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Executive Summary	January 2, 2015

The Economy As the New Year begins, the U.S. is putting up some of the most impressive economic numbers it has since the expansion began back in 2009. Gross Domestic Product growth for the third quarter was revised upward to 5.0%, for example -- the fastest pace since 2003. Bears have argued that the 5.0% figure is propped up by some factors that aren't bullish -- some of the gain was due to improvement in net exports, which was more to do with lower imports than increased demand for exports, for example. (Of course, many of these same bears ignore mitigating factors when they are a drag on GDP.) The bottom line is that 5.0% growth is very hard to ignore, and it's a sign that the US economy has been gaining steam (even as quantitative easing, which some said was propping up a weak economy, was winding down) The latest consumer data was also impressive. The Commerce Department said that personal income jumped 0.4% in November, with real disposable personal income up 0.5%. Real personal consumption expenditures surged 0.7%. The personal savings rate fell slightly but was still a solid 4.4%. Elsewhere, new claims for unemployment rose bit over the past two weeks, but in the most recent week were still close to 14% lower than they were in the year-ago period. Continuing claims, the data for which lag new claims by a week, edged slightly lower since our last newsletter and are 17.6% below year-ago levels. New home sales fell by 1.6% in October, meanwhile, according to a new government report. That put them about 3% below year-ago levels. Gas and oil prices, meanwhile, keep tumbling. A gallon of regular unleaded on average cost $2.26 as of Dec. 31, down 52 cents from a month earlier, according to AAA. As I've noted before, the gas price declines should give consumers a bit of a boost. But it is a double-edged sword. The energy sector is a big facilitator of job growth, and at some point, if the lower prices lead to less production, all of this could have an impact on the jobs market. Since our last newsletter, the S&P 500 returned 2.3%, while the Hot List returned 1.1%. Since its inception in July 2003, the Hot List is far outpacing the index, having gained 223.4% vs. the S&P's 105.8% gain. Portfolio Update The final two weeks of 2014 were relatively quiet ones for the Hot List. Since our last newsletter, six of the portfolio's ten holdings are in the black, with four in the red. Leading the way was United Insurance Holdings Corp., which was up 3.8% (all figures through Wednesday's close). UIHC announced that it has entered into merger plan with Family Security Holdings, the parent of Family Security Insurance Company (a Hawaii-based property and casualty insurer), and Family Security Underwriters (a managing general agency performing administrative and marketing services for FSIC). Universal Insurance Holdings also notched a nice game, rising 2.4%. There didn't seem to be a stock-specific catalyst for its rise, so it may have been a case of industry issues or just noise moving the stock. On the downside, Silicon Motion Technology Corp. was down 4%. There didn't seem to be any major catalyst for the decline, so it may have been another case of short-term noise in a small cap stock, particularly given that it was the end of the year. AmTrust Financial Services, meanwhile, was down 2.4%. That decline did appear to have a catalyst: statements from Alistair Capital alleging that AmTrust has "significant accounting problems that put shareholders, creditors, and policyholders at grave risk." The firm is requesting an investigation into AmTrust. No wrongdoing has been proved at this point, however. Two weeks from now, we'll conduct our first regularly scheduled rebalancing of 2015. At that point we'll see if AmTrust and the portfolio's other holdings will have what it takes to remain in the Hot List .		Editor-in-Chief: John Reese Since Inception   Hot List 223.4% S&P 500 105.8% Accuracy 54.6% Beta 1.2 YTD   Hot List 0.0% S&P 500 0.0% Since Last Issue   Hot List 1.1% S&P 500 2.3% Avg. Fundamentals   Market Cap (mil) $10,856 PE Ratio 14.2 5 Yr EPS Growth 22.8% Yield 1.7% Rel. Strength 75 Portfolio Sectors Financial 4 Services 2 Technology 1 Basic Materials 1 Capital Goods 1 Consumer Cyclical 1
Have Your Portfolio Managed Using Validea's Investing System Many users know about our research services but are unaware that money management services based on our system are also offered through a separate registered investment advisory firm, Validea Capital Management. If you are thinking about switching advisors or no longer have the time or inclination to manage your investments yourself, find out more about Validea Capital, its portfolio offerings, and its performance below. Request an Investment Consultation Today! ** Validea Capital Management is a separate investment advisory firm managed by Validea.com founder John Reese. The information above is not intended as personal investment advice and should not be interpreted as such. Guru Spotlight: Peter Lynch Choosing the greatest fund manager of all-time is a tough task. John Templeton, Benjamin Graham, John Neff -- a number of investors have put up the types of long-term track records that make it difficult to pick just one who was "The Greatest". If you were to rank Peter Lynch at the top of the list, however, you'd probably find few would disagree with you. During his 13-year tenure as the head of Fidelity Investments' Magellan Fund, Lynch produced a 29.2 percent average annual return -- nearly twice the 15.8 percent return that the S&P 500 posted during the same period. According to Barron's, over the last five years of Lynch's tenure, Magellan beat 99.5 percent of all other funds. If those