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Building A Hedged Portfolio Of Governance Metrics International’s Top-Ranked Stocks

Summary A way to potentially boost your returns when building a concentrated portfolio is to start with stocks that are rated highly by quantitative analysis. The Governance Metrics International, or GMI, rating system uses quantitative analysis to assess financial reporting and corporate governance, and determine which stocks are likely to substantially outperform the market. With any quantitative system, there’s a risk the analysis will be wrong, or the market will move against you. Using the hedged portfolio method can limit your downside risk. We show how to create a hedged portfolio starting with top-rated GMI stocks, and provide a sample hedged portfolio designed to limit downside risk to a 20% drawdown. In the Wake of Enron, A Focus On Financial Reporting One of the forensic accounting firms founded in the wake of Enron’s fraud was Audit Integrity, which later changed its name to Governance Metrics International (GMI), and was acquired by MSCI ‘s ESG Integration Unit last year. GMI uses a proprietary quantitative approach to analyze the financial reports and governance practices of public companies. The best-known indicator GMI uses is its Accounting and Governance Risk ( AGR ) ratings, which range from “Very Aggressive” to “Conservative.” According to GMI, companies rated “Very Aggressive” are 10 times more likely to face SEC enforcement actions than those rated “Conservative,” and 4 times more likely to file for bankruptcy. GMI uses its AGR ratings to derive its AGR Equity Risk Factor, which it considers to be a leading indication of share performance. AGR Equity Risk Factor ratings range from 1 (“Substantially Outperform Market”) to 5 (“Substantially Underperform Market”). We’re going to start with the universe of GMI’s 1-rated stocks to build a concentrated, hedged portfolio. Why a Concentrated Portfolio The point of a concentrated portfolio is to invest in a handful of securities with high potential returns, instead of a larger number of securities with lower potential returns. As Warren Buffett noted in a lecture at the University of Florida’s business school in 1998: If you can identify six wonderful businesses, that is all the diversification you need. And you will make a lot of money. And I can guarantee that going into the seventh one instead of putting more money into your first one is going to be terrible mistake. Very few people have gotten rich on their seventh best idea. But a lot of people have gotten rich with their best idea. Why a Hedged Portfolio Because we’re not Warren Buffett. We don’t have vast wealth to absorb large losses, and hedging limits our downside risk in the event that we pick the wrong stocks, or the market moves against us. There is, of course, a tradeoff between what we are willing to risk and our potential return. Risk Tolerance and Potential Return All else equal, with a hedged portfolio, the greater an investor’s risk tolerance — the greater the maximum drawdown he is willing to risk (his “threshold”, in our terminology) – the higher his potential return will be. So, we should expect that an investor who is willing to risk a 25% decline will have a chance at higher returns than one who is only willing to risk, say, a 15% drawdown. For the purposes of this example, we’ll split the difference and create a hedged portfolio designed for an investor with $100,000 who is willing to risk a drawdown of no more than 20%. Constructing A Hedged Portfolio We’ll summarize process the hedged portfolio process here, and then explain how you can implement it yourself. Finally, we’ll present an example of a hedged portfolio that was constructed this way with an automated tool. The process, in broad strokes, is this: Find securities with high potential returns (we define potential return as a high-end, bullish estimate of how the security will perform). Find securities that are relatively inexpensive to hedge. Buy a handful of securities that score well on the first two criteria; in other words, buy a handful of securities with high potential returns net of their hedging costs (or, ones with high net potential returns). Hedge them. The potential benefits of this approach are twofold: If you are successful at the first step (finding securities with high potential returns), and you hold a concentrated portfolio of them, your portfolios should generate decent returns over time. If you are hedged, and your return estimates are completely wrong, on occasion — or the market moves against you — your downside will be strictly limited. How to Implement This Approach Finding promising stocks In this case, we’re going to start with the universe of stocks rated by GMI as likely to “substantially outperform the market”. To quantify potential returns for these stocks, you can, for example, use analysts’ price targets for them and then convert these to percentage returns from current prices. In general, though, you’ll need to use the same time frame for each of your potential return calculations to facilitate comparisons of potential returns, hedging costs, and net potential returns. Our method starts