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January 2011

FLIR Systems (FLIR) O’Reilly Automotive (ORLY) Thoratec Corporation (THOR)

INVESTMENT COMMENTS

The government has tried a number of stimu-lus measures in an attempt to resuscitate the economy in the past couple of years. This started with President Bush’s small tax rebate in 2008, President Obama’s $875 billion stimu-lus plan in 2009, and ongoing monetary stimu-lus from the Federal Reserve Board. Econo-mists argue whether or not these had more than a temporary effect on the economy. The more recent initiative from the Fed seems to be having some effect.

The Fed’s goal is to return our economy to the “virtuous circle.” This term refers to the self-sustaining mechanism whereby solid consum-er confidence fuels demand, boosting busi-ness output and employment. It is a little early to be positive that this virtuous circle is em-bedding itself in our economy, but there are some interesting early signs.

In late August 2010, Federal Reserve Board Chairman Ben Bernanke gave a speech in which he revealed a discussion of additional bond purchases to put more money into the economy. The Fed started purchasing inter-mediate- to long-term Treasury securities on November 12. The plan is to purchase $75 billion of these securities each month for eight months for a total of $600 billion. The stock

market didn’t wait for the actual impact to be felt, however. The S&P bottomed out right around the time of Mr. Bernanke’s speech in August. It has sprinted up an impressive 19% in the 3-1/2 months since.

Higher stock prices may be partially responsi-ble for improving consumer confidence and spending. While consumer confidence is still low compared to pre-recession levels, it was up an impressive four points in November. Personal income growth was fairly strong, and spending has remained on a positive trajecto-ry. November retail sales were also up signifi-cantly and have risen at a 7.8% annualized rate in just the last three months.

The stock market responded quickly to this round of monetary stimulus and the economy is responding gradually, but the real confirma-tion that this virtuous circle might be in place is how the bond market is behaving. Prices of long-term taxable bonds are down about 4% over the past six weeks and municipals are down 9% since their peak. The yield on the ten-year Treasury note is up to 3.45%, a rise of more than one percentage point since its low in October. The significance of these de-clines is that investors have been piling into bonds over the past couple of years, apparent-

Guiding investors to

Published by ICLUBcentral Inc. 711 W. 13 Mile Rd.Madison Heights, MI 48071www.iclub.com/IAS

success since 1973.

January 2011 ly feeling that the uncertainty over growth made bonds modest, stable return more valu-able. As investors are becoming more confi-dent about a U.S. recovery, a safe 2%, 3%, 4% doesn’t sound as appealing as it did when the stock market was shaky. An economist recently told us that the Fed seemed to be tar-geting stock prices specifically as a way to im-prove consumer confidence.

Bond investors may be concerned that the current low rates of inflation may rise if the Fed remains “accommodative” too long. In its most recent official pronouncement on December 14, the Fed noted “The economic recovery is continuing, though ‘not’ at a rate to sufficiently

bring down unemployment.” This comment is particularly significant because the previous month, the Fed described the pace of recovery as “slow.” One rarely gets unambiguous sig-nals from the Fed, but it clearly intended to communicate an improved economic outlook through the choice of the words “continuing” versus “slow.”

While we have been generally positive about the economic outlook this year, it has been somewhat puzzling to us that the bond market really didn’t share our opinion. It is encourag-ing to see higher bond yields as an expecta-tion that economic growth may be improving.

Key Market Indicators (through December 15, 2010)

Standard & Poor's 500

600700800900100011001200130014001500

7/ 1/05 3/31/06 12/31/06 9/ 28/07 6/ 30/08 3/ 6/ 09 12/ 4/ 09 8/20/ 10

Yield on Long-term Treasuries

2.503.003.504.004.505.005.506.00

7/1/05 3/31/06 12/31/06 9/28/07 6/30/08 3/13/09 12/11/09 9/3/10

Yield on 91-Day Treasury Bills

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7/1/05 3/10/06 11/14/06 7/27/07 4/11/08 12/12/08 8/14/09 4/16/10 12/15/10

NEWS OF COMPANIES

Sale of Stock Recommended Baldor Electric (BEZ) Copart, Inc. (CPRT) Progressive Corporation (PGR) Swiss construction giant ABB Group offered an impressive 63.50 in cash for Baldor Elec-tric. This represents a hefty 41% premium to Baldor’s stock price right before the acquisi-

tion. As we have frequently mentioned, changes in energy efficiency regulations will push customers into higher priced motors, significantly aiding Baldor’s sales and profits. We expected to recommend a sale of Baldor given that this growth improvement would have been temporary. We appreciate that ABB makes the decision even easier. We recom-mend that Baldor shareholders either sell

January 2011 their shares in the open market or tender them to ABB. We will discontinue follow-up of BEZ (63.21).

Vehicle auctioneer Copart reported 9.8% rev-enue growth in the first fiscal quarter, norma-lized for an accounting change. Organic growth was 6.1%. Unfortunately, incremental revenue came at the expense of gross mar-gins, which decreased more than 2% year-over-year. Copart is growing again, but not very profitably. These lower gross margins could prove permanent, as the company’s growth is increasingly driven by relationships with large partners who can negotiate highly competitive contracts. Acquisition activity has also been surprisingly slow.

Meanwhile, SG&A expenses continue to out-pace revenue growth. Operating income grew just 5% year-over-year. Management attributes the increasing costs to one-time re-structuring charges. If these costs indeed prove temporary, and if gross margins stabil-ize, the company should realize nice operating leverage in coming years. This is the second quarter of stubbornly high costs, however, and management provides no guidance as to when investors can reasonably expect cost-cutting efforts to help the bottom line. The an-swer remains “soon,” as it has for some time now.

An eroding growth story and vague promises of future cost savings add up to a tenuous in-vestment thesis, and Copart’s stock now ap-pears unsuitable for growth-oriented investors. We will therefore discontinue coverage of CPRT (36.95) in this newsletter.

Progressive’s revenue has been fairly flat for four years. The auto insurance market is ex-tremely competitive, and price increases have been difficult to obtain. While the company remains one of the better-managed auto in-surers, it appears that its efforts and strong brand name are only producing low single-digit revenue growth. It is hard to envision profits growing much faster than that. In the third quarter, adjusted EPS rose 3% with 5% reve-nue growth. Stronger economic growth might increase overall miles driven, but this is prob-

ably only a slight boost on top of very modest growth figures. Better growth companies are available for P/E ratios comparable to or cheaper than Progressive’s trailing P/E of 12.8. We recommend that PGR (20.75) be sold and will discontinue coverage.

* * * * * Like other investment managers, Eaton Vance continues to mount a meaningful re-covery reflecting improvement in the stock market. Earnings rose 38% in the October quarter, driven by a 19% increase in revenue. Earnings figures exclude the impact of a non-cash accounting charge in this year’s third quarter and a one-time tax adjustment in last year’s quarter. Assets under management hit a record at October 31, suggesting that con-tinued good times are ahead for the company. The annualized growth rate of new assets was disappointing at just 7%, but would have been a more typical 11% excluding the loss of a single large customer due to a merger.

EV (30.90) is a buy up to 31.

The first fiscal quarter ended November 30, 2010 for FactSet Research Systems showed continuing recovery. Sales increased 12%, the first double digit increase in seven quarters, a clear reflection that the investment manage-ment industry has stabilized and is starting to spend again. EPS, was $0.85, up 15% after adjusting for a one-time tax settlement. The company continues to hire staff in support of expanding international operations which to-day only account for 32% of sales. For the second fiscal quarter, FactSet projects sales growth of 11%-14% and EPS of $0.85-$0.87, up 13%-16%.

FDS (91.30) is a buy up to 73.

GameStop enjoyed a reasonable third quarter as it gears up for the critical holiday season. Sales for the three months ended October 31 increased 4%, led by a 9% increase in new software sales. However, new hardware sales fell 14%. Comparable store sales in the U.S. increased 5.3%, but company-wide compara-ble stores sales were up only 1.1% as interna-tional hardware sales were weak. EPS, ad-

January 2011 justed for a charge to retire debt, came in at $0.38, up 19%. Operating income increased only 3%, but EPS enjoyed leverage from lower interest cost, stock buybacks, and a lower tax rate.

The firm is optimistic heading into the fiscal fourth quarter. EPS is projected in the range of $1.53-$1.59, up 19%-23%, based on new hardware platforms from Microsoft and Sony, new software titles, and a well-stocked inven-tory of used games.

GME (21.56) is a buy up to 27.

