Prudent Speculatorthe

Established in March 1977 • 85 Argonaut, Suite 220 • Aliso Viejo, California 92656 • 800.258.7786

Chief Investment Officer

Al Frank Asset Management (AFAM)

AFAM also offers wealth management services. To learn more, contact 888.994.6837 and visit alfrank.com

Blackrock especially interesting as it found: “While afflu-

ent investors (those with more than $250,000 in investable

assets) expressed greater confidence about their financial

futures, even they—along with investors

of all types around the world—tend to hold

a lot of cash, with no immediate plans to

change their investment mix. In the U.S.,

investors of all types held 48% of invest-

able assets in cash, with 18% in stocks and

7% in bonds.” Those numbers are stag-

gering when one considers the returns on

cash these days—the average yield on a

money-market fund is still 0.01% (i.e. mon-

ey doubles in 6,932 years).

While we respect that more than a few pundits are

warning that stock prices are in a bubble that will soon

burst, Mr. Greenspan himself said two weeks ago, “In a

sense, we are actually at relatively low stock prices. So-

called equity premiums are still at a very high level, and

that means that the momentum of the market is still ul-

timately up...Price-earnings ratios are not hugely up. The

market has gone up a huge amount, but it’s not bubbly.”

No doubt, Mr. Greenspan has received plenty of blame

for the Financial Crisis, and his market timing advice is

as suspect as anyone else’s, but we share his view that

equity valuations are reasonable, given the health of

corporate profits and balance sheets, the extremely low

yields on competing investments, the friendly Federal

Reserve (even if Ben Bernanke & Co. soon begin to taper

their bond-buying program) and the likelihood for stron-

ger global and domestic economic growth in 2014. On that

last score, the widely watched monthly gauge of national

activity in the manufacturing sector from the Institute for

Supply Management (ISM) just came in at 56.4, the high-

est level this year and a reading that if annualized would

correspond to a very robust 4.4% U.S. GDP growth rate.

565

November 4, 2013

“The difference

in winning and

losing is most often

not quitting.”

—Walt Disney

After back-to-back 4% total-return months for our

newsletter portfolios during seasonally scary Septem-

ber and October, it is not surprising that we are finally

starting to see some real interest in equi-

ties, especially as we have just entered the

historically favorable six months of the

year. The latest read on the sentiment of

investment professionals from Investors

Intelligence found more than three times

as many Bulls as Bears, with the latter

number dropping to the lowest level since

May 2011. It is the same story for Main

Street as the latest Bull/Bear survey from

the American Association of Individual In-

vestors showed 45.0% optimistic about the prospects for

stocks over the next six months, versus 21.5% who were

pessimistic, though the figures have been more bullishly

skewed on several occasions earlier this year.

We are also witnessing actual dollars moving more

rapidly back into stocks as the latest data on actively

managed mutual funds from the Investment Company

Institute showed that a net $9.2 billion flowed into U.S.

equities in the most recent week, the biggest inflow since

ICI began tracking weekly flows in January 2007. And

researcher TrimTabs estimated that for the four weeks

through October 28, a net $49 billion had flowed into equi-

ty mutual and exchange traded funds (ETFs), with about

half of that flowing into domestic stocks and the other

half into international stocks. The TrimTabs tally marked

the fourth highest month of inflows, trailing only January

2013, July 2013 and February 2000, the last one obviously

a potentially more ominous precedent than the first two.

To be sure, we are always on the watch for signs of ir-

rational exuberance, to borrow the phrase former Federal

Reserve Chairman Alan Greenspan popularized back in

1996, but we think it will take more than a few months

of renewed interest in stocks (and disinterest in bonds

as money has only recently started to flow out of bond

funds and bond ETFs) to make up for the tremendous

amount of money that flowed out of equities during and

after the 2008 Financial Crisis. And we found the results

of a study just released by investment management giant

Graphic Detail

catchy a slogan as “Sell in May and Go Away,” but it is

hard to argue with the “Buy Halloween, Sell May Day”

performance numbers enjoyed by our newsletter portfo-

lios over the past 23 years, or the returns on stocks in gen-

eral based on data going as far back as 1926.

