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Value-oriented Equity Investment Ideas for Sophisticated Investors

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Investing In The Tradition ofGraham, Buffett, Klarman

Year IV, Volume I January 31, 2011

When asked how he became so successful, Buffett answered: We read hundreds and hundreds of annual reports every year.

Top Ideas In This Report

(Nasdaq:

(NYSE: ...

(NYSE: ...

Also Inside

Editorial Commentary . 5 MOI Performance Review .. 9Superinvestor Update 12Five Takes on Market Valuation .. 13Browsing for Large-Cap Ideas 18Cheapest 20 DJIA Components 30

Exclusive VALUEx Insights ..110 Favorite Value Screens 171 This Months Top Web Links .. 179

About The Manual of Ideas

Our goal is to bring you investmentideas that are compelling on thebasis of value versus price. In ourquest for value, we analyze the topholdings of top fund managers. Wealso use a proprietary methodologyto identify stocks that are not widelyfollowed by institutional investors.

Our research team has extensiveexperience in industry and securityanalysis, equity valuation, andinvestment management. We bring abuy side mindset to the ideageneration process, cutting acrossindustries and market capitalizationranges in our search for compellingequity investment opportunities.

L ARGE C A P S TOC K S :

H OW C HEAP A RE T H EY ?

Five takes on U.S. equity market valuation Cheapest 20 DJIA components profiled and analyzed

Proprietary selection of Top Three investment candidates Plus: Superinvestor holdings update

Plus: Favorite stock screens for value investors Plus: Exclusive insights from VALUEx participants

Companies mentioned in this issue include 3M, Abbott Labs, Alcoa, Amazon.com, America Movil, American Express,

Anglo American, Anheuser-Busch, Apple, AstraZeneca, AT&T,Australia and NZ, Banco Bradesco, Banco Santander, Bank of America,

Bank of Nova Scotia, Barclays, BASF, Bayer, Berkshire Hathaway,

BHP Billiton, BP, British Am. Tobacco, Canon, Caterpillar, Chevron,China Life Insurance, China Mobile, China Telecom, Cisco Systems,Citigroup, CNOOC, Co. Bebidas Americas, Coca-Cola, Comcast,

ConocoPhillips, Daimler, Ecopetrol, Eni, Exxon Mobil, Ford Motor,General Electric, GlaxoSmithKline, Goldman Sachs, Google,

Hewlett-Packard, Home Depot, Honda, HSBC, IBM, Intel, Itau Unibanco,Johnson & Johnson, JPMorgan Chase, Kraft Foods, McDonalds, Merck,Microsoft, Mitsubishi UFJ, Novartis, Novo Nordisk, NTT, NTT DoCoMo,

Occidental Petroleum, Oracle, PepsiCo, PetroChina, Petroleo Brasileiro,Pfizer, Philip Morris, Procter & Gamble, Qualcomm, Roche,

Royal Bank of Canada, Royal Dutch Shell, SAP, Schlumberger, Siemens,Sinopec, StatoilHydro, Suncor Energy, Taiwan Semiconductor, Telefonica,

The Travelers Companies, TOTAL, Toyota, UBS, Unilever, United Technologies, UPS, Vale, Verizon, Visa, Volkswagen, Wal-Mart,

Walt Disney, Wells Fargo, Westpac Banking,, and more.

(analyzed companies are underlined)

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Table of ContentsEDITORIAL COMMENTARY ..........................................................................5

THE MANUAL OF IDEAS PERFORMANCE REVIEW ..................................9 SUPERINVESTOR HOLDINGS UPDATE ................................................... 12

VIEW FROM THE TOP: FIVE TAKES ON MARKET VALUATION ............ 13

TOBINS Q ............................................................................................................................. 14 SHILLERS TEN-YEARTRAILINGP/E ........................................................................................ 15 U.S. EQUITYMARKETCAPITALIZATION TOGDP....................................................................... 16 S&P EARNINGSYIELD VERSUSINTERESTRATES..................................................................... 16 DOWJONESINDUSTRIALS INTERMS OFGOLD......................................................................... 17

BROWSING FOR POTENTIAL LARGE CAP OPPORTUNITIES ............... 18

LARGEST100 COMPANIES(BY MARKET VALUE), SORTED BYFORWARDP/E ............................... 18 LARGEST100 COMPANIESTRADING AT $5 BILLION) ........................ 22 MAGICFORMULA,BASED ONTHISYEARS EPS ESTIMATES(MV > $5 BILLION) ........................ 23 MAGICFORMULA,BASED ONNEXTYEARS EPS ESTIMATES(MV > $5 BILLION) ....................... 24 VALUE WITHCATALYST: CHEAPREPURCHASERS OFSTOCK(MV > $5 BILLION).......................... 25 PROFITABLEDIVIDENDPAYORS WITHDECENTBALANCESHEETS(MV > $5 BILLION) .................. 26 DEEP VALUE: LOTS OFREVENUE, LOWENTERPRISEVALUE(MV > $5 BILLION) ......................... 27 DEEP VALUE: NEGLECTEDGROSS PROFITEERS(MV > $5 BILLION) ........................................... 28 ACTIVISTTARGETS: POTENTIALSALES ORRECAPITALIZATIONS(MV > $5 BILLION) ..................... 29

