usa - april 2013 samplebwld m iff cybx tdc bwld restaurants 1,617.41 0.84 1.00 m retail - department...

Data as of Market Close: 2013-04-01

Monthly Stock Picks

USA - April 2013

Stock Picks for USA - April 2013

The stocks listed in Table 1 were selected through a top-down process that shortlists companies with upside potential for holding periods of three to twelve months. Each month, a shoal tracking algorithm is used to select a strategy from a set of over fifteen thousand strategies. Investors who choose to invest in our stock picks may end up holding a diversified revolving portfolio built from about 10 strategies and 40 stocks. To avoid excessive trading while adjusting to changing market conditions, investors should set up appropriate stop loss limits and periodically review their portfolio weightings. This month our strategy favors companies with good StockMarks quality, good past risk-adjusted return, high marginal efficiency of capital, with a premium over intrinsic value, and high equity/capex elasticity

T1. Monthly Picks based on "DM-FP-GH-GV-IA" strategy

Quality Risk Sentiment

Ticker Company SMT SMB SMM SMP SML SMV SMO SADIF Consensus

BWLD Buffalo Wild Wings 75 75 66 50 73 73 56 75 71

M Macy s, Inc. 65 67 58 49 32 61 52 33 75

IFF International Flavors & Fragrances Inc 59 44 63 58 49 59 52 53 69

CYBX Cyberonics, Inc. 57 67 77 16 84 31 42 62 84

TDC Teradata Corporation 70 57 75 47 59 66 54 59 71

Diversification and Fundamental Analysis

Proper portfolio diversification requires careful stock picking and, most importantly, suitable weightings of portfolio holdings. The stocks picked this month were selected from a shortlist of 8 to 10 candidates based on our ratings and diversification requirements. Table 2 lists data typically used for so-called naïve diversification (industry and size) and statistical diversification (beta and correlation). In Table 4, located on page 5, we present alternative weighting systems based on historical data. The two non-naïve weightings are based on mean-variance minimization (Harry Markowitz) and on the marginal efficiency of shareholders equity (Marques-Mendes). Table 3 provides a synopsis of financial data which can be used for further diversification analysis.

T2. Diversification

Ticker Industry Capitalization Beta Price Correlation, Last Quarter

BWLD M IFF CYBX TDC

BWLD Restaurants 1,617.41 0.84 1.00

M Retail - Department Stores 16,455.33 1.65 0.86 1.00

IFF Chemicals - Commodity 6,151.73 0.84 0.86 0.92 1.00

CYBX Advanced Medical Equipment 1,290.04 0.70 -0.21 -0.52 -0.54 1.00

TDC IT Services & Consulting 9,411.69 0.94 -0.85 -0.79 -0.78 0.12 1.00

See page 6 for an index of Due Diligence Reports for companies selected as monthly picks. For a disclaimer and a description of rating categories see page 8.

© 2007-2013 Marques Mendes & Associados Lda (MM&A). All Rights Reserved. Please read disclaimer in page 8.1

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T3. RatiosSelected Benchmark Ratios

Company Ratios BWLD M IFF CYBX TDC

Margins and Turnover

EBITDA Margin[EBITDA/Total Revenue]

29.91 23.54 25.83 37.92 37.16

Operating Margin[EBIT/Total Revenue]

7.71 12.32 14.56 32.44 20.14

Asset Turnover[4*(Total Revenue)/Total Assets]

2.06 1.78 0.84 1.00 0.97

Efficiency

ROA[Net Income/Total Assets]

10.54 6.20 8.18 20.30 14.75

ROE[Net Income/Total Equity]

16.33 22.28 21.46 22.88 25.60

Growth

Asset Growth[(Total Assets_Q/Total Assets_Q-1)-1]

7.50 -5.74 6.20 7.23 0.49

Equity Growth[(Total Equity_Q/Total Equity_Q-1)-1]

