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PORTFOLIO MANAGERS REVIEW

A Monthly Publication of BeyondProxy LLC www.manualofideas.com editor@manualofideas.com February 18, 2010

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

Edited by the
Manual of Ideas
THE SUPERINVESTOR ISSUE
Research Team

If our efforts can further the


goals of our members by giving Snapshot of 100 companies owned by superinvestors
them a discernible edge over
other market participants, we Latest holdings of 20+ top investors
have succeeded. 20+ companies profiled by MOI research team
Proprietary selection of Top 5 candidates for investment
Top Five Ideas In This Report
Plus: Exclusive Interview with Aaron Edelheit
Fair Isaac
(NYSE: FICO) p. 46
Plus: Exclusive Interview with Ori Eyal
Hyatt Hotels Plus: Exclusive Interview with Marko Vucemilovic
(NYSE: H) .. p. 50
Investors Title Company
(Nasdaq: ITIC) p. 54
Republic Aiways Superinvestor companies mentioned in this issue include
(Nasdaq: RJET) . p. 56 Accenture, Air Transport Services Group, Alleghany, Alliance One,
Vodafone AllianceBernstein, ATP Oil & Gas, Audiovox, Automatic Data Processing,
(Nasdaq: VOD, London: VOD) p. 60 AutoNation, BIDZ.com, Biogen Idec, Blockbuster, Boston Scientific,
Also Inside BreitBurn Energy, Brown & Brown, CapitalSource, Cardinal Health,
CareFusion, Chesapeake Energy, Chipotle Mexican Grill, CIT Group,
Editors Commentary .. p. 4 Citigroup, Coca-Cola, Contango Oil & Gas, Corrections Corp. of America,
Portfolios with Signal Value p. 6 Cresud, DDi Corp., Dell, Dillard's, DineEquity, DIRECTV, EMC,
Interview: Aaron Edelheit p. 28 Energizer Holdings, Enzon Pharma, Exxon Mobil, Fair Isaac,
Interview: Ori Eyal .. p. 33 Fairfax Financial, Fidelity National, Gastar Exploration, General Electric,
Interview: Marko Vucemilovic p. 41 Hallmark Financial, Home Depot, Horsehead, HSN, Hyatt Hotels,
100 Superinvestor Stocks .. p. 122 Intelligent Systems, Interactive Intelligence, International Assets,
International Coal, Investors Title, ITC Holdings, Johnson & Johnson,
About Portfolio Managers Review
The Knot, Kraft Foods, Lab Corp. of America, Leucadia National,
Our goal is to bring you investment Level 3 Communications, Lions Gate Entertainment, McDonald's,
ideas that are compelling on the
Molson Coors Brewing, Monsanto, Multimedia Games, MVC Capital,
basis of value versus price. In our
quest for value, we analyze the top Northrop Grumman, Osteotech, Overstock.com, Patterson Companies,
holdings of top fund managers. We Paychex, Potash, Redwood Trust, Republic Airways, Republic Services,
also use a proprietary methodology
to identify stocks that are not widely RSC Holdings, SandRidge Energy, Seabridge Gold, Seahawk Drilling,
followed by institutional investors. Silicon Storage Technology, Stamps.com, Steak n Shake, Stratasys,
Our managing editor John Mihaljevic Strayer Education, Take-Two, Tandy Leather Factory, Teck Cominco, Terex,
is a member of Value Investors Club, Texas Industries, Theravance, TransDigm Group, tw telecom, USG, ViaSat,
an exclusive community of money
managers, and has won the Clubs VistaPrint, Vodafone, Walgreen Company, Wal-Mart, Weight Watchers,
prize for best investment idea. John Winmark, Winthrop Realty, Yum! Brands, Zenith National, and more.
is a trained capital allocator, having
studied under Yale chief investment
officer David Swensen and served as
research assistant to Nobel laureate (profiled companies are underlined)
James Tobin. John holds a BA in
Economics, summa cum laude, from
Yale and is a CFA charterholder.

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Table of Contents
EDITORS COMMENTARY .............................................................................4
PORTFOLIOS WITH SIGNAL VALUE ........................................................6
BILL ACKMAN, PERSHING SQUARE ........................................................................................... 7
ZEKE ASHTON, CENTAUR ......................................................................................................... 8
BRIAN BARES, BARES CAPITAL ................................................................................................ 9
BRUCE BERKOWITZ, FAIRHOLME ............................................................................................ 10
RICHARD BREEDEN, BREEDEN CAPITAL .................................................................................. 11
WARREN BUFFETT, BERKSHIRE HATHAWAY ............................................................................ 12
IAN CUMMING & JOE STEINBERG, LEUCADIA ........................................................................... 13
DAVID EINHORN, GREENLIGHT ............................................................................................... 14
TOM GAYNER, MARKEL GAYNER ............................................................................................ 15
GLENN GREENBERG, BRAVE W ARRIOR (FORMERLY CHIEFTAIN) ............................................... 16
MASON HAWKINS, SOUTHEASTERN ........................................................................................ 17
CHRIS HOHN, CHILDRENS INVESTMENT .................................................................................. 18
CARL ICAHN, ICAHN PARTNERS .............................................................................................. 19
SETH KLARMAN, BAUPOST .................................................................................................... 20
EDDIE LAMPERT, RBS PARTNERS .......................................................................................... 21
DAN LOEB, THIRD POINT ....................................................................................................... 22
STEVE M ANDEL, LONE PINE ................................................................................................... 23
MOHNISH PABRAI, PABRAI FUNDS .......................................................................................... 24
BRYANT RILEY, RILEY INVESTMENT ........................................................................................ 25
PREM WATSA, FAIRFAX ......................................................................................................... 26
WALLY WEITZ, WEITZ FUNDS ................................................................................................. 27
EXCLUSIVE INTERVIEW WITH AARON EDELHEIT ................................. 28
EXCLUSIVE INTERVIEW WITH ORI EYAL ................................................ 33
EXCLUSIVE INTERVIEW WITH MARKO VUCEMILOVIC ......................... 41
TOP FIVE SUPERINVESTOR SELECTIONS.............................................. 46
FAIR ISAAC (FICO) SOUTHEASTERN ................................................................................ 46
HYATT HOTELS (H) PERSHING SQUARE ......................................................................... 50
INVESTORS TITLE (ITIC) MARKEL GAYNER ....................................................................... 54
REPUBLIC AIRWAYS (RJET) GREENLIGHT ....................................................................... 56
VODAFONE (VOD) GREENLIGHT .................................................................................... 60
NEW OR INCREASED SUPERINVESTOR HOLDINGS ............................. 66
BROWN & BROWN (BRO) W EITZ ..................................................................................... 66
INTERNATIONAL COAL GROUP (ICO) FAIRFAX .................................................................. 70
OSTEOTECH (OSTE) SPENCER ..................................................................................... 74
REPUBLIC SERVICES (RSG) BERKSHIRE HATHAWAY ......................................................... 78
RSC HOLDINGS (RRR) FAIRHOLME ................................................................................. 80
UNCHANGED (OR OFFSETTING) SUPERINVESTOR HOLDINGS .......... 84
AUTONATION (AN) ESL INVESTMENTS ............................................................................ 84
CORRECTIONS CORP. OF AMERICA (CXW) PERSHING SQUARE ......................................... 88
GASTAR EXPLORATION (GST) SPENCER ............................................................................. 92
JOHNSON & JOHNSON (JNJ) BERKSHIRE HATHAWAY , FAIRFAX ..................................... 96
MOLSON COORS BREWING (TAP) CHILDRENS , THIRD POINT .................................... 100
MONSANTO (MON) LONE PINE , WEITZ ..................................................................... 102
OVERSTOCK.COM (OSTK) CHOU , FAIRFAX ............................................................... 106
POTASH CORP. (POT) CHILDRENS , PABRAI ............................................................. 110
TRANSDIGM (TDG) THIRD POINT ................................................................................... 114
REDUCED OR ELIMINATED SUPERINVESTOR HOLDINGS ................. 116
HSN (HSNI) WEITZ ...................................................................................................... 116
VISTAPRINT (VPRT) LONE PINE .................................................................................... 119
SNAPSHOT OF 100 SUPERINVESTOR HOLDINGS ............................... 122
IN ALPHABETICAL ORDER ..................................................................................................... 122
BY MARKET VALUE .............................................................................................................. 124
BY SECTOR......................................................................................................................... 126
STOCK PRICE PERFORMANCE .............................................................................................. 128
FREE CASH FLOW ............................................................................................................... 130
P/E MULTIPLES ................................................................................................................... 132
LATEST QUARTERLY EPS SURPRISES................................................................................... 134
REVENUE AND EPS GROWTH ............................................................................................... 136
PERCENTILE RANK WITHIN INDUSTRY .................................................................................... 138
INSIDER BUYING AND OWNERSHIP ........................................................................................ 140

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 3 of 144
Editors Commentary
Welcome to another superinvestor issue of Portfolio Managers Review. Some
of the most highly regarded value-oriented investment managers have filed their
quarterly 13F-HR forms, and we are pleased to bring you their top ideas. As we have
done each quarter, we list the top holdings of selected investors, both ranked by
position size as well as by what we call Signal Rank. The latter draws on our
proprietary methodology for identifying the current top ideas of the superinvestors
we track. Look inside for more information on Signal Rank.

We highlight the following five ideas as worthy of further investigation:


Fair Isaac (FICO) is 20%-owned by Mason Hawkins Southeastern Asset
Management, which has added to its stake in recent months. Fair Isaac has leveraged
the success of the industry-leading FICO credit score brand to create products in
related areas and non-financial verticals. These diversification efforts as well as a
variable cost structure have dampened the impact of lower demand for high-margin
credit scores. FICO continues to be a fundamentally attractive business with low
capital intensity, good normalized margins, and a strong competitive position.
Longer term, it remains to be seen how successful the FICO score will be in terms of
beating back challenges from rival products. We suspect that the brief window of
opportunity that opened up for competing products as a result of the credit cisis may
be shut before competitors are able to challenge the supremacy of the FICO brand. In
any case, with FICO shares trading at a 10+% FCF yield in a still below-normal
operating environment, we believe the shares are too cheap to ignore.
Hyatt Hotels (H), the owner and operator of hotel properties worldwide, was
taken public last November by the controlling Pritzker family. Hyatt owns, leases,
manages or franchises 120,000 rooms in 415 hotels. Despite investment bankers
clamoring for the deal, the IPO appears to have exhibited some of the characteristics
of undersold offerings. Recent GAAP financials neither reflect the companys true
earning power nor the intrinsic value of the hospitality assets. The investment case
for Hyatt is distinguished by the high asset backing, a net cash position, and an
interested and active owner in the Pritzkers. The company should be able to create
long-term value by franchising and growing the Hyatt brand in global markets. Bill
Ackmans Pershing Square Capital Management purchased a 6% ownership stake
following the IPO. Whether Ackman will seek to convince the Pritzkers of the
virtues of splitting Hyatt into a real estate-owning entity and a hotel-operating-and-
franchising entity remains to be seen. At a valuation of 1.1x tangible book value
stated at historical cost, we find the shares quite compelling.
Investors Title Company (ITIC) is 10%-owned by Tom Gayner of Markel.
ITIC is a title insurer providing a non-discretionary service for real estate industry
participants, primarily along the U.S. East Coast. As residential and commercial real
estate transactions drive demand for title insurance, business has suffered in the real
estate downturn. Despite the challenges facing the company, tangible book value per
share would be up 50% since yearend 2004 if dividends were added back. While this
may point to a potential issue surrounding loss reserve adequacy, management has
strengthened provisions materially in the past three years. At 0.8x tangible book
value, Investors Title shares appear undervalued based on prospects for an eventual
recovery in real estate transaction volumes and/or pricing. The thesis for Investors
Title is quite similar to our thesis for Stewart Information Services (STC), which we
outlined in the January issue of Portfolio Managers Review.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 4 of 144
Republic Airways (RJET) is 10%-owned by David Einhorns Greenlight
Capital. Republic has undergone a transformation over the past twelve months,
acquiring two established but distressed branded airlines who were also Republic
customersFrontier in Dallas and Midwest in Milwaukee. The purchases add a
branded, risk-based model to the traditional business of flying for major network
carriers under their brands. The latter model eliminated Republics exposure to fuel
prices, fares and load factors, giving it a stable pre-tax profit margin. While Republic
retains the fixed-fee business, growth is likely to be driven by branded operations.
The new business mix may have prompted some holders to sell, as Republics
shareholder base had been conditioned to view the company more as a fixed-margin
service business than an airline business. The turnover in the shareholder base
provides an opportunity to buy a well-run, profitable and cash-generative business at
an unreasonably cheap price. We note that only $85 million of $2.7 billion in debt on
Republics balance sheet is recourse to the company. Unrestricted cash amounts to
roughly $5 per share, approaching the recent market price.

British mobile telephony giant Vodafone (VOD) is a new holding of David


Einhorns Greenlight Capital. Vodafone shares offer a 6% dividend yield, supported
by the companys free cash flow even before Vodafones 45% stake in Verizon
Wireless is considered. The minority interest in Verizon Wireless, the number-one
U.S. mobile operator, may be Vodafones single most valuable asset. However, as
Vodafones operating cash flow does not include a contribution from Verizon
Wirelessbecause no cash dividend is being paid to Vodafonethe market may be
ignoring this valuable asset when valuing Vodafone on the basis of reported FCF.
Revaluation of Vodafone shares could occur following a potential resumption of
cash distributions from Verizon Wireless some time this year. Regardless of how
Verizon Wireless and other unconsolidated assets are monetized, a sum-of-the-parts
analysis suggests that the market may be valuing Vodafone at 4x trailing EBITDA.
This strikes us as too low given the companys strong share in key mobile markets,
growth prospects in emerging markets, and margin improvement potential.
In addition to the above five investment ideas and scores of others, we are also
pleased to bring you three interviews in this issue of Portfolio Managers Review
with Ori Eyal, Aaron Edelheit, and Marko Vucemilovic. We were able to glean some
truly unique insights from these value-oriented investors who manage funds that are
somewhat smaller in size than those of the superinvestors we track. As a result, these
three investors are in a position to uncover value opportunistically across the market
capitalization spectrum. I believe youll enjoy their insights.
Sincerely,

John Mihaljevic, CFA


and The Manual of Ideas research team

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 5 of 144
Portfolios With Signal Value
Revealing the Top Ideas of Top Investors

Signal value as opposed to noise. We present the MOI Signal Rank answers the question, What are this
holdings of some of the worlds top investors. We look for investors top ten ideas right now? Rather than simply
investors who have amassed impressive track records over presenting each investors largest holdings as of the recently
long periods of time. We choose these investors carefully filed quarter end, the MOIs proprietary methodology ranks
to avoid the noise inherent in most 13F-HR filings. the companies in each investors portfolio based on the
investors current level of conviction in each holding, as
Top investors included in this section: judged by the MOI.
William Ackman, Pershing Square Our proprietary methodology takes into account
Zeke Ashton, Centaur a number of variables, including the size of a position in an
Brian Bares, Bares Capital investors portfolio, the size of a position relative to the
Bruce Berkowitz, Fairholme
market value of the corresponding company, the most recent
Richard Breeden, Breeden Capital
quarterly change in the number of shares owned, and the
Warren Buffett, Berkshire Hathaway
change in the stock price of a position since the most recent
Ian Cumming & Joe Steinberg, Leucadia
David Einhorn, Greenlight quarterly filing date.

Glenn Greenberg, Brave Warrior For example, an investor might have the most
Tom Gayner, Markel Gayner conviction in a position that is only the tenth-largest
Mason Hawkins, Southeastern position in such investors portfolio. This might be the case
Chris Hohn, Childrens Investment Fund if an investor invests in a small company, resulting in a
Carl Icahn, Icahn
holding that is simply too small to rank highly based on size
Seth Klarman, Baupost
alone. On the other hand, such a holding might represent
Eddie Lampert, RBS (ESL)
19.9% of the shares outstanding of the subject company,
Dan Loeb, Third Point
Steve Mandel, Lone Pine suggesting a high level of conviction. Our estimate of the

Mohnish Pabrai, Pabrai Funds conviction level would rise further if the subject company
Bryant Riley, Riley Investment has a 20% poison-pill threshold, thereby suggesting that the
Prem Watsa, Fairfax investor has bought as much of the subject company as is
Wally Weitz, Weitz Funds practically feasible.

Missing your favorite superinvestor?


Let us know at editor@manualofideas.com.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 6 of 144
Bill Ackman, Pershing Square
Bill Ackman, managing member of Pershing Square Capital, is a value-oriented activist investor. He runs a concentrated
portfolio with the largest ten equity investments accounting for the vast majority of his long book. Before the credit crunch
developed into a full-blown economic crisis, Ackman made a strong case for why MBIA (MBI) and AMBAC (ABK) were
overvalued and fundamentally more distressed than the market had judged at the time. On the long side, Ackman has
approached large companies, including McDonalds (MCD) and Target (TGT), with proposals for unlocking value.

MOI Signal Rank Top Current Ideas of Pershing Square


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Hyatt Hotels H 5,098 29.34 29.81 -2% 2,766,958 new position 6% 3%
2 Kraft Foods KFT 43,034 29.09 27.18 7% 32,784,113 new position 2% 38%
3 Corrections Corp. of America CXW 2,260 19.57 24.55 -20% 10,936,672 no change 9% 11%
4 Landrys Restaurants LNY 311 19.28 21.29 -9% 1,554,255 no change 10% 1%
5 Borders Group BGP 74 1.23 1.18 4% 10,597,980 no change 18% 1%
6 Greenlight Capital Re GLRE 846 23.30 23.59 -1% 250,000 no change 1% 0%
7 Target TGT 36,592 48.64 48.37 1% 20,790,815 -20% 3% 43%
8 Automatic Data Processing ADP 20,491 40.59 42.82 -5% 114,482 -98% 0% 0%

Top Holdings of Pershing Square By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Target TGT 36,592 48.64 48.37 1% 20,790,815 -20% 3% 43%
2 Kraft Foods KFT 43,034 29.09 27.18 7% 32,784,113 new position 2% 38%
3 Corrections Corp. of America CXW 2,260 19.57 24.55 -20% 10,936,672 no change 9% 11%
4 Hyatt Hotels H 5,098 29.34 29.81 -2% 2,766,958 new position 6% 3%
5 Landrys Restaurants LNY 311 19.28 21.29 -9% 1,554,255 no change 10% 1%
6 Borders Group BGP 74 1.23 1.18 4% 10,597,980 no change 18% 1%
7 Greenlight Capital Re GLRE 846 23.30 23.59 -1% 250,000 no change 1% 0%
8 Automatic Data Processing ADP 20,491 40.59 42.82 -5% 114,482 -98% 0% 0%

New Positions Sold Out Positions


Hyatt Hotels (H) EMC (EMC)
Kraft Foods (KFT) McDonalds (MCD)

Portfolio Metrics Sector Weightings


Portfolio size $2 billion
Top 10 as % of portfolio 100% Consumer, Cyclical 80%

Median market value $2 billion


Consumer, Non-
Average market value $9 billion 19%
cyclical

Median price to earnings 16x


Median price to book 1.6x Financial 0%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 7 of 144
Zeke Ashton, Centaur
Zeke Ashton is founder and managing partner of Centaur Capital, a Dallas-based investment firm. Centaur Capital serves as
advisor to the Centaur family of private partnerships using a value-oriented long/short equity strategy. Centaur is also the
sub-advisor to the Tilson Dividend Fund, a mutual fund utilizing an income-oriented value investing strategy.

MOI Signal Rank Top Current Ideas of Centaur


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Alleghany Y 2,341 263.36 276.00 -5% 15,300 12% 0% 5%
2 MVC Capital MVC 278 11.45 11.80 -3% 312,500 3% 1% 5%
3 Fidelity National Financial FNF 3,180 13.80 13.46 3% 228,200 new position 0% 4%
4 Lab Corp of America LH 7,621 71.76 74.84 -4% 77,900 no change 0% 7%
5 SPDR Gold GLD 38,866 107.04 107.31 0% 34,200 no change 0% 5%
6 Northrop Grumman NOC 17,830 58.89 55.85 5% 71,300 no change 0% 5%
7 Exxon Mobil XOM 307,624 64.80 68.19 -5% 52,600 16% 0% 5%
8 Fairfax Financial FRFHF 6,936 355.54 389.96 -9% 5,200 new position 0% 3%
9 Mass Financial MFCAF 141 9.24 9.30 -1% 15,242 new position 0% 0%
10 Chipotle Mexican Grill CMG 3,308 104.87 88.16 19% 41,000 n/m* 0% 5%
*
On December 21, 2009, Chipotle shareholders approved a conversion into a single class of common stock. This resulted in Centaur owning Chipotle
common stock rather than Class B common stock.

Top Holdings of Centaur By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Lab Corp of America LH 7,621 71.76 74.84 -4% 77,900 no change 0% 7%
2 Alleghany Y 2,341 263.36 276.00 -5% 15,300 12% 0% 5%
3 Northrop Grumman NOC 17,830 58.89 55.85 5% 71,300 no change 0% 5%
4 MVC Capital MVC 278 11.45 11.80 -3% 312,500 3% 1% 5%
5 SPDR Gold GLD 38,866 107.04 107.31 0% 34,200 no change 0% 5%
6 Chipotle Mexican Grill CMG 3,308 104.87 88.16 19% 41,000 new position 0% 5%
7 Exxon Mobil XOM 307,624 64.80 68.19 -5% 52,600 16% 0% 5%
8 Fidelity National Financial FNF 3,180 13.80 13.46 3% 228,200 new position 0% 4%
9 AllianceBernstein AB 2,461 26.53 28.10 -6% 102,500 no change 0% 4%
10 Seabridge Gold SA 933 24.82 24.27 2% 89,900 -15% 0% 3%

New Positions Sold Out Positions


AG Growth (AGGZF) Fidelity National Financial (FNF) Barnes & Noble (BKS) Crawford (CRD/A)
Duoyuan Printing (DYP) Mass Financial (MFCAF) Berkshire Hathaway (BRK/B) Diamond Hill Investment (DHIL)
Fairfax Financial (FRFHF) Steak N Shake (SNS) Chesapeake Energy (CHK) Pico Holdings (PICO)

Portfolio Metrics Sector Weightings


Portfolio size $79 million Cash 26%
Financial 25%
Top 10 as % of portfolio 44%
Consumer, Cyclical 12%
Median market value $2 billion Consumer, Non- 9%
Industrial 8%
Average market value $26 billion Communications 6%
Median price to earnings 18x Funds 5%
Energy 5%
Median price to book 1.6x Basic Materials 3%
Technology 2%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 8 of 144
Brian Bares, Bares Capital
Brian Bares started his investment firm, Bares Capital Management, in 2000, focusing initially on micro-cap public
companies. The firm launched a small-cap institutional strategy in 2001 and now manages assets in two value-oriented
strategies. Bares Capital Management is quite unique in the institutional asset management world, as it has adhered to a
disciplined business strategy, limiting the growth of assets under management to benefit investment performance. Both of
Baress institutional strategies have beaten their respective benchmark indices by wide margins since inception.

MOI Signal Rank Top Current Ideas of Bares Capital Management


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Walgreen WAG 32,993 33.49 36.72 -9% 850,068 >100% 0% 14%
2 Interactive Intelligence ININ 297 17.21 18.45 -7% 2,485,345 2% 14% 20%
3 Winmark Corp WINA 108 20.70 21.49 -4% 834,500 3% 16% 8%
4 International Assets Holding IAAC 268 15.28 14.54 5% 1,494,206 13% 9% 10%
5 Tandy Leather Factory TLF 34 3.70 3.91 -5% 1,640,372 no change 18% 3%
6 Hallmark Financial HALL 153 7.63 7.96 -4% 1,382,567 >100% 7% 5%
7 Stratasys SSYS 519 25.65 17.24 49% 1,444,819 1% 7% 11%
8 Bidz.com BIDZ 43 1.94 2.00 -3% 1,483,192 1% 7% 1%
9 Weight Watchers WTW 2,227 28.92 29.16 -1% 89,560 new position 0% 1%
10 Stamps.com STMP 145 9.19 9.00 2% 1,023,161 5% 6% 4%

Top Holdings of Bares Capital Management By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Interactive Intelligence ININ 297 17.21 18.45 -7% 2,485,345 2% 14% 20%
2 Walgreen WAG 32,993 33.49 36.72 -9% 850,068 >100% 0% 14%
3 Stratasys SSYS 519 25.65 17.24 49% 1,444,819 1% 7% 11%
4 International Assets Holding IAAC 268 15.28 14.54 5% 1,494,206 13% 9% 10%
5 Winmark Corp WINA 108 20.70 21.49 -4% 834,500 3% 16% 8%
6 American Dental Partners ADPI 205 13.09 12.89 2% 1,004,139 -12% 6% 6%
7 Hallmark Financial HALL 153 7.63 7.96 -4% 1,382,567 >100% 7% 5%
8 Utah Medical Products UTMD 96 26.68 29.32 -9% 326,857 no change 9% 4%
9 Stamps.com STMP 145 9.19 9.00 2% 1,023,161 5% 6% 4%
10 Rentrak RENT 198 18.70 17.67 6% 492,704 -4% 5% 4%

New Positions Sold Out Positions


Female Health (FHCO) White Mountains (WTM)
Lockheed Martin (LMT)
Weight Watchers (WTW)
Winthrop Realty (FUR)

Portfolio Metrics Sector Weightings


Portfolio size $225 million Technology 33%
Consumer, Non- 19%
Top 10 as % of portfolio 75%
Financial 19%
Median market value $1.4 billion Consumer, Cyclical 17%
Communications 6%
Average market value $24 billion
Industrial 3%
Median price to earnings 16x Energy 1%
Funds 1%
Median price to book 2.0x Utilities 0%
Diversified 0%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 9 of 144
Bruce Berkowitz, Fairholme
Bruce Berkowitz, manager of The Fairholme Fund, has been one of the most successful value-oriented investors of the past
decade. From inception on December 29, 1999 through December 31, 2009, The Fairholme Fund delivered a cumulative
return, net of expenses, of 253%, versus a return of -9%, before expenses, for the S&P 500 Index. This translates into
annualized performance of 13.4% and -0.9% for The Fairholme Fund and the S&P 500 Index, respectively.

MOI Signal Rank Top Current Ideas of Fairholme


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Citigroup C 90,577 3.18 3.31 -4% 214,698,274 new position 1% 7%
2 RSC Holdings RRR 706 6.83 7.04 -3% 10,813,600 77% 10% 1%
3 Winthrop Realty FUR 244 11.69 10.86 8% 4,297,670 >100% 21% 0%
4 Hertz HTZ 4,261 10.40 11.92 -13% 59,138,966 1% 14% 7%
5 Berkshire Hathaway BRK/B 177,566 76.90 65.72 17% 12,075,350 39% 2% 8%
6 St. Joe JOE 2,664 28.84 28.89 0% 26,833,468 1% 29% 8%
7 CIT Group CIT 6,450 32.25 27.61 17% 14,321,338 new position 7% 4%
8 Leucadia National LUK 5,305 21.82 23.79 -8% 20,247,644 10% 8% 5%
9 Comcast CMCSK 43,145 14.52 16.01 -9% 14,520,900 new position 2% 2%
Comcast CMCSA 43,145 15.34 16.86 -9% 9,031,600 new position 0% 2%

Top Holdings of Fairholme By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Sears SHLD 10,456 90.47 83.45 8% 14,951,639 -2% 13% 13%
2 Berkshire Hathaway BRK/B 177,566 76.90 65.72 17% 12,075,350 39% 2% 8%
3 St. Joe JOE 2,664 28.84 28.89 0% 26,833,468 1% 29% 8%
4 Citigroup C 90,577 3.18 3.31 -4% 214,698,274 new position 1% 7%
5 Hertz HTZ 4,261 10.40 11.92 -13% 59,138,966 1% 14% 7%
6 Humana HUM 7,804 45.95 43.89 5% 15,879,600 6% 9% 7%
7 AmeriCredit ACF 2,965 22.15 19.04 16% 31,536,670 -2% 24% 6%
8 Spirit Aerosystems SPR 2,530 17.94 19.86 -10% 27,435,154 0% 26% 5%
9 Leucadia National LUK 5,305 21.82 23.79 -8% 20,247,644 10% 8% 5%
10 WellPoint WLP 27,194 59.33 58.29 2% 7,592,794 14% 2% 4%

New Positions Sold Out Positions


CIT Group (CIT) Comcast (CMCSK) Cardinal Health (CAH)
Citigroup (C) Marshall & Ilsley (MI) Northrop Grumman (NOC)
Comcast (CMCSA) Regions Financial (RF)

Portfolio Metrics Sector Weightings


Portfolio size $10 billion Financial 40%

Top 10 as % of portfolio 72% Consumer, Non- 27%

Median market value $8 billion Consumer, Cyclical 13%


Average market value $34 billion Industrial 11%
Median price to earnings 13x
Diversified 5%
Median price to book 1.4x
Communications 4%

Energy 0%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 10 of 144
Richard Breeden, Breeden Capital
Richard C. Breeden, born in 1949, is a former Chairman of the U.S. Securities and Exchange Commission. Breeden founded
Breeden Capital Management in 2006. The fund applies a concentrated, activist investment approach.

MOI Signal Rank Top Current Ideas of Breeden


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Pharma Product Development PPDI 2,558 21.65 23.44 -8% 3,467,301 >100% 3% 7%
2 Zale ZLC 61 1.89 2.72 -31% 9,070,839 no change 28% 2%
3 Hillenbrand HI 1,214 19.50 18.84 4% 4,684,375 18% 8% 8%
4 Bally Technologies BYI 2,186 39.59 41.29 -4% 1,251,602 new position 2% 5%
5 H&R Block HRB 6,996 20.85 22.62 -8% 13,292,143 no change 4% 27%
6 Helmerich & Payne HP 4,402 41.64 39.88 4% 4,128,186 no change 4% 15%
7 STERIS STE 1,809 30.59 27.97 9% 5,067,321 no change 9% 13%
8 Raytheon RTN 20,464 53.40 51.52 4% 1,073,513 >100% 0% 5%
9 Burger King Holdings BKC 2,464 18.22 18.82 -3% 4,000,320 16% 3% 7%
10 Dun & Bradstreet DNB 3,658 70.39 84.37 -17% 677,456 no change 1% 5%

Top Holdings of Breeden By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 H&R Block HRB 6,996 20.85 22.62 -8% 13,292,143 no change 4% 27%
2 Helmerich & Payne HP 4,402 41.64 39.88 4% 4,128,186 no change 4% 15%
3 STERIS STE 1,809 30.59 27.97 9% 5,067,321 no change 9% 13%
4 Hillenbrand HI 1,214 19.50 18.84 4% 4,684,375 18% 8% 8%
5 Pharma Product Development PPDI 2,558 21.65 23.44 -8% 3,467,301 >100% 3% 7%
6 Burger King Holdings BKC 2,464 18.22 18.82 -3% 4,000,320 16% 3% 7%
7 Dun & Bradstreet DNB 3,658 70.39 84.37 -17% 677,456 no change 1% 5%
8 Raytheon RTN 20,464 53.40 51.52 4% 1,073,513 >100% 0% 5%
9 Bally Technologies BYI 2,186 39.59 41.29 -4% 1,251,602 new position 2% 5%
10 Hewitt Associates HEW 3,547 37.73 42.26 -11% 1,021,268 -16% 1% 4%

New Positions Sold Out Positions


Bally Technologies (BYI) FLIR Systems (FLIR)
PetSmart (PETM)

Portfolio Metrics Sector Weightings


Portfolio size $1 billion
Consumer, Non-cyclical 62%
Top 10 as % of portfolio 94%
Energy 15%
Median market value $3 million
Average market value $4 billion Consumer, Cyclical 14%

Median price to earnings 14x Industrial 5%


Median price to book 2.5x
Technology 5%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 11 of 144
Warren Buffett, Berkshire Hathaway
Warren Buffett has built an unparalleled investment track record over several decades, becoming widely regarded as the best
investor of all time. Buffett has embraced a long term-oriented investment approach with an emphasis on investing in
companies with durable competitive advantage, high returns on capital employed, and shareholder-friendly management.

MOI Signal Rank Top Current Ideas of Berkshire Hathaway


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Wells Fargo WFC 139,151 26.88 26.99 0% 320,088,385 2% 6% 15%
2 Washington Post WPO 3,840 408.56 439.60 -7% 1,727,765 no change 21% 1%
3 USG Corp USG 1,312 13.21 14.05 -6% 17,072,192 no change 17% 0%
4 Coca-Cola KO 125,081 53.98 57.00 -5% 200,000,000 no change 9% 20%
5 American Express AXP 45,797 38.42 40.52 -5% 151,610,700 no change 13% 11%
6 Wesco Financial WSC 2,516 353.40 343.00 3% 5,703,087 no change 80% 3%
7 Kraft Foods KFT 43,034 29.09 27.18 7% 138,272,500 no change 9% 6%
8 Republic Services RSG 9,895 26.03 28.31 -8% 8,290,500 >100% 2% 0%
9 Iron Mountain IRM 4,415 21.71 22.76 -5% 7,000,000 >100% 3% 0%
10 Wal-Mart Stores WMT 201,558 52.90 53.45 -1% 39,037,142 3% 1% 4%

Top Holdings of Berkshire Hathaway By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Coca-Cola KO 125,081 53.98 57.00 -5% 200,000,000 no change 9% 20%
2 Wells Fargo WFC 139,151 26.88 26.99 0% 320,088,385 2% 6% 15%
3 American Express AXP 45,797 38.42 40.52 -5% 151,610,700 no change 13% 11%
4 Procter & Gamble PG 179,388 61.76 60.63 2% 87,503,411 -9% 3% 9%
5 Kraft Foods KFT 43,034 29.09 27.18 7% 138,272,500 no change 9% 6%
6 Wal-Mart Stores WMT 201,558 52.90 53.45 -1% 39,037,142 3% 1% 4%
7 Wesco Financial WSC 2,516 353.40 343.00 3% 5,703,087 no change 80% 3%
8 ConocoPhillips COP 72,211 48.67 51.07 -5% 37,711,330 -34% 3% 3%
9 Johnson & Johnson JNJ 173,051 62.72 64.41 -3% 27,132,467 -26% 1% 3%
10 US Bancorp USB 44,483 23.26 22.51 3% 69,039,426 no change 4% 3%

New Positions Sold Out Positions


None Norfolk Southern (NSC)
Union Pacific (UNP)

Portfolio Metrics Sector Weightings


Portfolio size $58 billion Not meaningful, as a significant portion of Berkshire
Hathaways asset value may be attributed to holdings in
Top 10 as % of portfolio 87% companies that are not publicly traded and are therefore
Median market value $33 billion not included in the table above.

Average market value $62 billion


Median price to earnings 17x
Median price to book 1.9x

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 12 of 144
Ian Cumming & Joe Steinberg, Leucadia
Chairman Cumming and President Steinberg describe their approach to managing a public investment vehicle in their 2008
letter: We tend to be buyers of assets and companies that are troubled or out of favor and as a result are selling substantially
below the values, which we believe, are there. From time to time, we sell parts of these operations when prices available in
the market reach what we believe to be advantageous levels. While we are not perfect in executing this strategy, we are proud
of our long-term track record. We are not income statement driven and do not run your company with an undue emphasis on
either quarterly or annual earnings. We believe we are conservative in our accounting practices and policies and that our
balance sheet is conservatively stated.

MOI Signal Rank Top Current Ideas of Leucadia


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 AmeriCredit ACF 2,965 22.15 19.04 16% 33,600,440 1% 25% 35%
2 TravelCenters of America TA 76 4.58 4.42 4% 275,308 no change 2% 0%
3 International Assets Holding IAAC 268 15.28 14.54 5% 1,384,985 no change 8% 1%
4 Capital Southwest CSWC 311 82.99 78.80 5% 19,776 no change 1% 0%
5 Jefferies Group JEF 4,356 25.90 23.73 9% 48,585,385 no change 29% 64%

Top Holdings of Leucadia By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Jefferies Group JEF 4,356 25.90 23.73 9% 48,585,385 no change 29% 64%
2 AmeriCredit ACF 2,965 22.15 19.04 16% 33,600,440 1% 25% 35%
3 International Assets Holding IAAC 268 15.28 14.54 5% 1,384,985 no change 8% 1%
4 Capital Southwest CSWC 311 82.99 78.80 5% 19,776 no change 1% 0%
5 TravelCenters of America TA 76 4.58 4.42 4% 275,308 no change 2% 0%

New Positions Sold Out Positions


None None

Portfolio Metrics Sector Weightings


Portfolio size $2 billion Not meaningful, as a significant portion of Leucadias
asset value may be attributed to holdings in companies
Top 10 as % of portfolio 100% that are not publicly traded and are therefore not
Median market value $311 million included in the table above.

Average market value $2 billion


Median price to earnings 16x
Median price to book 1.1x

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 13 of 144
David Einhorn, Greenlight
David Einhorn is the founder of Greenlight Capital, a value-oriented, research-driven investment firm with a market-beating
long-term track record. From inception in May 1996 through yearend 2009, Greenlight Capital has returned, net of fees and
expenses, 1,397% cumulatively or 22% annualized. He is also author of Fooling Some of the People All of the Time.

MOI Signal Rank Top Current Ideas of Greenlight


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Boston Scientific BSX 11,162 7.39 9.00 -18% 32,668,000 new position 2% 10%
2 CIT Group CIT 6,450 32.25 27.61 17% 6,320,922 new position 3% 6%
3 Pfizer PFE 143,638 17.80 18.19 -2% 14,804,098 24% 0% 9%
4 MI Developments MIM 573 12.28 12.28 0% 5,655,235 no change 12% 2%
5 CareFusion CFN 5,572 25.17 25.01 1% 8,718,724 no change 4% 7%
6 BioFuel Energy BIOF 99 2.76 2.71 2% 7,542,104 no change 29% 1%
7 Einstein Noah Restaurant BAGL 191 11.67 9.83 19% 10,733,469 no change 66% 4%
8 Republic Airways RJET 183 5.31 7.38 -28% 3,442,800 no change 10% 1%
9 Employers Holdings EIG 553 12.57 15.34 -18% 2,325,000 no change 5% 1%
10 Foster Wheeler FWLT 3,421 26.93 29.44 -9% 724,833 93% 1% 1%

Top Holdings of Greenlight By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Boston Scientific BSX 11,162 7.39 9.00 -18% 32,668,000 new position 2% 10%
2 Pfizer PFE 143,638 17.80 18.19 -2% 14,804,098 24% 0% 9%
3 CareFusion CFN 5,572 25.17 25.01 1% 8,718,724 no change 4% 7%
4 Cardinal Health CAH 12,066 33.38 32.24 4% 6,550,500 -2% 2% 7%
5 CIT Group CIT 6,450 32.25 27.61 17% 6,320,922 new position 3% 6%
6 URS URS 3,859 45.99 44.52 3% 3,608,167 5% 4% 5%
7 Gold Miners ETF GDX 5,337 43.94 46.21 -5% 3,200,000 no change 3% 5%
8 EMC Corp EMC 34,922 17.12 17.47 -2% 7,152,600 -1% 0% 4%
9 Travelers TRV 26,249 50.45 49.86 1% 2,132,272 no change 0% 4%
10 Einstein Noah Restaurant BAGL 191 11.67 9.83 19% 10,733,469 no change 66% 4%

New Positions Sold Out Positions


Becton Dickinson (BDX) Energy Partners (EPL) AerCap Holdings (AER) Duke Realty (DRE)
Boston Scientific (BSX) Ralcorp Holdings (RAH) Aircastle (AYR) EchoStar (SATS)
CIT Group (CIT) Vodafone (VOD) Amkor Technology (AMKR) General Cable (BGC)
Anixter International (AXE) Liberty Media Interactive (LINTA)
Belden (BDC) Novatel Wireless (NVTL)
Colonial Properties (CLP) Oshkosh (OSK)
Crosstex Energy (XTXI) Smithfield Foods (SFD)
Danaos (DAC) Teekay (TK)

Portfolio Metrics Sector Weightings


Portfolio size $3 billion Consumer, Non-cyclical 44%
Financial 22%
Top 10 as % of portfolio 60%
Technology 10%
Median market value $3 billion Industrial 9%

Average market value $16 billion Funds 5%


Consumer, Cyclical 4%
Median price to earnings 12x
Energy 4%
Median price to book 1.4x Basic Materials 1%
Communications 0%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 14 of 144
Tom Gayner, Markel Gayner
Tom Gayner has been President of Markel Gayner Asset Management since 1990 and Executive Vice President and Chief
Investment Officer of Markel, a Richmond, Virginia-based international property and casualty insurance holding company,
since 2004. Tom has been a disciplined steward of capital on behalf of Markel shareholders, and his long-term investment
track record is one of the best in the business. For more information, visit www.markelcorp.com.

MOI Signal Rank Top Current Ideas of Markel Gayner


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Fairfax Financial FRFHF 6,936 356 390 -9% 279,459 no change 1% 8%
2 Investors Title ITIC 81 35.41 30.90 15% 228,850 no change 10% 0%
3 Berkshire Hathaway BRK/B 177,566 76.90 65.72 17% 1,570,900 no change 0% 7%
4 Paychex PAYX 10,672 29.53 30.64 -4% 50,900 >100% 0% 0%
5 Wal-Mart Stores WMT 201,558 52.90 53.45 -1% 868,130 1% 0% 3%
6 Home Depot HD 49,312 29.00 28.93 0% 969,739 >100% 0% 2%
7 ITC Holdings ITC 2,675 52.70 52.09 1% 103,200 >100% 0% 0%
8 McDonalds MCD 68,625 63.59 62.44 2% 122,601 >100% 0% 1%
9 Patterson PDCO 3,522 28.76 27.98 3% 89,800 >100% 0% 0%
10 Union First Market Bankshares * UBSH 242 13.14 12.39 6% 3,504,920 new position 19% 3%
*
Markel acquired UBSH shares in connection with a merger of a Markel subsidiary with First Market Bank, a private company in which Markel was a shareholder.

Top Holdings of Markel Gayner By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 CarMax KMX 275 21.00 24.25 -13% 5,321,399 0% 41% 9%
2 Fairfax Financial FRFHF 6,936 355.54 389.96 -9% 279,459 no change 1% 8%
3 Berkshire Hathaway BRK/B 177,566 76.90 65.72 17% 1,570,900 no change 0% 7%
Berkshire Hathaway BRK/A 177,566 114,000 99,200 15% 897 0% 0% 6%
5 Diageo DEO 40,346 64.44 69.41 -7% 1,256,560 0% 0% 6%
6 Brookfield Asset Management BAM 12,545 21.71 22.18 -2% 3,100,114 0% 1% 5%
7 General Electric GE 165,569 15.55 15.13 3% 3,644,200 0% 0% 4%
8 Walt Disney DIS 58,321 30.07 32.25 -7% 1,490,683 0% 0% 3%
9 Wal-Mart Stores WMT 201,558 52.90 53.45 -1% 868,130 1% 0% 3%
10 Union First Market Bankshares * UBSH 242 13.14 12.39 6% 3,504,920 new position 19% 3%
*
Markel acquired UBSH shares in connection with a merger of a Markel subsidiary with First Market Bank, a private company in which Markel was a shareholder.

New Positions Sold Out Positions


Novo Nordisk (NVO) Bank of America (BAC)
Union First Market Bank (UBSH)

Portfolio Metrics Sector Weightings


Portfolio size $1.4 billion Financial 41%
Consumer, Cyclical 20%
Top 10 as % of portfolio 54%
Consumer, Non- 15%
Median market value $21 billion Industrial 11%
Communications 6%
Average market value $45 billion
Energy 4%
Median price to earnings 17x Technology 1%
Median price to book 2.7x Basic Materials 1%
Diversified 1%
Utilities 0%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 15 of 144
Glenn Greenberg, Brave Warrior (formerly Chieftain)
Brave Warrior, formerly called Chieftain Capital Management, was founded in 1984 by Glenn Greenberg and John Shapiro.
The firm runs a concentrated portfolio focused on companies with high returns on capital and sustainable competitive
advantage. Brave Warriors long-term performance record is believed to feature mid teens annualized investment returns.

MOI Signal Rank Top Current Ideas of Brave Warrior


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Comcast CMCSK 43,145 14.52 16.01 -9% 16,966,476 -32% 2% 16%
2 Dell DELL 27,080 13.84 14.36 -4% 8,027,811 -32% 0% 7%
3 Lab Corp of America LH 7,621 71.76 74.84 -4% 3,026,932 -33% 3% 13%
4 Ryanair Holdings RYAAY 7,938 26.86 26.81 0% 8,572,012 -31% 3% 13%
5 Lockheed Martin LMT 28,780 75.58 75.35 0% 3,829,724 -32% 1% 17%
6 US Bancorp USB 44,483 23.26 22.51 3% 10,645,764 -31% 1% 14%
7 Crosstex Energy XTEX 466 9.38 8.60 9% 2,153,150 -27% 4% 1%
8 Waters WAT 5,517 58.26 61.96 -6% 1,063,320 -57% 1% 4%
9 Varian Medical Systems VAR 5,897 47.58 46.85 2% 3,584,538 -47% 3% 10%
10 Precision Castparts PCP 15,450 109.05 110.35 -1% 790,141 -66% 1% 5%

Top Holdings of Brave Warrior By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Lockheed Martin LMT 28,780 75.58 75.35 0% 3,829,724 -32% 1% 17%
2 Comcast CMCSK 43,145 14.52 16.01 -9% 16,966,476 -32% 2% 16%
3 US Bancorp USB 44,483 23.26 22.51 3% 10,645,764 -31% 1% 14%
4 Ryanair Holdings RYAAY 7,938 26.86 26.81 0% 8,572,012 -31% 3% 13%
5 Lab Corp of America LH 7,621 71.76 74.84 -4% 3,026,932 -33% 3% 13%
6 Varian Medical Systems VAR 5,897 47.58 46.85 2% 3,584,538 -47% 3% 10%
7 Dell DELL 27,080 13.84 14.36 -4% 8,027,811 -32% 0% 7%
8 Precision Castparts PCP 15,450 109.05 110.35 -1% 790,141 -66% 1% 5%
9 Waters WAT 5,517 58.26 61.96 -6% 1,063,320 -57% 1% 4%
10 Crosstex Energy XTXI 350 7.53 6.05 24% 4,526,099 -21% 10% 2%

New Positions Sold Out Positions


None None

Portfolio Metrics Sector Weightings


Portfolio size $2 billion Industrial 25%

Top 10 as % of portfolio 99% Consumer, Non-cyclical 23%

Median market value $8 billion Communications 16%

Financial 14%
Average market value $17 billion
Consumer, Cyclical 13%
Median price to earnings 16x
Technology 7%
Median price to book 3.2x
Energy 3%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 16 of 144
Mason Hawkins, Southeastern
Mason Hawkins is chairman and CEO of Southeastern Asset Management, a firm he founded in 1975. Southeastern serves as
investment adviser to the Longleaf Partners Funds, a family of value-oriented mutual funds. The firm has $22 billion of
assets under management, including $13 billion in separately managed accounts.

MOI Signal Rank Top Current Ideas of Southeastern


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 tw telecom TWTC 2,258 15.04 17.15 -12% 24,341,622 5% 16% 2%
2 DIRECTV DTV 29,366 30.69 33.35 -8% 85,628,178 13% 9% 13%
3 Fair Isaac FICO 979 21.06 21.31 -1% 9,491,578 20% 20% 1%
4 Level 3 Communications LVLT 2,263 1.38 1.53 -10% 430,914,071 0% 26% 3%
5 Texas Industries TXI 959 34.56 34.99 -1% 2,993,651 17% 11% 0%
6 Yum! Brands YUM 15,603 33.36 34.97 -5% 48,055,553 1% 10% 8%
7 Chesapeake Energy CHK 16,167 24.96 25.88 -4% 76,534,039 1% 12% 9%
8 Dell DELL 27,080 13.84 14.36 -4% 137,458,334 1% 7% 9%
9 Dillards DDS 1,212 16.42 18.45 -11% 9,202,748 no change 13% 1%
10 DineEquity DIN 489 27.80 24.29 14% 3,217,500 no change 18% 0%

Top Holdings of Southeastern By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 DIRECTV DTV 29,366 30.69 33.35 -8% 85,628,178 13% 9% 13%
2 Chesapeake Energy CHK 16,167 24.96 25.88 -4% 76,534,039 1% 12% 9%
3 Dell DELL 27,080 13.84 14.36 -4% 137,458,334 1% 7% 9%
4 Walt Disney DIS 58,321 30.07 32.25 -7% 56,001,551 -3% 3% 8%
5 Yum! Brands YUM 15,603 33.36 34.97 -5% 48,055,553 1% 10% 8%
6 Cemex CX 9,138 9.52 11.82 -19% 103,939,301 -2% 11% 6%
7 Pioneer Natural Resources PXD 5,432 47.10 48.17 -2% 22,526,175 -1% 20% 5%
8 Liberty Media Interactive LINTA 6,479 10.87 10.84 0% 85,401,302 -15% 15% 4%
9 Philips Electronics PHG 28,207 29.02 29.44 -1% 30,096,075 -11% 3% 4%
10 Level 3 Communications LVLT 2,263 1.38 1.53 -10% 430,914,071 0% 26% 3%

New Positions Sold Out Positions


Bank of New York Mellon (BK) EnCana (ECA)
Fairfax Financial (FFH)
Liberty Media (LMDIA)

Portfolio Metrics Sector Weightings


Portfolio size $22 billion Communications 36%
Top 10 as % of portfolio 69% Energy 14%

Median market value $5 billion Industrial 13%

Average market value $15 billion Financial 13%

Median price to earnings 16x Consumer, Cyclical 12%

Technology 10%
Median price to book 1.6x
Consumer, Non-cyclical 2%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 17 of 144
Chris Hohn, Childrens Investment
Chris Hohn is the founder of London-based The Childrens Investment Fund Management. TCI runs a concentrated portfolio
that has historically been heavily weighted in industrials. Hohn has acquired a reputation as an aggressive shareholder
activist, most notably forcing the resignation of the CEO of Deutsche Boerse after he refused to abandon a proposed takeover
of the London Stock Exchange. Hohn also agitated for a sale of ABN Amro, ultimately pushing it into the hands of RBS.

MOI Signal Rank Top Current Ideas of Childrens Investment Fund


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Union Pacific UNP 32,040 63.41 63.90 -1% 7,870,775 new position 2% 13%
2 Oracle ORCL 117,313 23.41 24.53 -5% 17,216,616 >100% 0% 11%
3 Visa V 62,714 84.78 87.46 -3% 15,768,809 50% 3% 36%
4 Lockheed Martin LMT 28,780 75.58 75.35 0% 4,782,436 5% 1% 9%
5 WellPoint WLP 27,194 59.33 58.29 2% 1,418,801 new position 0% 2%
6 AmBev ABV 52,619 92.35 101.09 -9% 459,191 47% 0% 1%
7 Molson Coors Brewing TAP 7,183 38.90 45.16 -14% 5,406,250 13% 3% 6%
8 Virgin Media VMED 4,677 14.21 16.83 -16% 111,695 new position 0% 0%
9 Philip Morris PM 93,882 49.29 48.19 2% 2,005,832 34% 0% 3%
10 MasterCard MA 29,257 225.48 255.98 -12% 5,446 new position 0% 0%

Top Holdings of Childrens Investment Fund By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Visa V 62,714 84.78 87.46 -3% 15,768,809 50% 3% 36%
2 Coca-Cola KO 125,081 53.98 57.00 -5% 10,400,249 -12% 0% 15%
3 Union Pacific UNP 32,040 63.41 63.90 -1% 7,870,775 new position 2% 13%
4 Oracle ORCL 117,313 23.41 24.53 -5% 17,216,616 >100% 0% 11%
5 Lockheed Martin LMT 28,780 75.58 75.35 0% 4,782,436 5% 1% 9%
6 Molson Coors Brewing TAP 7,183 38.90 45.16 -14% 5,406,250 13% 3% 6%
7 Philip Morris PM 93,882 49.29 48.19 2% 2,005,832 34% 0% 3%
8 WellPoint WLP 27,194 59.33 58.29 2% 1,418,801 new position 0% 2%
9 PepsiCo PEP 95,062 60.92 60.80 0% 1,355,006 -10% 0% 2%
10 AmBev ABV 52,619 92.35 101.09 -9% 459,191 47% 0% 1%

New Positions Sold Out Positions


MasterCard (MA) H&R Block (HRB)
Union Pacific (UNP) Potash Corp. (POT)
Virgin Media (VMED)
WellPoint (WLP)

Portfolio Metrics Sector Weightings


Portfolio size $4 billion Consumer, Non-
66%
cyclical
Top 10 as % of portfolio 99%
Industrial 22%
Median market value $36 billion
Average market value $49 billion Technology 12%

Median price to earnings 15x Basic Materials 0%


Median price to book 4.7x
Communications 0%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 18 of 144
Carl Icahn, Icahn Partners
Carl Icahn is an activist investor with a long track record of success agitating for change at underperforming companies. Carl
publishes an activist investing blog entitled The Icahn Report at www.icahnreport.com.

MOI Signal Rank Top Current Ideas of Icahn Partners


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 CIT Group CIT 6,450 32.25 27.61 17% 2,426,335 new position 1% 1%
2 American Railcar Industries ARII 192 9.02 11.02 -18% 11,564,154 0% 54% 3%
3 Take-Two Interactive Software TTWO 803 9.65 10.05 -4% 2,174,605 new position 3% 0%
4 Biogen Idec BIIB 14,885 55.21 53.50 3% 3,215,052 0% 1% 4%
5 Federal Mogul FDML 1,678 16.88 17.30 -2% 75,241,924 no change 76% 29%
6 Icahn Enterprises IEP 3,437 45.96 39.95 15% 74,792,659 9% 92% 67%
7 Blockbuster BBI/B 20 0.28 0.59 -53% 1,113,236 0% 2% 0%
Blockbuster BBI 67 0.38 0.67 -43% 2,630,970 0% 2% 0%
9 Enzon Pharmaceuticals ENZN 415 9.13 10.53 -13% 704,215 0% 2% 0%
10 Lions Gate Entertainment LGF 616 5.23 5.81 -10% 4,232,487 2% 4% 1%

Top Holdings of Icahn Partners By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Icahn Enterprises IEP 3,437 45.96 39.95 15% 74,792,659 9% 92% 67%
2 Federal Mogul FDML 1,678 16.88 17.30 -2% 75,241,924 no change 76% 29%
3 Biogen Idec BIIB 14,885 55.21 53.50 3% 3,215,052 0% 1% 4%
4 American Railcar Industries ARII 192 9.02 11.02 -18% 11,564,154 0% 54% 3%
5 CIT Group CIT 6,450 32.25 27.61 17% 2,426,335 New 1% 1%
6 Lions Gate Entertainment LGF 616 5.23 5.81 -10% 4,232,487 2% 4% 1%
7 Take-Two Interactive Software TTWO 803 9.65 10.05 -4% 2,174,605 New 3% 0%
8 Enzon Pharmaceuticals ENZN 415 9.13 10.53 -13% 704,215 0% 2% 0%
9 Blockbuster BBI 67 0.38 0.67 -43% 2,630,970 0% 2% 0%
Blockbuster BBI/B 20 0.28 0.59 -53% 1,113,236 0% 2% 0%

New Positions Sold Out Positions


CIT Group (CIT) Yahoo! (YHOO)
Take-Two Interactive (TTWO)

Portfolio Metrics Sector Weightings


Portfolio size $4 billion Diversified 62%

Top 10 as % of portfolio 100% Consumer, Cyclical 30%

Median market value $616 million Consumer, Non-cyclical 4%

Average market value $2.6 billion Industrial 3%

Median price to earnings 14x Financial 2%

Median price to book 2.1x Technology 0%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 19 of 144
Seth Klarman, Baupost
Seth Klarman, founder and president of The Baupost Group, is the author of Margin of Safety and one of the most widely
respected value-oriented investors. From inception in February 1983 through December 2008, The Baupost Group has
delivered an annual compounded return of approximately 20%.

MOI Signal Rank Top Current Ideas of Baupost


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Theravance THRX 617 9.70 13.07 -26% 10,100,000 12% 19% 8%
2 Enzon Pharmaceuticals ENZN 415 9.13 10.53 -13% 8,082,400 30% 18% 5%
3 ViaSat VSAT 1,055 29.05 31.78 -9% 4,915,901 6% 15% 10%
4 DIRECTV DTV 29,366 30.69 33.35 -8% 1,617,471 new position 0% 3%
5 Facet Biotech FACT 414 16.53 17.55 -6% 3,506,875 no change 14% 4%
6 CIT Group CIT 6,450 32.25 27.61 17% 2,582,186 new position 1% 4%
7 BreitBurn Energy BBEP 803 15.22 10.59 44% 8,495,939 no change 16% 6%
8 Multimedia Games MGAM 134 4.91 6.01 -18% 2,600,000 no change 10% 1%
9 Audiovox VOXX 157 6.86 7.09 -3% 1,797,286 no change 9% 1%
10 Alliance One AOI 449 5.04 4.88 3% 8,800,000 no change 10% 3%

Top Holdings of Baupost By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 News Corp. NWSA 36,243 13.11 13.69 -4% 24,450,000 -1% 1% 21%
2 Domtar UFS 2,211 50.40 55.41 -9% 2,900,000 -10% 7% 10%
3 ViaSat VSAT 1,055 29.05 31.78 -9% 4,915,901 6% 15% 10%
4 Theravance THRX 617 9.70 13.07 -26% 10,100,000 12% 19% 8%
5 BreitBurn Energy BBEP 803 15.22 10.59 44% 8,495,939 no change 16% 6%
6 Enzon Pharmaceuticals ENZN 415 9.13 10.53 -13% 8,082,400 30% 18% 5%
7 CapitalSource CSE 1,619 5.01 3.97 26% 20,278,400 15% 6% 5%
8 CIT Group CIT 6,450 32.25 27.61 17% 2,582,186 new position 1% 4%
9 Facet Biotech FACT 414 16.53 17.55 -6% 3,506,875 no change 14% 4%
10 DIRECTV DTV 29,366 30.69 33.35 -8% 1,617,471 new position 0% 3%

New Positions Sold Out Positions


CIT Group (CIT) RHI Entertainment (RHIE)
DIRECTV (DTV)

Portfolio Metrics Sector Weightings


Portfolio size $1.6 billion Communications 36%
Top 10 as % of portfolio 74% Consumer, Non-cyclical 23%
Median market value $710 million Financial 22%
Average market value $5.2 billion Basic Materials 10%

Median price to earnings 20x Energy 6%

Median price to book 1.2x Consumer, Cyclical 2%


Industrial 1%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 20 of 144
Eddie Lampert, RBS Partners
Eddie Lampert, founder and managing member of ESL Investments, is a value investor who started out working under Bob
Rubin at the arbitrage desk of Goldman Sachs. When he left Goldman to start ESL in 1988, he received the support of Texas
investor Richard Rainwater. Lampert compounded ESLs capital at rates of more than 25% per annum for many years. His
largest investment was the much-publicized taking control of Kmart during Kmarts bankruptcy process in 2002. Lampert
engineered the merger of Kmart and Sears in 2004. He is currently chairman and chief capital allocator of the combined firm,
Sears Holdings (SHLD). He also still manages his investment partnership, which holds a concentrated investment portfolio.

