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Ascendere Associates LLC Innovative Long/Short Equity Research

Model Portfolio Daily Update: November 18, 2010


This daily update is a supplement to a monthly report dated October 31, 2010 that details the model portfolio strategies of Ascendere Associates LLC ("Ascendere"). For more
information about our approach to generating investing ideas and model portfolio strategies please see our list of frequently asked questions, suggested tips on using our
newsletter or an interview with us on Covestor Live. Like our readers, we use this newsletter as simply one tool of many to help us make investment decisions. At any time we
may be long or short any of the equities mentioned in this newsletter. Please see our disclosures and disclaimers at the back of this report.

This newsletter in no way reflects any investment management service that we offer nor may it be construed as an advertisement of any investment management service. For
investors that do not have the time to manage their own accounts using tools like this newsletter, we do offer two solutions: 1) for accounts assets greater than $750,000 we
can provide customized investment management services; 2) accounts with less assets can access a long-only model based on actual trade data via a mirrored trading service.

New Actions Required:


The Opportunistic Model Short portfolio reached its stop level and is now assumed closed. Massey Energy Co. (MEE) exceeded its stop price of $47.86 and will be assumed
closed at the end of trading the next day.

Of Note:
Williams-Sonoma (WSM) reported a good quarter and raised guidance but not high enough to a level that will likely reset analyst expectations higher; in fact, some estimates
may come down following the report depending on how cautious analysts are on the macro environment. As a result, the stock declined more than 10%. The lesson of this
story is two-fold: 1) there is no easy way to make money in the stock market; 2) if you read the phrase "...despite softness..." in any press release, stop reading, and sell, sell, sell!

Separately, the model short portfolio is getting increasingly worse -- it is supposed to move up, not down. This is because "low-quality" stocks really do not look that bad; they
only look mediocre. So think about that. Of 3000+ companies, we are only able to find a few mediocre "low-quality" stocks, and if you have been tracking that model, you will
see a lot of turnover in that model lately. It does not take a genius to figure out this is exceedingly good news for the overall economy. Despite this, it seems still a good

Ascendere Associates LLC November 18, 2010


J. Stephen Castellano Page 1 steve@ascenderellc.com
www.ascenderellc.com
approach to hedging. For our long-only model based on actual trade data, we are using a long-only variation of the stocks in this newsletter. One other note, we do not omit
pending takeover candidates, like Massey, from the model in order to be consistent with our backtests and leave that up to the readers discretion instead.

Actions Taken for November to Date:


11/15/2010: We adjusted MTD returns for the short models to take into account a large dividend paid to GGP shareholders.

11/15/2010: A short position in Fortune Brands (FO) was assumed closed at $57.33 for a 6.01% loss after closing above its stop price of $58.23 the previous trading day.

11/11/2010: A short position in General Growth Properties (GGP) was assumed closed at $15.44 for a 8.1% gain and replaced with cash after closing below its target price of
$15.48 the previous trading day.

11/10/2010: A long position in Fossil Inc. (FOSL) was assumed closed at $69.70 for an 18.2% gain and replaced with cash after closing above its price target of $66.92 the
previous trading day.

11/10/2010: A short position in Range Resources Corp. (RRC) was assumed closed at $42.75 for a 14.3% loss and replaced with cash after closing above its stop price of $40.95
the previous trading day.

11/9/2010: A short position in MGM Mirage (MGM) was assumed closed at the end-of-day price of $13.00 for an 18.9% loss after closing above its stop price of $12.81 the
previous trading day.

11/4/2010: A short position in EOG Resources, Inc. (EOG) was assumed closed at the closing price of $88.29 for a 7.8% gain and replaced with cash, after closing below its price
target of $88.64 the previous trading day for an assumed 7.76% return.

10/31/2010: Model portfolios were rebalanced following the 10/31/2010 close.

