the stock superstars report illustrates how to build and ...€¦ · payment process for health...

As of the close on Wednesday, November 29, the iShares DJ U.S. ETF (IYY) is up 2.3% month to date while the SSR tracking portfo-lio is up 2.7% for the month.

Portfolio Deletion AlertFor December, there is one port-

folio deletion: Alaska Air Group Inc. (Group 2: ALK).

Alaska Air Group is the holding company for Alaska Airlines and Horizon Air. Alaska Airlines pri-marily offers long-haul, full-service flights along the Pacific Coast. Horizon Air offers short-haul com-muter service in most of the same markets. Alaska Airlines is the fifth-largest U.S. airline, following its purchase of Virgin America.

Alaska Air was held in Group 2, which looks for dividend-paying

Volume 15Issue 12

stocks with low price-earnings ratios exhibiting positive historical and projected earnings growth. As of the close on Tuesday, Novem-ber 28, the stock was trading at a price-earnings ratio of 10.8 based on trailing earnings of $6.24. This is slightly above the five-year aver-age P/E of 10.1.

Since the company’s quarterly earnings announcement on October 25, Alaska Air shares have fallen nearly 15% as management high-lighted integration challenges stem-ming from its acquisition of Virgin America as well as rising pilot wages and fuel costs. Following the earnings announcement, analysts have made 10 downward revisions to their earnings estimates for the current fiscal quarter and 10 down-ward revisions to estimates for the

current fiscal year, both of which end December 31. The consensus estimate for the current quarter has fallen nearly 14% in the last month while the fiscal-year con-sensus has fallen over 2%. Ana-lysts are also now forecasting that adjusted earnings will fall nearly 6% in fiscal 2018.

Alaska Air shares have fallen 30% from their high price since being added to the SSR tracking portfolio. This triggered a portfolio deletion rule, which is why Alaska Air Group is being removed from the SSR tracking portfolio.

A portfolio addition alert was issued for Alaska Air Group on December 6, 2013. The stock has gained 85.0% since purchase through November 28, 2017, while the iShares DJ U.S. ETF (IYY) has risen 56.5% over the same period.

December Portfolio Addition: Express Scripts Holding Co. (Group 4: ESRX)

Express Scripts Holding Co. passed the Group 4 screen, which looks for strong but sustainable historical sales growth, expecta-tions of strong future earnings growth, a low dividend-adjusted PEG ratio (the ratio of trailing price-earnings ratio and the sum of the expected average annual earn-ings growth rate and the dividend yield), positive free cash flow and favorable margins compared to industry norms.

Express Scripts is the larg-est pharmacy benefit manager (PBM) in the United States. In this role, the company manages the prescription drug approval and payment process for health plans, companies and some government

December 2017

The Stock Superstars Report illustrates how to build and manage a well-diversified portfolio with controlled risk. Our goal is to create a portfolio that provides investment information and reflects an approach consistent with current research findings.

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

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

In This IssuePortfolio Alerts This Month . . . . . . . . . . . . . . . . . . . . 2Performance of SSR . . . . . . . . . . . . . . . . . . . . . . . . . . . 3SSR Stocks in the News. . . . . . . . . . . . . . . . . . . . . . . . 4Recent Earnings Announcements . . . . . . . . . . . . . . 5The Current SSR Portfolio . . . . . . . . . . . . . . . . . . . . . 6In-Depth Stock Reports A.O. Smith Corp. . . . . . . . . . . . . . . . . . . 8 Washington Federal Inc. . . . . . . . . . . . 9 j2 Global Inc. . . . . . . . . . . . . . . . . . . . . . 10 Express Scripts Holding Co. . . . . . . . 11Portfolio Corner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Next Publication Date: January 5, 2018

2 December 2017

Stock Superstars Report

3 December 2017

entities. Express Scripts’ PBM services include retail network pharmacy management, home delivery services, specialty phar-macy services, patient care contact centers, benefit plan design and consultation, drug formulary man-agement, compliance and therapy management programs. The company’s clients include health insurers, third-party administra-tors, employers, union-sponsored benefit plans, government health programs, office-based oncologists, renal dialysis clinics, ambulatory surgery centers and primary care physicians. Through its mail-order pharmacy, Accredo, and network of retail pharmacies, Express Scripts processes approximately 1.4 billion prescriptions annually for its payer clients.

Revenues are generated primari-ly through the delivery of prescrip-tion drugs through contracted re-tail pharmacies, as well as through

home delivery fulfillment pharma-cies and specialty drug pharma-cies. Revenues from the delivery of prescription drugs to members represented 98.3% of revenues in fiscal 2016. Revenues from services such as the administration of some clients’ retail pharmacy networks, medication counseling services, specialty distribution centers and sample fulfillment and sample ac-countability services comprised the remainder of total revenues.

Express Scripts, along with PBMs CVS Caremark and UnitedHealth Group’s (Group 2: UNH) OptumRx control close to 90% of all prescrip-tion volume in the U.S. according to Morningstar. This dynamic al-lows pharmacy benefit managers to pool the negotiating power of their customers and seek price conces-sions directly from drug manufac-turers or wholesalers, allowing cli-ents to achieve better pricing than if they negotiated on their own.

Express Scripts also competes against indepen-dent PBMs such as Catalyst Rx, Medco Health Solutions and MedImpact as well as other, smaller PBMs owned by retail pharmacies (Rite Aid Health

Solutions and Walgreens Health Initiatives) and those owned by managed care organizations (Aetna Inc., which is rumored to be ac-quired by CVS, Cigna Corp. and Prime Therapeutics).

Express Scripts has a current price-earnings ratio of 10.1 times trailing 12-month earnings of $6.08 per share. This ranks in the bottom 11% of all U.S.-listed companies. Based on the consen-sus earnings estimate of $7.64 per share for the fiscal-year ending December 2018, Express Scripts’ forward price-earnings ratio is 8.0. This forward price-earnings ratio compares favorably to the expected annual earnings growth rate over the next three to five years of 11.8% from six analysts. This projected growth rate is higher than 55% of U.S.-listed stocks where ana-lysts are providing an estimated earnings growth rate. The trailing price-earnings ratio of 10.1 is well

Portfolio Alerts This Month

Published monthly by the American Association of Individual Investors 625 N. Michigan Ave., Chicago, IL 60611 312-280-0170, www.aaii.com. Annual SSR subscription, $199.

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

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

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

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

Printed in the U.S.A.

December Portfolio Additions

Group Company (Ticker)Latest Price (11/28/2017)

Risk Index Description

4 Express Scripts Holding Co. (ESRX) $61.44 1.79Portfolio Deletions Since Last Monthly Issue

Date Price2 Alaska Air Group, Inc. (ALK) 12/1/2017 67.29* 85.0% 56.5% 12/6/2013

*Closing price on 11/28/2017.

pharmacy benefit management (PBM) company

Group

Portfolio Deletion Alert G/L Since

Purchase

iShares DJ U.S. (IYY) Change

Since PurchasePortfolio Addition Alert

DateCompany (Ticker)

2 December 2017 December 2017 33 December 2017


below the company’s five-year average price-earnings ratio of 24.7 as well as the industry median price-earnings ratio of 22.4 for Express Scripts’ industry, desig-nated as retail (drugs) by Thomson Reuters.

On October 24, 2017, Express Scripts reported quarterly earnings per share of $1.90, which was in line with the consensus estimate. According to Thomson Reuters, Express Scripts has reported earn-ings that have been in line with the consensus estimate for each of the last four quarters. There are 20 analysts providing estimates for the fiscal year ending December 2018. The mean estimate is $7.64 per share ($7.44 to $7.84 per share range) and $8.51 for the fiscal-year ending December 2019.

Sales at Express Scripts have ex-panded at an average annual rate of 16.8% over the last five years but are down 2.0% for the trailing 12 months. Earnings per share, fully

diluted from continuing opera-tions, have grown an average of 16.4% over the last five years and are up 43.6% year over year for the trailing 12 months. According to the company, adjusted (non-GAAP) earnings per share have risen by an average of 15.8% a year since 2010.

The company’s net profit margin is currently 3.6%, which is up from 1.4% for fiscal 2012. The company has improved its net margin for four consecutive years. The current net margin is also well above the industry median of 0.6%.

Express Scripts does not cur-rently pay a dividend.

The company’s market capital-ization is $34.8 billion, placing it in the large-cap range of domestic stocks. Express Scripts is a con-stituent of the S&P 500 index.

The ratio of total liabilities to total assets for the company stands at 68.9%. This is slightly above the median value of 65.7% for Express

Scripts’ industry.Over the last 12 months, Express

Scripts has generated free cash flow per share of $10.02. Fur-thermore, free cash flow has been positive for each of the last seven fiscal years.

