The Manual of Ideas: Large-Cap Stocks: How Cheap Are They?

Value-oriented Equity Investment Ideas for Sophisticated Investors

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If our efforts can further the goals of our members by giving them a discernible edge over other market participants, we have succeeded.

Copyright Warning: It is a violation of federal copyright law to reproduce all or part of this publication for any purpose without the prior written consent of BeyondProxy LLC. Email [email protected] if you wish to have multiple copies sent to you. 2008-2011 by BeyondProxy LLC. All rights reserved.

Investing In The Tradition of Graham, Buffett, Klarman

Year IV, Volume I January 31, 2011

When asked how he became so successful, Buffett answered: We read hundreds and hundreds of annual reports every year.

Top Ideas In This Report

Cisco Systems (Nasdaq: CSCO) 50 Pfizer (NYSE: PFE) ... 94 Travelers (NYSE: TRV) ... 98

Also Inside

Editorial Commentary . 5

MOI Performance Review .. 9

Superinvestor Update 12

Five Takes on Market Valuation .. 13

Browsing for Large-Cap Ideas 18

Cheapest 20 DJIA Components 30

Exclusive VALUEx Insights ..110

Favorite Value Screens 171

This Months Top Web Links .. 179

About The Manual of Ideas

Our goal is to bring you investment ideas that are compelling on the basis of value versus price. In our quest for value, we analyze the top holdings of top fund managers. We also use a proprietary methodology to identify stocks that are not widely followed by institutional investors. Our research team has extensive experience in industry and security analysis, equity valuation, and investment management. We bring a buy side mindset to the idea generation process, cutting across industries and market capitalization ranges in our search for compelling equity investment opportunities.

LARGE CAP STOCKS: HOW CHEAP ARE THEY?

Five takes on U.S. equity market valuation

Cheapest 20 DJIA components profiled and analyzed Proprietary selection of Top Three investment candidates

Plus: Superinvestor holdings update Plus: Favorite stock screens for value investors

Plus: Exclusive insights from VALUEx participants

Companies mentioned in this issue include 3M, Abbott Labs, Alcoa, Amazon.com, America Movil, American Express,

Anglo American, Anheuser-Busch, Apple, AstraZeneca, AT&T, Australia and NZ, Banco Bradesco, Banco Santander, Bank of America,

Bank of Nova Scotia, Barclays, BASF, Bayer, Berkshire Hathaway, BHP Billiton, BP, British Am. Tobacco, Canon, Caterpillar, Chevron, China Life Insurance, China Mobile, China Telecom, Cisco Systems,

Citigroup, CNOOC, Co. Bebidas Americas, Coca-Cola, Comcast, ConocoPhillips, Daimler, Ecopetrol, Eni, Exxon Mobil, Ford Motor,

General Electric, GlaxoSmithKline, Goldman Sachs, Google, Hewlett-Packard, Home Depot, Honda, HSBC, IBM, Intel, Itau Unibanco,

Johnson & Johnson, JPMorgan Chase, Kraft Foods, McDonalds, Merck, Microsoft, Mitsubishi UFJ, Novartis, Novo Nordisk, NTT, NTT DoCoMo,

Occidental Petroleum, Oracle, PepsiCo, PetroChina, Petroleo Brasileiro, Pfizer, Philip Morris, Procter & Gamble, Qualcomm, Roche,

Royal Bank of Canada, Royal Dutch Shell, SAP, Schlumberger, Siemens, Sinopec, StatoilHydro, Suncor Energy, Taiwan Semiconductor, Telefonica,

The Travelers Companies, TOTAL, Toyota, UBS, Unilever, United Technologies, UPS, Vale, Verizon, Visa, Volkswagen, Wal-Mart,

Walt Disney, Wells Fargo, Westpac Banking,, and more.

(analyzed companies are underlined)


2008-2011 by BeyondProxy LLC. All rights reserved. SUBSCRIBE TODAY! www.manualofideas.com January 31, 2011 Page 3 of 182

Table of Contents EDITORIAL COMMENTARY ..........................................................................5

THE MANUAL OF IDEAS PERFORMANCE REVIEW ..................................9

SUPERINVESTOR HOLDINGS UPDATE ................................................... 12

VIEW FROM THE TOP: FIVE TAKES ON MARKET VALUATION ............ 13

TOBINS Q ............................................................................................................................. 14 SHILLERS TEN-YEAR TRAILING P/E ........................................................................................ 15 U.S. EQUITY MARKET CAPITALIZATION TO GDP....................................................................... 16 S&P EARNINGS YIELD VERSUS INTEREST RATES ..................................................................... 16 DOW JONES INDUSTRIALS IN TERMS OF GOLD ......................................................................... 17

BROWSING FOR POTENTIAL LARGE CAP OPPORTUNITIES ............... 18

LARGEST 100 COMPANIES (BY MARKET VALUE), SORTED BY FORWARD P/E ............................... 18 LARGEST 100 COMPANIES TRADING AT $5 BILLION) ........................ 22 MAGIC FORMULA, BASED ON THIS YEARS EPS ESTIMATES (MV > $5 BILLION) ........................ 23 MAGIC FORMULA, BASED ON NEXT YEARS EPS ESTIMATES (MV > $5 BILLION) ....................... 24 VALUE WITH CATALYST: CHEAP REPURCHASERS OF STOCK (MV > $5 BILLION).......................... 25 PROFITABLE DIVIDEND PAYORS WITH DECENT BALANCE SHEETS (MV > $5 BILLION) .................. 26 DEEP VALUE: LOTS OF REVENUE, LOW ENTERPRISE VALUE (MV > $5 BILLION) ......................... 27 DEEP VALUE: NEGLECTED GROSS PROFITEERS (MV > $5 BILLION) ........................................... 28 ACTIVIST TARGETS: POTENTIAL SALES OR RECAPITALIZATIONS (MV > $5 BILLION) ..................... 29

CHEAPEST 20 MEMBERS OF DOW JONES INDUSTRIAL AVERAGE ... 30

ALCOA (AA) CAPITAL WORLD .............................................................................................. 30 AMERICAN EXPRESS (AXP) BARES, BERKSHIRE, MARKEL ..................................................... 34 AT&T (T) CAP RE, T ROWE ................................................................................................. 38 BANK OF AMERICA (BAC) APPALOOSA, BRK, CHOU, BRAVE WARRIOR, FAIRHOLME, PAULSON 42 CHEVRON (CVX) BP CAPITAL, FPA ..................................................................................... 46 CISCO SYSTEMS (CSCO) APPALOOSA, CENTAUR, EDINBURGH, GLENVIEW, PENNANT ............ 50 EXXON MOBIL (XOM) BRK, KLEINHEINZ, MARKEL, PENNANT, VIKING ..................................... 54 GENERAL ELECTRIC (GE) BRK, EDINBURGH, FAIRHOLME, MARKEL ....................................... 58 HEWLETT-PACKARD (HPQ) APPALOOSA, FPA, GLENVIEW, MAVERICK, SHUMWAY .................. 62 IBM (IBM) CAPITAL WORLD, MARKEL, T ROWE .................................................................... 66 INTEL (INTC) APPALOOSA, EDINBURGH, MARKEL .................................................................. 70 JOHNSON & JOHNSON (JNJ) APPALOOSA, BRK, FAIRFAX, FPA, MARKEL, WEST COAST ......... 74 JPMORGAN (JPM) BLUE RIDGE, CASTLE POINT, KLEINHEINZ, LONE PINE, PAULSON, VIKING ... 78 KRAFT FOODS (KFT) BRK, EAGLE, FAIRFAX, FPA, PERSHING SQUARE, WEST COAST ............ 82 MERCK (MRK) APPALOOSA, FAIRFAX ................................................................................... 86 MICROSOFT (MSFT) APPALOOSA, BARES, BLUE RIDGE, FPA, GREENLIGHT, MARKEL, WEITZ .. 90 PFIZER (PFE) BLUE RIDGE, FPA, GREENLIGHT, KLEINHEINZ, MAVERICK, PAULSON, PENNANT 94 TRAVELERS (TRV) FPA, GREENLIGHT, SOUTHEASTERN ........................................................ 98 WAL-MART (WMT) BRK, EAGLE, FAIRFAX, FPA, KLEINHEINZ, MARKEL, WEITZ .................... 102 WALT DISNEY (DIS) CHILDRENS, SOUTHEASTERN .............................................................. 106



EXCLUSIVE INSIGHTS FROM VALUEX PARTICIPANTS ...................... 110

ETHAN BERG, G4 ................................................................................................................ 110 PHILIP BEST, ARGOS INVESTMENT MANAGERS ...................................................................... 113 JAMES BRADFORD, PRIVATE INVESTOR ................................................................................. 114 DAVID COYNE, SETANTA ASSET MANAGEMENT ...................................................................... 115 SHAI DARDASHTI, DARDASHTI CAPITAL MANAGEMENT ........................................................... 119 SIMON DENISON-SMITH, METROPOLIS CAPITAL ..................................................................... 120 DR. CHRISTOPHER DETWEILER, PRIVATE INVESTOR............................................................... 122 TIM DU TOIT, EUROSHARELAB .............................................................................................. 123 CHRISTIAN ECK, UBS .......................................................................................................... 127 ORI EYAL, EMERGING VALUE CAPITAL MANAGEMENT ............................................................. 127 DON FITZGERALD, TOCQUEVILLE FINANCE ............................................................................ 132 MASSIMO FUGGETTA, HORATIUS .......................................................................................... 134 BENEDIKT GERMANIER, PRIVATE INVESTOR ........................................................................... 135 PABLO GONZALEZ, ABACO CAPITAL ...................................................................................... 136 DR. OLAF HEIN, SPARTA AG ................................................................................................ 137 MARKUS HENZ, WTHRICH, HENZ & CO. ............................................................................... 139 ROBERT KARAS, SCHOELLERBANK (UNICREDIT GROUP) ........................................................ 139 ANDREAS LECHNER, PRIVATE INVESTOR ............................................................................... 141 SBASTIEN LEMONNIER, TOCQUEVILLE FINANCE.................................................................... 141 KAUSHAL MAJMUDAR, THE RIDGEWOOD GROUP .................................................................... 143 PAUL MCNULTY, SETANTA ASSET MANAGEMENT ................................................................... 144 WILLIAM OCHEE, HIMALAYA CONSULTING ............................................................................ 146 BERNARD PEPERSTRAETE, NGN CAPITAL ............................................................................. 147 MATTHIAS RIECHERT, PRIVATE INVESTOR ............................................................................. 150 STEPHEN ROSEMAN, THESIS FUND MANAGEMENT ................................................................. 151 MARC SAINT JOHN WEBB, ARGOS INVESTMENT MANAGERS ................................................... 152 YUSUF SAMAD, BELFIELD CAPITAL ........................................................................................ 153 RAHUL SARAOGI, ATYANT CAPITAL ....................................................................................... 155 BENJAMIN SCHMITT, VARUS FUND ........................................................................................ 156 ALAN SCHRAM, WELLCAP PARTNERS .................................................................................... 157 ANDREAS SCHWEITZER, PRIVATE INVESTOR .......................................................................... 159 KEVIN SLEMP, PRIVATE INVESTOR ........................................................................................ 159 GUY SPIER, AQUAMARINE CAPITAL MANAGEMENT ................................................................. 161 CHRISTOPH STAHL, PRIVATE INVESTOR ................................................................................ 161 ARMIN STRACKE, CITIGROUP................................................................................................ 162 JOSH TARASOFF, GREENLEA LANE CAPITAL MANAGEMENT .................................................... 163 PAOLO TRAMONTANA, KRAEMER, SCHWAB ........................................................................... 165 CARTER VENKAT, PRIVATE INVESTOR ................................................................................... 167 JACOB WOLINSKY, VALUE ADVISORY .................................................................................... 168 PETER WTHRICH, WTHRICH, HENZ & CO........................................................................... 170

FAVORITE STOCK SCREENS FOR VALUE INVESTORS ...................... 171

MAGIC FORMULA, BASED ON TRAILING OPERATING INCOME ................................................. 171 MAGIC FORMULA, BASED ON THIS YEARS EPS ESTIMATES ................................................. 172 MAGIC FORMULA, BASED ON NEXT YEARS EPS ESTIMATES ................................................ 173 VALUE WITH CATALYST: CHEAP REPURCHASERS OF STOCK ................................................... 174 PROFITABLE DIVIDEND PAYORS WITH DECENT BALANCE SHEETS............................................ 175 DEEP VALUE: LOTS OF REVENUE, LOW ENTERPRISE VALUE ................................................... 176 DEEP VALUE: NEGLECTED GROSS PROFITEERS .................................................................... 177 ACTIVIST TARGETS: POTENTIAL SALES, LIQUIDATIONS OR RECAPS ......................................... 178

THIS MONTHS TOP 10 WEB LINKS ....................................................... 179



Editorial Commentary In this issue, we present some of the largest multinational corporations trading

on U.S. stocks exchanges. We analyze twenty of the cheapest components of the Dow Jones Industrials Average (DJIA), as determined by forward P/E. Several DJIA companies recently traded at no more than ten times estimated forward earnings. These companies include Bank of America (NYSE: BAC), Chevron (NYSE: CVX), Hewlett-Packard (NYSE: HPQ), Intel (Nasdaq: INTC), JPMorgan Chase (NYSE: JPM), Merck (NYSE: MRK), Microsoft (Nasdaq: MSFT), Pfizer (NYSE: PFE), and Travelers (NYSE: TRV).

