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011 1 MARKET HAVEN MONTHLY

F E B R U AR Y

Market Haven Monthly

S tocks extended their rally into January with
the S&P posting a +2.3% gain for the month. All
We will reiterate here that it is not a foregone
conclusion that stocks are about to fall off a cliff.
the chatter across the news and blogosphere is In fact, an accommodative Fed is a very
that stocks are a buy. The economy is powerful force not to be underestimated. And
improving. Earnings are coming in strong. the Fed is incredibly accommodative right now.
Technical patterns are pointing to higher market We don’t see that changing anytime soon. We
values. And well-respected investors like David believe the Fed knows that even if its situation is
Tepper, Chris Davis, Jeffrey Saut, and even dire, there are many other weaker currencies out
Richard Russell are there that will feel
bullish on equity prices. the heat before the
Almost literally, U.S. dollar does.
overnight, the market That means the Fed
developed a cheering has cart blanche to
squad. stimulate away. For
the time being that
The fly in the ointment is
means stocks will
valuation. At 1286, the
continue to rise.
S&P is trading at 17x
current trend earnings. A very difficult ceiling to We don’t know when that stops. We can only
cross in times past is 18x earnings. Add to observe the facts. And the facts say that the
higher valuations that we are in a secular (i.e., market is slightly overvalued, but there’s a mad
10-year and 20-year) decline and that current man behind it pushing with all his might. We
earnings exceed trend earnings. Historically, believe it is prudent to have some exposure to
when all of these conditions have been present, stocks, but to definitely keep plenty of cash on
stocks have returned -27% on average over the hand to take advantage of opportunities that will
following year. come in due time.
 PAGE 2 MARKET HAVEN MONTHLY

Where’s the Value?

Stocks

Our Static Model is an easy way to hedge out

much of the market risk in an unemotional way.
Through regular rebalancing and a fairly
conservative asset allocation, the portfolio has Healthcare continues to struggle, but we believe
done a good job of dampening volatility risk. the attractive valuations will eventually
Additionally, the beta of our long portfolio has disappear. Rising bond yields have steepened
historically been about 1.3 allowing investors to the yield curve, making the profit environment
get full market exposure while leaving some for financials a more attractive place to be. It
cash on the sidelines. Net long exposure for the has had the opposite effect on utilities which
Static Model is +50%. Our Timing Model, on the continue to be an unattractive space to be. The
other hand, factors in market valuations. Net run up in oil prices have carried energy stocks
long exposure is -30%. with it and left energy shares as a whole less
attractive as investments. We’re seeing more
Strategy Static Timing
Model Model buying opportunities in technology and believe
Long Exposure +80% 0% the increased pace of M&A activity will create
Short Exposure -30% -30% some significant profit opportunities in that
Net Exposure +50% -30% sector.

