1. Financial Strength (found in lower right corner)

a. reflects low much money the company is making
b. how high their debts are
c. whether V.L. analysts think they are well managed
d. nine categories: A ++ to C

A ++ ....Supreme relative financial strength
A + . . . . . Excellent financial position relative to other companies
A .. . .. . .High?grade relative financial strength

B ++ . . Superior financial health on a relative basis
B+ . Very good relative financial structure

B .. . .. . .Good overall relative financial position
C + + .. . .Satisfactory finances relative to other companies
C + . . ... ,Below?average relative financial position
C . ... ... Poorest financial strength relative to other major companies

e. Want Financial Strength to be an A or B, even if timeliness & safety were good the Beardstown Ladies (B.L.) would not study this stock ...looking for good companies to start with.

2. Timeliness (found in upper left comer)

a. From 1 to 5, 1 being best

b. Shows whether price of this stock will go up faster than the average stock in the neat 6 to 12 months

c. A # 1 says o t this stock's price is rising much taster than the rest of the mark NOW

d. Rating is computer generated based on how fast earnings are growing (does not reflect analysts' opinions)

e. Stocks rated 1 for timeliness tend to be in smaller, less established growth companies, often a young, aggressive company coming out with a new product.

f. Consider a #3 if all other fundamentals fall into place g. Of V.L.'s 1700 stocks 100 are rated 1 & 200
are rated 2

g. Rare to find a stock rated 1 for timeliness with a high safety rating. Prices usually go up fast & come down faster.

3. Safety (found in upper left comer)

a. From 1 to 5, 1 being best
b. Show how risky a stock is compared to others in the market
c. Computer generated
d. Most important ingredient in a good stock

e. Based on two things:
1. How strong the company is whether it makes a solid profit without going into debt 2. how stable the stock
price is

f. Prefer 1 or 2, 3 is acceptable if other fundamentals are good

g. A high rating means the price is expected to rise slowly over time ? not going fast and coming down faster

h. Measure of quality

4. Debt (first listing in Capital Structure Box)

a. Should be < 1/3 (33%) of company's total capitalization

b. In a healthy business, stocks will usually account for @ least 2/3rds of the money that does not come
from sales

5. Sales(Revenues) and Earnings ( in Statistics Box)

a. Top of box shows numbers on a per/share basis

b. Bottom of box shows total figures

c. Look for companies whose sales & earnings have been growing steadily for the last 5 years

d. Want business whose sales & earnings are expected to grow by double digits in neat few years

Large Company ...(has annual sales over $4 billion) ... .. . ... should grow @ least 7 to 10%

Medium Size ....(has annual sales of $400 million to $4billion) should grow @ least 10 to 12%

Small Company ..(has annual sales $400 million or less) should grow @ least 12 to 15%

To figure this : subtract this years earnings from those predicted for 5 years in the future divide result by this
year's earnings this number is the earnings growth expressed as a %

6. Price/Earnings ratio (P/E) (found middle of top of page)

a. The price/earnings ratio is the ratio between the price of the stock & how much money the company earns per
share in a given year.

b. We look at this figure to see whether the company's profits justify the they are asking for stock.

c. It is a handy way to see whether or not the stock is a bargain.

d. Current P/E should be @ least @ or below the 5 year average P/E

e. The last 15 years' P/E ratios are listed in the Statistics Box

f. Presently the acceptable P/E is 20. Above 20 may mean the stock is overpriced. The price may eventually
return to normal

g. Also look at what the P/E is running in that particular industry. Judge your company with the average P/E of
that industry. If above the average, your stock may be overpricesd.

7. Beta (found upper left baud comer)

a. Shows how much the stock moves compared to the market as a whole (ie. compared to the average of
all the stocks on any given day)

b. Good clue to whether the stock overreacts to rises & falls in the market.

c. A beta of 1 means the stock moves up & down at the same rate as the market as a whole.

d. A beta of 2 means that when the market drops or rises 10%, the stock price is likely to move twice as much,
or 20%

e. Timely stocks, as a role, have higher betas

f. Stocks with a high safety rating generally have lower betas

g. Beta can be accepted on risk/reward comfort level. Beta of 1 is conservative. B.L. usually accept between
.80 & 1.20

h. Expect stock price to bounce up & down if bought with a high beta. Do a little more homework to make sure
it is a solid company, & then don't worry about it.

i. Utilities usually have lower betas, they are not volatile

8. Management .(found bottom half of page, 400?word analysis)

a. Outlines the company's successes, failures, & hopes for the future

b. Look for leaders with solid track records, planning for the future, & have outstanding problems under control

Information from The Beardstown Ladies' Pocketbook Guide To Picking Stocks