MOI Signal Rank Top Current Ideas of RBS Partners


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 CIT Group CIT 6,450 32.25 27.61 17% 4,527,973 new position 2% 1%
2 Wells Fargo WFC 139,151 26.88 26.99 0% 1,500,000 new position 0% 0%
3 Citigroup C 90,577 3.18 3.31 -4% 31,250,000 67% 0% 1%
4 Bank of America BAC 125,128 14.45 15.06 -4% 453,512 new position 0% 0%
5 Genworth Financial GNW 7,123 14.58 11.35 28% 8,775,684 no change 2% 1%
6 Capital One Financial COF 15,810 35.14 38.34 -8% 9,615,000 -2% 2% 3%
7 AutoNation AN 3,043 17.72 19.15 -7% 76,989,622 -3%* 44% 13%
8 AutoZone AZO 7,961 160.85 158.07 2% 19,291,196 -4%* 39% 28%
*
Represents share transfers between various affiliated entities rather than outright sales of securities.

Top Holdings of RBS Partners By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Sears Holdings SHLD 10,456 90.47 83.45 8% 62,046,884 -6%* 54% 47%
2 AutoZone AZO 7,961 160.85 158.07 2% 19,291,196 -4%* 39% 28%
3 AutoNation AN 3,043 17.72 19.15 -7% 76,989,622 -3%* 44% 13%
4 Capital One Financial COF 15,810 35.14 38.34 -8% 9,615,000 -2% 2% 3%
5 CIT Group CIT 6,450 32.25 27.61 17% 4,527,973 new position 2% 1%
6 Citigroup C 90,577 3.18 3.31 -4% 31,250,000 67% 0% 1%
7 Genworth Financial GNW 7,123 14.58 11.35 28% 8,775,684 no change 2% 1%
8 Wells Fargo WFC 139,151 26.88 26.99 0% 1,500,000 new position 0% 0%
*
Represents share transfers between various affiliated entities rather than outright sales of securities.

New Positions Sold Out Positions


Bank of America (BAC) None
CIT Group (CIT)
Wells Fargo (WFC)

Portfolio Metrics Sector Weightings


Portfolio size $11 billion
Consumer, Cyclical 93%
Top 10 as % of portfolio 100%
Median market value $8 billion
Average market value $37 billion Financial 7%

Median price to earnings 16x


Median price to book 1.2x
Technology 0%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 21 of 144
Dan Loeb, Third Point
Dan Loeb is the founder and managing member of long/short hedge fund Third Point. He is a well-known shareholder
activist who has accumulated a respectable long-term investment track record.

MOI Signal Rank Top Current Ideas of Third Point


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Citigroup C 90,577 3.18 3.31 -4% 25,000,000 new position 0% 8%
2 TransDigm Group TDG 2,355 48.03 47.49 1% 1,800,000 80% 4% 8%
3 WellPoint WLP 27,194 59.33 58.29 2% 1,100,000 38% 0% 6%
4 Aspen Technology AZPN 831 9.05 9.80 -8% 5,021,000 new position 5% 5%
5 Depomed DEPO 152 2.93 3.35 -13% 6,790,000 no change 13% 2%
6 Affiliated Computer Services ACS 5,826 59.64 59.69 0% 800,000 new position 1% 4%
7 Mead Johnson Nutrition MJN 9,213 45.05 43.70 3% 1,000,000 new position 0% 4%
8 Xerox XRX 11,852 8.77 8.46 4% 4,000,000 new position 0% 3%
9 PHH PHH 971 17.73 16.11 10% 4,780,000 7% 9% 7%

Top Holdings of Third Point By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 TransDigm Group TDG 2,355 48.03 47.49 1% 1,800,000 80% 4% 8%
2 Citigroup C 90,577 3.18 3.31 -4% 25,000,000 new position 0% 8%
3 PHH PHH 971 17.73 16.11 10% 4,780,000 7% 9% 7%
4 Health Net HNT 2,381 22.91 23.29 -2% 3,000,000 no change 3% 7%
5 WellPoint WLP 27,194 59.33 58.29 2% 1,100,000 38% 0% 6%
6 Aspen Technology AZPN 831 9.05 9.80 -8% 5,021,000 new position 5% 5%
7 CIT Group CIT 6,450 32.25 27.61 17% 1,750,000 new position 1% 5%
8 Affiliated Computer Services ACS 5,826 59.64 59.69 0% 800,000 new position 1% 4%
9 Mead Johnson Nutrition MJN 9,213 45.05 43.70 3% 1,000,000 new position 0% 4%
10 Xerox XRX 11,852 8.77 8.46 4% 4,000,000 new position 0% 3%

New Positions Sold Out Positions


Abraxas Petroleum (AXAS) Liberty Media Starz (LSTZA) Alkermes (ALKS) Liberty Entertainment (LMDIA)
Advanced Micro Devices (AMD) Life Partners Holdings (LPHI) Allergan (AGN) Lions Gate Entertainment (LGF)
Affiliated Computer Svcs (ACS) Mead Johnson Nutrition (MJN) Anadarko Petroleum (APC) Loral Space (LORL)
Aspen Technology (AZPN) Pain Therapeutics (PTIE) Apple (AAPL) Merck (MRK)
CIT Group (CIT) TCW Strategic Income (TSI) Bank of America (BAC) Molson Coors Brewing (TAP)
Citigroup (C) Velocity Express (VEXPQ) Blockbuster (BBI, BBI/B) Oracle (ORCL)
DIRECTV (DTV) Xerox (XRX) CareFusion (CFN) Pfizer (PFE)
Energy Partners (EPL) Yahoo! (YHOO) CF Industries (CF) Resolute Energy (REN)
First American (FAF) Synaptics (SYNA)
Liberty Acquisition (LIA) Trian Acquisition (TUX)

Portfolio Metrics Sector Weightings


Portfolio size $1.1 billion Consumer, Non- 35%
Top 10 as % of portfolio 60% Financial 26%
Technology 15%
Median market value $2 billion
Communications 9%
Average market value $11 billion
Industrial 8%
Median price to earnings 15x Energy 5%
Median price to book 1.9x Consumer, Cyclical 2%
Utilities 1%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 22 of 144
Steve Mandel, Lone Pine
Steve Mandel founded long/short hedge fund Lone Pine Capital in 1997. He previously worked for Julian Robertsons Tiger
Management, Goldman, Sachs and Mars and Company.

MOI Signal Rank Top Current Ideas of Lone Pine


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Baxter International BAX 33,712 55.92 58.68 -5% 10,441,630 new position 2% 6%
2 Qualcomm QCOM 65,275 38.84 46.26 -16% 12,240,777 4% 1% 5%
3 HSBC Holdings HBC 177,741 51.01 57.09 -11% 6,676,242 new position 0% 4%
4 JPMorgan Chase JPM 153,541 38.95 41.67 -7% 17,486,108 7% 0% 7%
5 Accenture ACN 29,599 40.49 41.50 -2% 8,708,237 new position 1% 3%
6 New Oriental Education & Tech EDU 2,636 69.97 75.61 -7% 2,479,109 >100% 7% 2%
7 Visa V 62,714 84.78 87.46 -3% 5,465,874 24% 1% 5%
8 McDonalds MCD 68,625 63.59 62.44 2% 7,620,201 20% 1% 5%
9 eBay EBAY 28,148 21.77 23.53 -7% 8,042,649 new position 1% 2%
10 Walt Disney DIS 58,321 30.07 32.25 -7% 7,441,464 new position 0% 2%

Top Holdings of Lone Pine By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 JPMorgan Chase JPM 153,541 38.95 41.67 -7% 17,486,108 7% 0% 7%
2 Monsanto MON 41,373 75.82 81.75 -7% 8,185,449 -2% 2% 6%
3 Baxter International BAX 33,712 55.92 58.68 -5% 10,441,630 new position 2% 6%
4 Qualcomm QCOM 65,275 38.84 46.26 -16% 12,240,777 4% 1% 5%
5 Apple AAPL 181,704 200.38 210.73 -5% 2,525,541 -18% 0% 5%
6 Visa V 62,714 84.78 87.46 -3% 5,465,874 24% 1% 5%
7 McDonalds MCD 68,625 63.59 62.44 2% 7,620,201 20% 1% 5%
8 Hewlett-Packard HPQ 114,568 48.46 51.51 -6% 8,529,811 -13% 0% 4%
9 HSBC Holdings HBC 177,741 51.01 57.09 -11% 6,676,242 new position 0% 4%
10 Accenture ACN 29,599 40.49 41.50 -2% 8,708,237 new position 1% 3%

New Positions Sold Out Positions


Accenture (ACN) HSBC Holdings (HBC) America Movil (AMX) Liberty Entertainment (LMDIA)
Autodesk (ADSK) Mead Johnson Nutrition (MJN) Cemex (CX) MasterCard (MA)
Bank of America (BAC) Sears Holdings (SHLD) Coach (COH) Philip Morris (PM)
Baxter International (BAX) Staples (SPLS) Coca-Cola (KO) priceline.com (PCLN)
Cninsure (CISG) Walt Disney (DIS) Fomento Economico (FMX) Walter Energy (WLT)
CVS Caremark (CVS) Wells Fargo (WFC) Huntington Bancshares (HBAN)
eBay (EBAY) Yum! Brands (YUM)

Portfolio Metrics Sector Weightings


Portfolio size $10 billion Technology 18%
Top 10 as % of portfolio 52% Financial 17%

Median market value $10 billion Consumer, Cyclical 14%


Communications 12%
Average market value $35 billion
Industrial 7%
Median price to earnings 20x
Basic Materials 6%
Median price to book 3.1x Funds 2%
Energy 1%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 23 of 144
Mohnish Pabrai, Pabrai Funds
Mohnish Pabrai is founder and managing partner of Pabrai Investment Funds, a family of value-oriented investment
partnerships with a fee structure similar to that of the Buffett Partnerships of the 1950s and 60s, i.e. no management fee and
25% performance fee above 6% annual hurdle rate. Pabrai Funds have a long-term track record vastly superior to that of the
S&P 500 Index. Pabrai follows an investment strategy built upon the principles of Graham, Buffett and Greenblatt.

MOI Signal Rank Top Current Ideas of Pabrai Funds


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Fairfax Financial FRFHF 6,936 355.54 389.96 -9% 80,611 17% 0% 10%
2 Potash Corp of Saskatchewan POT 33,031 111.60 108.50 3% 338,473 4% 0% 11%
3 Teck Resources TCK 21,249 35.88 34.97 3% 1,006,501 no change 0% 11%
4 Cresud CRESY 672 12.72 14.41 -12% 1,719,377 5% 3% 8%
5 Air Transport Services ATSG 149 2.35 2.64 -11% 5,393,962 no change 8% 4%
6 CapitalSource CSE 1,619 5.01 3.97 26% 2,818,141 new position 1% 3%
7 Horsehead Holding ZINC 454 10.47 12.75 -18% 1,358,498 0% 3% 5%
8 Leucadia National LUK 5,305 21.82 23.79 -8% 791,074 0% 0% 6%
9 Terex TEX 2,030 18.78 19.81 -5% 530,776 no change 0% 3%
10 Interactive Brokers IBKR 698 16.93 17.72 -4% 94,104 -1% 0% 1%

Top Holdings of Pabrai Funds By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Potash Corp of Saskatchewan POT 33,031 111.60 108.50 3% 338,473 4% 0% 11%
2 Teck Resources TCK 21,249 35.88 34.97 3% 1,006,501 no change 0% 11%
3 Fairfax Financial FRFHF 6,936 355.54 389.96 -9% 80,611 17% 0% 10%
4 Harvest Natural Resources HNR 170 5.11 5.29 -3% 5,596,529 -1% 17% 9%
5 Brookfield Properties BPO 6,483 12.93 12.12 7% 2,359,267 0% 0% 9%
6 Cresud CRESY 672 12.72 14.41 -12% 1,719,377 5% 3% 8%
7 Berkshire Hathaway BRK/B 177,566 76.90 65.72 17% 319,900 -2% 0% 7%
8 Leucadia National LUK 5,305 21.82 23.79 -8% 791,074 0% 0% 6%
9 Horsehead Holding ZINC 454 10.47 12.75 -18% 1,358,498 0% 3% 5%
10 Pinnacle Airlines PNCL 157 8.58 6.88 25% 2,076,702 -2% 11% 4%

New Positions Sold Out Positions


CapitalSource (CSE) Ternium (TX)

Portfolio Metrics Sector Weightings


Portfolio size $321 million Financial 37%

Top 10 as % of portfolio 75% Basic Materials 28%

Energy 9%
Median market value $2 billion
Consumer, Non- 8%
Average market value $17 billion
Industrial 8%
Median price to earnings 15x Diversified 6%
Median price to book 1.2x Consumer, Cyclical 4%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 24 of 144
Bryant Riley, Riley Investment
Riley Investment Management is a private investment firm founded by Bryant Riley in 2000. The firm takes an active, value-
oriented approach to investing in small- and microcap public companies, often seeking to effect change at the Board level.
The firm appears to favor investments with large asset value and liquid balance sheets.

MOI Signal Rank Top Current Ideas of Riley Investment Management


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 DDI DDIC 86 4.33 4.89 -11% 1,838,554 no change 9% 25%
2 Zilog ZILG 62 3.58 3.54 1% 846,472 no change 5% 8%
3 Regent Communications RGCI 5 0.13 0.26 -50% 2,895,782 no change 7% 2%
4 Trans World Entertainment TWMC 42 1.34 1.51 -11% 1,453,230 -14% 5% 6%
5 Aldila ALDA 21 4.00 3.47 15% 34,370 no change 1% 0%
6 Magnetek MAG 45 1.45 1.54 -6% 1,209,053 -47% 4% 5%
7 Iteris ITI 48 1.39 1.50 -7% 1,439,569 -60% 4% 6%
8 Transwitch TXCC 32 1.60 2.10 -24% 9,187 -97% 0% 0%
9 Silicon Storage Technology SSTI 272 2.84 2.56 11% 2,715,489 -33% 3% 19%
10 Integrated Silicon Solution ISSI 192 7.65 5.65 35% 60,000 -6% 0% 1%

Top Holdings of Riley Investment Management By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 DDI DDIC 86 4.33 4.89 -11% 1,838,554 no change 9% 25%
2 Silicon Storage Technology SSTI 272 2.84 2.56 11% 2,715,489 -33% 3% 19%
3 Zilog ZILG 62 3.58 3.54 1% 846,472 no change 5% 8%
4 Trans World Entertainment TWMC 42 1.34 1.51 -11% 1,453,230 -14% 5% 6%
5 Iteris ITI 48 1.39 1.50 -7% 1,439,569 -60% 4% 6%
6 Magnetek MAG 45 1.45 1.54 -6% 1,209,053 -47% 4% 5%
7 LeCroy LCRY 50 3.97 3.65 9% 281,441 -75% 2% 3%
8 Regent Communications RGCI 5 0.13 0.26 -50% 2,895,782 no change 7% 2%
9 Management Network TMNGD 14 2.03 2.15 -6% 290,820 -89% 4% 2%
10 Integrated Silicon Solution ISSI 192 7.65 5.65 35% 60,000 -6% 0% 1%

New Positions Sold Out Positions


None None

Portfolio Metrics Sector Weightings


Portfolio size $36 million
Industrial 57%
Top 10 as % of portfolio 100%
Technology 32%
Median market value $46 million
Average market value $72 million Consumer, Cyclical 6%

Median price to earnings 18x Consumer, Non-


3%
cyclical
Median price to book 1.1x
Communications 2%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 25 of 144
Prem Watsa, Fairfax
Prem Watsa is the founder, chairman and CEO of Fairfax (FFH), a Canadian property/casualty insurance and reinsurance
firm. While managing Fairfaxs investment portfolio over the past couple of decades, Watsa has built a reputation as an
astute value investor. Some have called him Warren Buffett of Canada. In recent years, Watsas firm successfully defended
itself against short sellers who allegedly conspired to drive down the price of Fairfax stock and hurt the companys business.

MOI Signal Rank Top Current Ideas of Fairfax


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 SandRidge Energy SD 1,741 8.47 9.43 -10% 25,096,592 >100% 12% 6%
2 Level 3 Communications LVLT 2,263 1.38 1.53 -10% 266,032,816 91% 16% 10%
3 USG USG 1,312 13.21 14.05 -6% 16,083,430 >100% 16% 6%
4 International Coal ICO 695 3.88 3.86 1% 45,155,588 24% 29% 4%
5 Overstock.com OSTK 269 11.80 13.56 -13% 3,388,774 no change 15% 1%
6 Wells Fargo WFC 139,151 26.88 26.99 0% 20,043,700 0% 0% 14%
7 Dell DELL 27,080 13.84 14.36 -4% 34,763,489 no change 2% 13%
8 Johnson & Johnson JNJ 173,051 62.72 64.41 -3% 6,884,300 no change 0% 11%
9 General Electric GE 165,569 15.55 15.13 3% 26,597,770 no change 0% 10%
10 Zenith National Insurance ZNT 1,066 28.14 29.76 -5% 3,118,441 >100% 8% 2%

Top Holdings of Fairfax By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Wells Fargo WFC 139,151 26.88 26.99 0% 20,043,700 0% 0% 14%
2 Dell DELL 27,080 13.84 14.36 -4% 34,763,489 no change 2% 13%
3 Johnson & Johnson JNJ 173,051 62.72 64.41 -3% 6,884,300 no change 0% 11%
4 Level 3 Communications LVLT 2,263 1.38 1.53 -10% 266,032,816 91% 16% 10%
5 General Electric GE 165,569 15.55 15.13 3% 26,597,770 no change 0% 10%
6 US Bancorp USB 44,483 23.26 22.51 3% 15,857,400 0% 1% 9%
7 Kraft Foods KFT 43,034 29.09 27.18 7% 9,949,871 no change 1% 7%
8 Magna International MGA 6,409 56.75 50.58 12% 4,798,976 -9% 4% 6%
9 SandRidge Energy SD 1,741 8.47 9.43 -10% 25,096,592 >100% 12% 6%
10 USG USG 1,312 13.21 14.05 -6% 16,083,430 >100% 16% 6%

New Positions Sold Out Positions


Sun Microsystems (JAVA) Gannett (GCI) Office Depot (ODP)
Intel (INTC) Viacom (VIA/B)

Portfolio Metrics Sector Weightings


Portfolio size $4 billion Financial 25%
Consumer, Non-cyclical 20%
Top 10 as % of portfolio 84%
Communications 17%
Median market value $3 billion Industrial 13%

Average market value $42 billion Technology 13%


Consumer, Cyclical 7%
Median price to earnings 15x
Energy 6%
Median price to book 1.4x Diversified 0%
Basic Materials 0%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 26 of 144
Wally Weitz, Weitz Funds
Wally Weitz, sometimes called The Other Oracle of Omaha, founded Wallace R. Weitz & Co. in 1983 with $10 million
under management. The firm has since grown into a $2 billion asset manager best known for the Weitz Value Fund.

MOI Signal Rank Top Current Ideas of Weitz


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Dell DELL 27,080 13.84 14.36 -4% 5,641,469 14% 0% 5%
2 Redwood Trust RWT 1,054 13.57 14.46 -6% 6,669,148 7% 9% 6%
3 Liberty Global LBTYK 6,361 24.02 21.86 10% 4,031,770 3% 3% 5%
4 Intelligent Systems INS 10 1.09 0.94 16% 2,269,600 0% 25% 0%
5 Energizer Holdings ENR 3,826 54.79 61.28 -11% 20,000 100% 0% 0%
6 DIRECTV DTV 29,366 30.69 33.35 -8% 500,000 >100% 0% 1%
7 Monsanto MON 41,373 75.82 81.75 -7% 119,215 new position 0% 1%
8 Knot KNOT 328 9.74 10.07 -3% 115,574 >100% 0% 0%
9 Strayer Education STRA 2,879 206.26 212.52 -3% 27,000 >100% 0% 0%
10 Accenture ACN 29,599 40.49 41.50 -2% 142,500 new position 0% 0%

Top Holdings of Weitz By Dollar Value


Market Price ($) Shares Owned Holdings
Value Latest Filing Since Latest Since as % of
Company Ticker ($mn) Date Date Filing Filing 9/30/09 Co. Fund
1 Berkshire Hathaway BRK/B 177,566 76.90 65.72 17% 2,765,250 -4% 0% 11%
2 Redwood Trust RWT 1,054 13.57 14.46 -6% 6,669,148 7% 9% 6%
3 Liberty Media Interactive LINTA 6,479 10.87 10.84 0% 8,559,200 -3% 2% 6%
4 Liberty Global LBTYK 6,361 24.02 21.86 10% 4,031,770 3% 3% 5%
5 Dell DELL 27,080 13.84 14.36 -4% 5,641,469 14% 0% 5%
6 Microsoft MSFT 244,959 27.93 30.48 -8% 2,378,800 -7% 0% 4%
7 Liberty Media Capital LCAPA 2,650 27.24 23.88 14% 2,903,600 5% 3% 4%
8 Telephone & Data Systems TDS/S 3,185 28.04 30.20 -7% 2,251,900 -11% 4% 4%
9 Comcast CMCSK 43,145 14.52 16.01 -9% 4,229,000 -6% 1% 4%
10 Omnicare OCR 3,038 25.46 24.18 5% 2,485,860 9% 2% 4%

New Positions Sold Out Positions


Accenture (ACN) ITT Educational Services (ESI) American Express (AXP)
AutoZone (AZO) Liberty Global (LBTYA) USG (USG)
Buckle (BKE) Monsanto (MON) Wells Fargo (WFC)
Compass Minerals (CMP)

Portfolio Metrics Sector Weightings


Portfolio size $1.7 billion
Communications 29%
Top 10 as % of portfolio 53% Financial 21%
Median market value $6 billion Consumer, Non- 17%
Industrial 11%
Average market value $30 billion
Technology 10%
Median price to earnings 16x
Consumer, Cyclical 7%
Median price to book 2.2x Energy 3%
Basic Materials 2%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 27 of 144
Exclusive Interview with Aaron Edelheit

We recently had the pleasure of interviewing Aaron


Edelheit of Sabre Value Asset Management, a value-
oriented investment firm founded in 1998. The firm
manages the Sabre Value Fund and two distressed real
estate funds. Edelheit graduated with a B.B.A. in
finance from the University of Georgia in 1996. He is a
philanthropist and serves on the board of directors of
the Moishe House Foundation. Edelheit maintains an
online blog at aaronedelheit.com, which we have found Aaron Edelheit
Sabre Value
educational and thought-provoking. Since June 1998,
Edelheit has reported a compounded annual net return in excess of 12%.

The Manual of Ideas: Value investors come in many different stripes. How
does your approach differ from some other value-oriented strategies?
Aaron Edelheit: I focus on small to medium sized companies that most
Im looking for spin-offs, investors have never heard of. My goal is to find companies that are very
companies restructuring, attractive, but arent being followed closely due to their size, lack of analyst
turnarounds and special coverage or neglect. I look for change inside of those companies that investors
situations, such as a company are not seeing and that will make the company much more valuable.
with two divisions, in which Specifically, Im looking for spin-offs, companies restructuring, turnarounds and
the poor division is masking special situations, such as a company with two divisions, in which the poor
the other division that is very division is masking the other division that is very attractive. And I take very
attractive. concentrated positions, am patient and do not use leverage.

MOI: You have at times put in writing your thesis on your favorite ideas, both
long and short. Lets take a look at some of what youve written and extract
lessons that may help us become better investors. In April 2009, when Sprott
Resource (Toronto: SCP), an investment firm controlled by respected
Canadian investor Eric Sprott, traded at C$2.65 per share, you wrote, What if I
told you there was a company out there that was predominantly sitting in cash,
gold and silver bullion with no debt, whose tangible book value is
approximately C$3.50 per share, with little expenses, that was selling for C$2.65
per share? Better yet, what if I told you that it is run by one of the best resource
investors around, who has a proven record for making investors money and has
increased book value from $1.50 to over $3.50 in two years? Many investors
reading your argument might have said, Yes, I see that SCP is undervalued on a
sum-of-the-parts basis, but what is the catalyst to unlocking value? Cant the
discount persist indefinitely? Eight months later, SCP traded at more than C$4
per share, with additional upside looking likely due to value creation in the
interim. When dealing with investment vehicles such as SCP, how do you
decide what discount to net asset value is sufficiently compelling, and how do
you avoid the entities that do trade at wide discounts to NAV for a long time?

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 28 of 144
Edelheit: Sprott was a compelling investment because it was trading at $2.65
per share, had $3 per share of cash and gold bullion and another $0.50 per share
of investments with no debt. Insiders were buying like mad and the company
was buying back stock as aggressively as it could. The key to this not being a
value trap is that the company was buying back 10% of its stock a year (still is)
and there were no losses taking away that value. The catalyst was the buybacks
and further investments that Sprott had made increasing the book value past
$3.50, which they have done.

Every time I see insider MOI: You also wrote the following about Sprott Resource in April 2009:
buying on the way up, the While the market may not be buying, insiders sure are. The Chairman, Eric
Sprott, has bought 631,200 shares in the last four months and the CEO, Kevin
stock has always followed.
Bambrough, has bought 412,000 shares. And they have done this buying despite
already owning large stakes. How important is the existence of insider buying
to your stock selection process? Do you use it primarily as confirmatory
evidence or do you also screen for new ideas based on whos buying their own
stock?
Edelheit: Insider buying is very important. But it is critical when you see insider
buying is happening as the stock goes up. Every time I see insider buying on the
way up, the stock has always followed. I do both, use it as a confirmatory piece
of evidence and use it to generate ideas.
MOI: You provided the following update on your valuation analysis of Sprott
Resource (Toronto: SCP) in January 2010:

$/CAD # of units $ per unit Total value

Cash $41,364,405
Gold (oz) 1.06 73,971 $1,100 $86,250,186
Public Equities $25,989,024
Minority stakes in private firms $18,978,480
Waseca 73,640,000 $0.60 $44,184,000
Stonegate Agricom 63,600,000 $0.50 $31,800,000
One Earth Farms 30,000,000 $1.00 $30,000,000
Orion Oil & Gas (OIP) 229,000,000 $1.50 $343,500,000
Cash From Warrants 16,594,284 $4.25 $70,525,707

Fully Diluted S/O 113,953,284 $6.08 per share

If Orion Oil & Gas (OIP) is at $0.50 per share $4.07 per share
$1.00 per share $5.07 per share
$1.50 per share $6.08 per share
$2.00 per share $7.08 per share
$1.75 per share $6.58 per share

Obviously, as the table shows, the stake in Orion Oil & Gas (Toronto:
OIP) accounts for a large portion of SCPs intrinsic value. How do you think
about the fair value of Oriondoes the recent market price of C$1.50 per share
accurately reflect intrinsic value?
Edelheit: I think it does reflect intrinsic value. Orion is a fast growing
exploration and production, energy company focused on Alberta, Canada and
has 2,650 boe/d of production on its way to 7,000 boe/d of production by years
end. Orion has 18 million barrels of oil equivalent (MBoe) in proven and
probable reserves and is about 45% light oil and 55% natural gas.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 29 of 144
There are number of ways to try and value OIP, which is important
since it is the biggest piece of the valuation of Sprott. The two I am focused on
is on a multiple of debt-adjusted cash flow for 2010 and on an enterprise value
to reserves.
Orion currently trades for around 7 times cash flow for 2010. On a
multiple of cash flow it appears a bit expensive compared to many other
Canadian juniors, which trade for 4-5 times multiples to cash flow, but Orion, is
growing really fast, much faster than comps. It should grow its production this
year 180% from beginning of the year to year-end. Further, it has little or no
When a company can shift
debt and it has a well-capitalized partner in Sprott that removes financing risk.
or enter into a business that
allows it to go from selling On an enterprise valuation to reserves it comes out cheaper than comps
products to selling products with a valuation of about US$19 per barrel. Most comps trade on average for
and a service it can become over $20 per barrel equivalent.
very powerful, as investors Here is the bottom line for investors in Sprott: OIP has to trade below
are sometimes slow to $0.50 per share versus its current price of around $1.50 for Sprott to be worth
appreciate it. You can have less than its current stock price.
years of great returns from
MOI: You have successfully invested in companies undergoing a business
one stock based on such a
model change. In particular, you have highlighted companies adding a new
change.
recurring revenue stream while a legacy revenue stream might be declining.
What is attractive about these kinds of companies, both in terms of the
fundamental shift as well as the markets inability to value them properly?
Edelheit: Wall Street and investors love recurring revenue models and rightfully
so. When a business has a high degree of predictability, investors give it a higher
multiple. When a company can shift or enter into a business that allows it to go
from selling products to selling products and a service it can become very
powerful, as investors are sometimes slow to appreciate it. You can have years
of great returns from one stock based on such a change.
MOI: What parallels do you see between the opportunity in KVH Industries
(Nasdaq: KVHI) and your experience with CAM Commerce?
Edelheit: My experience with CADA (used to be CAM Commerces symbol,
was bought out in 2008) is what made me so excited about KVHI. CADA sold
glorified cash registers, or point of sale systems. This was a crappy low margin
hardware business that the company struggled in. They had about 10,000 of
these systems installed in mom and pop retailers, when they developed a
payment processing system to process credit card and check transactions. They
went to their mom and pop retailers and said use us and we will group all of you
together and save you 20% on your payment processing cost as if you were a big
retailer. To the mom and pop retailer, this was a no brainer, you just save
money. To CADA, they got 50 basis points, or 0.5 cents of every $1 that got
transacted. Suddenly, CADA had a cash cow of a business growing at leaps and
bounds. When I first discovered CADA, the old hardware business was
disguising the new payment processing business. The stock went from $12 to
$40, where it was bought out three years later.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 30 of 144
Fast forward to today and KVHI, which historically made antennas for
leisure marine boats and RVs to get satellite TV. You can imagine how good the
RV and leisure marine boat business was in 2008 and 2009terrible. Those
businesses were down 50% to 77%! This tremendous decline was masking that
KVH had developed antennae to get broadband internet in the middle of the
ocean for a fraction of the cost of existing alternatives. Further, KVH was now
offering not only the antennae, but the monthly service of providing the Internet
to shipping companies, the Coast Guard and oil service boats as well. Suddenly,
KVH has a recurring revenue business.
First, thinking that just
KVH also has a defense business providing fiber optic gyroscopes to
because you dont invest in
the military so that soldiers can operate guns from inside of Humvees and not be
levered companies and you
exposed to sniper fire or explosive devices. At one point last year this business
yourself dont use leverage, grew 767%! There are only three companies in the world that offer these kinds
doesnt make you immune to of devices.
the stupidity and craziness of
what other people are doing. Both this defense business and the satellite broadband internet business
Second, buying on the way are about to bust out into the forefront as the old line businesses have troughed
down was a terrible practice and the size of the new businesses outweighs any old legacy products. Despite
that I just wont repeat going KVHs excellent performance last year, CADA shows me it is just the
beginning.
forward. I bought too early
and too aggressively. Third, MOI: Stepping back to your core investment approach, are you generally more
when a company disappoints attracted to companies that might be described as Greenblatt-style good and
move on, do not linger. I cheap businesses or to Graham-style balance sheet bargains?
lingered with one investment Edelheit: I am very flexible. I will invest in good and cheap and balance sheet.
and it hurt a lot. It just depends on the opportunity.
MOI: How do you generate investment ideas?
Edelheit: Insider buying, spin-offs, turnarounds, restructurings and reading
what other really smart money managers are doing.
MOI: The art of portfolio management often takes a backseat to the art of
security selection, but the former is just as important. Can you shed light on your
approach to portfolio management, touching on portfolio concentration,
leverage, and short selling?
Edelheit: I dont use any leverage. Im mostly long. I do some short selling,
though it is currently only 20% of the portfolio. I have very concentrated
portfolios and focus my investment research and know my companies well.
MOI: Late 2008 and early 2009 presented many challenges for value investors
but also threw up some of the best bargains in a long time. How did the
volatility affect your investment process, and have you tweaked your approach
in any way as a result of last years experience?
Edelheit: I learned a lot from 2008 and 2009. I made a couple of mistakes that
really hurt. First, thinking that just because you dont invest in levered
companies and you yourself dont use leverage, doesnt make you immune to
the stupidity and craziness of what other people are doing. Second, buying on
the way down was a terrible practice that I just wont repeat going forward. I
bought too early and too aggressively. Third, when a company disappoints move
on, do not linger. I lingered with one investment and it hurt a lot.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 31 of 144
MOI: What is the single biggest mistake that keeps investors from reaching
their goals?
Edelheit: Themselves. For investors, the combination of emotion, fear of loss,
greed for gain, how your brain works are all so important and few pay attention
to it. I think knowing yourselfwhat are your weaknesses and your strengths
is critical to being a good investor. I work on it every day.
MOI: Are there any off-the-beaten path books that have made you a better
investor?
I just read a fantastic book
Edelheit: I just read a fantastic book called The First Tycoon, by T.J. Stiles,
called The First Tycoon, by
about Cornelius Vanderbilt. There were many lessons and ideas I drew from the
T.J. Stiles, about Cornelius
book about what made him so successful, and I think there is a lot to learn about
Vanderbilt. history as well.
MOI: You maintain a blog at aaronedelheit.com, in which you explore the
stock market, faith, Tikkun Olam and humor in no particular order. For those
unfamiliar with the phrase Tikkun Olam, could you explain its meaning and
significance to you?
Edelheit: Tikkun Olam is the Jewish belief of repairing the world. The idea is it
is each one of our jobs to help in our own way to help heal a broken world. For
me this means being a better person, volunteering and doing acts of charity with
money and time. It is very important to me and helps drive me in how hard I
work on a daily basis. This way there is more for me to give back to others.
MOI: Aaron, thank you very much for your time.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 32 of 144
Exclusive Interview with Ori Eyal

We recently interviewed up-and-coming investment


manager Ori Eyal, founder of Emerging Value Capital
Management. Eyal has spent the past eight years in the
practice of global value investing, including at
Deutsche Bank Asset Management, Deephaven Capital
Management, and Guy Spiers Aquamarine Fund. Eyal
founded Emerging Value Capital Management in
October 2008 and posted a net return of 6% as the S&P
Ori Eyal
500 fell 10% in late 2008. In 2009, Eyals fund posted Emerging Value
a 37% net return, once again edging out the S&P 500 Capital Management
index return of 24%.

The Manual of Ideas: How did you get interested in investing? What prompted
you to start your own investment firm, Emerging Value Capital Management, in
2008?
The basic tenets of value Ori Eyal: While I started out in Computer Science, I was always interested in
investing make intuitive sense finance and economics. Around the year 2000 I read The Essays of Warren
to me: buying something for Buffett and became a value investing addict. The basic tenets of value investing
less than its worth, investing make intuitive sense to me: buying something for less than its worth, investing
within your circle of within your circle of competence, demanding a large margin of safety, and the
competence, demanding a power of compounding over time.
large margin of safety, and Ever since, I have been on a journey to learn from the masters of value
the power of compounding investing and to develop my global value investing framework. I earned my
over time. MBA at the University of Chicagos Booth School of Business in 2006. I
worked for Deutsche Bank as an analyst at one of their global investing funds. I
also interned for several hedge funds, including Deephaven and Aquamarine.
In 2008, after a decade of developing and practicing my global value
investing framework, I finally felt ready to launch my own fund, Emerging
Value Capital Management (EVCM). EVCM is a long-biased global value fund.
At EVCM, I strive to integrate my global value investing framework with the
best practices and ideas from the value investors I have studied. My life savings
are invested in EVCM fund so I eat my own cooking.
MOI: What are the key insights youve gleaned from Guy Spier, either in terms
of running a fund or selecting investments? Do you share Guys views regarding
the importance of checklists?
Eyal: I was very fortunate to work for Guy Spier at Aquamarine Fund while
studying for my MBA. Guy Spier is an extremely talented and thoughtful
investor who looks at the world as one global integrated market. Using his deep
insights into how the world operates, and his latticework of mental models, Guy
has been able to successfully identify and invest in some of the worlds greatest
businesses.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 33 of 144
At one point, Guy and I traveled to Israel together and we went to visit
and research about 15 undiscovered companies in Israel. In some cases I think
we were the first international investors that had ever visited them. Watching
Guy interact with the management teams of these companies was a key learning
event for me. He has the ability to quickly develop rapport with everyone in the
room and get to the main business issues that each company faces. By the time
the meeting is over, Guy has a better understanding of the business than the
company management team does. Furthermore, Guy intuitively understands the
people running the company, their motives, and their likely future behavior.
Working for Guy helped me develop my global value investing
framework. He taught me how to analyze great businesses and how to approach
and interact with company management teams. He has been a great mentor, role
model, and friend over the years. When I launched EVCM fund, Guy Spier was
my biggest supporter and my first investor.
MOI: You state that one of the main tenets of your investment strategy is
global value investing. Can you elaborate on how this approach guides the
construction of the EVCM portfolio?
Eyal: Even today, most value investing takes place in the U.S. and is applied to
U.S. stocks. Having an international background, I became convinced that value
The Euro, the U.S. Dollar, investing can and should be applied to global markets. Therefore, one of the
the British Pound, and the main tenets of my investment strategy is global value investing. I invest in
Japanese Yen all face severe various countries based on where I find the best investment opportunities. When
problems, making it difficult I invest outside the U.S., I look for investment opportunities that are so attractive
to determine which developed that they more than compensate me for bearing additional geo-political and
market currency is the macroeconomic risks.
worst.
Portfolio construction is a bottom-up process driven by where I find the
best investment opportunities at any given time. I dont have a target allocation
for any specific country. Rather, I keep my idea radar open for opportunities
around the world in both developed and emerging countries. I search the world
for the best investment opportunities and use them to construct the portfolio.
MOI: What are the main benefits of your global value investing approach? How
do you weigh these against the risks of investing in non-U.S. markets?
Eyal: There are a few key benefits that EVCM fund expects to gain from global
investing. These are currency diversification, exposure to emerging markets
consumers, a larger investment opportunity set (more stocks and bonds to
choose from) and less efficient asset prices (more mispriced assets to invest in).
The Euro, the U.S. Dollar, the British Pound, and the Japanese Yen all
face severe problems, making it difficult to determine which developed market
currency is the worst. In general, I think that emerging market and commodity
based currencies are likely to appreciate over time versus developed market
currencies. Global investing allows me to diversify EVCM funds exposures
between developed market currencies and, when possible, to shift our exposure
from developed to emerging market currencies. In the best of cases, I can find
investments in emerging markets where I expect to make a strong return both
from the asset itself and from the local currency appreciating over time.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 34 of 144
The growth in the number and in the wealth of emerging market
consumers is one of the most powerful secular investment themes of which I am
aware. As the emerging markets population urbanizes, it rapidly embraces
capitalism, creates wealth for itself, and increases its purchasing power. To
profit from this trend I seek to invest in businesses that sell to emerging market
consumers. Companies that I own that sell to emerging market consumers
include Willi Food (Nasdaq: WILC), Plaza Centers (London: PLAZ), China
Marine (Amex: CMFO), Zhongpin (Nasdaq: HOGS), ChinaCast Education
(Nasdaq: CAST), Fuqi International (Nasdaq: FUQI), Hilan Tech (Tel
Aviv: HLTC), Nestle (OTC: NSRGY), and Philip Morris (NYSE: PM).
I carefully weigh many qualitative and quantitative factors when
choosing in which countries EVCM fund should invest. It is of critical
importance that we invest in stable countries with regimes that respect foreign
investors and the rule of law. I also prefer to invest in countries that have
embraced capitalism and have relatively free markets. I think the U.S., China,
Brazil, Australia, Canada, Mexico, Israel, South Korea, Europe (West and East),
Taiwan, Singapore, and Hong Kong are fairly attractive investment destinations.
Japan faces structural and cultural obstacles that make me reluctant to invest
there.

I view the lumping of the I view the lumping of the BRIC (Brazil, Russia, India, and China)
BRIC countries into a single countries into a single group as misleading. I like China and Brazil. While not
group as misleading. I like perfect, they are making progress towards a more capitalist economy and offer
China and Brazil. While not reasonable investor protections. On the other hand, Russia needs to improve its
perfect, they are making respect for the rule of law, and therefore EVCM fund is not likely to invest
progress towards a more there. I have not invested in India even though it is a potentially attractive
capitalist economy and offer investment destination. This is mostly because India has erected regulatory
barriers that make direct investment difficult and (unlike China) few Indian
reasonable investor
companies are traded on U.S. exchanges.
protections. On the other
hand, Russia needs to MOI: How do you generate investment ideas?
improve its respect for the Eyal: The short answer is I read everything and talk to everyone.
rule of law, and therefore
EVCM fund is not likely to I subscribe to about 20 different publications: Forbes, Fortune,
invest there. Barrons, The Economist, Value Investor Insight, Downside Protection Report,
Capital and Crisis, Complete Growth Investor, etc. I also surf the leading
investing websites: Value Investors Club, SumZero, Market Folly, etc. I attend
great investing conferences: The Value Investor Congress, IRA Sohn Investment
Conference, The Rodman & Renshaw Global Investment Conference, etc. And
perhaps most importantly, I regularly talk with other smart fund managers and
discuss ideas.
Once I find an investment idea that looks interesting I do independent
in-depth research and analysis. Every idea must pass four tests (or filters) before
it can be added to the portfolio. Is it within my circle of competence, is it a good
business with permanent competitive advantages, is management capable,
honest, and shareholder friendly, and is it extraordinarily cheap?
Circle of competence: Do I understand the business and industry? Can I
reasonably predict its future prospects and cash flows?

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 35 of 144
Quality of business: What are the competitive advantages of the
business? What are the expected long-term ROE and ROA? Can the business
grow profitably without requiring too much capital? Is the balance sheet strong?
What are the industry dynamics? What is the long-term outlook for the industry
and the business? Is the business recession resistant?
Management: Are they competent, shareholder friendly, and good
capital allocators? Have they created shareholder value in the past?
Price: How cheap is the business? Is there a large margin of safety?
How much can I lose? Favorable risk/reward?
MOI: Since your fund is based in New York, what is your process for getting to
know non-U.S. companies? Do you try to visit their operations on the ground?
Eyal: New York is the business capital of the world, and most management
teams visit New York at least once or twice a year. Having my office in New
York allows me to meet with them when they get here.
I consider visiting companies on a case-by-case basis. Large companies
(both U.S.-based and international) tend to be well researched by many analysts
and it is often a waste of time to be the 100th analyst that visits them just to hear
the same story they told everyone else. On the other hand, small companies
(both U.S.-based and international) are often unknown or not well researched. It
You have to look at the makes a lot of sense for me to visit them and to interact with the management
business, the financial team in order to evaluate how well the company is managed, what the future
statements, the industry, the strategy is, and how competent and shareholder-friendly management is.
competition, the management
team, the valuation, etc. and Researching international companies is not fundamentally different
than researching U.S. companies. You have to look at the business, the financial
combine all of these into a
statements, the industry, the competition, the management team, the valuation,
conservative estimate of the
etc. and combine all of these into a conservative estimate of the quality of the
quality of the business and
business and what its worth.
what its worth.
MOI: Can you share a few investments that best reflect your approach?
Eyal: In October of 2008 EVCM fund invested in Plaza Centers (London:
PLAZ). I also wrote my investors about Plaza Centers in my monthly letter (see
EVCM October 2008 letter to investors) 1. Plaza Centers is a leading developer
of western-style (mid to high end) retail centers (shopping and entertainment) in
Central and Eastern Europe (CEE), including Romania, Poland, Czech Republic,
Hungary, Serbia, Latvia, Bulgaria, Greece, and also in India. Plaza Centers has a
strong 12-year track record of profitably developing shopping and entertainment
centers in these regions.
At the time I made the investment, real estate, Eastern Europe, India,
and shopping malls were all out of favor and no investor wanted any part of
them. So you can image how much the market disliked a company that was
exposed to all four of these factors. Contrary to the popular wisdom at that time,
I believed that Eastern Europe and India would continue their long-term
emergence and growth. They both have ever larger and wealthier middle classes
that use and will continue to demand the high-end western-style shopping and
entertainment centers developed by Plaza Centers.
1
To download the letter, visit http://bit.ly/a9fFzs

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Plaza is run by a skilled and experienced management team with a long
history of creating shareholder value. Plazas competitive advantages include a
well regarded brand name, an extensive network of business partners (including
leading retailers that rent stores in its shopping malls), strong project execution
skills, country specific experience, and good access to capital. Unlike many
competing real-estate developers that entered 2008 highly leveraged and unable
to finance their project pipe-lines, Plaza Centers has plenty of cash and little
company-level debt. Plaza Centers launches each new project as a separate
company, using non-recourse project debt, and it seeks to pre-let its properties
prior to completion.
While most real estate developers choose to record mark-to-market
profits on their real-estate development projects based on third party value
assessments (which almost always prove to be too optimistic), Plaza Centers has
conservatively chosen to record all of its real estate development projects at
historical purchase cost. This means that book value for Plaza Centers is a real
number giving us a conservative estimate of the true value of their real estate
development projects.
When EVCM fund invested, Plaza Centers was trading at about 1/3 of
book value, with book value conservatively calculated using historical purchase
costs. A conservative estimate for the companys intrinsic value would be at
least book value, probably much more. The stock is up about 150% since
EVCM fund invested, yet I still own the shares since even today Plaza trades at
While most real estate
only about 75% of book value.
developers choose to record
mark-to-market profits on My second example is a Chinese company that trades in the U.S. In
their real-estate development January of 2009, EVCM fund invested in Fuqi International (Nasdaq: FUQI).
projects based on third party I also wrote my investors about FUQI in my monthly letter (see EVCM January
value assessments (which 2009 letter to investors) 2. Fuqi designs, manufactures and sells a broad range of
almost always prove to be jewelry products to middle-class consumers in China.
too optimistic), Plaza Centers Products consist of a range of unique styles and designs made from
has conservatively chosen to precious metals such as platinum and gold as well as diamonds and other
record all of its real estate gemstones. Fuqis in-house design team creates about 300 new designs every
development projects at month, with designs especially tailored to meet the different local tastes in each
historical purchase cost. Chinese province. Products are distributed via a nationwide distribution network
to over 100 retailers and 700 direct sales distributors. Among other awards, Fuqi
received designations as a China Top Brand, Famous Brand of Guangdong,
and Well-known Brand of China Jewelry Industry. In China, jewelry is
viewed more as a necessity than as a luxury good. Demand for jewelry is
embedded in the Chinese culture and it is considered customary to bring jewelry
gifts to events such as weddings and childbirths.
We have all heard about frauds and misbehaviors in some Chinese
companies so it is important to note that Fuqi is a well managed company. It is
listed in the U.S. and is subject to SEC oversight and reporting requirements.
Fuqis auditor is Stonefield Josephson, an internationally recognized accounting
firm based in California with a satellite office in Hong Kong. Stonefield
Josephson was listed by Bowmans Accounting Report as one of Americas
Top 25 Auditors of 2005, 2006 and 2007. I met with Fuqis management team
several times and was favorably impressed.

2
To download the letter, visit http://bit.ly/alKxsY

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When EVCM fund first invested in Fuqi, its market cap was about $90
million. At the time, it had $34 million of net cash, $50 million of inventory
(mostly gold), $50 million of accounts receivable (average collection period is
45 days), and no debt. It was trading for much less than its working capital! The
stock then went up about 500% and I sold our position. Recently the shares have
declined under $17 and EVCM fund is slowly buying again. Today, Fuqi trades
for less than 10x 2009 net income and still has a fortress balance sheet and
amazing growth prospects in China.
My third example is an Israeli company that trades on the Tel-Aviv
stock exchange. Hilan Tech (Tel Aviv: HLTC) is Israels leading payroll
processing and reporting service provider. U.S. investors might think of it as the
ADP of Israel. The company provides an array of solutions for organizations:
payroll, human resources, time and attendance, and pension administration.
Hilan Tech possesses the most advanced and comprehensive system of
its kind in Israel, providing services to 700 organizations and companies, which
together employ over 500,000 employees.
Payroll processing and HR services is the core of Hilan Techs
business. It comprises about 60% of company revenues and 85% of operating
profits. Customers in this business segment are very sticky since it would
require a lot of time, effort, and expense to switch service providers. It is a
predictable, slow growth business which generates a lot of recurring free cash
think of [Hilan Tech] as flow, requires minimal capital investments, is recession resistant, and provides a
the ADP of Israel. we are high return on capital invested.
paying about 6x enterprise The financial crisis of 2008 has slowed down business somewhat since
value to operating income. payroll processing is sensitive to the unemployment level and since corporate
That is a cheap price for such customers are more reluctant to spend money. Despite this slowdown, I believe
a high-quality cash flow that in 2009 Hilan Tech will earn over 50 million ILS in operating profits from
generative business. revenue of over 230 million ILS. This implies over 20% operating margins and
an almost 60% pre-tax return on equity.
Current market cap is 280 million ILS. Enterprise value is about 300
million ILS. So we are paying about 6x enterprise value to operating income.
That is a cheap price for such a high-quality cash flow generative business. Keep
in mind that capital expenditure requirements are minimal. Dividend yield is
about 6.5%. I think it is reasonable to expect dividend growth of 10%+ per year
for the foreseeable future. I also like the underlying exposure to the Israeli
Shekel, as I think it has strong fundamentals and is likely to appreciate over time
versus the major developed market currencies.
MOI: What is your reasoning behind holding a large cash position? Tell us
more about your risk management framework, including the use of cash, short
positions or other hedges.
Eyal: Risk management and capital preservation are my number one job.
Making money is only my night job. Capital preservation does not mean that
everything I buy always goes up right away (I wish that it did). Rather, it means
that I make a great effort to avoid permanent losses of capital. It also means that
I construct my investment portfolio in such a way that minimizes the risk that
multiple investment positions will all experience a permanent loss of capital due
to one event, misfortune, or mistake.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 38 of 144
A permanent loss of capital occurs when I make an investment and
after its stock declines I discover that the intrinsic business value of the
investment is actually worth less than I first thought. Permanent losses of capital
are extremely painful to me and I do everything I can to avoid them. In contrast,
a temporary loss of capital occurs when a stock that I own declines even though
the intrinsic value of the underlying business remains unchanged. While also
painful, temporary losses of capital often allow me to buy more of a stock that I
like for an even cheaper price.
At the individual position level I limit risk and avoid permanent losses
of capital by conducting in-depth research on each investment; sizing each
position based on its risk/reward profile; demanding a large margin of safety for
each investment; investing only within my circle of competence; seeking to
invest in good businesses with durable competitive advantages; preferring
experienced and shareholder friendly management teams; and periodically
reviewing and re-assessing the investment thesis for each of my investments.
At the portfolio level I limit risk and avoid permanent loss of capital by
holding cash or other placeholders when there are few good investment ideas;
occasionally selling short stocks or stock indexes (or using put options); using
little or no leverage; seeking to reasonably diversify our investments across four
dimensions: investment types (cheap growth, special situation, great business,
global macro), industry exposure, country/currency exposure, and market caps;
The key to long-term wealth and limiting the possible damage from any single event or mistake.
creation is not earning high
I do not have a target cash position. Rather, I search for individually
returns. Rather, it is earning compelling investments, both long and short. If I dont find enough great
good returns while avoiding investments, I patiently hold cash and keep looking. On October 17, 2008, The
(or minimizing) the blow-ups. New York Times published an article by Warren Buffett entitled Buy American.
The biggest mistake that I am. 3 In the article, Mr. Buffett said he was buying American stocks for his
investors make is not personal account in which until recently he had owned nothing but U.S.
investing in a conservative government bonds. Mr. Buffett held 100% U.S. government bonds in his
enough manner. personal account for a long time not because he was timing the market, but
(almost certainly) because he was having difficulty finding compelling
investment opportunities.
MOI: Shifting gears a bit, what would you say is the single biggest mistake that
keeps investors from reaching their goals?
Eyal: The key to long-term wealth creation is not earning high returns. Rather, it
is earning good returns while avoiding (or minimizing) the blow-ups. The
biggest mistake that investors make is not investing in a conservative enough
manner.
The world is a dangerous place for capital. Inflation, expropriation,
revolution, currency devaluation, industry declines, wars, natural disasters,
depressions, market meltdowns, black swans, theft, fraud, and taxes all pose a
constant and lurking threat to growing (or even just maintaining) wealth over
time. In any given year, the probability of disaster is small. But over many years
and decades anything that can go wrong eventually will.

3
To read the op-ed, visit http://nyti.ms/1legil

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As long as we can stay in the game, the long-term power of
compounding will work in our favor. A 10% real annual return will multiply our
money over 117 times in 50 years. But having even one single year with
catastrophic losses undoes years of great performance. Simply put, the key to
amassing wealth over time is avoiding catastrophic losses and never having to
start over from scratch. When things go wrong, we can avoid catastrophic losses
only by investing conservatively and without leverage. Conservative investing is
like insuranceit seems like a waste of money until something bad happens and
then you are glad to have it.
I see funds that use leverage (either at the portfolio level or by investing
in highly levered companies), and I see funds that are too concentrated. Over the
long run, leverage and excessive concentration usually end badly. I think that
eventually most investors agree that having about 20 long positions is the correct
compromise between over-concentration and over-diversification. Some
investors just take longer than others to reach that conclusion.
MOI: Are there any books on value investing, particularly globally oriented
investing, that you have found valuable but investors may not be broadly
familiar with?
Eyal: Reading voraciously is a characteristic that all great investors share in
common. There is simply no better way to gain wisdom and learn about the
world than to read great books.
Reading voraciously is a
characteristic that all great For international investing, Jim Rogerss earlier books, Investment
investors share in common. Biker, Adventure Capitalist, and Hot Commodities are good. The Economist is a
There is simply no better way great weekly magazine to read and learn about the world. I also think Mohnish
to gain wisdom and learn Pabrais The Dhandho Investor and Joel Greenblatts You Can Be a Stock
about the world than to read Market Genius are great investing books.
great books. Economics is a key investing skill so I think everyone should read
Milton Friedman, especially his books Capitalism and Freedom and Free to
Choose.
Trying to forecast what the future will look like is an important
investing skill. To this end I recommend books by Ray Kurzweil, Fantastic
Voyage and The Singularity Is Near. Bill Gates has called Ray Kurzweil the
best person I know at predicting the future of artificial intelligence.
To broaden your latticework of mental models, I highly recommend
books by Richard Dawkins, Jared Diamond, Richard Feynman, Michael Pollan
and John Brockman. I also think Buzzmarketing by Mark Hughes and Influence
by Robert Cialdini are must read books.
Finally, I highly recommend the fantastic publications by The Manual
of Ideas: Downside Protection Report, Portfolio Managers Review, etc. I also
think that Value Investor Insight is great.
MOI: Ori, thank you very much for your time and insights.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 40 of 144
Exclusive Interview with Marko Vucemilovic

We recently had the pleasure of interviewing hedge


fund manager Marko Vucemilovic, founder of Alkar
Global, a value-oriented investment firm that invests in
both emerging and developed markets. Vucemilovic
has been investing internationally for about a decade
and is frequently on the road, visiting emerging market
economies worldwide. Born in Croatia and educated at
Harvard and Wharton, he manages Alkar Global out of Marko Vucemilovic
New York City. Prior to founding Alkar in early 2009, Alkar Global
Vucemilovic was an analyst and portfolio manager at
Tiedemann Investment Group.

The Manual of Ideas: Tell us a little about your background and the genesis of
your firm.
Marko Vucemilovic: Prior to founding Alkar Global, I spent about five years
One needs to hit the with Tiedemann Emerging Markets, a New York long/short hedge fund where I
pavement, so to speak, and got my footing in global equity investing, learned what worked or didnt work
rack up countless frequent and eventually got to manage a portion of the book. My investment banking and
flier miles to countries with venture capital background helped me climb up the learning curve. The
colorful bazaars, one-lane emerging markets experience gave me the opportunity to learn about these
highways lined with large markets first hand, which I believe is crucial for investing in them. One needs to
Samsung billboards and hit the pavement, so to speak, and rack up countless frequent flier miles to
hundreds of construction countries with colorful bazaars, one-lane highways lined with large Samsung
cranes in plain sight before billboards and hundreds of construction cranes in plain sight before one can
one can separate quality separate quality investments from the overall market. I very much enjoyed this
investments from the overall process. My affinity for emerging markets came from taking a big picture view
of global equities and contemplating where one could logically expect the
market.
biggest upside in the coming decades. That was about ten years ago, exactly at
the time when emerging markets seemed to have hit an inflection point, clearly
very fortuitous timing, although the pace at which these countries have evolved
since then has exceeded my expectations.
As I continued to hone my investment skill I became increasingly
interested in analyzing stocks in developed markets. I felt it was inefficient to
constrain ones field of operation since the same time-tested investment
principles applied across different asset classes. As a result, I launched Alkar
Global. The firm is based in New York and runs a value-based global long/short
equities strategy on behalf of U.S. and European clients. Typically, about half of
our capital is invested in emerging markets and the other half in the U.S. and
Europe.
MOI: You grew up in Croatia at a time when it was part of communist
Yugoslavia and lived through significant political and economic upheavals. How
has that experience shaped you as an investor?