Over the last 52 weeks, Express Scripts shares have fallen by 20%, underperforming the S&P 500 by 33% and underperforming three-quarters of all domestically traded stocks. Over the last 26 weeks, the stock price has increased more than 3%, underperforming the S&P 500 by nearly 6% and outperform-ing 47% of all U.S.-listed stocks.

Shares of PBMs, including Ex-press Scripts, fell sharply earlier this year on rumors that Amazon.com Inc. (AMZN) would launch its own mail-based prescrip-tion distribution service, thereby leveraging its massive logistics operations. Amazon already owns wholesale distribution licenses in over a dozen states, according to

Stock Superstars Portfolio

iShares DJ U.S. (IYY)

November 2.7% 2.3%2017 17.7% 19.0%2016 13.8% 12.0%2015 -3.1% 0.5%2014 4.4% 12.7%2013 44.0% 32.6%2012 16.2% 16.1%2011 4.3% 1.1%2010 19.5% 16.4%2009 34.3% 28.5%2008 -43.5% -37.2%2007 5.5% 5.8%2006 3.0% 15.3%2005 -0.3% 6.1%2004 14.3% 11.8%2003 40.2% 30.4%2002 0.5% -22.1%

From Inception 274.3% 225.1%Risk Index (3 Yr) 1.08 1.00

Std. Dev. (3 Yr) 10.9% 10.1%Performance as of 11/29/2017.

Performance

Ret

urn

Ris

k

$50,000

$75,000

$100,000

$125,000

$150,000

$175,000

$200,000

$225,000

$250,000

$275,000

$300,000

$325,000

$350,000

$375,000

$400,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Growth of $100,000

Stock Superstars

Performance of SSR

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

4 December 2017


5 December 2017

Seeking Alpha, but it would take several quarters to secure the necessary licenses in all 50 states. There is the chance that Amazon would disrupt the pharmacy in-dustry just as it has done with the retail industry. However, this risk is probably priced into the shares of Express Scripts. It is also worth noting that no official announce-ment has been made by Amazon.

Also, in October, Express Scripts’ largest client, Anthem, announced plans to set up its own pharmacy benefits management unit while accusing Express Scripts of over-charging it billions of dollars. Anthem also said it had secured

a five-year agreement with CVS Health Corp.—the operator of a PBM that is Express Scripts’ big-gest competitor—that goes into ef-fect after its current contract with Express Scripts expires at the end of 2019. However, per Bloomberg, Express Scripts has already been taking steps to offset the impact of Anthem’s exit. The news is “not unexpected, but is disappointing,” said Express Scripts spokesman Brian Henry.

Express Scripts is being added to Group 4 because of its strong forecasted earnings growth over the next three to five years, reason-able historical sales growth, free

cash flow generation and margins that are well above its industry norms. While the company faces headwinds from its loss of Anthem and the possible disruption from Amazon, the low valuations, in our opinion, limit the downside for Express Scripts shares.

SSR PortfolioYear to date through the close

on November 29, the SSR tracking portfolio has gained 17.7%, while the iShares DJ U.S. ETF has risen 19.0%.

Since inception, the iShares DJ U.S. fund is up 225.1%, while the SSR portfolio has gained 274.3%. •

SSR Stocks in the News

AbbVie Inc. (ABBV)(10/27/2017) AbbVie increased its quarterly divi-

dend by 11%, from $0.64 to $0.71 per share. The dividend is payable February 15, 2018. The record date is close of business on January 12, 2018. The ex-dividend date is January 11, 2018. AbbVie has increased its dividend more than 77% since the com-pany’s inception in 2013.

(10/27/2017) AbbVie, in cooperation with Neu-rocrine Biosciences Inc. (NBIX), announced that the U.S. Food and Drug Administration (FDA) has granted priority review for elagolix, an investigational, orally administered gonadotropin-releasing hormone (GNRH) antagonist being investigated for the man-agement of endometriosis with associated pain.

(10/27/2017) The European Medicines Agency (EMA) recommends further restrictions on the use of AbbVie and Biogen Inc.’s (BIIB) multiple sclerosis (MS) medication Zinbryta (daclizumab). A review of the product showed that the effect on the liver is un-predictable and a potentially fatal immune-mediated liver injury can occur with Zinbryta treatment. Going forward, Zinbryta can only be prescribed for patients with relapsing forms of MS who have not responded adequately to at least two disease-modifying therapies and cannot be treated with other disease-modifying therapies.Burlington Stores Inc. (BURL)

(10/30/2017) Burlington raised its earnings

guidance for the third quarter ended October 28, 2017. Adjusted earnings before interest, taxes, de-preciation and amortization (EBITDA) is expected to be in the range of $129 million to $131 million, and adjusted earnings per share (EPS) are expected to be in the range of $0.64 to $0.66. This compares to adjusted EBITDA and adjusted earnings for third-quarter 2016 of $109.6 million and $0.51 per share, respectively. These estimates are based on a total sales increase of approximately 7.1%, which includes a comparable store sales increase of approximately 3.1%. Cantel Medical Corp. (CMD)

(11/01/2017) Cantel declared a 21% increase to its semiannual dividend from $0.07 to $0.085 per share. The dividend is payable January 31, 2018, to share-holders of record January 17, 2018. The stock will trade ex-dividend on January 16, 2018.Cisco Systems, Inc. (CSCO)

(10/23/2017) Cisco Systems announced a defini-tive agreement to acquire BroadSoft Inc. (BSFT) for about $1.9 billion. The acquisition is expected to add to Cisco Systems’ push into software and services, as BroadSoft is a maker of cloud-based communications software.

(10/25/2017) Cisco Systems and Google (GOOGL) announced a partnership to integrate their access to the corporate computing market, dominated by competitors Amazon (AMZN) and Microsoft (MSFT).



The combination of services will allow companies to run both Cisco Systems and Google soft-ware on a hybrid cloud network of both local servers and Google servers. Google is contributing its cloud-development expertise and tools, and Cisco Systems is contributing its network-ing, security and infrastructure technologies.D.R. Horton, Inc. (DHI)

(11/09/2017) D.R. Horton declared an increase to its quar-terly dividend of 25%. The divi-dend has been increased from $0.100 per share to $0.125 per share. The dividend is payable December 15, 2017, for share-holders of record on December 1, 2017. The ex-dividend date is November 30, 2017. The last time the company increased its dividend was in October of 2016.Finisar Corporation (FNSR)

(11/07/2017) Finisar announced that it has entered its 100G shortwave wavelength division multiplexing (SWDM) optical transceiver into full production. The pluggable QSFP28 transceiver is the first mass-pro-duced module capable of transmitting 100 Gbps over a single pair of multimode fibers, thereby enabling users to upgrade from existing 10 Gbps to 100 Gbps without altering the existing fiber infrastructure. This will save customers money and also provide opera-tional savings by eliminating the need for new fiber installation and facility upgrades.j2 Global Inc. (JCOM)

(11/02/2017) J2 Global declared a dividend of $0.395 per share, an increase of 2.6% from the prior dividend of $0.385 per share. The dividend is payable December 1, 2017. JPMorgan Chase & Co. (JPM)

(10/22/2017) JPMorgan Chase & Co. is in discus-sions with United Continental Holdings Inc. (UAL) to renegotiate the terms of their co-brand card partner-ship, one of the bank’s biggest card relationships. United Continental executives said during their recent earnings call that they were considering the negotia-tions as a way to increase profitability. According to The Wall Street Journal, reworking the incentives offered as part of co-brand partners could involve the bank giving up on revenue or adding to costs.

Lam Research Corp. (LRCX)(11/14/2017) Lam Research increased its quarterly

dividend by 11.1%, from $0.45 per share to $0.50 per share. The dividend is payable January 10, 2017, for shareholders of record December 6, 2017. The ex-divi-dend date is Tuesday, December 5, 2017. Additionally, Lam Research stated it will buy back up to $2 billion in shares over the next 12 to 18 months.Pfizer Inc. (PFE)

(10/25/2017) Pfizer plans to start an auction process for its consumer health care business in November af-ter earlier reports said the company was considering a sale of the segment, which includes brand names like Advil and ChapStick lip balm. The deal is expected to garner up to $15 billion for Pfizer. Tetra Tech, Inc. (TTEK)

(10/24/2017) Tetra Tech announced that it was se-lected by the U.S. Army Corps of Engineers (USACE), Engineering Support Center, Huntsville Center, for an indefinite delivery, indefinite quantity contract valued at $950 million. Under the five-year International Remediation and Environmental Services contract, Tetra Tech will provide comprehensive environmental remediation services to the Department of Defense outside the continental United States (OCONUS). Tetra Tech will work with the Huntsville Center to safely identify, recover and remediate hazardous, toxic and radiological waste in OCONUS, with an initial focus on regions in Iraq and Afghanistan. •

Recent Earnings AnnouncementsDate Reported Expected Surprise

Stock (Ticker) Reported Earnings Earnings %Group 1Burlington Stores Inc. (BURL) Nov 21 $0.70 $0.65 7.7%Supernus Pharmaceuticals (SUPN) Nov 6 $0.29 $0.27 7.4%Group 2Cisco Systems, Inc. (CSCO) Nov 15 $0.61 $0.60 1.7%Skyworks Solutions Inc. (SWKS) Nov 6 $1.82 $1.75 4.0%Group 3j2 Global Inc. (JCOM) Nov 2 $1.34 $1.34 0.0%Kraft Heinz Co. (KHC) Nov 1 $0.83 $0.82 1.2%Tetra Tech, Inc. (TTEK) Nov 8 $0.63 $0.61 3.3%Group 4D.R. Horton, Inc. (DHI) Nov 9 $0.82 $0.81 1.2%Copart, Inc. (CPRT) Nov 21 $0.33 $0.27 22.2%Magna International Inc. (MGA) Nov 9 $1.36 $1.32 3.0%MetLife Inc. (MET) Nov 1 $1.09 $0.90 21.1%Tower Semiconductor Ltd. (TSEM) Nov 7 $0.59 $0.52 13.5%Announcements through the close of 11/29/2017. Figures are rounded .