with calculations of six-month potential returns. Finding inexpensive ways to hedge these securities First, you’ll need to determine whether each of these top holdings are hedgeable. Then, whatever hedging method you use, for this example, you’d want to make sure that each security is hedged against a greater-than-20% decline over the time frame covered by your potential return calculations (our method attempts to find optimal static hedges using collars as well as protective puts going out approximately six months). And you’ll need to calculate your cost of hedging as a percentage of position value. Selecting the securities with highest net potential returns In order to determine which securities these are, out of the list above, you may need to first adjust your potential return calculations by the time frame of your hedges. For example, although our method initially calculates six-month potential returns and aims to find hedges with six months to expiration, in some cases the closest hedge expiration may be five months out. In those cases, we will adjust our potential return calculation down accordingly, because we expect an investor will exit the position shortly before the hedge expires (in general, our method and calculations are based on the assumption that an investor will hold his shares for six months, until shortly before their hedges expire or until they are called away, whichever comes first). Next, you’ll need to subtract the hedging costs you calculated in the previous step from the potential returns you calculated for each position, and exclude any security that has a negative potential return net of hedging costs. Fine-tuning portfolio construction You’ll want to stick with round lots (numbers of shares divisible by 100) to minimize hedging costs, so if you’re going to include a handful of securities from the sort in the previous step and you have a relatively small portfolio, you’ll need to take into account the share prices of the securities. Another fine-tuning step is to minimize cash that’s leftover after you make your initial allocation to round lots of securities and their respective hedges. Because each security is hedged, you won’t need a large cash position to reduce risk. And since returns on cash are so low now, by minimizing cash you can potentially boost returns. In this step, our method searches for what we call a “cash substitute”: that’s a security collared with a tight cap (1% or the current yield on a leading money market fund, whichever is higher) in an attempt to capture a better-than-cash return while keeping the investor’s downside limited according to his specifications. You could use a similar approach, or you could simply allocate leftover cash to one of the securities you selected in the previous step. Calculating Expected Returns While net potential returns are bullish estimates of how well securities will perform, net of their hedging costs, expected returns, in our terminology, are the more likely returns net of hedging costs. In a series of 25,412 backtests over an 11-year time period, we determined two things about our method of calculating potential returns: it generates alpha, and it overstates actual returns. The average actual return over the next six months in those 25,412 tests was 0.3x the average potential return calculated ahead of time. So, we use that empirically derived relationship to calculate our expected returns. An Automated Approach Here we’ll show an example of creating a hedged portfolio starting with 1-rated GMI stocks using the general process described above, facilitated by the automated hedged portfolio construction tool at Portfolio Armor . Narrowing Down Our List of Stocks To get the universe of 1-rated GMI stocks we used Fidelity ‘s screener to screen for optionable stocks rated 1, or “substantially outperform” according to the GMI AGR Equity Risk Rating. Since over 1,000 stocks met those two criteria, we added a third: 52-week price performance in the top 20% by industry. That winnowed the list to 247 names, and we picked the top 5 to input into our automated hedged portfolio construction tool: ABIOMED (NASDAQ: ABMD ) Bassett Furniture Industries (NASDAQ: BSET ) Sketchers USA (NYSE: SKX ) JetBlue Airways (NASDAQ: JBLU ) Universal Insurance Holdings (NYSE: UVE ) Using the Automated Tool In the first step, we enter the five ticker symbols in the “Tickers” field, the dollar amount of our investor’s portfolio (100000) in the field below that, and in the third field, the maximum decline he’s willing to risk in percentage terms (20). In the second step, we are given the option of entering our own potential return estimates for each of these securities. Instead, in this case, we’ll let Portfolio Armor supply its own potential returns. A couple minutes after clicking the “Create” button, we were presented with the hedged portfolio below. The data here is as of Monday’s close. Why These Particular Securities? The site included all of the entered securities for which it calculated a positive potential return, net of hedging costs. In this case, that turned out to be three of the five stocks, ABMD, JBLU, and SKX. Since it aims to include four primary securities in a portfolio of this size, and