4.79 8.77 0.13 9.55 -5.27

Financial Strength

Interest Service Coverage[(EBITDA - Provision for Income Taxes)/Interest Expense]

N/A N/A 14.89 1.00 N/A

Quick Ratio *[Cash and Short Term Investment/(Current Liabilities, ex-short term debt + Current debt)]

0.17 0.23 0.29 5.06 0.72

Current Ratio *[Total Current Assets/(Current Liabilities, ex-short term debt + Current debt)]

0.70 0.97 1.40 7.45 1.51

Average Days - Payables *[nr. of days*(Accounts Payable)/(Variable Costs)]

15.00 70.80 40.20 26.40 34.00

Average Days - Receivables & Other *[nr. of days*(Total Current Assets-Cash and short Term Investments)/Total Revenue]

30.50 63.30 168.70 90.30 100.10

Solvency

Capitalization[Total Equity/Total Assets]

0.65 0.29 0.38 0.90 0.58

Gearing *[Total Debt/Total Equity]

0.07 1.15 0.83 N/A 0.15

Asset Quality

Share of Intangibles[Intangibles, Net/Non Current Asset]

8.03 4.28 2.19 11.25 23.43

Share of Goodwill[Goodwill, Net/Non Current Asset]

6.95 28.54 39.69 N/A 60.84

Valuation Multiples

PE[Price/Net Income per Share]

28.34 12.70 24.45 28.80 23.37

PBV[Price/Book value per Share]

4.25 2.75 4.96 5.85 5.47

* The definition of this ratios is different for banks and insurance companies.


USA - April 2013Monthly Stock Picks

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Price Trend and StockMarks ratings

When building a diversified portfolio, it is important to bear recent price trends in mind. Chart 1 shows these trends for our selected stocks. Over the period, Buffalo Wild Wings was the most bullish stock. Charts 2 to 5 show the position of each company in the market distribution for several key ratings. Investors with a longer investment horizon may wish to consider that the company better placed in terms of business (SMB) and quality (SMT) was Buffalo Wild Wings. Investors with a shorter horizon may choose to increase focus on Cyberonics, Inc. and Macy s, Inc. which are the worst placed in terms of outlook (SMO) and recommendation (SMR).



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Market Sentiment

While past returns are not a good predictor of future performance, in Charts 6 to 10 we depict the recent price trend against the market sentiment. The sell-side consensus and the SADIF recommendations are shown with a 12 month lead and investors should compare both recommendations. For instance, SADIF's recommendation was significantly different to the sell-side consensus for Cyberonics, Inc..SADIF's analysis of Macy s, Inc. resulted in our most bearish sentiment.



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T6. Management Alerts Ratings Price Target

Ticker Company Country SMT SMR SML Last Price Lower Band Price Target Upper Band

BWLD Buffalo Wild Wings United States 74 72 72 86.79 106.12 112.23 116.79

M Macy s, Inc. United States 58 24 30 41.63 40.49 73.68 145.56

IFF International Flavors & Fragrances Inc United States 56 46 46 75.48 69.82 79.24 92.06

CYBX Cyberonics, Inc. United States 54 57 82 46.68 71.45 72.12 72.72

TDC Teradata Corporation United States 67 56 57 57.02 72.90 81.78 86.93

Portfolio backtesting

The portfolio of selected stocks has been backtested to measure its return since the start of the last three quarters. The cumulative valuations for each period are depicted in Chart 11. The oldest equal weighted portfolio would have appreciated by 5.56%.Table 5, showing the statistics and portfolio returns for each weighting system, indicates that the best return was achieved with the Marques-Mendes method, with an excess return of -5.56 percentage points. For the backtesting period the chosen strategy had a positive alpha.In Table 6 we suggest potential portfolio management alerts. The price targets are based on SADIF estimates and the ratings reflect the volatility of the respective StockMarks. SADIF's clients may choose to have these alerts added automatically to their account and are welcome to call our analysts to further discuss this strategy and the stock picks.