Seasonal Favoritism

Returns in statistically scary September and Octo-

ber were sensational this go round, illustrating that

seasonal factors do not always hold, but the historical

evidence suggests that we have just entered the most

favorable six-month stretch of the calendar. Not quite as

SEASONAL VALUE VERSUS GROWTH

Nice to see that Value has won the performance spoils over the past eight decades, no matter the time of year...

From 10.31.27 through 04.30.13. Geometric average. SOURCE: Al Frank using data from Professors Eugene F. Famaand Kenneth R. French

Ave

rage

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etur

n

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May-OctNov-Apr

Small Growth StocksSmall Value StocksLarge Growth StocksLarge Value Stocks

SEASONAL DIV VERSUS NON-DIV PAYERS

...though it is noteworthy that dividend-paying stocks have really earned their stripes during the seasonally unfavorable period.

Ave

rage

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al R

etur

n

-2%

0%

2%

4%

6%

8%

10%

May-OctNov-Apr

Non-Dividend PayersLowest 30% of Dividend PayersMiddle 40% of Dividend PayersHighest 30% of Dividend Payers

From 10.31.27 through 04.30.13. Geometric average. SOURCE: Al Frank using data from Professors Eugene F. Famaand Kenneth R. French

LONG-TERM MONTHLY PERF AVERAGES

Defying their negative historical propensity, statistically weak September and October enjoyed handsome gains this year.

From 12.31.25 through 09.30.13 Geometric average. SOURCE: Al Frank using data from Ibbotson Associates

Ave

rage

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thly

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etur

n

-2%

-1%

0%

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DNOSAJJMAMFJ

Small-cap stocks

Large-cap stocks

NEWSLETTER PORTS’ NOV-APR PERF

Though the winning streak was snapped from 2007 through 2009, the past four years have witnessed a return to form.

TPS Millennium PruFolio Buckingham Average

90–91 117.29% 117.29%91–92 25.53% 25.53%92–93 39.91% 39.91%93–94 12.23% 12.23%94–95 16.75% 16.75%95–96 28.50% 28.50%96–97 27.13% 27.13%97–98 23.49% 23.49%98–99 23.77% 23.77%99–00 50.96% 50.96%00–01 6.83% 29.14% 17.98%01–02 56.45% 38.67% 41.77% 45.63%02–03 10.78% 4.74% 17.99% 11.17%03–04 12.62% 10.37% 18.23% 6.93% 12.04%04–05 11.06% 10.42% 2.39% 10.77% 8.66%05–06 19.00% 15.88% 18.39% 20.08% 18.34%06–07 11.07% 11.78% 13.98% 16.10% 13.23%07–08 -12.87% -12.89% -10.59% -13.94% -12.57%08–09 -4.24% -2.03% -3.25% -5.64% -3.79%09–10 23.15% 25.28% 19.53% 23.78% 22.93%10–11 19.21% 18.91% 20.04% 18.13% 19.08%11-12 11.48% 10.47% 11.48% 10.77% 11.05%12-13 17.92% 16.41% 14.97% 16.85% 16.54% Geometric average 21.82%SOURCE: Al Frank

Graphic Detail

Indexed to 100 on 06.30.26. Through 09.30.13. Logarithmic scale. SOURCE: Al Frank using data from Professors Kenneth R. French and Eugene F. Fama

100

1k

10k

100k

1m

10m

100090807060504030

Hyp

othe

tica

l $1

00

inve

sted

on

06

.30

.26

Growth Stocks 9.3%

Value Stocks13.6%

And given the dramatic outperformance of small- and

mid-cap stocks since the turn of the Millennium, we con-

tinue to believe that value is more often than not found to-

day in generally less-volatile, large-capitalization stocks,

which also tend to be more generous dividend payers.

While we respect that Growth may win the short- or

even intermediate-term battle, and that high-flying

richly-priced stocks like Netflix, Tesla and Yelp are grab-

bing the individual stock headlines nowadays, we know

that Value has historically won the long-term war.

VALUE VS. GROWTH: LONG-TERM

Some 87 years of evidence (Fama/French use book value to price as the determining factor) is overwhelming in support of Value...

Ret

urn

As of 10.31.13. Annualized index total returns. SOURCE: Al Frank via Bloomberg

0%

5%

10%

15%

20%

25%

30%

30-Yr20-Yr10-Yr5-Yr3-Yr2-Yr1-Yr

Russell 3000 Growth Russell 3000 Russell 3000 Value

VALUE VS. GROWTH: SHORT- AND MID-TERM

...but Growth has outperformed over the last one, three and five years, meaning that history would favor Value going forward.