only three of the ones we entered had positive net potential returns, Portfolio Armor added one of its own top-ranked stocks, Post Holdings (NYSE: POST ). In its fine-tuning step, it added Restoration Hardware (NYSE: RH ) as a cash substitute. Let’s turn our attention now to the portfolio level summary for a moment. Worst-Case Scenario The “Max Drawdown” column in the portfolio level summary shows the worst-case scenario for this hedged portfolio. If every underlying security in it went to zero before their hedges expired, the portfolio would decline 18.78%. Negative Hedging Cost Note that, in this case, the total hedging cost for the portfolio was negative, -0.26%, meaning the investor would receive more income in total from selling the call legs of the collars on his positions than he spent buying the puts. Best-Case Scenario At the portfolio level, the net potential return is 12.07% over the next six months. This represents the best-case scenario, if each underlying security in the portfolio meets or exceeds its potential return. A More Likely Scenario The portfolio level expected return of 4.93% represents a conservative estimate, based on the historical relationship between our calculated potential returns and backtested actual returns. By way of comparison, a hedged portfolio created on Friday using the same and decline threshold (20%), but without entering any ticker symbols (i.e., letting Portfolio Armor pick all the securities), had an expected return of 6.1%. You can see that hedged portfolio in a recent article (“Investing While Guarding Against Extensive Vertical Losses”). Each Security Is Hedged Note that each of the above securities is hedged. Restoration Hardware, the cash substitute, is hedged with an optimal collar with its cap set at 1%, and the remaining securities are hedged with optimal collars with their caps set at each underlying security’s potential return. Here is a closer look at the hedge for JetBlue: JetBlue is capped here at 14.25%, because that’s the potential return Portfolio Armor calculated for it over the next several months. As you can see at the bottom of the image above, the cost of the put protection in this collar is $1,050, or 5.7% of position value. But if you look at the image below, you’ll see the income generated from selling the calls is $735, or 3.99% of position value. So, the net cost of this optimal collar is $315, or 1.71% of position value.[i] Note that, although the cost of hedging this position is positive, the cost of hedging the portfolio as a whole is negative. Possibly More Protection Than Promised In some cases, hedges such as the ones in the portfolio above can provide more protection than promised. For an example of that, see this instablog post on hedging the iPath S&P 500 VIX ST Futures ETN (NYSEARCA: VXX ). [i]To be conservative, this optimal collar shows the puts being purchased at their ask price, and the calls being sold at their bid price. In practice, an investor can often buy the puts for less (i.e., at some point between the bid and ask prices) and sell the calls for more (again, at some point between the bid and ask). So the actual cost of opening this collar would have likely been less. That’s true of the other hedges in this portfolio as well. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Why TIPS Deserve A Spot In Your Portfolio

Summary TIPS represent only 10% of the Treasury market but should play a larger role in diversified portfolios. TIPS protect bond investors against unexpected inflation while capping deflation risk. Only TIPS can provide an inflation hedge, the prospect of real returns, and the safety of the backing of the U.S. Treasury. We’ve written several articles in the past about what investments and asset classes shouldn’t be in your portfolio, such as commodities , currency funds , and bank loan funds . We also wrote a few articles about asset classes that should be in your portfolio, such as international bonds . But we’ve never discussed how to assemble a comprehensive, well-diversified portfolio. It’s important to note we are talking about an investment portfolio so we will not be considering cash which would be part of someone’s savings portfolio. In this ongoing series of articles, we’ll be discussing each of the asset classes we use to assemble client portfolios. Over the next few weeks, we’ll be discussing each asset class in depth and talking about what risk and reward attributes they bring to a portfolio. For this series of articles, we’ve divided the asset classes into three conceptual categories: low risk, medium risk, and high risk. The links to previous articles are below. Low Risk Treasury Inflation Protected Securities (( OTC:TIPS )): Why TIPS Deserve a Spot in Your Portfolio Domestic Government Bonds Medium Risk High Risk Real Estate Domestic and International Stocks Summary How to Assemble a Comprehensive Investment Portfolio What are Treasury Inflation Protected Securities or TIPS? Treasury Inflation Protected Securities or TIPS are a relatively recent invention having only been issued by the U.S. Treasury since 1997. TIPS represent a small minority of the Treasury securities market, with only about a 10% market share, but we believe