24 Stocks for May 2014

Ascendere Associates LLC April 30, 2014 J. Stephen Castellano [email protected]

Ascendere Associates LLC Innovative Long/Short Equity Research

Model Portfolio Monthly Update: April 30, 2014 There are limitations inherent in our theoretical model results, particularly with the fact that such results do not represent actual trading and they may not reflect the impact material economic and market factors might have had on our decision making if we were actually managing client money. Please see additional disclaimers and disclosures at the back of this report. We highlight stocks that demonstrate solid growth at a reasonable price (GARP). Stocks selected for our model portfolio strategies all rank highly for the following metrics, with an emphasis on proxies for cash flow growth and ROIC:

Relative Value

Operating Momentum

Analyst Revision Momentum

Fundamental Quality Page 2 contains rebalancing actions for our long-only model portfolio. Page 3 contains rebalancing actions for our short-only model portfolio. Target and stop prices, as well as updated return data, to be provided in our daily reports that will follow.

http://www.ascenderellc.com/ascendere-associates-llc/


Long Model Portfolio -- Rebalancing Actions

4/30/2014 Rebalancing

Core and Opportunistic Long Portfolio:

26 stocks in the model portfolio = 3.85% weight per position

Close Position Hold/Rebalance Open Position

DIRECTV DTV AMC Networks Inc. AMCX Icahn Enterprises, L.P. IEP

Cablevision Systems Corporation CVC Pilgrim's Pride Corporation PPC Companhia Brasileira de Distribuicao CBD

Monster Beverage Corporation MNST Ultrapar Holdings Inc. UGP FMC Technologies, Inc. FTI

Oceaneering International, Inc. OII Cimarex Energy Co. XEC Old Republic International Corporation ORI

SEI Investments Co. SEIC Waddell & Reed Financial, Inc. WDR Sun Life Financial Inc. SLF

Fifth Third Bancorp FITB The Blackstone Group L.P. BX Affiliated Managers Group Inc. AMG

Primerica, Inc. PRI Protective Life Corporation PL Myriad Genetics Inc. MYGN

Align Technology Inc. ALGN PAREXEL International CorporationPRXL Gilead Sciences Inc. GILD

Spirit Airlines, Inc. SAVE American Airlines Group Inc. AAL Johnson & Johnson JNJ

Lennox International, Inc. LII Harris Corporation HRS Trinity Industries Inc. TRN

Broadridge Financial Solutions, Inc.BR Ansys, Inc. ANSS Robert Half International Inc. RHI

Paychex, Inc. PAYX Snap-on Inc. SNA

DST Systems Inc. DST SanDisk Corp. SNDK

Anixter International Inc. AXE CGI Group, Inc. GIB

Wipro Ltd. WIT PTC Inc. PTC

Packaging Corporation of AmericaPKG

Source: Ascendere Associates LLC


Short Model Portfolio -- Rebalancing Actions When the market anticipates an improving economy from low price levels, low-quality stocks will at times out-perform high-quality stocks as the expected improvements in fundamentals are discounted from a relatively more depressed price level.

4/30/2014 Rebalancing

Core and Opportunistic Short Portfolio:

20 stocks in the model portfolio = 5.00% weight per position

Close Position Hold/Rebalance Open Short Sale

Sinclair Broadcast Group Inc. SBGI Jarden Corp. JAH CarMax Inc. KMX

Ctrip.com International Ltd. CTRP Sears Holdings Corporation SHLD Molson Coors Brewing Company TAP

Pioneer Natural Resources Co. PXD Darling International Inc. DAR American Campus Communities, Inc. ACC

Peabody Energy Corp. BTU Golar LNG Ltd. GLNG athenahealth, Inc. ATHN

Armstrong World Industries, Inc. AWI The Royal Bank of Scotland Group plcRBS Alkermes plc ALKS

Kennametal Inc. KMT Allscripts Healthcare Solutions, Inc.MDRX Vertex Pharmaceuticals Incorporated VRTX

Yahoo! Inc. YHOO SunEdison, Inc. SUNE BioMarin Pharmaceutical Inc. BMRN

3D Systems Corp. DDD Carpenter Technology Corp. CRS FEI Company FEIC

Crown Holdings Inc. CCK Zillow, Inc. Z

Allegheny Technologies Inc. ATI Air Products & Chemicals Inc. APD

TransAlta Corp. TAC



Return Data – March 2014

Core & Opportunistic Long Model MTDTheoretical Longs Stopped Out on 8/4/2011 close for a -12.33% loss

3/31/2014 to 4/30/2014

Target/ Date+1

Sector Company Ticker 3/31/2014 4/30/2014 Performance Stop Date Sell Price Return