numbers aren't impressive enough, try this one: If you'd invested $10,000 in Magellan the day Lynch took the helm, you would have had $280,000 on the day he retired 13 years later. Just like investors who entrusted him with their money, I, too, owe a special debt of gratitude to Lynch. When I was trying to find my way in the stock market many years ago, Lynch's book One Up On Wall Street was a big part of what put me on the right track. Lynch didn't use complicated schemes or highbrow financial language in giving investment advice; he focused on the basics, and his common sense approach and layman-friendly writing style resonated not only with me but with amateur and professional investors all over, as evidenced by its best-seller status. The wisdom of Lynch's approach so impressed me that I decided to try to computerize the method, the first step I took toward developing my Guru Strategy computer models. Just what was it about Lynch's approach that made him so incredibly successful? Interestingly, a big part of his approach involved something that is not at all exclusive to being a renowned professional fund manager: He invested in what he knew. Lynch believed that if you personally know something positive about a stock -- you buy the company's products, like its marketing, etc. -- you can get a beat on successful businesses before professional investors get around to them. In fact, one of the things that led him to one of his most successful investments -- undergarment manufacturer Hanes -- was his wife's affinity for the company's new pantyhose years ago. But while his "buy-what-you-know" advice has gained a lot of attention over the years, that part of his approach was only a starting point for Lynch. What his strategy really focused on was fundamentals -- that's why I was able to computerize it -- and the most important fundamental he looked at was one whose use he pioneered: the P/E/Growth ratio. The P/E/Growth ratio, or "PEG", divides a stock's price/earnings ratio by its historical growth rate. The theory behind this was relatively simple: The faster a company was growing, the more you should be willing to pay for its stock. To Lynch, PEGs below 1.0 were signs of growth stocks selling on the cheap; PEGs below 0.5 really indicated that a growth stock was a bargain. To show how the P/E/G can be more useful than the P/E ratio, Lynch has cited Wal-Mart, America's largest retailer. In his book "One Up On Wall Street", he notes that Wal-Mart's P/E was rarely below 20 during its three-decade rise. Its growth rate, however was consistently in the 25 to 30 percent range, generating huge profits for shareholders despite the P/E ratio not being particularly low. That also proved another one of Lynch's tenets: that a good company can grow for decades before earnings level off. The PEG wasn't the only abbreviation Lynch popularized within the stock market lexicon. His strategy is often used as a primary example of "GARP" -- Growth At A Reasonable Price -- investing, which blends growth and value tenets. While some categorize Lynch as a growth investor because his favorite type of stocks were "fast-growers" -- those growing earnings per share at an annual rate of at least 20 percent -- his use of PEG as a way to make sure he wasn't paying too much for growth really makes him a hybrid growth-value investor. One Size Doesn't Fit All One aspect of Lynch's approach that makes it different from those of other gurus I follow is his practice of evaluating different categories of stocks with different variables. His favorite category, as I noted, was "fast-growers". These companies were growing earnings at a rate of 20 to 50 percent per year. (Lynch didn't want growth rates above 50 percent, because it was unlikely companies could sustain such high growth rates over the long term). The other two main categories of stocks Lynch examined in his writings were "stalwarts" and "slow-growers". Stalwarts are large, steady firms that have multi-billion-dollar sales and moderate growth rates (between 10 and 20 percent). These are usually firms you know well -- Wal-Mart and IBM are current examples of "stalwarts" based on that definition. Their size and stability usually make them good stocks to have if the market hits a downturn, so Lynch typically kept some of them in his portfolio. "Slow-growers", meanwhile, are firms with higher sales that are growing EPS at an annual rate below 10 percent. These are the types of stocks you invest in primarily for their high dividend yields. One way Lynch treated slow-growers and stalwarts differently from fast-growers involved the PEG ratio. Because slow-growers and stalwarts tend to offer strong dividend yields, Lynch adjusted their PEG calculations to include dividend yield. For example, consider a stock that is selling for $30, and has a P/E ratio of 10, EPS growth of 12 percent, and a 3 percent yield. To find the PEG, you'd divide the P/E (10) by the total of the growth rate and yield (12+3=15). That gives you 10/15=0.67, which, being under 1.0, indicates that the stock is indeed a good value. Another difference: For slow-growers, Lynch wanted a high yield, and the model I base on his approach requires dividend yield to be higher than the S&P average and greater than 3 percent. Beyond The PEG The PEG wasn't the only variable Lynch applied to all stocks. For fast-growers, stalwarts, and slow-growers alike, he also looked at the inventory/sales ratio, which my Lynch-based model wants to be declining, and the debt/equity ratio, which should be below 80%. (For financial companies, it uses the equity/assets ratio and return on assets rates rather than the debt/equity ratio, since financials typically have to carry a lot of debt as a part of their business.) The final part of the Lynch strategy includes