6 December 2017


7 December 2017

Rel Strength Since Purchase – Price performance of a stock compared to the iShares Dow Jones U.S. ETF (IYY) since the stock was purchased for the SSR portfolio.Rel Strength % Rank – An indication of how a stock has performed relative to all U.S.-listed stocks over the stated time period. A rank of 75% reflects performance that surpassed 75% of all stocks over the period—or that places the stock within the top 25% of the universe.Risk Index – The 36-month annualized standard deviation of return for the stock divided by the 36-month annualized standard deviation of return for the

iShares Dow Jones U.S. ETF (IYY). The baseline value for the index is 1.00. Values above 1.00 indicate greater risk than the index. Values below 1.00 indicate less risk than the index. P/E Ratio (TTM) – The current stock price divided by diluted earnings per share from continuing operations for the trailing 12 months.EPS (TTM) – The amount of fully diluted earnings from continuing operations reported by a company for the most recent 12-month period (TTM) on a per share basis.EPS (Est Current Year) – The average consensus earnings estimate for the current fiscal year.

Rel Price- AvgSSR Strength EPS Price- to- DailyPur- Latest Since Since Risk P/E (Est to- Book- Market Dollar

chase Price One Pur- Purchase Index Ratio EPS Current Hist Est Hist Sales Value Div Cap VolumeCompany (Exchange: Ticker) Date Price Price (11/28/17) Month chase (Index) 4 Wk 52 Wk (3 Yr) (TTM) (TTM) Year) EPS EPS Sales Ratio Ratio Yield (Mil) (Mil) DescriptionGroup 1: Profitability & Relative StrengthLeMaitre Vascular Inc. (LMAT) 8/25/17 $34.07 $36.84 $33.87 5.8% -8.1% 0.86 74% 81% 3.25 43.5 $0.78 $0.85 32.6% 15.0% 9.1% 6.61 6.1 0.6% $644 $6.5 medical devices for treating vascular diseaseSupernus Pharmaceuticals (SUPN) 5/26/17 $35.75 $39.02 $39.15 -5.9% 0.3% 0.93 23% 91% 4.53 35.7 $1.10 $1.07 29.1% 22.0% 205.9% 7.24 7.9 0.0% $1,994 $24.6 drugs for central nervous system diseasesCantel Medical Corp. (CMD) 12/2/16 $81.14 $84.92 $104.42 6.5% 23.0% 1.05 76% 71% 2.48 61.1 $1.71 $2.34 17.3% na 14.8% 5.63 8.3 0.2% $4,348 $15.7 infection prevention products & servicesBurlington Stores Inc. (BURL) 6/24/16 $63.53 $63.16 $104.82 11.6% 66.0% 1.28 85% 64% 2.64 27.5 $3.81 $4.28 25.0% 18.9% 7.5% 1.21 nmf 0.0% $6,988 $121.8 discount retailer of branded apparelVisa Inc. (V) 1/29/16 $74.49 $73.53 $113.36 3.1% 54.2% 1.11 64% 81% 1.47 40.5 $2.80 $4.06 28.8% 16.6% 12.0% 14.03 9.5 0.7% $254,969 $781.7 payment processing and credit card companyA.O. Smith Corp. (AOS) 12/4/15 $39.47 $38.73 $62.26 5.2% 60.8% 1.26 72% 71% 1.85 30.6 $2.04 $2.13 25.3% 8.0% 9.4% 3.67 6.4 0.9% $10,551 $65.8 manufactures water heating equipDomino's Pizza, Inc. (DPZ) 12/6/13 $69.78 $69.21 $172.29 -5.9% 149.0% 1.59 23% 42% 2.19 32.8 $5.25 $5.76 20.3% 19.3% 8.4% 2.92 nmf 1.1% $7,633 $178.9 pizza delivery companyGroup 2: Value & Financial StrengthCarnival Corp. (CCL) 7/28/17 $66.40 $67.31 $66.51 0.2% -1.2% 0.93 48% 71% 1.85 18.1 $3.67 $3.70 9.0% 12.9% 0.7% 2.80 2.0 2.7% $47,589 $203.9 cruise ship operator and vacation providerUnum Group (UNM) 12/2/16 $42.72 $42.85 $55.23 6.1% 28.9% 1.09 75% 73% 2.33 13.0 $4.26 $4.23 33.3% na 34.3% 1.11 1.3 1.7% $12,104 $58.9 disability insurance & other products in the US & UKSkyworks Solutions Inc. (SWKS) 7/29/16 $66.02 $66.04 $107.55 -5.5% 62.9% 1.34 24% 78% 3.01 19.9 $5.41 $7.35 38.7% 15.5% 18.4% 5.40 4.9 1.2% $19,701 $188.0 produces analog semiconductorsCisco Systems, Inc. (CSCO) 1/29/16 $23.79 $23.24 $37.73 10.5% 62.4% 1.17 83% 69% 1.91 19.6 $1.93 $2.46 5.0% 9.3% 0.8% 3.92 2.9 3.1% $182,271 $723.0 delivers integrated network and internet solutionsFirst American Financial Corp. (FAF) 8/28/15 $38.82 $38.14 $55.29 1.6% 45.0% 1.09 56% 79% 1.58 21.9 $2.53 $3.50 33.4% na 7.8% 1.07 1.9 2.7% $6,096 $30.1 property title insurance & related servicesPACCAR Inc. (PCAR) 5/29/15 $63.56 $63.43 $68.53 -4.5% 8.0% 0.84 26% 55% 2.05 17.6 $3.90 $4.19 -12.3% 8.3% 0.8% 1.33 3.0 1.5% $23,523 $124.9 light, medium, and heavy-duty commercial trucksJPMorgan Chase & Co. (JPM) 2/27/15 $61.28 $61.84 $101.36 0.7% 63.9% 1.26 51% 72% 2.02 14.5 $6.97 $6.92 6.8% 8.8% -1.8% 5.79 1.5 2.2% $339,790 $1,232.1 