ﬁ April 2011 Issue 4 - Stock Superstars · 2011. 3. 31. · ﬁ ed petroleum gas (LPG), gasoline, jet fuel, diesel oil, other fuel oils, asphalt and petroleum coke. Chevron’s

estimates of losses from the Febru-ary earthquake in New Zealand and the January fl oods and Cy-clone Yasi in Australia totaling $90 million. It is still too early for the company to issue a loss estimate for Japan.

Afl ac Inc. (Group 4: AFL) was the second-weakest SSR stock during March, down 11.4% as of March 29, 2011. Afl ac offers sup-plemental health and life insurance in the United States and Japan and is the number one provider of guaranteed-renewable insurance in Japan. While the fi ring of come-dian Gilbert Gottfried, who voiced the iconic Afl ac Duck, seemed to get the most press surrounding Afl ac, investor concerns weighed down the stock price. Investors were not reassured by Daniel P.

Amos, Afl ac chair-man and CEO, who said in a statement issued on March 14, 2011, that the company expects Afl ac Japan sales to be only minimally impacted by the events, with earn-ings guidance for the year unchanged.

It seems that we are discussing the impact of some unanticipated event

Events during March reinforced that we should always expect the unexpected. While Japan has prepared for both earthquakes and tsunamis, the 9.0-magnitude earthquake and subsequent tsuna-mi unleashed a level of destruction that could not have been antici-pated. In addition, the after-effects from explosions and the release of radiation at a damaged nuclear power plant will likely reshape en-ergy policies throughout the globe.

Two stocks in the SSR portfolio were hurt directly by the devas-tation in Japan. Montpelier Re Holdings Ltd. (Group 4: MRH), a provider of global property and casualty reinsurance and insur-ance products, was down 15.5% during March. On March 14, 2011, Montpelier announced preliminary

Volume 9Issue 4

on the SSR portfolio every month. The best way to protect your in-vestments against such unexpected events is to maintain a diversi-fi ed portfolio. Big winners during March include Lubrizol Corpora-tion (formerly Group 4: LZ) up 23.1%, MWI Veterinary Supply (Group 1: MWIV) up 12.1% and Tractor Supply Company (Group 3: TSCO) up 11.7%, the latter two benefi ting from accelerating growth in the pet industry and in domestic agriculture, respectively.

Lubrizol’s gain during March resulted from an agreement to be acquired by Berkshire Hathaway for $135 per share in an all-cash transaction. On March 14, 2011, Berkshire Hathaway Inc. (BRK.A) and Lubrizol Corporation (LZ) an-nounced the merger. The acquisi-tion price represented a 28% pre-mium over Lubrizol’s closing price on Friday, March 11, 2011, and was also 18% higher than Lubrizol’s all-time high share closing price.

The transaction is subject to the approval of Lubrizol’s sharehold-ers and the satisfaction of custom-ary closing conditions, including the expiration of waiting periods and the receipt of approvals under the Hart-Scott-Rodino Antitrust Improvements Act and applicable non-U.S. merger control regula-tions. Berkshire Hathaway and Lubrizol expect the transaction

April 2011

The Stock Superstars Report illustrates how to build and manage a well-diversifi ed portfolio with controlled risk. Our goal is to create a portfolio that provides investment information and refl ects an approach consistent with current research fi ndings.

“The American Association of Individual Investors is an independent nonprofi t corporation formed in 1978 for the purpose of assisting individuals in becoming effective managers of their own assets through programs of education, information and research.”

www.stocksuperstars.comSSR Phone Hotline: 866-801-2576

In This IssueIn This IssuePortfolio Alerts This Month . . . . . . . . . . . . . . . . . . . . 2Performance of SSR . . . . . . . . . . . . . . . . . . . . . . . . . . . 3SSR Stocks in the News. . . . . . . . . . . . . . . . . . . . . . . . 4Recent Earnings Announcements . . . . . . . . . . . . . . 4The Current SSR Portfolio . . . . . . . . . . . . . . . . . . . . . 6In-Depth Stock Reports Cognizant Technology . . . . . . . . . . . . . . 8 Chevron Corporation . . . . . . . . . . . . . . . . 9

Volterra Semiconductor . . . . . . . . . . . 10 GrafTech International, Ltd. . . . . . . . . . 11Portfolio Corner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Next Publication Date: April 29, 2011

2 April 2011

Stock Superstars Report

to be completed during the third quarter of 2011.

Portfolio Deletion AlertIt is SSR policy to issue a portfo-

lio deletion alert for a stock that is being acquired once the board of directors approves the deal and the stock price substantially refl ects the acquisition price. Therefore, Lubrizol is being removed from the SSR portfolio. Our Portfolio Corner column on page 12 answers some common questions you might have if one of your stocks is an acquisi-tion target.

A portfolio addition alert was issued for Lubrizol Corporation on May 28, 2010. The stock was add-ed to the SSR portfolio on June 2, 2010, at an average cost of $87.51. Since the stock was purchased for the SSR portfolio, LZ shares rose 52.9% compared to a gain of 19.4% for the Wilshire 5000.

As we were going to press, news

came out that David Sokol, con-sidered by many to be a frontrun-ner as successor to CEO Warren Buffett at Berkshire Hathaway, announced his sudden resigna-tion from the fi rm for personal reasons.

What makes the timing of his resignation interesting is that Sokol seems to have been the catalyst behind Berkshire Ha-thaway’s acquisition of Lubrizol and personally profi ted from the buyout. Buffett indicated in a press release that the acquisition “would not have occurred without Dave’s early efforts.” Sokol acquired 96,060 shares of Lubrizol in early January 2011 prior to presenting the idea to Buffett on more than one occasion and also disclosed in passing that he owned stock in the company. Buffett stated in a press release, “Neither Dave nor I feel his Lubrizol purchases were in any way unlawful.”

Segment Performance

The Wilshire 5000 was up 0.3% for the month through March 30, 2011. Small- and mid-cap stocks again performed more strongly than large-cap

stocks during March, with the S&P SmallCap 600 up 2.3% while the large-cap S&P 500 was up only 0.1% through March 30, 2011. The SSR tracking portfolio gained 2.1% during March. Year-to-date the SSR tracking portfolio is up 9.6% through March 30, 2011, and the Wilshire 5000 index is up 5.6%. The technology-heavy NASDAQ 100 index was down 0.6% during March, but is up 5.4% for the year. The growth-oriented stocks in SSR Groups 1 and 3 performed slightly better in March than the value-oriented stocks in Groups 2 and 4. This represents a slight shift from February performance, during which the stocks in Group 2 shined brightest.

April Portfolio AdditionThere is one addition to the

Stock Superstars Portfolio for April: Chevron Corporation (CVX) in Group 2. Nineteen stocks

April Portfolio Additions:

Group Company (Ticker)Latest Price (3/29/2011)

1 Yr RiskGrade Description

2 Chevron Corporation (CVX) $107.37 98Portfolio Deletions Since Last Monthly Issue:

Date Price0102/82/5%4.91%9.2557.331$1102/81/3)ZL( noitaroproC lozirbuL4

prods oil and gas, refines crude into petroleum

GroupPortfolio Deletion Alert G/L Since

Purchase

Wilshire 5000 Change Since

Purchase

PortfolioAddition Alert

DateCompany (Ticker)

Portfolio Alerts This Month

Published monthly by the AmericanAssociation of Individual Investors625 N. Michigan Ave., Chicago, IL 60611,312-280-0170, www.aaii.com.Annual SSR subscription, $199.