they could play a much bigger role in investors’ portfolios. Like the name suggests TIPS are designed to protect investors from unexpected rises in inflation by adjusting the income and principal investors receive when inflation changes. How TIPS Work TIPS function just like normal bonds but with one key difference. Like a traditional bond, a TIPS bond pays a fixed percentage coupon and the investor receives the par value of the bond back at maturity. However, TIPS protect investors against inflation by adjusting the par value of the bond upwards when inflation rises. The coupon payments also increase since they are based on the new, higher par value of the bond. Inflation data is calculated using the non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban Consumers (CPI-U) index published by the Bureau of Labor Statistics. The inflation data is calculated every six months when the TIPS pay interest (like most bonds, TIPS make interest payments twice per year). To see how this works, let’s look at a hypothetical TIPS bond that has a par value of $1,000 and pays a coupon of 2%, and then what happens after a year that sees 10% inflation. For simplicity’s sake, we are going to just pretend TIPS pay interest once per year while in reality they make two coupon payments each year (each one being one-half the calculated interest rate). Year Inflation/Deflation Par Value Coupon Rate Coupon Payment Initial Year n/a $1,000 2% $20 Second Year 10% inflation $1,100 2% $22 As you can see in the table, the 10% increase in inflation increases the par value of the bond by 10% or $100. The coupon is 2% of the new par value of $1,100 or $22. Now, an important thing to take note of is that this process also works in reverse. If inflation, as measured by CPI-U, is negative, then the par value of the bond will decrease. However, the value will never drop below the initial par value the bond was issued at (in this case $1,000). To see how deflation affects TIPS, let’s take the same example we used above but now add a third year where we have 5% deflation. The table below shows what will happen. Year Inflation/Deflation Par Value Coupon Rate Coupon Payment Initial Year n/a $1,000 2% $20 Second Year 10% inflation $1,100 2% $22 Third Year 5% deflation $1,045 2% $20.9 The par value of the bond is reduced from its previous value of $1,100 by 5% to $1,045. The coupon rate as always stays the same at 2% and the new coupon payment is 2% of the new par value of $1,045 or $20.90. It’s also important to note that the fluctuation of the par value of TIPS will have an effect on the taxes an investor pays. An investor will be liable for taxes on the adjustments to the par value of the bonds. Increases in the par value of the bonds are treated as interest income in the year the increases occur, even though the investor may only receive the increase in par value years in the future when the bond comes due. For example, if an investor received $2,000 in interest and the par value of the bonds rose $500, then the investor would be taxed on $2,500 of income ($2,000 in interest plus a $500 increase in par value). Likewise, decreases in the par value of the bond due to deflation are treated as reductions in interest income. For example, if an investor received $2,000 in interest payments but the par value of the bonds dropped by $500, the investor would only be taxed on $1,500 of income ($2,000 in interest minus $500 reduction in par value). What TIPS Can Add to Your Portfolio We’ve spent almost the last decade in an environment of very low to no inflation so TIPS may seem like they provide little value. In fact, we’ve basically been in a period of falling inflation and falling interest rates over the past few decades which have been great for traditional bonds. But the recent past is certainly not an indication of the future. The chart below shows the year-over-year change in the inflation measure used by TIPS (CPI-U). As you can see, inflation has been much more volatile in the past. Unexpected, high inflation is the exact type of risk that TIPS are designed to protect investors against. In periods of unexpected rising inflation, TIPS behave the opposite of normal bonds. If inflation were to rise unexpectedly, the fixed coupon payments of traditional Treasury securities would become less valuable in real terms. Investors would demand higher interest rates and the price of bonds would fall. With TIPS, both the coupon payment and the par value of the bond would be adjusted upwards to match inflation. TIPS also benefit from the fact that inflation below expectations (remember all bonds have inflation expectations built into them in the form of what interest rates investors demand) or deflation will only reduce the value of a TIPS bond down to its par value. Thus, losses due to negative inflation adjustments are effectively capped. TIPS offer investors unlimited inflation upside and limited deflation downside. It’s virtually impossible to find any other type of investment with capped downside and unlimited upside risks in respect to inflation. The Case for TIPS over Other Hedges While TIPS certainly aren’t the only type of inflation hedge out there, they are one of the best. Specific types of