financial service and banking institutionWashington Federal Inc. (WAFD) 8/1/14 $20.69 $20.74 $34.90 0.3% 68.3% 1.17 48% 49% 1.92 17.9 $1.95 $2.06 8.6% 10.0% -1.4% 5.58 1.5 1.7% $2,954 $13.0 bank holding companyUnitedHealth Group (UNH) 8/31/12 $54.30 $54.29 $216.14 2.8% 298.1% 1.95 62% 80% 1.32 24.6 $8.80 $9.99 8.9% 15.1% 12.7% 1.06 4.6 1.4% $205,361 $583.7 diversified healthcare and well-being companyU.S. Bancorp (USB) 4/27/12 $32.29 $32.18 $53.02 -2.5% 64.8% 0.80 32% 50% 1.42 15.8 $3.36 $3.43 5.7% 6.3% 0.8% 6.32 2.0 2.3% $85,829 $283.5 multi-state financial services holding companyPfizer Inc. (PFE) 5/1/09 $13.58 $13.93 $35.85 2.3% 157.4% 0.77 60% 56% 1.57 22.0 $1.63 $2.60 3.3% 6.0% -2.8% 4.07 3.5 3.6% $211,546 $589.8 global pharmaceutical companyGroup 3: GARP RevisionsLam Research Corp. (LRCX) 10/27/17 $208.00 $207.61 $213.14 2.2% 2.7% 1.00 59% 93% 2.57 19.5 $10.95 $14.60 47.0% 17.7% 24.6% 3.90 4.8 0.9% $34,159 $473.0 semiconductor processing systemsBank of America Corp. (BAC) 8/25/17 $23.77 $23.78 $27.64 0.9% 16.2% 1.08 52% 76% 2.77 16.0 $1.72 $1.82 182.4% 11.2% -5.1% 5.09 1.1 1.7% $277,350 $1,802.0 bank holding companyAdvanced Energy Industries (AEIS) 3/31/17 $68.56 $68.20 $83.94 -0.9% 23.1% 1.10 38% 84% 2.61 16.4 $5.12 $4.68 28.4% na -1.3% 5.33 6.1 0.0% $3,302 $35.4 power conversion & control systemsj2 Global Inc. (JCOM) 1/6/17 $84.03 $83.81 $77.05 3.9% -8.1% 0.80 67% 42% 2.21 28.5 $2.70 $5.68 5.2% 15.5% 21.5% 3.48 3.7 2.1% $3,708 $26.2 cloud computing services & digital mediaKraft Heinz Co. (KHC) 9/30/16 $89.51 $89.05 $78.98 2.1% -11.3% 0.72 59% 35% nmf 24.6 $3.21 $3.60 na 9.9% na 3.67 1.6 3.2% $96,985 $249.1 food & beverage companyGentex Corporation (GNTX) 10/30/15 $16.39 $16.57 $19.83 2.2% 19.7% 0.96 59% 51% 2.03 15.8 $1.26 $1.27 15.9% 13.0% 10.4% 3.22 2.8 2.0% $5,491 $40.1 automatic-dimming rearview mirrors & electronicsToll Brothers Inc. (TOL) 5/1/15 $35.81 $35.87 $49.47 7.5% 37.9% 1.06 78% 88% 2.26 18.5 $2.68 $3.19 56.0% 13.6% 28.5% 1.43 1.8 0.6% $7,625 $84.7 designs, builds, markets luxury homesTetra Tech, Inc. (TTEK) 1/3/14 $27.63 $28.32 $50.25 2.0% 77.5% 1.17 58% 58% 2.12 24.6 $2.04 $2.33 4.5% 13.5% 0.1% 1.39 3.0 0.8% $2,705 $14.5 natl resource, infrastructure, energy & envir svcsGroup 4: Reasonably Priced GrowthExpress Scripts Holding Co. (ESRX) 12/1/17 na na $61.44 0.2% na na 48% 24% 1.79 10.1 $6.08 $7.01 16.4% 11.8% 16.8% 0.35 2.2 0.0% $34,815 $212.6 pharmacy benefit management (PBM) companyFinisar Corporation (FNSR) 8/25/17 $24.60 $24.59 $20.68 -12.1% -15.9% 0.78 13% 15% 4.69 9.7 $2.13 $1.45 36.8% 13.5% 8.8% 1.61 1.4 0.0% $2,343 $62.1 optical subsystems & components for telecom appsTower Semiconductor Ltd. (TSEM) 4/28/17 $21.52 $21.53 $35.19 6.4% 63.4% 1.49 75% 93% 3.16 19.6 $1.79 $2.14 33.2% 17.8% 15.4% 2.52 3.9 0.0% $3,286 $23.5 independent semiconductor foundryCopart, Inc. (CPRT) 1/27/17 $28.51 $27.92 $41.79 15.2% 49.7% 1.30 88% 85% 1.74 32.6 $1.28 $1.55 19.1% na 9.4% 6.33 8.8 0.0% $9,655 $46.7 online auctions and vehicle remarketing servicesAbbVie Inc. (ABBV) 9/30/16 $63.07 $63.20 $95.42 5.7% 51.0% 1.24 73% 87% 2.21 23.1 $4.14 $5.54 10.9% 15.2% 8.0% 5.59 22.8 3.0% $152,109 $551.2 biopharmaceutical companyD.R. Horton, Inc. (DHI) 12/4/15 $32.99 $32.22 $50.11 13.3% 55.5% 1.22 87% 90% 2.04 18.3 $2.74 $3.21 -0.2% 14.4% 26.5% 1.33 2.4 1.0% $18,553 $195.6 designs, builds & sells residential homesMagna International Inc. (MGA) 7/31/15 $54.36 $55.30 $54.98 0.8% -0.6% 0.80 51% 75% 2.65 9.8 $5.61 $5.96 4.3% 11.0% 4.9% 0.54 1.8 2.0% $19,533 $71.1 supplier of automotive interior & exterior productsHelen of Troy Limited (HELE) 3/1/13 $36.56 $36.27 $90.35 -2.7% 149.1% 1.36 31% 42% 2.20 23.1 $3.92 $6.72 7.7% 8.1% 5.4% 1.58 2.4 0.0% $2,400 $13.0 household consumer productsMetLife Inc. (MET) 9/28/12 $30.89 $30.88 $52.65 8.1% 70.5% 0.86 35% 51% 2.31 115.7 $0.46 $4.41 -35.7% na -2.2% 0.96 1.0 3.0% $54,057 $249.2 insurance, annuities & employee benefit programsReinsurance Grp of America (RGA) 6/24/11 $59.90 $60.75 $161.71 8.3% 166.2% 1.20 80% 74% 1.48 13.3 $12.14 $11.10 7.9% na 5.5% 0.84 1.3 1.2% $10,280 $48.1 life & disability, annuity and financial reinsuranceData as of 11/28/2017. Source: AAII Stock Investor Pro, Thomson Reuters and I/B/E/S.