On December 16, the Federal Reserve Board came out with its response to the Durbin Amendment to the Dodd-Frank financial reform act. The Durbin Amendment required the Fed to design a program to ensure that debit card transactions are priced to reflect the cost of the underlying service, and that there would be additional competition in the debit market. Debit transaction prices will cost mer-chants between seven and twelve cents per transaction, which is actually higher than we thought.

While this should have been good news for Global Payments and Visa, there were two other troubling aspects of the Fed announce-ment. One is that the Fed doesn’t seem to distinguish between PIN and signature debit transactions. We view these as separate products. PIN debit is just a digital form of cash while signature debit is like paying cash, but with the consumer protections Visa and MasterCard offer. The Fed is also considering requiring that each debit card feature two un-affiliated signature debit networks, which ap-pears to be over and above the law’s require-ment that each card feature two unaffiliated debit networks (without distinguishing between the PIN and signature debit types.) The dan-ger to Global Payments and Visa is that greatly weakening the signature debit market would hurt the profits of both companies, since the revenue and profit contribution from signa-ture debit is far higher than from PIN debit.

The price of Global Payments actually went up on this news, so there may be more here than meets the eye. About 50% of Global

Payments’ transaction volume is signature debit. We are concerned about the huge po-tential impact of the Fed tinkering with the sig-nature debit product. The price of Visa went down after the Fed announcement. While this reaction makes sense, we disagree with the extent of its decline, especially considering Global Payments’ price move. We will keep you up to date about these developments but aren’t drawing conclusions at this time.

GPN (44.43) is a buy up to 50.

JoS. A. Bank Clothiers reported a soft quar-ter, but early December results look promising. Sales for the third fiscal quarter ended Octo-ber 31, 2010 increased 7%. Comparable store sales increased 3%, and Direct Marketing sales (largely those through the Internet) in-creased 15%. EPS came in at $0.45, up 7%. Suit sales suffered during the quarter against some difficult comparisons, but the company reports that November and December results have been strong. JoS. A. Bank has ex-panded its tuxedo rental program to all stores and expects meaningful contributions in Fiscal 2011.

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Investment Analysis Provided By

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teed. It should never be assumed that recommenda-‐

tions will be profitable or will equal the past perfor-‐

mance of listed or recommended securities.

January 2011 JOSB (40.04) is a buy up to 39.

Medtronic Inc. reported moderate results for the fiscal second quarter ending October 29. Earnings per share were up 11% on a 2% in-crease in sales. While these numbers do not sound very impressive, we believe the com-pany when it states that Medtronic is building a foundation for the future. In terms of geo-graphical expansion, the firm has been in-creasing investment in China, where it states that it sees itself as the leader for the products that it sells. The pipeline of new products is full, with a new product for dealing with hyper-tension and a range of products coming from acquisitions. The company’s most recent ac-quisition is a firm called Ardian, which has unique competency in catheters. Medtronic is continuing R&D efforts in stents, spinal cord stimulators, and cryo products. The core of the company’s products remains in cardiac rhythm stimulation. Medtronic is a very large and ex-tremely high-quality firm whose stock has set-tled into a stable but not exciting routine. How-

ever, we feel it offers excellent long-term po-tential.

MDT (35.99) is a buy up to 35.

Visa. See comments under Global Pay-

ments.

V (76.94) is a buy up to 98.

* * * * * “Est. EPS” on the ranking tables found before

this month’s company write-ups were updated

to reflect estimated earnings for the twelve

months ending 12/31/11. Other individual ad-

justments are made when circumstances

deem it necessary. Any of these changes can

affect the buy and sell prices. We typically

forecast approximately twelve months into the

future. Good first quarter earnings and brigh-

tening outlooks for many companies have re-

sulted in substantially higher forecasted earn-

ings than the previous estimates.

IAS NAMED AGAIN TO INVESTMENT NEWSLETTER HONOR ROLL

In the December 2010 issue of the Hulbert Financial Digest, the publication that tracks the performance of U.S. stock and mutual fund newsletters, Editor Mark Hulbert names his 2011 Investment Newsletter Honor Roll. We are pleased to note that the Inves-tor Advisory Service has been named to this list for the second year in a row. This year, just six equity and mutual fund newslet-ters qualified for the 2011 Honor Roll.

To be included on Hulbert's Investment Newsletter Honor Roll, newsletters must show above-average performance, on a risk-adjusted basis, in both up and down markets over the past decade. Since Hulbert began tracking the Investor Advisory Service in 1998, last year was the first year that the Service was eligible for inclusion, so we are doubly pleased to have continued to demon-strate superior performance. In fact, of the fund and equity newsletters named to the 2011 Investment Newsletter Honor Roll, the IAS has the second-best overall perfor-

mance.

Fewer than 10% of the newsletters tracked by Hulbert qualified for the 2011 Investment Newsletter Honor Roll. According to Hul-bert, if newsletters’ ranks in up and down markets were randomly distributed, 25% of them would make it onto the list. Since fewer than 10% actually do make the grade, Hul-bert says that “making it onto the Honor Roll really means something.”

In addition, Hulbert notes that investors in-cluded on the 2010 Honor Roll did better over the last 12 months than those that did not, as they have every year this decade.

For more information on the Hulbert Finan-cial Digest, call 1-888-HULBERT or visit http://www.marketwatch.com/hulbert-newsletters.

On behalf of the staff and analysts of the In-vestor Advisory Service, we thank all of our subscribers for their continuing support.

January 2011

Qtr %end This Year Last Year Change

Eaton Vance * 10/31 0.47 0.34 38.2%FactSet 11/30 0.85 0.74 14.9%GameStop 10/30 0.38 0.32 18.8%JoS. A. Bank 10/31 0.45 0.42 7.1%Medtronic* 10/24 0.82 0.74 10.8%Progressive * 09/30 0.37 0.36 2.8%

* Excludes the effects of nonrecurring items

% Date RecordCompany New Old Chng. Payable DateRoper Industries 0.110 0.095 16% 1/28 1/7Stryker Corporation 0.18 0.15 20% 1/31 31-Dec

Scott Maury DanHorsburgh, Elvekrog, Boyle,CFA CFA CFA

P e a c e o f M i n d Contact Dan KrstevskiC o n f i d e n c e 800-449-6970W e a l t h & L i f e s t y l e P r e s e r v a t i o n www.seger-elvekrog.com

M a n a g i n g R i s k & D e l i v e r i n g S o l i d I n v e s t m e n t R e s u l t s f o r O v e r 2 5 Y e a r sC a r e f u l l y F o l l o w i n g B e t t e r I n v e s t i n g M e t h o d s

Recent Earnings Reports - January 2011

Dividend Changes

Stock Splits

Company

None

---Earnings---Per Share

P/E Ratio Sort

Q P/EU December 15, 2010 B Over- Rwd/ asA % Est. Tot. % Curr Buy U valued Risk % DateL Sym Company Name Price Div Yld EPS Ret. Gr. P/E RV Up to Y At Ratio Growth Rec.3 RGA Reinsurance Group 52.85 0.48 0.9% 7.25 22.1 10% 7.3 73% 57.00 B 94.00 3.7 73% 9/10