two bonus categories: free cash flow/price ratio and net cash/price ratio. Lynch loved it when a stock had a free cash flow/price ratio greater than 35 percent, or a net cash/price ratio over 30 percent. (Lynch defined net cash as cash and marketable securities minus long term debt). Failing these tests doesn't hurt a stock, however, since these are only bonus criteria. A Market-Beater Over the long term my Lynch-inspired model has had its ups and downs, but if you've stuck with it, it's paid off. Overall since I started tracking it in July 2003, the portfolio has averaged annualized returns of 10.9%, easily beating the 6.6% annualized return for the S&P 500 (all performance figures are through Dec. 30). With one trading day left in 2014, it was up 9.2% while the index was up 12.6%. But that follows a year in which the Lynch portfolio gained 68.6%, more than doubling the S&P. The 20-stock Lynch-inspired portfolio I track has been one of my best performers, gaining 14.7% annualized since its mid-2003 inception. Here's a look at the stocks that currently make up my 10-stock Lynch-based portfolio: Silicon Motion Technology Corporation (SIMO) IDT Corporation (IDT) FutureFuel (FF) HCI Group (HCI) WSFS Financial Corporation (WSFS) New Oriental Education & Technology Group (EDU) TriCo Bancshares (TCBK) SLM Corporation (SLM) Regional Management Corp. (RM) Amtrust Financial Services (AFSI) News about Validea Hot List Stocks Williams-Sonoma Inc. (WSM): Sonoma announced that its Board of Directors has declared a quarterly cash dividend of $0.33 per common share. The dividend is payable on February 24, 2015 to stockholders of record as of the close of business on January 26, 2015. The firm's dividend yield as of Dec. 30 was 1.7%. United Insurance Holdings Corp. (UIHC): UIHC announced that it has entered into merger plan with Family Security Holdings, an insurance holding company with two wholly-owned subsidiaries, Family Security Insurance Company, a Hawaii-based property and casualty insurer, and Family Security Underwriters, a managing general agency performing administrative and marketing services for FSIC. Under the agreement, which is subject to FSH shareholder approval, a UIHC subsidiary will acquire all of the issued and outstanding shares, units and other ownership rights of FSH. 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 AFSI AMTRUST FINANCIAL SERVICES INC Insurance (Prop. & Casualty) 100 ZUMZ ZUMIEZ INC. Retail (Apparel) 53 AGCO AGCO CORPORATION Constr. & Agric. Machinery 51 SSL SASOL LIMITED (ADR) Chemical Manufacturing 47 UVE UNIVERSAL INSURANCE HOLDINGS, INC. Insurance (Prop. & Casualty) 39 SIMO SILICON MOTION TECHNOLOGY CORP. (ADR) Semiconductors 38 BLK BLACKROCK, INC. Investment Services 30 UIHC UNITED INSURANCE HOLDINGS CORP.(NDA) Insurance (Prop. & Casualty) 16 JLL JONES LANG LASALLE INC Real Estate Operations 15 WSM WILLIAMS-SONOMA, INC. Furniture & Fixtures 1 Ticker Market Cap Date Added Start Price Current Price Return AFSI $4,212 10/24/2014 $49.37 $56.25 13.9% ZUMZ $1,129 10/24/2014 $32.97 $38.63 17.2% AGCO $4,157 12/20/2013 $57.62 $45.20 -21.6% SSL $24,343 12/19/2014 $38.95 $37.97 -2.5% UVE $701 11/21/2014 $19.30 $20.45 6.0% SIMO $797 12/19/2014 $24.09 $23.65 -1.8% BLK $59,074 12/19/2014 $360.15 $357.56 -0.7% UIHC $459 12/19/2014 $21.20 $21.95 3.5% JLL $6,720 9/26/2014 $126.57 $149.93 18.5% WSM $6,969 12/19/2014 $75.04 $75.68 0.9%

Detailed Stock Analysis Disclaimer: The analysis is from Validea's selection and interpretation of content from the guru's book or published writings, and is not from nor endorsed by the guru. See Full Disclaimer AFSI   |   ZUMZ   |   AGCO   |   SSL   |   UVE   |   SIMO   |   BLK   |   UIHC   |   JLL   |   WSM   |   AMTRUST FINANCIAL SERVICES INC Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Amtrust Financial Services, Inc. (AmTrust) underwrites and provides property and casualty insurance. The Company operates in three business segments: Small Commercial Business, Specialty Risk and Extended Warranty and Specialty Program. Small Commercial Business segment provides workers' compensation to small businesses that operate in low and medium hazard classes, such as restaurants, retail stores, physicians and other professional offices, and commercial package and other property and casualty insurance products to small businesses. The Company's Specialty Risk and Extended Warranty segment provides coverage for consumer and commercial goods and custom designed coverages, such as accidental damage plans and payment protection plans. The Company's Specialty Program segment provides workers' compensation, package products, general liability, commercial auto liability, excess and surplus lines programs and other specialty commercial property and casualty insurance Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider AFSI a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (10.43) relative to the growth rate (23.76%), 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 AFSI (0.44) 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. AFSI, whose sales are $3,653.6 million, needs to have a P/E below 40 to pass this criterion. AFSI's P/E of (10.43) 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 AFSI is 23.8%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good. TOTAL DEBT/EQUITY RATIO: [NEUTRAL] AFSI is a financial company so debt to equity rules are not applied to determine the company's financial soundness. EQUITY/ASSETS RATIO: [PASS] This methodology uses the Equity/Assets Ratio as a way to determine a financial intermediary's health, as it is a better measure than the Debt/Equity Ratio. AFSI's Equity/Assets ratio (15.00%) is extremely healthy and above the minimum 5% this methodology looks for, thus passing the criterion. RETURN ON ASSETS: [PASS] This methodology uses Return on Assets as a way to measure a financial intermediary's profitability. AFSI's ROA (3.49%) is above the minimum 1% that this methodology looks for, thus passing the criterion. 