Gain/Loss

Portfolio AlertRel Strength Growth Rate

% Rank

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Rel Price- AvgSSR Strength EPS Price- to- DailyPur- Latest Since Since Risk P/E (Est to- Book- Market Dollar

chase Price One Pur- Purchase Index Ratio EPS Current Hist Est Hist Sales Value Div Cap VolumeCompany (Exchange: Ticker) Date Price Price (11/28/17) Month chase (Index) 4 Wk 52 Wk (3 Yr) (TTM) (TTM) Year) EPS EPS Sales Ratio Ratio Yield (Mil) (Mil) DescriptionGroup 1: Profitability & Relative StrengthLeMaitre Vascular Inc. (LMAT) 8/25/17 $34.07 $36.84 $33.87 5.8% -8.1% 0.86 74% 81% 3.25 43.5 $0.78 $0.85 32.6% 15.0% 9.1% 6.61 6.1 0.6% $644 $6.5 medical devices for treating vascular diseaseSupernus Pharmaceuticals (SUPN) 5/26/17 $35.75 $39.02 $39.15 -5.9% 0.3% 0.93 23% 91% 4.53 35.7 $1.10 $1.07 29.1% 22.0% 205.9% 7.24 7.9 0.0% $1,994 $24.6 drugs for central nervous system diseasesCantel Medical Corp. (CMD) 12/2/16 $81.14 $84.92 $104.42 6.5% 23.0% 1.05 76% 71% 2.48 61.1 $1.71 $2.34 17.3% na 14.8% 5.63 8.3 0.2% $4,348 $15.7 infection prevention products & servicesBurlington Stores Inc. (BURL) 6/24/16 $63.53 $63.16 $104.82 11.6% 66.0% 1.28 85% 64% 2.64 27.5 $3.81 $4.28 25.0% 18.9% 7.5% 1.21 nmf 0.0% $6,988 $121.8 discount retailer of branded apparelVisa Inc. (V) 1/29/16 $74.49 $73.53 $113.36 3.1% 54.2% 1.11 64% 81% 1.47 40.5 $2.80 $4.06 28.8% 16.6% 12.0% 14.03 9.5 0.7% $254,969 $781.7 payment processing and credit card companyA.O. Smith Corp. (AOS) 12/4/15 $39.47 $38.73 $62.26 5.2% 60.8% 1.26 72% 71% 1.85 30.6 $2.04 $2.13 25.3% 8.0% 9.4% 3.67 6.4 0.9% $10,551 $65.8 manufactures water heating equipDomino's Pizza, Inc. (DPZ) 12/6/13 $69.78 $69.21 $172.29 -5.9% 149.0% 1.59 23% 42% 2.19 32.8 $5.25 $5.76 20.3% 19.3% 8.4% 2.92 nmf 1.1% $7,633 $178.9 pizza delivery companyGroup 2: Value & Financial StrengthCarnival Corp. (CCL) 7/28/17 $66.40 $67.31 $66.51 0.2% -1.2% 0.93 48% 71% 1.85 18.1 $3.67 $3.70 9.0% 12.9% 0.7% 2.80 2.0 2.7% $47,589 $203.9 cruise ship operator and vacation providerUnum Group (UNM) 12/2/16 $42.72 $42.85 $55.23 6.1% 28.9% 1.09 75% 73% 2.33 13.0 $4.26 $4.23 33.3% na 34.3% 1.11 1.3 1.7% $12,104 $58.9 disability insurance & other products in the US & UKSkyworks Solutions Inc. (SWKS) 7/29/16 $66.02 $66.04 $107.55 -5.5% 62.9% 1.34 24% 78% 3.01 19.9 $5.41 $7.35 38.7% 15.5% 18.4% 5.40 4.9 1.2% $19,701 $188.0 produces analog semiconductorsCisco Systems, Inc. (CSCO) 1/29/16 $23.79 $23.24 $37.73 10.5% 62.4% 1.17 83% 69% 1.91 19.6 $1.93 $2.46 5.0% 9.3% 0.8% 3.92 2.9 3.1% $182,271 $723.0 delivers integrated network and internet solutionsFirst American Financial Corp. (FAF) 8/28/15 $38.82 $38.14 $55.29 1.6% 45.0% 1.09 56% 79% 1.58 21.9 $2.53 $3.50 33.4% na 7.8% 1.07 1.9 2.7% $6,096 $30.1 property title insurance & related servicesPACCAR Inc. (PCAR) 5/29/15 $63.56 $63.43 $68.53 -4.5% 8.0% 0.84 26% 55% 2.05 17.6 $3.90 $4.19 -12.3% 8.3% 0.8% 1.33 3.0 1.5% $23,523 $124.9 light, medium, and heavy-duty commercial trucksJPMorgan Chase & Co. (JPM) 2/27/15 $61.28 $61.84 $101.36 0.7% 63.9% 1.26 51% 72% 2.02 14.5 $6.97 $6.92 6.8% 8.8% -1.8% 5.79 1.5 2.2% $339,790 $1,232.1 financial service and banking institutionWashington Federal Inc. (WAFD) 8/1/14 $20.69 $20.74 $34.90 0.3% 68.3% 1.17 48% 49% 1.92 17.9 $1.95 $2.06 8.6% 10.0% -1.4% 5.58 1.5 1.7% $2,954 $13.0 bank holding companyUnitedHealth Group (UNH) 8/31/12 $54.30 $54.29 $216.14 2.8% 298.1% 1.95 62% 80% 1.32 24.6 $8.80 $9.99 8.9% 15.1% 12.7% 1.06 4.6 1.4% $205,361 $583.7 diversified healthcare and well-being companyU.S. Bancorp (USB) 4/27/12 $32.29 $32.18 $53.02 -2.5% 64.8% 0.80 32% 50% 1.42 15.8 $3.36 $3.43 5.7% 6.3% 0.8% 6.32 2.0 2.3% $85,829 $283.5 multi-state financial services holding companyPfizer Inc. (PFE) 5/1/09 $13.58 $13.93 $35.85 2.3% 157.4% 0.77 60% 56% 1.57 22.0 $1.63 $2.60 3.3% 6.0% -2.8% 4.07 3.5 3.6% $211,546 $589.8 global pharmaceutical companyGroup 3: GARP RevisionsLam Research Corp. (LRCX) 10/27/17 $208.00 $207.61 $213.14 2.2% 2.7% 1.00 59% 93% 2.57 19.5 $10.95 $14.60 47.0% 17.7% 24.6% 3.90 4.8 0.9% $34,159 $473.0 semiconductor processing systemsBank of America Corp. (BAC) 8/25/17 $23.77 $23.78 $27.64 0.9% 16.2% 1.08 52% 76% 2.77 16.0 $1.72 $1.82 182.4% 11.2% -5.1% 5.09 1.1 1.7% $277,350 $1,802.0 bank holding companyAdvanced Energy Industries (AEIS) 3/31/17 $68.56 $68.20 $83.94 -0.9% 23.1% 1.10 38% 84% 2.61 16.4 $5.12 $4.68 28.4% na -1.3% 5.33 6.1 0.0% $3,302 $35.4 power conversion & control systemsj2 Global Inc. (JCOM) 1/6/17 $84.03 $83.81 $77.05 3.9% -8.1% 0.80 67% 42% 2.21 28.5 $2.70 $5.68 5.2% 15.5% 21.5% 3.48 3.7 2.1% $3,708 $26.2 cloud computing services & digital mediaKraft Heinz Co. (KHC) 9/30/16 $89.51 $89.05 $78.98 2.1% -11.3% 0.72 59% 35% nmf 24.6 $3.21 $3.60 na 9.9% na 3.67 1.6 3.2% $96,985 $249.1 food & beverage companyGentex Corporation (GNTX) 10/30/15 $16.39 $16.57 $19.83 2.2% 19.7% 0.96 59% 51% 2.03 15.8 $1.26 $1.27 15.9% 13.0% 10.4% 3.22 2.8 2.0% $5,491 $40.1 automatic-dimming rearview mirrors & electronicsToll Brothers Inc. (TOL) 5/1/15 $35.81 $35.87 $49.47 7.5% 37.9% 1.06 78% 88% 2.26 18.5 $2.68 $3.19 56.0% 13.6% 28.5% 1.43 1.8 0.6% $7,625 $84.7 designs, builds, markets luxury homesTetra Tech, Inc. (TTEK) 1/3/14 $27.63 $28.32 $50.25 2.0% 77.5% 1.17 58% 58% 2.12 24.6 $2.04 $2.33 4.5% 13.5% 0.1% 1.39 3.0 0.8% $2,705 $14.5 natl resource, infrastructure, energy & envir svcsGroup 4: Reasonably Priced GrowthExpress Scripts Holding Co. (ESRX) 12/1/17 na na $61.44 0.2% na na 48% 24% 1.79 10.1 $6.08 $7.01 16.4% 11.8% 16.8% 0.35 2.2 0.0% $34,815 $212.6 pharmacy benefit management (PBM) companyFinisar Corporation (FNSR) 8/25/17 $24.60 $24.59 $20.68 -12.1% -15.9% 0.78 13% 15% 4.69 9.7 $2.13 $1.45 36.8% 13.5% 8.8% 1.61 1.4 0.0% $2,343 $62.1 optical subsystems & components for telecom appsTower Semiconductor Ltd. (TSEM) 4/28/17 $21.52 $21.53 $35.19 6.4% 63.4% 1.49 75% 93% 3.16 19.6 $1.79 $2.14 33.2% 17.8% 15.4% 2.52 3.9 0.0% $3,286 $23.5 independent semiconductor foundryCopart, Inc. (CPRT) 1/27/17 $28.51 $27.92 $41.79 15.2% 49.7% 1.30 88% 85% 1.74 32.6 $1.28 $1.55 19.1% na 9.4% 6.33 8.8 0.0% $9,655 $46.7 online auctions and vehicle remarketing servicesAbbVie Inc. (ABBV) 9/30/16 $63.07 $63.20 $95.42 5.7% 51.0% 1.24 73% 87% 2.21 23.1 $4.14 $5.54 10.9% 15.2% 8.0% 5.59 22.8 3.0% $152,109 $551.2 biopharmaceutical companyD.R. Horton, Inc. (DHI) 12/4/15 $32.99 $32.22 $50.11 13.3% 55.5% 1.22 87% 90% 2.04 18.3 $2.74 $3.21 -0.2% 14.4% 26.5% 1.33 2.4 1.0% $18,553 $195.6 designs, builds & sells residential homesMagna International Inc. (MGA) 7/31/15 $54.36 $55.30 $54.98 0.8% -0.6% 0.80 51% 75% 2.65 9.8 $5.61 $5.96 4.3% 11.0% 4.9% 0.54 1.8 2.0% $19,533 $71.1 supplier of automotive interior & exterior productsHelen of Troy Limited (HELE) 3/1/13 $36.56 $36.27 $90.35 -2.7% 149.1% 1.36 31% 42% 2.20 23.1 $3.92 $6.72 7.7% 8.1% 5.4% 1.58 2.4 0.0% $2,400 $13.0 household consumer productsMetLife Inc. (MET) 9/28/12 $30.89 $30.88 $52.65 8.1% 70.5% 0.86 35% 51% 2.31 115.7 $0.46 $4.41 -35.7% na -2.2% 0.96 1.0 3.0% $54,057 $249.2 insurance, annuities & employee benefit programsReinsurance Grp of America (RGA) 6/24/11 $59.90 $60.75 $161.71 8.3% 166.2% 1.20 80% 74% 1.48 13.3 $12.14 $11.10 7.9% na 5.5% 0.84 1.3 1.2% $10,280 $48.1 life & disability, annuity and financial reinsuranceData as of 11/28/2017. Source: AAII Stock Investor Pro, Thomson Reuters and I/B/E/S.