T4. Portfolio Weightings (Backtesting Period: 2012-11-07 - 2013-04-01)

Ticker Company Price Change Equal Capitalization Harry-Markowitz Marques-Mendes

BWLD Buffalo Wild Wings 16.30% 20% 2.95% 9.71% 4.62%

M Macy s, Inc. 2.90% 20% 56.55% 10.67% 25.58%

IFF International Flavors & Fragrances Inc 19.20% 20% 17.55% 40.00% 32.08%

CYBX Cyberonics, Inc. 2.40% 20% 2.39% 11.44% 26.43%

TDC Teradata Corporation -9.60% 20% 20.57% 28.18% 11.28%

T5. Portfolio Statistics (Backtesting Period: 2012-11-07 - 2013-04-01)

Market Benchmark

Selected Portfolio

Portfolio Statistics / Weighting Methods ETF: DIA Equal Capitalization Harry-Markowitz Marques-Mendes

Portfolio Period Return 13.35% 6.63% 3.59% 7.65% 7.79%

Portfolio Annualized Return 33.60% 16.70% 9.05% 19.25% 19.60%

Risk Adjusted - Sharpe 39.54% 33.62% 10.56% 34.09% 38.98%

Risk Adjusted - Treynor 0.67% 0.68% 0.23% 0.68% 0.90%

Alpha 0.00% -0.32% 0.00% 0.19%

Beta 0.88 0.73 0.82 0.83

Significance 71.62% 58.60% 73.79% 54.02%



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Dates of Latest Summary Due Diligence Reports Published

Note: These stock picks should not be interpreted as buy or sell recommendations or a selection of portfolio constituents. Both would require correlation analysis and a prior knowledge of an investor's holdings and strategy, which are beyond our scope. For a general disclaimer note please refer to page 8.

BWLD Buffalo Wild Wings 4 January 2013

M Macy s, Inc. 7 January 2013

IFF International Flavors & Fragrances Inc 22 January 2013

CYBX Cyberonics, Inc. 20 November 2012

TDC Teradata Corporation 12 February 2013



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Notes:



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The StockMarks™ Ratings

Classical StockMark (SMC)Short-medium term attractiveness rating combining SMT and SMP.

Total Quality StockMark (SMT)The overall long-term investment-attractiveness of a company based on a combined three dimensional analysis of three sub-ratings: Business, Management and Price.

Business StockMark (SMB)A company's business quality based on variables including: operating margin, sales elasticity and sales growth rate.

Price StockMark (SMP)A company's price quality rating in terms of undervaluation reflected by valuation measures such as price to book, price to sales per share and price to earnings per share.

Management StockMark (SMM)A company's management quality based on the following key indicators: return on assets, earnings per employee and the earnings growth rate.

Outperformance StockMark (SMO)The likelihood of a stock to outperform the market based on the valuation of the company, the SMV and the SMT.

Volatility StockMark (SMV)Risk of the stock based on numerous historical analyses of stock price and market correlation.

© 2007-2013 Marques Mendes & Associados Lda (MM&A). All Rights Reserved. This report is for information purposes only and is not a solicitation or advice to buy or sell any security. The data contained within this report is not warranted to be accurate or complete. This report is only intended as a summary of SADIF's stock ratings and not a recommendation for stock purchase or sale. Redistribution of this report without explicit permission is strictly prohibited. All logos are the copyright property of their respective companies and are used here only to aid the reader in identification of the subject of the article. The author of this article does not hold a position in any of the companies featured within this report.

Liquidity StockMark™ (SML)Except for banks, a company’s liquidity safety is measured based on its capitalization, current ratio and the relative amount of short debt in relation to medium and long term debt.

Recommendation StockMark (SMR)A stock recommendation based on price attractiveness, liquidity risk and market sentiment.

8Marques Mendes & Associados Lda. Rua Domingos F. Pinto Basto, 21 – 3830-176 Ilhavo, Portugal,

Ph: (+ 351)234 296 930 Email: [email protected]

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