Market Cap
Sectors
Low quality, small cap outperformance
Relative to the market as a whole, our screens continued through the month of January. The
are showing that the best places to find value are most short opportunities continue to exist at the
in technology, consumer discretionary, lower capitalization ranges. Consequently, more
healthcare, and financials. buying opportunities have appeared in the mega
cap stocks.
 PAGE 3
Recent Price Strength
For the last 90 days, energy has been the story.
The sector has significantly outperformed all
other sectors. The higher yielding stocks in the
utilities, telecommunications, and consumer
staples sectors continue to lag in a big way. The
disparity is significant. In our universe of stocks,
energy shares appreciated +21% on average
while staples and utility stocks were up only
+3.5% and +4.3%, respectively.
Bonds
After appreciably rising during the month of
December, yields leveled off in January. We
think this is temporary and that some investors
are viewing this as a buying opportunity. We
tend to disagree and believe yields are headed
higher.
Volatility
The VIX ticked up a little to 19.5 from 17 during
January. That is not a meaningful change in our
opinion. As long as the complacency in the
market builds, we would still expect to see the
MARKET HAVEN MONTHLY
VIX head lower before the real spikes hit. We
would still recommend maintaining exposure to
volatility if that fits your investment style. We
would suggest 75% of your normal portfolio
weighting to volatility. Nevertheless, we do
expect readings to decline before they materially
increase.
Commodities
In spite of gold’s continued decent in January,
the broader basket of commodities continued
their ascent. In line with what we’ve spelled out
in this newsletter, investors are feeling better
about stocks and are therefore less interested in
gold. Plus, gold has had a nice run and needed
to pull back temporarily. The key word there is
temporarily. We firmly believe the underlying
fundamental forces that have been driving gold
higher will continue to drive gold higher longer
term. We would use these pullbacks as
opportunities to acquire more.
With all of the political unrest in the world (e.g.,
Egypt, Tunisia, Ivory Coast) and the natural
disasters (e.g., Russian droughts, Australian
floods) dominating the headlines, it’s no wonder
that agricultural prices have run up
dramatically. While we are bullish on
commodity prices longer term, these short-term
factors are a bit different than our long-term
reason for investing in commodities.
 PAGE 4
Some Investment Ideas
Here are a few names that have shown up
recently as potential investment ideas on our
screens. Some of these may appear in the
portfolios. Some may not simply because the
names currently in the portfolio haven’t worked
their way yet.
It’s important to remember that these ideas are
meant to serve as a small part of a portfolio. We
understand and expect that not every
investment idea will work out the way we’d
hoped it would. Therefore, a core characteristic
of the portfolios we construct is diversification.
We like to have between 30 and 40 names in the
long portfolio and more than that in our short
portfolio. We let the ideas that are working
continue to run. Conversely, the ideas that are
not working become a smaller proportion of the
portfolio simply by the diminishing market cap
they exhibit. This also lends to the comfort we
have taking chances on stocks that may have
headline or operational risk from time to time.
LHC Group (LHCG) - long
LHCG operates nursing facilities and provides
home-based healthcare services. As 78 million
baby boomers age, health care will only increase
in demand. We believe these are the kind of
demographics that serve LHCG well. They
MARKET HAVEN MONTHLY
operate primarily in the south where the elder
generation tends to migrate with age. While they
are small with a market cap of $500 million,
they have virtually no debt and sport EBITDA
margins in the upper teens. Sales growth has
slowed markedly over the last couple of years,
giving the stock market reason to be cautious on
the shares. Nevertheless, the stock has an
attractive earnings yield of 13% and a price-to-
book of 1.9x.
Compania Cervecerias Unidas SA
(CCU) - long
CCU is a $3.5 billion beverage company that
operates in Chile, Argentina, the Cayman
Islands, and Liechtenstein. It has licensing
agreements with many of the big beverage
names like Pepsi, Heineken, and Anheuser-
Busch. The dividends distributed over the last
year amount to a yield of about 3.5%. Earnings
per share grew +19% over the last five years and
are expected to increase +11% over the next
three to five years. We like the international
exposure and the valuation isn’t bad either.
EBITDA margins are consistently above 20%
and the stock trades at 14x earnings.
Netease.com Inc. (NTES) - long
NTES operates an online community in China
and provides Chinese language content and
 PAGE 5 MARKET HAVEN MONTHLY

services via its online games, Internet portal and
wireless services businesses. The company,
which has a market cap of $5.6 billion,
generates revenue from fees charged to users of
online games, fees charged for premium
services, and from online ads. Sales growth has
averaged +38%, EBITDA yields have been north
of +40%, yet the stock trades at a p/e of 13x. At
that price, it seems worth the risk.
Aflac Incorporated (AFL) - long
Thanks to the duck there are few people who
don’t know that AFL provides supplemental
insurance primarily through businesses. In fact,
they are the world’s largest underwriter of
supplemental cancer insurance. What many
don’t know is that Japan accounts for 75% of
sales and that the company estimates in the U.S.
they’ve only tapped about 10% of the potential
small business market. AFL has a market cap of
$27 billion and pays a dividend of 2.1%. The
fundamentals are solid as well as its competitive
positioning. The shares trades at 9x earnings
and have an expected long-term growth rate of
12%, giving the shares an attractive PEG of 0.7x.
the seller of the Xbox video game console, many
view MSFT as a waning brand with only market
share to lose. However, its new products are
doing well. Windows 7 is correcting some of the
mistakes the company made with Vista. The
Office 2010 productivity suite’s improvements
are being well-received. And the Kinect sensor
for Xbox is a huge hit amongst gamers. Don’t
forget that the economic downturn pushed the
technology upgrade cycle off, but we are
beginning to see technology spending pick up.
Agreed, MSFT will not be a fast grower going
forward. May we remind those who’ve lost
interest in the company to remember that
stockholders make money because the company
makes money, not because earnings grow. There
is a difference. Given a choice between a 30%
grower that meets its cost of capital and a 5%
grower that exceeds its cost of capital by 10%,
we’re going to pick the slower grower. With an
earnings yield of 10%, a dividend yield of 2.3%,
and an average economic margin of +14%,
MSFT is still a cash cow.