Gain/Loss

Portfolio AlertRel Strength Growth Rate

% Rank

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

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

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8 December 2017


9 December 2017

SSR Group 1: A.O. Smith Corp. (AOS) $62.26 ($62.51 - $46.44)

Group 1: Profitability & Relative StrengthAddition Alert Date: 12/4/2015Price at Alert: $39.47Primary Industry: Electronic Instru & Controls3 Yr Risk Index: 1.85Market Cap: $10,551 MilAvg Daily Dollar Volume: $65.8 Mil

Multiples Current 12/2016 12/2015 12/2014 12/2013 12/2012Price/Earnings 30.6 22.1 20.8 22.2 23.6 14.9Price/Book Value 6.4 4.7 4.0 3.3 3.0 2.0Price/Sales 3.7 2.7 2.3 1.9 1.8 1.2Price/Cash Flow 207.8 nmf nmf nmf 35.1 nmfPrice/Free Cash Flow 72.4 25.6 27.8 37.3 28.7 59.7Yield (%) 0.9 1.2 1.2 1.2 1.1 1.4Ratios Current 12/2016 12/2015 12/2014 12/2013 12/2012Gross Margin (%) 41.2 41.7 39.8 36.5 35.9 33.6Operating Margin (%) 17.0 17.2 15.9 12.2 11.0 12.1Net Margin (%) 12.2 12.2 11.2 8.8 7.9 8.2ROE (%) 22.4 22.1 20.0 15.3 13.5 13.9ROA (%) 12.0 11.8 11.0 8.5 7.3 6.9Current Ratio 2.3 2.0 2.1 2.2 2.0 2.2Payout Ratio (%) 26.2 25.7 23.9 26.1 25.0 0.0Liabilities to Assets (%) 46.3 47.6 45.1 45.1 44.4 47.6Asset Turnover 1.0 1.0 1.0 1.0 0.9 0.8Financial Statements TTM 12/2016 12/2015 12/2014 12/2013 12/2012

Sales ($M) 2,926.2 2,685.9 2,536.5 2,356.0 2,153.8 1,939.3Stock Rel Strgth Rel Strgth Gross Income ($M) 1,204.5 1,119.3 1,009.8 859.3 773.8 652.0Gain Index Rank Depreciation ($M) 68.3 65.1 63.0 59.8 59.7 54.6

4 Week 5% 1.03 72% Unusual/Extra ($M) 0.0 0.0 0.0 0.0 11.0 (3.9)13 Week 15% 1.07 71% Operating Income ($M) 496.4 462.5 402.5 286.7 236.4 233.826 Week 13% 1.04 65% Interest Expense ($M) 0.0 0.0 0.0 0.0 0.0 0.052 Week 28% 1.07 71% Pretax Income ($M) 496.4 462.5 402.5 286.7 236.4 233.8

Net Income ($M) 356.5 326.5 282.9 207.8 169.7 158.7Growth TTM 3 Year 5 Year Operating Cash Flow ($M) 333.2 446.6 351.7 263.9 279.6 143.8

Sales 11.4% 7.6% 9.4% Investing Cash Flow ($M) (165.2) (300.2) (186.1) (206.0) (8.2) (86.8)Net Income 10.2% 24.4% 1.3% Financing Cash Flow ($M) (115.4) (139.6) (161.4) (119.2) (157.6) (253.5)EPS Basic 11.5% 26.6% 2.4% Net Cash Flow ($M) 52.6 6.8 4.2 (61.3) 113.8 (196.5)EPS Dil Cont 11.4% 26.4% 25.3% EPS Basic ($) 2.06 1.87 1.59 1.15 0.92 0.86Dividends 18.7% 27.8% 26.2% EPS Diluted Cont ($) 2.04 1.85 1.58 1.14 0.91 0.87

Dividends/Share ($) 0.54 0.48 0.38 0.30 0.23 0.18Est Surprise EPS % Surp SUE Score Free Cash Flow/Share ($) 0.86 1.59 1.18 0.68 0.75 0.2210/25/2017 $0.54 1.5% 0.90 Cash ($M) 767.9 754.6 645.2 541.9 486.0 462.9

Quarterly Annual Annual Goodwill/Intangibles ($M) 828.6 799.8 1,002.9 737.3 758.3 1,112.8EPS Estimates 12/2017 12/2017 12/2018 Total Assets ($M) 3,104.6 2,891.0 2,629.2 2,515.3 2,391.5 2,278.8# of Estimates 12 13 13 Long-Term Debt ($M) 442.2 316.4 236.1 210.1 177.7 225.1Current $0.56 $2.13 $2.39 Total Liabilities ($M) 1,438.7 1,375.7 1,186.9 1,134.0 1,062.8 1,084.7Month Ago $0.56 $2.13 $2.39 Book Value/Share ($) 9.66 8.67 8.12 7.65 7.21 6.46Three Mos. Ago $0.55 $2.11 $2.36 Avg Shares Outst'g (M) 172.4 174.7 177.6 180.6 184.2 184.8Sources: AAII Stock Investor Pro, Thomson Reuters and I/B/E/S. Data as of 11/28/2017.

A.O. Smith Corp. operates its business through two segments: North America and Rest of World. The Rest of World segment primarily comprises China, Europe and India and supplies water heaters to the residential markets with a range of product offerings, including electric, gas, gas tankless, heat pump and solar units, as well as combi boilers. The North America segment serves residential and commercial end markets with a range of products, including water heaters, boilers and other. The company also markets in-home air purification products in China.

AOS passed the Group 1 screen, which looks for companies with a proven record of earnings growth that are showing strong relative price strength. AOS has a current P/E of 30.6 based on trailing 12-month EPS of $2.04. The consensus EPS estimate for fiscal-year 2017, ending December 2017, is $2.13 and is $2.39 for fiscal-2018. On October 25, 2017, AOS released an earnings report showing EPS of $0.54, 1.5% above analyst expectations. The consensus long-term estimated earnings growth rate is 8.0% from one analyst. Earnings have grown at an annual rate of 25.3% over the last five years. AOS' stock price has outpaced the S&P 500 by 7.1% over the last 52 weeks and has outperformed 71% of all U.S. stocks over the same period.

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Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016



SSR Group 2: Washington Federal Inc. (WAFD) $34.90 ($35.95 - $29.80)

Group 2: Value & Financial StrengthAddition Alert Date: 08/1/2014Price at Alert: $20.69Primary Industry: Regional Banks3 Yr Risk Index: 1.92Market Cap: $2,954 MilAvg Daily Dollar Volume: $13.0 Mil

Multiples Current 9/2017 9/2016 9/2015 9/2014 9/2013Price/Earnings 17.9 14.2 12.9 13.2 12.8 11.3Price/Book Value 1.5 1.2 1.1 1.1 1.0 0.9Price/Sales 5.6 4.5 3.9 4.0 3.8 3.3Price/Cash Flow 0.6 0.5 0.5 0.5 0.4 0.3Price/Free Cash Flow 34.6 27.4 15.8 38.5 25.3 15.0Yield (%) 1.7 2.1 2.4 2.4 2.1 2.1Ratios Current 9/2017 9/2016 9/2015 9/2014 9/2013Gross Margin (%) -- -- -- -- -- --Operating Margin (%) 79.1 79.1 79.5 80.0 78.9 73.4Net Margin (%) 31.6 31.6 30.6 30.2 29.5 29.3ROE (%) 8.6 8.7 8.3 8.2 8.0 7.9ROA (%) 1.2 1.2 1.1 1.1 1.1 1.2Current Ratio -- -- -- -- -- --Payout Ratio (%) 30.2 30.2 30.6 32.0 26.4 23.5Liabilities to Assets (%) 86.9 86.9 86.7 86.6 86.6 85.2Asset Turnover 0.0 0.0 0.0 0.0 0.0 0.0Financial Statements TTM 9/2017 9/2016 9/2015 9/2014 9/2013

Sales ($M) 548.9 548.9 536.8 530.6 533.7 516.3Stock Rel Strgth Rel Strgth Gross Income ($M) -- -- -- -- -- --Gain Index Rank Depreciation ($M) 41.7 41.7 23.0 21.2 17.3 15.8

4 Week 0% 0.98 48% Unusual/Extra ($M) 1,399.0 1,375.0 1,309.0 1,124.0 1,064.0 991.013 Week 11% 1.04 64% Operating Income ($M) 434.0 434.0 426.5 424.6 421.0 378.826 Week 9% 1.00 58% Interest Expense ($M) -- -- -- -- -- --52 Week 7% 0.90 49% Pretax Income ($M) 256.2 256.2 248.1 249.5 244.9 234.6


Sales 2.3% 0.9% (1.4%) Investing Cash Flow ($M) (544.5) (544.5) (131.1) (290.5) 781.0 (391.9)Net Income 5.8% 3.3% 4.7% Financing Cash Flow ($M) 227.5 227.5 75.7 (350.2) (376.5) (337.4)EPS Basic 8.7% 7.9% 8.6% Net Cash Flow ($M) (137.3) (137.3) 166.3 (497.8) 578.3 (547.9)EPS Dil Cont 8.9% 7.9% 8.6% EPS Basic ($) 1.95 1.95 1.80 1.68 1.56 1.45Dividends 7.3% 12.9% 13.0% EPS Diluted Cont ($) 1.95 1.95 1.79 1.67 1.55 1.45


Quarterly Annual Annual Goodwill/Intangibles ($M) 298.7 298.7 297.0 299.4 302.9 264.3EPS Estimates 12/2017 9/2018 9/2019 Total Assets ($M) 15,253.6 15,253.6 14,888.1 14,568.3 14,756.0 13,082.9# of Estimates 5 5 5 Long-Term Debt ($M) 0.0 0.0 0.0 0.0 0.0 0.0Current $0.51 $2.06 $2.24 Total Liabilities ($M) 13,247.9 13,247.9 12,912.3 12,612.6 12,782.8 11,145.2Month Ago $0.51 $2.06 $2.24 Book Value/Share ($) 22.86 22.56 21.62 20.45 19.51 18.51Three Mos. Ago $0.49 $2.04 $2.23 Avg Shares Outst'g (M) 87.7 88.9 91.4 95.6 101.2 104.7Sources: AAII Stock Investor Pro, Thomson Reuters and I/B/E/S. Data as of 11/28/2017.