3 GME Gamestop 21.56 0.00 0.0% 2.87 23.9 10% 7.5 68% 27.00 B 43.00 5.9 75% 8/09

2 CEPH Cephalon 62.88 0.00 0.0% 8.17 37.6 11% 7.7 39% 106.00 B 204.00 9.9 70% 1/10

2 AFL AFLAC Inc. 55.10 1.20 2.2% 6.21 25.6 13% 8.9 74% 64.00 B 97.00 4.6 68% 12/06

2 SFG StanCorp Financial 46.03 0.86 1.9% 5.13 18.5 12% 9.0 86% 48.00 B 65.00 3.5 75% 6/09

2 GILD Gilead Sciences 37.31 0.00 0.0% 4.06 39.2 17% 9.2 43% 63.00 B 107.00 8.6 54% 4/10

3 HCC HCC Insurance 28.50 0.50 1.8% 3.05 16.7 14% 9.3 95% 30.00 B 39.00 3.8 66% 7/09

3 RIMM Research in Motion 59.18 0.00 0.0% 6.23 29.8 15% 9.5 63% 81.00 B 126.00 6.6 63% 1/10

3 TEVA Teva Pharmaceuticals 52.31 0.50 1.0% 5.25 31.1 15% 10.0 55% 76.00 B 116.00 9.3 67% 5/10

1 MDT Medtronic, Inc. 35.99 0.90 2.5% 3.58 32.3 10% 10.1 53% 35.00 91.00 2.3 101% 2/10

1 ABT Abbott Labs 48.12 1.76 3.7% 4.67 27.4 12% 10.3 61% 64.00 B 89.00 9.7 86% 3/10

2 AMGN Amgen 55.67 0.00 0.0% 5.34 24.4 9% 10.4 69% 71.00 B 117.00 7.0 116% 2/09

3 TRLG True Religion Apparel 21.89 0.00 0.0% 2.00 22.3 12% 10.9 78% 26.00 B 38.00 5.8 91% 3/09

3 WDC Western Digital 33.21 0.00 0.0% 3.02 9.5 12% 11.0 138% 24.00 34.00 1.1 92% 7/10

3 AFAM Almost Family 34.95 0.00 0.0% 3.09 26.9 17% 11.3 80% 40.00 B 65.00 4.0 66% 4/10

2 ACM AECOM 27.72 0.00 0.0% 2.38 27.0 15% 11.6 68% 36.00 B 55.00 6.6 77% 2/10

3 JOSB Jos A Bank Clothiers Inc. 40.04 0.00 0.0% 3.40 17.7 12% 11.8 97% 39.00 57.00 2.7 98% 3/10

1 JNJ Johnson & Johnson 62.57 2.16 3.5% 5.01 16.2 8% 12.5 81% 59.00 84.00 2.4 156% 5/09

2 STJ St. Jude Medical 41.71 0.00 0.0% 3.25 22.8 13% 12.8 61% 48.00 B 72.00 4.5 98% 10/10

2 FISV Fiserv, Inc. 59.60 0.00 0.0% 4.45 15.8 12% 13.4 91% 58.00 80.00 2.8 112% 10/07

3 PGR Progressive Corp. 20.75 0.15 0.7% 1.55 11.0 12% 13.4 104% 17.50 23.00 1.5 112% 7/04

3 PRAA Portfolio Recovery 71.90 0.00 0.0% 5.20 18.1 15% 13.8 90% 68.00 100.00 2.6 92% 9/09

2 LH Laboratory Corp 86.64 0.00 0.0% 6.03 17.8 13% 14.4 83% 89.00 B 125.00 3.3 111% 9/09

2 BEN Franklin Resources 116.77 0.88 0.8% 8.05 21.4 16% 14.5 85% 131.00 B 187.00 4.4 91% 3/10

3 OMC Omnicom Group 46.06 0.80 1.7% 3.15 19.1 13% 14.6 91% 37.00 63.00 1.8 112% 9/06

2 SHPGY Shire 71.03 0.35 0.5% 4.87 31.8 16% 14.6 58% 107.00 B 164.00 10.1 91% 12/10

1 SYK Stryker Corp. 53.55 0.72 1.3% 3.64 24.8 14% 14.7 74% 62.00 B 92.00 4.4 105% 7/10

2 BCR C. R. Bard 91.34 0.68 0.7% 6.15 21.7 14% 14.9 78% 105.00 B 149.00 4.9 106% 11/09

2 EBIX EBIX 22.44 0.00 0.0% 1.50 20.2 17% 15.0 100% 23.00 B 35.00 3.6 88% 5/10

3 NSR NeuStar 26.27 0.00 0.0% 1.75 18.2 12% 15.0 88% 29.00 B 39.00 4.4 125% 1/10

2 V Visa 74.00 0.60 0.8% 4.90 26.2 17% 15.1 76% 98.00 B 142.00 8.1 89% 11/10

2 MHS Medco Health 62.52 0.00 0.0% 4.07 28.0 17% 15.4 68% 76.00 B 122.00 4.7 91% 8/10

3 DGIT DG 27.73 0.00 0.0% 1.74 22.4 15% 15.9 82% 34.00 B 48.00 7.1 106% 10/10

3 GPN Global Payments 44.43 0.08 0.2% 2.79 19.5 15% 15.9 84% 50.00 B 69.00 4.7 106% 5/10

3 PCP Precision Castparts 137.98 0.12 0.1% 8.56 16.3 14% 16.1 100% 131.00 185.00 2.5 115% 4/08

3 CFR Cullen/Frost Bankers 58.93 1.72 2.9% 3.63 10.5 10% 16.2 111% 51.00 63.00 1.4 162% 11/09

1 AAPL Apple 320.36 0.00 0.0% 19.69 23.6 17% 16.3 82% 394.00 B 574.00 6.4 96% 4/10

3 FLIR FLIR Systems 28.39 0.00 0.0% 1.73 19.6 15% 16.4 78% 32.00 B 44.00 4.3 109% 1/11

3 SYNT Syntel 48.16 0.24 0.5% 2.89 15.7 14% 16.7 111% 43.00 63.00 2.4 119% 7/10

2 EV Eaton Vance 30.90 0.72 2.3% 1.84 18.1 15% 16.8 96% 31.00 B 42.00 3.2 112% 6/04

Recommended companies are highlighted

P/E Ratio Sort

Q P/EU December 15, 2010 B Over- Rwd/ asA % Est. Tot. % Curr Buy U valued Risk % DateL Sym Company Name Price Div Yld EPS Ret. Gr. P/E RV Up to Y At Ratio Growth Rec.3 SYNA Synaptics 30.14 0.00 0.0% 1.78 20.9 15% 16.9 87% 34.00 B 49.00 4.7 113% 12/10

2 CELG Celgene 57.83 0.00 0.0% 3.39 29.5 20% 17.1 36% 77.00 B 122.00 6.2 86% 8/10

1 EMR Emerson 57.94 1.38 2.4% 3.38 13.3 10% 17.1 103% 51.00 67.00 1.8 171% 10/08

3 PX Praxair, Inc. 93.09 1.80 1.9% 5.45 17.5 13% 17.1 97% 90.00 124.00 2.7 132% 6/10

3 LKQX LKQ Corp. 22.85 0.00 0.0% 1.33 20.5 15% 17.2 86% 27.00 B 37.00 5.5 115% 6/10

3 THOR Thoratec 26.01 0.00 0.0% 1.51 29.3 20% 17.2 32% 35.00 B 54.00 6.2 86% 1/11

2 WAT Waters Corp. 79.36 0.00 0.0% 4.61 17.2 14% 17.2 94% 82.00 B 113.00 3.3 123% 10/10

2 DHR Danaher 45.91 0.08 0.2% 2.63 17.3 15% 17.5 94% 49.00 B 67.00 4.5 117% 12/10

3 PRGO Perrigo 66.29 0.22 0.3% 3.79 18.6 15% 17.5 99% 66.00 95.00 2.9 117% 9/10

3 IEX IDEX Corp. 39.43 0.60 1.5% 2.23 15.3 12% 17.7 104% 33.00 48.00 1.8 148% 6/99

3 ORLY O'Reilly Automotive 61.13 0.00 0.0% 3.45 16.8 15% 17.7 96% 64.00 B 91.00 6.3 118% 1/11

1 ADP Automatic Data Proc. 46.60 1.44 3.1% 2.57 18.4 13% 18.1 91% 44.00 61.00 2.5 139% 8/09

3 LOGI Logitech International 19.06 0.00 0.0% 1.05 11.6 12% 18.2 121% 14.50 21.00 1.3 152% 2/05

2 EBAY eBay 30.19 0.00 0.0% 1.62 17.8 14% 18.6 93% 30.00 43.00 3.0 133% 9/10

2 BRLI Bio-Reference 21.46 0.00 0.0% 1.15 22.9 18% 18.7 85% 25.00 B 38.00 6.3 104% 11/10

2 URBN Urban Outfitters 36.62 0.00 0.0% 1.95 18.4 15% 18.8 94% 39.00 B 55.00 3.9 125% 12/08

1 EMC EMC Corp. 22.54 0.00 0.0% 1.19 18.2 15% 18.9 95% 20.00 32.00 3.0 126% 9/08

2 COH Coach 57.68 0.60 1.0% 3.02 18.1 15% 19.1 101% 57.00 81.00 3.1 127% 6/10

3 VAR Varian Medical Systems 68.34 0.00 0.0% 3.50 10.0 12% 19.5 130% 45.00 70.00 0.9 163% 5/09

3 FOSL Fossil 71.36 0.00 0.0% 3.64 15.5 15% 19.6 115% 62.00 92.00 2.2 131% 2/09

3 TSCO Tractor Supply 47.53 0.28 0.6% 2.42 11.6 12% 19.6 119% 38.00 54.00 1.5 163% 7/09

3 BRKR Bruker 17.16 0.00 0.0% 0.87 23.3 17% 19.7 80% 19.00 B 29.00 3.8 116% 11/10

3 BRO Brown & Brown 23.86 0.32 1.3% 1.20 13.3 15% 19.9 116% 20.00 27.00 1.7 133% 4/093 DECK Deckers Outdoor 81.78 0.00 0.0% 4.07 9.4 15% 20.1 155% 50.00 76.00 0.8 134% 9/093 ROP Roper Ind. 77.19 0.44 0.6% 3.80 16.7 16% 20.3 104% 74.00 105.00 2.8 127% 3/09

