are adding 2 stocks to the portfolio. These include: Apollo Group Inc (APOL) and Finish Line Inc (FINL). Portfolio Changes Additions   APOLLO GROUP INC APOL FINISH LINE INC FINL Deletions   CACI INTERNATIONAL INC CACI ALTISOURCE PORTFOLIO SOLUTIONS S.A. ASPS Newcomers to the Validea Hot List Apollo Group (APOL): Apollo owns the University of Phoenix and several other schools that offer undergraduate, master's, and doctoral degrees through both on-campus and online courses. The Phoenix, Ariz.-based firm has a $4.4 billion market cap and has taken in about $4.5 billion in revenue in the past year. For-profit education companies have been dealing with several challenges over the past few years, not the least of which is the potential for increased government regulation of their operations. But my models think that Apollo should be getting more love from investors. It gets high marks from my Joel Greenblatt- and Peter Lynch-based models. To read more about the stock, scroll down to the Detailed Stock Analysis section below. Finish Line Inc. (FINL): Based in Indianapolis, Finish Line is a mall-based retailer that sells athletic and casual footwear, as well as apparel and accessories. It has about 650 stores across the U.S. The firm has a $1.1 billion market cap, and has taken in about $1.4 billion in sales over the past year. Finish Line gets high marks from 3 of my strategies, those I based on the writings of Peter Lynch, James O'Shaughnessy, and Martin Zweig. To read more about it, see the Detailed Stock Analysis section below. News about Validea Hot List Stocks Coinstar Inc. (CSTR): Coinstar shares surged after-market on Thursday, after the firm announced strong fourth-quarter results. Profit from continuing operations was $1.62 to $1.66 a share, the firm announced, citing preliminary results, according to Bloomberg. Sales were $567 million to $569.2 million. Analysts expected profit of 89 cents a share on sales of $538.6 million, according to Bloomberg. Shares were posting double-digit percentage gains in after-hours trading, eclipsing all time highs. 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 FRX FOREST LABORATORIES, INC. Biotechnology & Drugs 74 TJX THE TJX COMPANIES, INC. Retail (Department & Discount) 71 AAP ADVANCE AUTO PARTS, INC. Retail (Specialty) 68 APOL APOLLO GROUP INC Schools 65 FINL FINISH LINE INC Retail (Apparel) 62 Ticker Market Cap Date Added Start Price Current Price Return BPI $1,128 3/18/2011 $18.02 $21.60 19.9% CSH $1,299 3/16/2012 $47.05 $44.26 -5.9% BODY $447 3/16/2012 $26.76 $27.71 3.6% CSTR $1,897 2/17/2012 $56.23 $61.31 9.0% NOC $15,507 2/17/2012 $60.08 $61.29 2.0% FRX $8,956 9/2/2011 $33.10 $33.73 1.9% TJX $29,990 3/16/2012 $37.91 $39.76 4.9% AAP $6,560 3/16/2012 $88.05 $89.95 2.2% APOL $4,484 4/13/2012 TBD $37.17 TBD FINL $1,102 4/13/2012 TBD $21.22 TBD

Detailed Stock Analysis Disclaimer: The analysis is from Validea's selection and interpretation of content from the guru's book or published writings, and is not from nor endorsed by the guru. See Full Disclaimer BPI   |   CSH   |   BODY   |   CSTR   |   NOC   |   FRX   |   TJX   |   AAP   |   APOL   |   FINL   |   BRIDGEPOINT EDUCATION INC Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool 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: 83% PROFIT MARGIN: [PASS] This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. BPI's profit margin of 18.51% passes this test. RELATIVE STRENGTH: [FAIL] 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. Although BPI's relative strength of 89 is below the acceptable level, yet it is very close. Keep an eye on the stock as it could move into the acceptable range. COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [FAIL] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for BPI (-8.89% for EPS, and 14.99% for Sales) are not good enough to pass. INSIDER HOLDINGS: [PASS] BPI's insiders should own at least 10% (they own 66.22% ) of the company's outstanding shares which is extremely attractive since the minimum requirement is 10%. A high percentage indicates that the insiders are confident that the company will do well. CASH FLOW FROM OPERATIONS: [PASS] A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. BPI's free cash flow of $3.26 per share passes this test. PROFIT MARGIN CONSISTENCY: [PASS] BPI's profit margin has been consistent or even increasing over the past three years (Current year: 18.51%, Last year: 17.89%, Two years ago: 10.37%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise. R&D AS A PERCENTAGE OF SALES: [NEUTRAL] This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in BPI's case. CASH AND CASH EQUIVALENTS: [PASS] BPI's level of cash $287.7 million passes this criteria. If a company is a cash generator, like BPI, 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 BPI was 8.19% last year, while for this year it is 6.66%. Since the AR to sales is decreasing by -1.53% the stock passes this criterion. LONG TERM DEBT/EQUITY RATIO: [PASS] BPI's trailing twelve-month Debt/Equity ratio (0.00%) is at a great