AAII’s Stock Superstars Report® (SSR) is not a registered investment adviser or a broker/dealer. This report is issued solely for informational purposes and

should not be construed as an offer to sell or the solicitation of an offer to buy securities. The opinions and analyses included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our information providers shall be liable for any errors or inaccuracies, regardless of cause, or the lack of

timeliness of, or any delay or interruptions in, the transmission thereof to the users. All information contained in this report should be independently verifi ed with the companies mentioned.

© American Association of Individual Investors, 2011. The Stock Superstars Report is a registered trademark of the American Association of Individual Investors. This publication may not be reproduced in whole or in part by any means without prior written consent.

“The American Association of Individual Investors is an independent nonprofi t corporation formed in 1978 for the purpose of assisting individuals in becoming effective managers of their own assets through programs of education, information and research.”

Printed in the U.S.A.

April 2011 3


StockSuperstars WilshirePortfolio 5000

March 2.1% 0.3%2011 YTD 9.6% 5.6%

2010 19.5% 15.7%2009 34.3% 26.9%2008 -43.5% -38.7%2007 5.5% 3.9%2006 3.0% 13.9%2005 -0.3% 4.6%2004 14.3% 10.8%2003 40.2% 29.4%2002 0.5% -21.0%

From Inception 73.4% 33.5%RiskGrade (1 Yr) 101 86RiskGrade (3 Yr) 143 128

Ann'l Std. Dev.* 18.8% 16.2%Performance as of 3/30/2011.

Performance

Ris

kR

etur

n

Growth of $100,000

$50,000

$75,000

$100,000

$125,000

$150,000

$175,000

$200,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Performance of SSR

*Since SSR inception.The Stock Superstars portfolio started at the beginning of 2002. The SSR portfolio is run as if managed by a subscriber and includes delays in reaction time to SSR alerts, actual commissions and bid-ask spreads.

passed our initial SSR Group 2 screen, which looks for domestic, dividend-paying stocks with below-average price-earnings ratios and better-than-average fi nancial strength. This month witnessed a larger than normal concentration of energy and banking stocks pass-ing the initial fi lter, which worked out well because both sectors are underrepresented in the SSR portfolio.

Chevron is one of the world’s leading integrated energy com-panies, with subsidiaries that are involved in virtually every facet of the energy industry worldwide. Chevron explores for, produces and transports crude oil and natural gas; refi nes, markets and distributes transportation fuels and lubricants; manufactures and sells petrochemical products; generates power and produces geothermal energy; and even is developing energy resources such as biofuels. Upstream energy business consists of energy exploration and produc-

tion and includes searching for potential underground or under-water oil and gas fi elds, drilling exploratory wells, and the sub-sequent operation of those wells. Downstream efforts refer to the refi ning of crude oil, and the sell-ing and distribution of natural gas and products derived from crude oil. Such products include liqui-fi ed petroleum gas (LPG), gasoline, jet fuel, diesel oil, other fuel oils, asphalt and petroleum coke.

Chevron’s $214.4 billion in market capitalization (shares out-standing times stock price) place Chevron in the top 1% of stocks traded in the United States. Sales totaled $204.9 billion for 2010 and have expanded 19.4% over the prior year, but have declined at an annual rate of 2.5% over the last three years. Fully diluted earnings from continuing opera-tions increased 80.9% during 2010 and have grown at a 2.6% annual average rate over the last three years. Higher oil prices, increased

productivity, and higher profi t margins on refi ned products drove up earnings. Chevron has had suc-cess in resource replacement of its depleted energy resources. Over the period from 2002 to 2009, it has been able to replace 89% of its energy resources at a average un-derlying fi nding cost that is below average for the industry. Chevron completed its acquisition of natural gas producer Atlas Energy on Feb-ruary 18, 2011, a move that gives Chevron access to vast unconven-tional natural gas reserves in the Marcellus Shale in Pennsylvania and New York.

Looking forward, two analysts are providing long-term earnings growth rate estimates that average 2.4%, with a range of a negative 0.6% to a positive 5.4%. With the profi tability of Chevron largely de-pendent upon the price of oil and natural gas, long-term forecasts are diffi cult to make, at best.

On February 7, 2011, Chevron announced quarterly earnings

4 April 2011


AboveNet, Inc. (ABVT)(2/28/2011) Yahoo! Finance reported that BWS

Financial downgraded AboveNet from buy to hold and set a target price of $67.Amerisafe, Inc. (AMSF)

(3/10/2011) Yahoo! Finance reported that broker-age fi rm Wunderlich upgraded Amerisafe from hold to buy.

(3/24/2011) Briefi ng.com reported that research fi rm Sidoti downgraded Amerisafe from buy to neutral.Apple Inc. (AAPL)

(3/2/2011) MarketWatch reported that Apple’s

Steve Jobs announced the release of the iPad 2, tout-ing the company’s strong lead in the tablet market and predicting that the latest iPad would maintain the company’s strong position.

(3/16/2011) Bloomberg reported that JMP Securi-ties said slower sales growth at Foxconn’s Hon Hai Precision Industry Co., whose Chinese factories make Apple devices, may signal lower-than-expected revenue for Apple. JMP Securities lowered its rating on Apple shares from market outperform to market perform, which is the fi rst downgrade for Apple since October 2010, according to the report.

Also, Briefi ng.com reported that trading fi rm BTIG raised its target price on AAPL shares from $350 to $450.

(3/17/2011) Yahoo! Finance reported that Credit Suisse initiated coverage on Apple with a buy rating and a $500 target price.

(3/22/2011) Briefi ng.com

Recent Earnings AnnouncementsDate Reported Expected Surprise

%sgninraEsgninraEdetropeR)rekciT( kcotSGroup 4

%3.9316.0$58.0$52 beF)TVBA( .cnI ,teNevobA%0.5-04.0$83.0$3 raM)FSMA( .cnI ,efasiremA

SSR Stocks in the News

of $2.44 per share, a 1.2% posi-tive earnings surprise. There are 20 analysts providing earnings estimates for Chevron’s 2011 fi scal year, which ends in December. The mean estimate is $11.37 ($7.21 to $14.16 range) for fi scal 2011 and $12.06 ($9.63 to $15.90 range) for fi scal 2012. There were nine upward revisions and one to three downward revisions to the com-pany’s 2011 and 2012 fi scal-year earnings estimates over the last month.

While Chevron had a decline in its operating cash fl ow during 2009, the overall strength in cash fl ow has allowed Chevron to ac-quire and build assets while paying a dividend and retiring outstand-ing common stock.

Chevron has an indicated per share dividend of $2.88, which has grown at annual rate of 10.2% over the last fi ve years. Its current

dividend yield is 2.7%, greater than 87% of the 9,873 stocks covered by AAII’s Stock Investor Pro research database and screening program. The next dividend will be declared on April 27, 2011, for shareholders of record on June 10, 2011.

The Group 2 screen does not seek out a minimum level of rela-tive price performance; however, Chevron’s 45% price gain over the last 52 weeks is better than 80% of all stocks; over the last 26 weeks, its price increase of 33% outper-formed 75% of all stocks.

Chevron’s percentage of total liabilities to total assets stands at 43.1%, below the 53.0% median for the integrated oil and gas industry and the 46.2% company average over the last fi ve years. Chevron has $17.1 billion in cash.

Chevron is trading with a price-earnings ratio of 11.3 based on trailing 12-month earnings of

$9.48 per share. Its forward price-earnings ratio is 9.4 times the con-sensus earnings estimate of $11.37 for 2011. A year ago, the stock traded with a price-earnings ratio of 13.8, and that ratio has averaged 9.1 over the last fi ve years.