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 AFSI (19.20%) 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 AFSI (12.14%) 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.   ZUMIEZ INC. Profile Strategy: Growth/Value Investor Based on: James P. O'Shaughnessy Zumiez Inc. (Zumiez) is a specialty retailer of action sports related apparel, footwear, equipment and accessories operating under the Zumiez brand name. As of January 28, 2012, the Company operated 434 stores in the United States and 10 stores in Canada. In addition, the Company operates a Website that sells merchandise online. At January 28, 2012, its stores averaged approximately 2,900 square feet. Its apparel offerings include tops, bottoms, outerwear and accessories, such as caps, bags and backpacks, belts, jewelry and sunglasses. Zumiez's footwear offerings primarily consist of action sports related athletic shoes and sandals. Its equipment offerings, or hardgoods, include skateboards, snowboards and ancillary gear, such as boots and bindings. The Company also offers a selection of other items, such as miscellaneous novelties. 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. ZUMZ, with a market cap of $1,129 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. ZUMZ, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 0.30, 0.79, 1.20, 1.35 and 1.52, 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. ZUMZ's Price/Sales ratio of 1.45, 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. ZUMZ, whose relative strength is 88, is in the top 50 and would pass this last criterion.   AGCO CORPORATION Profile Strategy: P/E/Growth Investor Based on: Peter Lynch AGCO Corporation is engaged in manufacturing and distributing agricultural equipment and related replacement parts throughout the world. The Company sells a range of agricultural equipment, including tractors, combines, self-propelled sprayers, application equipment, hay tools, forage equipment, tillage, implements, engines, precision farming technologies, grain storage and protein production systems, and replacement parts. Its products are used in the agricultural equipment industry and are marketed under a number of brands, including Challenger, Fendt, GSI, Massey Ferguson and Valtra. The Company distributes most of its products through a combination of approximately 3,100 independent dealers and distributors in more than 140 countries. In addition, the Company provides retail financing, through its retail finance joint ventures with Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank). Analysis Guru Score: 93% DETERMINE THE CLASSIFICATION: This methodology would consider AGCO a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (9.24) relative to the growth rate (29.73%), 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 AGCO (0.31) 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. AGCO, whose sales are $10,098.2 million, needs to have a P/E below 40 to pass this criterion. AGCO's P/E of (9.24) is considered acceptable. 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 AGCO was 17.10% last year, while for this year it is 18.69%. 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 (1.59%) is below 5%. 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 AGCO is 29.7%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is acceptable. TOTAL DEBT/EQUITY RATIO: [PASS] This methodology would consider the Debt/Equity ratio for AGCO (37.80%) to be normal (equity is approximately twice debt). FREE CASH FLOW: [NEUTRAL] The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for AGCO (8.14%) 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 AGCO (-6.72%) 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.   SASOL LIMITED (ADR) Profile Strategy: Contrarian Investor Based on: David Dreman Sasol Limited (Sasol) is an integrated energy and chemicals company. Sasol mines coal in South Africa and produce natural gas and condensate in Mozambique, oil in Gabon and shale gas in Canada. In South Africa it refines imported crude oil and retail liquid fuels. It has chemical manufacturing and marketing operations in South Africa, Europe, the Middle East, Asia and the Americas. It operates in four segments: South African energy cluster, International Energy Cluster, Chemical Cluster and Other businesses. Effective March 31, 2013, Sasol Olefins & Surfactants sold G.D. Portbury Ltd. On 16 August 2013, Sasol Investment Company (Pty) Limited, a wholly owned subsidiary of Sasol, entered into a definitive sale and share purchase agreement pursuant to which Main Street 1095 (Pty) Limited, completed the acquisition of 100% of the interest of SPI International (Pty) Limited (SPII). SPII is the indirect owner of a 50% interest in the Iranian joint venture, Arya Sasol Polymer Company. Analysis Guru Score: 77% 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. SSL has a market cap of $24,343 million, therefore passing the test. EARNINGS TREND: [FAIL] A company should show a rising trend in the reported earnings for the most recent quarters. SSL's EPS for the latest quarter is not greater than the prior quarter, (from earliest to most recent quarter) 2.42, 2.31. Hence the stock fails this test, but the investor should evaluate this company qualitatively to see if it qualifies under this methodology's "exception rule". 