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Vucemilovic: In several ways. Quite simply, a rapidly changing surrounding
tends to sharpen ones survival instincts. Growing up in what could be described
as an unstable geography taught me that a lot if not most of what we take for
granted is actually quite brittle and constantly evolving. Dogmas are like market
momentum; with time they start to seem absolute and everlasting, until they
exhaust themselves and are rapidly replaced by some entirely different
framework which then goes through the same cycle. The more frequent and
profound the experience of this process, the more pragmatic and less reliant on
accepted, conventional wisdom one becomes. I think this is quite useful in
global investing. At Alkar we observe the macro or industry picture and try to be
cognizant of the direction and the magnitude of prevalent market biases because
they are bound to be cyclical.
Another result of my early experiences is that I am quite comfortable
investing pretty much anywhere where I see a good opportunity. For example, to
a skeptic, the perceived risk of emerging markets investing can seem daunting.
The ebbs and flows of their economies appear utterly chaotic and unreliable.
However, there is certain logic and structure to every society and every sector
has value-creating businesses that are able to navigate through it. Knowing what
it was like to live in one such emerging market helps me observe global
markets with a more discerning eye. When I read about investors putting their
Alkar is primarily a value money in some frontier market, or how some large western city has a higher
fund. In the end, it all comes murder rate than Baghdad, I can easily understand why that might be the case.
down to individual company
fundamentals and valuation. MOI: Tell us about your global approach to investing. How do you go about
However, considering the identifying investment opportunities?
size of global equity markets, Vucemilovic: Alkar is primarily a value fund. In the end, it all comes down to
a thematic approach helps us individual company fundamentals and valuation. However, considering the size
narrow our research effort of global equity markets, a thematic approach helps us narrow our research
on areas with the optimal effort on areas with the optimal risk/reward. Our approach is also based on a
risk/reward. belief that the market is a lot more efficient at valuing individual companies than
sectors or asset classes. We therefore tend to spend a good portion of our
research effort on the big picture, or sectors and geographies and their long-
term value drivers. What drives long-term value creation? From top to bottom,
some of the key drivers are demographics, government, technology, resources,
consumer preferences, and company management/business model. We do not
necessarily look for a perfect combination. However, what we do care about a
great deal is how they are trending and the market bias regarding their future
prospects. Looking at the total market capitalization of a sector on a per capita
basis or the overall market penetration can be very useful. That way long-term
growth potential or the prevailing market bias tends to become more apparent.
For example, this is why in 2009 we allocated capital to a bank in India, a
medical imagining business in China, and a mobile telecom in Russia.
The bottom up portion of our research is based on a companys free
cash flow, return on invested capital, growth rate, price to earnings, net asset
value, quality of the management, etc. All these variables are considered and
ranked until we find the optimal vehicle for whatever theme we are researching.
Basically, we try to pick stocks at the intersection of value and positive value
drivers. We gravitate towards larger, quality companies, leaders in their

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 42 of 144
industries, and companies we have known and followed for a number of years.
Top 80% of our portfolio tends to be filled with such names, and the remaining
20% with more speculative smaller names with a steeper risk/reward profile. In
either case, every investment we add to our portfolio has to satisfy our macro as
well as our fundamental value criteria. The beauty of investing globally is that
the scope is so large that we can always find interesting opportunities.
MOI: You are part of a somewhat rare breed of value-oriented investor who
places perhaps as much weight on top-down analysis as you do on analyzing the
fundamentals of specific companies. How do you identify the key themes that
will create or destroy value across industries or geographies?
Vucemilovic: Yes, we definitely combine top down with company
fundamentals. In my view they are two different but inseparable aspects of an
investment. This approach also helps us in finding new ideas because it turns
research into a reiterative process. A cheap stock standing apart from the rest of
its sector is rare. Usually, whatever is influencing its price is also acting on the
whole sector. We simply want to know what is driving value
creation/destruction in a sector and compare it to the level of market bias so that
we can determine whether it makes sense to expect that circumstances could
change in the foreseeable future.
In terms of identifying key themes, we read as widely as possible.
I have read Greenblatts Annual reports, industry journals, etc. We also maintain an extensive and
books and greatly admire his growing database of stocks grouped by sector and geography, ranging from the
work and track record. In our U.S. to the BRICs, and regularly update it and analyze for relative changes in
work we do similar screens, valuation. We pay particular attention to ROIC, P/E, and price to asset value
but with a bit more focus on metrics. This leads us to outliers in price performance and valuation. Every now
sustainably high ROICs. and then I also read those large 100+ page sell-side industry reports in order to
get up to speed on the main issues concerning a sector. Very bearish reports tend
Otherwise we would have a
to be the most interesting read.
portfolio full of cyclical or
dying businesses. Success really depends on the ability to link seemingly disconnected set
of events and figures and place each new piece of information in its proper
context. The best ideas often tend to be the simplest ones, in part because we
focus on easy-to-understand businesses. For example, we read about capacity
closures in one sector and shortages in another, or we notice that despite
improving fundamentals a sector or a country continues to trade at the same
level or at a discount to others, etc.
MOI: Your approach seems to incorporate elements of Joel Greenblatts magic
formula approach, including a focus on returns on capital. Once you identify a
business that is cheap and good based on the Greenblatt criteria, how do you
decide whether it is a good investment?
Vucemilovic: When I began my investment career I was obsessed with EVA
[economic value added] and the book called The Quest for Value.
Greenblatts magic formula screen took EVA concepts and simplified them,
similar to what Graham did with his statistical approach to stock selection based
on asset values. I have read Greenblatts books and greatly admire his work and
track record. In our work we do similar screens, but with a bit more focus on
sustainably high ROICs. Otherwise we would have a portfolio full of cyclical or
dying businesses.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 43 of 144
Deciding whether something is a good investment often comes down to
imagining how I would feel holding it in my portfolio for many years. I call this
the Buffett test. In the end, we are betting that a companys fundamentals are not
properly valued by the market. I can do various screens, due diligence, valuation
rituals, etc., but at the end of the day I have to believe in the companys business
model, the strength of their franchise, or sustainability of any of the value
drivers that have led it up to the point of our analysis. This is why we like to
own leading companies abroad and why we allocate a good portion of our
capital to quality U.S. names. Such stocks tend to have the best long-term track
record of creating risk-adjusted value for their shareholders.
MOI: To what extent do you employ short selling in your fund? What are the
key attributes you look for in a short sale candidate?
Vucemilovic: We run a long/short fund. Our ideal net exposure is around 30-
50%. In short selling we employ a lot of the same concepts as on the long side,
but we do use a different strategy. For example, about half of our shorts are
ETFs we believe are overextended, in sectors with inferior fundamentals and
without any apparent catalysts that could propel them higher. The rest are stocks
that share those same characteristics. While on the long side we tend to be quite
concentrated, with top ten positions carrying about two-thirds of the book, on
It took me a while to learn the short side we rarely assume a big position. Our big picture style of investing
to focus my time on drilling lends itself well to sector or country shorting, as opposed to making a bearish
down on the companies I bet on a single company, so we often pick a few related names and short them
know are good, and letting together in small increments. Its a difficult process that makes our work quite a
them perform, rather than bit more complicated, but we have found it extremely valuable.
diluting my research effort, MOI: In investing, good ideas are only one piece of the success equation.
time and capital on marginal Skilled portfolio management is indispensable. What are the biggest challenges
businesses for which I lack you face as a portfolio manager? How do you manage risk?
conviction. Finding what you Vucemilovic: I believe that the biggest challenge for any portfolio manager is to
are good at and pressing that develop a viable investment strategy and to have the discipline to stick to it.
to the maximum yields much Investing is a highly personal activity, a form of self-expression with very exact
better results than being results. It is highly unlikely that two people could share the same exact
decent at many things. investment style, risk tolerance, or way of thinking about stocks, which makes it
so important to find your own approach, perfect it and follow it. Otherwise, you
can easily get whipsawed by the market as you chase from one point of view to
another. For me personally, that translates to saying no to 90+% of stocks I
come across that seem cheap on some metrics but do not inherently fit my
investment style. It took me a while to learn to focus my time on drilling down
on the companies I know are good, and letting them perform, rather than
diluting my research effort, time and capital on marginal businesses for which I
lack conviction. Finding what you are good at and pressing that to the maximum
yields much better results than being decent at many things. However, finding
that one thing takes time and passion for investing.
In terms of risk management, I use a few simple rules such as keeping
my net exposures within a set range, not increasing the size of my positions
above 15% on the long side and 5% on the short side, and reducing risk taking
when drawdowns exceed certain pre-set limits. These and other simple rules
have served me well.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 44 of 144
MOI: What books have you read in recent years that have stood out as valuable
additions to your investment library?
Vucemilovic: In the last twelve months or so, I have focused on macroeconomic
classics in an attempt to make some sense of the macro picture. I found
Skidelskys biography of Keynes and Minskys Stabilizing an Unstable
Economy particularly helpful. I also liked The Origin of Wealth by
Beinhockerera very interesting book that is less about investing per se and
more about economy as an evolutionary system.
However, my all-time favorite list would have to include: The Quest for
Value by Stewart, The Intelligent Investor by Graham, Alchemy of Finance by
Soros, Business Cycles by Tvede, Trading Risk by Grant, and the entire Market
Wizards series by Schwager.
MOI: Marko, thank you very much for your time.

I found Skidelskys
biography of Keynes and
Minskys Stabilizing an
Unstable Economy
particularly helpful. I also
liked The Origin of Wealth
by Beinhockerera very
interesting book that is less
about investing per se and
more about economy as an
evolutionary system.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 45 of 144
Top Five Superinvestor Selections
Fair Isaac (FICO) Southeastern Minneapolis, MN, 612-758-5200
Technology: Software & Programming, Member of S&P MidCap 400 www.fico.com

Trading Data Consensus EPS Estimates Valuation


Price: $21.06 (as of 2/12/10) Month # of P/E FYE 9/30/09 16x
52-week range: $9.76 - $24.49 Latest Ago Ests P/E FYE 9/30/10 14x
Market value: $979 million This quarter $0.37 $0.35 4 P/E FYE 9/30/11 13x
Enterprise value: $1.2 billion Next quarter 0.37 0.37 5 P/E FYE 9/29/12 12x
Shares out: 46.5 million FYE 9/30/10 1.48 1.45 6 EV / LTM revenue 2.0x
Ownership Data FYE 9/30/11 1.58 1.56 6 EV / LTM EBITDA 9x
Insider ownership: 0% FYE 9/29/12 1.75 1.70 1 EV / LTM EBIT 9x
Insider buys (last six months): 2 LT EPS growth 7.5% 7.5% 2 P / tangible book n/m
Insider sales (last six months): 5 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 11%
# of institutional owners: 424 1/27/10 $0.37 $0.35 LTM pre-tax ROC >100%
Operating Performance and Financial Position
($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 9/30/03 9/30/04 9/30/05 9/30/06 9/30/07 9/30/08 9/30/09 12/31/09 12/31/08 12/31/09
Revenue 629 706 799 783 784 745 631 619 164 152
Gross profit 383 454 524 536 525 470 424 429 105 109
EBIT 174 180 193 154 160 122 117 128 20 32
Net income 107 103 135 104 105 84 65 71 12 18
Diluted EPS 1.41 1.31 1.86 1.60 1.94 1.64 1.34 1.46 0.25 0.37
Cash from ops 175 199 214 199 179 159 152 146 37 31
Capex 18 23 16 31 23 23 14 13 6 5
Free cash flow 156 176 198 168 157 136 138 133 31 27
Cash & investments 505 299 229 227 221 187 318 337 212 337
Total current assets 668 466 413 413 423 352 443 460 350 460
Intangible assets 552 825 803 786 740 739 706 704 711 704
Total assets 1,495 1,445 1,351 1,321 1,276 1,275 1,304 1,289 1,248 1,289
Short-term debt 0 0 0 400 391 0 0 0 0 0
Total current liabilities 98 120 138 537 526 123 115 114 106 114
Long-term debt 541 400 400 0 170 570 570 570 570 570
Total liabilities 646 528 546 551 710 713 704 702 698 702
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 850 917 805 770 566 562 600 587 550 587
EBIT/capital employed >100% >100% >100% >100% >100% >100% >100% >100% n/m n/m
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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 46 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA 1
FICO provides companies with products and services mainly YTD
to manage consumer credit risk. It has three segments: FYE September 30 2005 2006 2007 2008 2009 12/31/09
revenue 13% 3% -5% -5% -15% -7%
Applications: Preconfigured decision management products ending headcount -9% -2% 3% -12% -16% -11%
such as for client, fraud and insurance claims management. Revenue ($mn) 799 825 784 745 631 151
% of revenue by segment:
Scores: Includes FICO credit scores, which are distributed Applications 56% 55% 52% 52% 54% 61%
via credit reporting agencies and directly to individuals. Scores 21% 21% 23% 21% 21% 27%
Tools 6% 6% 7% 7% 8% 11%
Tools: Includes Blaze Advisor and Xpress Optimization Professional Services 17% 18% 19% 20% 18% 0%
software that clients use for custom decision management. Revenue growth by segment: 2
Applications 5% 1% -11% -4% -13% -2%
INVESTMENT HIGHLIGHTS Scores 17% 6% 2% -13% -16% -13%
Tools 23% -5% 12% 1% -6% -18%
Provides industry-standard FICO credit score, a Professional Services 39% 11% -1% 0% -25% n/m
measure of an individuals credit risk. 91 of the 100 EBIT margin by segment: 3
largest U.S. financial institutions and 50+ of the Applications 14% 19% 18% 16% 21% 15%
largest 100 banks worldwide use FICO scores for Scores 60% 63% 64% 58% 58% 53%
Tools 27% 6% 2% 15% 16% 4%
decisions on credit cards, mortgages and other debt.* Professional Services 14% 9% 5% 0% -5% n/m
Exploiting other business opportunities/verticals. Total EBIT margin 27% 24% 23% 20% 22% 23%
FICO sells products for credit card fraud detection % of revenue by geography:
and insurance claims management, among others. U.S. 75% 72% 69% 67% 68% n/a
International 25% 28% 31% 33% 32% n/a
Clients include over 400 insurers, 200 retailers, 100 Selected items as % of revenue:
public agencies, and 150 healthcare companies. Gross profit 66% 66% 67% 63% 67% 72%
60% of costs are staff-related. The variable cost R&D 10% 10% 9% 10% 12% 13%
structure has enabled FICO to keep EBIT margin Net income 17% 13% 14% 11% 10% 12%
D&A 6% 6% 6% 5% 6% 5%
relatively stable despite ongoing revenue pressure. Capex 2% 4% 3% 3% 2% 3%
Headcount is down 26% since yearend 2007. shares out (avg) -5% -4% -12% -13% -1% -2%
Owns 86 patents. While FICOs scoring model 1
Effective October 1, 2009, FICO consolidated reporting from four segments to
three, with the Professional Services segment now combined with one of the
relies on third-party consumer credit data, it creates three segments to which the services relate and the myFICO B2C service now
the credit score based on patented algorithms. included within the Scores segment (within Applications previously).
2
Repurchased 1.7 million shares for $33 million in 3
YTD revenue change is based on new reporting segment structure.
Segment margins include intangible amortization and exclude share-based
1Q10. Share count is down by a third since 2004. compensation. Total margin excludes intangible amortization and includes
Guiding for high single-digit percentage share-based compensation. Both exclude restructuring expenses and gain/loss
on assets sales. YTD margins are estimated to conform to historical reporting
growth in FY10 GAAP EPS (FY09 EPS: $1.34). (YTD corp. overhead of $16.5 million allocated to segments based on revenue).
12% FCF yield based on annualized F1Q10 FCF.
Relies on third-party distributors such as credit
INVESTMENT RISKS & CONCERNS reporting agencies. Equifax, TransUnion and
Is competitive moat narrowing? While FICO Experian accounted for 19% of fiscal 2009 revenue.
scores are widely used, their predictive power is $570 million of debt and $382 million of cash
debatable. U.S. consumer credit problems may including marketable securities.
highlight the brands shortcomings and invite rivals.
MAJOR HOLDERS
76% of revenue derived from transactional or CEO Greene <1% | Other insiders 3% | Southeastern 20% |
unit-based pricing during fiscal 2009. As lending
BlackRock 7% | Barclays 7% | Royce 6% | Sandell 5%
is curtailed worldwide, FICOs revenue declines
because it is largely dependent on lending volumes RATINGS
such as credit card usage and loan originations. VALUE Intrinsic value materially higher than market value?
Various sources of competition including lenders MANAGEMENT Capable and properly incentivized?
in-house analytics, rival credit scores (such as from FINANCIAL STRENGTH Solid balance sheet?
Equifax, Experian and TransUnion), and software MOAT Able to sustain high returns on invested capital?
and consulting firms more generally (e.g. IBM). EARNINGS MOMENTUM Fundamentals improving?
*
Source: FICO 2009 10-K. For more information on FICO scores, see
MACRO Poised to benefit from economic and secular trends?
http://www.myfico.com/CreditEducation/CreditScores.aspx EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
FICO has leveraged the success of its industry-leading credit score brand to create products in related areas and non-financial
verticals. These diversification efforts, and a variable cost structure, have dampened the impact of lower demand for high-
margin credit scores following a decline in worldwide lending volumes. Longer term, it remains to be seen if the FICO score
can withstand shortcomings associated with its predictive power and challenges from rival products. With shares trading on a
10%+ free cash flow yield, the market may be too pessimistic regarding the durability of FICOs competitive moat.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 47 of 144
additional insight into Fair Isaac:

SLIDES FROM COMPANY PRESENTATION, JANUARY 2010

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 48 of 144
additional insight into FICO scores:

Source: Board of Governors of the Federal Reserve System: Report to the Congress on Credit Scoring and Its Effects on the Availability and Affordability
of Credit, submitted to the Congress pursuant to section 215 of the Fair and Accurate Credit Transactions Act of 2003, August 2007, page 133.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 49 of 144
Hyatt Hotels (H) Pershing Square Chicago, IL
Services: Business Services www.hyatt.com

Trading Data Consensus EPS Estimates Valuation


Price: $29.34 (as of 2/12/10) Month # of P/E FYE 12/31/08 67x
52-week range: $25.75 - $32.24 Latest Ago Ests P/E FYE 12/31/09 n/m
Market value: $4.9 billion This quarter -$0.06 -$0.06 11 P/E FYE 12/31/10 n/m
Enterprise value: $4.6 billion Next quarter -0.06 -0.07 7 P/E FYE 12/31/11 122x
Shares out: 168.0 million FYE 12/31/09 -0.22 -0.21 10 EV / LTM revenue 1.3x
Ownership Data FYE 12/31/10 -0.01 0.00 12 EV / LTM EBITDA 13x
Insider ownership: 77% FYE 12/31/11 0.24 0.26 11 EV / LTM EBIT n/m
Insider buys (last six months): 8 LT EPS growth 8.5% 8.5% 2 P / tangible book 1.1x
Insider sales (last six months): 2 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 2% Date Actual Estimate LTM EBIT yield -1%
# of institutional owners: 50 11/14/09 $0.05 n/a LTM pre-tax ROC -2%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE
per share data) 12/31/06 12/31/07 12/31/08 6/30/09 6/30/09
Revenue 3,471 3,738 3,837 3,465 1,637
Gross profit 794 891 903 686 296
EBIT 352 324 278 (29) (57)
Net income 315 270 168 132 (36)
Diluted EPS 1.15 0.98 0.44 (0.37) (0.14)
Cash from ops 358 386 291 61 (230)
Capex 326 377 258 104 (154)
Free cash flow 32 9 33 (43) (76)
Cash & investments 409 428 968 968
Total current assets 1,065 1,057 1,529 1,529
Intangible assets 607 436 463 463
Total assets 6,248 6,119 6,739 6,739
Short-term debt 26 38 17 17
Total current liabilities 697 653 574 574
Long-term debt 1,288 1,209 595 595
Total liabilities 2,814 2,555 1,865 1,865
Preferred stock 0 0 0 0
Common equity 3,434 3,564 4,874 4,874
EBIT/capital employed 19% 8% -2% n/m

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 50 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA
Hyatt owns, leases, manages, or franchises ~120,000 rooms YTD
in 415 hotels globally. Jay Pritzker founded Hyatt in 1957. FYE December 31 2006 2007 2008 9/30/09
revenue 10% 8% 3% -17%
The controlling Pritzker family sold 44 million Class A Revenue ($bn) 3.5 3.7 3.8 2.4
shares at $25 per share in an IPO in November 2009. % of revenue by segment:
Owned/leased hotels 54% 55% 56% 54%
Management/franchising North America 38% 37% 36% 40%
INVESTMENT HIGHLIGHTS Management/franchising International 5% 6% 5% 4%
Owner/manager business model. Hyatt owns Corporate 4% 3% 3% 2%
and/or manages over 85% of total Hyatt-branded EBITDA margin by segment:
properties as measured by number of rooms. Owned/leased hotels 23% 25% 24% 17%
Management/franchising North America 13% 12% 12% 9%
Competes mainly in upper upscale segment. * Management/franchising International 58% 53% 50% 36%
Hyatt Regency and Hyatt brands account for 59% of Corporate -2% -2% -3% -2%
total rooms, with Grand Hyatt representing another Total EBITDA margin 18% 19% 18% 12%
% of revenue by geography:
17%. Other major segments include upscale (Hyatt U.S. 82% 81% 80% n/a
Place: 15% of rooms) and luxury (Park Hyatt: 4%). International 18% 19% 20% n/a
Owns 96 properties or 23% of total, and 22% of % of total rooms/units by type:
rooms. Net PP&E is $3.6 billion fair value may Owned/leased 1 25% 25% 24% 24%
Managed 2 66% 65% 64% 61%
be materially higher. H also manages 27 properties Franchised 7% 8% 10% 13%
owned or leased by unconsolidated ventures. Other 3 2% 2% 2% 2%
Opportunities in franchising/global expansion. Selected items as % of revenue:
Hyatt derives only 13% of revenue from franchising EBIT 4 12% 13% 11% 4%
Net income 9% 7% 4% -1%
and 20% of revenue from outside the U.S. World- D&A 6% 6% 6% 8%
recognizable brands represent a growth platform. Capex 9% 10% 7% 6%
Nine million Hyatt Gold Passport members. YTD Owned/leased hotels operating metrics:
through September 2009, new enrollment in Hyatts Average Daily Rate (ADR) $155 $173 $175 $154
Occupancy 67% 68% 70% 66%
loyalty club grew 20% year-on-year. Members Revenue Per Available Room (RevPAR) 5 $103 $117 $122 $101
represented 23% of total room nights in the period. RevPAR n/a 13% 4% -22%
Strong balance sheet with $567 million of pro- 1
shares out (avg) 19% -2% -5% 13%
Hyatt owns 90% of owned/leased rooms at 9/30/09; all are managed by Hyatt.
forma net cash at September 30, 2009 (including 2
Includes properties owned or leased by unconsolidated hospitality ventures.
$127 million from sale of 5.7 million IPO shares). 3
Includes vacation ownership properties and residences, all of which are
Shares trade at 1.1x tangible book. managed by Hyatt (some are owned by Hyatt).
4
Excludes gains on sales of real estate, asset impairments and discontinued
operations and changes in accounting principles, net of tax. Includes Hyatt's
INVESTMENT RISKS & CONCERNS share of operating income generated by unconsolidated hospitality ventures.
5
RevPAR is the product of ADR (excludes non-room revenue) and occupancy.
High capital intensity. Hyatts owner/manager
business model ties up significant capital and MAJOR HOLDERS
exposes it more to the cyclicality of the lodging Shares outstanding: 43.7 million class A shares (H; one vote
industry relative to franchise-focused models. per share) and 130.0 million class B shares (ten votes). The
22% RevPAR decline at owned/leased hotels Pritzker family owns 104.9 million class B shares, giving it
YTD through September 2009 reflects ongoing 60% of total shares and 78% of voting power.
weak economy and reduced travel worldwide.
Economic stake: Pritzker family 60% | Other insiders <1% |
Pritzker family has 78% voting control. Thomas
GS 7% | Madrone 6% | Abu Dhabi 3% | Singapore govt 2%
Pritzker (59) is executive chairman since 2004.
*
Based on branded hotel categorization per http://www.strglobal.com RATINGS
COMPARABLE PUBLIC COMPANY ANALYSIS VALUE Intrinsic value materially higher than market value?
MV EV EV / P / T. This Next MANAGEMENT Capable and properly incentivized?
($mn) ($mn) Rev. Book FY P/E FY P/E FINANCIAL STRENGTH Solid balance sheet?
MAR 9,590 12,120 1.1x n/m 30x 24x MOAT Able to sustain high returns on invested capital?
HOT 6,900 9,770 2.1x n/m 56x 36x EARNINGS MOMENTUM Fundamentals improving?
IHG 4,130 5,290 3.4x n/m 16x 21x MACRO Poised to benefit from economic and secular trends?
H 4,930 4,570 1.3x 1.1x n/m n/m EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
Hyatt distinguishes itself from other global hotel chains through its high asset backing, net cash position, and an interested
and active owner in the Pritzker family. Based on the power of the Hyatt brand, the company can create shareholder value by
following a strategy of franchising and international expansion. As this would reduce capital intensity and improve earnings
quality, it should enable significant return of capital to shareholders. On this basis, shares are undervalued. Change may be
slow, however, given weak lodging industry prospects, tight credit markets, and voting control by the Pritzker family.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 51 of 144
additional insight into Hyatt:

OVERVIEW OF HOSPITALITY BRANDS

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 52 of 144
additional insight into Hyatt:

U.S. Lodging Industry RevPAR Growth


(1988-2008)

Source: Smith Travel Research (per Hyatt IPO prospectus).

Global Lodging Industry Percentage Change in ADR, Occupancy and RevPAR


(YTD September 2009 vs. YTD September 2008)

Source: Smith Travel Research (per Hyatt IPO prospectus).

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 53 of 144
Investors Title (ITIC) Markel Gayner Chapel Hill, NC, 919-968-2200
Financial: Insurance (Property & Casualty)

Trading Data Consensus EPS Estimates Valuation


Price: $35.41 (as of 2/12/10) Month # of P/E FYE 12/31/08 n/m
52-week range: $17.14 - $35.86 Latest Ago Ests P/E FYE 12/31/09 15x
Market value: $81 million This quarter $0.34 $0.34 1 P/E FYE 12/31/10 19x
Enterprise value: $72 million Next quarter n/a n/a n/a P/E FYE 12/31/11 n/a
Shares out: 2.3 million FYE 12/31/09 2.31 2.31 1 EV / LTM revenue 1.0x
Ownership Data FYE 12/31/10 1.90 1.90 1 EV / LTM EBITDA n/m
Insider ownership: 24% FYE 12/31/11 n/a n/a n/a EV / LTM EBIT 80x
Insider buys (last six months): 0 LT EPS growth 4.0% 4.0% 1 P / tangible book 0.8x
Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 30% Date Actual Estimate LTM EBIT yield 1%
# of institutional owners: 44 10/30/09 $0.42 $0.73 LTM pre-tax ROC n/m

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 9/30/09 9/30/08 9/30/09
Revenue 73 91 80 88 85 85 71 69 18 16
Gross profit 34 42 43 49 51 46 28 17 9 8
EBIT 12 16 16 19 17 12 (3) 1 1 1
Net income 8 11 11 13 13 8 (1) 2 1 1
Diluted EPS 3.12 4.18 4.09 5.10 5.14 3.35 (0.50) 0.24 0.39 0.42
Cash from ops 13 17 15 17 19 10 1 2 4 4
Capex 1 1 2 2 2 1 1 1 0 0
Free cash flow 12 16 13 16 17 10 1 1 4 4
Cash & investments 4 5 5 15 4 3 5 9 6 9
Total current assets 0 0 0 0 0 0 0 0 0 0
Intangible assets 0 0 0 0 0 0 0 0 0 0
Total assets 85 101 113 129 144 150 140 146 142 146
Short-term debt 0 0 0 0 0 0 0 0 0 0
Total current liabilities 0 0 0 0 0 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 0 0 0 0
Total liabilities 32 37 41 44 48 50 50 48 48 48
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 53 63 73 84 95 99 90 98 93 98
EBIT/capital employed >100% n/m n/m n/m n/m >100% -427% n/m n/m n/m

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 54 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA
Investors Title primarily provides title insurance in the U.S. FYE December 31 2005 2006 2007 2008 2009
tangible equity per share 1 14% 15% 9% -4% 9%
net premiums written 7% -8% 0% -9% -2%
INVESTMENT HIGHLIGHTS revenue 10% -4% 0% -16% 0%
Regional U.S. title insurer. Investors Title has less Revenue ($mn) 88 85 85 71 71
than 1% share of total industry premiums written.* Selected items as % of revenue:
National firms such as Fidelity National (44%) and Pre-tax income 21% 20% 14% -5% 8%
Net income 15% 16% 10% -2% 7%
First American (27%) dominate the industry, with
Selected items as % of total assets:
regional firms having less than 10% market share. Investments 74% 85% 86% 83% 84%
Title insurance protects real estate owners and Cash and equivalents 11% 2% 2% 4% 6%
lenders against property loss due to defects in the Claims reserves 27% 26% 25% 28% 27%
title to the property. Customers include developers, Shareholders equity 66% 66% 66% 64% 66%
% of revenue by segment:
home buyers/sellers, and real estate lenders/brokers. Title insurance services 93% 90% 90% 93% n/a
Provides a non-discretionary service. U.S. lenders Exchange services 5% 7% 5% 2% n/a
generally require title insurance before making a Other and eliminations 2% 3% 5% 5% n/a
property loan to assure them of their lien position. Pre-tax income margin by segment:
Title insurance services 18% 16% 10% -5% n/a
Grew tangible book value per share 50% since Exchange services 79% 76% 65% -1% n/a
yearend 2004 (with dividends added back), despite Other and eliminations 0% 0% 2% 0% n/a
challenges due to the real estate market decline. Selected title insurance metrics:
Claims provision 2 11% 11% 15% 24% 14%
4Q09 net premiums written rose 1% reversing the
Net premiums written ($mn) 77 70 70 64 62
7% y-y decline recorded in the third quarter. The % of net premiums written by sales channel:
company was slightly profitable in the 4Q. Branch 45% 46% 43% 38% 35%
$124 million of investments at yearend 2009. Agency 55% 54% 57% 62% 65%
About 60% is invested in government debt, 15% in Return on tang. equity (avg) 17% 15% 9% -1% 5%
Tang. equity to assets (avg) 65% 66% 66% 65% 65%
corporate debt and rest in equity and short-term shares out (avg) 3% -1% -2% -5% -3%
investments (based on breakdown as of 9/30/09). 1
With dividends added back.

2
$9 million of cash and no debt at yearend 2009. As a percentage of net premiums written.

Shares trade on 0.8x tangible book (12/31/09).


COMPARABLE PUBLIC COMPANY ANALYSIS
INVESTMENT RISKS & CONCERNS MV EV EV / P / T. This Next
($mn) ($mn) Rev. Book FY P/E FY P/E
Expect downward pressure on future
FNF 3,180 3,750 .6x 3.0x 14x 11x
premiums. Based on management comments in
FAF 2,980 2,790 .5x 98.3x 15x 16x
the 4Q09 earnings release, the recent elevated pace
ORI 2,470 2,790 .8x .6x 66x 11x
of mortgage refinance activity will likely recede,
STC 200 400 .3x 1.0x n/m 31x
absent further declines in interest rates and as
ITIC 80 70 1.0x .8x 15x 19x
government stimulus programs come to an end.
Are provisions for title losses adequate? Claims
MAJOR HOLDERS
provision as a percentage of net premiums written
Fine family insiders 20 % | Other insiders 4% | Markel 10% |
was 14% in 2009, down from 24% in 2008. Known
DFA 6% | London Co. 5% | Bridgeway 2% | Vanguard 1%
title claims represented only 17% of total claims
reserve of $39 million as of September 30, 2009.
RATINGS
North Carolina represents 44% of net premiums
VALUE Intrinsic value materially higher than market value?
based on premiums written in 2009. South Carolina
MANAGEMENT Capable and properly incentivized?
and Virginia contributed another 9% and 8%. The
FINANCIAL STRENGTH Solid balance sheet? 1
company is vulnerable to the regional economy.
MOAT Able to sustain high returns on invested capital?
Adequate scale? While Investors Title benefits
EARNINGS MOMENTUM Fundamentals improving?
from local focus, it may have difficulty competing
MACRO Poised to benefit from economic and secular trends?
against larger scale, national rivals over time.
*
EXPLOSIVENESS 5%+ probability of 5x upside in one year?
Source: American Land Title Association (http://www.alta.org) 1
While the company has no debt, it is difficult to assess reserve adequacy.

THE BOTTOM LINE


Investors Title is a U.S. title insurer providing a non-discretionary service for real estate industry participants, primarily along
the East Coast. As residential and commercial real estate transactions drive demand for title insurance, business has suffered
in the real estate downturn. Despite unprecedented challenges facing the company, tangible book value per share is up 50%
since yearend 2004 (with dividends added back). While this may raise the question of the adequacy of loss reserves,
management has strengthened claims provisions in the past three years. Trading at 0.8x tangible book, shares appear
undervalued based on prospects for a potential recovery in transaction volume and/or pricing in the U.S. real estate market.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 55 of 144
Republic Airways (RJET) Greenlight Indianapolis, IN, 317-484-6000
Transportation: Airline www.rjet.com

Trading Data Consensus EPS Estimates Valuation


Price: $5.31 (as of 2/12/10) Month # of P/E FYE 12/31/08 2x
52-week range: $4.10 - $10.64 Latest Ago Ests P/E FYE 12/31/09 5x
Market value: $183 million This quarter $0.06 $0.08 5 P/E FYE 12/31/10 7x
Enterprise value: $2.3 billion Next quarter -0.01 0.13 2 P/E FYE 12/31/11 2x
Shares out: 34.4 million FYE 12/31/09 0.99 1.01 5 EV / LTM revenue 1.7x
Ownership Data FYE 12/31/10 0.75 1.38 5 EV / LTM EBITDA 6x
Insider ownership: 1% FYE 12/31/11 2.74 2.74 1 EV / LTM EBIT 12x
Insider buys (last six months): 0 LT EPS growth 10.0% 10.0% 1 P / tangible book 0.4x
Insider sales (last six months): 2 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 86% Date Actual Estimate LTM EBIT yield 9%
# of institutional owners: 256 11/4/09 $0.09 $0.29 LTM pre-tax ROC 7%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 9/30/09 9/30/08 9/30/09
Revenue 356 492 646 905 1,143 1,293 1,480 1,344 385 360
Gross profit 162 239 300 442 576 687 789 801 193 208
EBIT 30 83 91 159 213 230 255 198 60 37
Net income 7 36 39 61 80 83 85 41 17 3
Diluted EPS 0.35 1.73 1.63 1.66 1.82 2.02 2.42 1.12 0.50 0.09
Cash from ops 43 92 117 171 229 281 242 186 63 34
Capex 26 37 64 179 89 100 128 71 31 7
Free cash flow 17 55 52 (8) 140 181 115 115 31 27
Cash & investments 3 23 46 162 196 164 130 86 134 86
Total current assets 33 64 83 216 263 254 371 417 378 417
Intangible assets 13 13 13 13 13 13 13 84 13 84
Total assets 390 670 1,172 2,036 2,358 2,773 3,237 3,412 3,102 3,412
Short-term debt 55 48 47 74 87 132 196 157 208 157
Total current liabilities 94 102 117 159 203 277 356 436 376 436
Long-term debt 224 438 804 1,340 1,482 1,782 2,082 2,072 1,955 2,072
Total liabilities 355 597 997 1,611 1,850 2,347 2,761 2,915 2,646 2,915
Preferred stock 5 0 0 0 0 0 0 0 0 0
Common equity 30 72 175 425 509 426 476 496 456 496
EBIT/capital employed 10% 20% 12% 12% 12% 11% 10% 7% n/m n/m

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 56 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA excl. FRONTIER/MIDWEST
Republic is a U.S. domestic airline, established in 1974. The YTD
FYE December 31 2005 2006 2007 2008 9/30/09
company flies for five legacy carriers under their brands, and
Number of aircraft in operation:
since 2009 owns the branded carriers Frontier and Midwest. Owned 90 109 131 149
Republic operates 286 aircraft and 1,600 daily flights. Leased 52 62 88 79 } 192
% of revenue by network carrier:
INVESTMENT HIGHLIGHTS US Airways 21% 24% 22% 25% n/a
United 32% 30% 24% 21% n/a
Long term, fixed-fee contractual relationships Delta 34% 35% 33% 29% n/a
with five major carriers. The deals eliminate Continental 0% 0% 10% 12% n/a
Republics exposure to fuel price fluctuations, fare American 13% 11% 9% 10% n/a
Frontier, Midwest, etc. 0% 0% 2% 3% n/a
competition and passenger volumes (pre-tax margin
Selected growth metrics:
guidance of 7.5-8.5% in 2010E). The average Revenue 40% 26% 13% 14% -1%
remaining term of the deals is eight years. 60% of Headcount 33% 21% 26% -3% n/a
Republics fleet is dedicated to fixed-fee operations. Passengers carried
1
34% 39% 29% 16% 0%
Acquired two well- branded carriers in 2009. Rev passenger miles 47% 47% 29% 13% 0%
Available seat miles2 42% 40% 26% 15% 0%
Frontier has $1.3 billion in revenue and ranks #2 in Pass. load factor3 4% 6% 3% -2% 0%
Denver, while Midwest has $400 million in revenue Rev. per seat mile4 -1% -9% -10% 0% -1%
and ranks #1 in Milwaukee and #3 in Kansas City. Avg trip length (miles) 10% 6% 0% -3% -3%
Relatively diversified carrier customer base, with Selected items as a % of total revenue:
EBIT6 18% 19% 18% 17% 18%
roughly one-quarter of revenue from Delta, United, Net income6 7% 7% 6% 6% 4%
US Airways, and others (Continental, American). D&A 7% 8% 8% 9% 11%
Growth could come from (1) trend toward larger, Capex5 14% 8% 8% 9% 3%
higher-margin aircraft (70+ seats vs. 35-50 seats); shares out 54% 18% -4% -14% -2%
1
Passengers carried multiplied by miles flown.
(2) share gains due to low cost structure;* and (3) 2
Passenger seats available multiplied by miles flown.
3
potential move from hub model to point-to-point. 4
Revenue passenger miles divided by available seat miles.
Bryan Bedford (47) became CEO in 1999. He has 5
Total airline operating revenues divided by available seat miles.
Higher capex in 05 due to purchase of commuter slots and 35 Embraer jets.
6
20+ years of regional airline experience, having YTD 2009 EBIT and net margin exclude impairment of goodwill.
previously served as CEO of Mesaba Holdings.
~$5 per share in unrestricted cash. Only $85 COMPARABLE PUBLIC COMPANY ANALYSIS
million of $2.7 billion of total debt is recourse debt. MV EV EV / P / T. This Next
Trades at .4x tangible book and 7x 2010E ($mn) ($mn) Rev. Book FY P/E FY P/E
consensus EPS (guidance is $0.42-0.90 for FY10). SKYW 780 1,820 .7x .6x 8x 7x
PNCL 160 670 .8x 2.5x 7x 6x
INVESTMENT RISKS & CONCERNS XJT 60 20 .0x .4x n/a n/a
Acquisitions of Frontier and Midwest change RJET 180 2,320 1.7x .4x 5x 7x
business model, adding exposure to fuel prices, fare
competition and passenger volumes. While RJET MAJOR HOLDERS
may have purchased Frontier and Midwest cheaply, CEO Bedford 3% | Other insiders 2% | Greenlight 10% |
the purchases can also be seen as defensive, as both DFA 10% | TPG 7% | Royal 6% | Kleinheinz 3%
companies were Republic customers. Bankrupt RATINGS
Frontier had rejected its airline services agreement, VALUE Intrinsic value materially higher than market value?
resulting in an unsecured claim of $150 million. MANAGEMENT Capable and properly incentivized?
Vulnerable to weak financial position of network FINANCIAL STRENGTH Solid balance sheet?
partners. If any of the companys carrier partners MOAT Able to sustain high returns on invested capital?
file for bankruptcy, fixed-fee codeshare agreements EARNINGS MOMENTUM Fundamentals improving?
can be terminated or renegotiated at lower margins. MACRO Poised to benefit from economic and secular trends?
Republic has loaned money to its customers in the EXPLOSIVENESS 5%+ probability of 5x upside in one year?
past, including $35 million to US Airways. *
CASM of 7.61 versus 9.00 at SKYW and 9.25 at PNCL. CASM is
Fixed-fee ops stable but shrinking over time, calculated as operating expense and interest expense (less fuel) divided by
reflecting a low to no growth market (Republic). available seat miles. Data shown is for CQ3 2009, based on public filings.

THE BOTTOM LINE


Republic Airways has undergone a transformation over the past twelve months, acquiring two well-established but distressed
branded airlines, Frontier and Midwest, which have been Republic customers. The purchases add a branded, risk-based
model to Republics traditional business of flying for major network carriers under their brands. The latter model eliminated
Republics exposure to fuel prices, fares and load factors, giving it a stable pre-tax profit margin. While Republic retains the
fixed-fee business, growth is likely to be driven by branded operations. We note that only $85 million of Republics $2.7
billion in debt is recourse to the company; unrestricted cash amounts to ~$5 per share. The risk-reward seems compelling.

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additional insight into Republic Airways:

SLIDES FROM COMPANY PRESENTATION, FEBRUARY 2010

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additional insight into Republic Airways:
PRO FORMA BALANCE SHEET includes Republic, Midwest Airlines and Frontier Airlines (as of September 30, 2009)
(In thousands) Historical Combined Combined
Republic & Historical Pro Forma Pro Forma
Frontier
ASSETS Midwest Bal. Sheet Adjustments Bal. Sheet
Cash and cash equivalents $ 85,525 $ 53,918 $ 139,443 $ (28,750) (B) $ 110,693
Restricted cash 63,188 165,849 229,037 - 229,037
Receivablesnet 36,777 35,587 72,364 - 72,364
Inventoriesnet 64,059 13,156 77,215 (1,257) (C) 75,958
Prepaid expenses and other current assets 22,090 18,947 41,037 (4,907) (A) (D) 36,130
Notes receivablenet of allowance 78,636 - 78,636 (43,104) (E) 35,532
Assets held for sale 31,624 - 31,624 528 (A) (F) 32,152
Deferred income taxes 35,212 - 35,212 6,829 (G) 42,041
Total current assets 417,111 287,457 704,568 (70,661) 633,907
Aircraft and other equipmentnet 2,705,376 559,832 3,265,208 (61,233) (H) 3,203,975
Security and other deposits - 27,960 27,960 (27,960) (A) -
Prepaid maintenance payments - 137,452 137,452 (137,452) (A) -
Aircraft pre-delivery payments - 5,489 5,489 (5,489) (A) -
Restricted cash - 2,987 2,987 (2,987) (A) -
Deferred loan fees and other assets - 7,816 7,816 (7,816) (A) (K) -
Intangible and other assets 205,008 - 205,008 (205,008) (I) -
Intangible assetsnet - - - 172,464 (I) (J) 172,464
Other assets - - - 289,354 (A) (I) 289,354
Goodwill 84,143 - 84,143 - 84,143
Total assets $ 3,411,638 $ 1,028,993 $ 4,440,631 $ (56,788) $ 4,383,843
LIABILITIES AND STOCKHOLDERS EQUITY
Current portion of long-term debt $ 157,133 $ 25,053 $ 182,186 $ 14,115 (A) $ 196,301
Accounts payable 39,338 65,210 104,548 - 104,548
Air traffic liability 41,950 138,245 180,195 (26,262) (A) (L) 153,933
Short term borrowings - 14,115 14,115 (14,115) (A) -
Debtor-in-Possession loan - 40,000 40,000 (40,000) (M) -
Deferred frequent flyer revenue 15,117 - 15,117 31,252 (A) (N) 46,369
Other deferred revenue - 12,863 12,863 (12,863) (A) -
Deferred income taxes - 24,005 24,005 (24,005) (G) -
Accrued liabilities 181,929 55,785 237,714 3,095 (A) (O) 240,809
Total current liabilities 435,467 375,276 810,743 (68,783) 741,960
Long-term debtless current portion 2,071,998 303,226 2,375,224 (11,067) (A) (P) 2,364,157
Deferred frequent flyer revenue 47,745 - 47,745 64,424 (A) (N) 112,169
Deferred credits and other noncurrent liabilities 101,630 16,763 118,393 (16,763) (Q) 101,630
Other note payable - 3,000 3,000 (3,000) (A) -
Deferred income taxes 258,377 26,401 284,778 179,093 (G) 463,871
Total liabilities not subject to compromise 2,915,217 724,666 3,639,883 143,904 3,783,787
Liabilities subject to compromise - 28,750 28,750 (28,750) (B) -
Total liabilities 2,915,217 753,416 3,668,633 115,154 3,783,787
Common stock 44 37 81 (37) (R) 44
Additional paid-in capital 298,017 236,131 534,148 (236,131) (R) 298,017
Treasury stock (181,820) - (181,820) - (181,820)
Accumulated other comprehensive loss (2,284) - (2,284) - (2,284)
Accumulated earnings/(deficit) 382,464 39,409 421,873 64,226 (R) (S) 486,099
Total equity 496,421 275,577 771,998 (171,942) 600,056
Total $ 3,411,638 $ 1,028,993 $ 4,440,631 $ (56,788) $ 4,383,843
(A) Reflects a reclassification of certain Frontier assets and liabilities reported under the Frontier financial statement classifications to Republics classifications.
(B) Represents adjustment of $28,750 to reduce cash reflecting the settlement of Frontiers liabilities subject to compromise as set out in Plan of Reorganization.
(C) Adjustment reflects a decrease of $1,257 to report Frontier's inventories at their preliminary estimated fair value.
(D) Adjustment reflects a reduction of $4,321 to report prepaid expenses for Frontier at the preliminary estimated fair value.
(E) Reflects the repayment and elimination of Republics $43,104 debtor-in-possession (DIP) loan due from Frontier ($40,000 in principal and $3,104 in interest).
(F) Adjustment reflects a reduction of $58 to record Frontiers assets held for sale at the preliminary estimated fair value.
(G) Adjustment reflects an increase in the Companys preliminary estimate of the deferred taxes as of the acquisition date.
(H) Adjustment reflects the decrease of $61,233 to Frontier's aircraft and other equipment to record the assets at the preliminary estimated fair value.
(I) Republics intangibles and other assets were adjusted to separate the identifiable intangible assets from other long term assets.
(J) An increase of intangible assets of $79,400 reflects the increase in the preliminary estimated value of slots, trademarks, and credit card agreements at Frontier.
(K) Adjustment reflects a reduction of $4,294 to write off Frontier's deferred financing costs as a result of the application of accounting for business combinations.
(L) Adjustment reflects the preliminary estimate of the fair value of Frontiers air traffic liability in the amount of $21,866.
(M) Reflects the repayment and elimination of the principal balance of the $40,000 debtor-in-possession (DIP) loan payable to Republic.
(N) Reflects an adjustment of $91,280 to record the frequent flyer liability to the preliminary estimate of fair value. $31,252 is classified as current.
(O) Adjustment reflects elimination of accrued interest expense from DIP loan, elimination of co-branded credit card deferred revenue and other deferred revenue.
(P) Adjustment reflects decrease of $14,067 to long-term debt to adjust the balance to the preliminary estimate of fair value.
(Q) Adjustment reflects removal of $11,633 related to deferred rents, elimination of co-branded card deferred revenue and reclassification of deferred revenue.
(R) Adjustment reflects elimination of Frontiers shareholders deficit.
(S) Adjustment reflects the amount that the fair values of assets acquired exceeds the assumed liability and purchase price by $166,964 less the tax impact.

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Vodafone (VOD) Greenlight Berkshire, EN, United Kingdom, 44-016-353-325
Services: Communications Services www.vodafone.com

Trading Data Consensus EPS Estimates Valuation


Price: $21.91 (as of 2/12/10) Month # of P/E FYE 3/31/09 24x
52-week range: $15.46 - $24.04 Latest Ago Ests P/E FYE 3/31/10 9x
Market value: $115.3 billion This quarter n/a n/a n/a P/E FYE 3/31/11 9x
Enterprise value: $171.0 billion Next quarter n/a n/a n/a P/E FYE 3/30/12 8x
Shares out: 5,261.6 million FYE 3/31/10 2.38 2.48 3 EV / LTM revenue 2.6x
Ownership Data FYE 3/31/11 2.48 2.42 3 EV / LTM EBITDA 34x
Insider ownership: 0% FYE 3/30/12 2.62 2.73 1 EV / LTM EBIT 34x
Insider buys (last six months): 0 LT EPS growth 4.6% 3.0% 2 P / tangible book 7.4x
Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 9% Date Actual Estimate LTM EBIT yield 3%
# of institutional owners: 820 n/a n/a n/a LTM pre-tax ROC 41%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 3/31/03 3/31/04 3/31/05 3/31/06 3/31/07 3/31/08 3/31/09 9/30/09 9/30/07 9/30/09
Revenue 47,412 52,382 33,356 45,812 48,550 55,377 64,023 67,067 26,526 33,967
Gross profit 19,478 22,005 (10,041) 19,168 19,322 21,209 23,687 23,933 10,586 11,935
EBIT (9,039) (6,612) (15,940) (21,984) (2,441) 15,682 9,142 5,057 8,129 9,471
Net income (14,134) (12,685) (21,465) (34,209) (8,352) 10,396 4,804 17,588 5,135 7,524
Diluted EPS (2.37) (2.13) (2.15) (4.32) (1.40) 1.95 0.91 1.71 0.97 1.43
Cash from ops 16,311 20,123 17,137 18,483 16,121 16,349 19,063 2,917 (8,535) (8,560)
Capex 8,410 7,069 7,770 8,071 7,074 7,333 10,876 2,407 (3,606) (5,001)
Free cash flow 7,901 13,054 9,367 10,411 9,047 9,016 8,187 510 (4,929) (3,559)
Cash & investments 1,196 9,038 5,952 4,477 11,802 2,747 8,003 5,835 4,528 5,835
Total current assets 13,410 20,524 14,690 11,757 20,000 13,617 20,337 19,733 14,160 19,733
Intangible assets 168,709 146,134 151,637 107,886 87,834 109,779 116,970 121,225 99,964 121,225
Total assets 254,798 229,652 229,758 197,824 171,100 198,655 238,346 241,663 182,952 241,663
Short-term debt 2,232 3,206 3,127 5,382 7,519 7,653 15,080 11,189 8,855 11,189
Total current liabilities 22,310 23,454 22,816 24,213 29,573 34,297 43,622 40,152 32,451 40,152
Long-term debt 20,565 19,080 20,588 26,145 27,781 35,643 50,178 50,393 31,697 50,393
Total liabilities 54,021 54,951 52,129 64,485 66,416 76,838 103,857 104,936 71,497 104,936
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 200,777 174,701 177,629 133,339 104,684 121,817 134,489 136,728 111,455 136,728
EBIT/capital employed -40% -31% -89% -169% -29% >100% 76% 41% n/m n/m

Ten-Year Stock Price Performance and Trading Volume Dynamics

$80

$70

$60

$50

$40

$30

$20

$10

$0
Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10

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BUSINESS OVERVIEW SELECTED OPERATING DATA EXCL. VERIZON WIRELESS 1
Vodafone provides wireless communications services to YTD 2
more than 300 million customers worldwide. FYE March 31 2005 2006 2007 2008 2009 12/31/09
revenue 2% 10% 6% 14% 16% 10%
service revenue 3 5% 8% 5% 4% 0% -2%
REVENUE (LEFT) AND CUSTOMERS (RIGHT) BY SEGMENT 1 Revenue (bn) 26.7 29.4 31.1 35.5 41.0 33.3
Selected items as % of revenue:
Gross profit 41% 42% 40% 38% 37% 35%
EBIT 4 24% 24% 22% 20% 19% 16%
D&A 21% 20% 16% 17% 17% 18%
Capex 5 19% 18% 15% 13% 17% 17%
Free cash flow (bn) 6 5.6 6.3 5.3 4.7 4.1 4.0
shares out (avg) -3% -5% -12% -4% -1% -1%
1
Based on Vodafones consolidated financials (excluding Vodafones 45%
1
Based on April-December 2009 revenue and 314 million customers at stake in Verizon Wireless and contribution from other associates/investments).
2
12/31/09 (both figures exclude contribution from associates and investments). Only revenue figures have been reported through 12/31/09. Other figures are
estimated based on year-to-date through 9/30/09 reported actuals.
3
On organic basis. Service accounts for 90%+ of revenue (rest is equipment).
INVESTMENT HIGHLIGHTS 4
Excludes impairments.
5
Includes purchases of intangibles.

6
314 million mobile customers worldwide on a YTD free cash flow is an estimate (excludes Verizon Wireless contribution)
consolidated basis at yearend 2009. Excluding 59 SELECTED OPERATING DATA VERIZON WIRELESS 1
million customers attributable to minority interests FYE December 31 2005 2006 2007 2008 2009
and including 78 million unconsolidated customers revenue 17% 18% 15% 33% 6%
Vodafone has 333 million proportionate customers.* period-end customers 17% 15% 11% 30% 7%
Owns 45% of Verizon Wireless, the #1 wireless Revenue ($bn) 32.3 38.0 43.9 58.6 62.1
EBIT 23% 25% 27% 28% 28%
operator in the U.S. with 91 million customers. D&A 15% 13% 12% 11% 11%
Vodafone does not consolidate the stake and Capex 2 20% 17% 15% 11% 11%
receives only pass-through tax distributions from it. Selected operational metrics:
50%+ of customers in emerging markets, with Total customers (mn) 51.3 59.1 65.7 85.3 91.2
EBITDA margin on service revenue 43% 44% 45% 46% 46%
potential for growth and/or margin improvement 1
Based on consolidated figures. 2008 and 2009 figures are pro-forma for Alltel
(25-30% EBITDA margins versus 38% in Europe). acquisition. Net debt was $28.4 billion at 9/30/09 (1.2x 2009 EBITDA).
2
Excludes purchases of licenses (2008/09 capex percentages are estimates).
Vodafone has a presence in Eastern Europe, South
Africa, Egypt, India, and China, among others.
INVESTMENT RISKS & CONCERNS
6% dividend yield supported by operations
excluding Verizon Wireless and other associates. Europe organic service revenue down 3% y-y in
We estimate Vodafones consolidated operations December quarter. Competition and economic
generate a 7%+ free cash flow yield on a modestly weakness are affecting Vodafones mature markets,
levered balance sheet (net debt/EBITDA of <2.0x). which contribute ~75% of consolidated EBITDA.
Verizon Wireless stake may be worth ~50% of 69% of proportionate customers are pre-paid,
Vodafone market cap based on 6.0x trailing implying low switching costs. Prepaid as percentage
EBITDA and net debt of $28.4 billion at 9/30/09. of total customers ranges from just 8% at Verizon
Verizon (VZ), which owns 55%, is likely to approve Wireless to 94% in India and 100% in Ghana.
distributions beyond tax pass-throughs, leading to Capex requirements may increase as a result of
significant dividends to 45% partner Vodafone. ** ongoing technological innovation and competition.
One of David Einhorns six largest positions. $32 billion consolidated net debt at yearend 2009.
*
Minorities are mainly attributable to India-based Essar and South Africa- RATINGS
based Vodacom. Unconsolidated customers are mainly at Verizon Wireless. VALUE Intrinsic value materially higher than market value?
**
This may happen by mid-2010 as Verizon Wireless pays off an $8 billion MANAGEMENT Capable and properly incentivized?
loan to VZ by then. As VZ requires ongoing cash to upgrade its wireline FINANCIAL STRENGTH Solid balance sheet?
networks, it may resume Verizon Wireless distributions in future.
MOAT Able to sustain high returns on invested capital?
MAJOR HOLDERS EARNINGS MOMENTUM Fundamentals improving?
Insiders <1% | BlackRock 7% | Axa 5% | Greenlight <1% MACRO Poised to benefit from economic and secular trends?
EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
Vodafone shares offer a 6% dividend yield, which is well-supported by the companys free cash flow generation excluding
Verizon Wireless. As Vodafones 45% stake in the number one U.S. mobile operator is the companys most valuable single
asset, the markets ignorance of its value to Vodafone provides a compelling investment opportunity. An upward re-rating of
Vodafone shares could come following a likely resumption of cash distributions from Verizon Wireless beyond the current
level of tax pass-throughs. Regardless of how Verizon Wireless and other unconsolidated assets are monetized, Vodafones
sum-of-the-parts valuation implies the consolidated business trades at around 4x trailing EBITDA. This is too low given
Vodafones strong European market share, growth prospects in emerging markets, and margin improvement potential.