Chevron has benefi ted from the cyclical upswing in the oil industry, but its fortunes are largely tied to constantly changing actual and perceived demand for and supply of energy. Chevron is being added to the SSR portfolio for its reason-able valuation and strong fi nancial strength and to help balance the overall risk of the portfolio.

SSR PortfolioSince inception, the SSR port-

folio has gained 73.4%, while the Wilshire 5000 is up 33.5%. For 2011, the Wilshire 5000 is up 5.6%, while the SSR portfolio has gained 9.6%. •

April 2011 5


reported that Barclays continues to believe that Apple’s valuation is attractive and that the shares can benefi t from strong iPad and iPhone demand, Mac share gains, signifi cant international expansion, and a pipeline of new innovations.

(3/24/2011) Bloomberg reported that Forrester Re-search believes Apple can keep posting sales growth of more than 50% in the next two years.Cerner Corporation (CERN)

(3/1/2011) Yahoo! Finance reported that FBR Capi-tal initiated coverage of Cerner with an outperform rating.

(3/14/2011) Yahoo! Finance reported that invest-ment bank Auriga U.S.A. upgraded Cerner from hold to buy and raised its target price from $105 to $121.Comcast Corporation (CMCSA)

(2/28/2011) Barron’s reported that Goldman Sachs reinstated coverage of Comcast with a buy rating, of-fering estimates for how the combined business with NBC-Universal could lead to a surge in free cash fl ow.

(3/7/2011) Briefi ng.com reported that investment bank Maxim Group initiated coverage of Comcast with a buy rating.FMC Technologies, Inc. (FTI)

(3/8/2011) Yahoo! Finance reported that investment bank Dahlman Rose initiated coverage of FCM Tech-nologies with a hold rating.Goldman Sachs Group (GS)

(3/1/2011) MarketWatch reported that Goldman Sachs Group could lose as much as $3.4 billion in damages and other litigation-related matters involv-ing securities it underwrote in the last few years.

(3/4/2011) Briefi ng.com reported that Bank of America downgraded Goldman Sachs from buy to neutral.

(3/18/2011) Briefi ng.com reported that Goldman Sachs announced that the Federal Reserve has con-cluded that it has no objection to Goldman Sachs’ pro-posed 2011 capital actions, which include the redemp-tion in full of the 50,000 shares of the company’s 10% Cumulative Perpetual Preferred Stock Series G, held by Berkshire Hathaway; the repurchase of outstand-ing common stock; and a potential increase in quar-terly common stock dividend.

(3/25/2011) Barron’s reported that Nomura Bank reiterated its buy rating on Goldman Sachs Group, following meetings with management, and set a target price of $190.HealthSpring, Inc. (HS)

(3/24/2011) Yahoo! Finance reported that Health-

Spring announced that it has agreed to sell 7,500,000 shares of common stock in an underwritten public of-fering. The company has also granted the underwrit-ers a 30-day option to purchase up to an additional 1,125,000 shares of common stock, according to the report.Johnson Controls, Inc. (JCI)

(2/28/2011) Briefi ng.com reported that Piper Jaf-fray initiated coverage of Johnson Controls with a neutral rating and set a target price of $46.

(3/9/2011) Forbes reported that Barclays upgraded its rating on Johnson Controls from equal weight to overweight and raised its target price from $47 to $52.

(3/24/2011) Briefi ng.com reported that investment bank Needham Group upgraded its rating on Johnson Controls from buy to strong buy with a target price of $55.L-3 Communications (LLL)

(3/15/2011) Yahoo! Finance reported that research fi rm Stifel Nicolaus downgraded L-3 Communications from buy to hold.Montpelier Re Holdings Ltd. (MRH)

(3/16/2011) Yahoo! Finance reported that Zacks downgraded Montpelier Re Holdings from market perform to underperform based on apprehensions that the current pricing environment in the primary insurance market and the stressed economy would restrict top-line growth.Norfolk Southern Corp. (NSC)

(3/11/2011) Briefi ng.com reported that RBC Capital upgraded Norfolk Southern from sector perform to outperform and set a target price of $78.Pfi zer Inc. (PFE)

(3/14/2011) Yahoo! Finance reported that Stand-point Research downgraded Pfi zer from buy to hold.Tractor Supply Company (TSCO)

(3/9/2011) The Associated Press reported that research fi rm R.W. Baird upgraded Tractor Supply Company from neutral to outperform.Valassis Communications, Inc. (VCI)

(3/2/2011) Briefi ng.com reported that J.P. Morgan upgraded Valassis from neutral to overweight.Volterra Semiconductor (VLTR)

(3/15/2011) Yahoo! Finance reported that Stand-point Research upgraded Volterra Semiconductor from hold to buy.

(3/23/2011) Yahoo! Finance reported that Longbow Research initiated coverage of Volterra Semiconduc-tor with a buy rating. •

6 April 2011


April 2011 7


Rel Strength Since Purchase (Index) – Price performance of a stock compared to the Wilshire 5000 since the stock was purchased for the SSR portfolio.Rel Strength % Rank – An indication of how a stock has performed relative to all U.S.-listed stocks over the stated time period. A rank of 75% refl ects performance that surpassed 75% of all stocks over the period—or that places the stock within the top 25% of the universe.RiskGrade – Average RiskGrade over the last year and over the last three years. A measure of price volatility that can range from 0 to 1,000 or more, where 100 corresponds to the market-cap-weighted average volatility of global equities during normal market conditions over the period 1995 to 1999. A RiskGrade

of 0 indicates that a fi nancial asset effectively has no price volatility—such as cash. A RiskGrade of 1,000 indicates that a fi nancial asset is 10 times as volatile as an asset or index with a RiskGrade of 100. The RiskGrade of an asset increases in direct proportion to its price volatility.P/E Ratio (TTM) – The current stock price divided by diluted earnings per share from continuing operations for the trailing 12 months.EPS (TTM) – The amount of fully diluted earnings from continuing operations reported by a company for the most recent 12-month period (TTM) on a per share basis.EPS (Est Current Year) – The average consensus earnings estimate for the

Rel gvA-ecirPyliaD-ot-ecirPSPEhtgnertSRSSralloDtekraM-kooB-ottsE(E/PecniSecniStsetaL-ruP

chase Price One Pur- Purchase 1 3 Ratio EPS Current Hist Est Hist Sales Value Div Cap VolumeCompany (Exchange: Ticker) Date Price Price (3/29/11) Month chase (Index) 4 Wk 52 Wk Yr Yr (TTM) (TTM) Year) EPS EPS Sales Ratio Ratio Yield (Mil) (Mil) DescriptionGroup 1: Profitability & Relative StrengthHealthSpring, Inc. (HS) 2/25/11 $37.38 $37.42 $36.92 -1.9% -1.3% 0.98 37% 94% 189 270 10.9 $3.39 $3.81 69.8% 11.8% 29.6% 0.67 1.9 0.0% $2,117 $22.2 Medicare Advantage plans & prescription drug benefitsPerrigo Company (PRGO) 8/27/10 $58.13 $58.19 $76.99 0.7% 32.3% 1.04 48% 74% 155 180 26.2 $2.94 $3.87 20.4% 14.6% 17.2% 2.82 5.4 0.4% $7,010 $60.3 mfrs generic & store-brand OTC drugs & infant formulasMWI Veterinary Supply (MWIV) 6/25/10 $48.99 $50.13 $77.63 12.1% 54.9% 1.19 82% 90% 168 221 26.5 $2.93 $3.21 31.8% 16.5% 19.9% 0.71 3.7 0.0% $943 $4.5 distributes animal health care products to vets