Many of the superinvestors we track, including David Einhorn, John Paulson and David Tepper, have embraced large, high-quality stocks over the past year, and some have argued explicitly that large caps are significantly cheaper than small caps, setting up a scenario in which high-quality companies may finally outperform their junkier peers. One of the most vocal advocates for high-quality stocks has been famed asset allocator Jeremy Grantham of GMO. In a January 25th letter, the increasingly bearish Grantham argues that bulls are living on borrowed time and that U.S. quality stocks are the least overpriced equities.

While we focus on bottom-up analysis, we thought it might be instructive to review five top-down measures of U.S. equity market valuation in this report, if only to establish a basis for judging Granthams bearish outlook. As the following table shows, four of the five indicators below suggest that U.S. equities are overvalued. The only metric that puts equities into slightly undervalued territory is the Dow Jones Industrial Average expressed in terms of gold. This metric may reveal more about the price of gold, however, than about the valuation level of the Dow.

Selected Measures of U.S. Equity Market Valuation, 19002011

Tobins Q Shillers 10-Year Trailing P/E Market Cap / GDP Earnings Yield / Interest Rates DJIA / Ounce of Gold

Value Year Value Year Value Year Value Year Value Year Low 0.3 1948 5x 1920 35% 1948 0.3 2000 1.5 1980

High 1.9 1999 42x 1999 162% 1999 5.1 1932 39.9 2000

Average 0.7 16x 68% 1.8 10.1 Recent 1.1 Jan. 2011 23x Jan. 2011 99% Jan. 2011 1.3 Jan. 2011 8.8 Jan. 2011

Source: The Manual of Ideas analysis, Federal Reserve, Robert J. Shiller.

As promised last month, we include an analysis of the market performance of

our featured ideas in this report. Importantly, we show all the ideas we have selected as top ideas in past reports, thereby avoiding the credibility issues associated with selective disclosure. While you can inspect the performance of our featured ideas on a company-by-company basis, we highlight one summary statistic here: On average, our featured ideas have returned 51% from their respective feature dates through December 31, 2010, versus a comparable return of 25% for the S&P 500 Index. We are pleased with this record and believe it reflects our proprietary value-oriented approach, but we caution that past performance is in the past. It is no guarantee or even indication of future performance. We also note that our reports do not present investment recommendations but merely food for thought.



A rather cautious equity market outlook notwithstanding, we find the following three DJIA components quite interesting:

Cisco Systems (Nasdaq: CSCO, $21 per share; MV $119 billion)

Cisco is the dominant provider of data infrastructure products that enable the functioning of the Internet and improve network connectivity. The company enjoys favorable long-term demand prospects, based on expected growth of Internet data traffic and a proliferation of web-enabled devices, including smartphones. The company has a solid balance sheet with a net cash position, and trades at a high-single digit trailing FCF yield, which we find quite enticing for a company of Ciscos quality. Balancing the potential reward is the risk that technological change and competition may exacerbate existing margin pressure.

A sell-off following the companys earnings announcement in November provides an opportunity to invest in Cisco at an attractive price that is likely lower than that paid by at least three superinvestors David Teppers Appaloosa, Larry Robbins Glenview and Sandy Nairns Edinburgh Partners, who initiated a new holding or increased their existing holding during the September 2010 quarter.

Our analysis of three valuation scenarios based on our estimate of normalized operating income suggests a fair value range of $19-30 per share (see page 52).

CISCO SYSTEMS OPERATING CASH FLOW, FY90FY10 ($ in billions)

Cisco has reported positive and, with a few exceptions, growing cash flow over two decades.

Source: Company presentation dated September 14, 2010; available at http://bit.ly/h1Hftg

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Pfizer (NYSE: PFE, $18 per share; MV $147 billion)

Pfizers purchase of Wyeth in 2009 diversified revenue and improved the drug pipeline. An estimated 40% of 3Q10 revenue, however, remains vulnerable over the next five years due to expired or yet-to-expire drug patents (mostly by 2012, including blockbuster drug Lipitor). Nonetheless, the markets valuation may reflect too pessimistic a judgment regarding Pfizers ability to stabilize and grow earnings over time. Management expects net income to grow 5% from 2010 to 2012, helped by $4-5 billion in cost reductions and revenue contributions from new products.

The company is among the largest holdings of superinvestors David Tepper, David Einhorn, Alan Fournier, and John Griffin.

We find Pfizers stock price of $18 per share rather compelling in light of consensus estimates for EPS of $2.30 in 2011. An analysis of three valuation scenarios based on our estimate of normalized operating income suggests a fair value range of $19-31 per share (see page 96).

PFIZER KEY PATENT EXPIRATIONS

% of Q3 Patent1

Top 10 Drugs Primary indication Revenue Expiry Lipitor Reduction of LDL cholesterol 16% expired (2010)2 Enbrel (outside N.A.) Arthritis, psoriasis, spondylitis 5% n/m3 Lyrica Epilepsy, neuralgia, fibromyalgia 5% 2018 Prevnar Pneumococcal vaccine 5% n/m Celebrex Arthritis, inflammation, acute pain 4% 2014 Viagra Erectile dysfunction 3% 2012 Xalatan / Xalacom Glaucoma and ocular hypertension 3% 2011 Norvasc Hypertension 2% expired (2007) Zyvox Bacterial infections 2% 2015 Geodon / Zeldox Schizophrenia, bipolar disorder 2% 2012 Pfizer - Revenue of top 10 biopharmaceutical products 44%

1 Refers to the year in which the U.S. basic product patent expires (including six-month exclusivity period). 2 The U.S. basic product patent for Lipitor, including the pediatric exclusivity period, expired in March 2010. Pfizer has a patent covering the enantiomeric form of the drug, which (including the exclusivity period) expires in June 2011. Pfizer expects it will lose the substantial portion of our U.S. revenues from Lipitor shortly after exclusivity expiration in November 2011). The U.S. accounted for ~50% of Lipitor revenue in 3Q10. 3 Pfizer has exclusive rights to the biologic Enbrel outside the U.S. and Canada and co-promotes Enbrel with Amgen in the U.S. and Canada. Revenue figure reflects sales outside U.S./Canada only, with U.S./Canada sales included in "Alliance" revenue (not listed in our table; "Alliance" revenue was $1.0 billion in 3Q10 including sales of Enbrel in the U.S. and Canada, Aricept, Exforge, Rebif and Spiriva). The Enbrel patent, which is owned by Amgen, expires in October 2012 in the U.S. Pfizer's U.S./Canada co-promotion agreement with Amgen expires in October 2013 (Pfizer is entitled to a royalty stream for 36 months thereafter, which is significantly less than its current share of Enbrel profits from U.S. and Canadian sales). Pfizer's rights to Enbrel outside the U.S. and Canada will not be affected by the expiration of the co-promotion agreement. Source: Company filings, The Manual of Ideas analysis, assumptions and estimates.

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Travelers (NYSE: TRV, $56 per share; MV $26 billion)

Property and casualty insurer Travelers has compounded book value per share in the high teens, on average, since 2005. While this strikes us as quite an achievement, especially given the companys modest use of debt, the market is not impressed. Investors value the shares roughly in line with yearend 2010 shareholders equity and at only a modest premium to tangible book value. Given the companys exposure to catastrophe and some long-tail risks, the downside may not be as well protected as the valuation implies. Nonetheless, the risk-reward appears favorable. Value-accretive share repurchases, which have reduced share count by one-third over the past three years, are set to continue.

Superinvestors with a stake in Travelers include David Einhorn and Mason Hawkins. For Hawkins, the investment in Travelers was newly initiated during the third quarter of 2010.

We find the recent stock price of $56 per Travelers share rather enticing given consensus EPS estimates of $6.09 for this year. An analysis of three valuation scenarios based on book value and our estimate of normalized net income suggests a fair value range of $45-87 per share (see page 100).

We are pleased to include a special section in this report, featuring insights and ideas from selected participants in the VALUEx investment conference in Zurich and Klosters, Switzerland, February 2-4. As you browse through the mini-interviews, you will undoubtedly notice a remarkable diversity of experience, focus and opinion among the respondents. We found these exchanges an invaluable learning tool and a great snapshot of the global value investing community today. It is a pleasure to be associated with such a remarkable group, and Guy Spier and I are excited to host everyone for a few days of learning, skiing, and friendship.

Sincerely,

John Mihaljevic, CFA and The Manual of Ideas research team

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The Manual of Ideas Performance Review In this section, we review the performance of ideas featured as top ideas in past issues of The Manual of Ideas. Nothing in our reports should be construed as an investment recommendation. Past performance is no guarantee of future performance. A few observations:

From inception in November 2008 through yearend 2010, The Manual of Ideas featured ideas have delivered an average total return of twice the return of the S&P 500 Index ETF (+51% vs. +25%). This is not time-adjusted.

The average performance of top ideas for the one-year holding period following their featured dates is +56% versus +25% for the S&P during the equivalent time periods.

From inception in November 2008 through yearend 2010, The Manual of Ideas featured 123 top ideas in 23 monthly reports (average of five top ideas per report). 63% of top ideas were selected only once.

80% of top ideas featured since inception in November 2008 through yearend 2010 have a positive total return. Of the 25 ideas that have a negative return, 11 were down less than 10% since their feature date through yearend 2010.

Of the top ideas featured since inception in November 2008 and prior to 2010 (59 ideas), 42 have returned more than 20%, 25 more than 50%, nine more than 100%, and four more than 200% during the one-year holding period following their feature dates. 21 of the 64 top ideas featured in 2010 were up more than 20% through yearend 2010.

TOP WINNERS The Manual of Ideas monthly featured ideas

MOI Top Idea S&P 500 (SPY) # of Average Total Return Times Date From Featured Date Through Selected First 1 Year 12/31/ 1 Year 12/31/ as Top Company name Ticker Featured Later 2010 Later 2010 Idea Category Idea Travelzoo Nasdaq: TZOO 11/27/08 117% 533% 26% 48% Magic formula 2 Tempur-Pedic NYSE: TPX 11/27/08 209% 476% 26% 48% Magic formula 1 Premier Exhibitions Nasdaq: PRXI 11/27/08 68% 184% 26% 48% Hidden assets 3 Fibrek (formerly SFK Pulp Fund) Toronto: FBK 2/20/09 220% 168% 48% 69% Equity stub 2 Sears Holdings Nasdaq: SHLD 2/20/09 150% 94% 48% 69% Excess assets 1 Greenlight Capital Re Nasdaq: GLRE 2/20/09 88% 104% 48% 69% Jockey stock 1 AmeriCredit (acquired on 10/1/2010) NYSE: ACF 2/20/09 475% 531% 48% 52% Superinvestor 1 American Express NYSE: AXP 2/20/09 207% 241% 48% 69% Superinvestor 1 Harvest Natural Resources NYSE: HNR 4/27/09 95% 175% 41% 51% Superinvestor 2 Ticketmaster (acquired on 1/25/2010) Nasdaq: TKTM 5/28/09 112% 112% 23% 23% Special situation 1 Steinway Musical Instruments NYSE: LVB 6/19/09 67% 81% 24% 40% Hidden assets 1 Playboy Enterprises NYSE: PLA 6/19/09 38% 91% 24% 40% Hidden assets 2 MI Developments Toronto: MIM.A 6/19/09 53% 206% 24% 40% Superinvestor 1 Apartment Investment & Management NYSE: AIV 6/19/09 149% 191% 24% 40% Hidden assets 1 Sothebys NYSE: BID 7/31/09 81% 201% 13% 31% Hidden assets 1 InterContinental Hotels London: IHG 10/27/09 57% 62% 13% 21% Hidden assets 1 MVC Capital NYSE: MVC 11/20/09 37% 53% 12% 17% Deep value 1 CapitalSource NYSE: CSE 11/20/09 76% 89% 12% 17% Superinvestor 2 Lodgian (acquired on 4/19/2010) Amex: LGN 12/31/09 79% 79% 8% 8% Hidden assets 1 BreitBurn Energy Partners Nasdaq: BBEP 1/21/10 n/m 59% n/m 14% Hidden assets 1 Hyatt Hotels NYSE: H 2/18/10 n/m 53% n/m 15% Hidden assets 1 LookSmart Nasdaq: LOOK 4/21/10 n/m 84% n/m 6% Deep value 1 PRGX Global Nasdaq: PRGX 6/30/10 n/m 53% n/m 23% Magic formula 1 Lavendon London: LVD 9/30/10 n/m 118% n/m 11% Hidden assets 1

TOP LOSERS The Manual of Ideas monthly featured ideas

MOI Top Idea S&P 500 (SPY) # of Average Total Return Times Date From Featured Date Through Selected First 1 Year 12/31/ 1 Year 12/31/ as Top Company name Ticker Featured Later 2010 Later 2010 Idea Category Idea GigaMedia Nasdaq: GIGM 9/29/09 -61% -72% 10% 21% Magic formula 2 Princeton Review Nasdaq: REVU 7/31/09 -54% -78% 13% 31% Pricing power / low capital intensity 1 Royal Wessanen Amsterdam: WES 10/27/09 -35% -29% 13% 21% Event driven / activism 1