Microsoft Corporation (MSFT) - long

Clearly a behemoth with a market cap of $237

billion, MSFT’s stock doesn’t reflect all of its
potential. As the largest maker of software and
 PAGE 6
Portfolio Changes Last Month
The turnover for the long portfolio was 16% for
the last 12 months. During the month of
January we made three trades in the long
portfolio.
In the short portfolio, turnover was higher at
61% for the last 12 months. We made two trades
in the short portfolio during the month of
January.
Previously Mentioned Ideas
Below are the investment ideas that we have
highlighted in past issues. Additionally, we have
updated the current model recommendation for
each stock.
January 2011
Global Payments (GPN) – buy
Amedisys (AMED) – buy
Warnaco Group (WRC) – buy
MARKET HAVEN MONTHLY
Alliance Resource Parnters LP (ARLP) – buy
BHP Billiton ADR (BHP) – buy
December 2010
Harbin Electric (HRBN) – buy
Trina Solar (TSL) – buy
Best Buy (BBY) – buy
MasterCard (MA) – buy
Cliffs Natural Resources (CLF) – buy
November 2010
Global Payments (GPN) - buy
Research In Motion (RIMM) - buy
Cash America International (CSH) - buy
Telecom Argentina (TEO) - buy
Cephalon (CEPH) - buy
October 2010
Alpha Natural Resources (ANR) - hold
True Religion Apparel (TRLG) - buy
St. Jude Medical (STJ) - buy
General Dynamics (GD) - buy
Kraft Foods (KFT) - buy
 PAGE 7 MARKET HAVEN MONTHLY