level according to this methodology because the superior companies that you are looking for don't need to borrow money in order to grow. "THE FOOL RATIO" (P/E TO GROWTH): [PASS] The "Fool Ratio" is an extremely important aspect of this analysis. If the company has attractive fundamentals and its Fool Ratio is 0.5 or less (BPI's is 0.19), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. BPI passes this test. The following criteria for BPI are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] BPI has not been significantly increasing the number of shares outstanding within recent years which is a good sign. BPI currently has 56.0 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock. SALES: [FAIL] Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. BPI's sales of $933.4 million based on trailing 12 month sales, are too high and would therefore fail the test. It is companies with $500 million or less in sales that are most likely to double or triple in size in the next few years. DAILY DOLLAR VOLUME: [PASS] BPI passes the Daily Dollar Volume (DDV of $8.3 million) test. It is required that this number be less than $25 million because these are the stocks that remain relatively undiscovered by institutions. "You'll be scoring touchdowns against the big guys on your turf." PRICE: [PASS] This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. BPI with a price of $21.60 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] BPI's income tax paid expressed as a percentage of pretax income this year was (37.52%) and last year (41.42%) 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.   CASH AMERICA INTERNATIONAL, INC. Profile Strategy: Value Investor Based on: Benjamin Graham Cash America International, Inc. provides specialty financial services to individuals through retail services locations and through electronic distribution platforms known as e-commerce activities. The Company offers secured non-recourse loans, commonly referred to as pawn loans. The Company also offers unsecured consumer loans. Its consumer loan portfolio includes short-term loans, which include single payment loans (that are commonly referred to as payday loans) and line of credit products; longer-term multi-payment installment loans; and credit services and participation interests in receivables acquired from a third-party lender through the micro line of credit (MLOC) channel. It operates in two segments: retail services and e-commerce. Through the credit services organization programs (the CSO programs), it provides a third-party lender's consumer loan product in some markets by acting as a credit services organization or credit access business on behalf of consumers. Analysis Guru Score: 86% SECTOR: [FAIL] CSH is in the Financial sector, which is one sector that this methodology avoids. Technology and financial stocks were considered too risky to invest in when this methodology was published. Although times have changed since then with respect to the risk of financial stocks, several of Graham's criteria, like the Current Ratio and Debt to Current Assets, do not apply to financial companies. As a result, the company will not be able to pass this methodology, although we will include the remainder of the analysis for informational purposes. SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than $340 million. CSH's sales of $1,540.6 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. CSH's current ratio of 4.79 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 CSH is $503.0 million, while the net current assets are $644.9 million. CSH 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. CSH's EPS growth over that period of 512.2% 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. CSH's P/E of 12.00 (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. CSH's Price/Book ratio is 1.43, while the P/E is 12.00. CSH passes the Price/Book test.   BODY CENTRAL CORP Profile Strategy: Growth Investor Based on: Martin Zweig 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: 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. BODY's P/E is 22.81, based on trailing 12 month earnings, while the current market PE is 18.00. Therefore, it passes the first test. REVENUE GROWTH IN RELATION TO EPS GROWTH: [FAIL] Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. BODY's revenue growth is 15.83%, while it's earnings growth rate is 47.54%, based on the average of the 2 and 5 year historical and the current year eps growth rates. Therefore, BODY fails this criterion. SALES GROWTH RATE: [PASS] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (20.4%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (17.9%) of the current year. Sales growth for the prior must be greater than the latter. For BODY 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. BODY's EPS ($0.37) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. BODY's EPS for this quarter last year ($0.18) 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. BODY's growth rate of 105.56% 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 