Ascendere Associates LLC November 18, 2010


J. Stephen Castellano Page 2 steve@ascenderellc.com
www.ascenderellc.com
Nostradamus Activity:
We have noted on numerous occasions that it is not uncommon for stocks that appear in our model portfolios or our weekly ranking updates to presage major ratings actions by
sell side firms. See our "Nostradamus Report" for more details. Below is a non-comprehensive list of sell side actions on stocks that have been in our model portfolios since at
least 10/31/2010:

11/18/2010: LyondellBasell (LYB) was named a long Research Tactical Idea at Morgan Stanley. --theflyonthewall.com

11/16/2010: TRW Automotive Holdings Corp. (TRW) -- "Soleil raised its earnings estimates for TRW Automotive to reflect improving industry volume and the company's better
than expected results. The firm upped its target for shares to $59 from $54 and maintains a Buy rating." -- theflyonthewall.com

11/15/2010: Macy's (M) -- The stock was added to Bank of America's / Merrill Lynch's "US 1 List."

11/15/2010: Union Pacific (UNP) -- RW Baird upgraded Union Pacific to Outperform from Neutral, and raised its price target to $120 from $100.

11/12/2010: American Express (AXP) and Freeport McMoran (FCX) were added Ken Heebner's Capital Growth Management Fund, and Micron Technology (MU) and SanDisk
(SNDK) were removed. Heebner does not get a copy of our newsletter that we are aware of, but we are glad he sees the wisdom of our moves.

11/12/2010: Williams Sonoma (WSM) --RW initiated with an Outperform rating and $42 price target.

11/11/2010: Williams-Sonoma (WSM) -- "Wells Fargo raised its Q3 estimates for Williams-Sonoma above consensus levels ahead of the company's Q3 results. The firm thinks
the company will also beat Q4 consensus estimates and it believes the stock's valuation is favorable. The firm maintains an Outperform rating on the stock." --
theflyonthewall.com

11/10/2010: Williams-Sonoma (WSM) -- ThinkEquity upgraded the stock based on a recovery in home-related purchases and raised price target to $40 from $33. Oppenheimer
identified WSM as a top pick in the hardlines retail sector.

11/8/2010: Albemarle Corp. (ALB) --Zacks upgrades to a Strong Buy.

11/5/2010: American Express Corp. (AXP) -- Argus upgraded the stock and raised price target to $50 due to reduced loan losses and volume growth. See also our 10/25/10
article on Seeking Alpha, "Why American Express is Finally Worth a Look."

11/5/2010: TRW Automotive Holdings Corp. (TRW) -- Deutsche Bank raised its target to $57 from $52.

11/3/2010: TRW Automotive Holdings Corp. (TRW) -- S&P Equity raised its price target raised to $62 from $50.

11/3/2010: Union Pacific Corp (UNP) -- Deutsche Bank raised price target raised to $102 from $92.

11/2/2010: Fossil Inc. (FOSL) -- BB&T Capital Markets initiated with a Buy rating.

Ascendere Associates LLC November 18, 2010


J. Stephen Castellano Page 3 steve@ascenderellc.com
www.ascenderellc.com
* This table represents a theoretical model, and is presented for informational purposes only. This table is not representative of any actual portfolio and is not to be
construed as any advertisement of any investment service. The figures above are gross returns of various models and do not assume any kind of cost. Real portfolios that
attempt to replicate these theoretical strategies are practically guaranteed to generate returns significantly lower returns relative to these models.

The "Naive" Model is so named because it excludes risk management and other refinements and is intended to show the returns due to fundamental factors alone, which
include operating momentum, relative value, fundamental quality and analyst revision momentum. Typically the Naive Model comprises of approximately 80-100 stocks.

The Core Model is a refined version of the Naive Model and uses stock-specific price targets and stops. Over the backtest, the number of stocks in the Core Model has
comprised on average approximately 22 stocks in the long portfolio and 15 stocks in the short portfolio.

The Opportunistic Model uses the same stocks and stock-specific price targets and stops of the Core Model, but it additionally applies target and stop loss rules to the long and
short portfolios. This model is usually dollar neutral, but when target or stops are reached this model could change to 100% long or short or to 100% cash at any given time.

Return of Stocks in the Long Portfolio - Return of Stocks in the Short Portfolio = Return of Overall Portfolio. YTD returns are based in part on backtested returns. Returns of the
Naive Model have been tracked in real time since December 31, 2009. Returns of the Core Model has been tracked in real time since July 31, 2010. Returns of the Opportunistic
Model have been tracked in real time since August 31, 2010. Cumulative returns and the Sharpe Ratios are calculated from the 12/31/2004 "inception." The risk free rate used
in the calculation is the 90-day T-bill, which has averaged ~2.36% since 12/31/2004. None of these models assume any kind of expenses.