Washington Federal Inc. is a U.S.-based bank holding company. Its principal subsidiary is Washington Federal, National Association, which operates 250 branches in eight western states. The company obtains its funds primarily through deposits from the general public, repayments of loans, borrowings and retained earnings. These funds are used largely to make loans to individuals and businesses, including loans for the purchase of new and existing homes, construction and land loans, commercial real estate loans, and commercial and industrial loans. Washington Federal caters to home loans, personal banking and commercial banking segments.

WAFD passed the Group 2 screen, which looks for dividend-paying stocks with a low P/E ratio exhibiting positive historical and projected earnings growth and moderate levels of liabilities. WAFD's current P/E ratio of 17.9 is based on trailing 12-month EPS of $1.95. The consensus EPS estimate for the fiscal-year ending September 2018 is $2.06 and for fiscal-2019 is $2.24. The latest quarterly EPS came in at $0.52, 7.0% above expectations. The consensus long-term estimated EPS growth rate is 10.0%. Earnings have increased, on average, by 8.6% over the last five years. Revenues have fallen 1.4% a year over the same period. WAFD's current yield is 1.7% based on an indicated dividend of $0.60 per share. Over the last 12 months, WAFD has outperformed 49% of all stocks.

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10 December 2017


11 December 2017

SSR Group 3: j2 Global Inc. (JCOM) $77.05 ($91.48 - $71.09)

Group 3: GARP RevisionsAddition Alert Date: 1/6/2017Price at Alert: $84.03Primary Industry: Software & Programming3 Yr Risk Index: 2.21Market Cap: $3,708 MilAvg Daily Dollar Volume: $26.2 Mil

Multiples Current 12/2016 12/2015 12/2014 12/2013 12/2012Price/Earnings 28.5 22.2 25.7 20.3 19.0 10.9Price/Book Value 3.7 3.6 3.8 3.0 2.8 2.2Price/Sales 3.5 3.8 4.7 4.1 3.8 3.5Price/Cash Flow 33.7 nmf nmf 11.0 nmf 16.4Price/Free Cash Flow 19.2 17.8 22.3 23.0 17.3 11.0Yield (%) 2.1 0.0 0.0 0.0 0.0 0.0Ratios Current 12/2016 12/2015 12/2014 12/2013 12/2012Gross Margin (%) 84.2 83.2 82.9 82.3 83.3 82.0Operating Margin (%) 22.6 27.7 27.7 31.1 33.7 43.7Net Margin (%) 12.4 17.2 18.2 20.3 20.2 32.2ROE (%) 13.9 16.6 15.4 15.9 16.2 20.8ROA (%) 5.8 7.8 7.5 8.5 9.8 14.5Current Ratio 2.8 0.8 2.5 4.1 3.4 4.8Payout Ratio (%) 53.7 43.2 44.0 42.1 42.1 33.1Liabilities to Assets (%) 57.5 55.7 50.1 51.9 38.8 40.2Asset Turnover 0.5 0.5 0.4 0.4 0.5 0.5Financial Statements TTM 12/2016 12/2015 12/2014 12/2013 12/2012Sales ($M) 1,053.3 874.3 720.8 599.0 520.8 371.4

Stock Rel Strgth Rel Strgth Gross Income ($M) 886.7 727.2 597.9 493.0 433.9 304.4Gain Index Rank Depreciation ($M) 152.1 122.1 93.2 63.0 39.8 22.2

4 Week 4% 1.02 67% Unusual/Extra ($M) 0.0 0.0 0.0 0.0 0.0 0.713 Week 4% 0.97 49% Operating Income ($M) 237.7 242.6 199.4 186.2 175.4 162.226 Week (9%) 0.84 29% Interest Expense ($M) 0.0 0.0 0.0 0.0 0.0 0.052 Week 1% 0.85 42% Pretax Income ($M) 175.6 211.4 156.9 155.2 142.7 154.9


Sales 27.3% 18.8% 21.5% Investing Cash Flow ($M) (451.7) (448.9) (335.7) (275.5) (167.4) (249.5)Net Income (8.2%) 12.5% 5.9% Financing Cash Flow ($M) 295.4 41.2 (67.4) 327.5 (35.7) 158.4EPS Basic (8.1%) 10.8% 5.0% Net Cash Flow ($M) 117.0 (131.6) (178.1) 225.9 (10.9) 79.3EPS Dil Cont (9.1%) 11.1% 5.2% EPS Basic ($) 2.76 3.15 2.76 2.60 2.31 2.63Dividends 12.1% 11.7% 27.4% EPS Diluted Cont ($) 2.70 3.13 2.73 2.58 2.29 2.61


Quarterly Annual Annual Goodwill/Intangibles ($M) 1,539.1 1,634.5 1,160.3 947.5 681.0 573.1EPS Estimates 12/2017 12/2017 12/2018 Total Assets ($M) 2,304.7 2,062.3 1,783.7 1,705.2 1,153.8 995.2# of Estimates 6 5 6 Long-Term Debt ($M) 999.2 601.7 592.2 593.5 245.7 245.2Current $1.81 $5.68 $6.10 Total Liabilities ($M) 1,324.1 1,147.8 893.5 885.0 447.4 400.5Month Ago $1.87 $5.75 $6.26 Book Value/Share ($) 20.60 19.18 18.69 17.53 15.51 13.08Three Mos. Ago $1.87 $5.76 $6.33 Avg Shares Outst'g (M) 47.6 47.7 47.6 46.8 45.5 45.5Sources: AAII Stock Investor Pro, Thomson Reuters and I/B/E/S. Data as of 11/28/2017.

JCOM passed the Group 3 screen, which seeks companies with upward earnings estimate revisions, a positive earnings surprise in the most recent quarter and relatively strong price action. JCOM's current P/E ratio is 28.5 based on trailing earnings of $2.70 per share. The latest quarterly EPS was $1.34, which was in line with analyst expectations. The consensus EPS estimate for fiscal-year 2017 ending in December is $5.68. The historical five-year annual EPS growth rate is 5.2% and for revenues is 21.5%. The consensus long-term estimated annual earnings growth rate is 15.5%. JCOM's current dividend yield is 2.1%. Over the past 52 weeks, JCOM has outperformed 42% of all U.S.-listed stocks.

J2 Global Inc. is a provider of internet services operating two segments: business cloud services and digital media. The business cloud services division provides cloud services to businesses of all sizes, from individuals to enterprises, and licenses its intellectual property to third parties. In addition, the business cloud services division includes its j2 Cloud Connect business, which is primarily focused on its voice and fax products. The company's digital media division specializes in the technology and gaming markets. The digital media business segment consists of the web properties and business operations of Ziff Davis. The Ziff Davis portfolio of web properties includes PCMag.com, IGN.com, Speedtest.net, AskMen.com and TechBargains.com.