Consumer Staples Pilgrim's Pride Corporation PPC 20.92 21.86 4.49%

Energy Ultrapar Holdings Inc. UGP 24.09 24.89 3.32%

Information Technology Broadridge Financial Solutions Inc. BR 37.14 38.34 3.23%

Energy Oceaneering International, Inc. OII 71.86 73.28 1.98%

Consumer Discretionary DirecTV Group Inc. DTV 76.42 77.60 1.54%

Information Technology Harris Corp. HRS 73.16 73.52 0.49%

Energy Cimarex Energy Co. XEC 119.11 119.12 0.01%

Information Technology Ansys, Inc. ANSS 77.02 76.31 -0.92%

Consumer Discretionary Cablevision Systems Corp. CVC 16.87 16.70 -1.01%

Information Technology Paychex Inc. PAYX 42.60 41.81 -1.85%

Financials Primerica, Inc. PRI 47.11 45.89 -2.59%

Health Care Align Technology Inc. ALGN 51.79 50.39 -2.70%

Financials Protective Life Corp. PL 52.59 51.15 -2.74%

Information Technology DST Systems Inc. DST 94.79 92.19 -2.74%

Information Technology Anixter International Inc. AXE 101.52 97.98 -3.49%

Consumer Staples Hansen Natural Corp. HANS 69.45 66.96 -3.59%

Financials SEI Investments Co. SEIC 33.61 32.38 -3.66%

Industrials American Airlines Group Inc. AAL 36.60 35.07 -4.18%

Industrials Spirit Airlines, Inc. SAVE 59.40 56.84 -4.31%

Materials Packaging Corp. of America PKG 70.37 66.63 -5.31%

Industrials Lennox International Inc. LII 90.91 83.83 -7.79%

Financials Waddell & Reed Financial Inc. WDR 73.62 67.45 -8.38%

Consumer Discretionary AMC Networks Inc. AMCX 73.08 65.67 -10.14%

Financials Fifth Third Bancorp FITB 22.96 20.61 -10.22%

Information Technology Wipro Ltd. WIT 13.40 11.96 -10.75%

Financials The Blackstone Group BX 33.25 29.53 -11.19%

Health Care Parexel International Corp. PRXL 54.09 45.35 -16.16%


Core & Opportunistic Short Model MTDTheoretical shorts hit target 8/4/2011 for 14.84% gain

3/31/2014 to 4/30/2014

Target/ Date+1

Sector Company Ticker 3/31/2014 4/30/2014 Performance Stop Date Sell Price Return

Information Technology 3D Systems Corp. DDD 59.15 47.34 -19.97% 4/10/2014 48.07$ -18.73%

Healthcare Allscripts Healthcare Solutions, Inc. MDRX 18.03 15.22 -15.59% 4/10/2014 15.78$ -12.48%

Consumer Discretionary Sears Holdings Corporation SHLD 47.76 43.81 -8.27% 4/9/2014 34.40$ -27.97%

Consumer Discretionary Ctrip.com International Ltd. CTRP 50.42 46.74 -7.30%

Materials Carpenter Technology Corp. CRS 66.04 62.80 -4.91%

Consumer Discretionary Jarden Corp. JAH 59.83 57.15 -4.48% 4/11/2014 54.85$ -8.32%

Financials Royal Bank of Scotland Group plc RBS 10.38 10.16 -2.12%

Consumer Discretionary Sinclair Broadcast Group Inc. SBGI 27.09 26.73 -1.33%

Industrials Armstrong World Industries, Inc. AWI 53.25 52.56 -1.30%

Consumer Staples Darling International Inc. DAR 20.02 20.01 -0.05% 4/9/2014 20.80$ 3.90%

Information Technology Yahoo! Inc. YHOO 35.90 35.95 0.14%

Information Technology SunEdison, Inc. SUNE 18.84 19.23 2.07%

Energy Pioneer Natural Resources Co. PXD 187.14 193.27 3.28%

Utilities TransAlta Corp. TAC 11.64 12.22 4.98%

Materials Crown Holdings Inc. CCK 44.74 47.17 5.43% 4/23/2014 47.65$ 6.50%

Industrials Kennametal Inc. KMT 44.30 46.73 5.49%

Energy Golar LNG Ltd. GLNG 41.69 44.20 6.02% 4/17/2014 46.47$ 11.47%

Materials Allegheny Technologies Inc. ATI 37.68 41.20 9.34% 4/29/2014 41.20$ 9.34%

Energy Peabody Energy Corp. BTU 16.34 19.01 16.34% 4/8/2014 17.65$ 8.02%


* Return figures are calculated using cumulative simple returns. This table represents returns of several theoretical portfolios that do not assume any costs. This table is not to be construed as advertising for any investment service. Real portfolios that attempt to exactly replicate these theoretical strategies will generate lower returns relative to these models due to slippage, transaction costs, tax expenses and other costs. Theoretical returns in this table are based in part on backtests which may be changed or updated at any time as refine our strategies. There are limitations inherent in our backtested theoretical model results, particularly with the fact that such results do not represent actual trading and they may not reflect the impact material economic and market factors might have had on our decision making if we were actually managing client money. We do our best to provide accurate information, but do not guarantee this. Please see additional disclosures and disclaimers.