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additional insight into Vodafone:

ESTIMATE OF INTRINSIC VALUE BASED ON SUM-OF-THE-PARTS VALUATION ANALYSIS

Verizon Wireless valuation: Assumed EBITDA multiple


($ millions, unless stated otherwise) 5.0x 6.0x 7.0x
Calendar 2009 actual EBITDA $24,535 $24,535 $24,535
Implied enterprise value 122,675 147,210 171,745
less net debt (as of 9/30/09) -28,446 -28,446 -28,446
Equity value (100%) 94,229 118,764 143,299
Value of Vodafone's 45% equity stake ($) $42,403 $53,444 $64,485
Estimated value of Vodafone's 45% stake in Verizon Wireless 27,138 34,204 41,270
per Vodafone share 0.52 0.65 0.78

Vodafone valuation INCLUDING Verizon Wireless:


Estimated value of Vodafone's 45% stake in Verizon Wireless 0.52 0.65 0.78
Estimated equity value of rest of Vodafone (=recent stock price) 1.39 1.39 1.39
Vodafone total equity value estimate per share 1.91 2.04 2.18

Vodafone valuation EXCLUDING Verizon Wireless:


millions
Recent stock price 1 1.39 Financials excl. Verizon Wireless
Shares outstanding 52,608 and other associates/investments:
Market capitalization 73,230 EBITDA 7 14,910
Plus: Net debt (as of 9/30/09) 30,705 Free cash flow 8 5,384
Plus: Essar $5 billion put option (in ) 2 3,200
Plus: Estimated value of remaining 35% of Vodacom 3 3,733 Implied valuation ratios:
Less: Investments 4 (7,450) FCF yield 7.4%
Less: 44% stake in SFR 5 (3,825) dividend yield 5.6%
Adjusted enterprise value 6 99,593 pro-forma net debt / EBITDA 9 1.8x
1
Based on ordinary shares traded on the London Stock Exchange. Corresponds to $22.07 per ADS as of 2/5/10 (1 ADS=10 ordinary shares).
2
Essar can put its 33% stake in Vodafone Essar to Vodafone for $5 billion.
3
Implied value based on Vodafone paying 1.6 billion to increase its stake from 50% to 65% in April 2009.
4
Per balance sheet value as reported by Vodafone at 9/30/09 (includes, among others, stakes in China Mobile and Bharti Airtel).
5
Estimate.
6
Enterprise value calculation ignores certain other minority interests and associates (their inclusion does not materially change our investment case).
7
Based on annualizing Vodafones reported EBITDA in the first half of fiscal 2010 (six months ended 9/30/09).
8
FY10 FCF estimate. Calculated as net cash from operations less capex (including purchased intangibles), excluding dividends related to associates/investments/
minorities. Vodafone's FY10 FCF guidance is 6.5-7.0 billion, but this includes contribution from associates and investments and payments to minorities.
9
Pro-forma net debt includes estimated payments for Essar and Vodacom minorities offset by investments and SFR stake.

IMPLIED VODAFONE VALUATION DEPENDING ON DIFFERENT VALUES FOR ITS STAKE IN VERIZON WIRELESS
millions
Recent stock price 1.39 Assumed Verizon Wireless EBITDA multiple
Shares outstanding 52,608 5.0x 6.0x 7.0x
Market capitalization 73,230 73,230 73,230 73,230
Less: 45% Verizon Wireless stake 0 -27,138 (34,204) (41,270)
Less: Investments (7,450) (7,450) (7,450) (7,450)
Less: 44% SFR stake (3,825) (3,825) (3,825) (3,825)
Plus: Net debt (as of 9/30/09) 30,705 30,705 30,705 30,705
Plus: Essar $5 billion put option (in ) 3,200 3,200 3,200 3,200
Plus: Estimated value of remaining 35% of Vodacom 3,733 3,733 3,733 3,733
Adjusted enterprise value 99,593 72,455 65,389 58,323
Implied EV to consolidated EBITDA 6.7x 4.9x 4.4x 3.9x
net debt/(cash) to EBITDA 1.8x -0.1x -0.5x -1.0x

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additional insight into Vodafone:
SUBSCRIBER BREAKDOWN BY GEOGRAPHY

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additional insight into Vodafone:

SLIDES FROM COMPANY PRESENTATION, FEBRUARY 2010

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additional insight into Vodafone:

VERIZON SLIDES ON VERIZON WIRELESS, JANUARY 2010

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New or Increased Superinvestor Holdings
Brown & Brown (BRO) Weitz Daytona Beach, FL, 386-252-9601
Financial: Insurance (Miscellaneous), Member of S&P MidCap 400 www.bbinsurance.com

Trading Data Consensus EPS Estimates Valuation


Price: $17.70 (as of 2/12/10) Month # of P/E FYE 12/31/08 15x
52-week range: $14.95 - $20.30 Latest Ago Ests P/E FYE 12/31/09 16x
Market value: $2.5 billion This quarter $0.22 $0.22 13 P/E FYE 12/31/10 15x
Enterprise value: $2.6 billion Next quarter 0.34 0.34 7 P/E FYE 12/31/11 14x
Shares out: 142.0 million FYE 12/31/09 1.14 1.14 13 EV / LTM revenue 2.6x
Ownership Data FYE 12/31/10 1.16 1.17 12 EV / LTM EBITDA 8x
Insider ownership: 18% FYE 12/31/11 1.25 1.25 7 EV / LTM EBIT 9x
Insider buys (last six months): 1 LT EPS growth 9.5% 11.3% 2 P / tangible book n/m
Insider sales (last six months): 7 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 72% Date Actual Estimate LTM EBIT yield 11%
# of institutional owners: 497 10/19/09 $0.29 $0.29 LTM pre-tax ROC n/m
Operating Performance and Financial Position
($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 9/30/09 9/30/08 9/30/09
Revenue 456 551 647 786 878 960 978 986 247 244
Gross profit 0 0 0 0 0 0 0 0 0 0
EBIT 135 176 207 244 280 312 273 282 67 68
Net income 83 110 129 151 172 191 166 163 41 41
Diluted EPS 0.61 0.80 0.93 1.08 1.22 1.35 1.17 1.16 0.30 0.30
Cash from ops 70 143 170 215 225 215 342 327 42 4
Capex 7 16 10 13 15 31 14 12 3 3
Free cash flow 63 127 160 202 210 185 328 315 39 2
Cash & investments 68 57 188 101 89 38 79 186 0 186
Total current assets 0 0 0 0 0 0 0 0 0 0
Intangible assets 380 471 654 927 1,081 1,290 1,519 1,541 1,490 1,541
Total assets 754 866 1,250 1,609 1,808 1,961 2,120 2,238 2,107 2,238
Short-term debt 27 19 16 56 18 12 6 12 8 12
Total current liabilities 0 0 0 0 0 0 0 0 0 0
Long-term debt 58 41 227 214 226 228 254 251 254 251
Total liabilities 363 368 625 844 879 863 878 883 891 883
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 392 498 624 764 929 1,098 1,242 1,355 1,217 1,355
EBIT/capital employed n/m n/m n/m n/m n/m >100% >100% n/m n/m n/m
Ten-Year Stock Price Performance and Trading Volume Dynamics

$40

$35

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$25

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 66 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA
Brown & Brown is an independent insurance intermediary, FYE December 31 2005 2006 2007 2008 2009
with 219 offices in 37 U.S. states and one office in the U.K. organic core commissions/fees 1 3% 4% -3% -6% -5%
revenue 21% 12% 9% 2% -1%
revenue per avg employee 7% 2% 4% -5% n/a
INVESTMENT HIGHLIGHTS Revenue ($mn) 786 878 960 978 968
Sixth-largest U.S. insurance broker/agent based Commissions/fees as % of revenue 99% 98% 95% 99% 100%
on 2008 commission and fee revenue generated by % of commissions and fees by segment:
U.S.-based clients. * As a broker or agent, the Retail 2 63% 60% 60% 61% 60%6
Wholesale Brokerage 3 16% 18% 19% 17% 17%6
company does not assume underwriting risk. National Programs 4 17% 18% 17% 18% 20%6
Derives revenue mainly from commissions paid Services 5 3% 4% 4% 3% 3%6
by insurance companies. The commission is usually Commissions and fees growth by segment:
a percentage of the premium paid by the insured. Retail 7% 5% 6% 7% 1%6
Wholesale Brokerage 202% 27% 10% -4% -7%6
Commission rates generally vary by insurance type, National Programs 19% 18% 0% 13% 16%6
and the nature of services provided by the company. EBIT margin by segment:
Commercial retail business accounts for 50%+ of Retail 31% 32% 33% 29% 28%6
revenue. Property and casualty insurance is one of Wholesale Brokerage 32% 29% 27% 21% 23%6
National Programs 37% 38% 36% 40% 42%6
the main insurance types sold. The company is also Services 26% 26% 26% 25% 24%6
active in employee benefit lines. It has a relatively Total EBIT margin 33% 33% 34% 29% 28%
small presence in personal lines and reinsurance. Selected items as % of revenue:
Net income 19% 20% 20% 17% 16%
Diverse customer base. The largest insurance
D&A 6% 5% 6% 6% 7%
company customer contributed only 5% of revenue Capex 2% 2% 3% 1% 1%6
in 2008. The percentage is similar for prior years. Revenue per avg employee ($000s) 185 189 196 187 n/a
Beneficiary of potential financial sector reform? shares out (avg) 1% 1% 1% 0% 1%
1
Core commissions and fees exclude profit-sharing contingent commissions
Potential changes to the Gramm-Leach-Bliley Act and divested business. Organic additionally excludes impact of acquisitions.
of 1999 may lead to less competition from banks 2
Sells various types of insurance including property and casualty insurance
such as Wells Fargo who offer insurance broking. mainly on an agency basis. Revenue is commission-based.
3
Sells excess/surplus commercial insurance to agencies (including its own
May benefit from a rise in insurable exposure retail offices), and reinsurance. Revenue is commission-based.
4
units if the economy improves. Units such as Two units: Professional Programs sells liability products for pros via agents;
Special Programs sells niches products. Revenue is commission-based.
property values or sales/payroll levels partly drive 5
Provides insurance-related services such as third-party claims administration,
premiums and, hence, commissions received. Revenue is fee-based (not affected by insurance premium levels).
6
Figures based on YTD to 9/30/09, as 2009 data is not yet available.

INVESTMENT RISKS & CONCERNS COMPARABLE PUBLIC COMPANY ANALYSIS


Organic commissions/fees declined 5% in 2009, Market Price to This Next
Price FY End
excluding profit-sharing contingent commissions. ($)
Value Tangible FY FY
Date
This was the third consecutive annual decline and ($mn) Book P/E P/E
reflects ongoing pressure on insurance rates and MMC 22.10 11,690 n/m 13x 11x Dec-31
AON 39.80 10,900 n/m 12x 11x Dec-31
insurable exposure units in a weak economy.
WSH 27.80 4,670 n/m 10x 9x Dec-31
Price-taker facing cost inflation. Brown & Brown
AJG 23.00 2,360 n/m 16x 14x Dec-31
has little control over commission levels, which are
BRO 17.70 2,514 n/m 16x 15x Dec-31
subject to downward pressure over time. Employee
costs are about half of revenue and likely to rise. MAJOR HOLDERS
$183 million of acquisition contingency payments Chairman 15% | Other insiders 5% | Artisan 4% | Royce 4%
based on maximum liability as of September 30,
2009. Acquisition-led growth raises execution risk. RATINGS
Powell Brown (41) replaced his father Hyatt VALUE Intrinsic value materially higher than market value?
Brown (71) as CEO in 2009. Transition risk should MANAGEMENT Capable and properly incentivized?
be mitigated as the elder Hyatt remains chairman. FINANCIAL STRENGTH Solid balance sheet?
$62 million of net debt at yearend 2009. MOAT Able to sustain high returns on invested capital?
*
EARNINGS MOMENTUM Fundamentals improving?
Source: As reported by the company based on Business Insurance rankings.
A broker differs from an agent in that a broker sells products of a number of
MACRO Poised to benefit from economic and secular trends?
insurers and is expected to act in the interest of the insured, not the insurer. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
As an insurance intermediary, Brown & Brown benefits from a capital-light, commission-based business model. Organic
commission growth, however, has declined for the third consecutive year in 2009. This largely reflects the impact of a weak
economy on insurance rates and insurable exposure units (e.g. property values), which drive commission levels. Structural or
company-specific factors may also be at play. In this context, we worry managements acquisition-led growth strategy raises
risk without providing commensurate return. With shares trading on a 7% trailing earnings yield, risk-reward is not enticing.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 67 of 144
additional insight into Brown & Brown:

TOP 100 BROKERS OF U.S. INSURANCE BUSINESS


(Ranked by 2008 brokerage revenue generated by U.S.-based clients)

Source: Business Insurance, July 20, 2009, Brown & Brown.


Visit www.businessinsurance.com/directories for more information (subscription required).

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 68 of 144
additional insight into Brown & Brown:

TOP 10 INSURANCE BROKERS WORLDWIDE


(Ranked by 2008 brokerage revenue)

Source: Business Insurance, July 20, 2009, Brown & Brown.


Visit www.businessinsurance.com/directories for more information (subscription required).

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 69 of 144
International Coal Group (ICO) Fairfax Scott Depot, WV, 304-760-2400
Energy: Coal www.intlcoal.com

Trading Data Consensus EPS Estimates Valuation


Price: $3.88 (as of 2/12/10) Month # of P/E FYE 12/31/09 28x
52-week range: $1.09 - $5.35 Latest Ago Ests P/E FYE 12/31/10 19x
Market value: $695 million This quarter $0.02 $0.02 6 P/E FYE 12/31/11 9x
Enterprise value: $989 million Next quarter 0.05 0.05 6 P/E FYE 12/30/12 3x
Shares out: 179.0 million FYE 12/31/10 0.20 0.17 6 EV / LTM revenue 0.9x
Ownership Data FYE 12/31/11 0.41 0.55 6 EV / LTM EBITDA 5x
Insider ownership: 27% FYE 12/30/12 1.23 2.23 2 EV / LTM EBIT 12x
Insider buys (last six months): 0 LT EPS growth n/a n/a n/a P / tangible book 1.1x
Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 68% Date Actual Estimate LTM EBIT yield 8%
# of institutional owners: 253 1/28/10 $0.00 $0.00 LTM pre-tax ROC 8%
Operating Performance and Financial Position
($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09
Revenue 137 651 892 849 1,097 1,125 1,125 258 246
Gross profit 22 132 103 53 133 231 231 24 48
EBIT 10 60 (2) (198) (6) 82 82 (50) 0
Net income 4 32 (9) (148) (26) 21 22 (37) (11)
Diluted EPS 0.04 0.29 (0.06) (0.97) (0.17) 0.14 0.14 (0.24) (0.07)
Cash from ops 30 77 56 23 79 116 116 34 25
Capex 6 108 166 161 132 66 66 39 18
Free cash flow 25 (31) (110) (138) (54) 50 49 (4) 7
Cash & investments 24 9 19 107 64 93 93 64 93
Total current assets 94 119 168 265 248 289 289 248 289
Intangible assets 184 344 197 30 0 0 0 0 0
Total assets 460 1,051 1,317 1,303 1,351 1,368 1,368 1,351 1,368
Short-term debt 6 6 22 4 20 20 20 20 20
Total current liabilities 66 103 136 147 198 172 172 198 172
Long-term debt 173 44 178 387 418 367 367 418 367
Total liabilities 306 385 659 772 842 759 759 842 759
Preferred stock 0 0 0 0 0 0 0 0 0
Common equity 154 667 658 532 509 609 609 509 609
EBIT/capital employed 6% 16% 0% -20% -1% 8% 8% n/m n/m
Ten-Year Stock Price Performance and Trading Volume Dynamics

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 70 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA
International Coal Group (ICG) produces coal in Northern FYE December 31 2005 2006 2007 2008 2009
and Central Appalachia and the Illinois Basin in the U.S. revenue 27% 37% -5% 29% 3%
coal volume sold 5% 31% -5% 3% -11%
coal revenue per ton 23% 3% -2% 26% 13%
INVESTMENT HIGHLIGHTS coal cost per ton 16% -4% 4% 17% 6%
Controls 1.1 billion tons of proven and probable Revenue ($mn) 650 892 849 1,097 1,125
coal reserves, mainly in Illinois, Kentucky, West Selected items as % of revenue:
Virginia, Virginia and Maryland. * ICG controls an EBIT 1 9% 0% -23% -1% 8%
Net income 5% -1% -17% -2% 2%
additional 431 million tons of non-reserve deposits. DD&A 7% 8% 10% 9% 9%
70% of reserves are thermal coal, also known as Capex 17% 19% 19% 12% 6%
steam coal, used mainly by utilities to generate Selected operating metrics:
electricity. Remaining reserves are metallurgical Tons of coal sold (mn) 2 14.8 19.4 18.3 18.9 16.8
% of coal tons sold by source:
coal, aka coking coal, used mainly in steel making. Central Appalachian 66% 56% 62% 61% 59%
65+ years of reserve life based on 2009 production. Northern Appalachian 2% 17% 18% 21% 23%
ICG has 13 active mining complexes. Roughly 90% Illinois Basin 16% 10% 11% 12% 13%
Ancillary 3 16% 16% 9% 5% 5%
of reserves are underground. 2009 production split,
Per ton metrics in $:
however, was 53% surface and 47% underground. Coal sales revenue 4 $42 $43 $42 $53 $60
91% and 49% of 2010 and 2011 planned coal Cost of coal sales 4 40 38 40 47 49
sales are committed at average prices of $61.50 Coal margin per ton $2 $5 $2 $6 $10
Return on tangible equity 22% -2% -31% -5% 4%
and $55.50 per ton, excluding freight and handling.
Tangible equity to assets 30% 43% 40% 38% 41%
Key customers are electric utilities in eastern U.S. shares out (avg) 5 4% 37% 0% 0% 1%
Maintenance capex per ton may reduce as old 1
2
Includes impairment loss of $37 million in 2008 and $170 million in 2007.
94% of 2009 volume was steam coal. 3 Coal purchased for resale.
equipment inherited from Horizon and Anker 4
Excludes freight and handling. Costs also exclude DD&A and SG&A.
bankruptcies in 2005 is upgraded. Maintenance 5
2005/06 share growth reflects Anker/CoalQuest acquisitions and IPO in 2005.
capex per ton of production is down from $6.55 in
2005 to $5.24 in 2009 and may reduce further. Potential dilution. ICG has filed a shelf registration
Margin per ton sold increased to $12.11 in 4Q09, effective January to raise up to $600 million.
compared to $4.51 for the same period in 2008. $365 million of debt and 93 million of cash. Debt
Among Appalachian peers, ICGs cost per ton has includes $140 million of convertible notes.
been higher than at Consol and Massey, but lower
than at Patriot, Alpha and James River since 2007. COMPARABLE PUBLIC COMPANY ANALYSIS
Fairfax and WL Ross are largest shareholders. MV EV EV / P / T. This Next
Wilbur Ross, Jr. (71) has been chairman since 2005. ($mn) ($mn) Rev. Book FY P/E FY P/E
Guiding for adj. EBITDA of $170-200 million in CNX 8,940 9,820 2.1x 5.0x 15x 11x
2010 (2009: $202 million) on 16.7-17.3 million tons ANR 5,300 5,590 2.2x 2.4x 15x 10x
of coal sold at average price of $62.0-64.0 per ton MEE 3,600 4,240 1.6x 2.9x 16x 9x
and cost of $49.5-51.5 per ton (excludes SG&A). ACI 3,520 5,250 2.0x 1.8x 27x 12x
Capital expenditures are forecast at $85-95 million. PCX 1,450 1,630 .8x 1.5x n/m 179x
Shares trade at 1.0x tangible book and offer a ICO 690 980 .9x 1.1x 19x 9x
high-single digit free cash flow yield on 2009 FCF.
MAJOR HOLDERS
INVESTMENT RISKS & CONCERNS Non-WL Ross insiders 1% | WL Ross 14% | Fairfax 26% |
Commodity producer exposed to cyclicality. Steelhead 5% | Andreeff 3% | Vanguard 3% | DFA 3%
Profitability is at the mercy of economic activity,
RATINGS
price of coal, regulation, and the weather.
VALUE Intrinsic value materially higher than market value?
Competing energy sources. Coal generates one-
MANAGEMENT Capable and properly incentivized?
half of U.S. electricity, but growth may be impeded
FINANCIAL STRENGTH Solid balance sheet?
by use of gas, nuclear, and alternative energy.
MOAT Able to sustain high returns on invested capital?
Environmental considerations may reduce coal use.
* EARNINGS MOMENTUM Fundamentals improving?
66% of reserves are owned and 34% are leased from 3rd-party landowners.
~30% of reserves are assigned (can be extracted via existing mine shafts).
MACRO Poised to benefit from economic and secular trends?
EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
ICG has a strong operating presence in three of the four largest U.S. coal-producing regions: Central Appalachia, Northern
Appalachia and the Illinois Basin. In an industry where the key competitive advantage is being a low-cost producer, ICG
ranks average compared to Appalachian peers. Positives include long-lived reserves, contracted sales and a focus on cash
generation after years of investment. Large ownership by Fairfax and WL Ross bodes well for shareholder value creation.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 71 of 144
additional insight into International Coal Group:

SLIDES FROM COMPANY PRESENTATION, DECEMBER 2009

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 72 of 144
additional insight into International Coal Group:

PEER GROUP COST COMPARISON

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 73 of 144
Osteotech (OSTE) Spencer Eatontown, NJ, 732-542-2800
Health Care: Medical Equipment & Supplies, Member of S&P SmallCap 600 www.osteotech.com

Trading Data Consensus EPS Estimates Valuation


Price: $3.40 (as of 2/12/10) Month # of P/E FYE 12/31/08 28x
52-week range: $2.43 - $5.04 Latest Ago Ests P/E FYE 12/31/09 n/m
Market value: $61 million This quarter $0.06 -$0.06 1 P/E FYE 12/31/10 n/m
Enterprise value: $64 million Next quarter -0.05 -0.05 1 P/E FYE 12/31/11 68x
Shares out: 18.0 million FYE 12/31/09 -0.22 -0.34 1 EV / LTM revenue 0.7x
Ownership Data FYE 12/31/10 -0.04 -0.04 1 EV / LTM EBITDA n/m
Insider ownership: 1% FYE 12/31/11 0.05 0.05 1 EV / LTM EBIT n/m
Insider buys (last six months): 2 LT EPS growth n/a n/a n/a P / tangible book 0.8x
Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 42% Date Actual Estimate LTM EBIT yield -7%
# of institutional owners: 116 11/5/09 -$0.11 -$0.02 LTM pre-tax ROC -6%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 9/30/09 9/30/08 9/30/09
Revenue 83 94 89 93 99 104 104 95 24 23
Gross profit 37 52 36 32 48 54 55 47 13 11
EBIT (7) 18 (7) (20) 2 3 3 (5) 1 (2)
Net income (1) 11 (5) (21) 2 3 2 (5) 0 (2)
Diluted EPS (0.08) 0.62 (0.31) (1.23) 0.11 0.15 0.12 (0.30) 0.00 (0.11)
Cash from ops (2) 5 3 (2) 7 8 3 (5) 3 (1)
Capex 5 2 2 2 2 3 6 2 2 0
Free cash flow (7) 3 1 (4) 5 5 (3) (7) 1 (1)
Cash & investments 14 15 13 14 18 23 19 11 19 11
Total current assets 56 71 71 62 69 78 80 80 78 80
Intangible assets 2 2 2 2 2 2 2 0 0 0
Total assets 115 127 116 111 113 120 127 119 126 119
Short-term debt 3 3 3 1 1 1 1 1 1 1
Total current liabilities 13 14 14 17 17 20 25 21 23 21
Long-term debt 16 13 10 16 15 14 13 12 13 12
Total liabilities 31 31 25 40 39 41 44 40 43 40
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 84 96 91 71 74 79 83 79 83 79
EBIT/capital employed -8% 21% -8% -26% 3% 5% 4% -6% n/m n/m

Ten-Year Stock Price Performance and Trading Volume Dynamics

$25

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 74 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA 1
Osteotech provides processed human bone and connective YTD
tissue for transplantation in musculoskeletal surgery. FYE December 31 2004 2005 2006 2007 2008 9/30/09
revenue -6% 5% 6% 5% 0% -11%
Revenue ($mn) 89 93 99 104 104 70
INVESTMENT HIGHLIGHTS % of revenue by segment: 2
Worlds largest processor of allograft bone tissue DBM 52% 56% 58% 63% 60% 62%
yielding 4.5+ million grafts since company founding Traditional tissue 7% 13% 17% 17% 20% 22%
Spinal allografts 23% 18% 14% 10% 8% 8%
in 1986. * Based on American Association of Tissue Hybrid/Synthetics 0% 0% 1% 2% 3% 3%
Banks (AATB), over two million allografts are now Client services 15% 12% 9% 7% 8% 3%
distributed in the U.S. annually (1995: <0.5 million). Other 3% 1% 1% 1% 2% 2%
Revenue growth of selected segments: 2
Derives revenue mainly from service fees related DBM 0% 14% 9% 14% -6% -9%
to graft processing, storage, and distribution. Traditional tissue n/a 89% 45% 4% 15% 1%
Osteotech receives unprocessed donor tissue from Spinal allografts n/a -15% -19% -22% -21% -12%
its supplier CTS, a U.S. tissue bank. Before tissue EBIT margin of major segments: 2
can be transplanted by surgeons, it needs processing DBM 29% 29% 28% 31% 31% 28%
Traditional tissue -18% 2% 35% 14% 18% 5%
(i.e. screening and testing for safety, among others). Spinal allografts 5% -47% 13% 18% 3% 15%
Entry barriers include 377 patents (including Total EBIT margin -7% -22% 2% 3% 2% -6%
pending applications) for processing technology. % of revenue by geography:
Plants in France/Bulgaria are approved tissue banks, U.S. 87% 86% 83% 82% 79% n/a
International 13% 14% 17% 18% 21% n/a
while New Jersey plant is approved by FDA/AATB. Selected items as % of revenue:
Heartland, Spencer, and Boston Avenue filed a Gross profit 41% 34% 48% 52% 53% 48%
joint 13-D in January, with the goal of changing R&D 5% 5% 5% 5% 7% 7%
Net income -6% -23% 2% 3% 2% -7%
board composition. Osteotech has a poison pill. D&A 9% 6% 6% 5% 5% 7%
CEO Sam Owusu-Akyaw (56) held positions at Capex 2% 2% 2% 3% 6% 2%
Medtronic, J&J, and Bristol-Myers Squibb prior to Return on tang. equity 3 -9% -47% 5% 6% 6% -14%
joining in 2004. Chairman Kenneth Fallon, III (70) Tangible equity/assets 3 68% 58% 49% 51% 48% 46%
shares out (avg) 1% 0% 1% 1% 2% 1%
is an associate with 6%-shareholder Kairos Partners. 1
Osteotech reported in a January press release that 4Q09 revenue was $26.3
$11 million of cash. Osteotech has $13 million of million versus $24.6 million in 4Q08. 4Q09 revenue included $1.0 million from
capital leases and an unused $10 million credit line. newly-launched products and $3.3 million from a one-time licensing agreement.
2
All segments process and/or market bone tissue for transplantation purposes.
EV-to-trailing revenue is less than 0.7x. Segments vary mainly by tissue type used (DBM=Demineralized Bone Matrix).
3
Donor tissue is excluded from tangible book. Osteotech carried $48 million
of donor tissue on its balance sheet at 9/30/09 (52% of which is unprocessed).
INVESTMENT RISKS & CONCERNS
Viability as standalone entity? Despite proven COMPARABLE PUBLIC COMPANY ANALYSIS
products and a 48% gross margin, Osteotech is loss- MV EV EV / P / T. This Next
making. While poor execution may be one reason, ($mn) ($mn) Rev. Book FY P/E FY P/E
lack of scale in distribution and R&D are others. MDT 46,880 52,830 3.5x 15.6x 13x 12x
Various sources of competition. Osteotechs rivals IART 1,090 1,380 2.0x n/m 18x 16x
include divisions of Medtronic and J&J as well as WMGI 680 720 1.5x 1.9x 29x 24x
pure-play, smaller companies. Other transplant VITA 290 300 3.4x 8.8x n/m 91x
methods and technologies pose substitution risk. RTIX 180 180 1.1x 1.2x 19x 14x
Operates in regulated industry. Reimbursement OSTE 60 60 .6x .8x n/m n/m
changes, product liability, and ongoing certification
are risks. Osteotech was cited for deficiencies at its RATINGS
Bulgarian tissue bank in 2008 (now resolved). VALUE Intrinsic value materially higher than market value?
*
Allograft means bone or tissue transplanted from one person to another. MANAGEMENT Capable and properly incentivized?
For more info, visit http://orthoinfo.aaos.org/topic.cfm?topic=a00115
FINANCIAL STRENGTH Solid balance sheet?
MAJOR HOLDERS MOAT Able to sustain high returns on invested capital?
CEO O.-Akyaw 2% | Other insiders 2% ** | Heartland 18% | EARNINGS MOMENTUM Fundamentals improving?
DFA 8% | Kairos 6%* | RenTech 4% | Spencer 3% | BAC 3% MACRO Poised to benefit from economic and secular trends?
**
Excludes Kairos Partners. Chairman Fallon is an associate with Kairos. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
Osteotech is no newcomer to the growing market for regenerative bone tissue. With proven tissue processing technology
going back to the early 1990s, the company has remained competitive despite high regulatory requirements and competition
from larger rivals such as Medtronic and J&J. While management has not been able to generate adequate returns on capital, a
range of patent-protected technologies, long-standing industry accreditations, and nearly $50 million of donor tissue in
inventory may be attractive for a potential acquirer. Recently adopted poison pill, however, may thwart a change in control.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 75 of 144
additional insight into Osteotech:

SELECTED INFORMATION FROM AMERICAN ACADEMY OF ORTHOPAEDIC SURGEONS (AAOS)


(paraphrased or quoted from selected AAOS publications)

The use of musculoskeletal allograft tissue in reconstructive orthopedic procedures has markedly
increased over the last decade.

Musculoskeletal Allograft Distribution

Source: American Academy of Orthopaedic Surgeons (AAOS), http://www.aaos.org

500,000+ bone-grafting procedures are performed annually in the U.S., with half of these
procedures related to spine fusion. These numbers easily double on a global basis and indicate a
shortage of musculoskeletal donor tissue traditionally used in these reconstructions.

U.S. Trends in Musculoskeletal Tissue Donors

Source: American Academy of Orthopaedic Surgeons (AAOS), http://www.aaos.org; AATB Annual Survey.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 76 of 144
The above reality has stimulated corporate interest in supplying what is seen as a growing market
in bone replacement materials. These graft alternatives are subjected to varying degrees of
regulatory scrutiny, and thus their true effectiveness in patients may not be known prior to their
use by orthopedic surgeons.

U.S. Sales of Bone Graft and Bone-Graft Substitutes

Source: American Academy of Orthopaedic Surgeons (AAOS), http://www.aaos.org; Orthopedic Network News.

Comparative Properties of Bone Grafts

Source: American Academy of Orthopaedic Surgeons (AAOS), http://www.aaos.org

Comparison of Commercially Available Bone-Graft Substitutes, by Provider


To view this comparison of competing offerings,
including those by Osteotech and its competitors, visit
http://www.aatb.org/files/bonegraftsubstitutestable.pdf

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 77 of 144
Republic Services (RSG) Berkshire Hathaway Phoenix, AZ, 480-627-2700
Services: Waste Management Services, Member of S&P 500 www.republicservices.com

Trading Data Consensus EPS Estimates Valuation


Price: $26.03 (as of 2/12/10) Month # of P/E FYE 12/31/09 20x
52-week range: $15.05 - $29.82 Latest Ago Ests P/E FYE 12/31/10 16x
Market value: $9.9 billion This quarter $0.39 $0.38 6 P/E FYE 12/31/11 13x
Enterprise value: $17.1 billion Next quarter 0.42 0.43 5 P/E FYE 12/30/12 10x
Shares out: 380.8 million FYE 12/31/10 1.67 1.66 9 EV / LTM revenue 2.1x
Ownership Data FYE 12/31/11 2.01 2.00 6 EV / LTM EBITDA 7x
Insider ownership: 6% FYE 12/30/12 2.60 2.60 1 EV / LTM EBIT 12x
Insider buys (last six months): 1 LT EPS growth 16.2% 16.2% 2 P / tangible book n/m
Insider sales (last six months): 6 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 79% Date Actual Estimate LTM EBIT yield 9%
# of institutional owners: 951 2/11/10 $0.33 $0.33 LTM pre-tax ROC 24%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09
Revenue 2,518 2,708 2,864 3,071 3,176 3,685 8,199 8,199 1,244 1,999
Gross profit 912 994 1,060 1,146 1,172 1,268 3,355 3,355 381 798
EBIT 413 452 477 520 536 283 1,456 1,456 (112) 227
Net income 178 238 254 280 290 74 495 495 (132) 36
Diluted EPS 0.89 1.02 1.17 1.39 1.51 0.37 1.30 1.30 (0.55) 0.09
Cash from ops 601 666 748 511 661 512 1,397 1,397 38 384
Capex 273 284 309 327 293 387 826 826 123 284
Free cash flow 327 383 439 185 369 125 570 570 (85) 100
Cash & investments 119 142 132 29 22 69 48 48 69 48
Total current assets 556 497 482 393 414 1,326 1,265 1,265 1,326 1,265
Intangible assets 1,583 1,593 1,591 1,594 1,582 11,086 11,167 11,167 11,086 11,167
Total assets 4,554 4,465 4,551 4,429 4,468 19,921 19,540 19,540 19,921 19,540
Short-term debt 231 2 3 3 68 737 788 788 737 788
Total current liabilities 672 447 667 602 629 2,566 2,549 2,549 2,566 2,549
Long-term debt 1,289 1,352 1,472 1,545 1,566 7,199 6,420 6,420 7,199 6,420
Total liabilities 2,650 2,592 2,945 3,007 3,164 12,640 11,976 11,976 12,640 11,976
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 1,905 1,873 1,606 1,422 1,304 7,281 7,565 7,565 7,281 7,565
EBIT/capital employed 21% 24% 26% 28% 27% 7% 24% 24% n/m n/m

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 78 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA 1
Republic provides waste management services, including FYE December 31 2005 2006 2007 2008 2009
collection and disposal of non-hazardous solid waste. revenue 6% 7% 3% 16% 122%
due to price 4% 5% 6% 6% -1%
due to volume 2% 2% -2% -4% -10%
INVESTMENT HIGHLIGHTS due to net acquisitions 0% 0% -1% 13% 133%
#2 garbage hauler in the U.S. with ~18% market Revenue ($bn) 2.9 3.1 3.2 3.7 8.2
share of the $52 billion non-hazardous solid waste % of revenue by segment:
Eastern 19% 19% 18% 16% n/a
services industry. * Leader Waste Management has Central 20% 21% 20% 18% n/a
about 26% share. Municipal authorities and private Southern 26% 26% 26% 23% n/a
firms control about 26% and 16% of the market. Western 35% 35% 35% 31% n/a
Vertically integrated model. Republic owns or Allied Waste Industries 0% 0% 0% 13% n/a
EBIT margin by segment:
operates 239 transfer stations, 199 active landfills, Eastern 17% 16% 11% -17% n/a
and 79 recycling facilities. 80% of landfill sites Central 18% 18% 19% 18% n/a
have forecast lives of 10+ years. Commercial, Southern 17% 19% 22% 21% n/a
residential, and industrial customers accounted for Western 21% 21% 21% 18% n/a
Allied Waste Industries n/m n/m n/m 6% n/a
40%, 35%, and 25% of 2009 collection revenue. Corporate -2% -2% -2% -4% n/a
Non-discretionary: Garbage needs to be collected Total EBIT margin 17% 17% 17% 8% n/a
in good and bad times. Population growth and % of revenue by type:
business formation are two key drivers of volume. Collection 75% 76% 76% 78% 77%
Transfer and disposal 19% 19% 18% 18% 19%
$15-25 million of remaining Allied synergies Other 6% 5% 6% 4% 4%
targeted for 2010. The company acquired Allied Revenue growth by type:
Waste in December 2008 and has achieved related Collection 6% 8% 4% 19% 120%
synergies of $150 million through yearend 2009. Transfer and disposal 7% 8% -2% 14% 135%
Other -4% -10% 16% -11% 109%
CEO James OConnor (59) joined in 1998 from Selected items as % of revenue:
Waste Management (WM), where he was SVP. Gross profit 37% 37% 37% 34% 41%
Guiding for adjusted EPS of $1.63-1.67 in 2010 Net income 9% 9% 9% 2% 6%
(up 10-13% y-y) on revenue down 0.5-2.0% driven DD&A 10% 10% 10% 10% 11%
Capex 11% 11% 9% 10% 10%
by 3-4% volume decline partly offset by price rises. Tangible equity to assets 5% -3% -8% -35% -43%
Shares trade on 7% FCF yield based on 2010 shares out (avg) -5% -4% -4% 3% 93%
1
FCF guidance of $700-725 million, excluding $125 The company acquired Allied Waste Industries effective December 2008.
million of tax settlement and $10 million of merger-
related payments (2009 adj. FCF: $746 million). COMPARABLE PUBLIC COMPANY ANALYSIS
MV EV EV / P / T. This Next
INVESTMENT RISKS & CONCERNS ($mn) ($mn) Rev. Book FY P/E FY P/E

Low-growth business. Volume growth is in the WM 15,590 23,220 2.0x 35.8x 16x 15x
CWST 120 690 1.4x n/m n/m n/m
low-single digits in normal economic times. The
RSG 9,910 17,070 2.1x n/m 16x 13x
company has pricing power to offset cost rises.
Commercial and industrial volume negatively
affected by weak economy. Total company volume MAJOR HOLDERS
growth has been negative each year since 2007. Insiders <1% * | Cascade 15% | Blackstone 6% | T. Rowe 4%
Limited margin improvement potential. EBITDA Barclays 4% | FMR 4% | Capital World 3% | Vanguard 3%
*
Excludes shares held by director Foley as Blackstones board member.
margins of the combined company are similar to
levels of industry leader Waste Management. RATINGS
$7.0 billion of net debt at year-end 2009 (excludes VALUE Intrinsic value materially higher than market value?
$241 million restricted cash/marketable securities). MANAGEMENT Capable and properly incentivized?
Net debt to 2009 adjusted EBITDA is 2.8x. FINANCIAL STRENGTH Solid balance sheet?
$1.6 billion of environmental liabilities. Republic MOAT Able to sustain high returns on invested capital?
has responsibility for about 125 closed landfills. EARNINGS MOMENTUM Fundamentals improving?
*
Source: Republic Services 2008 10-K. Based on 2008 estimated industry MACRO Poised to benefit from economic and secular trends?
size. Republics market share is pro forma for Allied Waste acquisition. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
Republic Services has become the second-largest waste management company in the U.S. following the acquisition of Allied
Waste in late 2008. The combined company benefits from a consolidated industry structure, high barriers to entry, and a non-
discretionary nature of services provided. Negatives include a low-growth business, limited margin improvement potential,
and no tangible asset backing. With shares trading on a 7% trailing free cash flow yield, shares are modestly undervalued.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 79 of 144
RSC Holdings (RRR) Fairholme Scottsdale, AZ, 480-905-3300
Services: Rental & Leasing www.rscrental.com

Trading Data Consensus EPS Estimates Valuation


Price: $6.83 (as of 2/12/10) Month # of P/E FYE 12/31/08 6x
52-week range: $4.00 - $9.03 Latest Ago Ests P/E FYE 12/31/09 n/m
Market value: $706 million This quarter -$0.25 -$0.25 10 P/E FYE 12/31/10 n/m
Enterprise value: $2.9 billion Next quarter -0.22 -0.22 7 P/E FYE 12/31/11 17x
Shares out: 103.4 million FYE 12/31/09 -0.63 -0.63 7 EV / LTM revenue 2.1x
Ownership Data FYE 12/31/10 -0.20 -0.20 10 EV / LTM EBITDA 14x
Insider ownership: 11% FYE 12/31/11 0.41 0.41 7 EV / LTM EBIT 18x
Insider buys (last six months): 0 LT EPS growth 12.0% 12.0% 1 P / tangible book n/m
Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 40% Date Actual Estimate LTM EBIT yield 6%
# of institutional owners: 205 10/29/09 -$0.13 -$0.13 LTM pre-tax ROC 9%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 9/30/09 9/30/08 9/30/09
Revenue 1,218 1,329 1,461 1,653 1,769 1,765 1,421 467 316
Gross profit 288 374 478 601 676 615 352 169 68
EBIT 127 223 322 421 455 398 163 110 38
Net income 42 95 148 179 123 123 (13) 42 (6)
Diluted EPS 0.13 0.29 0.45 0.58 1.24 1.18 (0.13) 0.41 (0.06)
Cash from ops n/a 436 559 436 505 363 298 131 107
Capex n/a 453 697 750 601 274 67 68 16
Free cash flow n/a (17) (138) (314) (96) 89 231 64 91
Cash & investments 1 5 7 46 10 14 19 0 19
Total current assets 0 0 0 0 0 0 0 0 0
Intangible assets 926 926 926 926 926 939 940 939 940
Total assets 2,330 2,422 2,764 3,326 3,460 3,271 2,869 3,383 2,869
Short-term debt 0 0 0 0 0 0 0 0 0
Total current liabilities 0 0 0 0 0 0 0 0 0
Long-term debt 1,429 1,277 1,247 3,006 2,736 2,569 2,248 2,630 2,248
Total liabilities 1,766 1,759 1,951 3,761 3,504 3,227 2,840 3,320 2,840
Preferred stock 350 350 350 0 0 0 0 0 0
Common equity 214 313 464 (435) (44) 43 29 63 29
EBIT/capital employed 11% 19% 23% 25% 23% 20% 9% n/m n/m

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 80 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA
RSC provides rental equipment mainly for industrial and FYE December 31 2004 2005 2006 2007 2008 2009
non-residential construction markets via a network of 457 total revenue 9% 10% 13% 7% 0% -27%
rental revenue 9% 16% 20% 13% 2% -32%
branches across 40 U.S. states and three provinces in Canada. 12% 18% 19% 11% 2% -29%
s-s rental revenue
Private equity firms Oak Hill and Ripplewood bought 85% period-end employees -5% 3% 5% 6% -9% -17%
of RSC from Atlas Copco in a 2006 leveraged buyout. RSC Revenue ($bn) 1.3 1.5 1.7 1.8 1.8 1.3
sold 13 million new shares at $22 per share in a 2007 IPO. % of revenue by type:
Rental sales 74% 78% 83% 87% 89% 84%
Used equipment sales 14% 15% 12% 8% 7% 12%
INVESTMENT HIGHLIGHTS Merchandise sales 12% 7% 6% 5% 4% 4%
#2 U.S. equipment rental provider with 4% share % of revenue by geography:
of a highly fragmented market. Top ten firms have U.S. 97% 97% 96% 95% 95% 95%
Canada 3% 3% 4% 5% 6% 5%
25% share of the $32 billion U.S. equipment rental Selected items as % of revenue:
industry, which grew revenue at a 9% CAGR 2003- Gross profit 28% 32% 36% 38% 35% 21%
08. Industry revenue fell about 10% in 2009. EBIT 17% 22% 25% 26% 23% 6%
Net income 8% 11% 11% 7% 7% -5%
Rental penetration is a potential growth driver. D&A 17% 17% 18% 19% 21% 26%
Rental as a percentage of all equipment in use is Capex 1 18% 32% 33% 25% 8% -9%
currently 40% in the U.S. (up from ~25% in 2000). Equipment utilization 2 68% 71% 72% 73% 70% 58%
Penetration in the U.K. is 80% and in Japan 60%. Tangible equity/assets -22% -11% -35% -47% -38% -44%
Owns equipment at original cost of $2.3 billion at shares out (avg) 3 0% 0% -7% -68% 5% 0%
1
Includes proceeds from equipment sales, which led to negative figure in 2009.
yearend 2009 ($1.4 billion net of depreciation). In 2
Average dollar value of equipment rented in the period divided by the
terms of cost, 44% of equipment is aerial work aggregate dollar value of all equipment, both based on original equipment cost.
3
Shares outstanding were materially reduced in 2007 due to a recapitalization.
platforms, 23% forklifts, and rest earthmoving and
other units. Average rental term is seven to ten days.
INVESTMENT RISKS & CONCERNS
40-month average equipment age at yearend 2009
EV 23% above original equipment cost. EV may
(industry average: ~47 months). Equipment is
be too high, as rental equipment is a depreciating
depreciated over one to ten years to a salvage value
asset, equipment prices have fallen, barriers are low,
of zero to ten percent of cost (useful lives are likely
and a $100 billion used equipment market exists.
longer). Equipment maintenance costs are expensed.
Rental rates will likely remain under pressure.
Cash-generative due to ability to age equipment.
Rental revenue decreased 34% y-y in 4Q09 on
The young fleet age allows RSC to reduce capex
volume down 25% and price down 10% due to
while serving clients effectively. 2009 FCF of $390
weakness in construction and low industrial activity.
million (incl. $171 million of used equipment sales)
enabled RSC to cut debt by $397 million in 2009. $2.2 billion of net debt (93% of rental fleet at cost).
90% of debt is fixed at ~8% average interest rate.
Less cyclical non-construction markets are 58%
of rental revenue. These markets tend to be driven COMPARABLE PUBLIC COMPANY ANALYSIS
by maintenance/repair budgets. Construction Market Price to This Next
Price FY End
(mostly non-residential) accounts for the remainder. ($)
Value Tangible FY FY
Date
Higher share float since August 2009 following ($mn) Book P/E P/E
Ripplewoods distribution of 27 million RSC shares URI 7.10 430 n/m n/m 12x Dec-31
to its limited partners. Ripplewood retained a stake, HEES 10.50 370 1.5x n/m >99x Dec-31
but no board seats. Denis Nayden (55), a managing RRR 6.80 706 n/m n/m n/m Dec-31
partner of Oak Hill, has been chairman since 2006.
Fairholme is one of the largest shareholders. The RATINGS
share register also includes private equity firms and VALUE Intrinsic value materially higher than market value?
Atlas Copco, an industrial conglomerate. MANAGEMENT Capable and properly incentivized?
FINANCIAL STRENGTH Solid balance sheet?
MAJOR HOLDERS MOAT Able to sustain high returns on invested capital?
Insiders <1% | Oak Hill 34% | Fairholme 10% | Atlas Copco EARNINGS MOMENTUM Fundamentals improving?
10% | Ripplewood 8% | BofA 6% | Wellington 2% | GS 2% MACRO Poised to benefit from economic and secular trends?
EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
A key feature of the RSC business model is the ability to age its 3-4 year-old equipment rental fleet by reducing capex.
This boosts free cash flow as the fleets revenue-generating capacity remains unimpaired (useful fleet life is up to ten years or
longer). Our key concern is that RSC owns depreciating assets in an industry with low barriers to entry. With enterprise value
at a 20%+ premium to the original equipment cost, it may be cheaper to re-create the business from scratch or via roll-up.
This is especially true if credit availability improves and equipment prices stay low due to weak construction and industrial
activity. Plans by RSC management to increase capex in 2010 indicate that potentially attractive market opportunities exist.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 81 of 144
additional insight into RSC Holdings:

SLIDES FROM COMPANY PRESENTATION, FEBRUARY 2010

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 82 of 144
additional insight into RSC Holdings (source: Company presentation, February 2010)

OVERVIEW OF LONG-TERM INDUSTRY DYNAMICS

INDUSTRIAL REVENUE CONSIDERABLY LESS CYCLICAL THAN CONSTRUCTION-RELATED REVENUE

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 83 of 144
Unchanged (or offsetting) Superinvestor Holdings
AutoNation (AN) ESL Investments Ft. Lauderdale, FL, 954-769-6000
Services: Retail (Specialty Non-Apparel), Member of S&P 500 www.autonation.com

Trading Data Consensus EPS Estimates Valuation


Price: $17.72 (as of 2/12/10) Month # of P/E FYE 12/31/09 13x
52-week range: $9.21 - $21.60 Latest Ago Ests P/E FYE 12/31/10 13x
Market value: $3.0 billion This quarter $0.31 $0.31 5 P/E FYE 12/31/11 11x
Enterprise value: $4.0 billion Next quarter 0.33 0.33 5 P/E FYE 12/30/12 12x
Shares out: 171.7 million FYE 12/31/10 1.38 1.37 11 EV / LTM revenue 0.4x
Ownership Data FYE 12/31/11 1.59 1.59 6 EV / LTM EBITDA 8x
Insider ownership: 45% FYE 12/30/12 1.45 1.45 1 EV / LTM EBIT 10x
Insider buys (last six months): 3 LT EPS growth 14.0% 14.0% 1 P / tangible book 3.0x
Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 95% Date Actual Estimate LTM EBIT yield 10%
# of institutional owners: 659 2/11/10 $0.29 $0.27 LTM pre-tax ROC 21%
Operating Performance and Financial Position
($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09
Revenue 18,280 18,401 18,310 18,219 17,347 13,376 10,758 10,758 2,597 2,815
Gross profit 2,844 2,868 2,915 2,921 2,793 2,251 1,929 1,929 456 477
EBIT 730 755 794 783 701 (1,228) 423 410 68 95
Net income 479 434 497 317 279 (1,243) 198 233 67 62
Diluted EPS 1.81 1.44 1.46 1.43 1.44 (6.82) 1.32 1.32 0.42 0.36
Cash from ops 619 481 562 580 300 207 685 n/a 119 n/a
Capex 163 122 132 131 169 157 97 n/a 21 n/a
Free cash flow 456 359 430 449 130 50 588 n/a 98 n/a
Cash & investments 176 173 108 246 53 33 111 205 61 205
Total current assets 3,629 4,038 3,748 3,940 3,448 3,305 2,554 1,921 2,696 1,921
Intangible assets 2,894 2,877 2,947 2,945 3,085 3,054 1,327 1,300 1,325 1,300
Total assets 8,503 8,823 8,699 8,825 8,601 8,480 6,014 5,094 6,238 5,094
Short-term debt 2,311 2,758 15 41 14 24 33 8 56 8
Total current liabilities 2,981 3,809 3,411 3,412 3,015 2,903 2,456 1,562 2,615 1,562
Long-term debt 643 809 798 484 1,558 1,752 1,226 1,107 1,358 1,107
Total liabilities 4,593 4,873 4,436 4,155 4,889 5,006 3,816 2,783 4,110 2,783
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 3,910 3,950 4,263 4,670 3,713 3,474 2,198 2,311 2,128 2,311
EBIT/capital employed 16% 17% 24% 38% 32% -53% 20% 21% n/m n/m
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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 84 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA 1
AutoNation sells new and used vehicles and parts. It operates FYE December 31 2005 2006 2007 2008 2009
246 new vehicle franchises in 15 U.S. states. revenue 2% -3% -5% -23% -20%
total retail vehicles sold -1% -7% -8% -21% -23%
new retail vehicles sold -2% -7% -9% -24% -25%
INVESTMENT HIGHLIGHTS used retail vehicles sold 1% -7% -6% -16% -20%
#1 U.S. automotive retailer in a highly fragmented Revenue ($bn) 18.7 18.2 17.3 13.4 10.8
industry. * AutoNation sold 183,000 new vehicles in % of revenue by segment:
2009 versus industry vehicle sales of 10.6 million. It New vehicle 60% 59% 58% 55% 53%
Used vehicle 23% 24% 24% 24% 23%
also retailed 135,000 used vehicles in 2009. Parts and service 13% 14% 15% 17% 20%
Imports represent over half of new vehicles sold. Finance and insurance, net 3% 3% 3% 3% 3%
Key imported brands are Toyota (20% of 2009 new Revenue growth by segment:
vehicles sold), Honda (14%) and Nissan (13%). New vehicle 0% -4% -7% -26% -23%
Used vehicle 5% 0% -4% -24% -20%
Focused on building local market brands that are Parts and service 6% -1% 3% -9% -7%
"must-shop" choices for consumers. Stores under Gross margin by segment:
local retail brands contribute roughly two thirds of New vehicle 7% 7% 7% 7% 7%
revenue. Parts/services are 20% of 2009 revenue. Used vehicle 10% 9% 9% 8% 9%
Parts and service 44% 44% 44% 44% 44%
Value investor Lampert owns nearly half of the Total gross margin 16% 16% 16% 17% 18%
company via investment firm ESL. Lampert, who Selected items as % of revenue:
bought an initial 24% stake in 2001, is also a large EBIT 2 4% 4% 4% 3% 4%
Net income 2% 2% 2% -9% 2%
shareholder of car parts retailer AutoZone (AZO).
D&A 0% 0% 1% 1% 1%
Planning assumption for 2010 industry new Capex 1% 1% 1% 1% 1%
unit sales is 11.5 million units [up 8% y-y] with a New vehicle retail units sold by brand mix:
gradual increase in the selling rate over the course Domestic 3 42% 39% 35% 29% 29%
Import 4 38% 48% 50% 54% 54%
of the year. 4Q09 same-store revenue growth was Premium Luxury 5 20% 14% 15% 16% 17%
9% driven by an 8% rise in new vehicle unit sales. Retail vehicle unit sales by type (000s):
Reduced days of new inventory supply from 83 at New 381 355 323 244 183
yearend 2008 to 54 at yearend 09. Inventory was Used 229 213 201 169 135
Revenue per vehicle retailed ($000s):
$1.4 billion at yearend 2009 v. $1.8 billion year ago. New 29.5 30.3 31.0 30.4 31.2
Repurchased 7.7 million shares for $136 million Used 15.3 16.1 16.4 15.7 16.3
in 2009 (average price of $18 per share). New inventory supply (days) 55 52 52 83 54
Used inventory supply (days) 42 42 44 30 41
INVESTMENT RISKS & CONCERNS Return on tangible equity 26% 28% 57% n/m 25%
Tangible equity to assets 26% 20% 9% 13% 20%
Competitive market. The U.S. auto retail industry shares out (avg) -1% -14% -12% -10% 0%
1
comprises ~19,000 franchised auto dealerships and 2005-08 comparability impaired by discontinued operations. 2008-09 data is
largely comparable. 2 Excludes impairment of goodwill and franchise rights.
~39,000 independent used vehicle dealers. 3
Includes Ford (2009:15%), GM (11%), and Chrysler (3%) brands.
Vehicle manufacturer franchise and framework 4
5
Includes mainly Toyota (2009:20%), Honda (14%) and Nissan (13%) brands.
agreements limit operational flexibility and make Includes mainly Mercedes (2009: 8%), BMW (5%) and Lexus (3%) brands.

it difficult to develop a competitive advantage.


$900 million of net debt and $1.4 billion of
MAJOR HOLDERS
floorplan financing at yearend 2009. Most of the CEO Jackson 1% | Other insiders 4% | ESL 46% | Cascade
debt carries interest at variable rates. 13% | Axa 4% | Barclays 4% | State Street 3% | Vanguard 3%

COMPARABLE PUBLIC COMPANY ANALYSIS RATINGS


VALUE Intrinsic value materially higher than market value?
MV EV EV / P / T. This Next
($mn) ($mn) Rev. Book FY P/E FY P/E MANAGEMENT Capable and properly incentivized?
FINANCIAL STRENGTH Solid balance sheet?
KMX 4,680 4,810 .7x 2.5x 18x 18x
MOAT Able to sustain high returns on invested capital?
PAG 1,370 3,400 .4x n/m 18x 14x
GPI 640 1,620 .4x 10.3x 11x 9x
EARNINGS MOMENTUM Fundamentals improving?
SAH 490 1,760 .3x n/m 14x 9x
MACRO Poised to benefit from economic and secular trends?
AN 3,040 3,950 .4x 3.0x 13x 11x
EXPLOSIVENESS 5%+ probability of 5x upside in one year?
*
Source: AutoNation 2008 10-K.

THE BOTTOM LINE


In the fourth quarter of 2009, AutoNation achieved its first annual increase in new vehicle sales since 2005. With total U.S.
new vehicle sales expected to grow in 2010, the industry may have hit a bottom in 2009 (at less than 11 million new vehicles
sold). This represents a 39% drop from the over 17 million new vehicles sold in 2005. As the largest auto retailer in the U.S.,
AutoNation stands to benefit from a potential economic recovery as well as the industry-wide shakeout of weaker rivals. At a
6-7% trailing earnings yield, however, valuation is not sufficiently compelling even assuming a substantial earnings recovery.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 85 of 144
additional insight into AutoNation:

KEY CREDIT AGREEMENT COVENANT COMPLIANCE CALCULATIONS,


as of December 31, 2009

Selected Income Statement Data, January 1, 2009 December 31, 2009

Net income (loss) from continuing operations $234.2

Floorplan and other interest expense 78.7

Income tax provision (benefit) 116.8

Depreciation and amortization 77.5

Stock-based compensation expense (SFAS No. 123R) 13.5

Impairment charges (including goodwill, franchise rights, and long-lived assets) 3.3

EBITDA 524.0

Floorplan interest expense (36.1)

Adjusted EBITDA $487.9

Selected Data, as of December 31, 2009

Funded indebtedness (current and long-term debt and letters of credit) $1,177.8

Vehicle secured indebtedness (floorplan payables) 1,388.0

Funded indebtedness including floorplan 2,565.8

Shareholders equity 2,303.2

Total capitalization including floorplan $4,869.0

Ratio of funded indebtedness to adjusted EBITDA 2.41

Covenant less than 2.75

Ratio of funded debt to total capitalization (including floorplan) 52.7%

Covenant less than 65.0%

Source: Company press release dated February 11, 2010.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 86 of 144
additional insight into AutoNation:

U.S. CAR AND TRUCK UNIT SALES, 1964-2009

20 million
Trucks Sold per Year
18 million
Cars Sold per Year
16 million

14 million

12 million

10 million

8 million

6 million

4 million

2 million

0 million
1964 1969 1974 1979 1984 1989 1994 1999 2004 2009

Source: Wards Automotive Group, Manual of Ideas analysis.

50%
Annual Change in Trucks Sold
40%
Annual Change in Cars Sold
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
1964 1969 1974 1979 1984 1989 1994 1999 2004 2009

Source: Wards Automotive Group, Manual of Ideas analysis.