2 CHSI Catalyst Health 46.85 0.00 0.0% 2.26 16.9 16% 20.7 104% 37.00 58.00 1.7 129% 7/09

2 MTD Mettler-Toledo 153.36 0.00 0.0% 7.28 12.0 14% 21.1 112% 91.00 160.00 1.0 151% 11/08

1 TROW T. Rowe Price 62.70 1.08 1.7% 2.96 17.9 16% 21.2 110% 56.00 81.00 2.1 133% 8/10

2 PNRA Panera Bread 104.35 0.00 0.0% 4.35 12.0 14% 24.0 120% 84.00 117.00 1.5 171% 2/08

2 ISRG Intuitive Surgical 256.26 0.00 0.0% 10.32 20.2 20% 24.8 99% 258.00 B 421.00 6.9 124% 1/09

2 BEZ Baldor Electric 63.21 0.68 1.1% 2.54 2.9 10% 24.9 150% 32.00 47.00 0.1 249% 1/01

2 FDS FactSet Research Sys 91.30 0.92 1.0% 3.64 12.8 15% 25.1 126% 73.00 103.00 1.5 167% 12/08

1 FAST Fastenal Co. 59.14 0.84 1.4% 2.19 13.8 18% 27.0 124% 48.00 68.00 1.6 150% 1/07

2 SSYS Stratasys 32.13 0.00 0.0% 0.75 -0.3 14% 42.8 214% 15.00 22.00 0.0 306% 12/06


Symbol Sort

Q P/EU December 15, 2010 B Over- Rwd/ asA % Est. Tot. % Curr Buy U valued Risk % DateL Sym Company Name Price Div Yld EPS Ret. Gr. P/E RV Up to Y At Ratio Growth Rec.1 AAPL Apple 320.36 0.00 0.0% 19.69 23.6 17% 16.3 82% 394.00 B 574.00 6.4 96% 4/10

1 ABT Abbott Labs 48.12 1.76 3.7% 4.67 27.4 12% 10.3 61% 64.00 B 89.00 9.7 86% 3/10

2 ACM AECOM 27.72 0.00 0.0% 2.38 27.0 15% 11.6 68% 36.00 B 55.00 6.6 77% 2/10



2 AFL AFLAC Inc. 55.10 1.20 2.2% 6.21 25.6 13% 8.9 74% 64.00 B 97.00 4.6 68% 12/06

2 AMGN Amgen 55.67 0.00 0.0% 5.34 24.4 9% 10.4 69% 71.00 B 117.00 7.0 116% 2/09

2 BCR C. R. Bard 91.34 0.68 0.7% 6.15 21.7 14% 14.9 78% 105.00 B 149.00 4.9 106% 11/09



3 BRKR Bruker 17.16 0.00 0.0% 0.87 23.3 17% 19.7 80% 19.00 B 29.00 3.8 116% 11/10


3 BRO Brown & Brown 23.86 0.32 1.3% 1.20 13.3 15% 19.9 116% 20.00 27.00 1.7 133% 4/09

2 CELG Celgene 57.83 0.00 0.0% 3.39 29.5 20% 17.1 36% 77.00 B 122.00 6.2 86% 8/10

2 CEPH Cephalon 62.88 0.00 0.0% 8.17 37.6 11% 7.7 39% 106.00 B 204.00 9.9 70% 1/10



2 COH Coach 57.68 0.60 1.0% 3.02 18.1 15% 19.1 101% 57.00 81.00 3.1 127% 6/10

3 DECK Deckers Outdoor 81.78 0.00 0.0% 4.07 9.4 15% 20.1 155% 50.00 76.00 0.8 134% 9/09

3 DGIT DG 27.73 0.00 0.0% 1.74 22.4 15% 15.9 82% 34.00 B 48.00 7.1 106% 10/10

2 DHR Danaher 45.91 0.08 0.2% 2.63 17.3 15% 17.5 94% 49.00 B 67.00 4.5 117% 12/10

2 EBAY eBay 30.19 0.00 0.0% 1.62 17.8 14% 18.6 93% 30.00 43.00 3.0 133% 9/10

2 EBIX EBIX 22.44 0.00 0.0% 1.50 20.2 17% 15.0 100% 23.00 B 35.00 3.6 88% 5/10

1 EMC EMC Corp. 22.54 0.00 0.0% 1.19 18.2 15% 18.9 95% 20.00 32.00 3.0 126% 9/08

1 EMR Emerson 57.94 1.38 2.4% 3.38 13.3 10% 17.1 103% 51.00 67.00 1.8 171% 10/08

2 EV Eaton Vance 30.90 0.72 2.3% 1.84 18.1 15% 16.8 96% 31.00 B 42.00 3.2 112% 6/04

1 FAST Fastenal Co. 59.14 0.84 1.4% 2.19 13.8 18% 27.0 124% 48.00 68.00 1.6 150% 1/07

2 FDS FactSet Research Sys 91.30 0.92 1.0% 3.64 12.8 15% 25.1 126% 73.00 103.00 1.5 167% 12/08

2 FISV Fiserv, Inc. 59.60 0.00 0.0% 4.45 15.8 12% 13.4 91% 58.00 80.00 2.8 112% 10/07


3 FOSL Fossil 71.36 0.00 0.0% 3.64 15.5 15% 19.6 115% 62.00 92.00 2.2 131% 2/09

2 GILD Gilead Sciences 37.31 0.00 0.0% 4.06 39.2 17% 9.2 43% 63.00 B 107.00 8.6 54% 4/10

3 GME Gamestop 21.56 0.00 0.0% 2.87 23.9 10% 7.5 68% 27.00 B 43.00 5.9 75% 8/09



3 IEX IDEX Corp. 39.43 0.60 1.5% 2.23 15.3 12% 17.7 104% 33.00 48.00 1.8 148% 6/99






Symbol Sort

Q P/EU December 15, 2010 B Over- Rwd/ asA % Est. Tot. % Curr Buy U valued Risk % DateL Sym Company Name Price Div Yld EPS Ret. Gr. P/E RV Up to Y At Ratio Growth Rec.3 LKQX LKQ Corp. 22.85 0.00 0.0% 1.33 20.5 15% 17.2 86% 27.00 B 37.00 5.5 115% 6/10




2 MTD Mettler-Toledo 153.36 0.00 0.0% 7.28 12.0 14% 21.1 112% 91.00 160.00 1.0 151% 11/08

3 NSR NeuStar 26.27 0.00 0.0% 1.75 18.2 12% 15.0 88% 29.00 B 39.00 4.4 125% 1/10





2 PNRA Panera Bread 104.35 0.00 0.0% 4.35 12.0 14% 24.0 120% 84.00 117.00 1.5 171% 2/08


3 PRGO Perrigo 66.29 0.22 0.3% 3.79 18.6 15% 17.5 99% 66.00 95.00 2.9 117% 9/10

3 PX Praxair, Inc. 93.09 1.80 1.9% 5.45 17.5 13% 17.1 97% 90.00 124.00 2.7 132% 6/10

3 RGA Reinsurance Group 52.85 0.48 0.9% 7.25 22.1 10% 7.3 73% 57.00 B 94.00 3.7 73% 9/10


3 ROP Roper Ind. 77.19 0.44 0.6% 3.80 16.7 16% 20.3 104% 74.00 105.00 2.8 127% 3/09


2 SHPGY Shire 71.03 0.35 0.5% 4.87 31.8 16% 14.6 58% 107.00 B 164.00 10.1 91% 12/10

2 SSYS Stratasys 32.13 0.00 0.0% 0.75 -0.3 14% 42.8 214% 15.00 22.00 0.0 306% 12/06


1 SYK Stryker Corp. 53.55 0.72 1.3% 3.64 24.8 14% 14.7 74% 62.00 B 92.00 4.4 105% 7/103 SYNA Synaptics 30.14 0.00 0.0% 1.78 20.9 15% 16.9 87% 34.00 B 49.00 4.7 113% 12/103 SYNT Syntel 48.16 0.24 0.5% 2.89 15.7 14% 16.7 111% 43.00 63.00 2.4 119% 7/103 TEVA Teva Pharmaceuticals 52.31 0.50 1.0% 5.25 31.1 15% 10.0 55% 76.00 B 116.00 9.3 67% 5/10