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. Unfortunately, we do not have sufficient data available on SSL at this time. This methodology would utilize four separate criteria to determine if SSL is a contrarian stock. In order to eliminate weak companies we have stipulated that the stock should pass at least two of the following four major criteria in order to receive "Some Interest". P/E RATIO: [PASS] The P/E of a company should be in the bottom 20% of the overall market. Dreman uses the PE based on five year average earnings for cyclicals to counteract the fluctations in earnings they experience. SSL's P/E of 11.10 meets the bottom 20% criterion (below 12.12), and therefore passes 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. SSL's P/CF of 6.41 meets the bottom 20% criterion (below 6.86) 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. SSL's P/B is currently 1.74, which does not meet the bottom 20% criterion (below 0.97), 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%). SSL's P/D of 19.23 meets the bottom 20% criterion (below 20.62), 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: [PASS] A prospective company must have a strong Current Ratio (greater than or equal to the average of it's industry [1.60] or greater than 2). This is one identifier of financially strong companies, according to this methodology. SSL's current ratio of 2.50 passes the test. PAYOUT RATIO: [FAIL] A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for SSL is 44.81%, while its historical payout ratio has been 42.33%. Therefore, it fails 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 17.23%, and would consider anything over 27% to be staggering. The ROE for SSL of 18.45% 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. SSL's pre-tax profit margin is 22.26%, thus passing this criterion. YIELD: [PASS] The company in question should have a yield that is high and that can be maintained or increased. SSL's current yield is 5.20%, while the market yield is 2.61%. SSL 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 73.99%. SSL's Total Debt/Equity of 15.73% is considered acceptable.   UNIVERSAL INSURANCE HOLDINGS, INC. Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Universal Insurance Holdings, Inc. (UIH) is a vertically integrated insurance company. The Company's insurance products are offered to the Company's customers through Universal Property & Casualty Insurance Company (UPCIC) and American Platinum Property and Casualty Insurance Company (APPCIC), (collectively the Insurance Entities). Substantially all aspects of insurance underwriting, distribution and claims processing are covered through the Company's subsidiaries. Blue Atlantic Reinsurance Corporation (BARC), a wholly owned subsidiary of UIH, is a reinsurance intermediary broker. The Insurance Entities generate revenues primarily from the collection of premiums. Universal Risk Advisors, Inc. (URA), the Company's managing general agent, generates revenue through policy fee income and other administrative fees from the marketing of the Insurance Entities' insurance products through its distribution network of independent agents. Analysis Guru Score: 87% PROFIT MARGIN: [PASS] This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. UVE's profit margin of 19.74% 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 UVE's relative strength of 87 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: [PASS] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for UVE (52.50% for EPS, and 32.07% for Sales) are good enough to pass. INSIDER HOLDINGS: [PASS] UVE's insiders should own at least 10% (they own 10.94% ) of the company's outstanding shares which is the minimum required. A high percentage typically indicates that the insiders are confident that the company will do well. CASH FLOW FROM OPERATIONS: [PASS] A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. UVE's free cash flow of $3.65 per share passes this test. PROFIT MARGIN CONSISTENCY: [PASS] UVE's profit margin has been consistent or even increasing over the past three years (Current year: 19.58%, Last year: 11.23%, Two years ago: 8.90%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise. R&D AS A PERCENTAGE OF SALES: [NEUTRAL] This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in UVE's case. CASH AND CASH EQUIVALENTS: [FAIL] UVE's level of cash and cash equivalents per sales, 1.33 %, does not pass this criteria of roughly 20%(a number we determined to be appropriate based on various examples). UVE will have a more difficult time paying off debt (if it has any) or acquiring other companies than a company that passes this criteria. 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 UVE was 1.01% last year, while for this year it is 1.53%. 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. "THE FOOL RATIO" (P/E TO GROWTH): [PASS] The "Fool Ratio" is an extremely important aspect of this analysis. If the company's Fool Ratio is between 0.5 and 0.65 (UVE's is 0.64), the company demonstrates excellence in its fundamentals and have soundly beat the earnings estimates. UVE passes this test. The following criteria for UVE are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [PASS] UVE has not been significantly increasing the number of shares outstanding within recent years which is a good sign. UVE currently has 35.0 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock. SALES: [PASS] Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. UVE's sales of $342.4 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". UVE passes the sales test. DAILY DOLLAR VOLUME: [PASS] UVE passes the Daily Dollar Volume (DDV of $6.3 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. UVE with a price of $20.45 passes the price test, even though it doesn't fall in the preferred range. The price should be above $7 in order to eliminate penny stocks and below $20 since most stocks in this price range are undiscovered by the institutions. INCOME TAX PERCENTAGE: [PASS] UVE's income tax paid expressed as a percentage of pretax income this year was (41.35%) and last year (42.33%) 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.   