Newsletter Portfolio Performance

 MARKET HAVEN MONTHLY

Long Portfolio
Portion Of Current
Symbol Name Price Fund Shares Held Value Rating
CTSH COGNIZANT TECH SOLUTIONS'A' $72.95 7.2% 980.00 $71,491.00 Hold
NOV National Oilwell Varco Inc $73.90 6.0% 800.00 $59,120.00 Hold
WDC WESTERN DIGITAL $34.02 4.8% 1,400.00 $47,628.00 Hold
DECK DECKERS OUTDOOR $73.39 4.0% 540.00 $39,630.60 Hold
JOYG Joy Global Inc $87.18 4.0% 450.00 $39,231.00 Hold
COH COACH INC $54.09 3.8% 690.00 $37,322.10 Hold
NTRI NUTRI/SYSTEM INC $18.96 3.5% 1,820.00 $34,507.20 Hold
FCX FREEPT-MCMO COPPER & GOLD CL B $108.75 3.4% 310.00 $33,712.50 Buy
INT WORLD FUEL SERVICES $37.54 3.3% 880.00 $33,035.20 Hold
ESV Ensco PLC $54.34 3.1% 560.00 $30,430.40 Hold
HLF Herbalife, Limited $65.33 2.6% 390.00 $25,478.70 Buy
MIDD MIDDLEBY CORP $81.81 2.5% 300.00 $24,543.00 Hold
MUR MURPHY OIL $66.30 2.4% 360.00 $23,868.00 Hold
PCP PRECISION CASTPARTS $142.99 2.4% 170.00 $24,308.30 Hold
MA Mastercard Inc $236.51 2.4% 100.00 $23,651.00 Buy
GD GENERAL DYNAMICS $75.40 2.3% 300.00 $22,620.00 Buy
ARLP ALLIANCE RESOURCE PARTNERS LP $70.25 2.3% 320.00 $22,480.00 Buy
HRS HARRIS CORP $46.54 2.2% 470.00 $21,873.80 Buy
BYI Bally Technologies Inc $40.93 2.2% 540.00 $22,102.20 Hold
GPN Global Payments Inc $47.24 2.2% 460.00 $21,730.40 Buy
BHP BHP Billiton Ltd $89.03 2.2% 240.00 $21,367.20 Buy
HUM HUMANA INC $57.97 2.1% 360.00 $20,869.20 Hold
ANR Alpha Natural Resources Inc $53.73 2.0% 370.00 $19,880.10 Hold
FRX FOREST LABORATORIES INC $32.26 1.9% 580.00 $18,710.80 Buy
TPC Tutor Perini Corp $22.71 1.9% 830.00 $18,849.30 Buy
KCI Kinetic Concepts,Inc. $46.13 1.8% 380.00 $17,529.40 Hold
JCOM J2 GLOBAL COMMUNICATIONS NEW $27.60 1.8% 650.00 $17,940.00 Hold
ACN Accenture Plc $51.47 1.7% 320.00 $16,470.40 Hold
ATW ATWOOD OCEANICS $40.42 1.7% 410.00 $16,572.20 Hold
WMT WAL-MART STORES $56.07 1.6% 280.00 $15,699.60 Hold
GRMN GARMIN LTD $30.83 1.6% 520.00 $16,031.60 Hold
CEPH CEPHALON INC $59.08 1.6% 270.00 $15,951.60 Buy
NE Noble Corp $38.25 1.5% 380.00 $14,535.00 Hold
ENDP ENDO PHARMACEUTICALS HLDS INC $33.22 1.5% 460.00 $15,281.20 Buy
AMED AMEDISYS INC $34.09 1.4% 420.00 $14,317.80 Buy
ALGT Allegiant Travel Company $46.54 1.3% 280.00 $13,031.20 Hold
LHCG LHC Group, LLC $26.60 1.2% 460.00 $12,236.00 Buy
MDT MEDTRONIC INC $38.32 1.1% 290.00 $11,112.80 Hold
BBY BEST BUY CO INC $34.00 1.0% 290.00 $9,860.00 Buy
ESLT ELBIT SYSTEMS $50.82 1.0% 200.00 $10,164.00 Buy
 MARKET HAVEN MONTHLY