The Manual of Ideas monthly featured ideas ALL IDEAS (from inception through yearend 2010)

Stock Total Return S&P 500 Total Return 4

Featured From Featured Date To From Featured Date To Company Ticker Date 1 Year Later 31-Dec-10 1 Year Later 31-Dec-10 Compton Petroleum Toronto: CMT 12/27/10 n/m 2% n/m 0% Corinthian Colleges Nasdaq: COCO 12/27/10 n/m 11% n/m 0% Global Cash Access NYSE: GCA 12/27/10 n/m 3% n/m 0% Penson Worldwide Nasdaq: PNSN 12/27/10 n/m 0% n/m 0% Winn-Dixie Stores Nasdaq: WINN 12/27/10 n/m 4% n/m 0% Alere NYSE: ALR 11/26/10 n/m 16% n/m 6% EnCana Toronto: ECA 11/26/10 n/m 3% n/m 6% Fibrek (formerly SFK Pulp Fund) Toronto: FBK 11/26/10 n/m 5% n/m 6% SandRidge Energy NYSE: SD 11/26/10 n/m 38% n/m 6% Barclays London: BARC 10/29/10 n/m -4% n/m 7% Deutsche Bank Frankfurt: DBK 10/29/10 n/m -6% n/m 7% Mitsubishi UFJ Financial Tokyo: 8306 10/29/10 n/m 17% n/m 7% Roma Financial Nasdaq: ROMA 10/29/10 n/m 7% n/m 7% Waterstone Financial Nasdaq: WSBF 10/29/10 n/m -13% n/m 7% Lavendon London: LVD 9/30/10 n/m 118% n/m 11% Nokia Helsinki: NOK1V 9/30/10 n/m 5% n/m 11% OMV Vienna: OMV 9/30/10 n/m 13% n/m 11% OPAP Athens: OPAP 9/30/10 n/m 16% n/m 11% Premier Foods London: PFD 9/30/10 n/m 19% n/m 11% African Barrick Gold London: ABG 8/27/10 n/m 3% n/m 19% Chesapeake Energy NYSE: CHK 8/27/10 n/m 25% n/m 19% Ensco NYSE: ESV 8/27/10 n/m 30% n/m 19% NCR NYSE: NCR 8/27/10 n/m 17% n/m 19% Vodafone London: VOD 8/27/10 n/m 10% n/m 19% Contango Oil & Gas Amex: MCF 7/29/10 n/m 31% n/m 15% Cowen Group Nasdaq: COWN 7/29/10 n/m 11% n/m 15% I.D. Systems Nasdaq: IDSY 7/29/10 n/m 21% n/m 15% GenOn Energy (formerly Mirant) NYSE: GEN 7/29/10 n/m -3% n/m 15% Stewart Information Services NYSE: STC 7/29/10 n/m 19% n/m 15% CA Technologies Nasdaq: CA 6/30/10 n/m 33% n/m 23% Dell Nasdaq: DELL 6/30/10 n/m 12% n/m 23% Eli Lilly NYSE: LLY 6/30/10 n/m 8% n/m 23% GigaMedia Nasdaq: GIGM 6/30/10 n/m -38% n/m 23% PRGX Global Nasdaq: PRGX 6/30/10 n/m 53% n/m 23% Baxter International NYSE: BAX 5/24/10 n/m 23% n/m 19% CapitalSource NYSE: CSE 5/24/10 n/m 64% n/m 19% DirecTV NYSE: DTV 5/24/10 n/m 9% n/m 19% Sealed Air NYSE: SEE 5/24/10 n/m 26% n/m 19% Take-Two Interactive Nasdaq: TTWO 5/24/10 n/m 13% n/m 19% Gravity Nasdaq: GRVY 4/21/10 n/m -21% n/m 6% I.D. Systems Nasdaq: IDSY 4/21/10 n/m 9% n/m 6% LookSmart Nasdaq: LOOK 4/21/10 n/m 84% n/m 6% Market Leader Nasdaq: LEDR 4/21/10 n/m -19% n/m 6% Maxygen Nasdaq: MAXY 4/21/10 n/m -44% n/m 6% Nokia Helsinki: NOK1V 3/25/10 n/m -29% n/m 9% Playboy Enterprises NYSE: PLA 3/25/10 n/m 40% n/m 9% Sony Tokyo: 6758 3/25/10 n/m -15% n/m 9% Time Warner NYSE: TWX 3/25/10 n/m 5% n/m 9% Toyota Motor Tokyo: 7203 3/25/10 n/m -12% n/m 9% Fair Isaac NYSE: FICO 2/18/10 n/m 5% n/m 15% Hyatt Hotels NYSE: H 2/18/10 n/m 53% n/m 15% Investors Title Company Nasdaq: ITIC 2/18/10 n/m -13% n/m 15% Republic Airways Nasdaq: RJET 2/18/10 n/m 32% n/m 15% Vodafone London: VOD 2/18/10 n/m 23% n/m 15% BreitBurn Energy Partners Nasdaq: BBEP 1/21/10 n/m 59% n/m 14% Contango Oil & Gas Amex: MCF 1/21/10 n/m 11% n/m 14% EchoStar Nasdaq: SATS 1/21/10 n/m 29% n/m 14% Gravity Nasdaq: GRVY 1/21/10 n/m -1% n/m 14% Lockheed Martin NYSE: LMT 1/21/10 n/m -6% n/m 14% Premier Exhibitions Nasdaq: PRXI 1/21/10 n/m 45% n/m 14% Seaspan NYSE: SSW 1/21/10 n/m 20% n/m 14% Stewart Information Services NYSE: STC 1/21/10 n/m 6% n/m 14% Syms Nasdaq: SYMS 1/21/10 n/m -11% n/m 14% Take-Two Interactive Nasdaq: TTWO 1/21/10 n/m 31% n/m 14% Contango Oil & Gas Amex: MCF 12/31/09 23% 23% 15% 15% Imation NYSE: IMN 12/31/09 18% 18% 15% 15%



Stock Total Return S&P 500 Total Return 4

Featured From Featured Date To From Featured Date To Company Ticker Date 1 Year Later 31-Dec-10 1 Year Later 31-Dec-10 Lodgian (acquired 4/19/10) Amex: LGN 12/31/09 79% 79% 8% 8% Stewart Information Services NYSE: STC 12/31/09 3% 3% 15% 15% VASCO Data Security Nasdaq: VDSI 12/31/09 29% 29% 15% 15% ADP Nasdaq: ADP 11/20/09 8% 10% 12% 17% ATP Oil & Gas Nasdaq: ATPG 11/20/09 -7% 5% 12% 17% CapitalSource NYSE: CSE 11/20/09 76% 89% 12% 17% Lockheed Martin NYSE: LMT 11/20/09 -5% -4% 12% 17% MVC Capital NYSE: MVC 11/20/09 37% 53% 12% 17% AstraZeneca London: AZN 10/27/09 20% 9% 13% 21% Diageo London: DGE 10/27/09 24% 28% 13% 21% InterContinental Hotels London: IHG 10/27/09 57% 62% 13% 21% OMV Vienna: OMV 10/27/09 -4% 11% 13% 21% Royal Wessanen Amsterdam: WES 10/27/09 -35% -29% 13% 21% GigaMedia Nasdaq: GIGM 9/29/09 -61% -72% 10% 21% Pervasive Software Nasdaq: PVSW 9/29/09 -5% 0% 10% 21% Raytheon NYSE: RTN 9/29/09 -3% 0% 10% 21% Contango Oil & Gas NYSE: MCF 8/21/09 -7% 25% 6% 25% Exterran Holdings NYSE: EXH 8/21/09 20% 34% 6% 25% Pfizer NYSE: PFE 8/21/09 0% 11% 6% 25% McGraw-Hill Companies NYSE: MHP 7/31/09 1% 21% 13% 31% Princeton Review Nasdaq: REVU 7/31/09 -54% -78% 13% 31% Sothebys NYSE: BID 7/31/09 81% 201% 13% 31% Apartment Investment NYSE: AIV 6/19/09 149% 191% 24% 40% MI Developments Toronto: MIM.A 6/19/09 53% 206% 24% 40% Playboy Enterprises NYSE: PLA 6/19/09 38% 91% 24% 40% Steinway Musical Instruments NYSE: LVB 6/19/09 67% 81% 24% 40% Syms Nasdaq: SYMS 6/19/09 9% 5% 24% 40% EchoStar Nasdaq: SATS 5/28/09 34% 59% 22% 43% EMC NYSE: EMC 5/28/09 58% 95% 22% 43% Republic Airways Nasdaq: RJET 5/28/09 1% 27% 22% 43% Ticketmaster (acquired 1/25/10) Nasdaq: TKTM 5/28/09 112% 112% 23% 23% WellCare Health Plans NYSE: WCG 5/28/09 42% 57% 22% 43% Actions Semiconductor Nasdaq: ACTS 4/27/09 37% 24% 41% 51% Ascent Media Nasdaq: ASCMA 4/27/09 20% 58% 41% 51% Comverse Technology OTC: CMVT 4/27/09 29% 4% 41% 51% Harvest Natural Resources NYSE: HNR 4/27/09 95% 175% 41% 51% K-Swiss Nasdaq: KSWS 4/27/09 40% 30% 41% 51% American Express NYSE: AXP 2/20/09 207% 241% 48% 69% AmeriCredit (acquired 10/1/10) NYSE: ACF 2/20/09 475% 531% 48% 52% EchoStar Nasdaq: SATS 2/20/09 22% 56% 48% 69% Greenlight Capital Re Nasdaq: GLRE 2/20/09 88% 104% 48% 69% Microsoft Nasdaq: MSFT 2/20/09 63% 60% 48% 69% Premier Exhibitions Nasdaq: PRXI 2/20/09 48% 118% 48% 69% Sears Holdings Nasdaq: SHLD 2/20/09 150% 94% 48% 69% Fibrek (formerly SFK Pulp Fund) Toronto: FBK 2/20/09 220% 168% 48% 69% Sony Tokyo: 6758 2/20/09 96% 87% 48% 69% Travelzoo Nasdaq: TZOO 2/20/09 127% 733% 48% 69% American Eagle Outfitters NYSE: AEO 11/27/08 57% 63% 26% 48% Garmin Nasdaq: GRMN 11/27/08 87% 95% 26% 48% KHD Humboldt (delisted 3/31/10) NYSE: KHD 11/27/08 50% 45% 26% 36% MEMC Electronic Materials NYSE: WFR 11/27/08 -22% -27% 26% 48% Microsoft Nasdaq: MSFT 11/27/08 45% 41% 26% 48% Net 1 UEPS Technologies Nasdaq: UEPS 11/27/08 84% 21% 26% 48% Premier Exhibitions Nasdaq: PRXI 11/27/08 68% 184% 26% 48% Syneron Medical Nasdaq: ELOS 11/27/08 48% 51% 26% 48% Tempur-Pedic International NYSE: TPX 11/27/08 209% 476% 26% 48% Travelzoo Nasdaq: TZOO 11/27/08 117% 533% 26% 48%

Average Performance Since Inception 56% 51% 25% 25% 1 Based on the closing share price as of the publishing date of The Manual of Ideas report which features the company as a "top idea." 2 Based on the closing share price as of December 31, 2010. Share prices for Lodgian, Ticketmaster and AmeriCredit are based on their respective acquisition prices (related S&P 500 prices are as of the date the respective acquisition was completed). The share price of KHD Humboldt Wedag (and related S&P 500 price) is as of March 31, 2010, subsequent to which the shares were delisted to implement a corporate re-organization. 3 Based on dividends applicable to the respective shares in the designated holding periods. For U.S./Canadian-listed shares, all dividend data is based on Yahoo! Finance. For all other shares, the information sources are the respective company websites. 4 Based on the investable SPDR S&P 500 (NYSE: SPY). The S&P 500 return figures relating to the respective returns for Lodgian, Ticketmaster, AmeriCredit and KHD Humboldt Wedag are adjusted to reflect the same time periods (see related discussion under footnote #2).