As of 10.31.13. Using sector-based ETFs as proxies for index metrics: SPY for S&P 500, MDY for S&P 400 and SLY for S&P 600. SOURCE: Al Frank using data from Bloomberg.

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EV/EBITDAP/BP/EDividend YieldP/S

Rel

ativ

e R

atio

s

Buckingham Portfolio

Russell 3000

S&P 500 (SPY)

S&P 400 (MDY)

S&P 600 (SLY)

RELATIVE PORTFOLIO METRICS

The beauty of active portfolio management is that we are free to focus on the higher-yielding, less expensive areas of the market...

As of 10.31.13. Using sector-based ETFs as proxies for index metrics: SPY for S&P 500, MDY for S&P 400 and SLY for S&P 600. SOURCE: Al Frank using data from Bloomberg.

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lsIT

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strial

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Care

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cials

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y

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Disc

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ce t

o E

arni

ngs

Rat

io

Buckingham Portfolio

S&P 500 (SPY)

S&P 400 (MDY)

S&P 600 (SLY)

SECTOR VALUATIONS

...while our all-cap strategy allows us to favor large-capitalization stocks when they are attractive, as is very much the case today.

Value

Recommended Stocks

Banks BBT BB&T 33.97 44.65 18.8 nmf 1.0 nmf nmf 2.7% 23,946

• CM Canadian Imperial Bank 85.15 101.45 9.9 nmf 2.5 nmf nmf 4.5% 34,060

HBC HSBC Holdings PLC 55.04 66.80 12.7 nmf 1.4 nmf nmf 4.5% 206,366

PNC PNC Financial Services 73.53 99.23 10.6 nmf 1.5 nmf nmf 2.4% 39,118

WFC Wells Fargo & Co 42.69 53.19 11.1 nmf 1.8 nmf nmf 2.8% 225,134

Capital Goods CAT Caterpillar 83.36 106.45 15.0 0.9 7.3 6.8 374% 2.9% 53,985

DE Deere & Co 81.84 114.43 9.4 0.8 4.1 5.3 296% 2.5% 31,332

TWI Titan Int’l 14.50 26.94 17.3 0.4 1.2 6.2 66% 0.1% 776

Consumer Dur & App MDC MDC Holdings 29.19 58.08 11.5 0.9 1.2 15.7 70% 3.4% 1,427

Energy APA Apache 88.80 140.48 10.5 2.1 1.1 4.1 38% 0.9% 34,581

DO Diamond Offshore Drilling 61.93 95.21 11.9 2.9 1.8 6.9 32% 5.7% 8,610

ESV Ensco PLC 57.65 88.70 14.4 0.0 1.2 4.5 35% 3.5% 13,464

HFC HollyFrontier 46.06 62.30 5.8 0.5 2.5 3.0 36% 4.8% 9,205

RDS/A Royal Dutch Shell PLC 66.68 101.20 7.9 0.5 1.2 4.7 17% 4.6% 215,091

Food & Staples Retailing WMT Wal-Mart Stores 76.75 91.22 14.9 0.5 4.8 8.2 79% 2.4% 248,982

Health Care Equip/Srvcs ABT Abbott Laboratories 36.55 46.97 12.4 2.6 nmf nmf nmf 2.4% 56,803

AET Aetna 62.70 97.93 11.5 0.5 18.4 7.4 517% 1.3% 23,042

BAX Baxter Int’l 65.87 87.34 14.1 2.4 27.8 11.9 434% 3.0% 35,747

Insurance ALL Allstate 53.06 69.74 11.6 nmf 1.3 nmf nmf 1.9% 24,134

Materials AGU Agrium 85.32 136.18 9.2 0.8 2.8 6.1 48% 2.3% 12,523

AUY Yamana Gold 9.93 15.10 18.8 3.6 1.9 8.4 10% 2.6% 7,477

FCX Freeport-McMoRan 36.76 55.04 14.2 2.0 2.1 8.7 19% 3.4% 38,152

NEM Newmont Mining 27.26 47.44 12.5 1.6 1.2 8.0 56% 2.9% 13,614

Pharma/Biotech/Life Sci MRK Merck & Co 45.09 53.95 13.1 3.0 21.0 9.7 259% 3.8% 131,950