SILICON MOTION TECHNOLOGY CORP. (ADR) Profile Strategy: Small-Cap Growth Investor Based on: Motley Fool Silicon Motion Technology Corporation (SMTC) is a holding company. The Company's operations are conducted through Silicon Motion, Inc. (SMI Taiwan), a wholly owned subsidiary located in Taiwan and FCI, Inc. (FCI), a wholly owned subsidiary of SMTC, located in Korea. The Company is a fabless semiconductor company that designs, develops and markets, high-performance, low-power semiconductor solutions for the multimedia consumer electronics market. SMTC designs, develops and markets high performance, low-power semiconductor products for the multimedia consumer electronics market. Its products include mobile storage, mobile communications, multimedia systems-on-a-chip (SoCs) and other products. Its product offerings address three main markets: mobile storage, multimedia SoCs and mobile communications markets. On October 25, 2011, its subsidiary FCI acquired BTL System, Inc. 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. SIMO's profit margin of 14.13% passes this test. RELATIVE STRENGTH: [PASS] The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. SIMO, with a relative strength of 91, satisfies this test. COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [FAIL] Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for SIMO (281.40% for EPS, and -39.38% for Sales) are not good enough to pass. INSIDER HOLDINGS: [PASS] SIMO's insiders should own at least 10% (they own 11.33% ) of the company's outstanding shares which is the minimum required. A high percentage typically indicates that the insiders are confident that the company will do well. CASH FLOW FROM OPERATIONS: [PASS] A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. SIMO's free cash flow of $1.96 per share passes this test. PROFIT MARGIN CONSISTENCY: [FAIL] The profit margin in the past must be consistently increasing. The profit margin of SIMO has been inconsistent in the past three years (Current year: 12.15%, Last year: 16.78%, Two years ago: 18.53%), which is unacceptable. This inconsistency will carryover directly to the company's bottom line, or earnings per share. R&D AS A PERCENTAGE OF SALES: [PASS] SIMO is either maintaining the same levels of R&D expenditures(currently $46.5 million) or increasing these levels which is a good sign. This allows the company to develop the superior technology and new products that will put everyone else out of business. This criterion is particularly important for high-tech and medical stocks because they are so R&D dependant. CASH AND CASH EQUIVALENTS: [PASS] SIMO's level of cash $162.5 million passes this criteria. If a company is a cash generator, like SIMO, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash. INVENTORY TO SALES: [PASS] This methodology strongly believes that companies, especially small ones, should have tight control over inventory. It's a warning sign if a company's inventory relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Inventory to Sales for SIMO was 11.42% last year, while for this year it is 14.94%. Although the inventory to sales is rising, it is below the max 30% that is allowed. The investor can still consider the stock if all other criteria appear very attractive. ACCOUNT RECEIVABLE TO SALES: [PASS] This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for SIMO was 13.07% last year, while for this year it is 13.74%. 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] SIMO's trailing twelve-month Debt/Equity ratio (0.00%) is at a great level according to this methodology because the superior companies that you are looking for don't need to borrow money in order to grow. "THE FOOL RATIO" (P/E TO GROWTH): [PASS] The "Fool Ratio" is an extremely important aspect of this analysis. If the company has attractive fundamentals and its Fool Ratio is 0.5 or less (SIMO's is 0.13), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. SIMO passes this test. The following criteria for SIMO are less important which means you would place less emphasis on them when making your investment decision using this strategy: AVERAGE SHARES OUTSTANDING: [FAIL] SIMO has either issued a significant amount of new shares over the past year or has been issuing more and more shares over the past five years. SIMO currently has 9.0 million shares outstanding. Neither of these are a good sign. Generally when a small-cap company issues more stock, the existing stock becomes devalued by the market, and hence diluted. SALES: [PASS] Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. SIMO's sales of $231.9 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". SIMO passes the sales test. DAILY DOLLAR VOLUME: [PASS] SIMO passes the Daily Dollar Volume (DDV of $10.8 million) test. It is required that this number be less than $25 million because these are the stocks that remain relatively undiscovered by institutions. "You'll be scoring touchdowns against the big guys on your turf." PRICE: [PASS] This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. SIMO with a price of $23.65 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: [FAIL] SIMO's income tax paid expressed as a percentage of pretax income either this year (26.30%) or last year (13.11%) is below 20% which is cause for concern. Because the tax rate is below 20% this could mean that the earnings that were reported are unrealistically inflated due to the lower level of income tax paid. However, we have utilized a sophisticated formula so that the appropriate figures reflect a 'normal' tax rate (35%).   