Theoretical Model Portfolio* 04/30/14 MTD YTD

Since

03/31/09 Sharpe

Simple Returns (No Compounding)

Stock Targets Core Model

Long -0.44% -3.52% -1.10% 137.5% 1.03

Short 0.12% -1.42% -4.34% 81.6% 0.69

Core Long/Short -0.56% -2.10% 3.23% 55.9% 0.58

Stock Targets and Opportunistic Model

Portfolio Targets Long -0.44% -3.52% -5.91% 123.9% 1.21

Short 0.00% -1.42% -4.34% 33.1% 0.25

Opportunistic Long/Short -0.44% -2.10% -1.57% 90.8% 1.08

Stock Targets and Opportunistic Model III

Portfolio Targets Long Stocks -0.44% -3.52% -5.91% 123.9% 1.21

Long Inverse ETF ^SH 0.00% 0.74% 0.88% 66.6% 0.77

Opportunistic Long/Short III -0.44% -4.27% -6.79% 57.4% 0.75

S&P 500 Index -0.60% 0.69% 2.15% 93.48% 1.06

S&P 500 Total Return Index #REF! 0.81% 2.77% 104.31% 1.18


Core Opportunistic

"Dollar

Neutral" 1

"Dollar

Neutral" 2

Inception March 31, 2009

Long , Stock

Targets

Long, Stock and

Portfolio

Targets

Long/Short,

Stock Targets

and Portfolio

Targets

Long, Stock and

Portfolio

Targets / Long

^SH ETF

S&P 500 Total

Return Index

4/30/2014 Theoretical Theoretical Theoretical Theoretical

Simple Returns

Today 0.65% 0.65% 0.55% 0.28% 0.30%

MTD -3.52% -3.52% -2.10% -4.39% 0.81%

YTD -1.10% -5.91% -1.57% -7.88% 2.77%

Cumulative from 12/31/04 137.54% 123.91% 90.79% 56.52% 104.31%

Absolute Risk

Daily Average 0.12% 0.11% 0.08% 0.05% 0.08%

Daily Range 16.86% 15.84% 11.84% 12.00% 11.39%

Daily Standard Deviation 1.62% 1.22% 0.98% 0.88% 1.12%

Daily Return/Standard Deviation 7.11% 8.81% 7.73% 5.73% 7.43%

Average 90-Day T-bill 1.51% 1.51% 1.51% 1.51% 1.51%

Annualized Daily Returns 29.10% 27.17% 19.17% 12.71% 21.03%

Annualized Standard Deviation 25.8% 19.4% 15.6% 14.0% 17.8%

Sharpe Ratio 1.07 1.32 1.13 0.80 1.10

Percentage Down Days 44.1% 32.0% 42.3% 42.2% 43.1%

Average Daily Downside Value -1.18% -1.03% -0.65% -0.59% -0.82%

Daily Downside Deviation -1.21% -1.02% -0.63% -0.63% -0.85%

Daily VAR of 1000 at 95% Conf -25 -19 -15 -14 -17

Benchmark Relative Risk

Correlation 0.91 0.69 (0.07) 0.05

R-Squared 0.84 0.47 0.01 0.00

Daily Tracking Error 0.73% 0.90% 1.50% 1.35%

Regression

Beta 1.32 0.75 -0.06 0.04

Daily Alpha 0.026% 0.015% -0.011% -0.037%

Jensen's Daily Alpha 0.034% 0.012% 0.001% -0.001%

Trading Days 1279 1279 1279 1279

*Returns calculated by the simple return method (not compounded).

* Portfolio models are theoretical and assume no costs.