CHEAPEST 20 MEMBERS OF DOW JONES INDUSTRIAL AVERAGE ... 30

ALCOA(AA) CAPITALWORLD.............................................................................................. 30 AMERICANEXPRESS(AXP) BARES, BERKSHIRE, MARKEL..................................................... 34 AT&T (T) CAPRE, T ROWE................................................................................................. 38 BANK OFAMERICA(BAC) APPALOOSA, BRK, CHOU, BRAVEWARRIOR, FAIRHOLME, PAULSON42 CHEVRON(CVX) BP CAPITAL, FPA ..................................................................................... 46 CISCOSYSTEMS(CSCO) APPALOOSA, CENTAUR, EDINBURGH, GLENVIEW, PENNANT............ 50 EXXONMOBIL(XOM) BRK, KLEINHEINZ, MARKEL, PENNANT, VIKING..................................... 54 GENERALELECTRIC(GE) BRK, EDINBURGH, FAIRHOLME, MARKEL....................................... 58 HEWLETT-PACKARD(HPQ) APPALOOSA, FPA, GLENVIEW, MAVERICK, SHUMWAY.................. 62 IBM (IBM) CAPITALWORLD, MARKEL, T ROWE.................................................................... 66 INTEL(INTC) APPALOOSA, EDINBURGH, MARKEL.................................................................. 70 JOHNSON& JOHNSON(JNJ) APPALOOSA, BRK, FAIRFAX, FPA, MARKEL, WESTCOAST......... 74 JPMORGAN(JPM) BLUERIDGE, CASTLEPOINT, KLEINHEINZ, LONEPINE, PAULSON, VIKING... 78 KRAFTFOODS(KFT) BRK, EAGLE, FAIRFAX, FPA, PERSHINGSQUARE, WESTCOAST............ 82 MERCK(MRK) APPALOOSA, FAIRFAX ................................................................................... 86 MICROSOFT(MSFT) APPALOOSA, BARES, BLUERIDGE, FPA, GREENLIGHT, MARKEL, WEITZ.. 90

PFIZER(PFE) BLUERIDGE, FPA, GREENLIGHT, KLEINHEINZ, MAVERICK, PAULSON, PENNANT94

TRAVELERS(TRV) FPA, GREENLIGHT, SOUTHEASTERN........................................................ 98 WAL-MART(WMT) BRK, EAGLE, FAIRFAX, FPA, KLEINHEINZ, MARKEL, WEITZ.................... 102 WALTDISNEY(DIS) CHILDRENS, SOUTHEASTERN.............................................................. 106

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EXCLUSIVE INSIGHTS FROM VALUEX PARTICIPANTS ...................... 110

ETHANBERG, G4 ................................................................................................................ 110 PHILIPBEST, ARGOSINVESTMENTMANAGERS...................................................................... 113 JAMESBRADFORD, PRIVATEINVESTOR................................................................................. 114 DAVIDCOYNE, SETANTAASSET MANAGEMENT...................................................................... 115