8,5$668,323$%0.09.532.4%2.63%5.02%8.7539.22$19.71$6.91381521%58%95 14.1%2.66%6.0-69.053$12.112$89.112$01/8/1)LPAA( .cnI elppA 54.9 maker of Macs & iPods & related hardware and softwareCognizant Technology (CTSH) 10/30/09 $38.65 $42.48 $80.93 5.3% 90.5% 1.46 77% 85% 141 216 34.1 $2.37 $2.72 33.0% 20.6% 39.0% 5.35 6.9 0.0% $24,346 $196.0 global tech/outsourcing services providerNorfolk Southern Corp. (NSC) 9/26/08 $65.50 $56.67 $69.56 6.1% 22.7% 0.99 82% 67% 124 190 17.3 $4.01 $4.63 5.2% 13.6% 2.2% 2.64 2.4 2.3% $25,734 $174.1 railroad transportation of raw materials & goodsFMC Technologies, Inc. (FTI) 5/2/08 $63.68 $63.90 $95.47 1.5% 49.4% 1.53 69% 84% 198 265 31.2 $3.06 $3.38 35.9% 10.9% 12.6% 2.79 8.8 0.0% $11,383 $94.7 designs, mfrs & servs systems & prods for energy indusExpress Scripts, Inc. (ESRX) 8/31/07 $27.38 $27.43 $55.37 -1.5% 101.9% 2.16 42% 47% 130 178 24.9 $2.22 $3.22 27.0% 18.1% 15.5% 0.65 8.1 0.0% $28,837 $189.4 full-service pharmacy benefit management companyGroup 2: Value & Financial StrengthChevron Corporation (CVX) 4/1/11 na na $107.37 3.5% na na 77% 80% 98 156 11.3 $9.48 $11.37 7.7% 2.4% 0.7% 1.05 2.0 2.7% $214,356 $867.4 produces oil and natural gas, refines crude into petroStepan Company (SCL) 10/29/10 $67.44 $67.41 $71.74 2.2% 6.4% 0.95 59% 75% 181 241 12.1 $5.91 $6.51 35.1% 15.0% 5.8% 0.51 2.2 1.4% $722 $2.4 specialty & intermediate chemicals for range of indusNational Presto Industries (NPK) 7/29/10 $101.99 $107.19 $111.23 -5.9% 3.8% 0.87 15% 30% 156 206 12.0 $9.25 $9.13 31.0% na 21.0% 1.59 2.2 0.9% $776 $2.7 household appliances, ammunition & incontinence prodsL-3 Communications (LLL) 3/26/10 $93.26 $93.33 $78.75 -0.7% -15.6% 0.74 48% 25% 110 134 9.5 $8.27 $8.43 14.5% 8.8% 10.7% 0.56 1.3 2.3% $9,212 $67.4 aerospace and defense contractorComcast Corporation (CMCSA) 1/29/10 $15.83 $16.08 $24.52 -4.8% 52.5% 1.24 48% 75% 129 195 19.0 $1.29 $1.56 38.8% 12.8% 12.5% 1.80 1.5 1.8% $68,203 $440.8 cable television and Internet services providerAbbott Laboratories (ABT) 10/30/09 $50.57 $51.31 $48.38 0.6% -5.7% 0.72 59% 28% 70 109 16.3 $2.97 $4.59 6.6% 9.3% 9.5% 2.13 3.3 4.0% $74,330 $398.1 pharmaceutical, nutritional, diagnostic & vascular prodsSensient Technologies (SXT) 8/28/09 $26.24 $26.14 $35.89 7.5% 37.3% 1.03 82% 66% 115 159 16.5 $2.17 $2.33 18.2% 6.0% 5.3% 1.33 1.8 2.3% $1,788 $8.9 manufactures colors, flavors & fragrances

olg 3.778$126,261$%9.39.114.2%4.7%7.2%2.0-42.2$20.1$0.02241201%85%48 89.0%3.64%9.583.02$39.31$85.31$90/1/5)EFP( .cnI rezifP bal pharmaceutical companyPentair, Inc. (PNR) 9/26/08 $34.66 $33.04 $37.64 1.5% 13.9% 0.92 59% 47% 134 185 18.9 $1.99 $2.33 2.1% 14.5% 0.6% 1.22 1.8 2.1% $3,670 $19.7 mfrs water filters & pumps; electronics enclosures V.F. Corporation (VFC) 11/30/07 $74.79 $74.85 $96.38 1.4% 28.8% 1.37 48% 62% 117 171 18.6 $5.18 $7.08 4.2% 9.9% 6.4% 1.35 2.7 2.6% $10,372 $96.6 apparel: Lee, Napapijri, North Face, Reef, Vans & moreGroup 3: GARP RevisionsJohnson Controls, Inc. (JCI) 12/3/10 $39.19 $39.37 $41.93 3.2% 6.5% 0.99 65% 67% 155 230 18.9 $2.22 $2.58 11.0% 16.8% 4.5% 0.80 2.7 1.5% $28,042 $183.2 auto interior; building systems; car batteriesMKS Instruments (MKSI) 7/29/10 $21.46 $21.49 $32.79 9.2% 52.6% 1.28 84% 88% 206 233 12.6 $2.61 $2.98 32.9% 20.0% 10.9% 1.94 2.0 1.8% $1,654 $10.7 process control instru used primarily by semicond mfrsCypress Semiconductor (CY) 4/30/10 $12.88 $12.56 $19.85 -5.3% 58.0% 1.39 18% 89% 182 267 49.6 $0.40 $1.13 20.9% 13.1% -0.2% 3.75 4.7 0.0% $3,464 $73.3 makes programmable chips for a range of productsTractor Supply Company (TSCO) 2/26/10 $27.36 $28.47 $58.14 11.7% 104.2% 1.70 87% 93% 143 190 25.8 $2.25 $2.63 16.5% 16.3% 12.0% 1.16 4.5 0.5% $4,121 $35.9 operates retail farm and ranch storesSkyworks Solutions, Inc. (SWKS) 9/25/09 $12.94 $13.06 $32.59 -9.3% 149.5% 1.94 15% 93% 184 267 35.4 $0.92 $1.75 36.2% 16.2% 6.2% 5.07 4.2 0.0% $5,991 $128.5 semiconductors & chips for wireless & cellular prodsBecton, Dickinson & Co. (BDX) 3/6/09 $64.15 $63.78 $79.49 -0.1% 24.6% 0.61 42% 36% 82 114 15.9 $5.01 $5.51 12.4% 9.9% 6.7% 2.47 3.7 2.1% $17,391 $96.4 sells medical diagnostic supplies, devices & lab equipCerner Corporation (CERN) 12/5/08 $34.88 $37.98 $109.85 9.4% 189.2% 1.80 86% 67% 115 171 39.5 $2.78 $3.57 20.4% 18.5% 9.8% 4.93 4.8 0.0% $9,087 $61.2 provides clinical, financial & mgmt info sys for healthcare Volterra Semiconductor (VLTR) 8/1/08 $16.20 $15.47 $24.35 -3.5% 57.4% 1.47 26% 35% 227 260 22.1 $1.10 $1.17 39.3% 18.8% 23.3% 3.85 4.6 0.0% $594 $9.9 analog & mixed-signal power mgmt semiconductorsGoldman Sachs Group (GS) 6/30/06 $150.43 $151.05 $158.47 -3.2% 4.9% 0.96 29% 28% 151 251 12.0 $13.17 $16.52 -7.7% 12.0% -7.9% 1.87 1.2 0.9% $82,225 $847.4 investment banking, securities & investment mgmtGroup 4: Reasonably Priced GrowthAboveNet, Inc. (ABVT) 1/7/11 $60.20 $60.25 $64.53 -0.6% 7.1% 1.04 33% 70% 156 166 24.4 $2.64 $2.69 56.3% 17.5% 13.3% 4.05 3.0 0.0% $1,650 $7.3 high-bandwidth connectivity for corp & comm carriersValassis Communications, Inc. (VCI) 8/27/10 $30.66 $30.42 $28.67 1.6% -5.8% 0.74 29% 37% 207 410 3.8 $7.46 $2.83 31.3% 16.9% 15.6% 0.57 2.5 0.0% $1,436 $18.5 media & marketing: mail, print, in-store & online offersAmerisafe, Inc. (AMSF) 2/26/10 $17.21 $17.03 $22.06 10.5% 29.6% 1.08 87% 76% 123 196 12.7 $1.74 $1.74 68.7% 10.0% -2.1% 1.64 1.2 0.0% $400 $1.7 underwrites workers' compensation insuranceRock-Tenn Company (RKT) 12/4/09 $49.48 $50.25 $68.12 -0.8% 35.6% 1.09 42% 82% 169 233 12.3 $5.54 $5.97 63.4% 7.5% 11.6% 0.87 2.5 1.2% $2,690 $43.3 produces paperboard, packaging & merch displaysBrink's Company (BCO) 9/25/09 $23.64 $26.48 $31.98 3.6% 20.8% 0.94 74% 53% 147 181 27.1 $1.18 $1.80 5.6% 12.0% 4.5% 0.49 2.9 1.3% $1,486 $9.3 secure transportation & cash mgmt for banks, stores, etc.