stocks can be good inflation hedges. Stocks of companies that have significant pricing power and strong brands, the stereotypical example of cigarette companies come to mind, can provide a powerful hedge against inflation. They also come with the higher risk and volatility that comes with all stocks. Commodities are often cited as providing a hedge against inflation. However, as we showed in two of our previous articles last year ( here and part two here ), over the long term, commodities have only provided a hedge against inflation. They offered no real return above inflation. Also, as recent events have shown, commodities can be quite volatile as well. TIPS offer investors a hedge against inflation, the opportunity for real returns, and the safety of the backing of the U.S. Treasury. No other asset class can offer that combination to investors and that is why TIPS should play an important role in any diversified portfolio. Investors can purchase TIPS directly from the U.S. Treasury or via any number of ETFs or mutual funds, a few of which are shown in the table below. Fund Name (Ticker) Expense Ratio iShares TIPS Bond ETF .20% Vanguard Inflation-Protected Securities Fund (MUTF: VIPSX ) .20% Schwab U.S. TIPS ETF (NYSEARCA: SCHP ) .07% SPDR Barclays TIPS ETF (NYSEARCA: IPE ) .15% Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks. Disclosure: I am/we are long TIP. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

SCZ: Do You Need Some International Small-Cap Companies For Your Portfolio?

Summary SCZ has over 1500 holdings across the globe which appear to give it great internal diversification. The term “across the globe” might be overly optimistic since over 50% of the holdings are in two locations. The weakness for SCZ is that SCHC and VSS both offer materially lower expense ratios and more holdings for enhanced diversification. Since SCZ has a beta higher than 1, it has to be expected to generate fairly substantial returns. On top of the high beta raising required returns, SCZ also needs to be able to beat out SCHC and VSS to justify the high expense ratio. One of the funds I analyzed for exposure to international markets is the iShares MSCI EAFE Small-Cap ETF (NYSEARCA: SCZ ). I’ll be performing a substantial portion of my analysis along the lines of modern portfolio theory, so my goal is to find ways to minimize costs while achieving diversification to reduce my risk level. By reducing risk at the portfolio level investors can get their best shot at producing alpha. Expense Ratio The expense ratio for SCZ is .40% for both gross and net expense ratio. That may not seem bad for international small-cap equity and an ETF with 1555 holdings. However, investors should be aware that they also have options in the Schwab International Small-Cap Equity ETF (NYSEARCA: SCHC ) and the Vanguard FTSE All-World ex-US Small-Cap ETF (NYSEARCA: VSS ). SCHC has an expense ratio of .18% and 1645 holdings. VSS has an expense ratio of .19% and 3352 holdings. It should be no surprise that I see SCHC and VSS as the strong front runners for this kind of portfolio exposure. In the interest of full disclosure, while I don’t have a position in any of these ETFs yet, I do have a pending limit-buy order on SCHC. That order is quite a ways under the current share prices and is only intended to activate if share prices start falling hard again. Geography The geography of the exposure is important in considering international equity options. The chart below demonstrates the exposure for SCZ. Japan and the United Kingdom only represent over 50% of the market capitalization of the holdings in SCZ. I’d like to see more exposure around the globe. This is international and I’m okay with excluding China since I’ve been bearish on their market for months, but I’d like to see a few more continents included. Aside from the concentration being so heavily focused on the top two options, I don’t see any other problems there. Sector Exposures The following chart has the sector exposures within the ETF: I’m not seeing this as a huge problem, but it seems interesting that the exposure is so heavily focused on a few categories again. If it were reasonably possible, I’d like to see better diversification across the industries as well as across the globe. International ETFs are usually plagued by having fairly high levels of volatility and more diversification within the sectors might reduce that volatility some. On the other hand, when financial markets exhibit significant stress factors, it is common for correlation levels to increase throughout international markets so even more diversification in the holdings might not make a material difference in the volatility. Building the Portfolio This hypothetical portfolio has a moderately aggressive allocation for the middle aged investor. Only 30% of the total portfolio value is placed in bonds and a third of that bond allocation is given to high yield bonds. This portfolio is probably taking on more risk than would be appropriate for many retiring investors since the volatility on equity can be so high. However, the diversification within the portfolio is fairly solid. Long term treasuries work nicely with major market indexes and I’ve designed