BLACKROCK, INC. Profile Strategy: Growth Investor Based on: Martin Zweig BlackRock, Inc. (BlackRock) is an investment management firm. The Company provides a range of investment and risks management services. The Company's clients include retail, high net worth (HNW) and institutional investors, consists of pension funds, official institutions, endowments, insurance companies, corporations, financial institutions, central banks and sovereign wealth funds. The Company's platform enables the Company to offer active (alpha) investments with index (beta) products and risk management to develop tailored solutions for clients. Its product range includes single- and multi-asset class portfolios investing in equities, fixed income, alternatives and/or money market instruments. In October 2013, BlackRock Inc acquired Macquarie Global Property Advisors Ltd. In January 2014, Forge Group Limited announced that BlackRock Inc. and subsidiaries had ceased to be the substantial holder of Forge Group Limited. 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. BLK's P/E is 18.49, 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. BLK's revenue growth is 13.99%, while it's earnings growth rate is 23.16%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, BLK 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 (15.3%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (11.9%) of the current year. Sales growth for the prior must be greater than the latter. For BLK 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. BLK's EPS ($5.37) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. BLK's EPS for this quarter last year ($4.21) 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. BLK's growth rate of 27.55% 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 BLK is 11.58%. This should be less than the growth rates for the 3 previous quarters, which are 23.41%, 21.55%, and 12.65%. BLK 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, 18.99%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 27.55%, (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, 27.55% must be greater than or equal to the historical growth which is 23.16%. BLK 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. BLK, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 6.12, 10.55, 12.37, 13.79 and 16.87, 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. BLK's long-term growth rate of 23.16%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test. INSIDER TRANSACTIONS: [PASS] A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For BLK, this criterion has not been met (insider sell transactions are 126, 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.   UNITED INSURANCE HOLDINGS CORP.(NDA) Profile Strategy: P/E/Growth Investor Based on: Peter Lynch United Insurance Holdings Corp. (UIHC) is a holding company for United Property and Casualty Insurance Company and its affiliated companies. Its business is conducted principally through four wholly-owned subsidiaries, including United Property and Casualty Insurance Company (UPC), which writes insurance policies; United Insurance Management, L.C. (UIM), the managing general agent that manages substantially all aspects of UPC's business, Skyway Claims Services, LLC (SCS), a claims adjusting company that provides services to UPC; and UPC Re. UPC Re provides reinsurance protection to UPC. The Company offers standardized policies for a range of exposures, and its policies include coverage options for standard single-family homeowners, tenants (renters), and condominium unit owners. It also writes flood policies. Analysis Guru Score: 72% DETERMINE THE CLASSIFICATION: UIHC is considered a "Stalwart", according to this methodology, for its earnings growth of 12.61%. This is based on based on the average of the 4 and 5 year historical eps growth rates, which lies within a moderate 10%-19% range. 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. However, UIHC is not considered a "True Stalwart" for its sales of $268 million are less than the multi-billion dollar level. YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS] The Yield-adjusted P/E/G ratio for UIHC (0.83), based on the average of the 4 and 5 year historical eps growth rates, is O.K. EARNINGS PER SHARE: [PASS] The EPS for a stalwart company must be positive. UIHC's EPS ($1.98) would satisfy this criterion. TOTAL DEBT/EQUITY RATIO: [NEUTRAL] UIHC is a financial company so debt to equity rules are not applied to determine the company's financial soundness. EQUITY/ASSETS RATIO: [PASS] This methodology uses the Equity/Assets Ratio as a way to determine a financial intermediary's health, as it is a better measure than the Debt/Equity Ratio. UIHC's Equity/Assets ratio (31.00%) is extremely healthy and above the minimum 5% this methodology looks for, thus passing the criterion. RETURN ON ASSETS: [PASS] This methodology uses Return on Assets as a way to measure a financial intermediary's profitability. UIHC's ROA (6.97%) is above the minimum 1% that this methodology looks for, thus passing the criterion. 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 UIHC (29.25%) 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 UIHC (4.57%) 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.   