BODY is 23.77%. This should be less than the growth rates for the 3 previous quarters which are 25.93%, -26.67% and 80.00%. BODY 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, 3.66%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 105.56%, (versus the same quarter one year ago) then the stock passes. EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: [PASS] The EPS growth rate for the current quarter, 105.56% must be greater than or equal to the historical growth which is 47.54%. BODY 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. BODY, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were -193.52, -5.42, 0.23, 0.73 and 1.22, 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. BODY's long-term growth rate of 47.54%, based on the average of the 2 and 5 year historical and the current year 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. BODY's Debt/Equity (0.00%) is not considered high relative to its industry (285.02%) 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 BODY, this criterion has not been met (insider sell transactions are 238, while insiders buying number 97). 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.   COINSTAR, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch 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: 93% DETERMINE THE CLASSIFICATION: This methodology would consider CSTR a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (16.97) relative to the growth rate (44.45%), 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 CSTR (0.38) is very favorable. SALES AND P/E RATIO: [PASS] For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth high enough to support a P/E above this threshold. CSTR, whose sales are $1,845.4 million, needs to have a P/E below 40 to pass this criterion. CSTR's P/E of (16.97) 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 CSTR is 44.4%, based on the average of the 3, 4 and 5 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 CSTR (74.78%) to be mediocre. If the Debt/Equity ratio is this high, the other ratios and financial statistics for CSTR 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 CSTR (12.14%) 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 CSTR (-1.49%) 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.   NORTHROP GRUMMAN CORPORATION Profile Strategy: Value Investor Based on: Benjamin Graham 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: 71% SECTOR: [PASS] NOC 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. NOC's sales of $26,412.0 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. NOC's current ratio of 1.26 fails the test. LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for NOC is $3,935.0 million, while the net current assets are $1,611.0 million. NOC fails 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. NOC's EPS growth over that period of 183.5% passes the EPS growth test. P/E RATIO: [PASS] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. NOC's P/E of 10.10 (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. NOC's Price/Book ratio is 1.51, while the P/E is 10.10. NOC passes the Price/Book test.   FOREST LABORATORIES, INC. Profile Strategy: Value Investor Based on: Benjamin Graham 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: 100% SECTOR: [PASS] FRX 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. FRX's sales of $4,668.6 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. FRX's current ratio of 3.96 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 FRX is $0.0 million, while the net current assets are $2,896.4 million. FRX 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. FRX's EPS growth over that period of 164.9% passes the EPS growth test. P/E RATIO: [PASS] The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. FRX's P/E of 12.10 (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. FRX's Price/Book ratio is 1.64, while the P/E is 12.10. FRX passes the Price/Book test.   THE TJX COMPANIES, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch 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: 91% DETERMINE THE CLASSIFICATION: This methodology would consider TJX a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (20.49) relative to the growth rate (21.47%), 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 TJX (0.95) 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. TJX, whose sales are $23,191.5 million, needs to have a P/E below 40 to pass this criterion. TJX's P/E of (20.49) 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 TJX is 21.5%, 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 TJX (24.54%) to be acceptable (equity is three to ten times debt). This ratio is one quick way to determine the financial strength of the company. FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for TJX (2.72%) 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 TJX (2.69%) 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.   