PFE Pfizer 30.69 37.91 14.3 3.7 nmf 8.5 nmf 3.1% 203,144

Real Estate ANH Anworth Mortgage Asset 4.91 5.99 8.6 nmf 0.8 nmf nmf 9.8% 702

BMR BioMed Realty Trust 19.92 24.25 nmf nmf 1.4 nmf nmf 4.7% 3,827

Retailing FL Foot Locker 34.70 44.27 12.7 0.8 2.4 5.8 6% 2.3% 5,153

PETS PetMed Express 14.84 18.38 16.3 1.3 4.5 8.0 0% 4.6% 300

SPLS Staples 16.13 23.13 12.0 0.4 4.3 5.9 40% 3.0% 10,653

• TGT Target 64.79 87.96 13.5 0.6 2.6 7.8 91% 2.7% 40,891

Software & Services IBM Int’l Business Machines 179.21 242.03 11.0 1.9 nmf 9.2 nmf 2.1% 194,596

MSFT Microsoft 35.41 41.95 12.8 3.7 4.6 7.3 20% 3.2% 295,560

ORCL Oracle 33.50 48.95 13.0 4.1 21.4 7.9 259% 1.4% 152,675

Technology Hardware AVX AVX 13.25 17.11 22.1 1.5 1.3 6.3 0% 2.6% 2,235

CSCO Cisco Systems 22.56 33.64 11.9 2.5 3.6 6.3 38% 3.0% 120,957

Telecom Services NTT Nippon Telegraph 26.10 42.70 11.4 0.0 0.0 4.0 56% 2.9% 69,071

Transportation CSX CSX 26.06 33.50 11.3 0.8 1.3 nmf 438% 2.3% 26,416

NSC Norfolk Southern 86.02 110.07 15.6 2.4 2.6 8.7 82% 2.4% 26,572

Utilities • ETR Entergy 64.72 86.04 10.6 1.0 1.3 6.8 132% 5.1% 11,538

Target Price Multiples EV/ Debt/ Div MktIndustry Group Ticker1 Company Price Price EPS Sales TBV2 EBITDA3 TE4 Yld Cap

In this space, we list each month 40 of our most attrac-

tively priced recommended stocks. All trade for signifi-

cant discounts to our determination of long-term fair val-

ue and/or offer favorable risk/reward profiles. Note that,

while we always seek substantial capital gains, we require

lower appreciation potential for stocks that we deem to

have more stable earnings streams, more diversified busi-

nesses and stronger balance sheets. The natural corollary

is that riskier companies must offer far greater upside

to warrant a recommendation. Further, as total return is

how performance is ultimately judged, we explicitly fac-

tor dividend payments into our analytical work.

As of 10.31.13. N/A=Not applicable. nmf=Not meaningful. 1 •=First-time recommendation. 2Tangible book value. 3Enterprise value-to-earnings before interest taxes depreciation and amortization. 4Tangible equity. SOURCE: Al Frank using data from Bloomberg

Portfolio BuilderResearch Team Favorites

The Prudent Speculator follows an approach to invest-

ing that focuses on broadly diversified investments

in undervalued stocks for their long-term apprecia-

tion potential. Does that mean we build portfolios of 20

stocks...30...? More like 50 and up. We like stocks. And we

like a lot of ‘em. We don’t rely nearly as much on “how

many” as we do “in which,” but we tend to invest in far

more names than most. This expansive diversification,

we find, potentially serves us well in two ways: we can

further minimize the risk of individual stock ownership,

while maximizing the likelihood of finding the truly big

winners among the undervalued masses.

As for the “in which” part, readers should know we dis-

criminate among potential investments primarily by their

relative valuation metrics and our assessments of stock-

specific risk. We buy only those stocks we find underval-

ued along several lines relative to their own trading his-

tory, those of their peers or that of the market in general.

The prices at which we’ll buy and sell stocks incorporate

a range of fundamental risks (e.g. credit, customer and

competitive dynamic) that we believe the companies may

face over our normal 3-to-5-year investing time horizon.