Short Portfolio
Portion Of Current
Symbol Name Price Fund Shares Held Value Rating
WY WEYERHAEUSER CO $23.18 3.8% -3,541.00 ($82,080.38) Short
ARMH ARM HOLDINGS ADS $25.04 2.8% -2,410.00 ($60,346.40) Short
N NetSuite Inc $26.93 2.2% -1,760.00 ($47,396.80) Hold
EBS Emergent BioSolutions, Incorporated $21.24 1.9% -1,920.00 ($40,780.61) Hold
HUSA Houston American Energy Corporation $15.63 1.8% -2,490.00 ($38,918.70) Short
VRX Valeant Pharmaceuticals Intern $36.53 1.7% -1,033.00 ($37,735.49) Short
FXEN FX ENERGY INC $9.10 1.7% -4,010.00 ($36,491.00) Short
PEGA PEGASYSTEMS INC $34.18 1.6% -1,030.00 ($35,205.40) Hold
CRR CARBO CERAMICS INC $115.16 1.5% -290.00 ($33,396.40) Short
PXD PIONEER NATURAL RES $95.16 1.5% -350.00 ($33,306.00) Short
OREX Orexigen Therapeutics, Incorporated $9.09 1.5% -3,620.00 ($32,905.80) Hold
SFE SAFEGUARD SCIENTIFICS $16.45 1.4% -1,900.00 ($31,255.00) Short
BAGL Einstein Noah Restaurant Group $15.54 1.4% -1,990.00 ($30,924.60) Short
HOT STARWOOD HOTELS&RESWORLDWIDE $58.97 1.4% -520.00 ($30,664.40) Short
ACXM ACXIOM CORP $17.23 1.3% -1,710.00 ($29,463.30) Hold
MAKO MAKO Surgical Corporation $15.52 1.3% -1,890.00 ($29,332.80) Short
MCHP MICROCHIP TECHNOLOGY $36.47 1.3% -790.00 ($28,811.30) Hold
AH Accretive Health Inc $18.14 1.3% -1,560.00 ($28,298.40) Short
HNR Harvest Natural Resources Inc $11.12 1.3% -2,510.00 ($27,910.95) Short
SWK Stanley Black & Decker Inc $72.68 1.3% -383.00 ($27,836.44) Hold
CMO CAPSTEAD MORTGAGE(NEW) $12.71 1.3% -2,190.00 ($27,834.90) Hold
DUF Duff & Phelps Corporation $16.96 1.3% -1,640.00 ($27,814.40) Hold
TLM TALISMAN ENERGY $22.92 1.3% -1,210.00 ($27,733.20) Short
FL Foot Locker Inc $17.86 1.3% -1,530.00 ($27,325.80) Hold
BG Bunge Ltd $68.07 1.2% -380.00 ($25,866.56) Short
MCCC MEDIACOM COMMUNIC'A' $8.77 1.2% -2,950.00 ($25,856.75) Short
BCO Brink's Co/The $27.00 1.2% -950.00 ($25,650.00) Short
IGTE iGate Corporation $15.40 1.2% -1,660.00 ($25,564.00) Hold
NOVL NOVELL INC $6.02 1.2% -4,220.00 ($25,403.98) Short
FO FORTUNE BRANDS $61.68 1.2% -410.00 ($25,288.80) Short
VVUS VIVUS INC $8.95 1.2% -2,820.00 ($25,239.00) Hold
PTIE PAIN THERAPEUTICS $6.18 1.1% -4,020.00 ($24,863.30) Hold
NOG Northern Oil & Gas, Incorporated $27.57 1.1% -900.00 ($24,813.00) Short
COG CABOT OIL & GAS 'A' $41.63 1.1% -590.00 ($24,561.70) Hold
MAN MANPOWER INC $64.57 1.1% -380.00 ($24,536.56) Short
MF MF Global Holdings Ltd $8.28 1.1% -2,960.00 ($24,508.80) Short
MSCC MICROSEMI CORP $22.49 1.1% -1,080.00 ($24,289.09) Short
ALX ALEXANDER'S, INC $404.69 1.1% -60.00 ($24,281.40) Short
EXP Eagle Materials Inc $29.00 1.1% -830.00 ($24,070.00) Short
GEO Geo Group Inc/The $23.77 1.1% -1,010.00 ($24,007.70) Hold
LGF LIONS GATE ENTERTAINMENT $6.20 1.1% -3,860.00 ($23,932.00) Short
TIF TIFFANY & CO $58.13 1.1% -410.00 ($23,833.30) Hold
STMP STAMPS.COM INC $12.72 1.1% -1,870.00 ($23,786.40) Short
LUX LUXOTTICA GROUP ADS $30.37 1.1% -780.00 ($23,688.60) Hold
MNTA Momenta Pharmaceuticals Inc $12.79 1.1% -1,850.00 ($23,661.32) Hold
FDX FEDEX CORP $90.32 1.1% -260.00 ($23,483.17) Hold
CRTX Cornerstone Therapeutics Inc $5.82 1.1% -4,030.00 ($23,454.60) Short
BMS BEMIS CO $32.55 1.1% -720.00 ($23,436.00) Hold
BMRN BIOMARIN PHARMACEUTICAL INC $25.42 1.1% -920.00 ($23,386.40) Short
EQT EQT Corp $48.19 1.1% -480.00 ($23,131.20) Hold
FICO Fair Isaac Inc $25.38 1.1% -910.00 ($23,095.80) Short
BTX BIOTIME INC $7.83 1.1% -2,940.00 ($23,020.20) Short
KW Kennedy-Wilson Holdings Inc $10.55 1.1% -2,180.00 ($22,999.00) Hold
NATI NATL INSTRUMENTS $42.31 1.0% -540.00 ($22,847.40) Short
LTD Limited Brands $29.24 1.0% -770.00 ($22,514.80) Hold
GKSR G & K SERVICES CL'A' $31.33 1.0% -710.00 ($22,244.30) Short
PFS Provident Financial $14.65 1.0% -1,510.00 ($22,121.50) Hold
PC Panasonic Corp $13.73 1.0% -1,590.00 ($21,830.70) Hold
WTR Aqua America Inc $23.12 1.0% -930.00 ($21,501.60) Hold
ALE Allete Inc $36.91 1.0% -580.00 ($21,407.74) Hold
CFR CULLEN/FROST BANKERS $57.78 1.0% -360.00 ($20,800.80) Hold
 MARKET HAVEN MONTHLY