Superinvestor Holdings Update In the November issue of The Manual of Ideas, we profiled the top holdings of 50+ investment managers, based on Schedule 13F-HR filings with the SEC. On this page, we provide an update on the latest disclosed purchase and sale activity by the same group of investors. This information is based on Schedule 13G or 13D filings and Form 3 or 4 filings. Increases in Superinvestor Holdings

Latest Market Stock Price ($) Shares Owned Holdings Trade/ Filing Value Latest Filing since Latest since as % of Filing Type Investor Company / Ticker ($mn) Date Date Filing (mn) 9/30/10 Company

1/20/11 4 Icahn Hain Celestial / HAIN 1,140 26.64 26.63 0% 6.9 n/a 16% 1/19/11 4 Second Curve TN Commerce / TNCC 62 5.05 5.27 -4% 1.3 45% 11% 1/18/11 4 Second Curve Primus Guaranty / PRS 181 4.85 5.02 -3% 6.5 1% 17% 1/12/11 4 Fairfax AbitibiBowater / ABH 2,655 27.40 22.87 20% 17.0 new 18% 1/12/11 13D Fairholme AIG / AIG 1 77,188 43.00 58.00 -26% 44.3 23% 2% 1/7/11 4 MHR Lions Gate / LGF 852 6.24 6.50 -4% 40.2 2% 29%

12/16/10 13D Third Point Accuride / ACW 666 14.40 14.10 2% 3.7 new 8% 12/15/10 13D MSD Blueknight Energy / BKEP 266 7.75 7.54 3% 3.6 new 10% 11/30/10 4 Second Curve CompuCredit / CCRT 211 5.90 6.00 -2% 4.1 0% 12%

1 While Fairholme's holding in AIG has increased since 9/30/10, Fairholme has sold some AIG shares in January 2011. Source: SEC filings, The Manual of Ideas compilation and analysis. Decreases in Superinvestor Holdings

Latest Market Stock Price ($) Shares Owned Holdings Trade/ Filing Value Latest Filing since Latest since as % of Filing Type Investor Company / Ticker ($mn) Date Date Filing (mn) 9/30/10 Company

1/20/11 13D Breeden Zale / ZLC 156 4.85 4.99 -3% 8.7 -4% 27% 1/7/11 13D Southeastern Pioneer Natural / PXD 10,430 89.85 87.91 2% 11.2 -28% 10% 1/5/11 13D Breeden Hillenbrand / HI 1,360 22.06 20.90 6% 4.0 -8% 6% 1/3/11 4 ESL AutoZone / AZO 11,040 252.13 273.21 -8% 12.1 n/a 28%

12/31/10 13G Second Curve Tree.com / TREE 93 8.38 9.45 -11% 0.7 -27% 7% 12/20/10 13D Third Point Nabi Biopharma / NABI 233 5.48 5.60 -2% 4.0 -8% 9% 12/17/10 4 Fairfax International Coal / ICO 1,680 8.25 7.00 18% 22.6 -50% 11% 11/30/10 13G Baupost BreitBurn Energy / BBEP 1,160 21.85 19.68 11% 5.0 -30% 9% 11/30/10 13G Baupost AllianceOne / AOI 331 3.80 3.88 -2% 8.8 0% 10% 11/30/10 13G First Pacific Rosetta / ROSE 1,830 34.78 35.82 -3% 5.1 -14% 10% 11/29/10 13D Paulson Cheniere Energy / LNG 360 6.47 5.91 9% 2.8 -62% 5%

Source: SEC filings, The Manual of Ideas compilation and analysis. The Manual of Ideas follows portfolio moves by Bill Ackman, Pershing Square; Lee Ainsle, Maverick; Chuck Akre, Akre Capital; Zeke Ashton, Centaur Capital; Brian Bares, Bares Capital; Bruce Berkowitz, Fairholme; Richard Breeden, Breeden Capital; Tom Brown, Second Curve; Warren Buffett, Berkshire Hathaway; Francis Chou, Chou Associates; Chase Coleman, Tiger Global; James Crichton, Scout; Ian Cumming and Joe Steinberg, Leucadia; Boykin Curry, Eagle; David Einhorn, Greenlight; Phil Falcone, Harbinger; Alan Fournier, Pennant; Glenn Fuhrman and John Phelan, MSD Capital; Jeffrey Gates, Gates Capital; Tom Gayner, Markel Gayner; Kian Ghazi, Hawkshaw; Ed Gilhuly and Scott Stuart, Sageview; Glenn Greenberg, Brave Warrior; John Griffin, Blue Ridge; Howard Guberman, Gruss; Andreas Halvorsen, Viking Global; Mason Hawkins, Southeastern; Lance Helfert and Paul Orfalea, West Coast; Chris Hohn, Childrens Investment Fund; Carl Icahn, Icahn; Rehan Jaffer, H Partners; Seth Klarman, Baupost; John Kleinheinz, Kleinheinz Capital; Eddie Lampert, ESL Investments; Quincy Lee, Teton; Dan Loeb, Third Point; Steve Mandel, Lone Pine; Sandy Nairn, Edinburgh Partners; Mohnish Pabrai, Pabrai Funds; John Paulson, Paulson & Co.; Boone Pickens, BP Capital; Mark Rachesky, MHR; Lisa Rapuano, Lane Five; Larry Robbins, Glenview; Bob Rodriguez and Steven Romick, First Pacific; Wilbur Ross, WL Ross; Ken Shubin Stein, Spencer; Chris Shumway, Shumway Capital; David Tepper, Appaloosa; Peter Thiel, Clarium; Prem Watsa, Fairfax; Wally Weitz, Weitz Funds; and David Winters, Wintergreen.



View From The Top: Five Takes on Market Valuation We consider five measures of U.S. equity market valuation:

Tobins Q, i.e., market value to replacement value Robert Shillers P/E using average earnings for the past ten years Equity market capitalization to GDP Shiller ten-year average earnings yield divided by prevailing ten-year interest rate Dow Jones Industrial Average in terms of gold

As the following table shows, four of the five measures are above their historical averages, suggesting that the U.S. equity market may be overvalued. One measure, the DJIA in terms of gold, has recently been slightly below its historical average, suggesting that equities may be modestly undervalued relative to gold.

Selected Measures of U.S. Equity Market Valuation, 19002011

Tobins Q Shillers 10-Year Trailing P/E Market Cap / GDP Earnings Yield / Interest Rates DJIA / Gold Price

Value Year Value Year Value Year Value Year Value Year Low 0.3 1948 5x 1920 35% 1948 0.3 2000 1.5 1980

High 1.9 1999 42x 1999 162% 1999 5.1 1932 39.9 2000

Average 0.7 16x 68% 1.8 10.1 Recent 1.1 Jan. 2011 23x Jan. 2011 99% Jan. 2011 1.3 Jan. 2011 8.8 Jan. 2011


The following chart shows Tobins Q since 1900, Shillers ten-year average P/E since 1900, Dow Industrials in terms of gold since 1900, and market cap to GDP since 1945. The four time series correlate fairly closely. Selected Measures of U.S. Equity Market Valuation, 19002011


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1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2011

Tobin's Q (left axis)

10-Year Average P/E (right axis)

Market Cap to GDP (since 1945) (neither axis)

DJIA / Gold Price (right axis)



Tobins Q Economics Nobel Laureate James Tobin conceptualized the Q ratio as a measure of over- or undervaluation of publicly traded assets. In its simplest form, Q equals market value divided by replacement cost. If the market value of an asset exceeds the cost of replacing it (Q>1), an incentive exists to recreate the asset and immediately sell it in the market at a premium to cost. As a result, incremental real investment will tend to force high Q ratios back down to parity (Q1). Historically, a successful market-timing strategy over the past century would have been to buy U.S. equities when the Q ratio was at 0.40 or less, and to sell U.S. equities when then Q ratio was above 1.00.

Tobins Q has increased from 0.92 at the end of 2009 to 1.09 as of January 2011, based on Federal Reserve data and our estimates. During this time, the numerator of Q (market value of debt and equities adjusted for land value and net liquid assets) has increased 19%, while the denominator (replacement cost) has remained flat. A Q ratio of 1.09 sends a rather bearish long-term signal for U.S. equities, though historical experience shows that Q can move even higher in the short term. Our analysis of Tobins Q suggests that caution is warranted in equity markets. We highlight one important caveat: Future erosion of Tobins Q may not necessarily translate into declining equity prices if replacement cost increases at an accelerating pace due to inflation. Replacement cost has historically increased at a single-digit annual pace, though increases have been higher during inflationary periods. If replacement cost rises sharply, Q could decline even as market value remains constant or increases. If the Feds quantitative easing produces an inflationary environment, equity prices could rise. Tobins Q, 19002011

Source: The Manual of Ideas analysis, Federal Reserve data. Recent Tobins Q (quarterly)

Source: The Manual of Ideas analysis, Federal Reserve data.

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Sell?



Shillers Ten-Year Trailing P/E Robert Shiller uses average annual earnings for the past ten years as the input into his P/E data series. Using ten-year average earnings normalizes for the effects of cyclical upturns and downturns, yielding an earnings number that may be more appropriate than current earnings. The Shiller P/E recently stood at 23x, meaningfully above the historical average of 16x.

The following charts show data provided by Robert Shiller going back more than one hundred years, including stock

prices, earnings, ten-year average P/E ratios, and long-term interest rates.

Real S&P Stock Price Index versus Real S&P Composite Earnings, 18712011

Source: Robert J. Shiller, stock market data used in Irrational Exuberance; The Manual of Ideas analysis.

Shillers Ten-Year Average P/E, 18812011


Shillers Ten-Year Average P/E versus Long-Term Interest Rates, 18802011


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1871 1881 1891 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 2011

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1881 1891 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 2011

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Shiller's Ten-Year Trailing P/ELong-Term Interest Rates



U.S. Equity Market Capitalization to GDP The following chart shows the ratio of U.S. equity capitalization to nominal GDP. Data on aggregate equity market value is sourced from the Feds Z.1 statistical releases, while GDP data is provided by the Bureau of Economic Analysis. U.S. Equity Market Capitalization to GDP, 19452011 1

1 Annual data series, except most recent data point. Source: Federal Reserve, Bureau of Economic Analysis, The Manual of Ideas analysis.

S&P Earnings Yield versus Interest Rates The following chart shows the ratio of U.S. equity capitalization to nominal GDP. Data on aggregate equity market value is sourced from the Feds Z.1 statistical releases, while GDP data is provided by the Bureau of Economic Analysis. U.S. Equity Market Capitalization to GDP, 19452011 1

Source: Robert J. Shiller, stock market data used in Irrational Exuberance; The Manual of Ideas analysis. U.S. Equity Market Capitalization to GDP, 19452011 1


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1945 1953 1961 1969 1977 1985 1993 2001 2009

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1881 1891 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 2011

S&P 500 Current Earnings YieldShiller 10-Year Earnings YieldLong-Term Interest Rate

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1881 1891 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 2011

undervalued

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Dow Jones Industrials in Terms of Gold The following charts show the Dow Jones Industrial Average and the price of gold since 1900, along with the relationship between the two time series. It is obvious from the second chart that the DJIA, expressed in ounces of gold, has swung wildly over the past century, considerably more so than either time series has fluctuated in its own right. Gold has tended to be relatively cheap at times of equity market booms, while the metal has shown itself popular in equity bear markets.

The recent reading of DJIA in terms of gold of 8.8 ounces is modestly below the historical average and suggests that equities are not overvalued, at least in terms of gold. Of course, this is no guarantee for equity outperformance, as gold prices are notoriously volatile and could conceivably decline in the future. Dow Jones Industrial Average (DJIA) and Gold Price, 1900 2011 1

1 Logarithmic scale. Based on average annual data for DJIA and gold prices. Source: Kitco Metals, CME Group, The Manual of Ideas analysis. DJIA in Ounces of Gold, 1900 2011 1

1 Based on average annual data for DJIA and gold prices. Source: Kitco Metals, CME Group, The Manual of Ideas analysis.

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Dow Jones Industrial AverageGold Price ($ per ounce)