To download data on car and truck unit sales from 1931-2009, visit http://bit.ly/9avkQZ

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 87 of 144
Corrections Corp. of America (CXW) Pershing Square Nashville, TN, 615-263-3000
Services: Business Services, Member of S&P MidCap 400 www.correctionscorp.com

Trading Data Consensus EPS Estimates Valuation


Price: $19.57 (as of 2/12/10) Month # of P/E FYE 12/31/09 15x
52-week range: $9.50 - $26.25 Latest Ago Ests P/E FYE 12/31/10 16x
Market value: $2.3 billion This quarter $0.30 $0.33 8 P/E FYE 12/31/11 15x
Enterprise value: $3.4 billion Next quarter 0.31 0.34 8 P/E FYE 12/30/12 12x
Shares out: 116.0 million FYE 12/31/10 1.23 1.39 8 EV / LTM revenue 2.0x
Ownership Data FYE 12/31/11 1.31 1.56 8 EV / LTM EBITDA 8x
Insider ownership: 4% FYE 12/30/12 1.68 1.68 1 EV / LTM EBIT 11x
Insider buys (last six months): 0 LT EPS growth 12.3% 12.3% 3 P / tangible book 1.6x
Insider sales (last six months): 12 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 78% Date Actual Estimate LTM EBIT yield 9%
# of institutional owners: 476 2/9/10 $0.36 $0.34 LTM pre-tax ROC 12%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/09 12/31/08 12/31/09
Revenue 1,008 1,126 1,186 1,303 1,456 1,584 1,670 1,670 411 427
Gross profit 260 276 293 356 420 472 501 501 127 132
EBIT 166 173 176 225 267 301 314 314 83 85
Net income 127 61 50 105 133 151 155 190 41 43
Diluted EPS 1.14 0.51 0.41 0.85 1.06 1.19 1.33 1.33 0.32 0.36
Cash from ops 101 203 126 153 172 251 274 n/a 51 n/a
Capex 17 92 128 110 163 343 516 n/a 69 n/a
Free cash flow 84 111 (2) 43 9 (92) (242) n/a (18) n/a
Cash & investments 84 60 84 112 58 34 46 46 34 46
Total current assets 293 302 320 391 341 338 325 325 338 325
Intangible assets 16 16 16 16 14 14 14 14 14 14
Total assets 1,959 2,023 2,086 2,251 2,486 2,871 2,906 2,906 2,871 2,906
Short-term debt 1 3 12 0 0 0 0 0 0 0
Total current liabilities 160 172 156 164 215 192 195 195 192 195
Long-term debt 1,002 999 964 976 976 1,193 1,149 1,149 1,193 1,149
Total liabilities 1,184 1,207 1,170 1,201 1,264 1,491 1,463 1,463 1,491 1,463
Preferred stock 31 0 0 0 0 0 0 0 0 0
Common equity 745 816 917 1,050 1,222 1,380 1,443 1,443 1,380 1,443
EBIT/capital employed 10% 10% 10% 12% 13% 13% 12% 12% n/m n/m

Ten-Year Stock Price Performance and Trading Volume Dynamics

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 88 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA
CCA operates 65 correctional and detention facilities with a FYE December 31 2005 2006 2007 2008 2009
design capacity of 87,000 beds in 19 states and D.C. revenue 6% 12% 12% 9% 5%
compensated man days 1 3% 7% 6% 4% 4%
revenue/compensated man day 2 3% 4% 4% 5% 2%
INVESTMENT HIGHLIGHTS expense/compensated man day 3 3% 1% 1% 3% 2%
#1 operator of private prisons in the U.S. CCA Revenue ($bn) 1.2 1.3 1.5 1.6 1.7
manages 46% of all private prison beds. Private and Management revenue as % of total 4 98% 99% 99% 99% 100%
public facilities have 8% and 92% share of the $65 % of management revenue by facility type:
Owned and managed 72% 74% 76% 78% 79%
billion U.S. corrections market, respectively. Managed-only 28% 26% 24% 22% 21%
Privatized beds have grown at 16% CAGR from Contribution margin per compensated man day by facility type: 5
11,000 beds in 1990 to 188,000 in 2010, driven by Owned and managed 29% 32% 34% 35% 35%
prison overcrowding and perceived cost benefits. Managed-only 16% 15% 14% 15% 13%
Total margin per comp. man day 25% 27% 29% 31% 31%
$0.45 incremental EPS opportunity based on Selected items as % of revenue:
filling existing bed inventory and beds under EBIT 15% 17% 18% 19% 19%
development (limited capex), according to CCA. Net income 4% 8% 9% 10% 9%
D&A 5% 5% 5% 6% 6%
Announced $250 million buyback in February. Capex 6 9% 13% 24% 33% 3%
CCA has been an active and opportunistic purchaser Selected operating metrics:
of own shares. It bought back 11 million shares in Average available beds (000s) 69.4 71.4 73.3 78.5 86.2
2009 at an average price of under $12 per share. Average compensated occupancy 91% 95% 98% 96% 91%
Compensated man days p.a. (mn) 23.2 24.8 26.3 27.4 28.5
Guiding for 2010 adjusted FCF per share of per compensated man day in $:
$1.83-1.99 (down 10-2%). Guidance excludes Revenue 51 53 55 57 58
impact from share repurchase and is based on $53- Fixed expenses 29 28 29 30 31
58 million of maintenance capex (total capex: $144- Variable expenses 9 10 10 10 10
Contribution 13 14 16 18 18
169 million). Maintenance capex is below D&A.
% of period-end beds by facility type:
Shares trade at 9-10% FCF based on 2010 FCF Owned and managed 64% 64% 66% 70% 70%
guidance including maintenance capex only. Managed-only 36% 36% 34% 30% 30%
Facilities by type:
INVESTMENT RISKS & CONCERNS Owned and managed 39 40 41 43 44
Managed-only 24 25 24 22 21
Relies on government contracts. State, federal and Total facilities 63 65 65 65 65
local/other authorities represented 52%, 40% and Return on tangible equity 6% 11% 12% 12% 11%
8% of 2009 revenue. Changes in contract terms due Tangible equity to assets 42% 45% 48% 48% 49%
shares out (avg) 10% 4% 2% 2% -7%
to budget or political pressure may slow growth 1
Measure of volume (average available beds multiplied by average
and/or reduce profitability of private prisons. compensated occupancy multiplied by number of days in the period).

2
Blackwater risk. Like private military firms, Based on management revenue (excludes transportation and other revenue).
3
Based on facility management expenses (excludes D&A, SG&A).
private prison companies have been prone to reports 4
Excludes transportation, rental and other small revenue sources.
5
of inmate abuses, lawsuits, and public controversy. Excludes D&A and SG&A expenses.
6
Includes expansion capex for all years except for 2009, which is based on
Events of 1999-2000 exemplify this industry risk. maintenance and technology capex only ($49 million based on company data).
Long-time CEO Ferguson (63) retired in 2009.
He was replaced by Damon Hininger (39), who MAJOR HOLDERS
joined CCA in 1992. Ferguson will continue as CEO Hininger <1% | Other insiders 5% | Pershing Sq. 10% |
chairman, which mitigates potential continuity risk. Lazard 7% | Wellington 5% | Barclays 4% | Vanguard 4%
$1.1 billion of net debt at yearend 2009. 85% of
total debt is fixed at a 6.6% effective interest rate. RATINGS
Average maturity of fixed debt is five years. VALUE Intrinsic value materially higher than market value?
MANAGEMENT Capable and properly incentivized?
COMPARABLE PUBLIC COMPANY ANALYSIS
FINANCIAL STRENGTH Solid balance sheet?
MV EV EV / P / T. This Next MOAT Able to sustain high returns on invested capital?
($mn) ($mn) Rev. Book FY P/E FY P/E
EARNINGS MOMENTUM Fundamentals improving?
GEO 990 1,510 1.4x 1.6x 14x 13x
MACRO Poised to benefit from economic and secular trends?
CRN 290 590 1.4x 1.2x 12x 11x
EXPLOSIVENESS 5%+ probability of 5x upside in one year?
CXW 2,270 3,370 2.0x 1.6x 16x 15x
THE BOTTOM LINE
As the largest operator of private prisons in the U.S., CCA has benefited from steady inmate growth, an overcrowded public
prison system and constraints on new public prison development. Homeland security initiatives have also helped as the
proportion of revenue from U.S. Immigration and Customs has nearly doubled to 12% since 2002. This backdrop has enabled
returns on tangible equity in the low-teens over the last several years. Earnings-based measures may underestimate the high
cash generation ability of the business. Shares are cheap trading on a 9-10% maintenance FCF yield based on 2010 guidance.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 89 of 144
additional insight into Corrections Corp. of America:

SLIDES FROM COMPANY PRESENTATION, NOVEMBER 2009

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 90 of 144
additional insight into Corrections Corp. of America:

SLIDES BY BILL ACKMANS PERSHING SQUARE, OCTOBER 2009

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 91 of 144
Gastar Exploration (GST) Spencer Houston, TX, 713-739-1800
Energy: Oil & Gas Operations www.gastar.com

Trading Data Consensus EPS Estimates Valuation


Price: $4.56 (as of 2/12/10) Month # of P/E FYE 12/31/08 n/m
52-week range: $1.80 - $5.18 Latest Ago Ests P/E FYE 12/31/09 n/a
Market value: $228 million This quarter n/a n/a n/a P/E FYE 12/31/10 n/a
Enterprise value: $166 million Next quarter n/a n/a n/a P/E FYE 12/31/11 n/a
Shares out: 50.0 million FYE 1/0/00 n/a n/a n/a EV / LTM revenue 4.0x
Ownership Data FYE 12/30/00 n/a n/a n/a EV / LTM EBITDA n/m
Insider ownership: 17% FYE 12/30/01 n/a n/a n/a EV / LTM EBIT n/m
Insider buys (last six months): 0 LT EPS growth n/a n/a n/a P / tangible book 1.5x
Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 37% Date Actual Estimate LTM EBIT yield -61%
# of institutional owners: 54 n/a n/a n/a LTM pre-tax ROC -64%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 9/30/09 9/30/08 9/30/09
Revenue 1 2 6 27 27 35 63 42 16 4
Gross profit 0 0 0 0 0 0 0 0 0 0
EBIT (5) (5) (10) (12) (71) (58) (1) (101) 4 (22)
Net income (5) (5) (13) (26) (85) (31) (5) 30 3 112
Diluted EPS (0.23) (0.24) (0.57) (0.99) (2.50) (0.75) (0.13) 0.30 0.07 2.29
Cash from ops (1) (2) (1) 3 (1) 7 40 12 17 (3)
Capex 8 5 34 84 53 65 131 62 43 8
Free cash flow (9) (7) (35) (80) (54) (58) (91) (51) (26) (11)
Cash & investments 1 16 61 41 86 16 82 18 82
Total current assets 1 18 70 55 93 25 87 25 87
Intangible assets 0 0 0 0 0 0 0 0 0
Total assets 39 84 240 229 262 288 266 284 266
Short-term debt 2 0 0 0 1 153 20 3 20
Total current liabilities 5 2 14 32 29 182 106 38 106
Long-term debt 7 58 91 94 133 0 0 130 0
Total liabilities 15 62 119 131 167 187 114 173 114
Preferred stock 0 0 0 0 0 0 0 0 0
Common equity 24 22 121 98 95 102 152 111 152
EBIT/capital employed -15% -21% -11% -47% -42% -1% -64% n/m n/m

Ten-Year Stock Price Performance and Trading Volume Dynamics

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 92 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA 1
Gastar is a Canadian natural gas firm with assets in the U.S. YTD
FYE December 31 2005 2006 2007 2008 9/30/09
revenue 353% -2% 29% 83% -46%
INVESTMENT HIGHLIGHTS production 242% 23% 40% 29% 14%
Onshore U.S. natural gas producer with 64 Bcfe proved reserves 54% -5% 75% 16% n/a
of proved reserves at yearend 2008.* 50% of Proved reserves (period-end):
reserves, which are almost 100% natural gas, are Natural gas (MMcf) 33,023 31,157 54,822 63,685 n/a
Oil (000 barrels) 1 30 9 12 n/a
producing. Proved reserve life is about seven years. Total (MMcfe) 33,029 31,335 54,875 63,755 n/a
1,300-1,900 Bcfe of net resource potential, based Producing as % of proved 21% 36% 40% 50% n/a
on management. Gastar is exploring unconventional After-tax NPV ($mn) 2 91 40 132 110 n/a
shale and sands **at Marcellus in West Virginia and Selected production data:
Pennsylvania, and the Bossier sands of East Texas. Natural gas (MMcf) 3,810 4,646 6,576 8,482 7,155
Oil (000 barrels) 2 12 8 5 3
Relatively low cash costs of ~$2.50 per Mcfe Total (MMcfe) 3,822 4,716 6,621 8,510 7,175
based on YTD to September 2009 lease operating Average sales prices ($ per ...): 3
and G&A cost (down nearly by half since 2006). Natural gas (Mcf) 7.18 5.60 5.18 6.63 4.58
Oil (barrel) 50.85 64.66 66.17 98.39 51.29
Operates 100% of core assets. Gastar also has
Selected expenses ($ per Mcfe):
high working interests of 95-100% in West Virginia Lease operations 4 1.81 1.82 1.31 1.28 0.89
and Pennsylvania and 50-67% in East Texas. G&A 2.28 2.87 2.55 1.68 1.62
Split chairman and CEO role in January after DD&A 3.64 3.46 3.24 2.87 1.99
Total 7.73 8.16 7.11 5.83 4.50
call for change from 9% holder Palo Alto. The latter Revenue (US$mn) 5 27 27 35 63 25
believes Gastar has tremendous upside in its core Selected items as % of revenue:
assets in East Texas and the Marcellus shale play. EBIT 6 -8% -44% -36% 21% -29%
Chesapeake (CHK) is largest shareholder. The Net income 7 -94% -317% -88% -8% 158%
D&A 51% 61% 62% 39% 57%
investment by one of the largest U.S. producers of Capex 8 177% 241% 202% 218% 191%
natural gas may be viewed as an indication of value. Return on tangible equity -36% -77% -32% -5% 30%
Received additional $12 million in February due Tangible equity to assets 44% 47% 39% 36% 48%
to 2009 asset sale. In July 2009, Gastar sold a gas shares out (avg) 16% 31% 19% 2% 9%
1
MMcf(e) = millions of cubic feet (equivalents); Mcf(e) = thousands of cf(e).
project in Australia for $181 million, a cash-on-cash 2
After-tax net present value of future cash flows discounted at 10% (computed
return of over 3x. It paid down debt with proceeds. from production of proved reserves with period-end prices held constant).
3
$60 million of net cash as of September 30, 2009. 4
Including impact of realized hedging activities.
Includes production taxes and transportation and treating costs.
Adjusting for $12 million Australian proceeds and 5
6
After unrealized natural gas hedge gain/loss.
$22 million from sale of Texas assets in November Excludes natural gas/oil properties impairment, accretion of asset retirement
obligation, litigation expense and mineral resource properties expense.
2009, Gastar is debt-free and has $90+ million cash. 7
YTD net income includes proceeds from Australian asset sale.
8
Includes drilling advances.
INVESTMENT RISKS & CONCERNS
Dependent on exploration. Maximum after-tax net MAJOR HOLDERS
present value of proved reserves was only $132 CEO Porter 2% | Other insiders 1% | Chesapeake Energy
million at yearend 2007. Gastar depends on risky 14% | Palo Alto 9% | River Road 4% | Rima 2% | DLS 1%
exploration in order to create shareholder value.
Need for additional capital. Gastar generated only RATINGS
$12 million of trailing net cash from operations. It VALUE Intrinsic value materially higher than market value?
expects to spend $54 million on capex in 2010. As MANAGEMENT Capable and properly incentivized?
cash on hand is depleted, ongoing exploration and FINANCIAL STRENGTH Solid balance sheet?
development will require additional capital. MOAT Able to sustain high returns on invested capital?
EARNINGS MOMENTUM Fundamentals improving?
About 40% of proved reserves are undeveloped,
MACRO Poised to benefit from economic and secular trends?
indicating need for capex to raise production.
EXPLOSIVENESS 5%+ probability of 5x upside in one year?
Existence of hedges may limit potential upside if *
Bcfe=Billion cubic feet equivalent.
natural gas prices rebound significantly. **
Considered unconventional because prior to advances in drilling, fracturing
and completion technologies, production was not successful, or uneconomic.

THE BOTTOM LINE


Gastars strategy is to explore unconventional natural gas resources in the U.S., including sands, shale and coal bed methane.
Management estimates the ~75,000 acres under exploration may hold a net resource potential that is 20-30x the size of
proved reserves. While such claims are not uncommon among exploration companies, Gastar is notable for two reasons:
1) U.S. natural gas giant Chesapeake Energy (CHK) owns 14%; and 2) recent Australia asset sale demonstrates management
can deliver value from existing assets. With a cleaned-up balance sheet, improved corporate governance, and potential for
high reserve and production growth, Gastar may represent a worthwhile option to speculate on a rise in natural gas prices.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 93 of 144
additional insight into Gastar Exploration:

COMPARATIVE RESERVE AND VALUATION DATA

Breitburn Harvest
Gastar ATP Oil Compton Contango Delta
Company Energy Natural
Exploration & Gas Petroleum Oil & Gas Petroleum
Partners Resources

Ticker GST ATPG BBEP CMZ MCF DPTR HNR

Recent stock price $4.56 $16.38 $15.22 CAD 0.93 $52.15 $1.19 $5.11

Shares out (mn) 50.0 56.9 55.7 263.8 16.1 276.7 33.2

Market value (mn) $228 $932 $848 CAD 245 $842 $329 $170

Net debt/(cash) (mn) -60 996 583 589 (70) 315 (49)

Enterprise value
$168 $1,928 $1,431 CAD 834 $772 $644 $121
(mn)

Proved developed
7 19 94 78 58 30 16
reserves (MMboe)

proved reserves
11 119 102 100 - 147 48
(MMboe)

2P reserves (MMboe) - 197 - 212 - 433 84

3P reserves (MMboe) 215+ - - - - 850 211

EV / proved
$25 $101 $15 CAD 11 $13 $21 $7
developed Boe

EV / proved Boe 16 16 14 8 - 4 3

EV / 2P Boe - 10 - 4 - 1 1

EV / 3P Boe 1 - - - - 1 1

GOM/
Main location of Continental U.S. Continental U.S. Alberta Shallow U.S. Rocky
North Venezuela
proved reserves (WV, PA, TX) (MI, CA, WY) (Canada) GOM Mountains
Sea

Reserve split
0/100 55/45 25/75 10/90 20/80 6/94 80/20
(oil/natural gas) in %

Risk of additional
Low High Low High Low High Medium *
capital raise

* HNR announced in February 2010 it raised $30 million from a 8.25% convertible note offering due 2013 (conversion price of ~$5.71 per share). It also indicated
the possibility of another financing transaction. However, the latter may add value to HNR shareholders, as it would likely not be dilutive on a per-share basis.

Notes:
1) MMboe=millions of barrels of oil equivalent; Mcf=thousands cubic feet equivalent; 2P=proved+probable; 3P=proved+probable+possible; GOM=Gulf of Mexico.
2) MCF reserves are as of 9/30/09, HNR reserves are as of 8/31/09, and GST, CMZ, ATPG, DPTR, BBEP reserves are as of 12/31/08.
3) ATPG shares include convertible preferred shares; CMZ shares exclude 138 million warrants, each exercisable at C$1.55/share through October 2011.
4) All net debt/cash figures are as of 9/30/09 except for MCF which is as of 1/4/10. CMZ net debt is pro forma for recent net proceeds from equity raise and sale of
5.0% of production. DPTR net debt includes $50 million litigation award in December 2009 and excludes restricted deposits and non-recourse DHS debt.

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additional insight into Gastar Exploration:

SLIDES FROM COMPANY PRESENTATION, JANUARY 2010

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 95 of 144
Johnson & Johnson (JNJ) Berkshire Hathaway , Fairfax New Brunswick, NJ, 732-524-0400
Health Care: Major Drugs, Member of S&P 500 www.jnj.com

Trading Data Consensus EPS Estimates Valuation


Price: $62.72 (as of 2/12/10) Month # of P/E FYE 12/27/09 14x
52-week range: $46.25 - $65.95 Latest Ago Ests P/E FYE 12/31/10 13x
Market value: $173.1 billion This quarter $1.28 $1.28 16 P/E FYE 12/31/11 12x
Enterprise value: $170.3 billion Next quarter 1.27 1.26 13 P/E FYE 12/30/12 11x
Shares out: 2,759.1 million FYE 12/31/10 4.93 4.94 22 EV / LTM revenue 2.8x
Ownership Data FYE 12/31/11 5.36 5.38 16 EV / LTM EBITDA n/m
Insider ownership: 1% FYE 12/30/12 5.85 5.92 12 EV / LTM EBIT 11x
Insider buys (last six months): 0 LT EPS growth 7.0% 7.5% 6 P / tangible book 9.2x
Insider sales (last six months): 8 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 63% Date Actual Estimate LTM EBIT yield 9%
# of institutional owners: 3135 1/26/10 $1.02 $0.97 LTM pre-tax ROC 81%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/28/03 1/2/05 1/1/06 12/31/06 12/30/07 12/28/08 12/27/09 12/27/09 12/28/08 12/27/09
Revenue 41,862 47,348 50,514 53,324 61,095 63,747 61,897 61,897 15,182 16,551
Gross profit 29,686 33,874 36,504 38,267 43,344 45,236 43,450 43,450 10,810 11,239
EBIT 10,308 12,331 13,116 14,587 13,283 16,929 15,755 16,116 3,517 2,604
Net income 7,197 8,180 10,060 11,053 10,576 12,949 12,266 12,266 2,714 2,206
Diluted EPS 2.40 2.74 3.35 3.73 3.63 4.57 4.40 4.40 0.97 0.79
Cash from ops 8,176 10,595 11,089 11,799 14,248 15,022 14,972 n/a 4,001 n/a
Capex 2,099 2,262 2,175 2,632 2,666 2,942 3,066 n/a 1,128 n/a
Free cash flow 6,077 8,333 8,914 9,167 11,582 12,080 11,906 n/a 2,873 n/a
Cash & investments 7,475 9,523 12,884 16,138 4,084 9,315 12,809 14,337 14,799 14,337
Total current assets 19,266 22,995 27,320 31,480 22,975 29,945 34,377 35,602 36,590 35,602
Intangible assets 9,246 11,539 11,842 12,175 28,688 28,763 27,695 31,653 28,571 31,653
Total assets 40,556 48,263 53,317 58,864 70,556 80,954 84,912 91,558 87,724 91,558
Short-term debt 2,117 1,139 280 668 4,579 2,463 3,732 3,341 6,245 3,341
Total current liabilities 11,449 13,448 13,927 12,635 19,161 19,837 20,852 19,245 22,730 19,245
Long-term debt 2,022 2,955 2,565 2,017 2,014 7,074 8,120 8,259 8,395 8,259
Total liabilities 17,859 21,394 21,504 20,154 31,238 37,635 42,401 41,174 41,990 41,174
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 22,697 26,869 31,813 38,710 39,318 43,319 42,511 50,384 45,734 50,384
EBIT/capital employed 92% >100% >100% >100% 84% 97% 87% 81% n/m n/m

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 96 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA 1
Johnson & Johnson provides healthcare products worldwide. FYE December 31 2004 2005 2006 2007 2008 2009
revenue 13% 7% 6% 15% 4% -3%
due to volume 9% 5% 4% 10% 1%
INVESTMENT HIGHLIGHTS due to price 1% 1% 2% 1% 1% } 0%
About 70% of revenue attributable to products due to currency 3% 1% 0% 3% 2% -3%
or businesses with #1 or #2 global market share. Revenue ($bn) 47.3 50.5 53.3 61.1 63.7 61.9
Seven of the companys pharmaceuticals had over % of revenue by segment:
Pharmaceutical 47% 44% 44% 41% 39% 36%
$1 billion each of worldwide revenue in 2009.* Medical Devices 36% 38% 38% 36% 36% 38%
Largest global medical device business. Brands Consumer 18% 18% 18% 24% 25% 26%
including Ethicon (surgical), DePuy (orthopedic), Revenue growth by segment:
and Cordis (vascular) contributed 14%, 9%, and Pharmaceutical 13% 1% 4% 7% -1% -8%
Medical Devices 13% 13% 6% 7% 6% 2%
4%, respectively, to 2009 company revenue. Consumer 12% 9% 7% 48% 11% -2%
7th largest global pharmaceutical franchise. EBIT margin by segment: 2
Two of J&Js largest drugs, Remicade (autoimmune Pharmaceutical 34% 29% 30% 26% 31% 31%
Medical Devices 24% 27% 30% 22% 31% 32%
disease treatment) and Procrit/Eprex (anemia Consumer 18% 18% 14% 16% 17% 18%
treatment), contributed 7% and 4% to 2009 revenue. Corporate -2% -1% -1% -1% -1% -1%3
J&J markets over 100 drugs, of which ~25 have Total EBIT margin 26% 25% 26% 21% 27% 28%
more than $100 million of annual revenue each. % of revenue by geography:
U.S. 59% 56% 56% 53% 51% 50%
Over-the-counter pharmaceuticals/nutritionals International 4 41% 44% 44% 47% 49% 50%
make up nearly 40% of Consumer segment sales. Revenue growth by geography:
Brands include household drugs such as Tylenol, U.S. 10% 2% 5% 9% 0% -4%
Sudafed, Zyrtec and sweetener Splenda. Other key International 18% 13% 6% 22% 10% -1%
consumer franchises are Neutrogena and Aveeno Intl at constant forex 10% 11% 6% 15% 5% 4%
Selected items as % of revenue:
(skin care), Johnsons (baby care), Carefree Gross profit 72% 72% 72% 71% 71% 70%
(womens health) and Listerine (oral care). R&D 5 11% 13% 13% 13% 12% 11%
Guiding for EPS of $4.80-4.90 (up 4-6% y-y) in Net income 17% 20% 21% 17% 20% 20%
D&A 4% 4% 4% 5% 4% 4%3
2010 ** assuming constant exchange rates. Revenue
Capex 5% 5% 5% 5% 5% 3%3
guidance is $63-64 billion (up 2-3% y-y). Equity to assets (tang.) 45% 53% 42% 27% 27% 30%3
Strong balance sheet with $2.7 billion of net cash shares out (avg) 0% 0% -1% -2% -3% -2%
1
at September 30, 2009. 4Q09 estimated FCF is $4+ 2
J&J acquired Pfizers consumer healthcare business for $16.6 billion in 12/06.
Corporate includes minority interest. 2009 EBIT excludes restructuring costs.
billion. J&J also received $1 billion in February, 3
Figures based on YTD to 9/30/09 (or at 9/30/09), as 2009 not yet available.
from a Boston Scientific (BSX) patent settlement. 4 5
Europe was 51% of 2009 international revenue. Excludes in-process R&D.
*
These pharmaceuticals include Aciphex/Pariet (-2% y-y revenue growth at
constant currency), Concerta (+9%), Levaquin/Floxin (-2%), Procrit/Eprex
COMPARABLE PUBLIC COMPANY ANALYSIS
(-6%), Remicade (+15%), Risperdal Consta (+14%), and Topamax (-57%). P/ This Next
MV EV EV /
**
2010 EPS guidance is $4.85-4.95 based on mid-January exchange rates. Tang. FY FY
($mn) ($mn) Rev.
Book P/E P/E
PFE 143,640 129,800 2.6x 5.1x 8x 8x
INVESTMENT RISKS & CONCERNS
NVS 122,160 118,700 2.6x 3.5x 12x 11x
Pharma revenue fell 6% in 09 assuming constant MRK 112,770 99,590 4.3x 5.4x 11x 11x
exchange rates. Patent expirations are the main ABT 83,420 90,380 2.9x 28.9x 13x 11x
reason, with revenue falling 57% for Topamax and JNJ 173,050 170,310 2.8x 9.2x 13x 12x
Risperdal. Next major patent expiry is anti-infective
Levaquin in December 2010 (3% of 2009 revenue). RATINGS
EPS growth a challenge given revenue pressures VALUE Intrinsic value materially higher than market value?
and margins at five-year highs across the business. MANAGEMENT Capable and properly incentivized?
Given ample cash, potential M&A is a concern. FINANCIAL STRENGTH Solid balance sheet?
MOAT Able to sustain high returns on invested capital?
MAJOR HOLDERS EARNINGS MOMENTUM Fundamentals improving?
Insiders <1% | State Street 5% | BlackRock 5% | Barclays 4% MACRO Poised to benefit from economic and secular trends?
Vanguard 4% | FMR 2% | BNY Mellon 2% | Berkshire 1% EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
J&J has world-leading franchises in medical devices, branded pharmaceuticals and consumer healthcare products. As roughly
25% of revenue derives from products introduced in the last five years, innovation remains critical to value creation. While
we commend management in its restructuring efforts, it appears that the planned cuts of 5%+ of the workforce signal slower
growth ahead. An additional concern is a potential switch to acquisition versus organic-led growth, which would heighten
execution risk. Balancing our concerns is the quality of the J&J franchise with durable, highly profitable brands. Assuming
slower organic revenue growth in future, shares appear fairly valued at an 8% earnings yield based on 2010 EPS guidance.

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additional insight into Johnson & Johnson:

SLIDES FROM COMPANY PRESENTATION, JANUARY 2010

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additional insight into Johnson & Johnson:

PHARMACEUTICAL PIPELINE

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Molson Coors Brewing (TAP) Childrens , Third Point Denver, CO, 303-279-6565
Consumer Non-Cyclical: Beverages (Alcoholic), Member of S&P 500 www.molsoncoors.com

Trading Data Consensus EPS Estimates Valuation


Price: $38.90 (as of 2/12/10) Month # of P/E FYE 12/26/09 10x
52-week range: $30.76 - $51.33 Latest Ago Ests P/E FYE 12/31/10 11x
Market value: $7.2 billion This quarter $0.48 $0.56 10 P/E FYE 12/31/11 10x
Enterprise value: $8.2 billion Next quarter 1.20 1.25 9 P/E FYE 12/30/12 9x
Shares out: 185.0 million FYE 12/31/10 3.55 3.73 11 EV / LTM revenue 2.7x
Ownership Data FYE 12/31/11 3.78 4.08 8 EV / LTM EBITDA n/m
Insider ownership: 15% FYE 12/30/12 4.12 4.69 4 EV / LTM EBIT 22x
Insider buys (last six months): 0 LT EPS growth 12.0% 12.0% 1 P / tangible book 6.7x
Insider sales (last six months): 10 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 72% Date Actual Estimate LTM EBIT yield 5%
# of institutional owners: 874 2/9/10 $1.02 $1.10 LTM pre-tax ROC 33%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/28/03 12/26/04 12/25/05 12/31/06 12/30/07 12/28/08 12/26/09 12/26/09 12/28/08 12/26/09
Revenue 4,000 4,306 5,507 5,845 6,191 4,774 3,032 3,032 739 821
Gross profit 1,413 1,564 2,200 2,364 2,488 1,934 1,306 1,306 291 345
EBIT 307 348 421 590 615 610 754 372 146 136
Net income 175 197 135 361 497 379 720 699 94 222
Diluted EPS 2.39 2.59 1.44 2.16 2.84 2.11 3.92 3.92 0.47 1.17
Cash from ops 529 500 422 833 616 412 824 824 16 157
Capex 241 212 406 446 428 231 125 125 54 53
Free cash flow 288 288 16 387 188 181 700 700 (38) 104
Cash & investments 19 123 39 182 377 216 734 734 216 734
Total current assets 1,079 1,268 1,468 1,458 1,777 1,107 1,763 1,763 1,107 1,763
Intangible assets 1,349 1,472 7,295 7,364 8,386 5,221 6,010 6,010 5,221 6,010
Total assets 4,445 4,658 11,799 11,603 13,452 10,387 12,021 12,021 10,387 12,021
Short-term debt 91 39 348 4 4 0 300 300 0 300
Total current liabilities 1,134 1,177 2,237 1,800 1,736 986 1,581 1,581 986 1,581
Long-term debt 1,160 894 2,137 2,130 2,261 1,752 1,413 1,413 1,752 1,413
Total liabilities 3,177 3,056 6,475 5,786 6,302 4,331 4,942 4,942 4,331 4,942
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 1,267 1,601 5,325 5,817 7,149 6,055 7,080 7,080 6,055 7,080
EBIT/capital employed 21% 24% 26% 31% 29% 34% 67% 33% n/m n/m

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BUSINESS OVERVIEW SELECTED OPERATING DATA 1
Molson Coors Brewing Company (MCBC) produces beer for FYE December 31 2005 2006 2007 2008 2009
sale in Canada, the U.S., and the U.K. MCBC was formed in worldwide beer volume 2 24% 1% 1% 24% -3%
revenue 2 28% 6% 6% -23% -36%
2005 following the merger of Adolph Coors and Molson. Revenue (US$bn) 3 5.5 5.8 6.2 4.8 3.0
% of revenue by segment:
INVESTMENT HIGHLIGHTS Canada 29% 31% 31% 39% 57%
#2 Canadian brewer by volume with 41% market U.S. 44% 45% 44% 32% 0%
U.K. 27% 24% 24% 28% 40%
share in 2008. Key owned brands include Coors International and Corporate 0% 1% 1% 1% 2%
Light (13% share) and Canadian (8%), which are Revenue growth by segment:
second- and third-best selling beers in Canada. A-B Canada n/m 10% 7% -3% -7%
InBev-owned company Labatt has 44% share. U.S. 4% 5% 6% n/m n/m
U.K. -19% -8% 6% -8% -9%
Owns 42% of MillerCoors, a JV with SABMiller, EBIT margin by segment:
which was established in 2008. MCBC accounts for Canada 23% 26% 21% 24% 24%
the JV using the equity method and reported $382 U.S. 6% 6% 10% n/m n/m
million of related equity income in 2009. U.K. 5% 5% 5% 6% 7%
International and Corporate -3% -2% -2% -4% -4%
MillerCoors is the #2 U.S. brewer by volume with Total EBIT margin 4 8% 10% 10% 13% 25%
29% market share in 2008. Key owned brands are Selected items as % of revenue:
Coors Light, Miller Lite, Blue Moon and Miller Gross profit 40% 40% 40% 40% 43%
Genuine Draft. Leader A-B InBev has 49% share. Net income 2% 6% 8% 8% 24%
D&A 7% 8% 6% 6% 6%
#2 U.K. brewer by volume with 20% market share Capex 5 7% 8% 7% 5% 4%
in 2008. The Carling brand represents over 75% of Tangible equity to assets -24% -40% -30% -4% 17%
volume sold. Main rivals are Heineken/Carlsberg- shares out (avg) 6 114% 8% 4% 2% 1%
1
Effective July 1, 2008, the company and SABMiller combined the U.S. and
owned Scottish & Newcastle (25% market share), Puerto Rico operations of their respective subsidiaries in the MillerCoors JV.
A-B InBev (18%), and Carlsberg (13%). The results of U.S. operations, which had historically comprised substantially all
Generated $824 million net cash from operations of the companys U.S. segment were deconsolidated. The company has a 42%
economic stake in the JV and has accounted for it using the equity method.
in 2009 (including $401 million distribution from 2
Beer volume includes proportionate share of volume from equity investments.
MillerCoors). 2009 tax rate, however, was near zero 2005 data reflect Molson-Coors merger, 2008/09 data impact from MillerCoors.
3
After excise taxes. 4 Includes equity income in MillerCoors in 2008 and 2009.
versus an expected long-term rate of 22-26%. 5
Includes MillerCoors investment in 2008-09. 6 2005 increase due to M&A.
Shares trade on 6-7% estimated FCF yield based
on 2009 FCF and estimated normalized taxes. COMPARABLE PUBLIC COMPANY ANALYSIS
MV EV EV / P / T. This Next
INVESTMENT RISKS & CONCERNS ($mn) ($mn) Rev. Book FY P/E FY P/E
Operates in mature beer markets. 2008 total HINKY 22,930 35,910 1.7x n/m 16x 14x
market beer volume growth was 0.7% in the U.S., TAP 7,200 8,180 2.7x 6.7x 11x 10x
1.1% in Canada, and -5.5% in the U.K. MCBC has
little exposure to faster growing emerging markets. MAJOR HOLDERS
MCBC worldwide volume fell 3% y-y in 2009 to Shares out: 5.8 million Class A shares incl. exchangeable
50.0 million hectoliters, adjusted for MillerCoors. shares (not listed; voting) and 179.3 million Class B shares
MCBC said in February to expect volume to incl. exchangeable shares (NYSE: TAP; limited voting). The
remain challenging, especially in the first half. Molson and Coors families control voting via Class A shares.
Limited margin improvement potential? The near Economic stake: Coors family 14% | Molson family 4% |
$500 million of merger synergies have been realized Other insiders <1% | Cap Re 10% | FMR 5% | Childrens 3%
through 2009. While additional savings are targeted
at MCBC and at MillerCoors, it remains to be seen RATINGS
how much will flow through to the bottom line. VALUE Intrinsic value materially higher than market value?
Depends on a few brands. Coors Light, Canadian, MANAGEMENT Capable and properly incentivized?
Miller Lite, and Carling are key profit drivers. FINANCIAL STRENGTH Solid balance sheet?
Controlled by Molson and Coors families via MOAT Able to sustain high returns on invested capital?
combined majority ownership of class A shares. EARNINGS MOMENTUM Fundamentals improving?
$1.0 billion of net debt at yearend 2009. Liquidity MACRO Poised to benefit from economic and secular trends?
is high, however, and leverage could be increased. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
Molson Coors has a strong presence in three of the worlds largest beer markets including the U.S. (via the MillerCoors JV),
Canada, and the U.K. While these markets are attractive because of a highly consolidated industry structure and high cash
generation, they offer little growth potential. In addition, margin improvements may be harder to achieve going forward as
the merger-related synergies are largely realized by now. At a mid-to-high single digit FCF yield, shares appear fairly valued.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 101 of 144
Monsanto (MON) Lone Pine , Weitz St. Louis, MO, 314-694-1000
Basic Materials: Chemical Manufacturing, Member of S&P 500 www.monsanto.com

Trading Data Consensus EPS Estimates Valuation


Price: $75.82 (as of 2/12/10) Month # of P/E FYE 8/31/09 20x
52-week range: $66.57 - $93.35 Latest Ago Ests P/E FYE 8/31/10 23x
Market value: $41.4 billion This quarter $1.99 $1.98 17 P/E FYE 8/31/11 17x
Enterprise value: $42.9 billion Next quarter 1.37 1.38 14 P/E FYE 8/30/12 14x
Shares out: 545.7 million FYE 8/31/10 3.28 3.28 18 EV / LTM revenue 4.0x
Ownership Data FYE 8/31/11 4.44 4.44 17 EV / LTM EBITDA 19x
Insider ownership: 0% FYE 8/30/12 5.52 5.63 7 EV / LTM EBIT 19x
Insider buys (last six months): 0 LT EPS growth 15.0% 15.0% 1 P / tangible book 7.3x
Insider sales (last six months): 11 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 79% Date Actual Estimate LTM EBIT yield 5%
# of institutional owners: 1869 1/6/10 -$0.02 $0.00 LTM pre-tax ROC 35%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 8/31/03 8/31/04 8/31/05 8/31/06 8/31/07 8/31/08 8/31/09 11/30/09 11/30/08 11/30/09
Revenue 3,378 5,423 6,275 7,065 8,349 11,365 11,724 10,772 2,649 1,697
Gross profit 1,552 2,527 2,995 3,443 4,230 6,177 6,762 5,951 1,550 739
EBIT 87 545 469 1,110 1,369 2,908 3,103 2,317 748 (38)
Net income (23) 267 255 689 993 2,024 2,109 1,534 556 (19)
Diluted EPS 0.00 0.49 0.35 1.22 1.65 3.59 3.78 2.75 0.98 (0.04)
Cash from ops (214) 1,261 1,737 1,674 1,854 2,799 2,236 708 114 (1,414)
Capex 114 210 281 370 509 918 916 844 264 192
Free cash flow (328) 1,051 1,456 1,304 1,345 1,881 1,320 (136) (150) (1,606)
Cash & investments 511 1,337 675 1,460 866 1,613 1,956 471 1,342 471
Total current assets 4,939 4,931 4,644 5,461 5,084 7,609 7,883 7,431 7,489 7,431
Intangible assets 1,339 1,174 2,401 2,751 4,040 4,663 4,589 4,642 4,427 4,642
Total assets 9,536 9,164 10,579 11,728 12,983 17,991 17,877 17,606 16,909 17,606
Short-term debt 269 433 126 28 270 24 79 281 70 281
Total current liabilities 2,019 1,894 2,159 2,279 3,075 4,439 3,756 3,354 3,918 3,354
Long-term debt 1,258 1,075 1,458 1,639 1,150 1,792 1,724 1,724 1,755 1,724
Total liabilities 4,380 3,906 4,966 5,203 5,480 8,617 7,821 7,320 7,827 7,320
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 5,156 5,258 5,613 6,525 7,503 9,374 10,056 10,286 9,082 10,286
EBIT/capital employed 2% 12% 11% 26% 33% 65% 58% 35% n/m n/m

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 102 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA
Monsanto provides agricultural products via two segments: YTD 1
FYE August 31 2005 2006 2007 2008 2009 11/30/09
Seeds and Genomics: Produces natural and genetically revenue 16% 16% 18% 36% 3% -36%
modified crop and vegetable seeds. Modified seeds result ...due to volume 5% 6% 11% 8% -11% -12%
from artificial insertion of traits (e.g. insect-resistant trait). ...due to price 1% 2% 2% 20% 17% -24%
...due to currency 3% 1% 2% 5% -4% 0%
Agricultural Productivity: Includes mainly the branded ...due to acquisitions 7% 7% 2% 3% 1% 0%
herbicide Roundup. Herbicides are used for controlling weed. Revenue ($bn) 6.1 7.1 8.3 11.4 11.7 1.7
% of revenue by segment:
INVESTMENT HIGHLIGHTS Seeds and genomics 52% 55% 59% 56% 62% 61%
Agricultural productivity 48% 45% 41% 44% 38% 39%
Competes in $66+ billion global crop protection Revenue growth by segment:
and seeds market.* Crop protection grew from $28 Seeds and fenomics 39% 23% 28% 28% 15% -6%
billion in 2000 to $40+ billion in 2008. Since 2000, Agricultural productivity -2% 9% 6% 48% -11% -57%
EBIT margin by segment:
the seed market has grown 60% to $26 billion in Seeds and genomics 12% 20% 18% 19% 23% -6%
2008 and is forecast to exceed $40 billion by 2020. Agricultural productivity -1% 9% 14% 34% 31% 5%
Strategy is focused on genetically modified seeds Total EBIT margin 7% 15% 16% 25% 26% -2%
to increase farmers crop yield. The average yield % of revenue by major geography (based on country of origin):
U.S. 52% 57% 56% 50% 55% n/a
per corn acre, for example, is 157 bushels in the Latin America 20% 18% 18% 21% 20% n/a
U.S. versus 105 in the EU, 59 in Brazil and 35 in Europe and Africa 16% 15% 15% 17% 15% n/a
India. ** While yield gaps are due to many factors, Selected items as % of revenue:
genetic modification of seeds is pushing the frontier. Gross profit 48% 49% 51% 54% 58% 44%
R&D 10% 10% 9% 9% 9% 16%
Corn seed/traits represented 39% of gross profit Net income 4% 10% 12% 18% 18% -1%
in FY09. Monsanto has 36% corn market share in D&A 8% 7% 6% 5% 5% 8%
the U.S., 60% in Mexico, 49% in Argentina, 41% in Capex 5% 5% 6% 8% 8% 11%
Brazil, 37% in India and 14% in the EU. Other key shares out (avg) 1% 1% 1% 1% 0% -1%
1
Monsantos business is seasonal: F1Q is historically around break-even.
seeds/traits sold are soybean, cotton, and vegetables.
Owns worlds best-selling herbicide Roundup. Competitors include Syngenta, agri-divisions of
Roundup and other glyphosate-based herbicides DuPont, Dow Chemical, BASF and Bayer, as well
contributed 27% of company gross profit in FY09. as academic/other research centers. More broadly,
Extensive intellectual property includes crop- and rivals are crop yield enhancers (e.g. fertilizers).
functional-specific trait patents as well as licenses to 4% FCF yield on midpoint of 2012 FCF guidance.
genomics sequences (often perpetual in nature). COMPARABLE PUBLIC COMPANY ANALYSIS
R&D pipeline represents $8 billion gross revenue
MV EV EV / P / T. This Next
opportunity by 2020, based on management. Split ($mn) ($mn) Rev. Book FY P/E FY P/E
between modified/natural-hybrid seeds is ~50/50. SYT 24,120 26,380 2.4x 6.0x 12x n/a
Guiding for 28% gross profit increase from $6.8 MON 41,370 42,900 4.0x 7.3x 23x 17x
billion in FY09 to $8.7 billion in FY12. $2.9
billion incremental gross profit from seeds and traits MAJOR HOLDERS
(~70% corn-related) is to offset $0.9 billion decline Insiders <1% | BlackRock 5% | Capital World 4% | Barclays
in agricultural segment (due to decline in Roundup). 4% | State Street 4% | Vanguard 4% | Lone Pine 2%
RATINGS
INVESTMENT RISKS & CONCERNS VALUE Intrinsic value materially higher than market value?
Challenges to genetically modified food including MANAGEMENT Capable and properly incentivized?
public rejection and regulation. Health concerns and FINANCIAL STRENGTH Solid balance sheet?
potential for adventitious presence (contamination MOAT Able to sustain high returns on invested capital?
of natural seeds with traits) can slow market growth. EARNINGS MOMENTUM Fundamentals improving?
Industry growth may not equal value creation. MACRO Poised to benefit from economic and secular trends?
As the decline in Roundup revenue shows, generic EXPLOSIVENESS 5%+ probability of 5x upside in one year?
competition and negative supply-demand dynamics * Based on Phillips McDougall data per Syngenta industry handbook.
can quickly erode product brands that are off-patent. Genetically-modified seeds were ~30% of total seeds industry in 2008.
** Based on 2007-09 average yields. For additional information click here.
THE BOTTOM LINE
Monsanto has led development of genetically modified seeds ever since pioneering gene modification of plant cells in 1982.
The growth opportunity is clear: Population and GDP growth increase demand for food. With limited farmland, production
from existing fields has to rise. While there are many ways to achieve this (e.g. better field management via use of fertilizer
and hybrid seeds), Monsantos biotech traits are pushing the last frontier in crop yield maximization. Global industry growth
coupled with the companys patent-protected products is a strong combination. However, given that enterprise value is nearly
two thirds of global crop protection and seeds industry revenue, investors may be paying too much for expected future profit.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 103 of 144
additional insight into Monsanto:
SLIDES FROM COMPANY PRESENTATION, JANUARY 2010

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 105 of 144
Overstock.com (OSTK) Chou , Fairfax Salt Lake City, UT, 801-947-3100
Services: Retail (Catalog & Mail Order) www.overstock.com

Trading Data Consensus EPS Estimates Valuation


Price: $11.80 (as of 2/12/10) Month # of P/E FYE 12/31/08 n/m
52-week range: $6.71 - $17.99 Latest Ago Ests P/E FYE 12/31/09 49x
Market value: $270 million This quarter $0.45 $0.46 2 P/E FYE 12/31/10 25x
Enterprise value: $252 million Next quarter 0.01 0.02 2 P/E FYE 12/31/11 16x
Shares out: 22.9 million FYE 12/31/09 0.24 0.29 3 EV / LTM revenue 0.3x
Ownership Data FYE 12/31/10 0.48 0.50 3 EV / LTM EBITDA 97x
Insider ownership: 45% FYE 12/31/11 0.74 0.61 1 EV / LTM EBIT 97x
Insider buys (last six months): 0 LT EPS growth 25.0% 25.0% 2 P / tangible book n/m
Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 55% Date Actual Estimate LTM EBIT yield 1%
# of institutional owners: 192 11/3/09 -$0.03 -$0.03 LTM pre-tax ROC n/m

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 9/30/09 9/30/08 9/30/09
Revenue 92 239 495 795 780 766 834 815 187 195
Gross profit 19 26 66 117 90 125 143 155 32 38
EBIT (4) (12) (5) (17) (99) (45) (11) 3 (4) (0)
Net income (11) (12) (5) (25) (107) (48) (13) (2) (2) (1)
Diluted EPS (0.86) (0.73) (0.26) (1.17) (4.92) (1.86) (0.55) (0.07) (0.07) (0.03)
Cash from ops 3 (10) 25 (6) (26) 10 2 23 (0) 12
Capex 2 7 9 45 23 3 19 9 9 3
Free cash flow 1 (17) 16 (51) (49) 7 (17) 13 (9) 10
Cash & investments 33 40 288 112 127 147 110 79 70 79
Total current assets 56 86 356 235 188 197 146 119 114 119
Intangible assets 3 3 3 4 3 3 3 3 3 3
Total assets 64 99 378 326 265 231 172 144 146 144
Short-term debt 0 0 1 7 5 4 0 1 0 1
Total current liabilities 20 40 88 155 129 134 106 85 80 85
Long-term debt 0 0 117 78 79 76 67 60 67 60
Total liabilities 20 40 205 233 208 213 175 148 149 148
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 44 59 173 93 56 18 (3) (3) (4) (3)
EBIT/capital employed -48% -104% -78% -102% -663% n/m n/m n/m n/m n/m

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 106 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA 1
Overstock.com is an online retailer offering brand-name YTD
products at discount prices mainly to U.S.-based customers. FYE December 31 2004 2005 2006 2007 2008 9/30/09
revenue 105% 62% -2% -2% 9% -3%
gross bookings 2 82% 62% -1% -1% 7% -3%
INVESTMENT HIGHLIGHTS B2C orders 90% 46% -5% -10% 3% 18%
Internet-based closeout retailer. Overstock.com new B2C customers 51% 41% -18% -14% 5% 23%
sells branded products at off-prices including home avg acquisition cost 3 31% 33% 18% -9% -2% -19%
and garden merchandise (50% of gross bookings in Revenue ($mn) 491 795 780 766 834 559
% of revenue by segment: 4
2008), clothing and accessories (24%), electronics Direct 43% 40% 39% 26% 21% 17%
and entertainment media (18%) and other goods. Fulfillment partner 57% 60% 61% 74% 79% 83%
1.4 million unique customers in 3Q09 (+18% y-y) Revenue growth by segment:
of which 52% were repeat customers (+14% y-y). Direct 54% 52% -7% -35% -12% -23%
Fulfillment partner 179% 70% 0% 19% 16% 2%
Average order size was $114 in 3Q09 (-12% y-y). Gross margin by segment:
Offers alternative sales channel for liquidating Direct 13% 13% 6% 15% 11% 14%
manufacturers inventory. Manufacturers benefit Fulfillment partner 13% 16% 15% 17% 19% 21%
as they can sell excess inventory without disrupting Total gross margin 13% 15% 12% 16% 17% 20%
Selected items as % of revenue:
sales via their traditional, full-price channels. EBIT -1% -3% -13% -6% -1% -1%
GSI Commerce bought rival Retail Convergence Net income -1% -3% -13% -6% -2% 0%
(RC) for up to 2.6x trailing revenue in December D&A 1% 2% 4% 4% 3% 2%
2009. While valuation was driven by fast-growing Capex 2% 6% 3% 0% 2% 1%
Free cash flow ($mn) 16 -51 -50 7 -17 -26
private sales firm Rue La La (58% of revenue), RC Selected operating metrics:
also owns direct competitor SmartBargains.com. Gross bookings ($mn) 536 868 863 853 916 609
Chairman and CEO Byrne (46) owns 30%. B2C orders (mn) 5.8 8.4 8.0 7.2 7.4 1.8
Byrne, who founded the company in 1997, has often New B2C clients (mn) 2.5 3.5 2.9 2.5 2.6 0.7
Avg acquisition cost ($) 16 21 25 23 22 20
been transparent in shareholder communication and shares out (avg) 10% 9% 5% 17% -3% -1%
wrote an Owners Guide on key business metrics. 1
YTD figures include an unaudited 3Q09. YTD and 2008 figures are pending
About to report its first annual profit based on restatement. 99%+ of YTD revenue is attributable to customers in the U.S.
2
Gross bookings differ from GAAP revenue in that gross bookings represent
CEO Byrne comment on January 12, 2010.* Trailing the gross sales price of goods sold before returns and sales discounts.
3
net income is negative $1million for 12 months to 4
Sales and marketing expenses divided by new customers for the period.
Direct revenue is from sales fulfilled from own warehouses as opposed to
September 2009. Trailing EBITDA is $17 million. fulfillment partner revenue (from sales shipped from partner warehouses).
$18 million of net cash as of September 30 after
$60 million face value of 3.75% convertible notes COMPARABLE PUBLIC COMPANY ANALYSIS
due in 2011 (convertible at $76 per share). Current MV EV EV / P / T. This Next
assets minus current liabilities totaled $34 million. ($mn) ($mn) Rev. Book FY P/E FY P/E
AMZN 53,190 46,930 1.9x 13.2x 41x 32x
INVESTMENT RISKS & CONCERNS EBAY 28,150 23,210 2.7x 4.1x 13x 12x
Competitors: liquidators (SmartBargains.com), OSTK 270 250 .3x n/m 49x 25x
online general retailers (Amazon.com, Buy.com),
eBay, online specialty retailers (BlueNile.com), and MAJOR HOLDERS
traditional retailers (Walmart, Ross Stores, TJX). CEO Byrne 30% | Other insiders 1% | Fairfax 15% | Chou
Low barriers to entry. New competitors can Associates 10% | Axa 6% | Barclays 3% | Lee, Danner 3%
establish websites, logistical infrastructure, and
manufacturer relationships at relatively low cost. RATINGS
Negative $94 million of FCF in 2004-08. Trailing VALUE Intrinsic value materially higher than market value?
FCF, however, is positive $13 million. Revenue has MANAGEMENT Capable and properly incentivized?
mostly stagnated but gross margins have improved. FINANCIAL STRENGTH Solid balance sheet?
Reporting deficiencies. Issues include an SEC MOAT Able to sustain high returns on invested capital?
comment letter and restatement of 08-09 financials. EARNINGS MOMENTUM Fundamentals improving?
Litigation a distraction? CEO Byrne has fought MACRO Poised to benefit from economic and secular trends?
parties such as short sellers and prime brokers.** EXPLOSIVENESS 5%+ probability of 5x upside in one year?
**
* The company got a recent $5 million favorable verdict in the Rocker case.
As quoted in The New York Observer and reported in a related 8-K filing.