s 1.051$757,42$%3.22.281.1%6.7%3.31%1.1102.6$69.4$5.01582361%63%61 11.1%4.36%4.11-51.25$19.13$28.13$90/62/6)LFA( .cnI calfA upplemental health and life insuranceWESCO International, Inc. (WCC) 2/6/09 $21.75 $21.79 $61.82 6.2% 183.8% 1.78 86% 90% 160 242 24.8 $2.49 $3.52 3.5% 13.5% 2.8% 0.52 2.3 0.0% $2,639 $34.1 electrical construction products & maintenance suppliesGrafTech International, Ltd. (GTI) 12/5/08 $6.41 $7.42 $20.34 1.6% 174.3% 1.71 48% 85% 223 357 14.5 $1.40 $1.06 25.8% 10.0% 5.4% 2.60 2.1 0.0% $2,942 $24.8 mfrs graphite prods for electronic & transport indusMontpelier Re Holdings Ltd. (MRH) 3/28/08 $15.87 $16.62 $16.94 -15.5% 1.9% 1.00 10% 39% 109 170 5.6 $3.00 $2.02 17.8% 8.5% -5.0% 1.48 0.7 2.2% $1,062 $8.4 underwrites property and casualty insuranceData as of 3/29/2011. Source: AAII Stock Investor Pro, Thomson Reuters and I/B/E/S.

Growth Rate% Rank

Gain/Loss

Portfolio AlertRel Strength RiskGrade

current fi scal year.Growth Rate—Hist EPS – The compound annual percentage change in fully diluted earnings per share from continuing operations over the last fi ve fi scal years.Growth Rate—Est EPS – The average of analysts’ expected long-term (three- to fi ve-year) growth rate in earnings per share.Growth Rate—Hist Sales – The compound annual percentage change in total sales over the last fi ve fi scal years.Price-to-Sales Ratio – The current stock price divided by the sales per share for the trailing 12 months (last four fi scal quarters).

Price-to-Book-Value Ratio – The current stock price divided by book value per share for the latest reported fi scal quarter. Book value per share is equal to total assets less total liabilities and preferred stock, divided by common shares outstanding.Div Yield – The indicated dividend (last quarterly per share dividend multiplied by four) divided by the current stock price. Market Cap (Mil) – The current stock price multiplied by the average number of common shares outstanding during the last fi scal quarter.Avg Daily Dollar Volume (Mil) – The current stock price multiplied by the average daily trading volume over the last six months.

8 April 2011


SSR Group 1: Cognizant Technology (CTSH) $80.93 ($81.17 - $45.85)

Group 1: Profitability & Relative StrengthAddition Alert Date: 10/30/2009Price at Alert: $38.65Primary Industry: Software & Programming1 Yr RiskGrade: 141Market Cap: $24,346 MilAvg Daily Dollar Volume: $196.0 Mil

Multiples Current 12/2010 12/2009 12/2008 12/2007 12/2006Price/Earnings 34.1 24.7 17.9 17.9 33.6 42.5Price/Book Value 6.9 4.9 3.5 3.8 7.5 8.6

4.62.56.28.28.34.5selaS/ecirPPrice/Cash Flow 56.4 41.2 26.2 19.5 160.9 142.4Price/Free Cash Flow 43.0 31.2 16.1 29.6 72.8 66.8

0.00.00.00.00.00.0)%( dleiY102/21tnerruCsoitaR 0 12/2009 12/2008 12/2007 12/2006

Gross Margin (%) 42.2 42.2 43.6 44.2 43.5 44.7Operating Margin (%) 18.8 18.8 18.9 18.3 17.9 18.2Net Margin (%) 16.0 16.0 16.3 15.3 16.4 16.3

.625.721.522.325.328.22)%( EOR 0.815.812.81)%( AOR 7 20.5 22.1 21.2

Current Ratio (%) 3.8 3.8 3.6 3.8 3.6 4.2Payout Ratio (%) 0.0 0.0 0.0 0.0 0.0 0.0Liabilities to Assets (%) 21.8 21.8 20.5 17.2 20.1 19.0Asset Turnover (X) 1.1 1.2 1.1 1.3 1.3 1.3Financial Statements TTM 12/2010 12/2009 12/2008 12/2007 12/2006Sales ($M) 4,592.4 4,592.4 3,278.7 2,816.3 2,135.6 1,424.3

Stock Rel Strgth Rel Strgth Gross Income ($M) 1,937.8 1,937.8 1,429.3 1,243.5 929.6 636.4Gain Index Rank Depreciation ($M) 103.9 103.9 89.4 74.8 53.9 34.2

4 Week 5% 1.05 77% Unusual/Extra ($M) 0.0 0.0 0.0 0.0 0.0 0.013 Week 10% 1.05 66% Operating Income ($M) 861.9 861.9 618.5 516.7 381.5 259.026 Week 25% 1.09 66% Interest Expense ($M) -- -- -- -- -- --52 Week 56% 1.38 85% Pretax Income ($) 878.6 878.6 637.0 515.2 414.4 277.8

Net Income ($) 733.6 733.5 535.0 430.8 350.1 232.8Growth TTM 3 Year 5 Year Operating Cash Flow ($M) 764.6 764.7 672.3 429.7 344.3 252.9

Sales 39.0% 29.1% 39.0% Investing Cash Flow ($M) (446.8) (446.9) (394.8) (55.0) (277.3) (272.3)Net Income 37.1% 28.0% 34.6% Financing Cash Flow ($M) 119.9 120.0 76.9 44.0 4.0 82.9EPS Basic 33.3% 26.0% 32.0% Net Cash Flow ($M) 440.0 440.0 365.9 395.2 73.9 69.0EPS Dil Cont 33.0% 27.3% 33.0% EPS Basic ($) 2.44 2.44 1.82 1.49 1.22 0.83Dividends -- -- -- EPS Diluted Cont ($) 2.37 2.37 1.78 1.44 1.15 0.77