1900:8.3

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1965:26.2

1980:1.5

2000:39.9

2011:8.8



Browsing For Potential Large Cap Opportunities

Largest 100 Companies (by market value), sorted by Forward P/E to P/E P/E (Est.) EV/ Price/ Price 52-Week MV EV Last This Next In LTM Tang. Div. Company / Ticker Industry ($) Low High ($bn) ($bn) FY FY FY 2 Yrs Sales Book Yield Anglo American / AAUKY Metal Mining 26 -37% 3% 69 80 26x 8x 6x 5x 4x 3x 0% Sinopec / SNP Oil & Gas - Integrated 101 -31% 2% 88 120 9x 8x 7x 6x 1x 1x 3% AstraZeneca / AZN Major Drugs 48 -15% 13% 67 66 9x 7x 7x 8x 2x nm 6% Lloyds Banking / LYG Money Center Banks 4 -35% 10% 75 nm 10x 32x 8x 3x nm 1x - Banco Santander / STD Regional Banks 11 -25% 48% 94 nm 8x 9x 8x 7x nm 2x 7% Pfizer / PFE Major Drugs 18 -24% 11% 147 168 15x 8x 8x 8x 3x nm 4% BP / BP Oil & Gas - Integrated 49 -46% 27% 154 180 9x 9x 8x 8x 1x 2x - Vale / VALE Metal Mining 36 -35% 2% 190 206 36x 12x 8x 8x 9x 3x 2% Hewlett-Packard / HPQ Computer Hardware 46 -19% 18% 101 113 13x 9x 8x 8x 1x nm 1% Rio Tinto / RIO Metal Mining 71 -45% 3% 139 152 24x 10x 8x 9x 4x 5x 1% Eni / E Oil & Gas - Integrated 48 -26% 12% 95 128 15x 9x 8x 8x 1x 2x 5% TOTAL / TOT Oil & Gas - Integrated 57 -25% 14% 128 145 12x 9x 8x 7x 1x 2x 5% Barclays / BCS Money Center Banks 20 -22% 22% 60 nm 14x 12x 8x 8x nm 1x 1% Ford Motor / F Auto & Truck Makers 19 -48% 2% 65 163 22x 9x 9x 9x 1x nm - Volkswagen / VLKAY Auto & Truck Makers 31 -49% 2% 73 138 51x 10x 9x 6x 1x 2x 1% UBS / UBS Investment Services 18 -30% 5% 67 -9 nm 9x 9x 8x nm 2x - Merck / MRK Major Drugs 34 -10% 21% 105 113 6x 10x 9x 8x 4x >99x 4% Royal Dutch Shell / RDS.A Oil & Gas - Integrated 68 -28% 1% 213 247 17x 11x 9x 7x 1x 2x 5% BHP Billiton Ltd / BHP Metal Mining 91 -36% 4% 252 255 20x 15x 9x 8x 5x 5x 2% Chevron / CVX Oil & Gas - Integrated 93 -28% 0% 187 183 18x 10x 9x 8x 1x 2x 3% StatoilHydro / STO Oil & Gas - Integrated 24 -25% 6% 78 90 25x 12x 9x 8x 1x 3x 4% JPMorgan Chase / JPM Investment Services 45 -22% 7% 176 24 11x 12x 10x 8x x 2x 0% NTT / NTT Comms Services 23 -14% 6% 60 96 10x 10x 10x 9x 1x 1x 3% Roche / RHHBY Major Drugs 36 -11% 27% 123 151 15x 11x 10x 2x 3x nm 4% Goldman Sachs / GS Investment Services 175 -26% 7% 89 353 8x 13x 10x 9x 7x 1x 1% Australia and NZ / ANZBY Money Center Banks 23 -29% 13% 59 nm 13x 11x 10x 9x nm 2x 5% Intel / INTC Semiconductors 21 -17% 16% 118 98 10x 11x 10x 9x 2x 3x 3% Abbott Labs / ABT Major Drugs 47 -5% 21% 72 87 13x 11x 10x 9x 3x nm 4% Bank of America / BAC Money Center Banks 15 -28% 30% 154 nm nm 15x 10x 8x nm 1x 0% ConocoPhillips / COP Oil & Gas - Integrated 68 -31% 2% 102 115 21x 11x 10x 9x 1x 2x 3% GlaxoSmithKline / GSK Major Drugs 39 -18% 8% 102 115 12x 14x 11x 17x 3x nm 5% Microsoft / MSFT Software & Programming 28 -20% 12% 242 209 13x 12x 11x 9x 3x 7x 2% Novartis / NVS Major Drugs 57 -23% 6% 130 149 15x 11x 11x 10x 3x >99x 3% Toronto-Dominion / TD Money Center Banks 77 -25% 1% 67 nm 14x 12x 11x 9x nm 3x 3% PetroChina / PTR Oil & Gas - Integrated 138 -28% 0% 253 271 16x 13x 11x 9x 2x 2x 3% HSBC / HBC Regional Banks 56 -23% 4% 199 nm 33x 15x 11x 8x nm 2x 3% E.ON / EONGY Electric Utilities 32 -16% 29% 61 102 5x 9x 11x 11x 1x 3x 6% Royal Bank of Canada / RY Money Center Banks 54 -15% 15% 78 nm 17x 13x 11x 10x nm 3x 4% Citigroup / C Money Center Banks 5 -39% 0% 149 nm nm 13x 11x 9x nm 1x - Westpac Banking / WBK Money Center Banks 112 -23% 19% 67 nm 11x 11x 11x 11x nm 2x 6% AT&T / T Comms Services 28 -16% 6% 168 234 13x 12x 11x 10x 2x nm 6% CNOOC / CEO Oil & Gas Operations 247 -44% 2% 110 107 25x 14x 11x 9x 7x 4x 2% Bank of Nova Scotia / BNS Money Center Banks 57 -28% 1% 60 nm 15x 13x 11x 10x nm 3x 3% Banco Bradesco / BBD Regional Banks 20 -32% 12% 72 nm 14x 13x 12x 10x nm nm 4% Cisco Systems / CSCO Computer Peripherals 21 -10% 31% 118 94 16x 13x 12x 11x 2x 5x - BASF / BASFY Chemical Manufacturing 77 -36% 7% 71 86 38x 12x 12x 10x 1x 6x 3% Exxon Mobil / XOM Oil & Gas Operations 78 -28% 0% 393 399 20x 13x 12x 10x 1x 3x 2% Wells Fargo / WFC Regional Banks 33 -30% 5% 172 nm 19x 15x 12x 9x nm 3x 1% IBM / IBM Computer Hardware 150 -23% 0% 186 203 15x 13x 12x 11x 2x nm 2% China Mobile / CHL Comms Services 50 -11% 9% 201 155 12x 14x 12x 13x 2x 3x 4%



to P/E P/E (Est.) EV/ Price/ Price 52-Week MV EV Last This Next In LTM Tang. Div. Company / Ticker Industry ($) Low High ($bn) ($bn) FY FY FY 2 Yrs Sales Book Yield Mitsubishi UFJ / MTU Money Center Banks 6 -19% 1% 78 nm 7x 12x 12x 11x nm 1x 3% Itau Unibanco / ITUB Money Center Banks 24 -31% 10% 108 nm 12x 13x 12x 11x nm nm 3% Siemens / SI Conglomerates 122 -32% 3% 106 110 20x 14x 12x 9x 1x 10x 3% NTT DoCoMo / DCM Comms Services 18 -19% 0% 74 70 12x 13x 12x 12x 1x 2x 3% Wal-Mart / WMT Retail (dep't & discount) 55 -13% 3% 195 241 15x 14x 12x 11x 1x 4x 2% Johnson & Johnson / JNJ Major Drugs 63 -9% 6% 172 162 14x 13x 13x 12x 3x 7x 3% Bayer / BAYRY Major Drugs 74 -28% 7% 61 74 33x 13x 13x 12x 2x nm 2% Honda / HMC Auto & Truck Makers 41 -30% 0% 73 108 23x 11x 13x 10x 1x 1x 1% Petroleo Brasileiro / PBR Oil & Gas - Integrated 37 -17% 27% 241 318 11x 12x 13x 13x 3x 2x 3% British Am. Tobacco / BTI Tobacco 75 -25% 7% 75 89 18x 14x 13x 12x 4x nm 4% Visa / V Retail Financial Services 71 -9% 37% 60 56 20x 15x 13x 11x 7x 29x 1% Daimler / DDAIF Auto & Truck Makers 75 -46% 0% 77 133 nm 15x 13x 12x 1x 2x - Philip Morris / PM Tobacco 57 -49% 7% 103 117 17x 15x 13x 12x 2x nm 5% Taiwan Semiconductor / TSM Semiconductors 14 -32% 0% 71 67 23x 14x 14x 15x 7x 4x 3% Oracle / ORCL Software & Programming 31 -32% 3% 158 150 26x 15x 14x 12x 6x 32x 1% Occidental Petroleum / OXY Oil & Gas Operations 97 -26% 2% 79 79 27x 17x 14x 11x 5x 2x 2% America Movil / AMX Comms Services 58 -28% 2% 94 109 16x 16x 14x 13x 3x 6x 2% Telefonica / TEF Comms Services 71 -25% 17% 108 181 10x 15x 14x 13x 2x nm 7% Walt Disney / DIS Broadcasting & Cable 39 -27% 2% 74 84 19x 16x 14x 12x 2x 21x 1% Unilever / UN Food Processing 31 -15% 7% 86 94 20x 15x 14x 13x 2x nm 4% 3M / MMM Conglomerates 88 -22% 4% 63 63 19x 15x 14x 13x 3x 8x 2% PepsiCo / PEP Beverages (non-alcoholic) 67 -12% 2% 106 124 18x 16x 15x 13x 3x nm 3% General Electric / GE Conglomerates 19 -27% 5% 200 617 18x 17x 15x 12x 4x 5x 3% China Telecom / CHA Comms Services 55 -27% 5% 82 91 20x 18x 15x 12x 3x 3x 2% BG Group / BRGYY Oil & Gas Operations 105 -34% 1% 71 78 33x 17x 15x 14x 8x 5x 1% McDonald's / MCD Restaurants 74 -16% 9% 78 87 18x 16x 15x 13x 4x 7x 3% United Technologies / UTX Misc. Capital Goods 79 -20% 1% 73 80 19x 17x 15x 13x 2x nm 2% Procter & Gamble / PG Household Products 66 -40% 0% 186 218 19x 16x 15x 14x 3x nm 3% Apple / AAPL Computer Hardware 348 -45% 0% 321 295 23x 18x 15x 13x 5x 7x - Anheuser-Busch / BUD Beverages (alcoholic) 58 -25% 12% 93 135 20x 18x 15x 13x 4x nm 1% Suncor Energy / SU Oil & Gas - Integrated 39 -29% 2% 61 72 51x 25x 16x 12x 3x 2x 1% Comcast / CMCSA Broadcasting & Cable 23 -34% 1% 64 90 18x 18x 16x 13x 3x nm 2% SAP / SAP Software & Programming 54 -24% 2% 64 66 27x 18x 16x 14x 5x nm 1% Verizon / VZ Comms Services 35 -30% 6% 100 147 27x 16x 16x 14x 1x nm 5% Home Depot / HD Retail (home improvement) 36 -26% 3% 59 67 23x 18x 16x 14x 1x 3x 3% Caterpillar / CAT Construction Machinery 94 -46% 1% 60 86 66x 24x 16x 12x 3x 9x 2% Coca-Cola / KO Beverages (non-alcoholic) 63 -22% 4% 147 147 22x 18x 16x 15x 5x 9x 3% Qualcomm / QCOM Comms Equipment 52 -39% 2% 84 75 27x 19x 17x 16x 7x 5x 1% UPS / UPS Air Courier 72 -23% 2% 72 78 34x 21x 17x 15x 2x 12x 3% Berkshire Hathaway / BRK.A Property & Casualty 122K -21% 15% 202 nm 24x 18x 18x 17x nm 2x - Ecopetrol / EC Oil & Gas Operations 43 -45% 21% 86 92 32x 24x 18x 22x 6x nm 2% Co. Bebidas Americas / ABV Beverages (alcoholic) 28 -38% 14% 87 87 24x 20x 18x 17x 6x 30x 4% Google / GOOG Computer Services 624 -31% 1% 200 168 31x 22x 19x 16x 7x 6x - Canon / CAJ Computer Peripherals 51 -29% 2% 63 54 40x 21x 19x 16x 1x 2x 2% Toyota / TM Auto & Truck Makers 86 -21% 7% 135 233 54x 37x 21x 13x 1x 1x 1% Novo Nordisk / NVO Biotechnology & Drugs 111 -42% 4% 75 73 35x 25x 21x 21x 8x 13x 1% China Life Insurance / LFC Life Insurance 62 -9% 20% 118 112 24x 24x 22x 18x 2x 4x 2% LVMH / LVMUY Conglomerates 31 -38% 9% 77 81 32x 25x 22x 21x 4x 34x 2% Schlumberger / SLB Oil Well Services 87 -41% 0% 119 123 33x 31x 23x 18x 5x 10x 1% Amazon.com / AMZN Retail (specialty) 189 -44% 0% 85 79 93x 76x 54x 39x 3x 17x -



Largest 100 Companies Trading at 99x 3.4% TOTAL / TOT Oil & Gas - Integrated 57 -25% 14% 128 145 12x 9x 8x 7x 1.0x 2.0x 5.1% Roche / RHHBY Major Drugs 36 -11% 27% 123 151 15x 11x 10x 2x 3.0x nm 3.9% Intel / INTC Semiconductors 21 -17% 16% 118 98 10x 11x 10x 9x 2.2x 2.6x 3.4% Cisco Systems / CSCO Computer Peripherals 21 -10% 31% 118 94 16x 13x 12x 11x 2.3x 4.7x - CNOOC / CEO Oil & Gas Operations 247 -44% 2% 110 107 25x 14x 11x 9x 6.7x 3.8x 2.1% Merck / MRK Major Drugs 34 -10% 21% 105 113 6x 10x 9x 8x 4.1x >99x 4.4% ConocoPhillips / COP Oil & Gas - Integrated 68 -31% 2% 102 115 21x 11x 10x 9x .8x 1.6x 3.2% GlaxoSmithKline / GSK Major Drugs 39 -18% 8% 102 115 12x 14x 11x 17x 2.6x nm 5.1% Hewlett-Packard / HPQ Computer Hardware 46 -19% 18% 101 113 13x 9x 8x 8x .9x nm .7% Eni / E Oil & Gas - Integrated 48 -26% 12% 95 128 15x 9x 8x 8x 1.2x 1.9x 5.4% Banco Santander / STD Regional Banks 11 -25% 48% 94 nm 8x 9x 8x 7x nm 2.1x 6.9% Goldman Sachs / GS Investment Services 175 -26% 7% 89 nm 8x 13x 10x 9x nm 1.4x .8% Sinopec / SNP Oil & Gas - Integrated 101 -31% 2% 88 120 9x 8x 7x 6x .6x 1.5x 2.8% StatoilHydro / STO Oil & Gas - Integrated 24 -25% 6% 78 90 25x 12x 9x 8x 1.1x 2.9x 3.8% Lloyds Banking / LYG Money Center Banks 4 -35% 10% 75 nm 10x 32x 8x 3x nm 1.2x - Volkswagen / VLKAY Auto & Truck Makers 31 -49% 2% 73 138 51x 10x 9x 6x 1.0x 1.9x 1.4% Abbott Labs / ABT Major Drugs 47 -5% 21% 72 87 13x 11x 10x 9x 2.8x nm 3.8% Banco Bradesco / BBD Regional Banks 20 -32% 12% 72 nm 14x 13x 12x 10x nm nm 3.9% BASF / BASFY Chemical Manufacturing 77 -36% 7% 71 86 38x 12x 12x 10x 1.3x 6.4x 2.9% Anglo American / AAUKY Metal Mining 26 -37% 3% 69 80 26x 8x 6x 5x 3.8x 2.8x .5% AstraZeneca / AZN Major Drugs 48 -15% 13% 67 66 9x 7x 7x 8x 2.0x nm 6.3% Westpac Banking / WBK Money Center Banks 112 -23% 19% 67 nm 11x 11x 11x 11x nm 2.5x 5.7% Ford Motor / F Auto & Truck Makers 19 -48% 2% 65 163 22x 9x 9x 9x 1.4x nm - E.ON / EONGY Electric Utilities 32 -16% 29% 61 102 5x 9x 11x 11x .9x 2.7x 5.9% NTT / NTT Comms Services 23 -14% 6% 60 96 10x 10x 10x 10x .8x .8x 3.0% Barclays / BCS Money Center Banks 20 -22% 22% 60 nm 14x 12x 8x 8x nm .9x 1.4% Australia and NZ / ANZBY Money Center Banks 23 -29% 13% 59 nm 13x 11x 10x 9x nm 2.2x 5.1% General Motors / GM Auto & Truck Makers 38 -13% 3% 57 39 0x 13x 9x 7x .4x nm - France Telecom / FTE Comms Services 21 -19% 20% 56 86 15x 9x 9x 9x 1.4x nm 8.2% Freeport-McMoRan / FCX Gold & Silver 118 -52% 4% 56 57 20x 13x 11x 11x 3.8x 4.9x 1.7% Amgen / AMGN Biotechnology & Drugs 57 -11% 8% 53 50 13x 11x 11x 10x 3.4x 5.1x -