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SSR Group 4: Express Scripts Holding Co. (ESRX) $61.44 ($77.50 - $55.80)

Group 4: Reasonably Priced GrowthAddition Alert Date: 12/1/2017Price at Alert: Closing price on 12/1/2017Primary Industry: Retail (Drugs)3 Yr Risk Index: 1.79Market Cap: $34,815 MilAvg Daily Dollar Volume: $212.6 Mil

Multiples Current 12/2016 12/2015 12/2014 12/2013 12/2012Price/Earnings 10.1 14.1 22.8 28.5 26.8 31.0Price/Book Value 2.2 2.9 3.2 2.8 2.3 1.8Price/Sales 0.4 0.5 0.6 0.6 0.5 0.4Price/Cash Flow 33.5 -- 41.8 -- -- --Price/Free Cash Flow 6.1 10.5 12.4 13.9 11.7 9.1Yield (%) 0.0 0.0 0.0 0.0 0.0 0.0Ratios Current 12/2016 12/2015 12/2014 12/2013 12/2012Gross Margin (%) 8.6 8.6 8.5 8.3 7.8 7.8Operating Margin (%) 5.4 5.1 4.3 3.6 3.4 3.0Net Margin (%) 3.6 3.4 2.4 2.0 1.8 1.4ROE (%) 22.7 20.3 13.2 9.6 8.2 10.2ROA (%) 7.1 6.5 4.6 3.7 3.3 3.6Current Ratio (%) 0.7 0.8 0.7 0.6 0.6 0.8Payout Ratio (%) 0.0 0.0 0.0 0.0 0.0 0.0Liabilities to Assets (%) 68.9 68.6 67.4 62.7 59.2 59.8Asset Turnover 1.9 1.9 1.9 1.9 1.9 2.5Financial Statements TTM 12/2016 12/2015 12/2014 12/2013 12/2012

Sales ($M) 99,549.1 100,287.5 101,751.8 100,887.1 104,098.8 93,714.3Gross Income ($M) 8,609.8 8,620.5 8,619.9 8,387.4 8,132.4 7,311.9

Gain Index Rank Depreciation ($M) 1,887.6 2,154.6 2,359.1 2,242.9 2,447.0 1,871.44 Week 0% 0.98 48% Unusual/Extra ($M) 0.0 0.0 516.8 1,076.7 0.0 705.413 Week 0% 0.93 39% Operating Income ($M) 5,386.3 5,087.8 4,339.3 3,602.4 3,551.7 2,793.926 Week 3% 0.94 47% Interest Expense ($M) 585.9 694.8 500.3 582.9 596.1 1,238.052 Week (20%) 0.67 24% Pretax Income ($M) 4,835.8 4,427.1 3,863.8 3,066.2 3,030.3 2,200.4

Net Income ($M) 3,624.5 3,404.4 2,476.4 2,007.6 1,844.6 1,312.9Growth TTM 3 Year 5 Year Operating Cash Flow ($M) 6,230.4 4,919.4 4,848.3 4,549.0 4,770.9 4,739.1

Sales (2.0%) (1.2%) 16.8% Investing Cash Flow ($M) (418.0) (351.9) (268.5) (411.9) (72.1) (10,391.7)Net Income 32.1% 22.7% 21.7% Financing Cash Flow ($M) (4,725.2) (4,677.8) (3,217.0) (4,289.7) (5,494.8) 2,823.6EPS Basic 43.4% 33.5% 16.3% Net Cash Flow ($M) 1,091.2 (109.1) 1,353.7 (158.8) (801.7) (2,827.0)EPS Dil Cont 43.6% 32.6% 16.4% EPS Basic ($) 6.11 5.43 3.59 2.68 2.28 1.80Dividends -- -- -- EPS Diluted Cont ($) 6.08 5.39 3.56 2.65 2.31 1.80

Dividends/Share ($) 0.00 0.00 0.00 0.00 0.00 0.00Est Surprise EPS % Surp SUE Score Free Cash Flow/Share ($) 10.02 7.27 6.55 5.42 5.29 6.1310/24/2017 $1.90 (0.1%) (0.10) Cash ($M) 3,395.9 3,077.2 3,186.3 1,832.6 1,991.4 2,793.1

Quarterly Annual Annual Goodwill/Intangibles ($M) 37,122.6 37,914.7 39,747.0 41,481.8 43,321.0 61,396.2EPS Estimates 12/2017 12/2017 12/2018 Total Assets ($M) 51,206.2 51,744.9 53,243.3 53,748.3 53,548.2 58,111.2# of Estimates 17 19 20 Long-Term Debt ($M) 13,726.7 14,846.0 13,946.3 10,966.4 12,363.0 14,980.1Current $2.06 $7.01 $7.64 Total Liabilities ($M) 35,289.7 35,508.9 35,870.5 33,694.1 31,710.8 34,726.2Month Ago $2.06 $7.00 $7.67 Book Value/Share ($) 27.84 25.90 25.21 26.73 27.01 31.98Three Mos. Ago $2.05 $6.99 $7.67 Avg Shares Outst'g (M) 571.8 626.9 689.0 750.3 808.6 731.3Sources: AAII Stock Investor Pro, Thomson Reuters and I/B/E/S. Data as of 11/28/2017.

Express Scripts Holding Co. is a pharmacy benefit management (PBM) company engaged in providing health care management and administration services to its clients, including managed care organizations, health insurers, third-party administrators, employers, union-sponsored benefit plans, workers' compensation plans and government health programs. The company's PBM segment includes its integrated PBM operations and specialty pharmacy operations. Its other business operations segment includes its subsidiary, United BioSource Corp. (UBC), and its specialty distribution operations.

ESRX passed the Group 4 screen, which looks for a combination of low P/E ratios, solid EPS growth forecasts, a strong record of sales growth, and strong relative profitability. It has a current P/E ratio of 10.1, based on trailing 12-month EPS of $6.08. The consensus EPS estimate for fiscal-year 2017 ending in December 2018 is $7.64 and for fiscal-year 2019 is $8.51. The consensus long-term expected annual EPS growth rate is 11.8%. Earnings have increased by 16.4% annually over the last five years, while revenues have grown 16.8% annually over the same period. ESRX does not pay a dividend. ESRX has underperformed the S&P 500 by 32.9% over the last year and has outperformed 24% of all U.S. stocks over the same period.

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12 December 2017


Portfolio Corner: How to Build Your SSR PortfolioOne of the most common questions we receive from

those building their initial SSR portfolio is: What is the best way to invest in the SSR portfolio? This month, we provide an overview of how to do that. Additional information about how to follow the SSR portfolio is presented in the SSR User’s Guide, which you can find online. (Click on the User’s Guide tab from the top of any page of StockSuperstars.com.)

Investing Equal Dollar AmountsNo matter how many SSR stocks you buy, it is

important to invest equal dollar amounts in each stock you purchase initially. Doing so prevents any individual stock from disproportionately affecting the performance of your portfolio.

This means that if you have $50,000 to invest in 16 stocks, you will invest roughly $3,125 in each of the 16 SSR stocks you buy. For example, you would buy 14 shares of UnitedHealth Group (Group 2: UNH) with a price currently around $216 per share but 156 shares of Finisar Corporation (Group 4: FNSR) with a current price around $20. Most brokers today charge the same commission whether you purchase 15 shares or 200 shares, so determine the number of shares you want to purchase based on the dollar amount you plan to invest.

Investing Among the SSR GroupsThe overall SSR portfolio holds 36 stocks, divided

into four groups. When the portfolio was first started, each group held nine stocks. However, over time, the number of stocks in each group has become unbal-anced. For those who buy all 36 stocks, which is what we suggest, you will not be invested equally among the four groups, but you still want to invest equal dol-lar amounts in each of the 36 stocks. The more stocks you hold, the more diversification benefits you will realize and the lower the overall portfolio risk will be. In addition, your performance will also more closely match the performance of our SSR tracking portfolio.

If you choose to hold fewer than all 36 stocks, we suggest buying at least 16, investing in the same num-ber of companies in each of the four portfolio groups. One way to do this is selecting the four most recently added stocks from each group to achieve equal expo-sure to all four groups. This allows you to take advan-tage of the groups’ varying investment styles.

We suggest that you make your purchases

reasonably quickly—we always place trades for the tracking portfolio in the week following the addition alert—but we also suggest you pay attention to the market. This means you may wish to buy stocks on weak or down days. However, we do not recommend or believe in market timing and suggest it is better to make the purchases sooner rather than wait for a market dip that may never materialize.

Keep an Eye on ExpensesWhen deciding on how much to initially invest

in your SSR portfolio, it is also important to invest enough money to offset the impact of commissions. The typical online discount broker now charges less than $10 to buy and sell a stock. These amounts equate to a 1% fee, or expense ratio, on a $1,000 investment. The more money you invest in each stock, the lower the expense ratio and the less drag commis-sions will have on your returns.

To calculate your total expense ratio, add up the total commissions you will pay to start your SSR port-folio and divide that by the total amount you intend to invest. Ideally, you should have an expense ratio below 2%. If it is higher than that, you may wish to consider investing in fewer stocks or investing more money per stock.

Investing Additional Money Into the PortfolioIf you are already following the SSR portfolio but

hold less than all 36 stocks, you should use any ad-ditional dollars to work toward owning all 36. Start by looking at the most recently added stocks; if there is one you do not own, consider purchasing it. The next step would be to rotate through the four groups, picking one stock from each group, again working backward from the most recently added to the oldest stock in each group.

If you already hold all 36 stocks, your goal should be to have an equal amount invested in each stock. To accomplish this, divide the total amount you currently have invested in the SSR stocks and divide it by 36. This will give you the average position size for your holdings. Then, invest any new money into the small-est positions. For example, if your average position size is $4,000 per stock, but you only have $2,500 in-vested in one stock, you would allocate $1,500 of the additional dollars into that stock to bring its position size up to the $4,000 average. •

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