3 THOR Thoratec 26.01 0.00 0.0% 1.51 29.3 20% 17.2 32% 35.00 B 54.00 6.2 86% 1/11


1 TROW T. Rowe Price 62.70 1.08 1.7% 2.96 17.9 16% 21.2 110% 56.00 81.00 2.1 133% 8/10



2 V Visa 74.00 0.60 0.8% 4.90 26.2 17% 15.1 76% 98.00 B 142.00 8.1 89% 11/10


2 WAT Waters Corp. 79.36 0.00 0.0% 4.61 17.2 14% 17.2 94% 82.00 B 113.00 3.3 123% 10/10



Total Return Sort

Q P/EU December 15, 2010 B Over- Rwd/ asA % Est. Tot. % Curr Buy U valued Risk % DateL Sym Company Name Price Div Yld EPS Ret. Gr. P/E RV Up to Y At Ratio Growth Rec.2 GILD Gilead Sciences 37.31 0.00 0.0% 4.06 39.2 17% 9.2 43% 63.00 B 107.00 8.6 54% 4/10

2 CEPH Cephalon 62.88 0.00 0.0% 8.17 37.6 11% 7.7 39% 106.00 B 204.00 9.9 70% 1/10


2 SHPGY Shire 71.03 0.35 0.5% 4.87 31.8 16% 14.6 58% 107.00 B 164.00 10.1 91% 12/10

3 TEVA Teva Pharmaceuticals 52.31 0.50 1.0% 5.25 31.1 15% 10.0 55% 76.00 B 116.00 9.3 67% 5/10


2 CELG Celgene 57.83 0.00 0.0% 3.39 29.5 20% 17.1 36% 77.00 B 122.00 6.2 86% 8/10

3 THOR Thoratec 26.01 0.00 0.0% 1.51 29.3 20% 17.2 32% 35.00 B 54.00 6.2 86% 1/11


1 ABT Abbott Labs 48.12 1.76 3.7% 4.67 27.4 12% 10.3 61% 64.00 B 89.00 9.7 86% 3/10

2 ACM AECOM 27.72 0.00 0.0% 2.38 27.0 15% 11.6 68% 36.00 B 55.00 6.6 77% 2/10


2 V Visa 74.00 0.60 0.8% 4.90 26.2 17% 15.1 76% 98.00 B 142.00 8.1 89% 11/10

2 AFL AFLAC Inc. 55.10 1.20 2.2% 6.21 25.6 13% 8.9 74% 64.00 B 97.00 4.6 68% 12/06

1 SYK Stryker Corp. 53.55 0.72 1.3% 3.64 24.8 14% 14.7 74% 62.00 B 92.00 4.4 105% 7/10

2 AMGN Amgen 55.67 0.00 0.0% 5.34 24.4 9% 10.4 69% 71.00 B 117.00 7.0 116% 2/09

3 GME Gamestop 21.56 0.00 0.0% 2.87 23.9 10% 7.5 68% 27.00 B 43.00 5.9 75% 8/09

1 AAPL Apple 320.36 0.00 0.0% 19.69 23.6 17% 16.3 82% 394.00 B 574.00 6.4 96% 4/10

3 BRKR Bruker 17.16 0.00 0.0% 0.87 23.3 17% 19.7 80% 19.00 B 29.00 3.8 116% 11/10



3 DGIT DG 27.73 0.00 0.0% 1.74 22.4 15% 15.9 82% 34.00 B 48.00 7.1 106% 10/10


3 RGA Reinsurance Group 52.85 0.48 0.9% 7.25 22.1 10% 7.3 73% 57.00 B 94.00 3.7 73% 9/10

2 BCR C. R. Bard 91.34 0.68 0.7% 6.15 21.7 14% 14.9 78% 105.00 B 149.00 4.9 106% 11/09


3 SYNA Synaptics 30.14 0.00 0.0% 1.78 20.9 15% 16.9 87% 34.00 B 49.00 4.7 113% 12/10

3 LKQX LKQ Corp. 22.85 0.00 0.0% 1.33 20.5 15% 17.2 86% 27.00 B 37.00 5.5 115% 6/10


2 EBIX EBIX 22.44 0.00 0.0% 1.50 20.2 17% 15.0 100% 23.00 B 35.00 3.6 88% 5/10




3 PRGO Perrigo 66.29 0.22 0.3% 3.79 18.6 15% 17.5 99% 66.00 95.00 2.9 117% 9/10




1 EMC EMC Corp. 22.54 0.00 0.0% 1.19 18.2 15% 18.9 95% 20.00 32.00 3.0 126% 9/08

3 NSR NeuStar 26.27 0.00 0.0% 1.75 18.2 12% 15.0 88% 29.00 B 39.00 4.4 125% 1/10



Total Return Sort

Q P/EU December 15, 2010 B Over- Rwd/ asA % Est. Tot. % Curr Buy U valued Risk % DateL Sym Company Name Price Div Yld EPS Ret. Gr. P/E RV Up to Y At Ratio Growth Rec.2 EV Eaton Vance 30.90 0.72 2.3% 1.84 18.1 15% 16.8 96% 31.00 B 42.00 3.2 112% 6/04

2 COH Coach 57.68 0.60 1.0% 3.02 18.1 15% 19.1 101% 57.00 81.00 3.1 127% 6/10

1 TROW T. Rowe Price 62.70 1.08 1.7% 2.96 17.9 16% 21.2 110% 56.00 81.00 2.1 133% 8/10


2 EBAY eBay 30.19 0.00 0.0% 1.62 17.8 14% 18.6 93% 30.00 43.00 3.0 133% 9/10


3 PX Praxair, Inc. 93.09 1.80 1.9% 5.45 17.5 13% 17.1 97% 90.00 124.00 2.7 132% 6/10

2 DHR Danaher 45.91 0.08 0.2% 2.63 17.3 15% 17.5 94% 49.00 B 67.00 4.5 117% 12/10

2 WAT Waters Corp. 79.36 0.00 0.0% 4.61 17.2 14% 17.2 94% 82.00 B 113.00 3.3 123% 10/10




3 ROP Roper Ind. 77.19 0.44 0.6% 3.80 16.7 16% 20.3 104% 74.00 105.00 2.8 127% 3/09



2 FISV Fiserv, Inc. 59.60 0.00 0.0% 4.45 15.8 12% 13.4 91% 58.00 80.00 2.8 112% 10/07

3 SYNT Syntel 48.16 0.24 0.5% 2.89 15.7 14% 16.7 111% 43.00 63.00 2.4 119% 7/10

3 FOSL Fossil 71.36 0.00 0.0% 3.64 15.5 15% 19.6 115% 62.00 92.00 2.2 131% 2/09

3 IEX IDEX Corp. 39.43 0.60 1.5% 2.23 15.3 12% 17.7 104% 33.00 48.00 1.8 148% 6/99

1 FAST Fastenal Co. 59.14 0.84 1.4% 2.19 13.8 18% 27.0 124% 48.00 68.00 1.6 150% 1/07

3 BRO Brown & Brown 23.86 0.32 1.3% 1.20 13.3 15% 19.9 116% 20.00 27.00 1.7 133% 4/09

1 EMR Emerson 57.94 1.38 2.4% 3.38 13.3 10% 17.1 103% 51.00 67.00 1.8 171% 10/082 FDS FactSet Research Sys 91.30 0.92 1.0% 3.64 12.8 15% 25.1 126% 73.00 103.00 1.5 167% 12/082 MTD Mettler-Toledo 153.36 0.00 0.0% 7.28 12.0 14% 21.1 112% 91.00 160.00 1.0 151% 11/082 PNRA Panera Bread 104.35 0.00 0.0% 4.35 12.0 14% 24.0 120% 84.00 117.00 1.5 171% 2/08







3 DECK Deckers Outdoor 81.78 0.00 0.0% 4.07 9.4 15% 20.1 155% 50.00 76.00 0.8 134% 9/09


2 SSYS Stratasys 32.13 0.00 0.0% 0.75 -0.3 14% 42.8 214% 15.00 22.00 0.0 306% 12/06


January 2011

FLIR SYSTEMS (FLIR)Fiscal Year ends December 31

Recent Price 28.39 ESTIMATESBuy up to 32 Growth 15%52 Week Price Range 24.00 to 33.35 Dividend Payout Ratio 0%Quality Average 5 YEAR RISK REWARD ESTIMATECurrent Yield None Price Gain 133% to 66Shares Outstanding 160.9 Mil. Risk of Loss 33% to 19Total Debt None Potential Gain/Loss 4.0 to 1

EARNINGS PER SHARE & P/E RATIOS

FISCAL YEAR E/S P/E RATIO RVP/E AS

% GROWTH

2009 1.43 19.9 105 1332010 (Est.) 1.54 18.4 97 1232011 (Est.) 1.73 16.4 86 109

FLIR Systems designs and manufacturestechnologies for visual imaging, surveil-lance, and detection. An early leader ininfrared aviation vision systems, the com-pany’s product line now includes infraredand thermal cameras, ocular night-vision,and handheld spectrometry and thermogra-phy devices. Its systems are also installedin aircraft, watercraft, automobiles, and avariety of special-purpose vehicles.