to Market Enter. P/E P/E (Est.) EV/ Price/ Price 52-Week Value Value Last This Next In LTM Tang. Div. Company / Ticker Industry ($) Low High ($bn) ($bn) FY FY FY 2 Yrs Sales Book Yield Credit Suisse / CS Investment Services 45 -19% 20% 53 nm 8x 11x 9x 7x nm 2.1x 3.9% Sterlite Industries / SLT Metal Mining 16 -21% 26% 53 49 61x 11x 8x 11x 9.1x 6.3x .5% Tesco / TSCDY Retail (grocery) 19 -14% 10% 52 66 14x 13x 11x 10x .8x 3.2x 3.2% Nat'l Australia Bank / NABZY Money Center Banks 24 -24% 11% 52 nm 13x 10x 9x 9x nm 1.6x 5.8% Santander Brasil / BSBR Money Center Banks 13 -27% 17% 51 nm 7x 14x 11x 9x nm 2.0x 4.0% Teva Pharma / TEVA Biotechnology & Drugs 54 -13% 20% 51 57 24x 12x 10x 9x 4.1x >99x 1.4% Altria Group / MO Tobacco 24 -21% 9% 50 61 16x 13x 12x 11x 2.6x nm 6.3% Lukoil / LUKOY Oil & Gas Operations 63 -30% 0% 49 57 8x 6x 6x 4x .7x .9x 2.7% MetLife / MET Insurance (miscellaneous) 47 -28% 2% 46 nm nm 11x 9x 8x nm 1.1x 1.6% Apache / APA Oil & Gas Operations 126 -35% 1% 46 52 nm 14x 12x 10x 6.1x 2.2x .5% Societe Generale / SCGLY Money Center Banks 12 -42% 17% 45 nm >99x 9x 7x 6x nm .7x - UnitedHealth / UNH Health Insurance 41 -33% 0% 45 46 13x 10x 11x 10x .5x nm 1.2% AXA / AXAHY Life Insurance 20 -28% 25% 45 nm 10x 13x 7x 6x nm 1.3x 3.5% Bristol Myers Squibb / BMY Major Drugs 26 -14% 8% 44 43 16x 12x 11x 13x 2.3x 5.5x 5.1% Morgan Stanley / MS Investment Services 29 -23% 11% 44 nm nm 13x 10x 9x nm 1.2x .7% Banco Argentaria / BBVA Regional Banks 11 -23% 65% 42 nm 8x 7x 8x 7x nm 1.4x 5.0% Eli Lilly / LLY Major Drugs 35 -8% 9% 40 41 9x 7x 8x 9x 1.9x 5.0x 5.6% ING Groep / ING Life Insurance 11 -36% 8% 40 nm nm 8x 5x 2x nm .7x - Medtronic / MDT Medical Equipment 37 -17% 25% 40 47 13x 11x 10x 9x 3.0x 11.0x 2.4% News Corp. / NWSA Broadcasting & Cable 14 -18% 20% 37 42 15x 13x 11x 10x 1.3x 8.7x 1.1% Repsol / REP Oil & Gas - Integrated 30 -38% 0% 37 60 18x 13x 11x 10x .9x 2.2x 4.0% Telstra / TLSYY Comms Services 14 -19% 10% 35 48 9x 12x 11x 11x 1.9x 7.5x 9.2% Sasol / SSL Chemical Manufacturing 52 -36% 1% 34 34 13x 12x 11x 11x 1.9x 2.5x 2.9% PNC Financial / PNC Regional Banks 64 -23% 10% 34 nm 15x 12x 11x 10x nm 1.7x .6% POSCO / PKX Iron & Steel 106 -17% 29% 33 32 10x 9x 8x 8x 1.0x 1.9x 1.9% Mizuho Financial / MFG Regional Banks 4 -36% 4% 32 nm 3x 7x 8x 7x nm nm 4.1% Mitsui / MITSY Misc. Capital Goods 345 -32% 3% 31 57 17x 7x 6x 5x 1.1x 1.2x 1.2% Gilead Sciences / GILD Biotechnology & Drugs 38 -17% 30% 31 32 14x 10x 9x 8x 4.6x 7.5x - Corning / GLW Comms Equipment 20 -22% 7% 31 28 15x 10x 10x 10x 5.3x 1.7x 1.0% Marathon Oil / MRO Oil & Gas - Integrated 43 -35% 5% 30 37 26x 12x 9x 8x .7x 1.4x 2.3% Baxter International / BAX Medical Equipment 50 -20% 23% 29 31 14x 13x 12x 11x 2.5x 7.4x 2.5% Prudential Financial / PRU Life Insurance 62 -25% 8% 29 nm 8x 10x 10x 8x nm .9x 1.9% Exelon / EXC Electric Utilities 43 -61% 15% 28 39 10x 11x 11x 14x 2.2x 2.5x 4.9% Newmont Mining / NEM Gold & Silver 56 -23% 18% 27 28 21x 14x 11x 12x 3.6x 2.3x 1.1% Comp. Siderurgica / SID Misc. Fabricated Products 18 -27% 17% 27 29 21x 9x 6x 5x 5.9x 36.6x 4.6% General Dynamics / GD Aerospace and Defense 72 -23% 9% 27 29 12x 11x 10x 9x .9x nm 2.3% AFLAC / AFL Health Insurance 58 -31% 1% 27 nm 18x 10x 9x 9x nm 2.4x 2.1% Dell / DELL Computer Hardware 14 -19% 25% 27 20 19x 10x 9x 9x .4x 27.1x - Lockheed Martin / LMT Aerospace and Defense 75 -9% 17% 27 28 10x 11x 11x 9x .6x nm 4.0% Telenor / TELNY Comms Services 48 -31% 7% 26 30 17x 15x 12x 11x 1.8x 4.5x 2.4% Viacom / VIA.B Broadcasting & Cable 42 -33% 0% 25 31 22x 13x 11x 10x 3.3x nm 1.4% Travelers / TRV Property & Casualty 55 -13% 5% 25 nm 9x 9x 9x 9x nm 1.1x 2.6% WellPoint / WLP Health Insurance 64 -27% 10% 25 33 6x 10x 10x 9x .5x 8.2x - Hitachi / HIT Misc. Capital Goods 55 -41% 1% 25 45 nm 9x 12x 9x .4x 2.3x 1.1% KPN / KKPNY Comms Services 15 -20% 16% 24 40 9x 10x 9x 9x 2.2x nm 6.4% United Overseas / UOVEY Regional Banks 30 -16% 3% 23 nm 17x 12x 10x 9x nm 1.8x 3.0% BT Group / BT Comms Services 29 -46% 3% 23 38 15x 13x 9x 8x 1.2x nm 3.7% Swisscom / SCMWY Comms Services 43 -29% 4% 22 32 11x 13x 11x 11x 2.5x nm 4.2% Capital One / COF Retail Financial Services 48 -30% 0% 22 nm 49x 8x 10x 10x nm 1.9x .4% Archer Daniels / ADM Food Processing 34 -28% 2% 21 26 11x 12x 10x 9x .4x 1.4x 1.8%



Magic Formula, based on Trailing Operating Income (MV > $5 billion) Companies with high returns on capital employed, trading at high trailing EBIT-to-enterprise value yield

Move To Trailing EBIT/ Price/ Insiders Price 52-Week MV EV EV/ EBIT/ Capital Tax Tangible % Buys/ Company Ticker ($) Low High ($mn) ($mn) Sales EV Employed Rate Book Own. Sells

1 Apollo Group APOL 42.35 -20% 57% 6,062 5,203 1.0x 27% 1053% 48% 6.3x 3% 2 / 12 2 Dell DELL 13.47 -16% 30% 26,001 18,614 .3x 15% infinite 24% >9.9x 12% 13 / 6 3 Forest Labs FRX 31.66 -24% 8% 9,043 5,599 1.3x 18% 165% 27% 2.1x 1% 15 / 12 4 Microsoft MSFT 28.02 -19% 13% 239,726 206,218 3.1x 13% infinite 25% 7.2x 11% 15 / 13 5 McGraw-Hill MHP 37.64 -28% 5% 11,556 11,398 1.9x 13% infinite 36% n/m 0% 2 / - 6 SanDisk SNDK 49.97 -50% 7% 11,718 10,502 2.2x 14% 338% 22% 2.3x 0% 7 / 8 7 DISH Network DISH 21.61 -20% 12% 9,575 13,430 1.1x 15% 172% 36% n/m 0% 4 / 5 8 Reynolds American RAI 32.12 -39% 7% 18,728 20,586 2.4x 12% infinite 39% n/m 0% - / - 9 AmerisourceBergen ABC 36.10 -28% 1% 9,939 9,625 .1x 11% infinite 38% >9.9x 1% 10 / 4 10 CA CA 25.31 -30% 1% 12,949 11,991 2.7x 11% infinite 30% n/m 0% 2 / 3 11 Gilead Sciences GILD 38.19 -17% 30% 31,005 32,149 4.0x 13% 192% 27% 7.5x 1% 8 / 4 12 Lockheed Martin LMT 79.22 -15% 10% 28,529 30,125 .7x 14% 139% 33% n/m 0% 1 / - 13 Research In Motion RIMM 61.55 -31% 25% 32,117 30,341 1.6x 15% 125% 28% 5.1x 0% - / - 14 Raytheon RTN 52.15 -18% 15% 19,011 19,188 .8x 14% 134% 25% n/m 0% 4 / 3 15 Bristol Myers Squibb BMY 26.06 -15% 7% 44,607 42,970 2.2x 14% 119% 20% 5.6x 0% 4 / 8 16 Altria Group MO 24.09 -21% 9% 50,296 60,790 2.5x 10% 5108% 31% n/m 0% 5 / 5 17 Accenture ACN 51.04 -65% 1% 35,619 31,456 1.3x 10% infinite 29% >9.9x 0% - / - 18 Western Union WU 19.31 -24% 1% 12,665 13,965 2.7x 10% infinite 22% n/m 0% 7 / 4 19 Expedia EXPE 25.98 -30% 15% 7,391 7,482 2.3x 10% infinite 26% n/m 0% 7 / 6 20 Intel INTC 20.82 -15% 17% 116,134 96,364 2.2x 17% 90% 29% 2.6x 0% 3 / 3 21 Cisco Systems CSCO 20.73 -8% 34% 114,874 91,227 2.2x 10% 3384% 18% 4.6x 0% 21 / 12 22 Moody's MCO 28.99 -36% 7% 6,790 7,245 3.7x 10% 1342% 33% n/m 0% 13 / 2 23 SAIC SAI 16.48 -10% 20% 6,128 6,588 .6x 14% 91% 36% >9.9x 0% 17 / 13 24 Time Warner TWX 32.79 -19% 4% 36,374 48,922 1.9x 11% 134% 34% n/m 0% 5 / 4 25 Harris Corp. HRS 47.56 -15% 15% 6,101 7,212 1.3x 14% 89% 33% n/m 1% 10 / 10 26 McKesson MCK 73.21 -22% 3% 18,527 17,756 .2x 11% 132% 33% 7.1x 0% 10 / 10 27 Viacom VIA.B 42.28 -34% 2% 25,560 31,475 2.3x 10% 308% 34% n/m 0% 8 / 8 28 LyondellBasell LYB 35.05 -58% 6% 19,787 22,280 .6x 18% 69% n/m 2.4x 0% - / - 29 Lam Research LRCX 49.98 -36% 6% 6,147 5,234 2.0x 12% 112% 16% 3.7x 0% 6 / 10 30 Hewlett-Packard HPQ 47.23 -21% 16% 103,454 114,824 .9x 11% 118% 20% n/m 0% 14 / 11 31 Linear Technology Corp. LLTC 34.53 -25% 5% 7,783 7,811 5.4x 10% 188% 26% >9.9x 1% 6 / 12 32 Gap GPS 20.10 -17% 31% 12,349 10,695 .7x 18% 67% 40% 2.9x 2% 7 / 6 33 Quest Diagnostics DGX 54.51 -25% 11% 9,289 12,087 1.6x 11% 115% 35% n/m 0% - / - 34 Ross Stores ROST 64.92 -33% 3% 7,731 7,146 .9x 12% 99% 38% 6.0x 1% 2 / 5 35 Boeing BA 71.68 -20% 6% 52,583 55,036 .8x 10% 164% 32% n/m 0% 5 / 7 36 Johnson & Johnson JNJ 62.66 -9% 6% 172,080 161,979 2.6x 12% 92% 22% 6.9x 0% 9 / 7 37 Eli Lilly LLY 34.76 -8% 10% 40,083 41,080 1.8x 16% 65% 23% 4.9x 0% 12 / 2 38 L-3 Comms LLL 77.57 -15% 26% 8,780 12,272 .8x 14% 68% 36% n/m 0% 9 / 11 39 TJX Companies TJX 47.23 -22% 3% 18,694 18,015 .8x 13% 75% 38% 6.4x 0% 5 / 6 40 Analog Devices ADI 38.77 -32% 3% 11,579 9,292 3.4x 10% 132% 21% 3.9x 1% 15 / 11 41 Amdocs DOX 28.68 -11% 13% 5,500 4,266 1.4x 10% 132% 11% 4.0x 0% - / - 42 Western Digital WDC 31.51 -27% 43% 7,241 4,481 .5x 26% 59% 8% 1.5x 1% 16 / 9 43 Seagate Technology STX 13.28 -26% 63% 6,262 6,373 .6x 22% 59% n/m 2.3x 0% - / - 44 Omnicom OMC 45.53 -26% 5% 13,715 15,238 1.2x 9% infinite 34% n/m 1% 14 / 4 45 Interpublic Group IPG 10.94 -43% 12% 5,347 5,574 .9x 9% infinite 46% n/m 0% 1 / 1 Company website SEC Y! Price Charts Proxy Y!