* Data collected in real time since 3/31/2009



DISCLOSURES Ascendere is in the business of providing equity research and related consulting services to investors and their advisors. The equity research it provides includes basic quantitative model portfolios and more detailed fundamental research with respect to individual stocks. In addition, the firm manages stock portfolios for itself and clients. Ascendere does not rate stocks on any scale, but does offer individual stock commentary and valuation opinions. With regard to Ascendere's portfolio strategies, "long" or "high-quality" baskets should generally be considered buys, unless otherwise noted. Stocks in our "short" or "low-quality" baskets should generally be considered sells, unless otherwise noted. While exceptions may occasionally occur, typically stocks in the high-quality basket are expected to outperform the S&P 500 over a month's time and stocks in the low-quality basket are expected to underperform. A more relevant benchmark would comprise of all stocks and ADRs that trade on major U.S. stock exchanges with a market cap above $2 billion. Ascendere adheres to professional standards and abides by codes of ethics that put the interests of clients ahead of its own. The following are specific disclosures made by Ascendere: 1) Ascendere may have a financial interest in the companies referred to in this report ("the Companies"). The research analyst covering the Companies and members of the analyst's immediate family have a financial interest in one or more of the Companies. 2) Ascendere generates revenue from research subscription revenue and portfolio management fees. At any given time it may be long or short any of the Companies. 3) Ascendere does not make a market in the securities of any of the Companies. 4) Ascendere has not received compensation from the Companies. 5) Ascendere has not managed or co-managed a public offering for any of the Companies. 6) Neither Ascendere nor any of its officers or any family member of the covering analyst serve as an officer, director or advisory board member of any of the Companies. 7) Neither Ascendere nor any of its officers or any family member of the covering analyst beneficially own 1% or more of any class of securities of any of the Companies. DISCLAIMERS This report is intended for informational purposes only and does not constitute a recommendation, or an offer, to buy or sell any securities or related financial instruments. The report is not intended to be in furtherance of the specific investment objectives, financial situation, or particular needs of any individual recipient. Investment decisions should be based on an individual's own goals, time horizon and tolerance for risk. The information contained herein accurately reflects the opinion of Ascendere at the time the report was released. The opinions of Ascendere are subject to change at any time without notice and without obligation or notification. The officers, affiliates or family members of Ascendere Associates may hold positions in the securities of the Companies. No warranty is made as to the accuracy of the information contained herein. The views and opinions expressed in the market commentary reflect the opinions of the author and may be based upon information obtained from third-party sources believed to be reliable but not guaranteed. These opinions are subject to change at any time based upon market or other conditions. Ascendere disclaims any responsibility to update such views. This information is intended for the sole use of clients of Ascendere. Any other use, distribution or reproduction is strictly prohibited. Investing in stocks includes a high degree of risk, including the risk of total loss. This is for informational purposes only and is not intended to constitute a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. All information, opinions and estimates are current as of original distribution by author and are subject to change at any time without notice. Any companies, securities and/or markets referenced are solely for illustrative purposes. Past performance is not indicative of future performance, and no representation or warranty, express or implied, is made regarding future performance. For Investment Professional use only. NOT FOR FURTHER DISTRIBUTION. Any dissemination or copying of this commentary is strictly prohibited.


J. Stephen Castellano – founded Ascendere Associates LLC to provide innovative equity research and investment advisory services that blends fundamental and quantitative approaches. In general, our approach is quite simple -- we believe that return on invested capital and long-term earnings growth are key to stock valuation. More specifically, we use powerful and unique financial models that combine publicly available data, consensus estimates and our own inputs to generate consistent and actionable stock recommendations.

Among the services that Ascendere provides are: 1) detailed custom equity research analysis; 2) valuation scenario analysis studies; 3) supply /demand studies; 4) long and short stock idea generation; 5) portfolio feedback; 6) detailed fundamental financial modeling services; and 7) additional analytical consulting services. Additional information is available at www.ascenderellc.com. Mr. Castellano has over 15 years of experience in equity research and related consulting work. At PaineWebber, Warburg Dillon Read and Credit Lyonnais Securities he developed fundamental equity valuation models and conducted in-depth research on the steel and telecom services industries. At Boston Private Value Investors, he developed quantitative models for stock idea generation and also provided general fundamental equity research coverage. Steve received a MBA from the F. W. Olin School of Business at Babson College (2005) and a BA from Oberlin College (1993). Mr. Castellano's career history is highlighted below:

Startup Ecommerce Company (2013-Present)

Ascendere Associates, LLC (2009-Present)

Boston Private Value Investors , Equity Research, Equity Research Analyst (2005-2009)

Pyramid Research, Contract Consultant, Telecom Services (2002-2003)

Credit Lyonnais Securities (USA), Equity Research, Telecom Services, Vice President (2000-2001)

Warburg Dillon Read, Equity Research, Telecom Services, Research Associate (1999-2000)

PaineWebber, Equity Research, Steel and Nonferrous Metals, Research Associate, Editor (1995-1999)

http://www.ascenderellc.com/

24 Stocks for May 2014

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