THE BOTTOM LINE


CEO Byrne recognized the potential of liquidating manufacturers inventory of consumer goods through the Internet when he
founded Overstock.com in 1997. While revenue grew rapidly until 2005, growth has been stagnant and cash flow negative
since then. 2009 could mark a turning point as the company should be profitable. With revenue of $800+ million, the
valuation likely ignores Overstocks earning power. Given the mixed track record, however, this does not come as a surprise.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 107 of 144
additional insight into Overstock:

SLIDES FROM COMPANY PRESENTATION, NOVEMBER 2009

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 108 of 144
OWNERS GUIDE, BY OVERSTOCK.COM FOUNDER, CEO AND CHAIRMAN PATRICK BYRNE
The following Owners Guide is also available at http://bit.ly/dhWNYk

Dear Owner, antidote to this we started thinking in terms of the "economic cost of returns." This
I wish to set a gold standard in communicating with candor your firm's results. calculation, which varies by product, is a fairly complex function of the percentage of
units sold that are returned, the percentage of these that are restocked and resold, the
As teenagers my brothers and I ran a Christmas tree lot. We cared about reality, not percent that are damaged and so cannot be resold but for which we are reimbursed by
cosmetics, and wanted an accounting system to help us understand and run our either the vendor (for selling us damaged product) or the freight company (for
business. We devised a system we called, "cigar-box accounting," because at day's damaging it in shipping), handling fees, restocking fees charged, etc. The payoff is that
end, standing by the trashcan fire, we counted the bills in the cigar box and knew what we arrive at a "handicap" for each product with which to burden its COGS.
we had made or lost. It was simple, foolproof, and we made good decisions using it.
Partner COGS - As of July 1, 2003, partner COGS include the cost we pay the partner
Now, as the CEO of Overstock, I want shareholders to understand the economics of for each product, which is what the partner bills us to cover the cost of the product, as
their business and the metrics we use to most effectively manage it. Our internal well as their warehousing, handling and fulfillment costs. Additionally, we incur credit
method of accounting is quite straightforward and follows generally accepted card fees and chargebacks for selling the product on the website, as well as customer
accounting principles ("GAAP"), with a few exceptions. In our public SEC filings we service costs. As all partner returns are now sent back to our warehouse, partner
chose principles at the conservative edge of GAAP, but I will continue to present and returns costs are now accounted for by management the same way that we account for
discuss our results as I see them using the internal terms we have grown up with. For core returns costs, as an element of COGS.
your reference, our GAAP and our internal accounting methods are described below
with particular attention paid to the similarities and differences between the two. Juice

GAAP METRICS - see SEC filings for greater detail Gross sales less COGS defined as above leaves us the "juice," that is, our marginal
gain for making that one additional sale. Juice is comparable to gross profit if you were
Revenue is comprised of direct revenue, and fulfillment partner revenue. All revenue to subtract coupons and sales discounts.
amounts are net of returns, chargebacks and fraud, and sales discounts, primarily
coupons. Marketing and Customer Acquisition

Direct revenue consists of merchandise sales made to individual consumers and Our customer acquisition numbers capture all marketing expenses, from on-line
businesses, which are fulfilled from our warehouses in Utah. advertising to our off-line branding campaigns to the salaries and benefits of the people
in the marketing department.
Fulfillment partner revenue is generated when we sell the merchandise of other
retailers, catalogues or manufacturers through our Website. We do not own or Marketing Coupons - There was a day when an Internet company would repeatedly
physically handle the merchandise for these transactions unless the product is returned. give the same customer $5 coupons to buy $15 bags of dog food, and then book the
The entities with which we have a third party fulfillment relationship ship the products $15 as revenue. Eventually the Financial Accounting Standards Board ("FASB")
directly to the end customer. Revenue generated from our auctions and cars tabs is stopped this practice, opining that a firm could only book as revenue the amount the
reported on a net basis and is included in fulfillment partner revenue. customer actually paid ($10 in the above example). I agree that the FASB's decision
was a step forward, that if I give a $5 discount coupon to the same customer over and
Cost of Goods Sold consists primarily of the costs of merchandise sold to customers, over to make such purchases, then she is not really "spending" $15 each time she
fixed warehouse costs, warehouse handling costs, inbound and outbound shipping comes.
costs, credit card fees and customer service costs.
Yet there is a different way to look at some coupons: we are sending a check to Yahoo!
Sales and Marketing consist primarily of online and offline advertising, public this month so that they will generate new customers for us, we are sending checks to
relations and promotional expenditures, as well as payroll and related expenses for MSN and Google this month so that they will generate new customers for us, and we
personnel engaged in marketing and selling activities. are sending a check (in the form of a $5 discount coupon) this month to someone in
General and Administrative consist of wages and benefits for executive, accounting, Peoria in order to be a new customer for us. I agree that if I send the same "check" over
and administrative personnel, rents and utilities, travel and entertainment, depreciation and over to the same woman in Peoria to get repeat business from her then this "check"
and amortization and other general corporate expenses. (i.e., discount coupon) is just revenue I did not collect. But in considering only the
underlying economics of first buys, I think I should treat such cases as marketing
Technology Expense consist of wages and benefits for technology related personnel,
checks, just like the checks going to Yahoo!, MSN, and Google, and then calculate the
rents and utilities, and depreciation and amortization related to software and computer
efficacy of such checks, doubling up on winners and cutting losers. And since our
equipment.
marketing department uses essentially all its coupons in customer acquisition, and
MANAGEMENT METRICS rarely gives a coupon to someone who has already bought from us, our management
Gross Merchandise Sales (Gross Bookings for Auctions) accounting therefore does not net them against gross bookings, but instead, treats them
as an element of marketing spending.
One place where we are internally less conservative than GAAP is in how we think of
sales. GAAP recognizes as revenue the full value of goods shipped from our Nectar
warehouses or our partner's warehouses, less discounts and returns, whereas gross "Juice" less marketing expenses leaves us the "nectar", or the amount of gross profit
merchandise sales ("GMS") is simply the gross amount of goods shipped. The only left to cover our fixed costs, or "nut" (see below). On a GAAP basis, this is commonly
difference is that GAAP revenue is reduced by returns and marketing coupons: in our referred to as contribution, or contribution margin when thinking in terms of
management accounting system these show up in our COGS and marketing expenses percentages.
respectively, as explained below. Prior to July 1, 2003, the differences were more
Nut
significant as we were accounting for partner revenue on a net, or commission, basis.
From that time, however, we have taken all customer returns at our own facility, which Another term from my Christmas tree days was "nut", as in, "Did we cover our nut
requires us to account for fulfillment partner transactions in the same manner as we today?" This includes all employee compensation and benefits (excluding warehouse
would a direct transaction. Revenue for the auctions and cars businesses is accounted and marketing staff), warehouse rent and management expenses, corporate and
for on a net rather than a gross basis. technology expenses, and depreciation and amortization charges. (it baffles me that the
"pro forma" accounting of some Internet firms excludes depreciation as an expense:
Core versus Direct, Partner versus Fulfillment Partner
either it was an expense the day you bought it, or over the years that you use it up: at
Core sales are those shipped from our warehouses. Partner sales are those that are some point you have to admit the cash is gone! "Nut" is akin to G&A under GAAP.
generated by Overstock, our marketing and merchandising team, and our website, but
Management Operating Income
are those in which goods are drop-shipped directly from our partner to our customer.
From the customer's perspective, packages all appear to come from Overstock.com. With good gross bookings and COGS, and disciplined sales and marketing spend, what
The SEC and our auditors objected to our internal term, "partner," because it has the is left (nectar) can cover our nut. Anything left after that is management's operating
connotation (they say) of a legally bound entity, whereas these relationships are quite profit. By subtracting any non-cash or other charges from the management operating
dynamic. For this reason, in our GAAP terminology we call our core and partner profit, one gets, as I view it, to GAAP net income.
channels "direct" and "fulfillment partner," respectively. Conclusion
Cost of Goods Sold Labels are the guests of reality. - Zhuang-ze
Core COGS - Our accounting for core COGS is in-line with GAAP with one What matters in accounting is not always how it is being done, but that the rules by
exception. Inbound freight, outbound freight, customer service, credit card fees, which it is being done are made explicit. As required by law I present our financial
charge-backs, fraud, and warehouse handling and fixed expenses are all included in results according to GAAP. Beyond that, however, I wish to open our cigar box to you
our management COGS. Unlike GAAP, however, which nets returns from revenue, we in order to communicate with unprecedented candidness the economics of the business
include the cost of returns in our COGS calculation, an explanation of which is below. you bought. The system explained above is designed to that end.
Economic Cost of Returns - In our early history returns costs were huge, and fluctuated Respectfully submitted,
widely. Stuffing them into a contra against sales both introduced too much noise into
many metrics we wished to track as a percent of sales (for example, outbound freight), Patrick M. Byrne
and tended to camouflage them so that they did not get managed with discipline. As an

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 109 of 144
Potash Corp. (POT) Childrens , Pabrai Saskatoon, SK, Canada, 306-933-8500
Basic Materials: Non-Metallic Mining www.potashcorp.com

Trading Data Consensus EPS Estimates Valuation


Price: $111.60 (as of 2/12/10) Month # of P/E FYE 12/31/08 10x
52-week range: $63.65 - $126.47 Latest Ago Ests P/E FYE 12/31/09 n/a
Market value: $33.0 billion This quarter n/a n/a n/a P/E FYE 12/31/10 n/a
Enterprise value: $36.7 billion Next quarter n/a n/a n/a P/E FYE 12/31/11 n/a
Shares out: 296.0 million FYE 1/0/00 n/a n/a n/a EV / LTM revenue 7.7x
Ownership Data FYE 12/30/00 n/a n/a n/a EV / LTM EBITDA 26x
Insider ownership: 1% FYE 12/30/01 n/a n/a n/a EV / LTM EBIT 26x
Insider buys (last six months): 0 LT EPS growth n/a n/a n/a P / tangible book 5.8x
Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 67% Date Actual Estimate LTM EBIT yield 4%
# of institutional owners: 924 n/a n/a n/a LTM pre-tax ROC 23%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 9/30/09 9/30/08 9/30/09
Revenue 2,224 2,799 3,244 3,847 3,767 5,234 9,447 4,748 3,064 1,099
Gross profit 307 380 681 1,125 1,002 1,881 4,907 1,620 1,741 346
EBIT 167 (56) 514 893 876 1,589 4,635 1,416 1,715 358
Net income 60 (84) 291 533 626 1,062 3,395 1,485 1,212 251
Diluted EPS 0.19 (0.27) 0.87 1.60 1.96 3.27 10.70 4.83 3.86 0.83
Cash from ops 316 386 658 865 697 1,689 3,013 1,119 913 321
Capex 212 151 221 383 509 607 1,198 1,618 336 425
Free cash flow 104 235 438 482 188 1,082 1,815 (499) 577 (104)
Cash & investments 25 5 459 94 326 720 277 391 500 391
Total current assets 832 734 1,244 1,111 1,310 1,811 2,267 2,331 2,690 2,331
Intangible assets 97 130 134 132 126 122 119 117 119 117
Total assets 4,686 4,567 5,127 5,358 6,217 9,717 10,249 12,004 11,228 12,004
Short-term debt 476 178 104 253 558 90 1,432 548 1,677 548
Total current liabilities 823 558 704 1,096 1,104 1,002 2,616 1,252 3,145 1,252
Long-term debt 1,020 1,269 1,259 1,258 1,357 1,339 1,740 3,499 1,339 3,499
Total liabilities 2,593 2,594 2,741 3,225 3,437 3,698 5,660 6,150 5,911 6,150
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 2,093 1,974 2,386 2,133 2,780 6,019 4,589 5,854 5,317 5,854
EBIT/capital employed 4% -2% 15% 27% 24% 40% 96% 23% n/m n/m

Ten-Year Stock Price Performance and Trading Volume Dynamics

$300

$250

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$150

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 110 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA
Potash provides crop nutrients: potash, phosphate, nitrogen. FYE December 31 2005 2006 2007 2008 2009
revenue 19% -2% 39% 80% -58%
potash tonnes sold -1% -12% 31% -9% -65%
INVESTMENT HIGHLIGHTS
phosphate tonnes sold 5% 3% 5% -20% -8%
#1 potash producer with 20% of global capacity. nitrogen tonnes sold 2% -3% 23% -12% -1%
POT also has 5% of phosphate and 2% of nitrogen potash avg price per tonne sold 38% 2% 15% 169% -10%
capacity, making it the #3 player in each market.* Revenue (US$bn) 3.8 3.8 5.2 9.4 4.0
Population and GDP growth are driving food % of revenue by segment:
Potash 35% 33% 34% 43% 33%
demand. Potashs products are essential plant Phosphate 30% 33% 31% 30% 35%
nutrients applied to crops to increase yield. 90+% of Nitrogen 36% 34% 34% 26% 32%
global potash consumption is used in fertilizers. Revenue growth by segment:
Potash represents ~60% of gross profit based on Potash 27% -8% 46% 126% -68%
Phosphate 16% 10% 30% 76% -52%
2005-09 gross profit (2009: 71%). 50%+ potash Nitrogen 13% -6% 40% 39% -48%
gross margin versus lower/more volatile margins in Gross margin by segment:
phosphate and nitrogen reflect more concentrated Potash 53% 46% 51% 75% 56%
industry structure and low-cost position in potash. Phosphate 9% 10% 26% 39% 8%
Nitrogen 23% 25% 30% 30% 15%
No known substitutes for potash. While animal Total gross margin 29% 27% 36% 52% 26%
manure and other fertilizer sources may provide % of revenue by country of origin:
similar nutrients, these are of no large-scale threat. U.S. 48% 51% 50% 45% n/a
Owns long-lived potash and phosphate reserves. Canada 35% 33% 34% 43% n/a
Trinidad 16% 16% 15% 12% n/a
The companys six Canadian-based potash mines % of revenue by selected country of destination:
have reserve lives from about 60 to 100 years and U.S. 67% 68% 67% 56% n/a
its two U.S.-based phosphate mines about 90 years. Canada 5% 4% 4% 4% n/a
Entry barriers in potash production include Selected items as % of revenue:
EBIT 1 23% 23% 30% 49% 30%
consolidation and 7+ years lead time for new mines. Net income 14% 17% 21% 37% 25%
80%+ of reserves are in Canada, Russia and Belarus. D&A 6% 6% 6% 3% 8%
The worlds last greenfield mine was built in 1985. Capex 10% 14% 11% 13% 46%
~$25 per share in public equity investments. POT Net cash from operations (US$bn) 2 $0.9 $0.9 $1.5 $3.8 $1.4
Return on tangible equity (avg) 26% 27% 26% 67% 18%
owns stakes in companies with similar businesses: Tangible equity to assets (avg) 42% 41% 55% 53% 47%
32% of SQM (Chile), 28% of APC (Jordan), 22% of shares out (avg) 1% -4% 1% -3% -4%
1 2
Sinofert (Hong Kong), 14% of ICL (Israel). Includes equity investee contribution. Before working capital changes.

INVESTMENT RISKS & CONCERNS COMPARABLE PUBLIC COMPANY ANALYSIS


Are 50%+ potash gross margins sustainable? MV
($mn)
EV
($mn)
EV /
Rev.
P / T.
Book
This
FY P/E
Next
FY P/E
Capacity expansion may lead to potash oversupply.
MOS 26,190 24,950 4.1x 4.0x 27x 15x
Potash Corp. plans to raise operational capacity
AGU 10,100 11,600 1.2x 4.7x n/a n/a
from 11.5 million tonnes in 2010 to 17+ million by
POT 33,030 36,690 7.7x 5.8x n/a n/a
2015. It plans to ship only 7-8 million tonnes in 10.
Potash not immune from cyclicality. Despite MAJOR HOLDERS
favorable long-term demand trends and industry CEO Doyle 1% | Other insiders 1% | Cap World 5% |
structure, near-term volatility can be severe. The Barclays 4% | Primecap 3% | Jarislowsky 3% | Pabrai <1%
companys potash volume sold fell 65% in 2009.
4-5% earnings yield based on 2010 EPS guidance RATINGS
of $4.00-$5.00. Yield rises to a still modest 11% VALUE Intrinsic value materially higher than market value?
based on peak earnings in 2008, which equaled MANAGEMENT Capable and properly incentivized?
earnings during 2004-07 and 2009 combined. FINANCIAL STRENGTH Solid balance sheet?
$3.7 billion of net debt. Liquidity is high, however. MOAT Able to sustain high returns on invested capital?
*
Source: Potash February 10, 2010 presentation. For more background, read
EARNINGS MOMENTUM Fundamentals improving?
68-page overview of Potash Corp and its industry. MACRO Poised to benefit from economic and secular trends?
EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
Potash Corp. has enjoyed rapid business expansion since 2003 when global demand for potash started outstripping supply.
By 2007, demand was at available capacity, which led to a near tripling of the companys average potash price in 2008. The
market, however, proved to be not immune from cyclicality as economic weakness led to a decline in global fertilizer demand
since mid-2008. Despite the slowdown, long-term drivers of the business growth in global population and GDP leading to
greater demand for food remain intact. Our main concern is whether industry growth will translate into shareholder value
creation to the extent implied by the stocks 4-5% earnings yield on 2010 EPS guidance. The margin of safety appears low.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 111 of 144
additional insight into Potash:

SLIDES FROM COMPANY PRESENTATION, FEBRUARY 2010

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 112 of 144
MARKET PRICES OF SELECTED COMMODITIES, monthly averages, updated February 2010

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 113 of 144
TransDigm (TDG) Third Point Cleveland, OH, 216-706-2939
Capital Goods: Aerospace and Defense www.transdigm.com

Trading Data Consensus EPS Estimates Valuation


Price: $48.03 (as of 2/12/10) Month # of P/E FYE 9/30/09 15x
52-week range: $29.70 - $51.89 Latest Ago Ests P/E FYE 9/30/10 16x
Market value: $2.4 billion This quarter $0.76 $0.76 11 P/E FYE 9/30/11 14x
Enterprise value: $4.0 billion Next quarter 0.81 0.80 10 P/E FYE 9/29/12 13x
Shares out: 49.0 million FYE 9/30/10 3.08 3.11 11 EV / LTM revenue 5.2x
Ownership Data FYE 9/30/11 3.38 3.43 9 EV / LTM EBITDA 12x
Insider ownership: 0% FYE 9/29/12 3.69 3.86 3 EV / LTM EBIT 12x
Insider buys (last six months): 0 LT EPS growth 12.8% 12.8% 4 P / tangible book n/m
Insider sales (last six months): 18 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 91% Date Actual Estimate LTM EBIT yield 8%
# of institutional owners: 409 2/10/10 $0.67 $0.71 LTM pre-tax ROC >100%

Operating Performance and Financial Position


($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 9/30/03 9/30/04 9/30/05 9/30/06 9/30/07 9/30/08 9/30/09 1/2/10 12/27/08 1/2/10
Revenue 52 301 374 435 593 714 762 765 181 184
Gross profit 12 137 184 221 309 386 429 428 104 103
EBIT 5 95 138 118 234 299 335 329 83 77
Net income (6) 14 35 25 89 133 163 124 40 1
Diluted EPS (0.13) 0.29 0.75 0.53 1.83 2.56 3.10 2.36 0.75 0.01
Cash from ops 17 111 81 3 112 190 197 191 66 60
Capex 1 5 8 8 10 11 13 15 2 4
Free cash flow 16 106 73 (5) 102 179 184 176 65 56
Cash & investments 99 104 61 106 159 190 162 149 162
Total current assets 220 258 234 366 423 495 468 430 468
Intangible assets 1,041 1,086 1,104 1,583 1,711 1,835 1,908 1,771 1,908
Total assets 1,346 1,428 1,417 2,061 2,256 2,454 2,505 2,320 2,505
Short-term debt 4 3 0 0 0 0 0 0 0
Total current liabilities 41 140 43 67 89 100 101 119 101
Long-term debt 890 887 925 1,358 1,357 1,357 1,770 1,357 1,770
Total liabilities 1,049 1,095 1,054 1,574 1,602 1,635 2,064 1,644 2,064
Preferred stock 0 0 0 0 0 0 0 0 0
Common equity 297 333 363 488 654 819 441 676 441
EBIT/capital employed 65% >100% 86% 99% >100% >100% >100% n/m n/m

Ten-Year Stock Price Performance and Trading Volume Dynamics

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2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 114 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA
TransDigm makes commercial/military aircraft components. YTD
FYE September 30 2005 2006 2007 2008 2009 1/2/10
revenue 24% 16% 36% 20% 7% 2%
INVESTMENT HIGHLIGHTS revenue (organic) n/a 11% 14% 9% -2% -7%
Niche supplier of aircraft components in a highly Revenue ($mn) 374 435 593 714 762 184
fragmented industry. Based on Frost & Sullivan, * Revenue by product offering:
the industry has ~1,600 businesses, of which nearly Actuators and controls 13% 11% 12% 14% 16% n/a
Ignition systems 19% 16% 13% 12% 13% n/a
90% have less than $100 million of revenue. Gear pumps 13% 12% 11% 9% 9% n/a
Claims to be sole-source supplier of products Power conditioning devices 7% 9% 7% 7% 8% n/a
representing 80% of revenue based on fiscal 2009 Specialized valves 6% 7% 8% 7% 7% n/a
AC/DC electric motors 4% 7% 6% 6% 7% n/a
revenue, pro-forma for acquisitions. Management Engineered connectors 10% 10% 8% 7% 6% n/a
also estimates 95% of revenue is from proprietary Other products 27% 28% 35% 38% 34% n/a
products for which TransDigm owns the design. % of revenue by geography: 1
Aftermarket contributes 60% of revenue and a U.S. 78% 76% 76% 80% 80% n/a
International 22% 24% 24% 20% 20% n/a
much higher percentage of EBITDA, based on the Revenue growth by geography: 1
higher-margin profile of aftermarket sales versus U.S. 27% 14% 35% 27% 7% n/a
sales to original equipment manufacturers (OEM). International 17% 26% 39% 1% 4% n/a
65% of revenue is from commercial customers Selected items as % of revenue:
Gross profit 49% 51% 52% 54% 56% 56%
(40% aftermarket/25% OEM) and 32% from EBIT 2 37% 38% 39% 42% 44% 41%
military customers (19% aftermarket/13% OEM). Net income 9% 6% 15% 19% 21% 17%
Low exposure to old aircraft platforms. Less than D&A 5% 4% 4% 4% 4% 4%
5% of revenue is attributable to platforms such as Capex 2% 2% 2% 2% 2% 2%
shares out (avg) 0% 0% 3% 5% 1% 0%
B737/747 Classics, A300/310, and MD11/80/90. 1
International is assumed to equal export sales as reported by TransDigm.
50% gross margin reflects highly-engineered 2
2006 EBIT excludes refinancing costs.
products and strong competitive position. Nearly
all of the products are manufactured in the U.S. Backlog represents 50+% of FY09 revenue,
Cash-generative business due to low capital making new orders critical. The backlog of $427
intensity (capex ~2% of revenue). Fiscal 2009 FCF million as of January 2, 2010 is roughly flat y-y.
was $184 million (F1Q10 FCF: $56 million). EV-to-revenue is over 5x based on fiscal 2010
Shares trade on 7% trailing FCF yield. revenue guidance of $800-831 million (up 5-9%
y-y). Shares trade on 15-17x adjusted EPS guidance
INVESTMENT RISKS & CONCERNS of $2.95-3.15 (down 4-10% y-y) in fiscal 2010.
$1.6 billion of net debt as of January 2, 2010. COMPARABLE PUBLIC COMPANY ANALYSIS
TransDigm took on an incremental $425 million of MV EV EV / P / T. This Next
debt to pay a special dividend in October 2009. ($mn) ($mn) Rev. Book FY P/E FY P/E
Post-dividend net debt to trailing EBITDA is 4.5x. HON 28,890 33,700 1.1x n/m 16x 13x
Organic revenue fell 7% y-y in fiscal 1Q10 due to GR 7,880 9,080 1.4x 11.2x 14x 13x
lower commercial OEM and aftermarket demand TDG 2,350 3,960 5.2x n/m 16x 14x
partially offset by higher defense sales. The
acceleration of organic revenue decline (from -2% MAJOR HOLDERS
y-y in fiscal 2009) may point to lag effects of the CEO Howley 2% | Other insiders 3% | Berkshire Partners 9%
economic slowdown on aerospace markets. Pennant 8% | Tiger 6% | William Blair 5% | Times Sq. 5%
Acquisition-led growth increases execution risk.
TransDigm has acquired 27 businesses since its RATINGS
founding in 1993, including 12 since 2006. Revenue VALUE Intrinsic value materially higher than market value?
grew at a 19% CAGR 1993-2009 and EBITDA MANAGEMENT Capable and properly incentivized?
margin rose from ~20% in 2003 to ~50% in 2009. FINANCIAL STRENGTH Solid balance sheet?
Concentrated customer base. Boeing, Airbus and MOAT Able to sustain high returns on invested capital?
the U.S. Department of Defense are key customers. EARNINGS MOMENTUM Fundamentals improving?
*
As reported on page 19 in the January 2010 TransDigm presentation.
MACRO Poised to benefit from economic and secular trends?
EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
TransDigm differentiates itself from other aircraft component suppliers through above-average revenue predictability and
gross margins. This is due to large aftermarket exposure and high entry barriers as a result of proprietary component designs.
The high-margin, low capital-intensity business model remains cash-generative despite revenue pressure from weakening
commercial aerospace markets. Our key concern is high financial leverage, with net debt at 4.5x trailing EBITDA after a
$400+ million special dividend payment in late 2009. The 7% trailing FCF yield is not sufficient to compensate for this risk.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 115 of 144
Reduced or Eliminated Superinvestor Holdings
HSN (HSNI) Weitz St Petersburg, FL, 727-872-1000
Services: Retail (Catalog & Mail Order), Member of S&P SmallCap 600 www.hsni.com

Trading Data Consensus EPS Estimates Valuation


Price: $19.57 (as of 2/12/10) Month # of P/E FYE 12/31/08 n/m
52-week range: $3.33 - $21.21 Latest Ago Ests P/E FYE 12/31/09 19x
Market value: $1.1 billion This quarter $0.46 $0.46 2 P/E FYE 12/31/10 17x
Enterprise value: $1.2 billion Next quarter 0.25 0.21 1 P/E FYE 12/31/11 13x
Shares out: 56.4 million FYE 12/31/09 1.04 1.05 2 EV / LTM revenue 0.5x
Ownership Data FYE 12/31/10 1.16 1.20 2 EV / LTM EBITDA n/m
Insider ownership: 34% FYE 12/31/11 1.51 1.51 1 EV / LTM EBIT n/m
Insider buys (last six months): 0 LT EPS growth n/a n/a n/a P / tangible book 27.9x
Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 62% Date Actual Estimate LTM EBIT yield -223%
# of institutional owners: 375 11/12/09 $0.29 $0.18 LTM pre-tax ROC -906%
Operating Performance and Financial Position
($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/05 12/31/06 12/31/07 12/31/08 9/30/09 9/30/08 9/30/09
Revenue 2,671 2,878 2,908 2,824 2,690 672 641
Gross profit 1,023 1,113 1,088 985 946 236 237
EBIT 195 213 170 (3,102) (2,771) 12 36
Net income 223 123 165 (2,391) (2,119) 2 17
Diluted EPS 2.28 2.36 1.86 (42.48) (37.71) 0.09 0.29
Cash from ops 203 140 129 137 237 13 43
Capex 36 36 49 40 38 11 6
Free cash flow 167 104 80 97 199 1 37
Cash & investments 53 6 178 239 56 239
Total current assets 829 596 711 724 624 724
Intangible assets 3,468 3,456 262 261 3,150 261
Total assets 4,458 4,221 1,153 1,155 3,950 1,155
Short-term debt 0 0 15 21 11 21
Total current liabilities 488 449 404 407 369 407
Long-term debt 0 0 394 357 377 357
Total liabilities 1,335 1,278 894 854 1,550 854
Preferred stock 0 0 0 0 0 0
Common equity 3,124 2,943 258 301 2,400 301
EBIT/capital employed 50% 47% -1037% -906% n/m n/m
Ten-Year Stock Price Performance and Trading Volume Dynamics

$25

$20

$15

$10

$5

$0
Jan 09 Jan 10

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 116 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA 1
HSN sells third-party and private-label merchandise directly YTD
to consumers in the U.S. via the HSN television network, FYE December 31 2006 2007 2008 9/30/09
revenue 8% 1% -3% -7%
HSN.com and other websites, and Cornerstone catalogs. Internet revenue n/a 15% 5% -3%
HSN was spun-off from IAC/InterActiveCorp in 2008. Revenue ($bn) 2.9 2.9 2.8 1.9
% of revenue from Internet 29% 33% 36% 37%
% of revenue by segment:
INVESTMENT HIGHLIGHTS HSN 2 65% 65% 69% 73%
Multi-channel retailer with 37% of revenue from Cornerstone 3 35% 35% 31% 27%
the Internet, based on YTD through September Revenue growth by segment:
2009 revenue (up from 29% in 2006). TV and print HSN 0% 0% 3% -1%
Cornerstone 4 27% 2% -15% -19%
account for 52% and 12% of YTD total revenue. EBITDA margin by segment: 5
U.S. online retail sales to grow at a 10% CAGR HSN 12% 9% 8% 9%
from $141 billion in 2008 to $229 billion in 2013. * Cornerstone 7% 6% 0% 0%
Internet retailing should gain further share versus Total EBITDA margin 10% 8% 6% 6%
Selected items as % of revenue:
brick-and-mortar (2008: $2.9 trillion). Catalog and Gross profit 39% 37% 35% 36%
TV markets were $114 billion and $7 billion in 08. EBIT 6 7% 6% 3% 4%
Strong direct-to-consumer franchises. HSN TV Net income 6 5% 4% -85% 2%
D&A 7 4% 2% 2% 2%
reaches 93 million homes and has 4.6 million active
Capex 1% 2% 1% 1%
customers (80%+ are female). HSN.com is one of HSN product mix by revenue:
the top 10 trafficked e-commerce sites, and has over Home & other 49% 50% 52% 53%
a quarter million unique users per day. Cornerstone Health & beauty 20% 19% 19% 19%
distributes over 200 million catalogs annually. Jewelry 18% 18% 16% 16%
Fashion (apparel & accessories) 13% 13% 13% 12%
Owns #2 U.S. TV home shopping network behind shares out (avg) n/m n/m 0% 0%
QVC (owned by Liberty Media Interactive) and 1
Figures are on combined basis through the spin-off from IAC/InterActiveCorp
ahead of ShopNBC (owned by ValueVision Media). in August 2008 and on a consolidated basis thereafter.
2
Includes TV home shopping and HSN.com (29% of YTD segment revenue).
HSN TV sold 28 million units YTD through 9/30/09 3
Includes catalogs and related websites (56% of YTD segment revenue).
4
versus QVCs 74 million and ShopNBCs 3 million. 2006 revenue growth at Cornerstone reflects its acquisition in April 2005.
5
Based on adjusted EBITDA (excluding non-cash comp, asset dispositions,
Shares trade at 10% FCF yield based on average intangibles impairments, pro forma M&A adjustments, and one-time items).
6
annual free cash flow during 2006-YTD 9/30/09. 7
EBIT/Net income excludes/includes asset impairments of $3.2 billion in 2008.
Includes amortization of intangibles and cable and satellite distribution fees.

INVESTMENT RISKS & CONCERNS


COMPARABLE PUBLIC COMPANY ANALYSIS
50%+ of revenue is from products for the home.
MV EV EV / P / T. This Next
The weak housing market is a headwind for sales of ($mn) ($mn) Rev. Book FY P/E FY P/E
big-ticket, discretionary home furnishings and other AMZN 53,190 46,930 1.9x 13.2x 41x 32x
home products. Cornerstone and HSN segments EBAY 28,150 23,210 2.7x 4.1x 13x 12x
derive 66% and ~50% of revenue from home items. LINTA 6,480 12,470 1.6x n/m 32x 16x
Internet revenue is down 3% YTD through SNI 6,400 6,230 4.0x 10.5x 18x 16x
September 2009. The company depends on the VVTV 120 110 .2x 1.8x n/a n/a
online channel for growth as print and TV channels HSNI 1,100 1,240 .5x 27.8x 19x 17x
are likely to face growth challenges longer-term.
Channel transitioning represents challenges. MAJOR HOLDERS
HSN has a ~25% share of the U.S. TV shopping Insiders <1% | Liberty Media 32% | Lord Abbett 7% |
market but a much smaller share on the Internet, Barclays 5% | BlackRock 5% | T Rowe 4% | Acadian 4%
where it is exposed to more intense competition. RATINGS
Liberty Media owns 32%. The interests of Liberty VALUE Intrinsic value materially higher than market value?
founder John Malone may conflict with those of MANAGEMENT Capable and properly incentivized?
HSN shareholders, as Liberty owns rival QVC. FINANCIAL STRENGTH Solid balance sheet?
$377 million of debt and $239 million of cash. MOAT Able to sustain high returns on invested capital?
*
Source: Forrester Research. Excluded from Internet retailing are auto-sales, EARNINGS MOMENTUM Fundamentals improving?
travel and prescription drugs. TV market based on QVC, HSN ShopNBC. MACRO Poised to benefit from economic and secular trends?
Additional sources: Shop.org, E-Stats, U.S. Retail Trade Census, and TNS. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
QVC is the second-largest TV home shopping network in the U.S. and has built up a material presence in Internet retailing,
with $1 billion of Internet-related revenue (37% of total revenue). Growth remains pressured due to the weak economy and a
declining catalog business. Despite these challenges and stiff online competition, HSN continues to generate significant FCF.
With shares trading at 10% of average annual FCF since 2006, the valuation is interesting but not compelling.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 117 of 144
additional insight into HSN:
SLIDES FROM COMPANY PRESENTATION, JANUARY 2010
Access the full presentation at http://bit.ly/b0ABQ1

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 118 of 144
VistaPrint (VPRT) Lone Pine Hamilton, Bermuda, 441-295-2244
Services: Printing Services www.vistaprint.com

Trading Data Consensus EPS Estimates Valuation


Price: $54.91 (as of 2/12/10) Month # of P/E FYE 6/30/09 44x
52-week range: $22.18 - $59.92 Latest Ago Ests P/E FYE 6/30/10 n/a
Market value: $2.4 billion This quarter n/a n/a n/a P/E FYE 6/30/11 n/a
Enterprise value: $2.2 billion Next quarter n/a n/a n/a P/E FYE 6/30/12 n/a
Shares out: 43.4 million FYE 1/0/00 n/a n/a n/a EV / LTM revenue 3.7x
Ownership Data FYE 12/30/00 n/a n/a n/a EV / LTM EBITDA n/m
Insider ownership: 5% FYE 12/30/01 n/a n/a n/a EV / LTM EBIT 29x
Insider buys (last six months): 0 LT EPS growth n/a n/a n/a P / tangible book 7.0x
Insider sales (last six months): 0 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: n/a Date Actual Estimate LTM EBIT yield 3%
# of institutional owners: n/a n/a n/a n/a LTM pre-tax ROC 50%
Operating Performance and Financial Position
($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 6/30/03 6/30/04 6/30/05 6/30/06 6/30/07 6/30/08 6/30/09 12/31/09 12/31/08 12/31/09
Revenue 35 59 91 152 256 401 516 602 139 195
Gross profit 20 35 54 102 166 247 324 385 88 127
EBIT 1 3 (16) 19 27 41 62 76 21 31
Net income 0 0 (21) 17 27 40 56 69 19 27
Diluted EPS 0.00 0.03 (1.85) 0.45 0.60 0.87 1.25 1.55 0.42 0.59
Cash from ops 4 9 (7) 35 54 88 120 138 44 58
Capex 5 18 21 28 67 70 84 93 29 32
Free cash flow (1) (9) (27) 7 (13) 18 37 45 15 26
Cash & investments 20 26 108 108 130 134 159 111 159
Total current assets 22 31 115 119 144 157 188 127 188
Intangible assets 5 4 4 5 5 7 7 6 7
Total assets 42 66 171 235 316 370 443 321 443
Short-term debt 0 1 3 3 3 8 6 9 6
Total current liabilities 9 17 24 36 49 67 89 72 89
Long-term debt 6 16 23 22 20 11 0 11 0
Total liabilities 15 33 47 59 74 84 97 89 97
Preferred stock 44 71 0 0 0 0 0 0 0
Common equity (17) (38) 124 176 243 286 347 231 347
EBIT/capital employed 47% -123% 71% 46% 40% 44% 50% n/m n/m
Ten-Year Stock Price Performance and Trading Volume Dynamics

$70

$60

$50

$40

$30

$20

$10

$0
Jan 06 Jan 07 Jan 08 Jan 09 Jan 10

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 119 of 144
BUSINESS OVERVIEW SELECTED OPERATING DATA
Vistaprint provides marketing products and services to small YTD
businesses and individuals. It has 2,000 employees and FYE June 30 2005 2006 2007 2008 2009 12/31/09
revenue 55% 67% 68% 57% 29% 34%
operates 20 websites serving customers in 120+ countries. period-end staff 35% 74% 60% 45% 14% 27%
Revenue ($mn) 91 152 256 401 516 340
INVESTMENT HIGHLIGHTS % of revenue by geography: 1
Targets ~$25 billion market opportunity based on U.S. 73% 71% 68% 62% 61% 53%
International 27% 29% 32% 38% 39% 47%
50 million small offices/home offices (SOHOs) in Revenue growth by geography:
Europe and North America and average SOHO U.S. 46% 64% 60% 44% 26% 20%
marketing spend of roughly $500 per annum. International 86% 76% 89% 84% 33% 55%
Generates revenue from customized manufactured Selected items as % of revenue:
Gross profit 60% 67% 65% 62% 63% 64%
products, such as business cards, brochures, R&D 12% 10% 11% 11% 12% 11%
promotional merchandise, and digital services, EBIT 2 6% 12% 11% 10% 12% 13%
including web design/hosting and email marketing. Net income -18% 13% 11% 10% 11% 12%
Online/offline model. Vistaprint owns 20 websites D&A 6% 5% 6% 6% 7% 6%
Capex 3 23% 18% 26% 17% 16% 16%
and markets online. Products are mainly produced Selected operating metrics:
internally at two facilities in Canada and Holland, Web sessions (mn) 4 65 100 131 193 236 146
which cost a combined $200 million to build. Change (y-y) 39% 56% 31% 47% 22% 35%
Competitive advantages include lower customer Conversion rate 5 4.7% 4.7% 5.5% 5.9% 6.4% 6.5%
Avg order value ($) 6 29 30 33 33 33 36
acquisition costs versus storefront print and design Change (y-y) 10% 4% 9% 1% -2% 6%
firms, scale (5+ times larger than next online rival), Repeat client bookings 57% 62% 63% 64% 66% 66%
and technology (owns 40 patents related to design Return on tang. equity n/m 49% 19% 20% 22% 14%
software and online order processing/aggregation). Tangible equity/assets -63% 34% 73% 76% 77% 75%
shares out (avg) 7 3% 192% 28% 3% -1% -2%
Growth drivers: 1) increase average order value 1
Based on country-specific website through which client order is transacted.
via additional products (business cards represent 2
2005 excludes $21 million loss on contract termination (incl. in net income).
3
less than 40% of FY09 revenue, down from 60%+ 4
Includes capitalization of software and website development costs.
A session is measured each time a computer user visits a Vistaprint website.
in FY04); 2) international expansion and 3) further 5
Number of client orders divided by total number of sessions during a period.
penetration of home market (consumers accounted 6
7
Dollar bookings divided by total number of customer orders for a given period.
2006/07 share increases reflect conversion of preferred into common shares.
for 15% of FY09 revenue, up from 7% in FY04).
Two-thirds of orders are from repeat customers.
Vistaprint averaged 57,000 daily orders in the COMPARABLE PUBLIC COMPANY ANALYSIS
P/ This Next
quarter ended 12/31/09. It had 8.0 million unique MV EV EV /
Tang. FY FY
customers in FY09, of which 5.6 million were new. ($mn) ($mn) Rev.
Book P/E P/E
Strong balance sheet with $153 million net cash. CTCT 530 420 3.3x 5.0x 51x 28x
WWWW 120 80 .8x 3.2x 8x 7x
INVESTMENT RISKS & CONCERNS VPRT 2,380 2,230 3.7x 7.0x n/a n/a
Competition from Internet businesses (Overnight
Prints, Shutterfly, Web.com), wholesale printers MAJOR HOLDERS
(Taylor), office superstores (Staples, OfficeMax), CEO Keane 7% | Other insiders 2% | FMR 12% | Janus 10% |
and traditional storefront printing companies. Lone Pine 6% | Axa 5% | William Blair 5% | Wells Fargo 4%
Valuation assumes continued high growth. EV-
to-revenue is 3.5x and P/E is 38x based on midpoint RATINGS
of FY10 revenue and GAAP EPS guidance of $675- VALUE Intrinsic value materially higher than market value?
685 million (+31-33%) and $1.44-1.52 (+15-22%). MANAGEMENT Capable and properly incentivized?
Adopted poison pill in 2009. Vistaprint moved FINANCIAL STRENGTH Solid balance sheet?
its incorporation from Bermuda to Holland to MOAT Able to sustain high returns on invested capital?
protect itself from unsolicited takeover bids. EARNINGS MOMENTUM Fundamentals improving?
Recent selling by CEO Keane (46) who founded MACRO Poised to benefit from economic and secular trends?
Vistaprint in 1995 and remains a large holder. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE
Vistaprint has automated the entire graphic design and print process via an integrated online/offline model. By combining
online order processing and aggregation with high-volume printing facilities, the company has materially reduced the costs of
traditional short-run printing. This value proposition has allowed Vistaprint to penetrate the large and fragmented market for
small business and consumer marketing products and services. It has grown revenue organically from $6 million in fiscal
2001 to over $600 million in the last twelve months, making it one of the largest online providers of small business marketing
services. As the valuation already assumes continued rapid growth and execution, we are not compelled to own the shares.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 120 of 144
additional insight into Vistaprint:

SNAPSHOT OF VALUE PROPOSITION


According to Vistaprint, the company has brought long-run, low-cost economics to
short-run production jobs for the small business marketing market, a market opportunity
of over $25 billion.

SELECTED QUARTERLY OPERATING METRICS, Q3 FY06 Q2 FY10


% of Revenue Web Average Repeat
Revenue Non-US Sessions Conversion Order New Customer
($mn) Markets (mn) Rate Value Customers Bookings

FY06 Q3 42 30% 25 5.2% $30.16 528,000 63%


FY06 Q4 45 29% 27 5.2% $29.85 564,000 63%
FY07 Q1 50 30% 27 5.6% $31.30 603,000 64%
FY07 Q2 64 34% 34 4.9% $35.94 687,000 64%
FY07 Q3 69 32% 35 5.6% $33.02 800,000 63%
FY07 Q4 72 32% 35 5.9% $32.33 850,000 63%
FY08 Q1 79 34% 44 5.4% $31.71 975,000 64%
FY08 Q2 105 39% 53 5.4% $35.50 1,100,000 63%
FY08 Q3 106 38% 48 6.4% $32.54 1,200,000 64%
FY08 Q4 110 39% 48 6.4% $34.00 1,200,000 65%
FY09 Q1 114 38% 47 6.9% $33.79 1,200,000 66%
FY09 Q2 139 42% 61 6.5% $33.57 1,500,000 65%
FY09 Q3 127 38% 66 6.0% $31.06 1,500,000 66%
FY09 Q4 135 39% 62 6.4% $33.31 1,400,000 67%
FY10 Q1 145 41% 65 6.4% $34.23 1,400,000 67%
FY10 Q2 195 51% 80 6.6% $36.63 1,800,000 66%
Source: Company data.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 121 of 144
Snapshot of 100 Superinvestor Holdings
In Alphabetical Order
Recent YTD Market Enter.
Price Price Value Value
Company / Ticker Industry Notable Shareholders ($) ($mn) ($mn) Website
Accenture / ACN Business Services Cap Re, Weitz 40.49 -2% 28,903 24,901 www.accenture.com
Air Transport / ATSG Air Courier Acadian, Pabrai, RenTech 2.35 -11% 149 465 www.atsginc.com
Alleghany / Y Conglomerates Centaur, Eagle, Royce 263.36 -5% 2,341 2,278 www.alleghany.com
Alliance One / AOI Tobacco Baupost, RenTech 5.04 3% 449 1,450 www.aointl.com
AllianceBernstein / AB Investment Services Perkins, Royce 26.53 -6% 2,689 2,689 alliancebernstein.com
ATP Oil & Gas / ATPG Oil & Gas Operations Aletheia, Greenlight, Soros 16.38 -10% 829 1,965 www.atpog.com
Audiovox / VOXX Comms Equipment Baupost, Kahn, Smith 6.86 -3% 157 118 www.audiovox.com
Automatic Data / ADP Business Services Cap Re 40.59 -5% 20,491 18,751 www.adp.com
AutoNation / AN Retail (specialty) Cascade, ESL, Weitz 17.72 -7% 3,043 3,952 www.autonation.com
BIDZ.com / BIDZ Retail (online) Bares, Munder 1.94 -3% 43 44 www.bidz.com
Biogen Idec / BIIB Biotechnology & Drugs Icahn, Primecap 55.21 3% 14,885 14,721 www.biogenidec.com.
Blockbuster / BBI Recreational Activities Icahn, Prentice, Third Point 0.38 -43% 74 1,041 www.blockbuster.com
Boston Scientific / BSX Medical Equipment Greenlight, Paulson 7.39 -18% 11,165 16,219 www.bostonscientific.com
BreitBurn Energy / BBEP Oil & Gas - Integrated Acadian, Baupost 15.22 44% 803 1,432 www.breitburn.com
Brown & Brown / BRO Insurance (miscellaneous) Royce, Ruane Cunniff 17.70 -2% 2,514 2,590 www.bbinsurance.com
CapitalSource / CSE Regional Banks Baupost, Farallon, Pabrai 5.01 26% 1,619 nm www.capitalsource.com
Cardinal Health / CAH Biotechnology & Drugs Greenlight, Pzena 33.38 4% 12,066 12,431 www.cardinal.com
CareFusion / CFN Medical Equipment Greenlight, Pzena 25.17 1% 5,572 5,782 www.carefusion.com
Chesapeake Energy / CHK Oil & Gas Operations Southeastern 24.96 -4% 16,167 28,186 www.chk.com
Chipotle / CMG Restaurants Cap World, Centaur 104.87 19% 3,324 3,058 www.chipotle.com
CIT Group / CIT Regional Banks Baupost, Icahn 32.25 17% 6,450 nm www.cit.com
Citigroup / C Money Center Banks Fairholme, Paulson 3.18 -4% 90,577 nm www.citigroup.com
Coca-Cola Company / KO Beverages (non-alcoholic) Berkshire, Cap Re 53.98 -5% 124,316 126,962 thecoca-colacompany.com
Contango Oil & Gas / MCF Oil & Gas Operations Dreman, Sellers 52.15 11% 827 738 www.contango.com
Corrections Corp. / CXW Business Services Kalmar, Pershing Square 19.57 -20% 2,269 3,373 correctionscorp.com
Cresud / CRESY Crops Pabrai 12.72 -12% 634 907 www.cresud.com.ar
DDi Corp. / DDIC Electronic Instruments Miller, RenTech, Riley 4.33 -11% 86 61 www.ddiglobal.com
Dell / DELL Computer Hardware Fairfax, Southeastern, Weitz 13.84 -4% 27,080 17,747 www.dell.com
Dillard's / DDS Retail (dep't & discount) Acadian, Southeastern 16.42 -11% 1,212 2,113 www.dillards.com
DineEquity / DIN Restaurants MSD, Southeastern 27.80 14% 489 2,811 www.dineequity.com
DIRECTV / DTV Broadcasting & Cable Baupost, Southeastern 30.69 -8% 29,366 33,236 www.directv.com
EMC / EMC Computer Storage Pershing Square, Primecap 17.12 -2% 35,138 31,543 www.emc.com
Energizer Holdings / ENR Electronic Instruments Weitz 54.79 -11% 3,826 5,979 www.energizer.com
Enzon Pharma / ENZN Biotechnology & Drugs Baupost, Icahn, RenTech 9.13 -13% 415 555 www.enzon.com
Exxon Mobil / XOM Oil & Gas Operations Centaur, T Rowe 64.80 -5% 306,310 303,290 www.exxonmobil.com
Fair Isaac / FICO Business Services Southeastern 21.06 -1% 979 1,212 www.fairisaac.com
Fairfax Financial / FRFHF Property & Casualty Centaur, Markel, Pabrai 355.54 -9% 7,501 7,468 www.fairfax.ca
Fidelity National / FNF Property & Casualty Artisan, Centaur, Pennant 13.80 3% 3,180 3,749 www.fnf.com
Gastar Exploration / GST Oil & Gas - Integrated Palo Alto, Weiss 4.56 -5% 228 166 www.gastar.com
General Electric / GE Conglomerates Dodge & Cox, Fairfax 15.55 3% 165,569 551,569 www.ge.com
Hallmark Financial / HALL Property & Casualty Bares, Newcastle 7.63 -4% 154 129 www.hallmarkgrp.com
Home Depot / HD Retail (home improvement) Dodge & Cox, Markel 29.00 0% 49,312 57,012 homedepot.com
Horsehead / ZINC Metal Mining Driehaus, Pabrai, Royce 10.47 -18% 454 309 www.horsehead.net
HSN / HSNI Retail (online) Acadian 19.57 -3% 1,104 1,243 www.hsn.com
Hyatt Hotels / H Hotels & Motels Pershing Square, Singapore 29.34 -2% 4,930 4,574 www.hyatt.com
Intelligent Systems / INS Software & Programming Weitz 1.09 16% 10 7 www.intelsys.com
Interactive Intell. / ININ Software & Programming Bares, Essex 17.21 -7% 297 232 www.inin.com
International Assets / IAAC Investment Services Bares, Leucadia, Steinberg 15.28 5% 268 374 www.intlassets.com
International Coal / ICO Coal Chou, Fairfax, Steelhead 3.88 1% 695 989 www.intlcoal.com
Investors Title / ITIC Property & Casualty Bridgeway, Markel 35.41 15% 81 72 www.invtitle.com

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 122 of 144
In Alphabetical Order (continued)
Recent YTD Market Enter.
Price Price Value Value
Company / Ticker Industry Notable Shareholders ($) ($mn) ($mn) Website
ITC Holdings / ITC Electric Utilities Bamco, Markel 52.70 1% 2,675 5,026 www.itc-holdings.com
Johnson & Johnson / JNJ Major Drugs Berkshire, Fairfax 62.72 -3% 173,051 170,314 www.jnj.com
Kraft Foods / KFT Food Processing Berkshire, Pershing Square 29.09 7% 42,932 60,661 kraftfoodscompany.com
Lab Corp. of America / LH Healthcare Facilities Brave Warrior, Centaur, Harris 71.76 -4% 7,621 8,866 /www.labcorp.com
Leucadia National / LUK Conglomerates Advisory, Fairholme 21.82 -8% 5,305 6,771 www.leucadia.com
Level 3 Comms / LVLT Communications Services Fairfax, Southeastern 1.38 -10% 2,263 7,991 www.level3.com
Lions Gate / LGF Motion Pictures Icahn, MHR, Third Point 5.23 -10% 616 949 www.lionsgate.com
McDonald's / MCD Restaurants Cap World, Markel 63.59 2% 68,626 77,507 www.mcdonalds.com
Molson Coors / TAP Beverages (alcoholic) Cap Re, Children's 38.90 -14% 7,198 8,177 www.molsoncoors.com
Monsanto / MON Chemical Manufacturing Lone Pine, Weitz 75.82 -7% 41,373 42,907 www.monsanto.com
Multimedia Games / MGAM Casinos & Gaming Baupost, Par, Royce 4.91 -18% 134 189 multimediagames.com
MVC Capital / MVC Misc. Financial Services Cannell, Centaur, Royce 11.45 -3% 278 340 www.mvccapital.com
Northrop Grumman / NOC Aerospace and Defense Centaur, Fairholme, Pzena 58.89 5% 17,830 18,849 northropgrumman.com
Osteotech / OSTE Medical Equipment Heartland, RenTech 3.40 6% 61 64 www.osteotech.com
Overstock.com / OSTK Retail (online) Chou, Fairfax 11.80 -13% 270 252 www.overstock.com
Patterson Companies / PDCO Medical Equipment Markel, Select Equity 28.76 3% 3,522 3,877 pattersoncompanies.com
Paychex / PAYX Business Services Cap World, Markel 29.53 -4% 10,672 10,385 www.paychex.com
Potash Corp. / POT Non-Metallic Mining Cap World, Pabrai 111.60 3% 33,031 36,687 www.potashcorp.com
Redwood Trust / RWT Real Estate Operations Cap Re, NWQ, Weitz 13.57 -6% 1,054 5,098 www.redwoodtrust.com
Republic Airways / RJET Airline Greenlight, Kleinheinz 5.31 -28% 183 2,327 republicairways.com
Republic Services / RSG Waste Management Blackstone, Cap World 26.03 -8% 9,912 17,072 republicservices.com
RSC Holdings / RRR Rental & Leasing Fairholme, GS, Jennison 6.83 -3% 706 2,935 www.rscrental.com
SandRidge Energy / SD Oil & Gas Operations Ares, Fairfax, Jennison 8.47 -10% 1,554 3,579 sandridgeenergy.com
Seabridge Gold / SA Gold & Silver Jennison, Royce 24.82 2% 933 919 www.seabridgegold.net
Seahawk Drilling / HAWK Oil Well Services Chilton, MHR, Pennant 21.82 -3% 254 248 seahawkdrilling.com
Silicon Storage / SSTI Semiconductors Miller, RenTech, Riley 2.84 11% 272 149 www.sst.com
Stamps.com / STMP Retail (online) Bares, RenTech 9.19 2% 145 100 www.stamps.com
Steak n Shake / SNS Restaurants Centaur, Eagle, Lion 345.00 6% 496 576 www.steaknshake.com
Stratasys / SSYS Computer Peripherals Bares, Riverbridge 25.65 49% 520 468 www.stratasys.com
Strayer Education / STRA Schools Lone Pine, Maverick, Weitz 206.26 -3% 2,890 2,796 strayereducation.com
Take-Two / TTWO Software & Programming Glenview, Icahn, Legg 9.65 -4% 803 839 www.take2games.com
Tandy Leather / TLF Apparel/Accessories Bares 3.70 -5% 38 32 tandyleatherfactory.com
Teck Cominco / TCK Metal Mining Pabrai 35.88 3% 21,124 28,050 www.teck.com
Terex / TEX Misc. Capital Goods Eton Park, Pabrai 18.78 -5% 2,030 3,000 www.terex.com
Texas Industries / TXI Construction Materials Shamrock, Southeastern 34.56 -1% 959 1,446 www.txi.com
The Knot / KNOT Computer Services T Rowe, Weitz 9.74 -3% 329 200 www.theknot.com
Theravance / THRX Biotechnology & Drugs Baupost, Iridian, Litespeed 9.70 -26% 617 634 www.theravance.com
TransDigm / TDG Aerospace and Defense Pennant, Tiger 48.03 1% 2,355 3,963 www.transdigm.com
tw telecom / TWTC Communications Services Cap Re, Southeastern 15.04 -12% 2,258 3,095 www.twtelecom.com
USG / USG Construction Materials Berkshire, Fairfax, T Rowe 13.21 -6% 1,312 2,584 www.usg.com
ViaSat / VSAT Comms Equipment Baupost, Times Square 29.05 -9% 1,055 1,400 www.viasat.com
VistaPrint / VPRT Business Services Alydar, Lone Pine 54.91 -3% 2,384 2,231 www.vistaprint.co.uk
Vodafone / VOD Communications Services Dodge & Cox, Greenlight 21.91 -5% 115,283 171,030 www.vodafone.com
Walgreen / WAG Retail (drugs) Bares, Cap Re 33.49 -9% 32,994 32,221 www.walgreens.com
Wal-Mart / WMT Retail (dep't & discount) Barkshire, GMO, Markel 52.90 -1% 201,558 242,908 walmartstores.com
Weight Watchers / WTW Personal Services Bares, Cap World 28.92 -1% 2,228 3,690 weightwatchers.com
Winmark / WINA Misc. Financial Services Bares, Bremer 20.70 -4% 108 110 winmarkcorporation.com
Winthrop Realty / FUR Real Estate Operations Fairholme, Pamet, Raffles 11.69 8% 186 412 www.winthropreit.com
Yum! Brands / YUM Restaurants Cap Re, Southeastern 33.36 -5% 15,646 18,559 www.yum.com
Zenith National / ZNT Property & Casualty Artisan, Eagle, Royce 28.14 -5% 1,066 1,110 www.thezenith.com