Screening criteria: Market value > $5 billion ADRs and banks excluded



Magic Formula, based on This Years EPS Estimates (MV > $5 billion) Companies with high returns on capital employed, trading at high earnings yields (based on this FY EPS estimates)

Move To This FY EBIT/ Price to Insiders Price 52-Week MV EV EV/ EPS Capital Tax Tangible % Buys/ Company Ticker ($) Low High ($mn) ($mn) Sales Yield Employed Rate Book Own. Sells

1 Apollo Group APOL 42.35 -20% 57% 6,062 5,203 1.0x 11% 1053% 48% 6.3x 3% 2 / 12 2 Dell DELL 13.47 -16% 30% 26,001 18,614 .3x 10% infinite 24% >9.9x 12% 13 / 6 3 Forest Labs FRX 31.66 -24% 8% 9,043 5,599 1.3x 13% 165% 27% 2.1x 1% 15 / 12 4 Lam Research LRCX 49.98 -36% 6% 6,147 5,234 2.0x 12% 112% 16% 3.7x 0% 6 / 10 5 Microsoft MSFT 28.02 -19% 13% 239,726 206,218 3.1x 9% infinite 25% 7.2x 11% 15 / 13 6 Gilead Sciences GILD 38.19 -17% 30% 31,005 32,149 4.0x 10% 192% 27% 7.5x 1% 8 / 4 7 SanDisk SNDK 49.97 -50% 7% 11,718 10,502 2.2x 9% 338% 22% 2.3x 0% 7 / 8 8 Cisco Systems CSCO 20.73 -8% 34% 114,874 91,227 2.2x 8% 3384% 18% 4.6x 0% 21 / 12 9 Intel INTC 20.82 -15% 17% 116,134 96,364 2.2x 10% 90% 29% 2.6x 0% 3 / 3 10 Marvell Technology MRVL 20.08 -31% 14% 13,062 10,388 2.9x 8% 204% 2% 4.3x 0% 2 / 3 11 Eli Lilly LLY 34.76 -8% 10% 40,083 41,080 1.8x 14% 65% 23% 4.9x 0% 12 / 2 12 Bristol Myers Squibb BMY 26.06 -15% 7% 44,607 42,970 2.2x 8% 119% 20% 5.6x 0% 4 / 8 13 SAIC SAI 16.48 -10% 20% 6,128 6,588 .6x 9% 91% 36% >9.9x 0% 17 / 13 14 Apple AAPL 326.72 -42% 7% 301,000 274,023 3.6x 7% infinite 23% 5.6x 0% 10 / 9 15 KLA-Tencor KLAC 41.83 -36% 3% 6,988 6,215 2.9x 10% 64% 30% 3.7x 1% 13 / 6 16 Amgen AMGN 56.97 -12% 8% 53,826 50,069 3.3x 9% 72% 16% 5.2x 0% 3 / 9 17 Medtronic MDT 38.51 -20% 20% 41,340 48,361 3.1x 9% 76% 22% >9.9x 0% 11 / 7 18 Gap GPS 20.10 -17% 31% 12,349 10,695 .7x 9% 67% 40% 2.9x 2% 7 / 6 19 Adobe Systems ADBE 33.27 -24% 12% 16,925 15,980 4.2x 7% 812% 18% >9.9x 0% 3 / 4 20 Johnson & Johnson JNJ 62.66 -9% 6% 172,080 161,979 2.6x 8% 92% 22% 6.9x 0% 9 / 7 21 Xilinx XLNX 31.28 -27% 2% 8,105 7,583 3.3x 7% 110% 18% 4.2x 0% 3 / 3 22 Western Digital WDC 31.51 -27% 43% 7,241 4,481 .5x 10% 59% 8% 1.5x 1% 16 / 9 23 Applied Materials AMAT 15.01 -32% 2% 19,929 17,550 1.8x 8% 67% 32% 3.4x 0% 12 / 11 24 AmerisourceBergen ABC 36.10 -28% 1% 9,939 9,625 .1x 7% infinite 38% >9.9x 1% 10 / 4 25 Linear Technology LLTC 34.53 -25% 5% 7,783 7,811 5.4x 7% 188% 26% >9.9x 1% 6 / 12 26 Activision Blizzard ATVI 11.25 -12% 12% 13,562 10,713 2.3x 7% 236% 18% 5.4x 0% 9 / 7 27 Altera ALTR 37.13 -44% 7% 11,606 9,691 5.5x 7% 337% 9% 6.0x 0% 9 / 9 28 Lubrizol Corp. LZ 102.78 -33% 13% 6,745 7,184 1.4x 10% 54% 27% 5.8x 0% 8 / 12 29 Texas Instruments TXN 33.91 -34% 3% 39,816 37,306 2.8x 7% 83% 30% 4.6x 0% 13 / 13 30 Freeport-McMoRan FCX 108.40 -48% 13% 51,043 52,060 2.7x 11% 49% 35% 4.2x 1% 13 / 12 31 Ross Stores ROST 64.92 -33% 3% 7,731 7,146 .9x 7% 99% 38% 6.0x 1% 2 / 5 32 Oracle ORCL 32.51 -35% 1% 164,254 156,444 4.9x 6% infinite 26% >9.9x 22% 17 / 18 33 Biogen Idec BIIB 66.77 -31% 3% 15,911 16,167 3.5x 7% 72% 26% 7.3x 0% 7 / 9 34 Analog Devices ADI 38.77 -32% 3% 11,579 9,292 3.4x 7% 132% 21% 3.9x 1% 15 / 11 35 TJX Companies TJX 47.23 -22% 3% 18,694 18,015 .8x 7% 75% 38% 6.4x 0% 5 / 6 36 McKesson MCK 73.21 -22% 3% 18,527 17,756 .2x 7% 132% 33% 7.1x 0% 10 / 10 37 Best Buy BBY 35.11 -12% 39% 13,840 14,737 .3x 9% 48% 37% 4.3x 0% 8 / 3 38 News Corp. NWSA 15.32 -24% 11% 40,220 44,724 1.4x 7% 59% 18% 9.4x 0% 6 / 5 39 Autoliv ALV 76.94 -48% 9% 6,826 7,175 1.0x 8% 49% 29% 6.4x 0% 8 / 8 40 Mattel MAT 23.51 -19% 14% 8,436 8,691 1.5x 8% 50% 18% 4.6x 0% 12 / 12 41 Broadcom BRCM 44.51 -41% 6% 22,776 20,382 3.3x 6% 329% 1% 6.8x 0% 9 / 14 42 eBay EBAY 30.02 -37% 5% 39,138 34,310 3.7x 6% 141% 14% 4.6x 11% 7 / 10 43 Lear LEA 104.99 -63% 7% 5,334 4,593 .4x 8% 47% n/m 3.1x 0% 9 / 8 44 Whirlpool WHR 88.45 -20% 34% 6,724 8,345 .5x 11% 30% n/m >9.9x 0% 1 / - 45 Tyson Foods TSN 17.25 -21% 19% 6,506 8,064 .3x 11% 31% 36% 2.1x 0% 11 / 7 Company website SEC Y! Price Charts Proxy Y!

Screening criteria: MV > $5 billion ADRs and banks excluded Enterprise value to MV < 1.5



Magic Formula, based on Next Years EPS Estimates (MV > $5 billion) Companies with high returns on capital employed, trading at high earnings yields (based on next FY EPS estimates)

Move To Next FY EBIT/ Price to Insiders Price 52-Week MV EV EV/ EPS Capital Tax Tangible % Buys/ Company Ticker ($) Low High ($mn) ($mn) Sales Yield Employed Rate Book Own. Sells