Dividends/Share ($) 0.00 0.00 0.00 0.00 0.00 0.00Est Surprise EPS % Surp SUE Score Free Cash Flow/Share ($) 1.86 1.87 1.98 0.87 0.53 0.492/7/2011 $0.66 1.5% 1.00 Cash ($M) 2,226.4 2,226.4 1,399.3 762.6 670.4 648.1

Quarterly Annual Annual Goodwill/Intangibles ($M) 309.1 309.1 268.1 201.8 194.4 47.7EPS Estimates 3/2011 12/2011 12/2012 Total Assets ($M) 4,583.1 4,583.1 3,338.2 2,374.6 1,838.3 1,326.0# of Estimates 25 28 24 Long-Term Debt ($M) 0.0 0.0 0.0 0.0 0.0 0.0Current $0.63 $2.72 $3.28 Total Liabilities ($M) 998.6 998.6 685.1 409.0 370.1 252.5Month Ago $0.63 $2.72 $3.28 Book Value/Share ($) 11.81 11.92 9.05 6.78 5.10 3.81Three Mos. Ago $0.63 $2.68 $3.25 Avg Shares Outst'g (M) 303.6 300.7 293.3 290.1 288.2 281.7Sources: AAII Stock Investor Pro, Thomson Reuters and I/B/E/S. Data as of 3/29/2011.

Cognizant Technology provides custom information technology consulting services and outsourcing services.The company’s business includes technology consulting, complex systems development and integration, enterprise software package implementation and maintenance, data warehousing, business intelligence and analytics, application testing, application maintenance, infrastructure management, and business and knowledge process outsourcing.

Recent News: On March 21, 2011, Yahoo! Finance reported that Cognizant Technology announced it was named a leader in global IT infrastructure outsourcing by independent research firm Forrester Research Inc. The Forrester Research Inc. report evaluated and scored Cognizant Technology on the basis of a comprehensive methodology across 36 criteria relating to current offerings, strategy, and market presence, according to Yahoo! Finance.

0

200,000

Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010 Mar 2011

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90Volume(Thousands)

April 2011 9


SSR Group 2: Chevron Corporation (CVX) $107.37 ($107.01 - $66.83)

Group 2: Value & Financial StrengthAddition Alert Date: 4/1/2011Price at Alert: Closing Price on 4/1/2011Primary Industry: Oil & Gas - Integrated1 Yr RiskGrade: 98Market Cap: $214,356 MilAvg Daily Dollar Volume: $867.4 Mil


6.07.06.07.07.01.1selaS/ecirPPrice/Cash Flow 40.0 29.9 nmf 82.5 nmf 324.9Price/Free Cash Flow 35.4 26.3 nmf 34.2 48.6 23.4

1.38.22.39.36.37.2)%( dleiYRatios Current 12/2010 12/2009 12/2008 12/2007 12/2006Gross Margin (%) 34.3 43.2 41.9 37.2 39.7 39.0Operating Margin (%) 15.6 15.6 10.8 15.8 14.6 15.2Net Margin (%) 9.3 9.3 6.1 8.8 8.5 8.2

0.626.522.927.113.919.81)%( EOR3.313.314.514.69.018.01)%( AOR

Current Ratio (%) 1.7 1.7 1.4 1.1 1.2 1.3Payout Ratio (%) 29.8 29.8 50.6 21.6 25.6 25.6Liabilities to Assets (%) 43.1 43.1 44.2 46.2 48.2 48.0Asset Turnover (X) 1.2 1.2 1.1 1.8 1.6 1.6Financial Statements TTM 12/2010 12/2009 12/2008 12/2007 12/2006Sales ($M) 204,928.0 204,928.0 171,636.0 273,005.0 220,904.0 210,118.0

Stock Rel Strgth Rel Strgth Gross Income ($M) 70,270.0 88,461.0 71,983.0 101,608.0 87,595.0 81,967.0Gain Index Rank Depreciation ($M) 13,063.0 13,063.0 12,110.0 9,528.0 8,708.0 7,506.0

4 Week 5% 1.05 77% Unusual/Extra ($M) 244.0 0.0 0.0 0.0 0.0 0.013 Week 18% 1.13 78% Operating Income ($M) 32,105.0 32,055.0 18,528.0 43,057.0 32,274.0 31,976.026 Week 33% 1.17 75% Interest Expense ($M) 50.0 584.0 574.0 512.0 770.0 765.052 Week 45% 1.28 80% Pretax Income ($) 32,055.0 32,055.0 18,528.0 43,057.0 32,274.0 31,976.0

Net Income ($) 19,024.0 19,024.0 10,483.0 23,931.0 18,688.0 17,139.0Growth TTM 3 Year 5 Year Operating Cash Flow ($M) 31,359.0 31,359.0 19,373.0 29,632.0 24,977.0 24,323.0

Sales 19.4% (2.5%) 0.7% Investing Cash Flow ($M) (20,915.0) (20,915.0) (16,572.0) (17,081.0) (13,933.0) (12,219.0)Net Income 81.5% 0.6% 6.2% Financing Cash Flow ($M) (5,170.0) (5,170.0) (3,546.0) (10,400.0) (14,295.0) (11,848.0)EPS Basic 81.2% 2.6% 7.7% Net Cash Flow ($M) 5,344.0 5,344.0 (631.0) 1,985.0 (3,131.0) 450.0EPS Dil Cont 80.9% 2.6% 7.7% EPS Basic ($) 9.53 9.53 5.26 11.74 8.82 7.84Dividends 6.8% 7.9% 10.2% EPS Diluted Cont ($) 9.48 9.48 5.24 11.67 8.77 7.80

Dividends/Share ($) 2.84 2.84 2.66 2.53 2.26 2.01Est Surprise EPS % Surp SUE Score Free Cash Flow/Share ($) 3.02 3.03 (2.88) 2.34 1.65 2.782/7/2011 $2.44 1.2% 0.20 Cash ($M) 17,070.0 17,070.0 8,822.0 9,560.0 8,094.0 11,446.0

Quarterly Annual Annual Goodwill/Intangibles ($M) 4,617.0 4,617.0 4,618.0 4,619.0 4,637.0 4,623.0EPS Estimates 3/2011 12/2011 12/2012 Total Assets ($M) 184,769.0 184,769.0 164,621.0 161,165.0 148,786.0 132,628.0# of Estimates 16 20 18 Long-Term Debt ($M) 11,289.0 11,289.0 10,130.0 6,083.0 6,070.0 7,679.0Current $2.75 $11.37 $12.06 Total Liabilities ($M) 79,688.0 79,688.0 72,707.0 74,517.0 71,698.0 63,693.0Month Ago $2.58 $10.69 $11.64 Book Value/Share ($) 52.59 52.62 46.14 42.52 36.40 31.53Three Mos. Ago $2.50 $10.39 $11.80 Avg Shares Outst'g (M) 1,998.0 1,997.0 1,992.0 2,038.0 2,118.0 2,186.0Sources: AAII Stock Investor Pro, Thomson Reuters and I/B/E/S. Data as of 3/29/2011.

Chevron Corporation manages its investments in subsidiaries and affiliates and provides administrative, financial, management and technology support to the U.S. and international subsidiaries that engage in petroleum operations, chemicals operations, mining operations, power generation and energy services. Upstream operations consist of exploring, developing and producing crude oil and natural gas; transporting crude oil by international oil export pipelines; transportation, storage and marketing of natural gas; and a gas-to-liquids project. Downstream operations consist of refining crude oil into petroleum products and marketing crude oil and refined products.CVX passed the Group 2 screen, which looks for dividend-paying stocks with low price-earnings ratios exhibiting positive historical and projected earnings growth and moderate levels of liabilities. CVX has a current P/E ratio of 11.3 based on trailing 12-month EPS of $9.48. The consensus EPS estimate for fiscal-year 2011 is $11.37 and for fiscal-year 2012 is $12.06. Consensus long-term estimated earnings growth rate is 2.4%. Earnings have increased on an annualized basis by 7.7% over the last five years. Revenues have grown at 0.7% a year over the same period. CVX's current yield is 2.7% based on an indicated dividend of $2.88 per share. Over the last 12 months, CVX has outperformed 80% of all stocks.