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 123 of 144
By Market Value
Market Enter. LTM LTM Recent to 52-Wk
Value Value EBIT / EBIT / Price Low High
Company / Ticker ($mn) ($mn) EV Capital Industry Notable Shareholders ($) ($) ($)
Exxon Mobil / XOM 306,310 303,290 12% 25-50% Oil & Gas Operations Centaur, T Rowe 64.80 -5% 18%
Wal-Mart / WMT 201,558 242,908 9% 0-25% Retail (dep't & discount) Barkshire, GMO, Markel 52.90 -12% 4%
Johnson & Johnson / JNJ 173,051 170,314 9% 50-99% Major Drugs Berkshire, Fairfax 62.72 -26% 5%
General Electric / GE 165,569 551,569 2% 0-25% Conglomerates Dodge & Cox, Fairfax 15.55 -63% 13%
Coca-Cola Company / KO 124,316 126,962 6% 50-99% Beverages (non-alcoholic) Berkshire, Cap Re 53.98 -31% 10%
Vodafone / VOD 115,283 171,030 3% 25-50% Communications Services Dodge & Cox, Greenlight 21.91 -29% 10%
Citigroup / C 90,577 nm nm 0-25% Money Center Banks Fairholme, Paulson 3.18 -69% 71%
McDonald's / MCD 68,626 77,507 9% 25-50% Restaurants Cap World, Markel 63.59 -21% 3%
Home Depot / HD 49,312 57,012 8% 0-25% Retail (home improvement) Dodge & Cox, Markel 29.00 -40% 2%
Kraft Foods / KFT 42,932 60,661 7% 25-50% Food Processing Berkshire, Pershing Square 29.09 -28% 3%
Monsanto / MON 41,373 42,907 5% 25-50% Chemical Manufacturing Lone Pine, Weitz 75.82 -12% 23%
EMC / EMC 35,138 31,543 5% 50-99% Computer Storage Pershing Square, Primecap 17.12 -44% 8%
Potash Corp. / POT 33,031 36,687 4% 0-25% Non-Metallic Mining Cap World, Pabrai 111.60 -43% 13%
Walgreen / WAG 32,994 32,221 10% 0-25% Retail (drugs) Bares, Cap Re 33.49 -36% 21%
DIRECTV / DTV 29,366 33,236 7% 25-50% Broadcasting & Cable Baupost, Southeastern 30.69 -39% 12%
Accenture / ACN 28,903 24,901 10% >99% Business Services Cap Re, Weitz 40.49 -35% 8%
Dell / DELL 27,080 17,747 12% >99% Computer Hardware Fairfax, Southeastern, Weitz 13.84 -43% 25%
Teck Cominco / TCK 21,124 28,050 5% 0-25% Metal Mining Pabrai 35.88 -93% 16%
Automatic Data / ADP 20,491 18,751 10% >99% Business Services Cap Re 40.59 -21% 10%
Northrop Grumman / NOC 17,830 18,849 13% 50-99% Aerospace and Defense Centaur, Fairholme, Pzena 58.89 -43% 3%
Chesapeake Energy / CHK 16,167 28,186 nm nm Oil & Gas Operations Southeastern 24.96 -47% 20%
Yum! Brands / YUM 15,646 18,559 8% 50-99% Restaurants Cap Re, Southeastern 33.36 -30% 11%
Biogen Idec / BIIB 14,885 14,721 10% 50-99% Biotechnology & Drugs Icahn, Primecap 55.21 -24% 1%
Cardinal Health / CAH 12,066 12,431 15% 25-50% Biotechnology & Drugs Greenlight, Pzena 33.38 -40% 3%
Boston Scientific / BSX 11,165 16,219 nm nm Medical Equipment Greenlight, Paulson 7.39 -18% 59%
Paychex / PAYX 10,672 10,385 7% >99% Business Services Cap World, Markel 29.53 -31% 11%
Republic Services / RSG 9,912 17,072 9% 0-25% Waste Management Blackstone, Cap World 26.03 -42% 15%
Lab Corp. of America / LH 7,621 8,866 11% 50-99% Healthcare Facilities Brave Warrior, Centaur, Harris 71.76 -26% 7%
Fairfax Financial / FRFHF 7,501 7,468 24% >99% Property & Casualty Centaur, Markel, Pabrai 355.54 -9% 12%
Molson Coors / TAP 7,198 8,177 5% 25-50% Beverages (alcoholic) Cap Re, Children's 38.90 -21% 32%
CIT Group / CIT 6,450 nm nm nm Regional Banks Baupost, Icahn 32.25 -23% 9%
CareFusion / CFN 5,572 5,782 15% >99% Medical Equipment Greenlight, Pzena 25.17 -31% 13%
Leucadia National / LUK 5,305 6,771 nm nm Conglomerates Advisory, Fairholme 21.82 -53% 21%
Hyatt Hotels / H 4,930 4,574 nm nm Hotels & Motels Pershing Square, Singapore 29.34 -12% 10%
Energizer Holdings / ENR 3,826 5,979 11% 25-50% Electronic Instruments Weitz 54.79 -31% 26%
Patterson Companies / PDCO 3,522 3,877 9% 50-99% Medical Equipment Markel, Select Equity 28.76 -44% 8%
Chipotle / CMG 3,324 3,058 7% 25-50% Restaurants Cap World, Centaur 104.87 -54% 0%
Fidelity National / FNF 3,180 3,749 9% >99% Property & Casualty Artisan, Centaur, Pennant 13.80 -13% 66%
AutoNation / AN 3,043 3,952 10% 0-25% Retail (specialty) Cascade, ESL, Weitz 17.72 -48% 22%
Strayer Education / STRA 2,890 2,796 6% >99% Schools Lone Pine, Maverick, Weitz 206.26 -30% 12%
AllianceBernstein / AB 2,689 2,689 7% >99% Investment Services Perkins, Royce 26.53 -62% 13%
ITC Holdings / ITC 2,675 5,026 6% >99% Electric Utilities Bamco, Markel 52.70 -39% 3%
Brown & Brown / BRO 2,514 2,590 11% >99% Insurance (miscellaneous) Royce, Ruane Cunniff 17.70 -16% 15%
VistaPrint / VPRT 2,384 2,231 3% 25-50% Business Services Alydar, Lone Pine 54.91 -60% 9%
TransDigm / TDG 2,355 3,963 8% >99% Aerospace and Defense Pennant, Tiger 48.03 -38% 8%
Alleghany / Y 2,341 2,278 6% >99% Conglomerates Centaur, Eagle, Royce 263.36 -16% 10%
Corrections Corp. / CXW 2,269 3,373 9% 0-25% Business Services Kalmar, Pershing Square 19.57 -51% 34%
Level 3 Comms / LVLT 2,263 7,991 2% 0-25% Communications Services Fairfax, Southeastern 1.38 -57% 28%
tw telecom / TWTC 2,258 3,095 4% 0-25% Communications Services Cap Re, Southeastern 15.04 -57% 17%
Weight Watchers / WTW 2,228 3,690 11% >99% Personal Services Bares, Cap World 28.92 -43% 4%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 124 of 144
By Market Value (continued)
Market Enter. LTM LTM Recent to 52-Wk
Value Value EBIT / EBIT / Price Low High
Company / Ticker ($mn) ($mn) EV Capital Industry Notable Shareholders ($) ($) ($)
Terex / TEX 2,030 3,000 nm nm Misc. Capital Goods Eton Park, Pabrai 18.78 -61% 36%
CapitalSource / CSE 1,619 nm nm nm Regional Banks Baupost, Farallon, Pabrai 5.01 -82% 4%
SandRidge Energy / SD 1,554 3,579 nm nm Oil & Gas Operations Ares, Fairfax, Jennison 8.47 -47% 77%
USG / USG 1,312 2,584 nm nm Construction Materials Berkshire, Fairfax, T Rowe 13.21 -69% 50%
Dillard's / DDS 1,212 2,113 nm nm Retail (dep't & discount) Acadian, Southeastern 16.42 -82% 23%
HSN / HSNI 1,104 1,243 nm nm Retail (online) Acadian 19.57 -83% 8%
Zenith National / ZNT 1,066 1,110 5% >99% Property & Casualty Artisan, Eagle, Royce 28.14 -34% 15%
ViaSat / VSAT 1,055 1,400 3% 0-25% Comms Equipment Baupost, Times Square 29.05 -45% 13%
Redwood Trust / RWT 1,054 5,098 nm nm Real Estate Operations Cap Re, NWQ, Weitz 13.57 -16% 43%
Fair Isaac / FICO 979 1,212 11% 50-99% Business Services Southeastern 21.06 -54% 16%
Texas Industries / TXI 959 1,446 nm nm Construction Materials Shamrock, Southeastern 34.56 -64% 37%
Seabridge Gold / SA 933 919 2% 0-25% Gold & Silver Jennison, Royce 24.82 -40% 34%
ATP Oil & Gas / ATPG 829 1,965 1% 0-25% Oil & Gas Operations Aletheia, Greenlight, Soros 16.38 -83% 40%
Contango Oil & Gas / MCF 827 738 8% 0-25% Oil & Gas Operations Dreman, Sellers 52.15 -39% 5%
BreitBurn Energy / BBEP 803 1,432 16% 0-25% Oil & Gas - Integrated Acadian, Baupost 15.22 -64% 0%
Take-Two / TTWO 803 839 nm nm Software & Programming Glenview, Icahn, Legg 9.65 -42% 30%
RSC Holdings / RRR 706 2,935 6% 0-25% Rental & Leasing Fairholme, GS, Jennison 6.83 -41% 32%
International Coal / ICO 695 989 8% 0-25% Coal Chou, Fairfax, Steelhead 3.88 -72% 38%
Cresud / CRESY 634 907 10% 0-25% Crops Pabrai 12.72 -54% 26%
Theravance / THRX 617 634 nm nm Biotechnology & Drugs Baupost, Iridian, Litespeed 9.70 -1% 91%
Lions Gate / LGF 616 949 3% >99% Motion Pictures Icahn, MHR, Third Point 5.23 -25% 39%
Stratasys / SSYS 520 468 1% 0-25% Computer Peripherals Bares, Riverbridge 25.65 -70% 9%
Steak n Shake / SNS 496 576 6% 0-25% Restaurants Centaur, Eagle, Lion 345.00 -71% 1%
DineEquity / DIN 489 2,811 7% 0-25% Restaurants MSD, Southeastern 27.80 -81% 25%
Horsehead / ZINC 454 309 nm nm Metal Mining Driehaus, Pabrai, Royce 10.47 -70% 33%
Alliance One / AOI 449 1,450 12% 0-25% Tobacco Baupost, RenTech 5.04 -47% 18%
Enzon Pharma / ENZN 415 555 0% 0-25% Biotechnology & Drugs Baupost, Icahn, RenTech 9.13 -49% 26%
The Knot / KNOT 329 200 0% nm Computer Services T Rowe, Weitz 9.74 -43% 23%
Interactive Intell. / ININ 297 232 6% >99% Software & Programming Bares, Essex 17.21 -57% 39%
MVC Capital / MVC 278 340 3% >99% Misc. Financial Services Cannell, Centaur, Royce 11.45 -46% 8%
Silicon Storage / SSTI 272 149 nm nm Semiconductors Miller, RenTech, Riley 2.84 -54% 1%
Overstock.com / OSTK 270 252 1% >99% Retail (online) Chou, Fairfax 11.80 -43% 52%
International Assets / IAAC 268 374 3% 0-25% Investment Services Bares, Leucadia, Steinberg 15.28 -54% 31%
Seahawk Drilling / HAWK 254 248 nm nm Oil Well Services Chilton, MHR, Pennant 21.82 -12% 64%
Gastar Exploration / GST 228 166 nm nm Oil & Gas - Integrated Palo Alto, Weiss 4.56 -61% 14%
Winthrop Realty / FUR 186 412 7% 0-25% Real Estate Operations Fairholme, Pamet, Raffles 11.69 -50% 13%
Republic Airways / RJET 183 2,327 9% 0-25% Airline Greenlight, Kleinheinz 5.31 -23% 100%
Audiovox / VOXX 157 118 nm nm Comms Equipment Baupost, Kahn, Smith 6.86 -69% 18%
Hallmark Financial / HALL 154 129 16% >99% Property & Casualty Bares, Newcastle 7.63 -22% 15%
Air Transport / ATSG 149 465 0% nm Air Courier Acadian, Pabrai, RenTech 2.35 -93% 73%
Stamps.com / STMP 145 100 5% 50-99% Retail (online) Bares, RenTech 9.19 -15% 13%
Multimedia Games / MGAM 134 189 nm nm Casinos & Gaming Baupost, Par, Royce 4.91 -67% 32%
Winmark / WINA 108 110 6% 25-50% Misc. Financial Services Bares, Bremer 20.70 -60% 11%
DDi Corp. / DDIC 86 61 nm nm Electronic Instruments Miller, RenTech, Riley 4.33 -36% 19%
Investors Title / ITIC 81 72 1% >99% Property & Casualty Bridgeway, Markel 35.41 -52% 1%
Blockbuster / BBI 74 1,041 nm nm Recreational Activities Icahn, Prentice, Third Point 0.38 -66% 311%
Osteotech / OSTE 61 64 nm nm Medical Equipment Heartland, RenTech 3.40 -29% 48%
BIDZ.com / BIDZ 43 44 19% 25-50% Retail (online) Bares, Munder 1.94 -3% 149%
Tandy Leather / TLF 38 32 15% 0-25% Apparel/Accessories Bares 3.70 -58% 10%
Intelligent Systems / INS 10 7 nm nm Software & Programming Weitz 1.09 -50% 119%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 125 of 144
By Sector
Market Enter. P/E (Est.)
Value Value This Next
Sector Industry Company / Ticker Notable Shareholders ($mn) ($mn) FY FY
Basic Materials Chemical Manufacturing Monsanto / MON Lone Pine, Weitz 41,373 42,907 23x 17x
Basic Materials Non-Metallic Mining Potash Corp. / POT Cap World, Pabrai 33,031 36,687 na na
Basic Materials Metal Mining Teck Cominco / TCK Pabrai 21,124 28,050 na na
Basic Materials Gold & Silver Seabridge Gold / SA Jennison, Royce 933 919 na na
Basic Materials Metal Mining Horsehead / ZINC Driehaus, Pabrai, Royce 454 309 nm 18x
Capital Goods Aerospace and Defense Northrop Grumman / NOC Centaur, Fairholme, Pzena 17,830 18,849 10x 9x
Capital Goods Aerospace and Defense TransDigm / TDG Pennant, Tiger 2,355 3,963 16x 14x
Capital Goods Misc. Capital Goods Terex / TEX Eton Park, Pabrai 2,030 3,000 nm nm
Capital Goods Construction Materials USG / USG Berkshire, Fairfax, T Rowe 1,312 2,584 nm nm
Capital Goods Construction Materials Texas Industries / TXI Shamrock, Southeastern 959 1,446 nm >99x
Conglomerates Conglomerates General Electric / GE Dodge & Cox, Fairfax 165,569 551,569 16x 13x
Conglomerates Conglomerates Leucadia National / LUK Advisory, Fairholme 5,305 6,771 na na
Conglomerates Conglomerates Alleghany / Y Centaur, Eagle, Royce 2,341 2,278 25x 15x
Consumer Cyclical Apparel/Accessories Tandy Leather / TLF Bares 38 32 na na
Consumer Non-Cyclical Beverages (non-alcoholic) Coca-Cola Company / KO Berkshire, Cap Re 124,316 126,962 16x 14x
Consumer Non-Cyclical Food Processing Kraft Foods / KFT Berkshire, Pershing Square 42,932 60,661 14x 14x
Consumer Non-Cyclical Beverages (alcoholic) Molson Coors / TAP Cap Re, Children's 7,198 8,177 11x 10x
Consumer Non-Cyclical Crops Cresud / CRESY Pabrai 634 907 22x 27x
Consumer Non-Cyclical Tobacco Alliance One / AOI Baupost, RenTech 449 1,450 6x na
Energy Oil & Gas Operations Exxon Mobil / XOM Centaur, T Rowe 306,310 303,290 11x 9x
Energy Oil & Gas Operations Chesapeake Energy / CHK Southeastern 16,167 28,186 10x 10x
Energy Oil & Gas Operations SandRidge Energy / SD Ares, Fairfax, Jennison 1,554 3,579 10x 10x
Energy Oil & Gas Operations ATP Oil & Gas / ATPG Aletheia, Greenlight, Soros 829 1,965 nm 12x
Energy Oil & Gas Operations Contango Oil & Gas / MCF Dreman, Sellers 827 738 12x 9x
Energy Oil & Gas - Integrated BreitBurn Energy / BBEP Acadian, Baupost 803 1,432 19x 10x
Energy Coal International Coal / ICO Chou, Fairfax, Steelhead 695 989 19x 9x
Energy Oil Well Services Seahawk Drilling / HAWK Chilton, MHR, Pennant 254 248 nm nm
Energy Oil & Gas - Integrated Gastar Exploration / GST Palo Alto, Weiss 228 166 na na
Financial Money Center Banks Citigroup / C Fairholme, Paulson 90,577 nm 80x 9x
Financial Property & Casualty Fairfax Financial / FRFHF Centaur, Markel, Pabrai 7,501 7,468 na na
Financial Regional Banks CIT Group / CIT Baupost, Icahn 6,450 nm nm 9x
Financial Property & Casualty Fidelity National / FNF Artisan, Centaur, Pennant 3,180 3,749 14x 11x
Financial Investment Services AllianceBernstein / AB Perkins, Royce 2,689 2,689 13x 11x
Financial Insurance (miscellaneous) Brown & Brown / BRO Royce, Ruane Cunniff 2,514 2,590 16x 15x
Financial Regional Banks CapitalSource / CSE Baupost, Farallon, Pabrai 1,619 nm nm nm
Financial Property & Casualty Zenith National / ZNT Artisan, Eagle, Royce 1,066 1,110 65x 34x
Financial Misc. Financial Services MVC Capital / MVC Cannell, Centaur, Royce 278 340 25x 28x
Financial Investment Services International Assets / IAAC Bares, Leucadia, Steinberg 268 374 15x 29x
Financial Property & Casualty Hallmark Financial / HALL Bares, Newcastle 154 129 8x 9x
Financial Misc. Financial Services Winmark / WINA Bares, Bremer 108 110 20x 18x
Financial Property & Casualty Investors Title / ITIC Bridgeway, Markel 81 72 15x 19x
Health Care Major Drugs Johnson & Johnson / JNJ Berkshire, Fairfax 173,051 170,314 13x 12x
Health Care Biotechnology & Drugs Biogen Idec / BIIB Icahn, Primecap 14,885 14,721 12x 11x
Health Care Biotechnology & Drugs Cardinal Health / CAH Greenlight, Pzena 12,066 12,431 15x 14x
Health Care Medical Equipment Boston Scientific / BSX Greenlight, Paulson 11,165 16,219 13x 11x
Health Care Healthcare Facilities Lab Corp. of America / LH Brave Warrior, Centaur, Harris 7,621 8,866 13x 12x
Health Care Medical Equipment CareFusion / CFN Greenlight, Pzena 5,572 5,782 17x 15x
Health Care Medical Equipment Patterson Companies / PDCO Markel, Select Equity 3,522 3,877 16x 15x
Health Care Biotechnology & Drugs Theravance / THRX Baupost, Iridian, Litespeed 617 634 nm nm
Health Care Biotechnology & Drugs Enzon Pharma / ENZN Baupost, Icahn, RenTech 415 555 nm nm

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 126 of 144
By Sector (continued)
Market Enter. P/E (Est.)
Value Value This Next
Sector Industry Company / Ticker Notable Shareholders ($mn) ($mn) FY FY
Health Care Medical Equipment Osteotech / OSTE Heartland, RenTech 61 64 nm nm
Services Retail (dep't & discount) Wal-Mart / WMT Barkshire, GMO, Markel 201,558 242,908 15x 13x
Services Communications Services Vodafone / VOD Dodge & Cox, Greenlight 115,283 171,030 9x 9x
Services Restaurants McDonald's / MCD Cap World, Markel 68,626 77,507 14x 13x
Services Retail (home improvement) Home Depot / HD Dodge & Cox, Markel 49,312 57,012 19x 17x
Services Retail (drugs) Walgreen / WAG Bares, Cap Re 32,994 32,221 14x 12x
Services Broadcasting & Cable DIRECTV / DTV Baupost, Southeastern 29,366 33,236 22x 14x
Services Business Services Accenture / ACN Cap Re, Weitz 28,903 24,901 15x 13x
Services Business Services Automatic Data / ADP Cap Re 20,491 18,751 17x 16x
Services Restaurants Yum! Brands / YUM Cap Re, Southeastern 15,646 18,559 14x 12x
Services Business Services Paychex / PAYX Cap World, Markel 10,672 10,385 22x 21x
Services Waste Management Republic Services / RSG Blackstone, Cap World 9,912 17,072 16x 13x
Services Hotels & Motels Hyatt Hotels / H Pershing Square, Singapore 4,930 4,574 nm nm
Services Restaurants Chipotle / CMG Cap World, Centaur 3,324 3,058 25x 21x
Services Retail (specialty) AutoNation / AN Cascade, ESL, Weitz 3,043 3,952 13x 11x
Services Schools Strayer Education / STRA Lone Pine, Maverick, Weitz 2,890 2,796 22x 18x
Services Business Services VistaPrint / VPRT Alydar, Lone Pine 2,384 2,231 na na
Services Business Services Corrections Corp. / CXW Kalmar, Pershing Square 2,269 3,373 16x 15x
Services Communications Services Level 3 Comms / LVLT Fairfax, Southeastern 2,263 7,991 nm nm
Services Communications Services tw telecom / TWTC Cap Re, Southeastern 2,258 3,095 46x 29x
Services Personal Services Weight Watchers / WTW Bares, Cap World 2,228 3,690 11x 10x
Services Retail (dep't & discount) Dillard's / DDS Acadian, Southeastern 1,212 2,113 21x 22x
Services Retail (online) HSN / HSNI Acadian 1,104 1,243 19x 17x
Services Real Estate Operations Redwood Trust / RWT Cap Re, NWQ, Weitz 1,054 5,098 45x 8x
Services Business Services Fair Isaac / FICO Southeastern 979 1,212 14x 13x
Services Rental & Leasing RSC Holdings / RRR Fairholme, GS, Jennison 706 2,935 nm nm
Services Motion Pictures Lions Gate / LGF Icahn, MHR, Third Point 616 949 na na
Services Restaurants Steak n Shake / SNS Centaur, Eagle, Lion 496 576 22x 19x
Services Restaurants DineEquity / DIN MSD, Southeastern 489 2,811 13x 15x
Services Retail (online) Overstock.com / OSTK Chou, Fairfax 270 252 49x 25x
Services Real Estate Operations Winthrop Realty / FUR Fairholme, Pamet, Raffles 186 412 nm 24x
Services Retail (online) Stamps.com / STMP Bares, RenTech 145 100 15x na
Services Casinos & Gaming Multimedia Games / MGAM Baupost, Par, Royce 134 189 nm 41x
Services Recreational Activities Blockbuster / BBI Icahn, Prentice, Third Point 74 1,041 nm nm
Services Retail (online) BIDZ.com / BIDZ Bares, Munder 43 44 18x 10x
Technology Computer Storage EMC / EMC Pershing Square, Primecap 35,138 31,543 15x 13x
Technology Computer Hardware Dell / DELL Fairfax, Southeastern, Weitz 27,080 17,747 13x 11x
Technology Electronic Instruments Energizer Holdings / ENR Weitz 3,826 5,979 10x 9x
Technology Comms Equipment ViaSat / VSAT Baupost, Times Square 1,055 1,400 19x 15x
Technology Software & Programming Take-Two / TTWO Glenview, Icahn, Legg 803 839 nm 7x
Technology Computer Peripherals Stratasys / SSYS Bares, Riverbridge 520 468 >99x 52x
Technology Computer Services The Knot / KNOT T Rowe, Weitz 329 200 >99x >99x
Technology Software & Programming Interactive Intell. / ININ Bares, Essex 297 232 16x 15x
Technology Semiconductors Silicon Storage / SSTI Miller, RenTech, Riley 272 149 na na
Technology Comms Equipment Audiovox / VOXX Baupost, Kahn, Smith 157 118 43x 20x
Technology Electronic Instruments DDi Corp. / DDIC Miller, RenTech, Riley 86 61 54x 48x
Technology Software & Programming Intelligent Systems / INS Weitz 10 7 na na
Transportation Airline Republic Airways / RJET Greenlight, Kleinheinz 183 2,327 5x 7x
Transportation Air Courier Air Transport / ATSG Acadian, Pabrai, RenTech 149 465 4x 4x
Utilities Electric Utilities ITC Holdings / ITC Bamco, Markel 2,675 5,026 21x 20x

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Stock Price Performance (sorted by price decline since December 31, 2007)

Recent to Market Enter. Price Performance Price/ P/E


Price 52-Week Value Value Since Since Since Tang. Next
Company / Ticker ($) Low High ($mn) ($mn) 12/31/09 12/31/07 12/30/05 Book FY Notable Shareholders
Blockbuster / BBI 0.38 -66% 311% 74 1,041 -43% -90% -90% nm nm Icahn, Prentice, Third Point
Citigroup / C 3.18 -69% 71% 90,577 nm -4% -89% -93% 0.8x 9x Fairholme, Paulson
BIDZ.com / BIDZ 1.94 -3% 149% 43 44 -3% -78% na 1.3x 10x Bares, Munder
SandRidge Energy / SD 8.47 -47% 77% 1,554 3,579 -10% -76% na nm 10x Ares, Fairfax, Jennison
Republic Airways / RJET 5.31 -23% 100% 183 2,327 -28% -73% -65% 0.4x 7x Greenlight, Kleinheinz
CapitalSource / CSE 5.01 -82% 4% 1,619 nm 26% -72% -78% 0.7x nm Baupost, Farallon, Pabrai
Terex / TEX 18.78 -61% 36% 2,030 3,000 -5% -71% -37% 1.6x nm Eton Park, Pabrai
ATP Oil & Gas / ATPG 16.38 -83% 40% 829 1,965 -10% -68% -56% 1.7x 12x Aletheia, Greenlight, Soros
Intelligent Systems / INS 1.09 -50% 119% 10 7 16% -67% -49% 2.1x na Weitz
AllianceBernstein / AB 26.53 -62% 13% 2,689 2,689 -6% -65% -53% 1.4x 11x Perkins, Royce
USG / USG 13.21 -69% 50% 1,312 2,584 -6% -63% -80% 1.4x nm Berkshire, Fairfax, T Rowe
Redwood Trust / RWT 13.57 -16% 43% 1,054 5,098 -6% -60% -67% 1.2x 8x Cap Re, NWQ, Weitz
General Electric / GE 15.55 -63% 13% 165,569 551,569 3% -58% -56% 4.2x 13x Dodge & Cox, Fairfax
Osteotech / OSTE 3.40 -29% 48% 61 64 6% -57% -32% 0.8x nm Heartland, RenTech
Winthrop Realty / FUR 11.69 -50% 13% 186 412 8% -56% -59% 1.2x 24x Fairholme, Pamet, Raffles
Level 3 Comms / LVLT 1.38 -57% 28% 2,263 7,991 -10% -55% -52% nm nm Fairfax, Southeastern
Leucadia National / LUK 21.82 -53% 21% 5,305 6,771 -8% -54% -8% 1.3x na Advisory, Fairholme
Hallmark Financial / HALL 7.63 -22% 15% 154 129 -4% -52% -6% 1.1x 9x Bares, Newcastle
Energizer Holdings / ENR 54.79 -31% 26% 3,826 5,979 -11% -51% 10% nm 9x Weitz
Texas Industries / TXI 34.56 -64% 37% 959 1,446 -1% -51% -31% 1.2x >99x Shamrock, Southeastern
Theravance / THRX 9.70 -1% 91% 617 634 -26% -50% -57% nm nm Baupost, Iridian, Litespeed
Take-Two / TTWO 9.65 -42% 30% 803 839 -4% -48% -45% 4.3x 7x Glenview, Icahn, Legg
BreitBurn Energy / BBEP 15.22 -64% 0% 803 1,432 44% -47% na 0.6x 10x Acadian, Baupost
RSC Holdings / RRR 6.83 -41% 32% 706 2,935 -3% -46% na nm nm Fairholme, GS, Jennison
Audiovox / VOXX 6.86 -69% 18% 157 118 -3% -45% -51% 0.6x 20x Baupost, Kahn, Smith
Lions Gate / LGF 5.23 -25% 39% 616 949 -10% -44% -32% nm na Icahn, MHR, Third Point
Air Transport / ATSG 2.35 -93% 73% 149 465 -11% -44% -70% 1.9x 4x Acadian, Pabrai, RenTech
Dell / DELL 13.84 -43% 25% 27,080 17,747 -4% -44% -54% 10.1x 11x Fairfax, Southeastern, Weitz
International Assets / IAAC 15.28 -54% 31% 268 374 5% -43% 68% 1.2x 29x Bares, Leucadia, Steinberg
Vodafone / VOD 21.91 -29% 10% 115,283 171,030 -5% -41% -11% 7.4x 9x Dodge & Cox, Greenlight
Multimedia Games / MGAM 4.91 -67% 32% 134 189 -18% -41% -47% 1.8x 41x Baupost, Par, Royce
The Knot / KNOT 9.74 -43% 23% 329 200 -3% -39% -15% 2.3x >99x T Rowe, Weitz
Horsehead / ZINC 10.47 -70% 33% 454 309 -18% -38% na 1.4x 18x Driehaus, Pabrai, Royce
Zenith National / ZNT 28.14 -34% 15% 1,066 1,110 -5% -37% -39% 1.0x 34x Artisan, Eagle, Royce
Boston Scientific / BSX 7.39 -18% 59% 11,165 16,219 -18% -36% -70% nm 11x Greenlight, Paulson
Chesapeake Energy / CHK 24.96 -47% 20% 16,167 28,186 -4% -36% -21% 1.4x 10x Southeastern
Weight Watchers / WTW 28.92 -43% 4% 2,228 3,690 -1% -36% -41% nm 10x Bares, Cap World
Interactive Intell. / ININ 17.21 -57% 39% 297 232 -7% -35% 237% 4.4x 15x Bares, Essex
Fair Isaac / FICO 21.06 -54% 16% 979 1,212 -1% -34% -52% nm 13x Southeastern
Corrections Corp. / CXW 19.57 -51% 34% 2,269 3,373 -20% -34% 31% 1.6x 15x Kalmar, Pershing Square
Cresud / CRESY 12.72 -54% 26% 634 907 -12% -33% 23% nm 27x Pabrai
Monsanto / MON 75.82 -12% 23% 41,373 42,907 -7% -32% 96% 7.3x 17x Lone Pine, Weitz
Alleghany / Y 263.36 -16% 10% 2,341 2,278 -5% -32% 0% 0.9x 15x Centaur, Eagle, Royce
Exxon Mobil / XOM 64.80 -5% 18% 306,310 303,290 -5% -31% 15% 2.9x 9x Centaur, T Rowe
MVC Capital / MVC 11.45 -46% 8% 278 340 -3% -29% 7% 0.7x 28x Cannell, Centaur, Royce
Chipotle / CMG 104.87 -54% 0% 3,324 3,058 19% -29% na 4.9x 21x Cap World, Centaur
International Coal / ICO 3.88 -72% 38% 695 989 1% -28% -59% 1.1x 9x Chou, Fairfax, Steelhead
Gastar Exploration / GST 4.56 -61% 14% 228 166 -5% -27% -75% 1.5x na Palo Alto, Weiss
tw telecom / TWTC 15.04 -57% 17% 2,258 3,095 -12% -26% 53% 3.1x 29x Cap Re, Southeastern
Northrop Grumman / NOC 58.89 -43% 3% 17,830 18,849 5% -25% -2% nm 9x Centaur, Fairholme, Pzena

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 128 of 144
Stock Price Performance (sorted by price decline since December 31, 2007) (continued)

Recent to Market Enter. Price Performance Price/ P/E


Price 52-Week Value Value Since Since Since Tang. Next
Company / Ticker ($) Low High ($mn) ($mn) 12/31/09 12/31/07 12/30/05 Book FY Notable Shareholders
Brown & Brown / BRO 17.70 -16% 15% 2,514 2,590 -2% -25% -42% nm 15x Royce, Ruane Cunniff
Molson Coors / TAP 38.90 -21% 32% 7,198 8,177 -14% -25% 16% 6.7x 10x Cap Re, Children's
Stamps.com / STMP 9.19 -15% 13% 145 100 2% -25% -60% 2.0x na Bares, RenTech
Overstock.com / OSTK 11.80 -43% 52% 270 252 -13% -24% -58% nm 25x Chou, Fairfax
DineEquity / DIN 27.80 -81% 25% 489 2,811 14% -24% -41% nm 15x MSD, Southeastern
DDi Corp. / DDIC 4.33 -36% 19% 86 61 -11% -23% -35% 1.3x 48x Miller, RenTech, Riley
Potash Corp. / POT 111.60 -43% 13% 33,031 36,687 3% -22% 317% 5.8x na Cap World, Pabrai
Cardinal Health / CAH 33.38 -40% 3% 12,066 12,431 4% -20% -32% 4.1x 14x Greenlight, Pzena
Paychex / PAYX 29.53 -31% 11% 10,672 10,385 -4% -18% -23% 11.9x 21x Cap World, Markel
Republic Services / RSG 26.03 -42% 15% 9,912 17,072 -8% -17% 4% nm 13x Blackstone, Cap World
Seabridge Gold / SA 24.82 -40% 34% 933 919 2% -16% 164% 9.9x na Jennison, Royce
ViaSat / VSAT 29.05 -45% 13% 1,055 1,400 -9% -16% 9% 2.3x 15x Baupost, Times Square
Patterson Companies / PDCO 28.76 -44% 8% 3,522 3,877 3% -15% -14% 10.9x 15x Markel, Select Equity
Yum! Brands / YUM 33.36 -30% 11% 15,646 18,559 -5% -13% 42% nm 12x Cap Re, Southeastern
Dillard's / DDS 16.42 -82% 23% 1,212 2,113 -11% -13% -34% 0.5x 22x Acadian, Southeastern
Walgreen / WAG 33.49 -36% 21% 32,994 32,221 -9% -12% -24% 2.5x 12x Bares, Cap Re
Coca-Cola Company / KO 53.98 -31% 10% 124,316 126,962 -5% -12% 34% 10.4x 14x Berkshire, Cap Re
Kraft Foods / KFT 29.09 -28% 3% 42,932 60,661 7% -11% 3% nm 14x Berkshire, Pershing Square
Automatic Data / ADP 40.59 -21% 10% 20,491 18,751 -5% -9% -2% 7.4x 16x Cap Re
Investors Title / ITIC 35.41 -52% 1% 81 72 15% -8% -16% 0.8x 19x Bridgeway, Markel
EMC / EMC 17.12 -44% 8% 35,138 31,543 -2% -8% 26% 6.8x 13x Pershing Square, Primecap
ITC Holdings / ITC 52.70 -39% 3% 2,675 5,026 1% -7% 88% nm 20x Bamco, Markel
Johnson & Johnson / JNJ 62.72 -26% 5% 173,051 170,314 -3% -6% 4% 9.2x 12x Berkshire, Fairfax
Fidelity National / FNF 13.80 -13% 66% 3,180 3,749 3% -6% -43% 3.0x 11x Artisan, Centaur, Pennant
Silicon Storage / SSTI 2.84 -54% 1% 272 149 11% -5% -44% 1.1x na Miller, RenTech, Riley
Lab Corp. of America / LH 71.76 -26% 7% 7,621 8,866 -4% -5% 33% nm 12x Brave Warrior, Centaur
Enzon Pharma / ENZN 9.13 -49% 26% 415 555 -13% -4% 23% 461.1x nm Baupost, Icahn, RenTech
Biogen Idec / BIIB 55.21 -24% 1% 14,885 14,721 3% -3% 22% 4.6x 11x Icahn, Primecap
Winmark / WINA 20.70 -60% 11% 108 110 -4% -1% -1% 6.6x 18x Bares, Bremer
Stratasys / SSYS 25.65 -70% 9% 520 468 49% -1% 105% 4.4x 52x Bares, Riverbridge
Teck Cominco / TCK 35.88 -93% 16% 21,124 28,050 3% 0% 32% 1.8x na Pabrai
Contango Oil & Gas / MCF 52.15 -39% 5% 827 738 11% 2% 356% 2.2x 9x Dreman, Sellers
TransDigm / TDG 48.03 -38% 8% 2,355 3,963 1% 6% na nm 14x Pennant, Tiger
Home Depot / HD 29.00 -40% 2% 49,312 57,012 0% 8% -28% 2.7x 17x Dodge & Cox, Markel
McDonald's / MCD 63.59 -21% 3% 68,626 77,507 2% 8% 89% 6.4x 13x Cap World, Markel
Wal-Mart / WMT 52.90 -12% 4% 201,558 242,908 -1% 11% 13% 3.9x 13x Barkshire, GMO, Markel
Accenture / ACN 40.49 -35% 8% 28,903 24,901 -2% 12% 40% 14.7x 13x Cap Re, Weitz
Tandy Leather / TLF 3.70 -58% 10% 38 32 -5% 13% -46% 1.2x na Bares
AutoNation / AN 17.72 -48% 22% 3,043 3,952 -7% 13% -18% 3.0x 11x Cascade, ESL, Weitz
Strayer Education / STRA 206.26 -30% 12% 2,890 2,796 -3% 21% 120% 16.5x 18x Lone Pine, Maverick, Weitz
Alliance One / AOI 5.04 -47% 18% 449 1,450 3% 24% 29% 1.3x na Baupost, RenTech
VistaPrint / VPRT 54.91 -60% 9% 2,384 2,231 -3% 28% 141% 7.0x na Alydar, Lone Pine
DIRECTV / DTV 30.69 -39% 12% 29,366 33,236 -8% 33% 117% nm 14x Baupost, Southeastern
Steak n Shake / SNS 345.00 -71% 1% 496 576 6% 58% 2% 1.8x 19x Centaur, Eagle, Lion
Seahawk Drilling / HAWK 21.82 -12% 64% 254 248 -3% na na 0.5x nm Chilton, MHR, Pennant
Fairfax Financial / FRFHF* 355.54 -9% 12% 7,501 7,468 -9% na* na* 1.0x na Centaur, Markel, Pabrai
CIT Group / CIT 32.25 -23% 9% 6,450 nm 17% na na 3.3x 9x Baupost, Icahn
CareFusion / CFN 25.17 -31% 13% 5,572 5,782 1% na na 6.5x 15x Greenlight, Pzena
Hyatt Hotels / H 29.34 -12% 10% 4,930 4,574 -2% na na 1.1x nm Pershing Square, Singapore
HSN / HSNI 19.57 -83% 8% 1,104 1,243 -3% na na 27.9x 17x Acadian
* The ticker symbol of Fairfax changed from FFH to FRFHF in December 2009. Fairfax shares are up 24% since yearend 2007 and 148% since yearend 2005.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 129 of 144
Free Cash Flow (sorted by LTM free cash flow yield)

LTM Recent to Market Enter. EV / P/E P/E (Est.) Price/


FCF Price 52-Week Value Value LTM Last This Next In Div. Tang. Insider
Company / Ticker Yield ($) Low High ($mn) ($mn) Rev. FY FY FY 2 Yrs Yield Book Own.
CapitalSource / CSE 113% 5.01 -82% 4% 1,619 nm nm nm nm nm 13x 0.8% 0.7x 24%
Blockbuster / BBI 90% 0.38 -66% 311% 74 1,041 .2x nm nm nm nm - nm 44%
Republic Airways / RJET 63% 5.31 -23% 100% 183 2,327 1.6x 2x 5x 7x 2x - 0.4x 1%
Dillard's / DDS 41% 16.42 -82% 23% 1,212 2,113 .3x nm 21x 22x 8x 1.0% 0.5x 30%
Redwood Trust / RWT 36% 13.57 -16% 43% 1,054 5,098 9.0x nm 45x 8x 5x 7.4% 1.2x 2%
Hallmark Financial / HALL 35% 7.63 -22% 15% 154 129 .5x 12x 8x 9x 8x - 1.1x 11%
RSC Holdings / RRR 33% 6.83 -41% 32% 706 2,935 1.7x 6x nm nm 17x - nm 11%
Audiovox / VOXX 31% 6.86 -69% 18% 157 118 .2x nm 43x 20x na - 0.6x 19%
DineEquity / DIN 28% 27.80 -81% 25% 489 2,811 1.7x nm 13x 15x 15x - nm 4%
Air Transport / ATSG 21% 2.35 -93% 73% 149 465 .3x nm 4x 4x na - 1.9x 7%
BreitBurn Energy / BBEP 20% 15.22 -64% 0% 803 1,432 1.8x 2x 19x 10x 12x - 0.6x 42%
HSN / HSNI 18% 19.57 -83% 8% 1,104 1,243 .4x nm 19x 17x 13x - 27.9x 34%
Multimedia Games / MGAM 16% 4.91 -67% 32% 134 189 1.5x nm nm 41x na - 1.8x 2%
Alliance One / AOI 16% 5.04 -47% 18% 449 1,450 .6x 3x 6x na na - 1.3x 5%
Cardinal Health / CAH 15% 33.38 -40% 3% 12,066 12,431 .1x 11x 15x 14x 13x 2.1% 4.1x 0%
Fair Isaac / FICO 14% 21.06 -54% 16% 979 1,212 1.9x 16x 14x 13x 12x 0.4% nm 0%
Brown & Brown / BRO 13% 17.70 -16% 15% 2,514 2,590 2.6x 15x 16x 15x 14x 1.8% nm 18%
Winmark / WINA 12% 20.70 -60% 11% 108 110 3.1x 99x 20x 18x 16x - 6.6x 31%
Teck Cominco / TCK 12% 35.88 -93% 16% 21,124 28,050 4.3x 30x na na na - 1.8x 2%
Dell / DELL 11% 13.84 -43% 25% 27,080 17,747 .3x 11x 13x 11x 9x - 10.1x 14%
Seahawk Drilling / HAWK 11% 21.82 -12% 64% 254 248 nm nm nm nm nm - 0.5x 10%
Lab Corp. of America / LH 11% 71.76 -26% 7% 7,621 8,866 1.9x 14x 13x 12x na - nm 0%
Energizer Holdings / ENR 11% 54.79 -31% 26% 3,826 5,979 1.5x 12x 10x 9x 9x - nm 7%
Walgreen / WAG 10% 33.49 -36% 21% 32,994 32,221 .5x 17x 14x 12x 10x 1.6% 2.5x 1%
DDi Corp. / DDIC 10% 4.33 -36% 19% 86 61 .3x nm 54x 48x 27x - 1.3x 9%
Steak n Shake / SNS 10% 345.00 -71% 1% 496 576 .9x 82x 22x 19x na - 1.8x 8%
Weight Watchers / WTW 10% 28.92 -43% 4% 2,228 3,690 2.4x 11x 11x 10x 10x 2.4% nm 56%
Molson Coors / TAP 10% 38.90 -21% 32% 7,198 8,177 2.7x 10x 11x 10x 9x 2.5% 6.7x 15%
Accenture / ACN 9% 40.49 -35% 8% 28,903 24,901 1.1x 17x 15x 13x 12x - 14.7x 0%
Home Depot / HD 9% 29.00 -40% 2% 49,312 57,012 .8x 21x 19x 17x 14x 3.1% 2.7x 1%
Kraft Foods / KFT 9% 29.09 -28% 3% 42,932 60,661 1.4x 24x 14x 14x 12x 4.0% nm 1%
Northrop Grumman / NOC 8% 58.89 -43% 3% 17,830 18,849 .6x 12x 10x 9x 8x 2.9% nm 1%
TransDigm / TDG 7% 48.03 -38% 8% 2,355 3,963 5.2x 15x 16x 14x 13x - nm 0%
EMC / EMC 7% 17.12 -44% 8% 35,138 31,543 2.2x 31x 15x 13x 12x - 6.8x 1%
International Coal / ICO 7% 3.88 -72% 38% 695 989 .9x 28x 19x 9x 3x - 1.1x 27%
DIRECTV / DTV 7% 30.69 -39% 12% 29,366 33,236 1.7x 23x 22x 14x 11x - nm 54%
Tandy Leather / TLF 7% 3.70 -58% 10% 38 32 .6x 15x na na na - 1.2x 18%
Stamps.com / STMP 7% 9.19 -15% 13% 145 100 1.2x 17x 15x na na - 2.0x 27%
Terex / TEX 6% 18.78 -61% 36% 2,030 3,000 .3x 26x nm nm 16x - 1.6x 4%
Wal-Mart / WMT 6% 52.90 -12% 4% 201,558 242,908 .6x 16x 15x 13x 12x 2.1% 3.9x 45%
Alleghany / Y 6% 263.36 -16% 10% 2,341 2,278 2.3x 96x 25x 15x na - 0.9x 12%
Automatic Data / ADP 6% 40.59 -21% 10% 20,491 18,751 2.1x 15x 17x 16x 15x 3.4% 7.4x 0%
Biogen Idec / BIIB 6% 55.21 -24% 1% 14,885 14,721 3.4x 16x 12x 11x 11x - 4.6x 1%
Winthrop Realty / FUR 6% 11.69 -50% 13% 186 412 9.0x nm nm 24x 21x 5.6% 1.2x 18%
Republic Services / RSG 6% 26.03 -42% 15% 9,912 17,072 2.1x 20x 16x 13x 10x 2.9% nm 6%
Paychex / PAYX 6% 29.53 -31% 11% 10,672 10,385 5.0x 20x 22x 21x 19x 4.2% 11.9x 11%
tw telecom / TWTC 5% 15.04 -57% 17% 2,258 3,095 2.6x 84x 46x 29x 20x - 3.1x 5%
Coca-Cola Company / KO 5% 53.98 -31% 10% 124,316 126,962 4.1x 18x 16x 14x 13x 3.0% 10.4x 5%
Overstock.com / OSTK 5% 11.80 -43% 52% 270 252 .3x nm 49x 25x 16x - nm 45%
Chipotle / CMG 4% 104.87 -54% 0% 3,324 3,058 2.0x 27x 25x 21x na - 4.9x 3%

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Free Cash Flow (sorted by LTM free cash flow yield) (continued)

LTM Recent to Market Enter. EV / P/E P/E (Est.) Price/


FCF Price 52-Week Value Value LTM Last This Next In Div. Tang. Insider
Company / Ticker Yield ($) Low High ($mn) ($mn) Rev. FY FY FY 2 Yrs Yield Book Own.
Contango Oil & Gas / MCF 4% 52.15 -39% 5% 827 738 3.9x 16x 12x 9x 6x - 2.2x 21%
Yum! Brands / YUM 4% 33.36 -30% 11% 15,646 18,559 1.7x 15x 14x 12x 11x 2.5% nm 1%
Interactive Intell. / ININ 4% 17.21 -57% 39% 297 232 1.8x 37x 16x 15x na - 4.4x 33%
The Knot / KNOT 4% 9.74 -43% 23% 329 200 1.9x 75x >99x >99x 75x - 2.3x 15%
Stratasys / SSYS 3% 25.65 -70% 9% 520 468 3.8x 39x >99x 52x 36x - 4.4x 7%
Level 3 Comms / LVLT 3% 1.38 -57% 28% 2,263 7,991 1.9x nm nm nm nm - nm 34%
Strayer Education / STRA 3% 206.26 -30% 12% 2,890 2,796 7.1x 36x 22x 18x 15x 1.5% 16.5x 2%
Patterson Companies / PDCO 3% 28.76 -44% 8% 3,522 3,877 1.3x 17x 16x 15x 14x - 10.9x 24%
Enzon Pharma / ENZN 2% 9.13 -49% 26% 415 555 2.8x nm nm nm nm - 461.1x 1%
MVC Capital / MVC 2% 11.45 -46% 8% 278 340 13.0x 19x 25x 28x na 4.2% 0.7x 5%
VistaPrint / VPRT 2% 54.91 -60% 9% 2,384 2,231 4.3x 44x na na na - 7.0x 5%
Investors Title / ITIC 2% 35.41 -52% 1% 81 72 1.0x nm 15x 19x na 0.8% 0.8x 24%
Horsehead / ZINC 1% 10.47 -70% 33% 454 309 .7x 9x nm 18x 10x - 1.4x 1%
Cresud / CRESY 1% 12.72 -54% 26% 634 907 2.4x 22x 22x 27x 22x 2.5% nm 40%
Vodafone / VOD 0% 21.91 -29% 10% 115,283 171,030 2.7x 24x 9x 9x 8x 3.9% 7.4x 0%
Monsanto / MON 0% 75.82 -12% 23% 41,373 42,907 3.7x 20x 23x 17x 14x 1.4% 7.3x 0%
Hyatt Hotels / H -1% 29.34 -12% 10% 4,930 4,574 1.2x 67x nm nm >99x - 1.1x 77%
AllianceBernstein / AB -1% 26.53 -62% 13% 2,689 2,689 14.0x 15x 13x 11x na 10.1% 1.4x 3%
Texas Industries / TXI -1% 34.56 -64% 37% 959 1,446 1.7x nm nm >99x 30x 0.9% 1.2x 17%
Potash Corp. / POT -2% 111.60 -43% 13% 33,031 36,687 3.9x 10x na na na 0.4% 5.8x 1%
Leucadia National / LUK -2% 21.82 -53% 21% 5,305 6,771 6.3x nm na na na - 1.3x 23%
Zenith National / ZNT -3% 28.14 -34% 15% 1,066 1,110 1.9x 31x 65x 34x 23x 7.1% 1.0x 12%
ViaSat / VSAT -4% 29.05 -45% 13% 1,055 1,400 2.2x 24x 19x 15x 14x - 2.3x 12%
Seabridge Gold / SA -4% 24.82 -40% 34% 933 919 nm nm na na na - 9.9x 33%
BIDZ.com / BIDZ -7% 1.94 -3% 149% 43 44 .2x 3x 18x 10x na - 1.3x 52%
ITC Holdings / ITC -7% 52.70 -39% 3% 2,675 5,026 8.1x 24x 21x 20x 16x 2.4% nm 1%
International Assets / IAAC -8% 15.28 -54% 31% 268 374 .0x 15x 15x 29x 31x - 1.2x 31%
Osteotech / OSTE -11% 3.40 -29% 48% 61 64 .6x 28x nm nm 68x - 0.8x 1%
CIT Group / CIT -12% 32.25 -23% 9% 6,450 nm nm nm nm 9x 15x - 3.3x 0%
Fairfax Financial / FRFHF -14% 355.54 -9% 12% 7,501 7,468 .9x 4x na na na 2.8% 1.0x 8%
Intelligent Systems / INS -16% 1.09 -50% 119% 10 7 .4x nm na na na - 2.1x 36%
Chesapeake Energy / CHK -17% 24.96 -47% 20% 16,167 28,186 2.4x 22x 10x 10x 9x 1.2% 1.4x 0%
Gastar Exploration / GST -22% 4.56 -61% 14% 228 166 2.6x nm na na na - 1.5x 17%
Lions Gate / LGF -23% 5.23 -25% 39% 616 949 .6x nm na na na - nm 3%
Take-Two / TTWO -28% 9.65 -42% 30% 803 839 .9x nm nm 7x 16x - 4.3x 3%
SandRidge Energy / SD -49% 8.47 -47% 77% 1,554 3,579 3.0x nm 10x 10x 9x - nm 20%
ATP Oil & Gas / ATPG -51% 16.38 -83% 40% 829 1,965 3.2x 5x nm 12x 3x - 1.7x 15%
Exxon Mobil / XOM na 64.80 -5% 18% 306,310 303,290 1.0x 16x 11x 9x 7x 2.6% 2.9x 1%
Citigroup / C na 3.18 -69% 71% 90,577 nm nm nm 80x 9x 6x - 0.8x 1%
Boston Scientific / BSX na 7.39 -18% 59% 11,165 16,219 2.0x nm 13x 11x 9x - nm 4%
Fidelity National / FNF na 13.80 -13% 66% 3,180 3,749 .6x 14x 14x 11x 9x 4.3% 3.0x 5%
AutoNation / AN na 17.72 -48% 22% 3,043 3,952 .4x 13x 13x 11x 12x - 3.0x 45%
Johnson & Johnson / JNJ na 62.72 -26% 5% 173,051 170,314 2.8x 14x 13x 12x 11x 3.1% 9.2x 1%
General Electric / GE na 15.55 -63% 13% 165,569 551,569 3.5x 15x 16x 13x 11x 2.6% 4.2x 1%
McDonald's / MCD na 63.59 -21% 3% 68,626 77,507 3.4x 15x 14x 13x 12x 3.5% 6.4x 0%
Corrections Corp. / CXW na 19.57 -51% 34% 2,269 3,373 2.0x 15x 16x 15x 12x - 1.6x 4%
CareFusion / CFN na 25.17 -31% 13% 5,572 5,782 1.6x 19x 17x 15x 13x - 6.5x 19%
Silicon Storage / SSTI na 2.84 -54% 1% 272 149 .6x nm na na na - 1.1x 21%
USG / USG na 13.21 -69% 50% 1,312 2,584 .8x nm nm nm >99x - 1.4x 23%
Theravance / THRX na 9.70 -1% 91% 617 634 26.0x nm nm nm nm - nm 34%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 131 of 144
P/E Multiples (sorted by P/E based on estimated EPS for next fiscal year)

Recent Market Enter. P/E P/E (Est.) FY Price/


Price Value Value Last This Next In End LTGR* Tang. Div.
Company / Ticker ($) ($mn) ($mn) FY FY FY 2 Yrs Date (Est.) Book Yield Notable Holders
Air Transport / ATSG 2.35 149 465 nm 4x 4x na 12/31/09 na 1.9x - Pabrai, RenTech
Republic Airways / RJET 5.31 183 2,327 2x 5x 7x 2x 12/31/09 10% 0.4x - Greenlight, Kleinheinz
Take-Two / TTWO 9.65 803 839 nm nm 7x 16x 10/31/10 8% 4.3x - Glenview, Icahn, Legg
Redwood Trust / RWT 13.57 1,054 5,098 nm 45x 8x 5x 12/31/09 5% 1.2x 7.4% Cap Re, NWQ, Weitz
Hallmark Financial / HALL 7.63 154 129 12x 8x 9x 8x 12/31/09 15% 1.1x - Bares, Newcastle
Northrop Grumman / NOC 58.89 17,830 18,849 12x 10x 9x 8x 12/31/10 11% nm 2.9% Centaur, Fairholme
Vodafone / VOD 21.91 115,283 171,030 24x 9x 9x 8x 3/31/10 5% 7.4x 3.9% Greenlight
Exxon Mobil / XOM 64.80 306,310 303,290 16x 11x 9x 7x 12/31/10 14% 2.9x 2.6% Centaur, T Rowe
CIT Group / CIT 32.25 6,450 nm nm nm 9x 15x 12/31/09 na 3.3x - Baupost, Icahn
Contango Oil & Gas / MCF 52.15 827 738 16x 12x 9x 6x 6/30/10 na 2.2x - Dreman, Sellers
Citigroup / C 3.18 90,577 nm nm 80x 9x 6x 12/31/10 -8% 0.8x - Fairholme, Paulson
Energizer Holdings / ENR 54.79 3,826 5,979 12x 10x 9x 9x 9/30/10 10% nm - Weitz
International Coal / ICO 3.88 695 989 28x 19x 9x 3x 12/31/10 na 1.1x - Chou, Fairfax
SandRidge Energy / SD 8.47 1,554 3,579 nm 10x 10x 9x 12/31/09 10% nm - Ares, Fairfax, Jennison
Chesapeake Energy / CHK 24.96 16,167 28,186 22x 10x 10x 9x 12/31/09 6% 1.4x 1.2% Southeastern
BIDZ.com / BIDZ 1.94 43 44 3x 18x 10x na 12/31/09 30% 1.3x - Bares, Munder
Molson Coors / TAP 38.90 7,198 8,177 10x 11x 10x 9x 12/31/10 12% 6.7x 2.5% Cap Re, Children's
Weight Watchers / WTW 28.92 2,228 3,690 11x 11x 10x 10x 12/31/09 na nm 2.4% Bares, Cap World
BreitBurn Energy / BBEP 15.22 803 1,432 2x 19x 10x 12x 12/31/09 na 0.6x - Acadian, Baupost
Boston Scientific / BSX 7.39 11,165 16,219 nm 13x 11x 9x 12/31/10 12% nm - Greenlight, Paulson
Fidelity National / FNF 13.80 3,180 3,749 14x 14x 11x 9x 12/31/10 12% 3.0x 4.3% Artisan, Centaur, Pennant
Dell / DELL 13.84 27,080 17,747 11x 13x 11x 9x 1/31/10 11% 10.1x - Fairfax, Southeastern
AutoNation / AN 17.72 3,043 3,952 13x 13x 11x 12x 12/31/10 14% 3.0x - Cascade, ESL, Weitz
AllianceBernstein / AB 26.53 2,689 2,689 15x 13x 11x na 12/31/10 9% 1.4x 10.1% Perkins, Royce
Biogen Idec / BIIB 55.21 14,885 14,721 16x 12x 11x 11x 12/31/10 8% 4.6x - Icahn, Primecap
Johnson & Johnson / JNJ 62.72 173,051 170,314 14x 13x 12x 11x 12/31/10 7% 9.2x 3.1% Berkshire, Fairfax
ATP Oil & Gas / ATPG 16.38 829 1,965 5x nm 12x 3x 12/31/09 na 1.7x - Greenlight, Soros
Lab Corp. of America / LH 71.76 7,621 8,866 14x 13x 12x na 12/31/10 12% nm - Brave Warrior, Centaur
Walgreen / WAG 33.49 32,994 32,221 17x 14x 12x 10x 8/31/10 14% 2.5x 1.6% Bares, Cap Re
Yum! Brands / YUM 33.36 15,646 18,559 15x 14x 12x 11x 12/31/10 12% nm 2.5% Cap Re, Southeastern
Republic Services / RSG 26.03 9,912 17,072 20x 16x 13x 10x 12/31/10 16% nm 2.9% Blackstone, Cap World
General Electric / GE 15.55 165,569 551,569 15x 16x 13x 11x 12/31/10 9% 4.2x 2.6% Dodge & Cox, Fairfax
EMC / EMC 17.12 35,138 31,543 31x 15x 13x 12x 12/31/10 14% 6.8x - Pershing Square
McDonald's / MCD 63.59 68,626 77,507 15x 14x 13x 12x 12/31/10 9% 6.4x 3.5% Cap World, Markel
Accenture / ACN 40.49 28,903 24,901 17x 15x 13x 12x 8/31/10 14% 14.7x - Cap Re, Weitz
Wal-Mart / WMT 52.90 201,558 242,908 16x 15x 13x 12x 1/31/10 12% 3.9x 2.1% Barkshire, GMO, Markel
Fair Isaac / FICO 21.06 979 1,212 16x 14x 13x 12x 9/30/10 8% nm 0.4% Southeastern
Kraft Foods / KFT 29.09 42,932 60,661 24x 14x 14x 12x 12/31/09 6% nm 4.0% Berkshire, Pershing Sq.
DIRECTV / DTV 30.69 29,366 33,236 23x 22x 14x 11x 12/31/09 21% nm - Baupost, Southeastern
Cardinal Health / CAH 33.38 12,066 12,431 11x 15x 14x 13x 6/30/10 12% 4.1x 2.1% Greenlight, Pzena
TransDigm / TDG 48.03 2,355 3,963 15x 16x 14x 13x 9/30/10 13% nm - Pennant, Tiger
Coca-Cola Company / KO 53.98 124,316 126,962 18x 16x 14x 13x 12/31/10 9% 10.4x 3.0% Berkshire, Cap Re
DineEquity / DIN 27.80 489 2,811 nm 13x 15x 15x 12/31/09 na nm - MSD, Southeastern
Patterson / PDCO 28.76 3,522 3,877 17x 16x 15x 14x 4/30/10 14% 10.9x - Markel, Select Equity
Corrections Corp. / CXW 19.57 2,269 3,373 15x 16x 15x 12x 12/31/10 12% 1.6x - Pershing Square
Alleghany / Y 263.36 2,341 2,278 96x 25x 15x na 12/31/09 na 0.9x - Centaur, Eagle, Royce
ViaSat / VSAT 29.05 1,055 1,400 24x 19x 15x 14x 3/31/10 13% 2.3x - Baupost, Times Square
CareFusion / CFN 25.17 5,572 5,782 19x 17x 15x 13x 6/30/10 11% 6.5x - Greenlight, Pzena
Interactive Intell. / ININ 17.21 297 232 37x 16x 15x na 12/31/10 21% 4.4x - Bares, Essex
Brown & Brown / BRO 17.70 2,514 2,590 15x 16x 15x 14x 12/31/09 10% nm 1.8% Royce, Ruane Cunniff
*
LTGR = Analysts consensus estimate of long-term EPS growth.