JONES LANG LASALLE INC Profile Strategy: Growth Investor Based on: Martin Zweig Jones Lang LaSalle Incorporated (Jones Lang LaSalle), is a financial and professional services firm specializing in real estate. Jones Lang LaSalle has over 200 corporate offices worldwide and operations in more than 1,000 locations in 70 countries. The Company offers integrated real estate and investment management services on a local, regional and global basis to owner, occupier and investor clients. It delivers an array of Real Estate Services (RES) across its three geographic business segments: the Americas, Europe, Middle East and Africa (EMEA), and Asia Pacific. LaSalle Investment Management, a wholly owned member of the Jones Lang LaSalle group that consists of its fourth business segment, is a diversified real estate investment management company. In July 2014, Jones Lang LaSalle Inc acquired CLEO Construction Management (CLEO), a construction project management services firm that specializes in medical facilities. Analysis Guru Score: 77% P/E RATIO: [PASS] The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. JLL's P/E is 19.98, 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. JLL's revenue growth is 12.77%, while it's earnings growth rate is 19.60%, based on the average of the 3 and 5 year historical eps growth rates. Therefore, JLL fails this criterion. SALES GROWTH RATE: [FAIL] Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (23.4%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (29.1%) of the current year. Sales growth for the prior must be greater than the latter. For JLL this criterion has not been met and fails this test. The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria. CURRENT QUARTER EARNINGS: [PASS] The first of these criteria is that the current EPS be positive. JLL's EPS ($2.30) pass this test. QUARTERLY EARNINGS ONE YEAR AGO: [PASS] The EPS for the quarter one year ago must be positive. JLL's EPS for this quarter last year ($1.40) 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. JLL's growth rate of 64.29% 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 JLL is 9.80%. This should be less than the growth rates for the 3 previous quarters, which are 36.97%, 20.69%, and 54.90%. JLL 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, 40.65%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 64.29%, (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, 64.29% must be greater than or equal to the historical growth which is 19.60%. JLL 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. JLL, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were -0.11, 3.48, 3.70, 4.63 and 5.98, 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. JLL's long-term growth rate of 19.60%, based on the average of the 3 and 5 year historical eps growth rates, passes this test. TOTAL DEBT/EQUITY RATIO: [PASS] A final criterion is that a company must not have a high level of debt. A high level of total debt, due to high interest expenses, can have a very negative effect on earnings if business moderately turns down. If a company does have a high level, an investor may want to avoid this stock altogether. JLL's Debt/Equity (24.46%) is not considered high relative to its industry (151.83%) 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 JLL, this criterion has not been met (insider sell transactions are 199, while insiders buying number 210). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion.   WILLIAMS-SONOMA, INC. Profile Strategy: P/E/Growth Investor Based on: Peter Lynch Williams-Sonoma, Inc. is a multi-channel specialty retailer of products for the home. The Company is an e- commerce retailer with brands in home furnishings. It operates retail stores in the United States, Canada and Puerto Rico, and franchises its brands to a third party in a number of countries in the Middle East, including Bahrain, the Kingdom of Saudi Arabia, Kuwait and the United Arab Emirates. Its products are also available to customers through its catalogs and online worldwide. The Company operates in two segments: direct-to-customer and retail. The direct-to-customer segment has seven merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm, Rejuvenation and Mark and Graham) which sell its products through its seven e-commerce Websites and eight direct-mail catalogs. The retail segment has five merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation) which sells products through its retail stores. Analysis Guru Score: 91% DETERMINE THE CLASSIFICATION: This methodology would consider WSM a "fast-grower". P/E/GROWTH RATIO: [PASS] The investor should examine the P/E (24.70) relative to the growth rate (38.24%), 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 WSM (0.65) 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. WSM, whose sales are $4,622.9 million, needs to have a P/E below 40 to pass this criterion. WSM's P/E of (24.70) is considered acceptable. 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 WSM was 15.83% last year, while for this year it is 18.53%. 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 (2.70%) is below 5%. 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 WSM is 38.2%, 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 WSM (8.09%) 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 WSM (1.98%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. NET CASH POSITION: [NEUTRAL] Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for WSM (4.59%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.   Watch List The Watch List contains the highest scoring stocks according to our guru consensus system that are not currently in the Hot List portfolio. We provide this list both for informational purposes and for investors who are not comfortable with a portfolio of ten stocks. Ticker Company Name Industry Guru Score SAFM SANDERSON FARMS, INC. Food Processing 59 ECHO ECHO GLOBAL LOGISTICS, INC. Trucking 40 PJC PIPER JAFFRAY COMPANIES Investment Services 40 SWKS SKYWORKS SOLUTIONS INC Semiconductors 38 STWD STARWOOD PROPERTY TRUST, INC. Consumer Financial Services 34 HIBB HIBBETT SPORTS, INC. Retail (Specialty) 32 PII POLARIS INDUSTRIES INC. Recreational Products 32 HP HELMERICH & PAYNE, INC. Oil Well Services & Equipment 30 EDU NEW ORIENTAL EDUCATION & TECH GRP (ADR) Schools 29 TASR TASER INTERNATIONAL, INC. Electronic Instr. & Controls 29

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