this hypothetical portfolio without putting in the allocation I normally would for REITs on the assumption that the hypothetical portfolio is not going to be tax exempt. Hopefully investors will be keeping at least a material portion of their investment portfolio in tax advantaged accounts. The portfolio assumes frequent rebalancing which would be a problem for short term trading outside of tax advantaged accounts unless the investor was going to rebalance by adding to their positions on a regular basis and allocating the majority of the capital towards whichever portions of the portfolio had been underperforming recently. (click to enlarge) A quick rundown of the portfolio The two bond funds in the portfolio are the PIMCO 0-5 Year High Yield Corporate Bond Index ETF (NYSEARCA: HYS ) for high yield shorter term debt and the iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) for longer term treasury debt. TLT should be useful for the highly negative correlation it provides relative to the equity positions. HYS on the other hand is attempting to produce more current income with less duration risk by taking on some credit risk. The Consumer Staples Select Sector SPDR ETF (NYSEARCA: XLP ) is used to make the portfolio overweight on consumer staples with a goal of providing more stability to the equity portion of the portfolio. The iShares U.S. Utilities ETF (NYSEARCA: IDU ) is used to create a significant utility allocation for the portfolio to give it a higher dividend yield and help it produce more income. I find the utility sector often has some desirable risk characteristics that make it worth at least considering for an overweight representation in a portfolio. The core of the portfolio comes from simple exposure to the S&P 500 via the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ), though I would suggest that investors creating a new portfolio and not tied into an ETF for that large domestic position should consider the alternative by Vanguard’s Vanguard S&P 500 ETF (NYSEARCA: VOO ) which offers similar holdings and a lower expense ratio. I have yet to see any good argument for not using or another very similar fund as the core of a portfolio. In this piece I’m using SPY because some investors with a very long history of selling SPY may not want to trigger the capital gains tax on selling the position and thus choose to continue holding SPY rather than the alternatives with lower expense ratios. Risk Contribution The risk contribution category demonstrates the amount of the portfolio’s volatility that can be attributed to that position. Despite TLT being fairly volatile and tying SPY for the second highest volatility in the portfolio, it actually produces a negative risk contribution because it has a negative correlation with most of the portfolio. It is important to recognize that the “risk” on an investment needs to be considered in the context of the entire portfolio. To make it easier to analyze how risky each holding would be in the context of the portfolio, I have most of these holdings weighted at a simple 10%. Because of TLT’s heavy negative correlation, it receives a weighting of 20% and as the core of the portfolio SPY was weighted as 50%. Correlation The chart below shows the correlation of each ETF with each other ETF in the portfolio and with the S&P 500 . Blue boxes indicate positive correlations and tan box indicate negative correlations. Generally speaking lower levels of correlation are highly desirable and high levels of correlation substantially reduce the benefits from diversification. Conclusion SCZ is the most volatile investment in the portfolio when viewed in isolation as it has a volatility level of 18.7%. That problem is compounded by the high correlation between SCZ and the S&P 500. The combination leads SCZ to having a beta of 1.06% which is unfavorable. Under modern portfolio theory the only way to get risk adjusted returns on SCZ is for it to be outperforming the S&P 500 over the long run since it is increasing portfolio volatility. Will it outperform the S&P 500? I have no idea. The better question would probably be: “Will it outperform SCHC and VSS?” In that regard, I’m skeptical. It certainly could happen but SCHC and VSS have an advantage from having materially lower expense ratios which allow more of the returns to reach shareholders. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: Information in this article represents the opinion of the analyst. All statements are represented as opinions, rather than facts, and should not be construed as advice to buy or sell a security. Ratings of “outperform” and “underperform” reflect the analyst’s estimation of a divergence between the market value for a security and the price that would be appropriate given the potential for risks and returns relative to other securities. The analyst does not know your particular objectives for returns or constraints upon investing. All investors are encouraged to do their own research before making any investment decision. Information is regularly obtained from Yahoo Finance, Google Finance, and SEC Database. If Yahoo, Google, or the SEC database contained faulty or old information it could be incorporated into my analysis.