Each month in this column, we suggest to readers a

group of ten stocks with which to populate portfolios. The

list could serve as a portfolio foundation for new inves-

tors or as a pick-list for folks already maintaining well-

diversified holdings. While other themes may be featured

over time, our ongoing consolidation program has created

opportunities (i.e. proceeds of sales) to simply add stocks

each month to our newsletter portfolios.

Note that we are in no way suggesting that these stocks

replace those featured in prior months as we will always

issue a Sales Alert should we choose to exit a position.

This Month’s Theme

Redeploying proceeds from recent sales, we will add

$10,000 of Aetna and Canadian Imperial Bank to Mil-

lennium Portfolio. In PruFolio, we will pick up $18,000

of Entergy and Pfizer while we will bring the position in

BioMed Realty up to that amount. In TPS Portfolio, we

will buy $27,000 of Allstate and raise our stake in Royal

Dutch to that level. In Buckingham Portfolio, we will pur-

chase $5,500 of Target and Titan Int’l, while lifting Yama-

na Gold to that figure. As is our custom, we will transact

on November 8, four business days after publication.

TargetTicker Company Sector Price Price

Aetna (AET)

Aetna is one of the largest managed care organiza-

tions, covering almost 22 million members and focusing

on three segments: Health Care, Group Insurance and

Large Case Pension. The firm recently announced Q3 re-

sults that slightly missed analyst expectations, including

adjusted earnings of $1.50 per share on $13 billion of reve-

nue. Although investors were a bit disappointed, we were

pleased to see that management maintained its full year

earnings guidance of $5.80 to $5.90 per share. The low end

of the estimate range in mind, AET shares are currently

trading with a forward earnings multiple of less than 11.

While there might be a few operating potholes in the man-

aged health care space, we think Aetna offers attractive

long-term upside as it enjoys accretive benefits from its

Coventry Health Care acquisition, and takes advantage

of its scale and financial flexibility. We also like the com-

pany’s diverse product lines, improving margins in two of

its underperforming units, better pricing discipline, cost

control initiatives and share buybacks.

Allstate (ALL)

Allstate is the largest publicly-traded personal lines

insurance company in the U.S., with approximately 12%

of the personal lines market. Primarily a direct writer of

a full array of property and casualty products (preferred,

standard and nonstandard auto insurance, and homeown-

ers’ insurance), Allstate also offers life insurance and an-

nuities. The firm’s products are sold in North America by

NEWSLETTER PORTFOLIO PURCHASES

AET Aetna Health Care 62.70 97.93

ALL Allstate Financials 53.06 69.74

AUY Yamana Gold Materials 9.93 15.10

BMR BioMed Realty Trust Financials 19.92 24.25

CM Canadian Imperial Bank Financials 85.15 101.45

ETR Entergy Utilities 64.72 86.04

PFE Pfizer Health Care 30.69 37.91

RDS/A Royal Dutch Shell PLC Energy 66.68 101.20

TGT Target Consumer Discretionary 64.79 87.96

TWI Titan Int’l Industrials 14.50 26.94

As of 10.31.13. SOURCE: Al Frank using data from Bloomberg

Portfolio Builder continued

more than 10,000 exclusive Allstate agents as well as by

independent agents, banks and insurance brokers. Q3

earnings per share of $1.53 easily surpassed analyst ex-

pectations of $1.44. We also note that the underlying op-

erating performance was even stronger, as the firm had

to take charges related to previously discontinued lines

and pension costs equating to $0.29 per share. We are con-

fident that Allstate is well-positioned for the long term,

thanks to its vast distribution network, scale and result-

ing cost advantages, pricing sophistication and product

design. Its personal auto insurance business continues to

generate attractive returns and the fundamentals in hom-

eowners’ insurance are improving. ALL still has approxi-

mately $589 million remaining on its share repurchase

program. Allstate shares carry a 1.9% dividend yield and

are trading at 10 times consensus earnings estimates, the

latter well below the multiple of its peer group.