The company’s largest end-market is na-tional security, and its largest single cus-tomer is the U.S. government, responsiblefor 43% of last-year’s sales. Exposure togovernment buying patterns introduces vo-latility. 10% of the company’s sales evapo-rated when a single helicopter contract ranout. The government can be a fickle patron,but FLIR’s technological leadership andlow-cost competitive position should cu-

shion sales if and when defense budgetsshrink. The recent acquisition of ICx Tech-nologies has also helped diversify FLIR’snational security portfolio away from com-bat-oriented technologies and more towardborder security and general surveillance.These should remain growth areas for sometime.

Besides government and national defense,the company also derives about 45% ofsales from consumer and industrial markets.The industrial market has tended to runahead of the consumer market in the past,as businesses have more use for high-priced sensing technologies. Lately, howev-er, with economic softness depressing in-dustrial demand, the company perceives anemerging trend toward convergence asconsumer markets catch up. As imagingtechnologies get faster, smaller, and cheap-



success since 1973.

January 2011

er, and as they require less electric power tooperate, they are being integrated into muchwider markets. In the long run, we believethese applications hold the stock’s real op-portunity.

For example, FLIR currently has relation-ships with BMW and Audi to integrate itsnight-vision solutions into luxury cars. Carbuyers are embracing this novel feature,and we expect to see more carmakers offerit at lower price-points in the future. Securityfor the home as well as commercial propertypresents another huge emerging opportuni-ty.

In May, the company purchased the assetsof Raymarine, a manufacturer of electronicdevices for recreational and light commer-cial boats. Raymarine’s products includenavigational aids, night vision cameras, ma-rine radar, fish finders, and a host of boat-er’s “toys.” We like the acquisition and ex-pect FLIR to grow Raymarine’s sales andmargins.

FLIR Systems’ stock began trading publiclyin 1993. Investors have seen their share oftrouble at times. The company was accusedof accounting irregularities, and even out-right accounting fraud, in 2000, leading tothe dismissal and prosecution of numerousformer executives.

Problems for companies can sometimeslead to opportunities for investors. Priormanagement’s shenanigans seem not tohave undermined the company’s competi-tive position. Sales have grown at a com-pound rate of 23% since 2002, and net in-come has seen compound growth of 27%.Gross margins, impressively, have hoverednorth of 55%.

Current management appears to have thecompany nicely on the straight-and-narrow.The company applies conservative account-ing practices, such as expensing all re-search and development costs. Executivesand board members have displayed self-

control in awarding only reasonable levelsof stock options. The balance sheet is cur-rently debt-free. Current assets are $700million greater than total liabilities. Return-on-equity has recently been running above20%. The company generates terrificamounts of free cash, which it uses to fundacquisitions and to buy back shares.

With clouds forming over defense spending,FLIR’s stock carries a speculative compo-nent. Management warns that quarterlybookings have been soft lately. The compa-ny’s backlog of future business is highlyweighted toward the government side of thebusiness, so softness in bookings seems toconfirm some fears about tighter defensebudgets.

Future prospects still look quite good, how-ever. We will project sales and earningsgrowth of 15%, which could prove to beconservative if things go well and economicconditions improve. We believe that contin-ued earnings growth and a rekindling of in-vestors’ interest could support a high priceof 66.

For a low price, we will use 19, the stock’slow point at the depth of the bear market in2009.

FLIR Systems is listed on the NASDAQunder the symbol FLIR.

Investor contact is:

Mr. Shane Harrison2770 SW Parkway AveWilsonville, OR 97070

Telephone: 503/498-3162

Email: [email protected]

Website: www.flir.com

www.iclub.com

G rowth A n a lysis

%%

%%

Percentage Change

Year Ago Quarter

Latest Quarter

% Institutions

% Insiders

Debt($M)

Preferred($M)

Common(M Shares)

(3) Historical Earnings Per Share Growth

(4) Estimated Future Earnings Per Share Growth

(6) Earnings Per Share Growth R 2

(2) Estimated Future Sales Growth

(5) Sales Growth R2

(1) Historical Sales Growth

SALES ($M) ($)

PER SHAREEARNINGS

RECENT QUARTERLY FIGURES

% Debt to Tot.Cap.

Sector

Quality

StockStudy

1

ReferenceIndustry

Price Date

Data Source

Data DateStudy by

Company

5%

10%

15%

20%

25%

30%

1

2

3

4

567

10

20

30

40

506070

100

200

300

400

500600700

1K

2K

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

(﴾Buy)﴿

1,147.1

1.43

340.6

2,307.2

2.87

24.115.0

27.415.00.990.570.980.99

ss

ss

s ss

s

s s

e

e e

ee

e

e

ee

p

p

p

pp p

p

pp

FLIR Systems, Inc. 12/03/10IAS 12/03/10

Industrial Goods StkCntrl

NASDAQ:

Aerospace/Defense - Prod

3.0 (IAS))

Morningstr

0.0

160.9 1.1

0.00.0

0.0

FLIR

FY 2010 Q3 (Ended 9/30/2010)

332.5 0.39

285.6 0.38

16.4% 4.3%

Printed: 12/17/10 05:49 PM Prepared by: IAS Using Toolkit 6

5

4

3

2

TOTAL RETURN ANALYSIS

EVALUATING REWARD and RISK over the next 5 years

PRICE, PRICE/EARNINGS RATIO and DIVIDEND ANALYSIS

QUALITY ANALYSIS

Fiscal Year

6

5

4

3

2

1

A C U R R E N T YIELD

C % C O MP O U N D AN N U AL T O T AL R E T U R N - U SIN G F O R E C AST HIG H P/E

B AV E R A G E YIELD - U SIN G F O R E C AST HIG H P/E

D R E W AR D/RISK AN ALYSIS (Potentia l G a in vs . R isk of Loss)

C PRIC E R AN G E S

B F U T U R E L O W PRIC E AN ALYSIS -- N E XT 5 Y E AR S

A F U T U R E HIG H PRIC E AN ALYSIS -- N E XT 5 Y E AR S

Average Yield % + Annual Appreciation % = Compound Annual Total Return %

Avg. % Payout ÷ Forecast High P/E = Avg. Yield

=÷ Current Price of Stock $Present Full Year's Dividend $ Present Yield or % Returned on Purchase Price

To 1)﴿ =- Estimated Low PriceCurrent Price- Current Price )﴿ ÷ (﴾(﴾Forecast High Price

= $

Forecast High Price - Estimated Low Price = Range 25% of Range =

MAYBE (﴾Middle 50% of Range)﴿ =

BUY (﴾Lower 25% of Range)﴿ =

SELL (﴾Upper 25% of Range)﴿ =

to

to

to

Current Price is in the Range

(﴾a)﴿ Sel. Low P/E

(﴾b)﴿ Average 5-Year Low Price =

(﴾c)﴿ Recent Severe Low Price =

= $X Estimated Low Earnings/Share

Selected Estimated Low Price

(﴾d)﴿ Price Dividend Will Support = Present Divd. ÷ High Yield = =÷

= Forecast High Price $Selected High P/E X Estimated High Earnings/Share

% High Yield% PayoutDividendEPS

UP / DOWNTREND

© 2010 ICLUBcentral Inc., 711 West 13 Mile Road, Madison Heights, MI 48071 (﴾248)﴿-654-3100 www.iclub.com

(﴾as adj.)﴿

% ROE (﴾Beginning Yr)﴿

% Debt to Equity

% Pre-tax Profit on Sales

B

C

A

52-WEEK LOW52-WEEK HIGHCURRENT PRICE

Low PriceHigh Price

PROJECTED P/E RATIOAVERAGE P/E RATIOAVERAGE

5

CURRENT P/E RATIORELATIVE VALUE PROJ. RELATIVE VALUE AVG TTM + FTM EPS

PEG RATIOTTM EPSFTM EPS

YEAR AVG.