Ascendere Associates LLC November 18, 2010


J. Stephen Castellano Page 4 steve@ascenderellc.com
www.ascenderellc.com
Most of the time, our models assume investors are long "high-quality" stocks and short "low-quality" stocks. Therefore, we would prefer to see "high-quality"
stocks moving up for the day and "low-quality" stocks moving down.

Ascendere Associates LLC November 18, 2010


J. Stephen Castellano Page 5 steve@ascenderellc.com
www.ascenderellc.com
Daily Returns
The latest daily returns, and backtested daily returns, of all stocks and model portfolio strategies are available to paying subscribers on request.

The stock picking methodology among our Core and Opportunistic Models are the same.

Our Opportunistic Model differs from our Core Model in that it incorporates portfolio-based risk-management strategies, which are continually under
refinement.

Our portfolio targets and stops are available to paying subscribers.

Ascendere Associates LLC November 18, 2010


J. Stephen Castellano Page 6 steve@ascenderellc.com
www.ascenderellc.com
Ascendere Associates LLC November 18, 2010
J. Stephen Castellano Page 7 steve@ascenderellc.com
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Month to Date Returns

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Ascendere Associates LLC November 18, 2010
J. Stephen Castellano Page 9 steve@ascenderellc.com
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DISCLOSURES
Ascendere is in the business of providing equity research and related consulting services to investors and their advisors. The equity research it provides includes
basic quantitative model portfolios and more detailed fundamental research with respect to individual stocks. In addition, the firm manages stock portfolios for
itself and clients. Ascendere currently sources financial data from Capital IQ.

Ascendere does not rate stocks on any scale, but does offer individual stock commentary and valuation opinions. With regard to Ascendere's portfolio
strategies, "long" or "high-quality" baskets should generally be considered buys, unless otherwise noted. Stocks in our "short" or "low-quality" baskets should
generally be considered sells, unless otherwise noted. While exceptions may occasionally occur, typically stocks in the high-quality basket are expected to
outperform the S&P 500 over a month's time and stocks in the low-quality basket are expected to underperform. A more relevant benchmark would comprise
of all stocks and ADRs that trade on major U.S. stock exchanges with a market cap above $2 billion.

Ascendere adheres to professional standards and abides by codes of ethics that put the interests of clients ahead of its own. The following are specific
disclosures made by Ascendere:

1) Ascendere may have a financial interest in the companies referred to in this report ("the Companies"). The research analyst covering the Companies
and members of the analyst's immediate family have a financial interest in one or more of the Companies.

2) Ascendere generates revenue from research subscription revenue and portfolio management fees. At any given time it may be long or short any of
the Companies.

3) Ascendere does not make a market in the securities of any of the Companies.

4) Ascendere has not received compensation from the Companies.

5) Ascendere has not managed or co-managed a public offering for any of the Companies.

6) Neither Ascendere nor any of its officers or any family member of the covering analyst serve as an officer, director or advisory board member of any
of the Companies.

7) Neither Ascendere nor any of its officers or any family member of the covering analyst beneficially own 1% or more of any class of securities of any of
the Companies.

8) The covering analyst certifies that this report accurately reflects such analyst's personal views.

Ascendere Associates LLC November 18, 2010


J. Stephen Castellano Page 10 steve@ascenderellc.com
www.ascenderellc.com
DISCLAIMERS
This report is intended for informational purposes only and does not constitute a recommendation, or an offer, to buy or sell any securities or related financial
instruments. The report is not intended to be in furtherance of the specific investment objectives, financial situation, or particular needs of any individual
recipient. The information contained herein accurately reflects the opinion of Ascendere at the time the report was released. The opinions of Ascendere are
subject to change at any time without notice and without obligation or notification. The officers, affiliates or family members of Ascendere Associates may hold
positions in the securities of the Companies. No warranty is made as to the accuracy of the information contained herein. This information is intended for the
sole use of clients of Ascendere. Any other use, distribution or reproduction is strictly prohibited. Investing in stocks includes a high degree of risk, including the
risk of total loss. For additional information on risks, disclosures, disclaimers and frequently asked questions, please see the back of any monthly report.

Ascendere Associates LLC November 18, 2010


J. Stephen Castellano Page 11 steve@ascenderellc.com
www.ascenderellc.com

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