Yamana Gold (AUY)

Yamana Gold is a gold producer, developer and ex-

plorer with assets in Brazil, Chile, Argentina, Mexico and

Columbia. Despite declining gold prices since the begin-

ning of the year, the company has maintained a focus on

reliability, which includes the growth and protection of

reserves, resources and production inputs. Although Ya-

mana is heavily invested in gold production, it is also a

copper and silver miner and is well-positioned to continue

increasing its production capacity over the coming quar-

ters. Management pointed out that it is highly focused on

accomplishing this growth with greater cash flow certain-

ty due to the volatility in the current metals markets. Ad-

ditionally, we like the added emphasis on realistic expec-

tations and corresponding capital expenditures. Though

we are not banking on a resurgence in gold in the near

term, we like that Yamana is focused on long-term cash

flow generation, capital expenditure sustainability and

expense management. AUY has a dividend yield of 2.6%.

BioMed Realty Trust (BMR)

BioMed Realty Trust is a REIT that focuses on owning,

leasing, managing and developing commercial spaces

for life science tenants. BMR currently has a real estate

portfolio of approximately 16.3 million rentable square

feet primarily in the U.S., and stabilized occupancy rates

above 90%. The leasing side of the business, we believe,

will continue to benefit from the innovation and growth

within the life science industry as the U.S. population

ages, which should drive demand for incremental drugs.

In addition, we are encouraged by the relatively easy ac-

cess to capital its clients and prospective clients currently

have. The asset development and investing side of the

business should provide meaningful opportunity for the

company to expand as it launches new projects and part-

nerships, including Regeneron’s build-to-suit New York

project (which is 100% pre-leased) and pointed efforts to

further expand its presence in San Francisco. We feel that

the merger with Wexford Science & Technology will con-

tinue to improve its balance sheet and add important aca-

demic research space to the portfolio. Further, we think

the solid dividend yield of 4.7% is quite sustainable.

Canadian Imperial Bank (CM)

Canadian Imperial Bank, often referred to as CIBC

(while noting the ticker is CM), is the fifth largest Cana-

dian bank by market capitalization, providing banking

services through three operating segments: Retail and

Business Banking, Wealth Management and Wholesale

Banking. The retail market segment provides a full range

of banking services and products to retail and small busi-

ness customers and includes a 92% ownership in FirstCa-

ribbean. We like that the firm continues to enforce cost

control management, and that the Canadian government

has kept the banking segment attractive by maintaining

barriers to entry, which at least in the interim helps pro-

tect attractive returns for CIBC and its big competitors. As

the employment and economic growth outlook improves

in Canada, and interest rates eventually rise, CIBC should

meaningfully benefit. Shares of Canadian Imperial Bank

are trading for less than 10 times earnings, and offer in-

vestors a better than 4% dividend yield.

Entergy (ETR)

Entergy is an integrated energy company that is pri-

marily focused on electric power production and retail

electric distribution operations. The utility delivers elec-

tricity to customers in Arkansas, Louisiana, Mississippi

and Texas. ETR also owns and operates nuclear plants in

the northeast United States. Entergy has 30,000 megawatt

electric generating capacity and serves over 2.8 million

utility customers. We like that management has initia-

tives in place to lower costs and improve operational ef-

ficiency and customer service, while still focusing on rea-

sonably attractive earnings growth. We also believe that

the current constructive regulatory environment adds to

Entergy’s potential for growing earnings. Additionally,

environmental restrictions on coal-fired power plants and

Portfolio Builder continued

increasing pressure for restrictions on carbon dioxide

emissions make the economics of nuclear power more ap-

pealing. ETR shares are currently trading below 11 times

earnings, while yielding more than 5%.

Pfizer (PFE)

Pfizer is a global pharma company organized into two

commercial segments, Biopharmaceutical and Diversi-

fied. The Biopharmaceutical segment is focused on dis-

covering, developing, and marketing drugs for cardiovas-

cular, metabolic, central nervous system, immunology,

pain, infectious diseases, respiratory, oncology and other

indications. The Diversified segment represents the con-

sumer products division, which includes the non-pre-

scription self-medications and animal health products.

PFE reported Q3 earnings of $0.58 per share, which beat

expectations. We remain quite optimistic on PFE and its

ongoing restructuring story, as we believe its shares offer

a compelling valuation, and an attractive 3.1% dividend

yield, while the potential of its drug pipeline could pro-

vide meaningful upside. Further, Pfizer has a solid bal-

ance sheet and generates strong free cash flow, which al-

lows management financial flexibility to invest in growth

and return capital to shareholders (as evidenced by the

$13.1 billion in stock repurchased thus far in 2013).