0

500,000

1,000,000


$0

$20

$40

$60

$80

$100


10 April 2011


SSR Group 3: Volterra Semiconductor (VLTR) $24.35 ($29.93 - $18.34)

Group 3: GARP RevisionsAddition Alert Date: 8/1/2008Price at Alert: $16.20Primary Industry: Semiconductors1 Yr RiskGrade: 227Market Cap: $594 MilAvg Daily Dollar Volume: $9.9 Mil


2.54.47.28.27.39.3selaS/ecirPPrice/Cash Flow 35.0 34.8 14.5 nmf 65.0 47.6Price/Free Cash Flow 25.4 24.9 19.1 18.9 42.7 323.7

0.00.00.00.00.00.0)%( dleiYRatios Current 12/2010 12/2009 12/2008 12/2007 12/2006Gross Margin (%) 61.5 61.5 59.7 56.6 49.3 52.4Operating Margin (%) 18.8 18.7 10.6 13.4 (2.1) 5.9Net Margin (%) 18.6 18.5 10.4 13.7 0.4 9.2

.318.529.32)%( EOR 0 20.5 0.4 10.6

.115.229.02)%( AOR 0 17.3 0.4 9.2Current Ratio (%) 8.6 8.6 7.7 6.2 6.9 6.6Payout Ratio (%) 0.0 0.0 0.0 0.0 0.0 0.0Liabilities to Assets (%) 12.2 12.2 13.7 16.9 14.4 14.2Asset Turnover (X) 1.1 1.2 1.1 1.3 0.9 1.0Financial Statements TTM 12/2010 12/2009 12/2008 12/2007 12/2006

.351)M$( selaS 6 153.6 104.9 104.2 74.7 74.6Stock Rel Strgth Rel Strgth Gross Income ($M) 94.4 94.4 62.6 59.0 36.8 39.1Gain Index Rank Depreciation ($M) -- -- -- -- -- --

4 Week (5%) 0.95 26% Unusual/Extra ($M) 6.0 6.0 5.2 0.3 0.0 0.013 Week 3% 0.98 47% Operating Income ($M) 28.8 28.7 11.1 14.0 (1.6) 4.426 Week 9% 0.95 42% Interest Expense ($M) 0.0 0.0 0.1 0.2 0.1 0.152 Week (2%) 0.87 35% Pretax Income ($) 28.8 28.8 11.2 14.8 0.8 6.4


Sales 46.4% 27.2% 23.3% Investing Cash Flow ($M) (14.4) (14.5) 4.6 (12.7) 7.9 2.1Net Income 159.1% 355.8% 39.4% Financing Cash Flow ($M) 1.5 1.5 (0.5) (5.9) (12.7) 2.7EPS Basic 143.8% 390.5% 38.7% Net Cash Flow ($M) 17.7 17.7 22.3 (0.5) 5.6 8.9EPS Dil Cont 150.0% 280.3% 39.3% EPS Basic ($) 1.17 1.18 0.48 0.60 0.01 0.29Dividends -- -- -- EPS Diluted Cont ($) 1.10 1.10 0.45 0.57 0.02 0.26

Dividends/Share ($) 0.00 0.00 0.00 0.00 0.00 0.00Est Surprise EPS % Surp SUE Score Free Cash Flow/Share ($) 0.95 0.95 0.69 0.63 0.32 0.05

.378.998.99)M$( hsaC)02.0()%9.0(12.0$1102/42/1 7 57.4 47.4 51.8Quarterly Annual Annual Goodwill/Intangibles ($M) 0.0 0.0 0.0 0.0 0.0 0.0

EPS Estimates 3/2011 12/2011 12/2012 Total Assets ($M) 146.2 146.2 106.4 91.3 74.1 83.7# of Estimates 13 13 13 Long-Term Debt ($M) 0.0 0.0 0.0 0.0 0.0 0.0Current $0.18 $1.17 $1.71 Total Liabilities ($M) 17.8 17.8 14.6 15.4 10.7 11.9Month Ago $0.18 $1.15 $1.70 Book Value/Share ($) 5.29 5.31 4.00 3.20 2.61 2.98Three Mos. Ago $0.19 $1.23 $1.75 Avg Shares Outst'g (M) 24.2 24.2 22.9 23.7 24.3 24.1Sources: AAII Stock Investor Pro, Thomson Reuters and I/B/E/S. Data as of 3/29/2011.

Volterra Semiconductor develops and markets analog and mixed-signal power management semiconductors for the computing, storage, networking and consumer markets. Its products are integrated voltage regulator semiconductors and scalable voltage regulator semiconductor chipsets that transform, regulate, deliver and monitor the power consumed by digital semiconductors. Through the company’s power system architecture and mixed-signal design techniques, it has integrated power, analog and digital circuits onto a single complementary metal oxide silicon semiconductor, thereby eliminating the need for a large number of discrete components required by conventional power management solutions.

Recent News: On March 15, 2011, Yahoo! Finance reported that StandPoint Research upgraded Volterra Semiconductor from hold to buy.

On March 23, 2011, Yahoo! Finance Reported that Longbow Research initiated coverage of Volterra Semiconductor with a buy rating.

0

20,000

Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010

$0

$5

$10

$15

$20

$25

$30


April 2011 11


SSR Group 4: GrafTech International, Ltd. (GTI) $20.34 ($23.89 - $12.87)

Group 4: Reasonably Priced GrowthAddition Alert Date: 12/5/2008Price at Alert: $6.41Primary Industry: Electronic Instrum & Controls1 Yr RiskGrade: 223Market Cap: $2,942 MilAvg Daily Dollar Volume: $24.8 Mil

Multiples Current 12/2010 12/2009 12/2008 12/2007 12/2006Price/Earnings 14.5 11.5 108.6 9.1 9.3 14.1Price/Book Value 2.1 1.6 2.2 3.4 11.5 nmf

6.03.14.19.10.26.2selaS/ecirPPrice/Cash Flow nmf nmf 33.9 nmf nmf 4.7Price/Free Cash Flow 44.0 34.2 11.4 10.7 18.8 37.8

0.00.00.00.00.00.0)%( dleiYRatios Current 12/2010 12/2009 12/2008 12/2007 12/2006Gross Margin (%) 28.7 28.7 29.0 36.4 32.4 28.0Operating Margin (%) 14.9 15.8 14.9 26.6 21.2 12.2Net Margin (%) 17.4 17.4 1.9 17.4 15.8 10.7

.22)%( EOR 4 19.4 2.3 67.1 -- (56.6).819.224.15.215.41)%( AOR 0 10.2

Current Ratio (%) 2.5 2.5 2.4 1.9 2.5 2.6Payout Ratio (%) 0.0 0.0 0.0 0.0 0.0 0.0Liabilities to Assets (%) 35.7 35.7 35.3 46.5 87.0 112.6Asset Turnover (X) 0.8 0.7 0.7 1.3 1.1 1.0Financial Statements TTM 12/2010 12/2009 12/2008 12/2007 12/2006Sales ($M) 1,007.0 1,007.0 659.0 1,190.2 1,004.8 855.4