CBSH COMMERCE BANCSHARES $41.13 0.9% -497.00 ($20,441.61) Hold

NVEC NVE Corporation $58.08 0.9% -350.00 ($20,328.00) Hold
STEI STEWART ENTERPRISES INC CL A $6.38 0.9% -3,080.00 ($19,650.40) Short
CADX Cadence Pharmaceuticals, Incorporated $7.77 0.9% -2,510.00 ($19,490.15) Short
HTLD HEARTLAND EXPRESS $16.03 0.9% -1,200.00 ($19,230.00) Hold
TXI TEXAS INDUS $39.73 0.9% -480.00 ($19,070.35) Hold
RIGL RIGEL PHARMACEUTICALS $6.73 0.9% -2,800.00 ($18,830.00) Hold
CYN CITY NATIONAL $57.79 0.8% -320.00 ($18,492.80) Short
OMX OfficeMax Inc $16.07 0.8% -1,150.00 ($18,480.50) Hold
MYGN MYRIAD GENETICS $19.96 0.8% -920.00 ($18,363.20) Hold
CMA COMERICA INC $38.20 0.8% -470.00 ($17,954.00) Hold
AA ALCOA INC $16.57 0.8% -1,060.00 ($17,564.20) Hold
XXIA IXIA $15.73 0.8% -1,090.00 ($17,145.70) Short
XNPT XenoPort, Incorporated $7.88 0.8% -2,110.00 ($16,626.80) Hold
CVC CABLEVISION SYS'A' $33.85 0.7% -480.00 ($16,248.00) Hold
OMER Omeros Corp $6.26 0.7% -2,580.00 ($16,150.80) Hold
NSM.H NATL SEMICONDUCTOR $14.81 0.7% -1,030.00 ($15,254.30) Hold
LM LEGG MASON INC $33.13 0.7% -460.00 ($15,239.80) Hold
CWT CALIF WATER SVC GRP DELAWARE $36.50 0.6% -350.00 ($12,775.00) Hold
CGA China Green Agriculture Inc $8.13 0.6% -1,510.00 ($12,276.30) Short
ONB OLD NATL BANCORP(IND) $10.73 0.6% -1,130.00 ($12,124.90) Hold
MLM MARTIN MARIETTA MATERIALS $83.50 0.5% -140.00 ($11,690.00) Short
IDRA Idera Pharmaceuticals Inc $2.82 0.5% -4,000.00 ($11,280.00) Short
CNW Con-way Inc $34.02 0.5% -330.00 ($11,226.60) Hold
BXS BANCORPSOUTH $15.64 0.5% -640.00 ($10,009.60) Hold
HQS HQ Sustainable Maritime Indust $4.33 0.5% -2,290.00 ($9,915.70) Hold
JNY The Jones Group Inc $12.69 0.4% -770.00 ($9,771.30) Hold
FTR Frontier Communications Corp $9.17 0.4% -1,040.00 ($9,536.80) Hold
BKS BARNES & NOBLE $15.75 0.4% -600.00 ($9,450.00) Hold
PBCT PEOPLE'S BANK $12.91 0.4% -660.00 ($8,520.60) Hold