Royal Dutch Shell (RDS/A)

Royal Dutch Shell is engaged in the exploration, pro-

duction, refining and sale of petroleum products world-

wide. The company continues to see volatility across its

revenue sources, due in part to unstable geopolitical en-

vironments in many areas of the world. Shares recently

dipped after the oil giant reported disappointing quarter-

ly earnings that were driven by higher expenses, mainte-

nance and disruption in Nigeria. While we do not expect

the headwinds to disappear, we believe that they are near-

er term in nature, and the recent share price weakness

offers an attractive entry point for new investors. We are

still quite constructive on the management team’s con-

tinued work to keep the momentum it has built up over

the last few years via a focused capital expenditure plan,

which aims to extend the life of assets through innova-

tive technologies and selectivity in exploration, as well as

its willingness to divest non-core assets. We believe that

shareholders will benefit from the continued emphasis

on integrating natural gas, deepwater drilling and non-

petroleum alternative fuels into a larger portion of total

revenue. Further, we are attracted to the solid balance

sheet and free cash flow generation which can continue to

drive share repurchases and dividend increases. We also

like the single-digit P/E ratio and the 4.6% dividend yield.

Target (TGT)

Target Corp. is one of the largest discount retailers, op-

erating 1,780 Target and SuperTarget domestic stores and

working to open 124 stores in Canada by year end. TGT

shares have dropped more than 11% since late July as soft

consumer spending has hit much of the retail sector. We

believe this phenomenon is temporary, and are pleased to

see management taking steps to fix operational challeng-

es in both Canada and here at home. That said, there are

significant growth opportunities in Canada, and we think

that once the rollout is complete and the kinks are worked

out, earnings growth will accelerate. While the mass roll-

out of groceries and the REDcard have hurt margins in

the short-term, we believe that both will meaningfully

drive additional store traffic to a level that will help off-

set the negative margin impact. Additionally, we like that

Target sold its credit card receivables business, and with

the reduced risk, should be able to further strengthen its

balance sheet, resulting in enhanced return of capital to

shareholders. TGT shares, which are trading at relatively

attractive valuation multiples compared to the five-year

averages, currently yield 2.7%.

Titan Int’l (TWI)

Titan International is a manufacturer of tire and wheel

systems for agriculture, mining and commercial applica-

tions. While three-quarters of its business is in the U.S.,

Titan has been making significant progress expanding

into other markets around the globe, including Germany,

Russia, Australia and South America. Though the recent

broad-scale decline in commodity prices has hit Titan’s

shares as well, we, along with management, remain op-

timistic for the long-term prospects as emerging market

economies around the globe continue to industrialize and

many citizens of these areas enjoy improved socioeco-

nomic statuses. While the mining portion of the company

will continue to climb uphill in the near term, the agri-

culture wheel and tire business is still performing well

and benefitting from growth in China and India, where

imports of pre-owned equipment have created an earlier

need for replacement components. We continue to believe

that TWI shares offer attractive upside potential, partially

based on its sizable market share and unique stable of as-

sets, not to mention its aggressive acquisition strategy.

Inception Since Index Date Inception Return Index

Oct YTD 1-Year 3-Year 5-Year 10-Year

Since The Prudent Speculator’s launch in March 1977, its 1,804 stock recommendations have returned, on average, an annualized 17.23%, not including dividends.

NEWSLETTER PORTFOLIO PERFORMANCE

As of 10.31.13. All data are total returns, except for that of all recommended stocks, which excludes dividends. Data for periods greater than one year are annualized. The Dow Jones Industrial Average (DJIA or Dow) is a price-weighted average of 30 actively traded “blue chip” stocks, primarily industrials, but in-cludes financials and other service-oriented companies. The Russell 3000 Index measure the performance of the largest 3,000 U.S. companies. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. 1The Russell 3000 Index lacks sufficient history to match that of Al Frank’s TPS Portfolio. We therefore have shown the S&P 500 Index for comparison purposes. SOURCE: Al Frank using data from Bloomberg

TPS Portfolio is Al Frank’s actual investment portfolio. Though not presently leveraged, it has been so in the past. Buckingham Portfolio is John Buckingham’s actual investment portfolio. Though not presently leveraged, it has been so in the past. Millennium Portfolio is unleveraged and hypothetical. PruFolio is unleveraged and hypothetical.