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P/E Multiples (sorted by P/E based on estimated EPS for next fiscal year) (continued)

Recent Market Enter. P/E P/E (Est.) FY Price/


Price Value Value Last This Next In End LTGR* Tang. Div.
Company / Ticker ($) ($mn) ($mn) FY FY FY 2 Yrs Date (Est.) Book Yield Notable Shareholders
Automatic Data / ADP 40.59 20,491 18,751 15x 17x 16x 15x 6/30/10 11% 7.4x 3.4% Cap Re
HSN / HSNI 19.57 1,104 1,243 nm 19x 17x 13x 12/31/09 na 27.9x - Acadian
Home Depot / HD 29.00 49,312 57,012 21x 19x 17x 14x 1/31/10 11% 2.7x 3.1% Dodge & Cox, Markel
Monsanto / MON 75.82 41,373 42,907 20x 23x 17x 14x 8/31/10 15% 7.3x 1.4% Lone Pine, Weitz
Winmark / WINA 20.70 108 110 99x 20x 18x 16x 12/31/09 na 6.6x - Bares, Bremer
Strayer Education / STRA 206.26 2,890 2,796 36x 22x 18x 15x 12/31/10 21% 16.5x 1.5% Lone Pine, Maverick, Weitz
Horsehead / ZINC 10.47 454 309 9x nm 18x 10x 12/31/09 na 1.4x - Driehaus, Pabrai, Royce
Investors Title / ITIC 35.41 81 72 nm 15x 19x na 12/31/09 4% 0.8x 0.8% Bridgeway, Markel
Steak n Shake / SNS 345.00 496 576 82x 22x 19x na 9/30/10 na 1.8x - Centaur, Eagle, Lion
Audiovox / VOXX 6.86 157 118 nm 43x 20x na 2/28/10 na 0.6x - Baupost, Kahn, Smith
ITC Holdings / ITC 52.70 2,675 5,026 24x 21x 20x 16x 12/31/09 17% nm 2.4% Bamco, Markel
Paychex / PAYX 29.53 10,672 10,385 20x 22x 21x 19x 5/31/10 12% 11.9x 4.2% Cap World, Markel
Chipotle / CMG 104.87 3,324 3,058 27x 25x 21x na 12/31/10 20% 4.9x - Cap World, Centaur
Dillard's / DDS 16.42 1,212 2,113 nm 21x 22x 8x 1/31/10 6% 0.5x 1.0% Acadian, Southeastern
Winthrop Realty / FUR 11.69 186 412 nm nm 24x 21x 12/31/09 na 1.2x 5.6% Fairholme, Pamet, Raffles
Overstock.com / OSTK 11.80 270 252 nm 49x 25x 16x 12/31/09 25% nm - Chou, Fairfax
Cresud / CRESY 12.72 634 907 22x 22x 27x 22x 6/30/10 na nm 2.5% Pabrai
MVC Capital / MVC 11.45 278 340 19x 25x 28x na 10/31/10 13% 0.7x 4.2% Cannell, Centaur, Royce
International Assets / IAAC 15.28 268 374 15x 15x 29x 31x 9/30/10 na 1.2x - Bares, Leucadia, Steinberg
tw telecom / TWTC 15.04 2,258 3,095 84x 46x 29x 20x 12/31/10 25% 3.1x - Cap Re, Southeastern
Zenith National / ZNT 28.14 1,066 1,110 31x 65x 34x 23x 12/31/10 2% 1.0x 7.1% Artisan, Eagle, Royce
Multimedia Games / MGAM 4.91 134 189 nm nm 41x na 9/30/10 30% 1.8x - Baupost, Par, Royce
DDi Corp. / DDIC 4.33 86 61 nm 54x 48x 27x 12/31/09 na 1.3x - Miller, RenTech, Riley
Stratasys / SSYS 25.65 520 468 39x >99x 52x 36x 12/31/09 16% 4.4x - Bares, Riverbridge
Texas Industries / TXI 34.56 959 1,446 nm nm >99x 30x 5/31/10 7% 1.2x 0.9% Shamrock, Southeastern
The Knot / KNOT 9.74 329 200 75x >99x >99x 75x 12/31/09 20% 2.3x - T Rowe, Weitz
Intelligent Systems / INS 1.09 10 7 nm na na na 12/31/09 na 2.1x - Weitz
Leucadia National / LUK 21.82 5,305 6,771 nm na na na 12/31/09 na 1.3x - Advisory, Fairholme
Lions Gate / LGF 5.23 616 949 nm na na na 3/31/10 na nm - Icahn, MHR, Third Point
Gastar Exploration / GST 4.56 228 166 nm na na na 12/31/10 na 1.5x - Palo Alto, Weiss
Stamps.com / STMP 9.19 145 100 17x 15x na na 12/31/10 na 2.0x - Bares, RenTech
Potash Corp. / POT 111.60 33,031 36,687 10x na na na 12/31/09 na 5.8x 0.4% Cap World, Pabrai
Seabridge Gold / SA 24.82 933 919 nm na na na 12/31/09 na 9.9x - Jennison, Royce
Silicon Storage / SSTI 2.84 272 149 nm na na na 12/31/10 na 1.1x - Miller, RenTech, Riley
Teck Cominco / TCK 35.88 21,124 28,050 30x na na na 12/31/09 na 1.8x - Pabrai
Tandy Leather / TLF 3.70 38 32 15x na na na 12/31/09 na 1.2x - Bares
Alliance One / AOI 5.04 449 1,450 3x 6x na na 3/31/10 na 1.3x - Baupost, RenTech
VistaPrint / VPRT 54.91 2,384 2,231 44x na na na 6/30/10 na 7.0x - Alydar, Lone Pine
Fairfax Financial / FRFHF 355.54 7,501 7,468 4x na na na 12/31/10 na 1.0x 2.8% Centaur, Markel, Pabrai
Blockbuster / BBI 0.38 74 1,041 nm nm nm nm 12/31/09 13% nm - Icahn, Prentice, Third Point
CapitalSource / CSE 5.01 1,619 nm nm nm nm 13x 12/31/09 11% 0.7x 0.8% Baupost, Farallon, Pabrai
Terex / TEX 18.78 2,030 3,000 26x nm nm 16x 12/31/09 6% 1.6x - Eton Park, Pabrai
USG / USG 13.21 1,312 2,584 nm nm nm >99x 12/31/10 na 1.4x - Berkshire, Fairfax, T Rowe
Osteotech / OSTE 3.40 61 64 28x nm nm 68x 12/31/09 na 0.8x - Heartland, RenTech
Level 3 Comms / LVLT 1.38 2,263 7,991 nm nm nm nm 12/31/10 -2% nm - Fairfax, Southeastern
Theravance / THRX 9.70 617 634 nm nm nm nm 12/31/10 na nm - Baupost, Iridian, Litespeed
RSC Holdings / RRR 6.83 706 2,935 6x nm nm 17x 12/31/09 12% nm - Fairholme, GS, Jennison
Enzon Pharma / ENZN 9.13 415 555 nm nm nm nm 12/31/09 na 461.1x - Baupost, Icahn, RenTech
Seahawk Drilling / HAWK 21.82 254 248 nm nm nm nm 12/31/09 na 0.5x - Chilton, MHR, Pennant
Hyatt Hotels / H 29.34 4,930 4,574 67x nm nm >99x 12/31/09 9% 1.1x - Pershing Square, Singapore
*
LTGR = Analysts consensus estimate of long-term EPS growth.

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 133 of 144
Latest Quarterly EPS Surprises (sorted by magnitude of EPS surprise)

Recent Market Date of Latest EPS Surprise EPS (Actual) EPS (Estimated) FY
Price Value Latest Date EPS EPS % 2 Yrs Last This Next In End
Company / Ticker ($) ($mn) Quarter (Act.) (Est.) Diff. Ago FY FY FY 2 Yrs Date
Steak n Shake / SNS 345.00 496 12/31 2/1/10 3.82 0.93 >99% (16.27) 4.20 15.82 18.33 na 9/30/10
Winthrop Realty / FUR 11.69 186 9/30 11/5/09 0.90 0.06 >99% 0.11 (4.72) (4.92) 0.49 0.55 12/31/09
MVC Capital / MVC 11.45 278 10/31 12/22/09 1.13 0.05 >99% 2.63 0.59 0.46 0.41 na 10/31/10
Enzon Pharma / ENZN 9.13 415 9/30 11/3/09 0.00 (0.10) nm 1.29 (0.06) (0.14) (0.05) (0.21) 12/31/09
Dillard's / DDS 16.42 1,212 10/31 11/17/09 (0.03) (0.51) nm 0.68 (3.25) 0.80 0.74 2.01 1/31/10
DineEquity / DIN 27.80 489 9/30 10/27/09 0.55 0.30 83% (0.13) (10.09) 2.20 1.90 1.82 12/31/09
Seahawk Drilling / HAWK 21.82 254 9/30 11/12/09 (0.58) (1.65) nm 0.00 0.00 (2.76) (5.06) (1.66) 12/31/09
HSN / HSNI 19.57 1,104 9/30 11/12/09 0.29 0.18 61% 1.86 (42.48) 1.04 1.16 1.51 12/31/09
tw telecom / TWTC 15.04 2,258 12/31 2/8/10 0.07 0.05 40% (0.05) 0.18 0.33 0.52 0.75 12/31/10
Fidelity National / FNF 13.80 3,180 12/31 2/3/10 0.30 0.22 36% (0.80) 0.98 1.01 1.26 1.60 12/31/10
Redwood Trust / RWT 13.57 1,054 9/30 11/4/09 0.35 0.27 30% (39.70) (13.46) 0.30 1.78 2.85 12/31/09
Stratasys / SSYS 25.65 520 9/30 10/29/09 0.09 0.07 29% 0.66 0.65 0.24 0.49 0.72 12/31/09
Stamps.com / STMP 9.19 145 12/31 2/11/10 0.18 0.14 29% 0.50 0.53 0.60 na na 12/31/10
Cardinal Health / CAH 33.38 12,066 12/31 1/28/10 0.57 0.46 24% 3.56 3.16 2.18 2.39 2.63 6/30/10
ITC Holdings / ITC 52.70 2,675 9/30 10/28/09 0.74 0.60 23% 1.68 2.19 2.56 2.68 3.35 12/31/09
Winmark / WINA 20.70 108 9/30 10/14/09 0.33 0.27 22% 0.54 0.21 1.02 1.18 1.32 12/31/09
Chipotle / CMG 104.87 3,324 12/31 2/11/10 0.99 0.81 22% 2.36 3.95 4.20 4.89 na 12/31/10
Energizer Holdings / ENR 54.79 3,826 12/31 1/26/10 2.21 1.84 20% 5.59 4.72 5.24 5.79 6.41 9/30/10
Zenith National / ZNT 28.14 1,066 12/31 1/28/10 0.12 0.10 20% 2.55 0.91 0.43 0.83 1.20 12/31/10
AllianceBernstein / AB 26.53 2,689 12/31 2/11/10 0.62 0.53 17% 2.79 1.80 2.05 2.32 na 12/31/10
Kraft Foods / KFT 29.09 42,932 9/30 11/3/09 0.55 0.48 15% 1.48 1.22 2.01 2.12 2.33 12/31/09
Biogen Idec / BIIB 55.21 14,885 12/31 2/9/10 1.20 1.05 14% 2.65 3.35 4.58 4.82 5.09 12/31/10
Home Depot / HD 29.00 49,312 10/31 11/17/09 0.41 0.36 14% 2.27 1.37 1.56 1.71 2.09 1/31/10
Take-Two / TTWO 9.65 803 10/31 12/17/09 0.09 0.08 13% 1.28 (1.80) (0.54) 1.33 0.59 10/31/10
Contango Oil & Gas / MCF 52.15 827 12/31 2/9/10 1.18 1.06 11% 4.82 3.35 4.20 5.76 8.08 6/30/10
EMC / EMC 17.12 35,138 12/31 1/26/10 0.33 0.30 10% 0.61 0.55 1.14 1.30 1.45 12/31/10
General Electric / GE 15.55 165,569 12/31 1/22/10 0.28 0.26 8% 1.78 1.03 0.99 1.20 1.48 12/31/10
Chesapeake Energy / CHK 24.96 16,167 9/30 11/2/09 0.70 0.65 8% 2.62 1.14 2.47 2.55 2.79 12/31/09
AutoNation / AN 17.72 3,043 12/31 2/11/10 0.29 0.27 7% (6.82) 1.32 1.38 1.59 1.45 12/31/10
Exxon Mobil / XOM 64.80 306,310 12/31 2/1/10 1.27 1.19 7% 8.69 3.98 5.77 7.33 8.88 12/31/10
Weight Watchers / WTW 28.92 2,228 9/30 11/10/09 0.68 0.64 6% 2.48 2.60 2.62 2.80 2.89 12/31/09
Paychex / PAYX 29.53 10,672 11/30 12/16/09 0.35 0.33 6% 1.56 1.48 1.33 1.43 1.55 5/31/10
Corrections Corp. / CXW 19.57 2,269 12/31 2/9/10 0.36 0.34 6% 1.19 1.33 1.23 1.31 1.68 12/31/10
Fair Isaac / FICO 21.06 979 12/31 1/27/10 0.37 0.35 6% 1.64 1.34 1.48 1.58 1.75 9/30/10
Johnson & Johnson / JNJ 62.72 173,051 12/31 1/26/10 1.02 0.97 5% 4.57 4.40 4.93 5.36 5.85 12/31/10
Yum! Brands / YUM 33.36 15,646 12/31 2/3/10 0.50 0.48 4% 1.96 2.22 2.40 2.69 3.06 12/31/10
Northrop Grumman / NOC 58.89 17,830 12/31 2/4/10 1.31 1.26 4% (4.12) 4.87 5.83 6.70 7.18 12/31/10
Wal-Mart / WMT 52.90 201,558 10/31 11/12/09 0.84 0.81 4% 3.16 3.35 3.61 3.97 4.38 1/31/10
Automatic Data / ADP 40.59 20,491 12/31 2/2/10 0.60 0.58 3% 2.20 2.63 2.40 2.53 2.74 6/30/10
Accenture / ACN 40.49 28,903 11/30 12/17/09 0.67 0.65 3% 2.65 2.44 2.73 3.05 3.50 8/31/10
CareFusion / CFN 25.17 5,572 12/31 2/9/10 0.39 0.38 3% 1.48 1.33 1.47 1.67 1.88 6/30/10
Walgreen / WAG 33.49 32,994 11/30 12/21/09 0.49 0.48 2% 2.17 2.02 2.32 2.71 3.22 8/31/10
McDonald's / MCD 63.59 68,626 12/31 1/22/10 1.03 1.02 1% 3.76 4.11 4.43 4.82 5.25 12/31/10
Lab Corp. of America / LH 71.76 7,621 12/31 2/11/10 1.16 1.15 1% 4.15 4.98 5.43 6.00 na 12/31/10
Strayer Education / STRA 206.26 2,890 12/31 2/11/10 2.32 2.30 1% 4.47 5.67 9.51 11.63 14.06 12/31/10
Boston Scientific / BSX 7.39 11,165 12/31 2/10/10 0.13 0.13 0% (1.36) (0.68) 0.56 0.68 0.82 12/31/10
Republic Services / RSG 26.03 9,912 12/31 2/11/10 0.33 0.33 0% 0.37 1.30 1.67 2.01 2.60 12/31/10
Patterson Companies / PDCO 28.76 3,522 10/31 11/19/09 0.41 0.41 0% 1.69 1.69 1.76 1.94 2.11 4/30/10
ViaSat / VSAT 29.05 1,055 12/31 2/8/10 0.39 0.39 0% 1.04 1.20 1.56 1.93 2.15 3/31/10
Interactive Intell. / ININ 17.21 297 12/31 1/28/10 0.27 0.27 0% 0.23 0.47 1.11 1.14 na 12/31/10

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Latest Quarterly EPS Surprises (sorted by magnitude of EPS surprise) (continued)

Recent Market Date of Latest EPS Surprise EPS (Actual) EPS (Estimated) FY
Price Value Latest Date EPS EPS % 2 Yrs Last This Next In End
Company / Ticker ($) ($mn) Quarter (Act.) (Est.) Diff. Ago FY FY FY 2 Yrs Date
Brown & Brown / BRO 17.70 2,514 9/30 10/19/09 0.29 0.29 0% 1.35 1.17 1.14 1.16 1.25 12/31/09
Citigroup / C 3.18 90,577 12/31 1/19/10 (0.33) (0.33) nm (6.35) (0.76) 0.04 0.34 0.50 12/31/10
Overstock.com / OSTK 11.80 270 9/30 11/3/09 (0.03) (0.03) nm (1.86) (0.55) 0.24 0.48 0.74 12/31/09
RSC Holdings / RRR 6.83 706 9/30 10/29/09 (0.13) (0.13) nm 1.24 1.18 (0.63) (0.20) 0.41 12/31/09
International Coal / ICO 3.88 695 12/31 1/28/10 0.00 0.00 nm (0.17) 0.14 0.20 0.41 1.23 12/31/10
Coca-Cola Company / KO 53.98 124,316 12/31 2/9/10 0.66 0.67 -1% 2.49 2.93 3.42 3.74 4.06 12/31/10
DIRECTV / DTV 30.69 29,366 9/30 11/5/09 0.37 0.39 -5% 1.19 1.36 1.39 2.22 2.82 12/31/09
TransDigm / TDG 48.03 2,355 12/31 2/10/10 0.67 0.71 -6% 2.56 3.10 3.08 3.38 3.69 9/30/10
Theravance / THRX 9.70 617 12/31 2/11/10 (0.35) (0.33) nm (1.53) (1.35) (1.14) (1.14) (0.63) 12/31/10
Molson Coors / TAP 38.90 7,198 12/31 2/9/10 1.02 1.10 -7% 2.11 3.92 3.55 3.78 4.12 12/31/10
Level 3 Comms / LVLT 1.38 2,263 12/31 2/10/10 (0.11) (0.10) nm (0.73) (0.19) (0.40) (0.34) (0.30) 12/31/10
SandRidge Energy / SD 8.47 1,554 9/30 11/5/09 0.14 0.16 -13% 0.09 (9.37) 0.85 0.87 0.90 12/31/09
Dell / DELL 13.84 27,080 10/31 11/19/09 0.23 0.28 -18% 1.31 1.25 1.03 1.25 1.47 1/31/10
Hallmark Financial / HALL 7.63 154 9/30 11/12/09 0.18 0.25 -28% 1.34 0.62 0.91 0.88 0.95 12/31/09
The Knot / KNOT 9.74 329 9/30 11/5/09 0.02 0.03 -33% 0.36 0.13 0.03 0.08 0.13 12/31/09
BreitBurn Energy / BBEP 15.22 803 9/30 11/6/09 0.12 0.19 -37% (1.83) 6.28 0.81 1.46 1.32 12/31/09
Investors Title / ITIC 35.41 81 12/31 10/30/09 0.42 0.73 -42% 3.35 (0.50) 2.31 1.90 na 12/31/09
Horsehead / ZINC 10.47 454 9/30 11/5/09 (0.10) (0.07) nm 2.85 1.12 (0.72) 0.57 1.10 12/31/09
Texas Industries / TXI 34.56 959 11/30 1/7/10 (0.21) (0.14) nm 3.15 (0.64) (0.89) 0.02 1.17 5/31/10
DDi Corp. / DDIC 4.33 86 9/30 10/28/09 0.01 0.02 -50% 0.03 (1.60) 0.08 0.09 0.16 12/31/09
Alleghany / Y 263.36 2,341 9/30 11/5/09 1.56 3.50 -55% 30.24 2.75 10.70 17.60 na 12/31/09
Audiovox / VOXX 6.86 157 2/28 1/11/10 0.11 0.26 -58% 0.29 (3.11) 0.16 0.35 na 2/28/10
Air Transport / ATSG 2.35 149 12/31 11/12/09 0.05 0.13 -62% 0.33 (0.90) 0.55 0.59 na 12/31/09
Republic Airways / RJET 5.31 183 9/30 11/4/09 0.09 0.29 -69% 2.02 2.42 0.99 0.75 2.74 12/31/09
Multimedia Games / MGAM 4.91 134 12/31 2/9/10 (0.15) (0.08) nm 0.01 (1.67) (0.39) 0.12 na 9/30/10
BIDZ.com / BIDZ 1.94 43 9/30 11/9/09 0.00 0.01 <-99% 0.69 0.57 0.11 0.19 na 12/31/09
USG / USG 13.21 1,312 12/31 1/27/10 (1.17) (0.53) nm (4.67) (7.93) (2.84) (1.68) 0.12 12/31/10
Terex / TEX 18.78 2,030 9/30 10/21/09 (0.77) (0.34) nm 5.85 0.72 (2.16) (0.28) 1.18 12/31/09
ATP Oil & Gas / ATPG 16.38 829 9/30 11/5/09 (0.20) (0.08) nm 1.55 3.39 (0.32) 1.39 5.27 12/31/09
CapitalSource / CSE 5.01 1,619 9/30 11/2/09 (0.87) (0.26) nm 0.91 (0.89) (2.34) (0.22) 0.40 12/31/09
Blockbuster / BBI 0.38 74 9/30 11/12/09 (0.60) (0.11) nm (0.45) (2.01) (0.68) (0.25) (0.60) 12/31/09
Osteotech / OSTE 3.40 61 9/30 11/5/09 (0.11) (0.02) nm 0.15 0.12 (0.22) (0.04) 0.05 12/31/09
International Assets / IAAC 15.28 268 9/30 12/14/09 (0.20) 0.37 <-99% 2.94 1.05 1.04 0.53 0.50 9/30/10
Monsanto / MON 75.82 41,373 11/30 1/6/10 (0.02) 0.00 nm 3.59 3.78 3.28 4.44 5.52 8/31/10
Hyatt Hotels / H 29.34 4,930 9/30 11/14/09 0.05 na nm 0.98 0.44 (0.22) (0.01) 0.24 12/31/09
CIT Group / CIT 32.25 6,450 9/30 na na na nm 3.93 (2.69) (11.26) 3.59 2.20 12/31/09
Alliance One / AOI 5.04 449 12/31 na na na nm 0.10 1.48 0.90 na na 3/31/10
Cresud / CRESY 12.72 634 9/30 na na na nm 0.15 0.57 0.59 0.48 0.59 6/30/10
Intelligent Systems / INS 1.09 10 9/30 na na na nm (0.66) (0.71) na na na 12/31/09
Leucadia National / LUK 21.82 5,305 9/30 na na na nm 2.09 (11.19) na na na 12/31/09
Lions Gate / LGF 5.23 616 12/31 na na na nm (0.62) (1.40) na na na 3/31/10
Gastar Exploration / GST 4.56 228 21/31 na na na nm (0.75) (0.13) na na na 12/31/10
Potash Corp. / POT 111.60 33,031 9/30 na na na nm 3.27 10.70 na na na 12/31/09
Seabridge Gold / SA 24.82 933 9/30 na na na nm (0.40) (0.02) na na na 12/31/09
Silicon Storage / SSTI 2.84 272 12/31 na na na nm (0.40) (0.11) na na na 12/31/10
Teck Cominco / TCK 35.88 21,124 9/30 na na na nm 3.66 1.21 na na na 12/31/09
Tandy Leather / TLF 3.70 38 9/30 na na na nm 0.28 0.24 na na na 12/31/09
VistaPrint / VPRT 54.91 2,384 9/30 na na na nm 0.87 1.25 na na na 6/30/10
Fairfax Financial / FRFHF 355.54 7,501 12/31 na na na nm 58.54 80.71 na na na 12/31/10
Vodafone / VOD 21.91 115,283 12/31 na na na nm 1.95 0.91 2.38 2.48 2.62 3/31/10

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 135 of 144
Revenue and EPS Growth (sorted by estimated EPS growth for next fiscal year)

Revenue Growth EPS Growth P/E (E) Net Price/


5-Year Last FY LTM Last FY This FY Next FY LT This Next Debt/ Tang. Div. Insider
Company / Ticker CAGR (Actual) (Est.) (Est.) (Est.) FY FY Equity Book Yield Own.
Redwood Trust / RWT 11% -35% -40% nm nm >99% 5% 45x 8x >99% 1.2x 7.4% 2%
Stratasys / SSYS 20% 11% -15% -2% -63% >99% 16% >99x 52x nm 4.4x - 7%
Citigroup / C 4% -28% -28% nm nm >99% -8% 80x 9x nm 0.8x - 1%
Overstock.com / OSTK 28% 9% -7% nm nm >99% 25% 49x 25x nm nm - 45%
International Coal / ICO 52% 3% 3% nm 43% >99% na 19x 9x 48% 1.1x - 27%
The Knot / KNOT 23% 5% 2% -64% -77% >99% 20% >99x >99x nm 2.3x - 15%
Audiovox / VOXX 1% 2% -17% nm nm >99% na 43x 20x nm 0.6x - 19%
Zenith National / ZNT -11% -14% -14% -64% -53% 93% 2% 65x 34x 4% 1.0x 7.1% 12%
BreitBurn Energy / BBEP 80% >99% 65% nm -87% 80% na 19x 10x 50% 0.6x - 42%
BIDZ.com / BIDZ 34% 11% -50% -17% -81% 73% 30% 18x 10x 4% 1.3x - 52%
Alleghany / Y 9% -19% -20% -91% >99% 64% na 25x 15x nm 0.9x - 12%
DIRECTV / DTV 16% 14% 9% 14% 2% 60% 21% 22x 14x 95% nm - 54%
tw telecom / TWTC 13% 5% 5% nm 83% 58% 25% 46x 29x >99% 3.1x - 5%
Contango Oil & Gas / MCF >99% 64% -26% -30% 25% 37% na 12x 9x nm 2.2x - 21%
Monsanto / MON 17% 3% -10% 5% -13% 35% 15% 23x 17x 15% 7.3x 1.4% 0%
Exxon Mobil / XOM 1% -35% -35% -54% 45% 27% 14% 11x 9x nm 2.9x 2.6% 1%
Fidelity National / FNF -7% 37% 37% nm 3% 25% 12% 14x 11x 18% 3.0x 4.3% 5%
ViaSat / VSAT 18% 9% 5% 15% 30% 24% 13% 19x 15x 54% 2.3x - 12%
Strayer Education / STRA 22% 25% 29% 27% 68% 22% 21% 22x 18x nm 16.5x 1.5% 2%
Boston Scientific / BSX 8% 2% 2% nm nm 21% 12% 13x 11x 41% nm - 4%
Dell / DELL 8% 0% -19% -5% -18% 21% 11% 13x 11x nm 10.1x - 14%
General Electric / GE 3% -14% -14% -42% -4% 21% 9% 16x 13x >99% 4.2x 2.6% 1%
Republic Services / RSG 25% >99% >99% >99% 28% 20% 16% 16x 13x 95% nm 2.9% 6%
Walgreen / WAG 11% 7% 8% -7% 15% 17% 14% 14x 12x nm 2.5x 1.6% 1%
Chipotle / CMG 26% 14% 14% 67% 6% 16% 20% 25x 21x nm 4.9x - 3%
Steak n Shake / SNS 3% 3% 6% nm >99% 16% na 22x 19x 27% 1.8x - 8%
Winmark / WINA 3% 13% 5% -61% >99% 16% na 20x 18x 10% 6.6x - 31%
AutoNation / AN -10% -20% -20% nm 5% 15% 14% 13x 11x 39% 3.0x - 45%
Northrop Grumman / NOC 3% 4% 0% nm 20% 15% 11% 10x 9x 8% nm 2.9% 1%
EMC / EMC 11% -6% -6% -10% >99% 14% 14% 15x 13x nm 6.8x - 1%
CareFusion / CFN nm -2% 10% -10% 11% 14% 11% 17x 15x 5% 6.5x - 19%
AllianceBernstein / AB -3% -31% -31% -35% 14% 13% 9% 13x 11x 0% 1.4x 10.1% 3%
DDi Corp. / DDIC 4% 5% -18% nm nm 13% na 54x 48x nm 1.3x - 9%
Yum! Brands / YUM 4% -4% -4% 13% 8% 12% 12% 14x 12x >99% nm 2.5% 1%
Accenture / ACN 9% -8% -13% -8% 12% 12% 14% 15x 13x nm 14.7x - 0%
HSN / HSNI nm -3% -8% nm nm 12% na 19x 17x 46% 27.9x - 34%
Lab Corp. of America / LH 9% 4% 4% 20% 9% 10% 12% 13x 12x 59% nm - 0%
Energizer Holdings / ENR 7% -8% -1% -16% 11% 10% 10% 10x 9x >99% nm - 7%
Patterson Companies / PDCO 9% 3% 5% 0% 4% 10% 14% 16x 15x 27% 10.9x - 24%
Wal-Mart / WMT 9% 7% 0% 6% 8% 10% 12% 15x 13x 61% 3.9x 2.1% 45%
TransDigm / TDG 20% 7% 5% 21% -1% 10% 13% 16x 14x >99% nm - 0%
Cardinal Health / CAH 9% 9% 9% -11% -31% 10% 12% 15x 14x 7% 4.1x 2.1% 0%
Home Depot / HD 2% -8% -11% -40% 14% 10% 11% 19x 17x 40% 2.7x 3.1% 1%
Coca-Cola Company / KO 7% -3% -3% 18% 17% 9% 9% 16x 14x 11% 10.4x 3.0% 5%
McDonald's / MCD 4% -3% -3% 9% 8% 9% 9% 14x 13x 67% 6.4x 3.5% 0%
Johnson & Johnson / JNJ 6% -3% -3% -4% 12% 9% 7% 13x 12x nm 9.2x 3.1% 1%
Paychex / PAYX 10% 1% -4% -5% -10% 8% 12% 22x 21x nm 11.9x 4.2% 11%
Air Transport / ATSG 7% 37% 0% nm nm 7% na 4x 4x >99% 1.9x - 7%
Weight Watchers / WTW 10% 5% -7% 5% 1% 7% na 11x 10x nm nm 2.4% 56%
Fair Isaac / FICO -2% -15% -14% -18% 10% 7% 8% 14x 13x 40% nm 0.4% 0%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 136 of 144
Revenue and EPS Growth (sorted by estimated EPS growth for next FY; if unavailable, then by LTM revenue growth) (continued)

Revenue Growth EPS Growth P/E (E) Net Price/


5-Year Last FY LTM Last FY This FY Next FY LT This Next Debt/ Tang. Div. Insider
Company / Ticker CAGR (Actual) (Est.) (Est.) (Est.) FY FY Equity Book Yield Own.
Corrections Corp. / CXW 8% 5% 5% 12% -8% 7% 12% 16x 15x 76% 1.6x - 4%
Molson Coors / TAP -7% -36% -37% 86% -9% 6% 12% 11x 10x 14% 6.7x 2.5% 15%
Kraft Foods / KFT 7% 17% -3% -18% 65% 5% 6% 14x 14x 71% nm 4.0% 1%
Automatic Data / ADP 4% 1% -3% 20% -9% 5% 11% 17x 16x nm 7.4x 3.4% 0%
Biogen Idec / BIIB 15% 7% 7% 26% 37% 5% 8% 12x 11x nm 4.6x - 1%
ITC Holdings / ITC 43% 45% 7% 30% 17% 5% 17% 21x 20x >99% nm 2.4% 1%
Vodafone / VOD 4% 16% -32% -53% >99% 4% 5% 9x 9x 41% 7.4x 3.9% 0%
Chesapeake Energy / CHK 47% 49% -21% -56% >99% 3% 6% 10x 10x >99% 1.4x 1.2% 0%
Interactive Intell. / ININ 19% 8% 8% >99% >99% 3% 21% 16x 15x nm 4.4x - 33%
SandRidge Energy / SD 50% 74% -48% nm nm 2% 10% 10x 10x nm nm - 20%
Brown & Brown / BRO 12% 2% 2% -13% -3% 2% 10% 16x 15x 6% nm 1.8% 18%
Hallmark Financial / HALL 31% -2% -2% -54% 47% -3% 15% 8x 9x nm 1.1x - 11%
Dillard's / DDS -2% -5% -10% nm nm -8% 6% 21x 22x 40% 0.5x 1.0% 30%
MVC Capital / MVC 46% -13% -13% -78% -22% -11% 13% 25x 28x 14% 0.7x 4.2% 5%
DineEquity / DIN 32% >99% -4% nm nm -14% na 13x 15x >99% nm - 4%
Investors Title / ITIC -5% -16% -12% nm nm -18% 4% 15x 19x nm 0.8x 0.8% 24%
Cresud / CRESY 83% >99% >99% >99% 4% -19% na 22x 27x 55% nm 2.5% 40%
Republic Airways / RJET 25% 14% -10% 20% -59% -24% 10% 5x 7x >99% 0.4x - 1%
International Assets / IAAC >99% >99% >99% -64% -1% -49% na 15x 29x 45% 1.2x - 31%
VistaPrint / VPRT 54% 29% 28% 44% nm nm na na na nm 7.0x - 5%
Winthrop Realty / FUR 80% -11% 15% nm nm nm na nm 24x >99% 1.2x 5.6% 18%
Teck Cominco / TCK 25% 8% 9% -67% nm nm na na na 53% 1.8x - 2%
Lions Gate / LGF 31% 8% 7% nm nm nm na na na >99% nm - 3%
Theravance / THRX 22% 6% 6% nm nm nm na nm nm nm nm - 34%
Alliance One / AOI 23% 12% 5% >99% -39% nm na 6x na >99% 1.3x - 5%
Seahawk Drilling / HAWK nm na 0% nm nm nm na nm nm nm 0.5x - 10%
Hyatt Hotels / H nm 3% 0% -55% nm nm 9% nm nm nm 1.1x - 77%
Seabridge Gold / SA nm na 0% nm nm nm na na na nm 9.9x - 33%
Tandy Leather / TLF 5% -4% -2% -14% nm nm na na na nm 1.2x - 18%
Multimedia Games / MGAM -4% -3% -4% nm nm nm 30% nm 41x 52% 1.8x - 2%
Enzon Pharma / ENZN 3% 6% -4% nm nm nm na nm nm >99% 461.1x - 1%
Stamps.com / STMP 32% -1% -5% 6% 13% nm na 15x na nm 2.0x - 27%
Fairfax Financial / FRFHF 7% 7% -9% 38% nm nm na na na nm 1.0x 2.8% 8%
Osteotech / OSTE 2% 0% -11% -20% nm nm na nm nm 4% 0.8x - 1%
Level 3 Comms / LVLT 2% 1% -11% nm nm nm -2% nm nm >99% nm - 34%
Intelligent Systems / INS 4% 3% -13% nm nm nm na na na nm 2.1x - 36%
Leucadia National / LUK 28% -6% -18% nm nm nm na na na 34% 1.3x - 23%
Blockbuster / BBI -2% -5% -18% nm nm nm 13% nm nm nm nm - 44%
Silicon Storage / SSTI -11% -20% -20% nm nm nm na na na nm 1.1x - 21%
RSC Holdings / RRR 8% 0% -21% -5% nm nm 12% nm nm >99% nm - 11%
CapitalSource / CSE 45% -13% -25% nm nm nm 11% nm nm >99% 0.7x 0.8% 24%
Gastar Exploration / GST >99% 83% -26% nm nm nm na na na nm 1.5x - 17%
Texas Industries / TXI 2% -18% -30% nm nm nm 7% nm >99x 61% 1.2x 0.9% 17%
USG / USG -6% -30% -30% nm nm nm na nm nm >99% 1.4x - 23%
CIT Group / CIT 6% -22% -34% nm nm nm na nm 9x >99% 3.3x - 0%
Take-Two / TTWO -3% -37% -37% nm nm nm 8% nm 7x 7% 4.3x - 3%
Terex / TEX 20% 8% -43% -88% nm nm 6% nm nm 53% 1.6x - 4%
Potash Corp. / POT 28% 80% -47% >99% nm nm na na na 62% 5.8x 0.4% 1%
Horsehead / ZINC 19% -18% -49% -61% nm nm na nm 18x nm 1.4x - 1%
ATP Oil & Gas / ATPG 55% 2% -58% >99% nm nm na nm 12x >99% 1.7x - 15%

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 137 of 144
Percentile Rank within Industry (sorted by LTM EBIT margin rank)

Percentile Rank within Industry P/E (E)


Rev. Growth EPS Growth LTM EBIT This Next Insider
Company / Ticker Industry 5-Yr LTM LTM Est. Margin FY FY Own. Notable Shareholders
AllianceBernstein / AB Investment Services 15 17 38 30 100 13x 11x 3% Perkins, Royce
TransDigm / TDG Aerospace and Defense 73 68 46 55 90 16x 14x 0% Pennant, Tiger
Contango Oil & Gas / MCF Oil & Gas Operations 100 21 27 na 89 12x 9x 21% Dreman, Sellers
BreitBurn Energy / BBEP Oil & Gas - Integrated 96 92 74 na 88 19x 10x 42% Acadian, Baupost
Paychex / PAYX Business Services 52 53 47 52 88 22x 21x 11% Cap World, Markel
ITC Holdings / ITC Electric Utilities 89 72 65 75 88 21x 20x 1% Bamco, Markel
Potash Corp. / POT Non-Metallic Mining 80 7 35 na 88 na na 1% Cap World, Pabrai
Strayer Education / STRA Schools 74 85 70 87 87 22x 18x 2% Lone Pine, Maverick, Weitz
McDonald's / MCD Restaurants 32 55 61 32 86 14x 13x 0% Cap World, Markel
Weight Watchers / WTW Personal Services 52 49 61 na 85 11x 10x 56% Bares, Cap World
Coca-Cola Company / KO Beverages (non-alcoholic) 43 55 65 30 84 16x 14x 5% Berkshire, Cap Re
Johnson & Johnson / JNJ Major Drugs 37 55 50 21 84 13x 12x 1% Berkshire, Fairfax
Brown & Brown / BRO Insurance (miscellaneous) 57 65 51 33 84 16x 15x 18% Royce, Ruane Cunniff
Automatic Data / ADP Business Services 32 56 63 43 82 17x 16x 0% Cap Re
MVC Capital / MVC Misc. Financial Services 90 38 27 53 82 25x 28x 5% Cannell, Centaur, Royce
Monsanto / MON Chemical Manufacturing 67 43 39 64 81 23x 17x 0% Lone Pine, Weitz
Fair Isaac / FICO Business Services 16 36 49 23 81 14x 13x 0% Southeastern
Winmark / WINA Misc. Financial Services 27 69 37 na 80 20x 18x 31% Bares, Bremer
Lab Corp. of America / LH Healthcare Facilities 48 68 65 48 80 13x 12x 0% Brave Warrior, Centaur, Harris
Republic Services / RSG Waste Management 78 96 94 73 79 16x 13x 6% Blackstone, Cap World
Yum! Brands / YUM Restaurants 31 53 63 49 76 14x 12x 1% Cap Re, Southeastern
Citigroup / C Money Center Banks 31 19 88 2 74 80x 9x 1% Fairholme, Paulson
Chipotle / CMG Restaurants 79 78 81 83 74 25x 21x 3% Cap World, Centaur
CareFusion / CFN Medical Equipment na 75 49 45 73 17x 15x 19% Greenlight, Pzena
Biogen Idec / BIIB Biotechnology & Drugs 63 71 78 25 73 12x 11x 1% Icahn, Primecap
VistaPrint / VPRT Business Services 92 85 74 na 73 na na 5% Alydar, Lone Pine
DIRECTV / DTV Broadcasting & Cable 65 73 50 87 72 22x 14x 54% Baupost, Southeastern
Accenture / ACN Business Services 48 38 46 59 72 15x 13x 0% Cap Re, Weitz
Energizer Holdings / ENR Electronic Instruments 43 59 44 34 72 10x 9x 7% Weitz
Kraft Foods / KFT Food Processing 41 55 43 19 72 14x 14x 1% Berkshire, Pershing Square
RSC Holdings / RRR Rental & Leasing 44 26 22 49 72 nm nm 11% Fairholme, GS, Jennison
Exxon Mobil / XOM Oil & Gas Operations 22 14 33 60 71 11x 9x 1% Centaur, T Rowe
Patterson Companies / PDCO Medical Equipment 50 68 51 61 71 16x 15x 24% Markel, Select Equity
Interactive Intell. / ININ Software & Programming 71 73 89 88 71 16x 15x 33% Bares, Essex
EMC / EMC Computer Storage 55 50 48 63 70 15x 13x 1% Pershing Square, Primecap
tw telecom / TWTC Communications Services 60 68 99 93 69 46x 29x 5% Cap Re, Southeastern
Zenith National / ZNT Property & Casualty 7 35 30 7 68 65x 34x 12% Artisan, Eagle, Royce
Tandy Leather / TLF Apparel/Accessories 35 58 61 na 67 na na 18% Bares
Hallmark Financial / HALL Property & Casualty 83 58 36 64 66 8x 9x 11% Bares, Newcastle
Alliance One / AOI Tobacco 76 69 67 na 66 6x na 5% Baupost, RenTech
International Coal / ICO Coal 92 66 96 na 65 19x 9x 27% Chou, Fairfax, Steelhead
BIDZ.com / BIDZ Retail (online) 85 7 28 94 65 18x 10x 52% Bares, Munder
Northrop Grumman / NOC Aerospace and Defense 29 60 97 43 65 10x 9x 1% Centaur, Fairholme, Pzena
Molson Coors / TAP Beverages (alcoholic) 10 13 85 49 65 11x 10x 15% Cap Re, Children's
Home Depot / HD Retail (home improvement) 25 41 42 43 64 19x 17x 1% Dodge & Cox, Markel
Fairfax Financial / FRFHF Property & Casualty 41 44 33 na 64 na na 8% Centaur, Markel, Pabrai
Stratasys / SSYS Computer Peripherals 71 34 28 73 63 >99x 52x 7% Bares, Riverbridge
Stamps.com / STMP Retail (online) 84 52 37 na 63 15x na 27% Bares, RenTech
Wal-Mart / WMT Retail (dep't & discount) 50 62 52 48 62 15x 13x 45% Barkshire, GMO, Markel
Walgreen / WAG Retail (drugs) 54 72 51 62 61 14x 12x 1% Bares, Cap Re

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 138 of 144
Percentile Rank within Industry (sorted by LTM EBIT margin rank) (continued)

Percentile Rank within Industry P/E (E)


Rev. Growth EPS Growth LTM EBIT This Next Insider
Company / Ticker Industry 5-Yr LTM LTM Est. Margin FY FY Own. Notable Shareholders
Dell / DELL Computer Hardware 46 29 35 43 59 13x 11x 14% Fairfax, Southeastern, Weitz
Level 3 Comms / LVLT Communications Services 24 42 66 3 59 nm nm 34% Fairfax, Southeastern
Steak n Shake / SNS Restaurants 27 71 95 na 58 22x 19x 8% Centaur, Eagle, Lion
Teck Cominco / TCK Metal Mining 78 73 37 na 56 na na 2% Pabrai
Cardinal Health / CAH Biotechnology & Drugs 49 74 32 48 55 15x 14x 0% Greenlight, Pzena
Lions Gate / LGF Motion Pictures 83 71 84 na 55 na na 3% Icahn, MHR, Third Point
Overstock.com / OSTK Retail (online) 81 49 88 91 53 49x 25x 45% Chou, Fairfax
Enzon Pharma / ENZN Biotechnology & Drugs 28 53 94 na 53 nm nm 1% Baupost, Icahn, RenTech
The Knot / KNOT Computer Services 76 65 23 87 50 >99x >99x 15% T Rowe, Weitz
Corrections Corp. / CXW Business Services 46 69 62 53 50 16x 15x 4% Kalmar, Pershing Square
Dillard's / DDS Retail (dep't & discount) 16 44 10 16 47 21x 22x 30% Acadian, Southeastern
Cresud / CRESY Crops 96 100 na na 47 22x 27x 40% Pabrai
Osteotech / OSTE Medical Equipment 25 42 11 na 46 nm nm 1% Heartland, RenTech
USG / USG Construction Materials 11 17 29 na 45 nm nm 23% Berkshire, Fairfax, T Rowe
Alleghany / Y Conglomerates 49 28 45 na 44 25x 15x 12% Centaur, Eagle, Royce
Republic Airways / RJET Airline 77 43 33 34 44 5x 7x 1% Greenlight, Kleinheinz
Texas Industries / TXI Construction Materials 25 18 19 21 43 nm >99x 17% Shamrock, Southeastern
Audiovox / VOXX Comms Equipment 23 33 na na 41 43x 20x 19% Baupost, Kahn, Smith
Intelligent Systems / INS Software & Programming 30 38 66 na 41 na na 36% Weitz
Take-Two / TTWO Software & Programming 15 13 12 28 38 nm 7x 3% Glenview, Icahn, Legg
Horsehead / ZINC Metal Mining 71 7 18 na 38 nm 18x 1% Driehaus, Pabrai, Royce
General Electric / GE Conglomerates 29 36 42 31 36 16x 13x 1% Dodge & Cox, Fairfax
Fidelity National / FNF Property & Casualty 10 88 97 47 35 14x 11x 5% Artisan, Centaur, Pennant
ViaSat / VSAT Comms Equipment 68 69 49 56 35 19x 15x 12% Baupost, Times Square
AutoNation / AN Retail (specialty) 8 28 93 61 35 13x 11x 45% Cascade, ESL, Weitz
Seahawk Drilling / HAWK Oil Well Services na na na na 35 nm nm 10% Chilton, MHR, Pennant
ATP Oil & Gas / ATPG Oil & Gas Operations 93 4 34 na 32 nm 12x 15% Aletheia, Greenlight, Soros
DDi Corp. / DDIC Electronic Instruments 30 31 na na 31 54x 48x 9% Miller, RenTech, Riley
International Assets / IAAC Investment Services 100 96 41 na 31 15x 29x 31% Bares, Leucadia, Steinberg
Air Transport / ATSG Air Courier 41 60 11 na 30 4x 4x 7% Acadian, Pabrai, RenTech
DineEquity / DIN Restaurants 83 54 42 na 30 13x 15x 4% MSD, Southeastern
Investors Title / ITIC Property & Casualty 12 40 30 10 30 15x 19x 24% Bridgeway, Markel
Blockbuster / BBI Recreational Activities 16 30 0 53 27 nm nm 44% Icahn, Prentice, Third Point
Terex / TEX Misc. Capital Goods 73 9 13 17 26 nm nm 4% Eton Park, Pabrai
Leucadia National / LUK Conglomerates 81 31 5 na 23 na na 23% Advisory, Fairholme
Vodafone / VOD Communications Services 32 16 97 12 21 9x 9x 0% Dodge & Cox, Greenlight
Hyatt Hotels / H Hotels & Motels na na na 28 21 nm nm 77% Pershing Square, Singapore
Multimedia Games / MGAM Casinos & Gaming 14 54 2 94 21 nm 41x 2% Baupost, Par, Royce
Silicon Storage / SSTI Semiconductors 7 27 69 na 21 na na 21% Miller, RenTech, Riley
Boston Scientific / BSX Medical Equipment 45 64 74 49 20 13x 11x 4% Greenlight, Paulson
Redwood Trust / RWT Real Estate Operations 55 11 87 12 19 45x 8x 2% Cap Re, NWQ, Weitz
CapitalSource / CSE Regional Banks 90 23 na 43 16 nm nm 24% Baupost, Farallon, Pabrai
HSN / HSNI Retail (online) na 46 na na 13 19x 17x 34% Acadian
Chesapeake Energy / CHK Oil & Gas Operations 91 26 5 16 12 10x 10x 0% Southeastern
CIT Group / CIT Regional Banks 38 14 70 na 12 nm 9x 0% Baupost, Icahn
Winthrop Realty / FUR Real Estate Operations 96 78 15 na 6 nm 24x 18% Fairholme, Pamet, Raffles
Gastar Exploration / GST Oil & Gas - Integrated 98 21 96 na 6 na na 17% Palo Alto, Weiss
Theravance / THRX Biotechnology & Drugs 75 70 62 na 4 nm nm 34% Baupost, Iridian, Litespeed
SandRidge Energy / SD Oil & Gas Operations 92 7 na 34 3 10x 10x 20% Ares, Fairfax, Jennison
Seabridge Gold / SA Gold & Silver na na 98 na na na na 33% Jennison, Royce

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 139 of 144
Insider Buying and Ownership (sorted by number of buys minus sells in past six months, then by insider ownership)

Recent Last Six Months Market Enter. EV / P/E (E) Price/


Price Insider Insider Insider Value Value LTM This Next Tang.
Company / Ticker ($) Buys Sales Own. ($mn) ($mn) Rev. FY FY Book Notable Shareholders
Terex / TEX 18.78 63 2 4% 2,030 3,000 .3x nm nm 1.6x Eton Park, Pabrai
Silicon Storage / SSTI 2.84 24 - 21% 272 149 .6x na na 1.1x Miller, RenTech, Riley
DDi Corp. / DDIC 4.33 20 1 9% 86 61 .3x 54x 48x 1.3x Miller, RenTech, Riley
Hallmark Financial / HALL 7.63 11 - 11% 154 129 .5x 8x 9x 1.1x Bares, Newcastle
International Assets / IAAC 15.28 11 3 31% 268 374 .0x 15x 29x 1.2x Bares, Leucadia, Steinberg
Hyatt Hotels / H 29.34 8 2 77% 4,930 4,574 1.2x nm nm 1.1x Pershing Square, Singapore
Take-Two / TTWO 9.65 9 3 3% 803 839 .9x nm 7x 4.3x Glenview, Icahn, Legg
Texas Industries / TXI 34.56 5 - 17% 959 1,446 1.7x nm >99x 1.2x Shamrock, Southeastern
Strayer Education / STRA 206.26 5 - 2% 2,890 2,796 7.1x 22x 18x 16.5x Lone Pine, Maverick, Weitz
Redwood Trust / RWT 13.57 5 - 2% 1,054 5,098 9.0x 45x 8x 1.2x Cap Re, NWQ, Weitz
AutoNation / AN 17.72 3 - 45% 3,043 3,952 .4x 13x 11x 3.0x Cascade, ESL, Weitz
SandRidge Energy / SD 8.47 7 4 20% 1,554 3,579 3.0x 10x 10x nm Ares, Fairfax, Jennison
Steak n Shake / SNS 345.00 5 2 8% 496 576 .9x 22x 19x 1.8x Centaur, Eagle, Lion
CapitalSource / CSE 5.01 2 - 24% 1,619 nm nm nm nm 0.7x Baupost, Farallon, Pabrai
MVC Capital / MVC 11.45 4 2 5% 278 340 13.0x 25x 28x 0.7x Cannell, Centaur, Royce
Osteotech / OSTE 3.40 2 - 1% 61 64 .6x nm nm 0.8x Heartland, RenTech
USG / USG 13.21 1 - 23% 1,312 2,584 .8x nm nm 1.4x Berkshire, Fairfax, T Rowe
Air Transport / ATSG 2.35 4 3 7% 149 465 .3x 4x 4x 1.9x Acadian, Pabrai, RenTech
Multimedia Games / MGAM 4.91 1 - 2% 134 189 1.5x nm 41x 1.8x Baupost, Par, Royce
General Electric / GE 15.55 1 - 1% 165,569 551,569 3.5x 16x 13x 4.2x Dodge & Cox, Fairfax
Citigroup / C 3.18 2 1 1% 90,577 nm nm 80x 9x 0.8x Fairholme, Paulson
Weight Watchers / WTW 28.92 - - 56% 2,228 3,690 2.4x 11x 10x nm Bares, Cap World
Overstock.com / OSTK 11.80 - - 45% 270 252 .3x 49x 25x nm Chou, Fairfax
BreitBurn Energy / BBEP 15.22 - - 42% 803 1,432 1.8x 19x 10x 0.6x Acadian, Baupost
Cresud / CRESY 12.72 - - 40% 634 907 2.4x 22x 27x nm Pabrai
Intelligent Systems / INS 1.09 - - 36% 10 7 .4x na na 2.1x Weitz
HSN / HSNI 19.57 - - 34% 1,104 1,243 .4x 19x 17x 27.9x Acadian
Seabridge Gold / SA 24.82 - - 33% 933 919 nm na na 9.9x Jennison, Royce
Dillard's / DDS 16.42 - - 30% 1,212 2,113 .3x 21x 22x 0.5x Acadian, Southeastern
International Coal / ICO 3.88 - - 27% 695 989 .9x 19x 9x 1.1x Chou, Fairfax, Steelhead
Investors Title / ITIC 35.41 - - 24% 81 72 1.0x 15x 19x 0.8x Bridgeway, Markel
Audiovox / VOXX 6.86 - - 19% 157 118 .2x 43x 20x 0.6x Baupost, Kahn, Smith
Winthrop Realty / FUR 11.69 - - 18% 186 412 9.0x nm 24x 1.2x Fairholme, Pamet, Raffles
Gastar Exploration / GST 4.56 - - 17% 228 166 2.6x na na 1.5x Palo Alto, Weiss
Zenith National / ZNT 28.14 - - 12% 1,066 1,110 1.9x 65x 34x 1.0x Artisan, Eagle, Royce
Paychex / PAYX 29.53 - - 11% 10,672 10,385 5.0x 22x 21x 11.9x Cap World, Markel
RSC Holdings / RRR 6.83 - - 11% 706 2,935 1.7x nm nm nm Fairholme, GS, Jennison
Fairfax Financial / FRFHF 355.54 - - 8% 7,501 7,468 .9x na na 1.0x Centaur, Markel, Pabrai
Stratasys / SSYS 25.65 - - 7% 520 468 3.8x >99x 52x 4.4x Bares, Riverbridge
VistaPrint / VPRT 54.91 - - 5% 2,384 2,231 4.3x na na 7.0x Alydar, Lone Pine
Alliance One / AOI 5.04 - - 5% 449 1,450 .6x 6x na 1.3x Baupost, RenTech
Teck Cominco / TCK 35.88 - - 2% 21,124 28,050 4.3x na na 1.8x Pabrai
Enzon Pharma / ENZN 9.13 - - 1% 415 555 2.8x nm nm 461.1x Baupost, Icahn, RenTech
Kraft Foods / KFT 29.09 - - 1% 42,932 60,661 1.4x 14x 14x nm Berkshire, Pershing Square
Potash Corp. / POT 111.60 - - 1% 33,031 36,687 3.9x na na 5.8x Cap World, Pabrai
Horsehead / ZINC 10.47 - - 1% 454 309 .7x nm 18x 1.4x Driehaus, Pabrai, Royce
Home Depot / HD 29.00 - - 1% 49,312 57,012 .8x 19x 17x 2.7x Dodge & Cox, Markel
Accenture / ACN 40.49 - - 0% 28,903 24,901 1.1x 15x 13x 14.7x Cap Re, Weitz
Vodafone / VOD 21.91 - - 0% 115,283 171,030 2.7x 9x 9x 7.4x Dodge & Cox, Greenlight
CIT Group / CIT 32.25 - - 0% 6,450 nm nm nm 9x 3.3x Baupost, Icahn

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 140 of 144
Insider Buying and Ownership (sorted by number of buys minus number of sells in past six months) (continued)

Recent Last Six Months Market Enter. EV / P/E (E) Price/


Price Insider Insider Insider Value Value LTM This Next Tang.
Company / Ticker ($) Buys Sales Own. ($mn) ($mn) Rev. FY FY Book Notable Shareholders
Interactive Intell. / ININ 17.21 3 4 33% 297 232 1.8x 16x 15x 4.4x Bares, Essex
The Knot / KNOT 9.74 - 1 15% 329 200 1.9x >99x >99x 2.3x T Rowe, Weitz
DineEquity / DIN 27.80 - 1 4% 489 2,811 1.7x 13x 15x nm MSD, Southeastern
AllianceBernstein / AB 26.53 - 1 3% 2,689 2,689 14.0x 13x 11x 1.4x Perkins, Royce
ITC Holdings / ITC 52.70 - 1 1% 2,675 5,026 8.1x 21x 20x nm Bamco, Markel
Automatic Data / ADP 40.59 - 1 0% 20,491 18,751 2.1x 17x 16x 7.4x Cap Re
Wal-Mart / WMT 52.90 4 6 45% 201,558 242,908 .6x 15x 13x 3.9x Barkshire, GMO, Markel
Theravance / THRX 9.70 - 2 34% 617 634 26.0x nm nm nm Baupost, Iridian, Litespeed
Tandy Leather / TLF 3.70 - 2 18% 38 32 .6x na na 1.2x Bares
Alleghany / Y 263.36 - 2 12% 2,341 2,278 2.3x 25x 15x 0.9x Centaur, Eagle, Royce
Republic Airways / RJET 5.31 - 2 1% 183 2,327 1.6x 5x 7x 0.4x Greenlight, Kleinheinz
Blockbuster / BBI 0.38 - 3 44% 74 1,041 .2x nm nm nm Icahn, Prentice, Third Point
Winmark / WINA 20.70 9 12 31% 108 110 3.1x 20x 18x 6.6x Bares, Bremer
Dell / DELL 13.84 - 3 14% 27,080 17,747 .3x 13x 11x 10.1x Fairfax, Southeastern, Weitz
Lions Gate / LGF 5.23 2 5 3% 616 949 .6x na na nm Icahn, MHR, Third Point
Fair Isaac / FICO 21.06 2 5 0% 979 1,212 1.9x 14x 13x nm Southeastern
Cardinal Health / CAH 33.38 - 3 0% 12,066 12,431 .1x 15x 14x 4.1x Greenlight, Pzena
DIRECTV / DTV 30.69 - 4 54% 29,366 33,236 1.7x 22x 14x nm Baupost, Southeastern
Coca-Cola Company / KO 53.98 2 6 5% 124,316 126,962 4.1x 16x 14x 10.4x Berkshire, Cap Re
Northrop Grumman / NOC 58.89 - 4 1% 17,830 18,849 .6x 10x 9x nm Centaur, Fairholme, Pzena
Energizer Holdings / ENR 54.79 - 5 7% 3,826 5,979 1.5x 10x 9x nm Weitz
Republic Services / RSG 26.03 1 6 6% 9,912 17,072 2.1x 16x 13x nm Blackstone, Cap World
Biogen Idec / BIIB 55.21 - 5 1% 14,885 14,721 3.4x 12x 11x 4.6x Icahn, Primecap
Brown & Brown / BRO 17.70 1 7 18% 2,514 2,590 2.6x 16x 15x nm Royce, Ruane Cunniff
Fidelity National / FNF 13.80 1 7 5% 3,180 3,749 .6x 14x 11x 3.0x Artisan, Centaur, Pennant
Contango Oil & Gas / MCF 52.15 - 8 21% 827 738 3.9x 12x 9x 2.2x Dreman, Sellers
Johnson & Johnson / JNJ 62.72 - 8 1% 173,051 170,314 2.8x 13x 12x 9.2x Berkshire, Fairfax
Chesapeake Energy / CHK 24.96 - 8 0% 16,167 28,186 2.4x 10x 10x 1.4x Southeastern
Lab Corp. of America / LH 71.76 - 8 0% 7,621 8,866 1.9x 13x 12x nm Brave Warrior, Centaur, Harris
tw telecom / TWTC 15.04 - 9 5% 2,258 3,095 2.6x 46x 29x 3.1x Cap Re, Southeastern
Patterson Companies / PDCO 28.76 - 10 24% 3,522 3,877 1.3x 16x 15x 10.9x Markel, Select Equity
Molson Coors / TAP 38.90 - 10 15% 7,198 8,177 2.7x 11x 10x 6.7x Cap Re, Children's
ATP Oil & Gas / ATPG 16.38 - 10 15% 829 1,965 3.2x nm 12x 1.7x Aletheia, Greenlight, Soros
Walgreen / WAG 33.49 - 10 1% 32,994 32,221 .5x 14x 12x 2.5x Bares, Cap Re
CareFusion / CFN 25.17 2 13 19% 5,572 5,782 1.6x 17x 15x 6.5x Greenlight, Pzena
Monsanto / MON 75.82 - 11 0% 41,373 42,907 3.7x 23x 17x 7.3x Lone Pine, Weitz
Level 3 Comms / LVLT 1.38 - 12 34% 2,263 7,991 1.9x nm nm nm Fairfax, Southeastern
ViaSat / VSAT 29.05 - 12 12% 1,055 1,400 2.2x 19x 15x 2.3x Baupost, Times Square
Seahawk Drilling / HAWK 21.82 - 12 10% 254 248 nm nm nm 0.5x Chilton, MHR, Pennant
Corrections Corp. / CXW 19.57 - 12 4% 2,269 3,373 2.0x 16x 15x 1.6x Kalmar, Pershing Square
Chipotle / CMG 104.87 - 12 3% 3,324 3,058 2.0x 25x 21x 4.9x Cap World, Centaur
McDonald's / MCD 63.59 - 12 0% 68,626 77,507 3.4x 14x 13x 6.4x Cap World, Markel
Leucadia National / LUK 21.82 - 15 23% 5,305 6,771 6.3x na na 1.3x Advisory, Fairholme
Yum! Brands / YUM 33.36 - 17 1% 15,646 18,559 1.7x 14x 12x nm Cap Re, Southeastern
TransDigm / TDG 48.03 - 18 0% 2,355 3,963 5.2x 16x 14x nm Pennant, Tiger
Exxon Mobil / XOM 64.80 - 21 1% 306,310 303,290 1.0x 11x 9x 2.9x Centaur, T Rowe
EMC / EMC 17.12 - 27 1% 35,138 31,543 2.2x 15x 13x 6.8x Pershing Square, Primecap
Boston Scientific / BSX 7.39 1 42 4% 11,165 16,219 2.0x 13x 11x nm Greenlight, Paulson
Stamps.com / STMP 9.19 - 53 27% 145 100 1.2x 15x na 2.0x Bares, RenTech
BIDZ.com / BIDZ 1.94 - 79 52% 43 44 .2x 18x 10x 1.3x Bares, Munder

2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 Page 141 of 144
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