Company

Low P/EHigh P/E

2000

-14.0

258.8

2001

13.4

80.8

0.0

2002

18.7

36.8

0.0

2003

20.5

25.4

116.3

2004

20.7

35.3

55.8

2005

24.0

24.4

47.1

2006

23.1

23.7

42.8

2007

24.5

28.3

28.6

2008

27.4

27.4

19.7

2009

29.7

24.0

4.6

28.390 33.350 24.000

2005 18.0 10.3 0.55 32.5 18.6 0.000 0.0 0.0

2006 16.9 10.8 0.63 26.7 17.1 0.000 0.0 0.0

2007 36.4 15.0 0.86 42.4 17.5 0.000 0.0 0.0

2008 45.1 23.7 1.25 36.1 18.9 0.000 0.0 0.0

2009 33.2 18.9 1.43 23.3 13.3 0.000 0.0 0.0

FLIR Systems, Inc. (FLIR) 12/03/10

25.7 UP

25.6 DOWN

28.5 DOWN

15.7 25.0 17.1 0.0

21.1

19.2

91.0% 90.9%

1.4816.7

1.70

1.59

1.1

23.025.0 2.87 66.0

15.017.1 1.43 21.4

15.7

18.9

0.000 0.000 0.018.9

66.0 18.9 47.1 11.8

18.9 30.7

30.7 54.254.2 66.0

28.390 Buy

66.0 28.390 4.028.390 18.9

0.000 28.390 0.0 %

0.0 18.4 18.4

0.0 23.0 0.0


January 2011

O’REILLY AUTOMOTIVE, (ORLY)Fiscal Year ends December 31

Recent Price 61.13 ESTIMATESBuy up to 64 Growth 15%52 Week Price Range 36.91 to 62.40 Dividend Payout Ratio 0%Quality Above Average 5 YEAR RISK REWARD ESTIMATECurrent Yield None Price Gain 75% to 107Shares Outstanding 139.3 Mil. Risk of Loss 18% to 50Total Debt $431.3 Mil Potential Gain/Loss 4.0 to 1



% GROWTH

2009 2.23 27.4 134 1832010 (Est.) 3.00 20.4 100 1362011 (Est.) 2.89 17.7 86 118

In the mundane industry that is automotiveparts retailing, O’Reilly Automotive shines.The company had long been the third larg-est retailer in the sector, behind marketleader AutoZone Inc. and number two, Ad-vance Auto Parts. However, at the end ofthe third quarter O’Reilly had almost caughtAdvance Auto Parts for second place basedon store count (3,540 for Advance AutoParts and 3,536 for O’Reilly). But more im-portantly, O’Reilly’s performance has re-sulted in a 60.4% year to date appreciationfor the stock.

While this return is impressive, we thinkthere is more room for the stock to run,starting with a tailwind from the aftermarketauto parts industry. The deep recession of2008-2009 has reduced new light vehiclesales from 17.5 million in 2005 to 10.7 mil-lion for 2009. However, total miles driven

have increased yearly with only one slightdecline recorded in 2008 before resuminggrowth. This combination has increased theaverage age of the entire population of au-tos, leading to the need for additional after-market parts to keep these older vehicleson the road. All auto part retailers are bene-fitting from this growth, including O’Reilly.

According to the Automotive AftermarketIndustry Association, the total number ofauto parts retail locations in the UnitedStates has been stagnant, registering35,000-36,000 over the past 10 years.However, the 10 largest firms in the industrycomprised only 43% of these stores in2009. O’Reilly believes it can continue tocompete effectively against both its largercompetitors and smaller firms and takemarket share in this fragmented sector.



success since 1973.

January 2011

O’Reilly has built its business on a dualmarket strategy that sells auto parts tocommercial installers (repair shops, autodealers, etc.) and individual do-it-yourselfers. Since the company is sellingparts to a higher percentage of possiblecustomers, this strategy helps the companyleverage its existing overhead infrastructureand profitably to serve both large and smallmarkets. It also has the benefit of streng-thening the knowledge of its associates forthe do-it-yourself customer, since commer-cial installers tend to demand a higher levelof service. While not providing specificnumbers, the company reports that its salesare about evenly split between each cus-tomer type.

O’Reilly has a long history of operationalexcellence and has grown both organicallyand through acquisition. The company ex-pects to open 150 new stores during 2010and is forecasting 170 new stores for 2011.If the firm hits its target, the percentagegrowth in new stores would be 5% of itsbase.

In addition to purchasing stand-alone storesor small chains, the company has madefour substantial acquisitions in its history:Hi/Lo in 1998 (182 stores), Mid-state in2001 (82 stores), Midwest in 2005 (72stores), and the most strategic, CSK Auto,in 2008 (1,342 stores). CSK represented anexceptional opportunity for O’Reilly in manyways. Most of CSK’s stores were located inthe western United States, an area with littleoverlap with O’Reilly’s concentration in theMidwest and Southeast. CSK sold only 10%of its parts to the commercial installer mar-ket. This created an opportunity to addO’Reilly’s commercial sales expertise andbring significant incremental sales to exist-ing locations without adding much cost.CSK further suffered from lack of invest-ment in high-dollar parts which carry bettermargins.

The conversion of CSK stores to theO’Reilly system is projected to be com-pleted by the middle of 2011. The firm esti-mates that the combined company has re-duced costs by $100 million per yearthrough the combination of duplicate func-tions and greater price discounts due tohigher purchase volume. Third quarter 2010results back up the positive impact of theCSK acquisition, as comparable store salesadvanced 11.1% and adjusted operatingmargin hit a record 14.4%. EPS advanced37% to $0.86, and the company generated$143 million in free cash flow.

Wall Street analysts project long term earn-ings growth of 17%. We are more con-servative, projecting 15% EPS growth. Ifthis growth is realized, the price of the stockcould reach 107, assuming EPS of $4.49 in2014 and an average high P/E of 23.8. Ifachieved, this would be an annual total re-turn of about 12%. The downside risk ap-pears to be 18% to a stock price of 50, theproduct of trailing four quarter EPS of $2.89and the average low P/E of 17.2. The highand low P/E ratios for the 2008 and 2009years have been excluded, as they wereobserved during the severe recession.

O’Reilly Automotive is traded over-the-counter on the NASDAQ under the symbolORLY.


Mr. Tom McFall, CFO O’Reilly Automotive, Inc.233 South PattersonSpringfield, MO 65802

Telephone: 417/862-3333

Website: www.oreillyauto.com

www.iclub.com

G rowth A n a lysis

%%

%%

Percentage Change

Year Ago Quarter

Latest Quarter

% Institutions

% Insiders

Debt($M)

Preferred($M)

Common(M Shares)





(5) Sales Growth R2


SALES ($M) ($)

PER SHAREEARNINGS


% Debt to Tot.Cap.

Sector

Quality

StockStudy

1

ReferenceIndustry

Price Date

Data Source

Data DateStudy by

Company

5%

10%

15%

20%

25%

30%

1

2

3

4

567

10

20

30

40

506070

100

200

300

400

500600700

1K

2K

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

(﴾Buy)﴿

4,847.1

2.23

496.9

8,542.2

4.49

18.712.0

16.915.00.960.98

ss

ss

ss

ss

s

s

e

ee

ee

ee e e

e

p

pp

pp

pp p p

p

O'REILLY AUTOMOTIVE I.. 12/08/10IAS 12/08/10

Consumer Discretionary NAIC Data

NASDAQ:

Automotive Retail

3.0 (IAS))

0.0

139.3 3.9

90.0431.3

13.7

ORLY

FY 2010 Q3 (Ended 9/30/2010)

1,425.9 0.86

1,258.2 0.63

13.3% 36.5%


5

4

3

2




QUALITY ANALYSIS

Fiscal Year

6

5

4

3

2

1





C PRIC E R AN G E S







= $





to

to

to










UP / DOWNTREND


(﴾as adj.)﴿


% Debt to Equity


B

C

A


Low PriceHigh Price


5



YEAR AVG.