All portfolio returns are calculated on a total return basis and reflect the reinvestment of dividends, if any, margin leverage and margin interest charges, trading costs and subscription costs. There are inherent limitations with in hypothetical or model portfolio results as the securities are not actually purchased or sold. They may not reflect the impact, if any, of material market conditions which could have has an impact on AFAMs decision making if the hypothetical portfolios were real. Hypothetical performance is shown for illustrative purposes only and should not be interpreted as an indication of performance of any AFAM portfolio. The use of leverage magnifies gains and losses and increases risk to a portfolio.

IMPORTANT DISCLOSURES

The Prudent Speculator is published by

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Nothing presented herein is, or is intended to constitute, specific investment advice or marketing material. Information provided reflects the views of Al Frank Asset Management (AFAM) as of a particular time. Such views are subject to change at any point and AFAM shall not be obligated to provide notice of any change. Any securities information regarding holdings, allocations and other characteristics are presented to illustrate examples of the types of investments or allocations that AFAM may have bought or pursued as of a particular date. It may not be representative of any current or future investments or allocations and nothing should be construed as a recommendation to follow any invest-ment strategy or allocation. Any forward looking statements or forecasts are based on assumptions and actual results are ex-pected to vary from any such statements or forecasts. No reli-ance should be placed on any such statements or forecasts when making any investment decision. While AFAM has used reason-able efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability or completeness of third-party information presented herein. No guarantee of investment performance is being provided and no inference to the contrary should be made. There is a risk of loss from an investment in securities. Past performance is not a guarantee of future performance. Registration of an investment adviser does not imply any certain level of skill or training.

AFAM is an Investment Adviser, registered with the SEC, is no-tice filed in the State of CA and various other states, and serves as editor to The Prudent Speculator and the weekly e-mail up-dates; (TPS: ISSN 0743-0809). AFAM is sub-adviser to two propri-etary mutual funds and serves as manager to separate managed accounts. Many of the securities contained within this newslet-ter mentioned are analyzed, recommended and transacted in by AFAM and/or its associated persons for client and personal ac-counts. It is also possible that AFAM and/or its associated per-sons may take a position in a security that is inconsistent with the recommendations provided in TPS or may purchase securi-ties not mentioned in TPS without notice to its subscribers.

Past specific recommendations: Investment recommenda-tions provided herein are subject to change at any time. Past and current recommendations that are profitable are not in-dicative of future results, which may in fact result in a loss. See prudentspeculator.com or contact AFAM at tps@alfrank.com for a list of all past specific investment recommendations. Perfor-mance and characteristics of AFAM portfolios and securities are subject to risks and uncertainties. The stocks selected for listing and discussion in the newsletter were based on proprietary ana-lytical work performed by AFAM, and not based on performance, meaning that they are chosen irrespective of profits or losses. The securities presented do not represent all of the securities bought, sold or recommended.

Privacy: TPS periodically rents its mailing list to unaffiliated third-parties. Telephone marketing is prohibited. Subscribers who wish to have their names removed from the mailing list should contact TPS by e-mailing tps@alfrank.com.

Subscriptions: TPS is published monthly, with weekly e-mail updates, at the following rates: 1-year: $295; 2-years: $495. Sub-scriptions are not assignable. For subscribing, please contact us at tps@alfrank.com or call 877.817.4394.

Newsletter Portfolios

Buckingham 4.06 30.65 34.69 16.83 18.90 8.13

Millennium 4.28 32.06 35.07 17.91 20.12 8.40

PruFolio 4.03 28.96 31.81 18.85 19.58 9.47

TPS 3.69 32.09 36.99 18.14 18.61 10.41

Major Indexes

Russell 3000 4.25 26.46 29.01 16.88 15.92 7.91

S&P 500 4.60 25.30 27.17 16.54 15.15 7.45

Dow Jones Industrial Avg 2.88 21.02 21.82 14.80 13.90 7.43

Buckingham 01.21.03 13.21 9.36 Russell 3000

Millennium 12.31.99 9.77 3.93 Russell 3000

PruFolio 12.29.00 14.57 4.86 Russell 3000

TPS 03.10.77 18.75 11.42 S&P 5001