Stock Rel Strgth Rel Strgth Gross Income ($M) 289.4 289.4 191.1 433.4 325.9 239.8Gain Index Rank Depreciation ($M) -- -- -- -- -- --

4 Week 0% 1.00 48% Unusual/Extra ($M) 0.0 0.0 0.4 11.8 11.9 22.913 Week 2% 0.98 47% Operating Income ($M) 159.6 159.2 98.2 316.9 213.3 104.426 Week 30% 1.13 71% Interest Expense ($M) 5.1 5.1 5.6 19.4 43.4 46.552 Week 57% 1.40 85% Pretax Income ($) 174.7 174.7 36.7 262.6 197.0 69.2


Sales 52.8% 0.1% 5.4% Investing Cash Flow ($M) (321.5) (321.6) (60.1) (209.9) (26.5) 118.5Net Income -- 3.2% 27.7% Financing Cash Flow ($M) 138.4 138.2 (72.9) (80.2) (199.9) (39.6)EPS Basic -- (3.3%) 25.5% Net Cash Flow ($M) (37.1) (37.1) 38.5 (43.1) (94.8) 143.5EPS Dil Cont -- 0.7% 25.8% EPS Basic ($) 1.41 1.43 0.10 1.86 1.58 0.93Dividends -- -- -- EPS Diluted Cont ($) 1.40 1.42 0.10 1.74 1.39 0.43

Dividends/Share ($) 0.00 0.00 0.00 0.00 0.00 0.00Est Surprise EPS % Surp SUE Score Free Cash Flow/Share ($) 0.46 0.48 0.95 1.48 0.69 0.162/24/2011 $0.32 23.6% 3.10 .112.051.311.31)M$( hsaC 7 54.7 149.5

Quarterly Annual Annual Goodwill/Intangibles ($M) 499.2 499.2 9.0 7.2 9.7 9.8EPS Estimates 3/2011 12/2011 12/2012 Total Assets ($M) 1,913.2 1,913.2 892.6 943.1 866.7 906.2# of Estimates 8 7 8 Long-Term Debt ($M) 275.8 275.8 1.5 50.6 426.1 665.4Current $0.17 $1.06 $1.59 Total Liabilities ($M) 683.5 683.5 315.5 438.5 754.0 1,020.1Month Ago $0.32 $1.51 $1.69 Book Value/Share ($) 9.54 10.03 4.82 4.53 1.12 (1.17)Three Mos. Ago $0.33 $1.51 $1.77 Avg Shares Outst'g (M) 128.8 122.6 119.7 111.4 100.4 97.7Sources: AAII Stock Investor Pro, Thomson Reuters and I/B/E/S. Data as of 3/29/2011.

GrafTech International manufactures a range of graphite electrodes, products essential to the production of electric arc furnace steel and various other ferrous and non-ferrous metals. The company manufactures natural graphite products, enabling thermal management solutions for the electronics industry, and fuel cell solutions for the transportation and power generation industries. GrafTech International also manufactures and provides graphite and carbon products, as well as related technical services, including graphite and carbon materials for the transportation, solar, and oil and gas exploration industries.

Recent News: On February 24, 2011, Reuters reported that GrafTech International said 2011 results will be hit by pricing pressure on its graphite electrodes on weak operating rates in the steel industry. GrafTech expects 2011 earnings before interest, taxes, depreciation and amorization (EBITDA) of $285 million to $315 million, according to the report. During the fourth quarter of 2010, GrafTech International completed the acquisitions of petroleum-needle coke maker Seadrift Coke L.P. and graphite electrode producer C/G Electrodes LLC, according to the report.

0

100,000


$0

$5

$10

$15

$20

$25


12 April 2011


Portfolio Corner: Handling an Acquisition Target

The proposed acquisition of Lubrizol Corporation (LZ) by Berkshire Hathaway (BRK.A) likely raises questions for some of you. How does the transac-tion process work? Why not hold the stock until the merger process is completed? What are the tax conse-quences? What happens if I don’t sell?

In this month’s Portfolio Corner, we attempt to answer many of your questions.

How Does a Merger Work?The proposed acquisition of Lubrizol is a “friendly

takeover.” This means Lubrizol’s board of directors agreed to the terms proposed by the acquirer (Berk-shire). A hostile takeover occurs when an acquisition offer is made without the consent of the board of di-rectors for the company being acquired. In both cases, the merger cannot be completed until a thorough analysis is done by the acquiring company, regulators review the deal and shareholders of the company be-ing acquired vote to approve the deal.

It is important to realize that, at any point during this process, a proposed merger could fall apart. The reasons can include an acquisition offer from a third company, the discovery of unfavorable information about the company being acquired, an unanticipated change in business or market conditions, regulatory issues and a lack of approval by shareholders. These risks are why share prices of the company being acquired typically trade below the proposed merger price. For example, at press time, shares of Lubrizol were trading at approximately $1 below the merger price of $135.

If the merger is being paid with shares of the acquir-ing company’s stock, instead of cash, the acquisition price will fl uctuate based on the market capitalization of the acquirer. This is an important difference from a cash offer, which provides a fi xed dollar value of compensation.

One way to gauge a merger’s risk of not being com-pleted is to calculate the spread between the merger price and the current price. A difference of less than 1% suggests traders expect the merger to be complet-ed. A wider spread implies traders are fearful that the deal may not be completed.

Why Not Hold the Stock?Though the market is pricing in a high probability

of the Berkshire-Lubrizol deal being completed, no merger can be considered completed until it is actu-ally completed. Furthermore, the upside for the stock being acquired is most often limited (the merger price), whereas the downside could be signifi cant if the deal falls apart. Given this unfavorable risk-reward trade-off, we follow a blanket rule when an offer is made to acquire a stock held by the Stock Superstars portfolio. We sell the stock once the board of directors for the company being acquired approves the merger offer.

As far as dividends, the fi rst-quarter dividend was paid on March 10, 2011, prior to approval of the merger by the board of directors. A second-quarter dividend is scheduled to be paid on June 10, 2011, pending approval by the board of directors. If the sec-ond-quarter dividend is the same as the fi rst-quarter dividend, it would be 36 cents per share—an amount too small to justify keeping the stock in our portfolio.

What Are the Tax Consequences?A portfolio addition alert for Lubrizol Corpora-

tion (LZ) was sent on May 28, 2010, and a portfolio deletion alert was sent on March 18, 2011. Since the holding period is less than one year, the transaction counts as a short-term gain for tax purposes. Sub-scribers following the Stock Superstars portfolio may opt to wait until May 31 to sell to qualify for the lower, long-term capital gains tax rate. (May 29 is a Sunday and May 30 is Memorial Day.)

There are no tax consequences for shares held in a tax-deferred account, such as an IRA.

What Happens If You Don’t Sell?Investors who choose not to sell their shares of

Lubrizol now can wait until the merger is completed, which is tentatively scheduled for the third quarter, following a Lubrizol shareholder meeting. A vote on the merger will be held at the shareholder meeting; approval by a majority of Lubrizol shareholders is required to complete the merger.

Once this occurs, Lubrizol will cease to exist as a stand-alone company, terminating the rights of its shareholders. Shares of Lubrizol held in a brokerage account will be converted into cash at a price of $135 per share. Investors holding paper certifi cates will receive a transmittal form with instructions on how to surrender their shares. •

Documents

ﬁ April 2011 Issue 4 - Stock Superstars · 2011. 3. 31. · ﬁ ed petroleum gas (LPG), gasoline, jet fuel, diesel oil, other fuel oils, asphalt and petroleum coke. Chevron’s