ADVANCE AUTO PARTS, INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Advance Auto Parts, Inc. (Advance) is a specialty retailer of automotive aftermarket parts, accessories, batteries and maintenance items primarily operating within the United States. The Company operates in two segments: Advance Auto Parts (AAP), and Autopart International (AI). Its stores carry an extensive product line for cars, vans, sport utility vehicles and light trucks. The Company serves both do-it-yourself (DIY), and do-it-for-me (Commercial), customers. Its Commercial customers consist primarily of delivery customers for whom the Company delivers product from its store locations to it Commercial customers' places of business, including independent garages, service stations and auto dealers. 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. AAP, with a market cap of $6,560 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. AAP, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 2.28, 2.49, 2.83, 3.95 and 5.11, 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. AAP's Price/Sales ratio of 1.06, 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. AAP, whose relative strength is 92, is in the top 50 and would pass this last criterion.   APOLLO GROUP INC Profile Strategy: Value Investor Based on: Benjamin Graham Apollo Group, Inc. (Apollo Group) is a private education provider. The Company offers educational programs and services both online and on-campus at the undergraduate, master's and doctoral levels through its wholly owned subsidiaries, The University of Phoenix, Inc. (University of Phoenix); Institute for Professional Development (IPD); The College for Financial Planning Institutes Corporation (CFFP), and Meritus University, Inc. (Meritus). Apollo Group also formed a joint venture with The Carlyle Group (Carlyle), called Apollo Global, Inc. (Apollo Global), to pursue investments primarily in the international education services industry. As of August 31, 2011, Apollo Group owned 85.6% of Apollo Global, with Carlyle owning the remaining 14.4%. During the year ended December 31, 2011, the Other Schools segment includes IPD and CFFP, as well as Meritus University, Inc. (Meritus), which ceased operations. Analysis Guru Score: 71% SECTOR: [PASS] APOL 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. APOL's sales of $4,506.2 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. APOL's current ratio of 1.32 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 APOL is $93.8 million, while the net current assets are $410.2 million. APOL 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. APOL's EPS growth over that period of 318.4% 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. APOL's P/E of 9.60 (using the 3 year PE) passes this test. PRICE/BOOK RATIO: [FAIL] The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. APOL's Price/Book ratio is 4.13, while the P/E is 9.60. APOL fails the Price/Book test.   FINISH LINE INC Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy The Finish Line, Inc. (Finish Line) is a mall-based specialty retailer in the United States. Finish Line is a retailer of athletic shoes, apparel and accessories. As of April 15, 2011, the Company operated 660 Finish Line stores averaging approximately 5,400 square feet in 47 states. The Company's stores are primarily located in enclosed shopping malls. The typical Finish Line store format has a sales floor, which includes a try-on area, and a display area where each style of footwear carried in the store is displayed by category In addition, the Company operates an e-commerce site, www.finishline.com, as well as mobile commerce via m.finishline.com. Finish Line stores generally carry a selection of men's, women's and kids' performance and athletic casual shoes, as well as an assortment of apparel and accessories. Brand names offered by Finish Line include Nike, Brand Jordan, Reebok, Puma, adidas, Under Armour, Asics, Brooks, New Balance, Mizuno, Lacoste, The North Face and others. 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. FINL, with a market cap of $1,102 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. FINL, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were -0.89, 0.55, 0.92, 1.26 and 1.61, 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. FINL's Price/Sales ratio of 0.80, 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. FINL, whose relative strength is 68, is in the top 50 and would pass this last 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 TRCR TRANSCEND SERVICES, INC. Healthcare Facilities 57 ASPS ALTISOURCE PORTFOLIO SOLUTIONS S.A. Consumer Financial Services 57 DFS DISCOVER FINANCIAL SERVICES Consumer Financial Services 55 LKQX LKQ CORPORATION Auto & Truck Parts 54 GTAT GT ADVANCED TECHNOLOGIES INC Semiconductors 54 KLIC KULICKE AND SOFFA INDUSTRIES INC. Semiconductors 53 ZAGG ZAGG INC Containers & Packaging 51 UFS DOMTAR CORP. (USA) Paper & Paper Products 50 MNST MONSTER BEVERAGE CORP Beverages (Non-Alcoholic) 50 DCM NTT DOCOMO, INC. (ADR) Communications Services 49

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