SHAIDARDASHTI, DARDASHTICAPITALMANAGEMENT........................................................... 119 SIMONDENISON-SMITH, METROPOLISCAPITAL..................................................................... 120 DR. CHRISTOPHERDETWEILER, PRIVATEINVESTOR............................................................... 122 TIM DUTOIT, EUROSHARELAB.............................................................................................. 123 CHRISTIANECK, UBS .......................................................................................................... 127 ORIEYAL, EMERGINGVALUECAPITALMANAGEMENT............................................................. 127 DONFITZGERALD, TOCQUEVILLEFINANCE............................................................................ 132 MASSIMOFUGGETTA, HORATIUS.......................................................................................... 134 BENEDIKTGERMANIER, PRIVATEINVESTOR........................................................................... 135 PABLOGONZALEZ, ABACOCAPITAL...................................................................................... 136 DR. OLAFHEIN, SPARTAAG ................................................................................................ 137 MARKUSHENZ, WTHRICH, HENZ& CO. ............................................................................... 139 ROBERTKARAS, SCHOELLERBANK(UNICREDITGROUP) ........................................................ 139 ANDREASLECHNER, PRIVATEINVESTOR............................................................................... 141 SBASTIENLEMONNIER, TOCQUEVILLEFINANCE.................................................................... 141 KAUSHALMAJMUDAR, THERIDGEWOODGROUP.................................................................... 143 PAULMCNULTY, SETANTAASSET MANAGEMENT................................................................... 144 WILLIAMOCHEE, HIMALAYACONSULTING............................................................................ 146 BERNARDPEPERSTRAETE, NGN CAPITAL............................................................................. 147 MATTHIASRIECHERT, PRIVATEINVESTOR............................................................................. 150 STEPHENROSEMAN, THESISFUNDMANAGEMENT................................................................. 151 MARCSAINTJOHNWEBB, ARGOSINVESTMENTMANAGERS................................................... 152 YUSUFSAMAD, BELFIELDCAPITAL........................................................................................ 153 RAHULSARAOGI, ATYANTCAPITAL....................................................................................... 155 BENJAMINSCHMITT, VARUSFUND........................................................................................ 156 ALANSCHRAM, WELLCAPPARTNERS.................................................................................... 157 ANDREASSCHWEITZER, PRIVATEINVESTOR.......................................................................... 159 KEVINSLEMP, PRIVATEINVESTOR........................................................................................ 159 GUYSPIER, AQUAMARINECAPITALMANAGEMENT................................................................. 161 CHRISTOPHSTAHL, PRIVATEINVESTOR................................................................................ 161 ARMINSTRACKE, CITIGROUP................................................................................................ 162 JOSHTARASOFF, GREENLEALANECAPITALMANAGEMENT.................................................... 163 PAOLOTRAMONTANA, KRAEMER, SCHWAB........................................................................... 165 CARTERVENKAT, PRIVATEINVESTOR................................................................................... 167 JACOBWOLINSKY, VALUEADVISORY.................................................................................... 168 PETERWTHRICH, WTHRICH, HENZ& CO........................................................................... 170

FAVORITE STOCK SCREENS FOR VALUE INVESTORS ...................... 171

MAGICFORMULA,BASED ONTRAILINGOPERATINGINCOME................................................. 171 MAGICFORMULA,BASED ONTHISYEARS EPS ESTIMATES................................................. 172 MAGICFORMULA,BASED ONNEXTYEARS EPS ESTIMATES................................................ 173

VALUE WITHCATALYST: CHEAPREPURCHASERS OFSTOCK................................................... 174 PROFITABLEDIVIDENDPAYORS WITHDECENTBALANCESHEETS............................................ 175 DEEP VALUE: LOTS OFREVENUE, LOWENTERPRISEVALUE................................................... 176 DEEP VALUE: NEGLECTEDGROSS PROFITEERS.................................................................... 177 ACTIVISTTARGETS: POTENTIALSALES, LIQUIDATIONS ORRECAPS......................................... 178

THIS MONTHS TOP 10 WEB LINKS ....................................................... 179

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The Manual of Ideas research team is gratified to have won high praise for our

investment idea generation process and analytical work.

I highly recommend MOI the thoroughness of the product coupled with the qualityof the content makes it an invaluable tool for the serious investor.

T IM DAVIS , MANAGING DIRECTOR , BLUESTEM ASSET MANAGEMENT

We do similar work ourselves.GLENN GREENBERG , MANAGING DIRECTOR , BRAVE WARRIOR CAPITAL

The Manual of Ideas is a tremendous effort and very well put together.MOHNISH PABRAI , MANAGING PARTNER , PABRAI INVESTMENT FUNDS

Outstanding.JONATHAN HELLER , CFA, EDITOR , C HEAP STOCKS

Your reports provide serious investors with a plethora of bargain stocks and sound advice. I highly recommend them.

M IGUEL BARBOSA , EDITOR , S IMOLEON S ENSE

Very impressive.SHAI DARDASHTI , MANAGING PARTNER , DARDASHTI CAPITAL MANAGEMENT

Its little surprise MOI is a winner. When you start with superior stock screening and combine it with good judgment, you put yourself in a great position to outperform.MARKO VUCEMILOVIC , FOUNDER AND MANAGING DIRECTOR , ALKAR GLOBAL

This is the best institutional-quality equity research to come along in a long time. It not only unearths companies with compelling risk-reward profiles but also analyzesthem with a clear understanding of business economics and competitive dynamics.

PAVEL SAVOR , ASSISTANT PROFESSOR OF FINANCE , THE WHARTON SCHOOL

I am (as always) impressed with your work.MARK SPROULE , SCOPIA CAPITAL

Keep up the great work, you are quickly becoming one of my must-read sources.CORY JANSSEN , FOUNDER , INVESTOPEDIA .COM

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