Company

Low P/EHigh P/E

2000

9.3

19.5

2001

9.8

14.0

29.8

2002

10.0

14.5

29.3

2003

10.6

15.1

15.4

2004

10.9

14.7

10.6

2005

12.3

16.2

2.2

2006

12.4

15.2

8.1

2007

12.2

13.9

4.7

2008

9.0

11.7

31.7

2009

10.3

13.2

25.5

61.130 62.400 36.910

2005 32.5 22.0 1.39 23.4 15.8 0.000 0.0 0.0

2006 38.3 27.5 1.55 24.7 17.7 0.000 0.0 0.0

2007 38.8 30.4 1.67 23.2 18.2 0.000 0.0 0.0

2008 32.7 20.0 1.61 20.3 12.4 0.000 0.0 0.0

2009 42.9 26.5 2.23 19.2 11.9 0.000 0.0 0.0

O'REILLY AUTOMOTIVE INC (ORLY) 12/08/10

11.2 DOWN

14.0 DOWN

14.4 UP

25.3 23.8 17.2 0.0

20.5

21.2

103.4% 103.2%

2.8918.4

3.32

3.11

1.2

23.8 4.49 106.9

17.2 2.892.23 49.7

25.3

20.0

0.000 0.000 0.049.7

106.9 49.7 57.2 14.3

49.7 64.0

64.0 92.692.6 106.9

61.130 Buy

106.9 61.130 4.061.130 49.7

0.000 61.130 0.0 %

0.0 11.8 11.8

0.0 23.8 0.0


January 2011

THORATEC CORPORATION (THOR)Fiscal Year ends January 2

Recent Price 26.01 ESTIMATESBuy up to 35 Growth 20%52 Week Price Range 24.3 to 47.9 Dividend Payout Ratio 0%Quality Average 5 YEAR RISK REWARD ESTIMATECurrent Yield 0 Price Gain 258% to 93Shares Outstanding 58.5 Mil. Risk of Loss 42% to 15Total Debt 136.1 Potential Gain/Loss 6.1 to 1



% GROWTH

2009 0.89 29.2 66 1462010 (Est.) 1.25 20.8 47 1042011 (Est.) 1.51 17.2 72 86

Heart disease is one of the most commonand most serious medical problems, espe-cially as people get older. In the UnitedStates, 20% of the population over the ageof 40 has some problem with heart disease.The severity of these problems has beenrecognized for many years and has beenthe cause of a great deal of research. Manydrugs, particularly statins, have been devel-oped to try to help those with heart condi-tions.

The ability to construct ever more definedminiaturized appliances has also been afield for development. One of the most intri-guing devices has been a product devel-oped by Thoratec Corporation. This com-pany has developed mechanical productswhich are implanted in or near the heart andactually take over some of the heart’s

pumping function. This is a treatment that iscalled for only when the cardiac problem issevere and the heart is unable to do itswork normally. It can be a life saver for aperson on the waiting list for a heart trans-plant.

One of the advantages of the Thoratec mi-niaturized blood pump, HeartMate II, is thatit does not normally require that the patienttake anticoagulant drugs. This is not just amatter of convenience, but spares the indi-vidual from the risks of possible hemorrhag-ic stroke and other side effects that can oc-cur with long-term anticoagulant drug ad-ministration.

The use of the implanted heart pump hasbeen growing dramatically in recent times.The Mayo Clinic reports that four years ago



success since 1973.

January 2011

it was implanting one such pump per monthand that last year they implanted three permonth and expects that this year the num-ber will be close to doubling from the pre-vious year.

Last November, it was announced that Tho-ratec will have an active competitor—HeartWare. HeartWare is not a competitorpresently as its pump is not cleared by theFDA for sale in the U.S., but it is approvedfor sale in Europe. It is expected that it willonly be a matter of time until it is introducedhere. However, approval will take sometime, usually at least a couple of years.

How much of a competitor HeartWare willturn out to be is uncertain at this point.There has not been a head-to-head re-search comparison of the effect of the twocompany’s products and there is an ongo-ing disagreement about the implications ofwhat research there is. HeartWare is amuch smaller company—it is almost a start-up., as its sales last year were only $24 mil-lion. HeartWare’s project is much more ex-pensive than Thoratec’s selling for almost$90,000, more than three times Thoratec’sproduct cost.

How this competitive situation will shake outis uncertain at present, but Thoratec doeshave the advantage of being first with anestablished record with medical people thatare trained in the product’s use. With550,000 new cases of heart attacks re-ported each year currently, we expect thatthe market for Thoratec’s products will re-main. Presently, HeartWare’s pump has theadvantage of being half the size of Thora-tec’s, but Thoratec is also working on asmaller pump, the HeartMate III.

As we project likely developments for thefuture, we observe that for the last fiveyears, sales growth has been over 31% peryear. We don’t expect that growth can con-tinue at that rate, however, and we’ll use amuch more conservative figure of 20%

growth as we project possible future devel-opments. In bracketing price expectationsfor the next five years, we will use 30 as theexpected potential high P/E even thoughthe actual P/E in recent years has alwaysbeen higher than that. In the effort to beconservative in the face of an uncertaincompetitive situation, we will use 15 as thelow P/E even though 32 is the lowest P/Ethe stock has actually experienced. Calcu-lating on this basis produces a potentialhigh price of 93 and with a low price of 15produces a 6.1 to 1 ratio of potential gainversus risk of loss.

For our calculations we have used the$1.25 earnings per share expected for2010. We are so close to the end of theyear that the projection is quite firm. Weconsider Thoratec a high potential, but vo-latile and rather aggressive investment.

Thoratec Corporation is listed on theNASDAQ under the symbol THOR.


Thoratec Corporation6035 Stoneridge DrivePleasanton, CA 94588

Telephone: 925/847-8600

Website: www.thoratec.com

www.iclub.com

G rowth A n a lysis

%%

%%

Percentage Change

Year Ago Quarter

Latest Quarter

% Institutions

% Insiders

Debt($M)

Preferred($M)

Common(M Shares)





(5) Sales Growth R2


SALES ($M) ($)

PER SHAREEARNINGS


% Debt to Tot.Cap.

Sector

Quality

StockStudy

1

ReferenceIndustry

Price Date

Data Source

Data DateStudy by

Company

5%

10%

15%

20%

25%

30%

1

2

3

4

567

10

20

30

40

506070

100

200

300

400

500600700

1K

2K

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(﴾Buy)﴿

385.0

1.25111.9

958.0

3.11

15.020.0

73.920.00.710.99

ss

ss

s ss

ss s

e

ee

e

ee

e

e

e

p

p

p

p

p

p

p

p

p

THORATEC CORP 12/06/10IAS 12/06/10

Healthcare NAIC Data

NASDAQ:

Health Care Equipment

3.0 (IAS))

0.0

58.5 5.0

48.0136.1

18.2

THOR

FY 2010 Q3 (Ended 9/30/2010)

91.0 0.26

65.1 0.21

39.7% 23.8%


5

4

3

2




QUALITY ANALYSIS

Fiscal Year

6

5

4

3

2

1





C PRIC E R AN G E S







= $





to

to

to










UP / DOWNTREND


(﴾as adj.)﴿


% Debt to Equity


B

C

A


Low PriceHigh Price


5



YEAR AVG.

Company

Low P/EHigh P/E

2001

-6.3

14.7

2002

2.2

0.5

0.0

2003

5.2

1.3

0.0

2004

3.1

1.2

49.2

2005

10.3

4.8

41.3

2006

1.9

1.3

39.4

2007

1.1

1.1

36.1

2008

9.8

5.2

31.6

2009

14.2

7.6

25.1

2010

29.1

13.6

0.0

26.010 47.930 24.250

2006 25.4 11.6 0.09 282.2 128.9 0.000 0.0 0.0

2007 21.7 16.5 0.08 271.3 206.3 0.000 0.0 0.0

2008 32.7 12.9 0.38 86.1 33.9 0.000 0.0 0.0

2009 33.4 20.2 0.61 54.8 33.1 0.000 0.0 0.0

2010 47.9 24.3 1.25 38.3 19.4 0.000 0.0 0.0

THORATEC CORP (THOR) 12/06/10

11.2 UP

5.8 UP

26.4 DOWN

17.1 59.7 28.8 0.0

44.3

27.1

61.2% 61.2%

0.9622.6

1.15

1.06

1.1

30.059.7 3.11 93.3

20.028.8 1.25 25.0

17.1

20.2

0.000 0.000 0.015.0

93.3 15.0 78.3 19.6

15.0 34.6

34.6 73.773.7 93.3

26.010 Buy

93.3 26.010 6.126.010 15.0

0.000 26.010 0.0 %

0.0 29.1 29.1

0.0 30.0 0.0


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