1 Dell DELL 13.47 -16% 30% 26,001 18,614 .3x 11% infinite 24% >9.9x 12% 13 / 6 2 Apollo Group APOL 42.35 -20% 57% 6,062 5,203 1.0x 11% 1053% 48% 6.3x 3% 2 / 12 3 Forest Labs FRX 31.66 -24% 8% 9,043 5,599 1.3x 14% 165% 27% 2.1x 1% 15 / 12 4 Microsoft MSFT 28.02 -19% 13% 239,726 206,218 3.1x 10% infinite 25% 7.2x 11% 15 / 13 5 Gilead Sciences GILD 38.19 -17% 30% 31,005 32,149 4.0x 11% 192% 27% 7.5x 1% 8 / 4 6 Cisco Systems CSCO 20.73 -8% 34% 114,874 91,227 2.2x 9% 3384% 18% 4.6x 0% 21 / 12 7 Lam Research LRCX 49.98 -36% 6% 6,147 5,234 2.0x 10% 112% 16% 3.7x 0% 6 / 10 8 Intel INTC 20.82 -15% 17% 116,134 96,364 2.2x 11% 90% 29% 2.6x 0% 3 / 3 9 Eli Lilly LLY 34.76 -8% 10% 40,083 41,080 1.8x 13% 65% 23% 4.9x 0% 12 / 2 10 Marvell Technology MRVL 20.08 -31% 14% 13,062 10,388 2.9x 8% 204% 2% 4.3x 0% 2 / 3 11 Western Digital WDC 31.51 -27% 43% 7,241 4,481 .5x 12% 59% 8% 1.5x 1% 16 / 9 12 Bristol Myers Squibb BMY 26.06 -15% 7% 44,607 42,970 2.2x 9% 119% 20% 5.6x 0% 4 / 8 13 Walter Energy WLT 119.99 -52% 17% 6,347 6,304 4.4x 11% 60% 30% >9.9x 0% 3 / 6 14 Apple AAPL 326.72 -42% 7% 301,000 274,023 3.6x 8% infinite 23% 5.6x 0% 10 / 9 15 Medtronic MDT 38.51 -20% 20% 41,340 48,361 3.1x 10% 76% 22% >9.9x 0% 11 / 7 16 Amgen AMGN 56.97 -12% 8% 53,826 50,069 3.3x 9% 72% 16% 5.2x 0% 3 / 9 17 SAIC SAI 16.48 -10% 20% 6,128 6,588 .6x 9% 91% 36% >9.9x 0% 17 / 13 18 Gap GPS 20.10 -17% 31% 12,349 10,695 .7x 9% 67% 40% 2.9x 2% 7 / 6 19 KLA-Tencor KLAC 41.83 -36% 3% 6,988 6,215 2.9x 10% 64% 30% 3.7x 1% 13 / 6 20 Adobe Systems ADBE 33.27 -24% 12% 16,925 15,980 4.2x 8% 812% 18% >9.9x 0% 3 / 4 21 Applied Materials AMAT 15.01 -32% 2% 19,929 17,550 1.8x 9% 67% 32% 3.4x 0% 12 / 11 22 Lubrizol Corp. LZ 102.78 -33% 13% 6,745 7,184 1.4x 11% 54% 27% 5.8x 0% 8 / 12 23 AmerisourceBergen ABC 36.10 -28% 1% 9,939 9,625 .1x 8% infinite 38% >9.9x 1% 10 / 4 24 Freeport-McMoRan FCX 108.40 -48% 13% 51,043 52,060 2.7x 12% 49% 35% 4.2x 1% 13 / 12 25 SanDisk SNDK 49.97 -50% 7% 11,718 10,502 2.2x 8% 338% 22% 2.3x 0% 7 / 8 26 Biogen Idec BIIB 66.77 -31% 3% 15,911 16,167 3.5x 8% 72% 26% 7.3x 0% 7 / 9 27 Johnson & Johnson JNJ 62.66 -9% 6% 172,080 161,979 2.6x 8% 92% 22% 6.9x 0% 9 / 7 28 Activision Blizzard ATVI 11.25 -12% 12% 13,562 10,713 2.3x 7% 236% 18% 5.4x 0% 9 / 7 29 McKesson MCK 73.21 -22% 3% 18,527 17,756 .2x 8% 132% 33% 7.1x 0% 10 / 10 30 Best Buy BBY 35.11 -12% 39% 13,840 14,737 .3x 10% 48% 37% 4.3x 0% 8 / 3 31 Ross Stores ROST 64.92 -33% 3% 7,731 7,146 .9x 8% 99% 38% 6.0x 1% 2 / 5 32 TJX Companies TJX 47.23 -22% 3% 18,694 18,015 .8x 8% 75% 38% 6.4x 0% 5 / 6 33 Oracle ORCL 32.51 -35% 1% 164,254 156,444 4.9x 7% infinite 26% >9.9x 22% 17 / 18 34 News Corp. NWSA 15.32 -24% 11% 40,220 44,724 1.4x 8% 59% 18% 9.4x 0% 6 / 5 35 Analog Devices ADI 38.77 -32% 3% 11,579 9,292 3.4x 7% 132% 21% 3.9x 1% 15 / 11 36 Texas Instruments TXN 33.91 -34% 3% 39,816 37,306 2.8x 8% 83% 30% 4.6x 0% 13 / 13 37 Autoliv ALV 76.94 -48% 9% 6,826 7,175 1.0x 9% 49% 29% 6.4x 0% 8 / 8 38 Lear LEA 104.99 -63% 7% 5,334 4,593 .4x 9% 47% n/m 3.1x 0% 9 / 8 39 Cliffs Natural CLF 81.66 -52% 12% 11,062 11,805 2.9x 13% 30% 30% 3.6x 0% 6 / 8 40 Linear Technology LLTC 34.53 -25% 5% 7,783 7,811 5.4x 7% 188% 26% >9.9x 1% 6 / 12 41 Tyson Foods TSN 17.25 -21% 19% 6,506 8,064 .3x 11% 31% 36% 2.1x 0% 11 / 7 42 Mattel MAT 23.51 -19% 14% 8,436 8,691 1.5x 8% 50% 18% 4.6x 0% 12 / 12 43 Avnet AVT 34.98 -36% 5% 5,316 6,412 .3x 12% 28% 30% 2.2x 0% 17 / 15 44 Chevron CVX 93.78 -29% 0% 188,726 184,811 .9x 11% 29% 42% 1.9x 0% 3 / 8 45 Xilinx XLNX 31.28 -27% 2% 8,105 7,583 3.3x 7% 110% 18% 4.2x 0% 3 / 3 Company website SEC Y! Price Charts Proxy Y!

Screening criteria: MV > $5 billion ADRs and banks excluded Enterprise value to MV < 1.5



Value with Catalyst: Cheap Repurchasers of Stock (MV > $5 billion) Companies that may be creating value by reducing their shares outstanding at relatively cheap prices

Q-Q Next Price to Net Cash Insiders Price MV EV Change FY Tangible as % of % Buys/ Company Ticker ($) ($mn) ($mn) in Shares P/E Book MV Own. Sells

1 Gilead Sciences GILD 38.19 31,005 32,149 -5.5% 9x 7.5x -4% 1% 8 / 4 2 Banco Santander STD 12.39 101,955 n/m -5.0% 8x 2.3x n/m 0% - / - 3 WellPoint WLP 61.45 24,187 n/m -4.7% 9x 8.0x n/m 0% 7 / 9 4 Best Buy BBY 35.11 13,840 14,737 -4.0% 10x 4.3x -6% 0% 8 / 3 5 Lukoil LUKOY 64.11 50,093 57,431 -3.9% 6x .9x -15% 0% - / - 6 Walgreen WAG 41.69 38,456 38,796 -3.4% 14x 3.1x -1% 0% 16 / 5 7 Devon Energy DVN 83.51 36,068 38,089 -3.4% 14x 2.8x -6% 1% 12 / 10 8 Hewlett-Packard HPQ 47.23 103,454 114,824 -3.1% 8x n/m -11% 0% 14 / 11 9 Bunge BG 70.04 10,148 12,330 -3.1% 13x 1.1x -22% 0% - / - 10 Forest Labs FRX 31.66 9,043 5,599 -2.9% 7x 2.1x 38% 1% 15 / 12 11 PartnerRe PRE 81.00 6,034 n/m -2.8% 9x .9x n/m 0% - / - 12 Cardinal Health CAH 41.30 14,412 13,840 -2.6% 14x 6.2x 4% 0% 20 / 10 13 Zimmer Holdings ZMH 56.36 11,128 11,285 -2.5% 12x 4.9x -1% 0% 2 / 2 14 Aetna AET 33.28 13,315 n/m -2.4% 10x 3.1x n/m 0% 5 / 6 15 Garmin GRMN 30.79 5,954 4,696 -2.2% - 2.2x 21% 0% - / - 16 Ameriprise Financial AMP 60.36 14,967 n/m -2.2% 11x 1.4x n/m 0% 7 / 10 17 Lockheed Martin LMT 79.22 28,529 30,125 -2.0% 12x n/m -6% 0% 1 / - 18 Northrop Grumman NOC 69.53 20,302 21,983 -2.0% 10x n/m -8% 0% 17 / 4 19 Walt Disney DIS 39.74 75,251 85,009 -1.9% 14x 21.1x -13% 0% 18 / 7 20 Raytheon RTN 52.15 19,011 19,188 -1.8% 11x n/m -1% 0% 4 / 3 21 CIGNA CI 40.97 11,099 n/m -1.7% 9x 3.3x n/m 0% 14 / 13 22 Cisco Systems CSCO 20.73 114,874 91,227 -1.6% 11x 4.6x 21% 0% 21 / 12 23 Activision Blizzard ATVI 11.25 13,562 10,713 -1.6% 14x 5.4x 21% 0% 9 / 7 24 Baxter International BAX 49.49 28,839 30,934 -1.5% 12x 7.2x -7% 0% 6 / 5 25 Credit Suisse CS 45.35 53,708 n/m -1.4% 9x 2.1x n/m 0% - / - 26 Time Warner TWX 32.79 36,374 48,922 -1.4% 12x n/m -34% 0% 5 / 4 27 McGraw-Hill MHP 37.64 11,556 11,398 -1.3% 13x n/m 1% 0% 2 / - 28 Noble Corp. NE 37.64 9,496 11,852 -1.1% - 1.3x -25% 0% 8 / 10 29 SAIC SAI 16.48 6,128 6,588 -1.1% 12x 10.5x -8% 0% 17 / 13 30 KLA-Tencor KLAC 41.83 6,988 6,215 -1.1% 10x 3.7x 11% 1% 13 / 6 31 Expedia EXPE 25.98 7,391 7,482 -1.0% 13x n/m -1% 0% 7 / 6 32 XL Capital XL 22.69 7,334 n/m -1.0% - .7x n/m 0% - / - 33 Tokio Marine TKOMY 30.04 23,342 n/m -1.0% 15x 1.2x n/m 0% - / - 34 Rockwell Collins COL 63.71 9,880 10,141 -0.9% 14x 25.1x -3% 0% 18 / 15 35 Ahold AHONY 13.12 15,498 16,696 -0.9% 11x 2.3x -8% 0% - / - 36 Merck MRK 33.90 104,442 111,965 -0.9% 9x 662.7x -7% 0% 6 / 6 37 AmerisourceBergen ABC 36.10 9,939 9,625 -0.8% 13x 91.2x 3% 1% 10 / 4 38 Becton Dickinson BDX 83.20 18,824 18,778 -0.8% 14x 4.9x 0% 0% 10 / 11 39 TOTAL TOT 58.04 129,695 147,760 -0.7% 8x 2.0x -14% 0% - / - 40 Telenor TELNY 46.04 25,194 28,667 -0.7% 11x 4.3x -14% 0% - / - 41 Mattel MAT 24.19 8,436 8,691 -0.7% 12x 4.6x -3% 0% 12 / 12 42 Dell DELL 13.60 26,001 18,614 -0.7% 9x 26.0x 28% 12% 13 / 6 43 Companhia Paranaense ELP 25.66 7,195 7,227 -0.7% 14x 1.3x 0% 0% - / - 44 CA CA 23.87 12,949 11,991 -0.6% 12x n/m 7% 0% 2 / 3 45 ConocoPhillips COP 68.97 101,965 114,714 -0.6% 10x 1.6x -13% 0% 6 / 7 Company website SEC Y! Proxy Y!

Criteria: MV < 2.5 * tangible book value Next FY P/E < 14 Debt/equity < 0.5 MV > $5 billion Q-Q shares < 0



Profitable Dividend Payors with Decent Balance Sheets (MV > $5 billion) Dividend-paying companies with no net debt and EPS estimates in excess of 75% of the indicated annual dividend

Move To Dividend Yield Est. P/E Price to Insiders Price 52-Week MV EV Last 12 Annual This Next Tangible % Buys/ Company Ticker ($) Low High ($mn) ($mn) Months Indicated FY FY Book Own. Sells

1 Banco Santander STD 12.39 -30% 24% 101,955 n/m 4% 6% 10x 8x 2.3x 0% - / - 2 AstraZeneca AZN 48.10 -16% 11% 68,015 67,095 3% 6% 7x 7x n/m 0% - / - 3 Lorillard LO 74.20 -5% 21% 11,101 10,805 6% 6% 11x 10x n/m 0% 11 / 3 4 Nat'l Australia Bank NABZY 24.15 -24% 11% 51,521 n/m 6% 6% 10x 9x 1.6x 0% - / - 5 Westpac Banking WBK 112.10 -24% 19% 66,743 n/m 6% 6% 11x 11x 2.5x 0% - / - 6 Telecom Argentina TEO 26.70 -45% 2% 5,257 5,026 8% 5% 12x 10x 4.2x 0% - / - 7 Bristol Myers Squibb BMY 26.06 -15% 7% 44,607 42,970 5% 5% 12x 12x 5.6x 0% 4 / 8 8 Australia and NZ ANZBY 23.26 -30% 11% 59,539 n/m 5% 5% 11x 10x 2.3x 0% - / - 9 Nokia NOK 10.78 -26% 47% 40,371 34,159 5% 5% 14x 12x 5.5x 0% - / - 10 Santander Brasil BSBR 12.58 -22% 24% 47,810 n/m 2% 4% 13x 11x 2.0x 0% - / - 11 Credit Suisse CS 45.35 -20% 20% 53,708 n/m 5% 4% 11x 9x 2.1x 0% - / - 12 Turkcell TKC 15.98 -24% 25% 14,062 12,681 4% 4% 11x 11x 3.1x 0% - / - 13 Paychex PAYX 32.60 -24% 1% 11,791 11,327 4% 4% 23x 22x >9.9x 11% 1 / 4 14 Microchip Technology MCHP 36.47 -30% 3% 6,814 5,779 4% 4% 16x 15x 4.5x 0% 11 / 9 15 China Mobile CHL 49.79 -11% 10% 199,789 154,318 4% 4% 13x 11x 2.6x 0% - / - 16 Co. Bebidas Americas ABV 27.08 -35% 18% 84,029 83,437 1% 4% 20x 18x >9.9x 0% - / - 17 Intel INTC 20.82 -15% 17% 116,134 96,364 3% 3% 10x 9x 2.6x 0% 3 / 3 18 Johnson & Johnson JNJ 62.66 -9% 6% 172,080 161,979 3% 3% 13x 13x 6.9x 0% 9 / 7 19 NTT DoCoMo DCM 17.68 -18% 2% 73,556 69,768 5% 3% 13x 12x 1.5x 0% - / - 20 Genuine Parts GPC 50.49 -27% 4% 7,954 7,922 3% 3% 17x 15x 3.1x 1% 5 / 5 21 Maxim Integrated MXIM 26.13 -40% 8% 7,736 7,238 3% 3% 16x 15x 4.1x 1% 17 / 11 22 Chevron CVX 93.78 -29% 0% 188,726 184,811 3% 3% 10x 9x 1.9x 0% 3 / 8 23 Automatic Data ADP 49.04 -46% 0% 24,187 23,006 3% 3% 20x 18x >9.9x 0% 23 / 6 24 United Overseas Bank UOVEY 30.18 -17% 1% 23,093 n/m 3% 3% 12x

The Manual of Ideas: Large-Cap Stocks: How Cheap Are They?

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Transcript of The Manual of Ideas: Large-Cap Stocks: How Cheap Are They?