COMMON STOCK ANALYSIS

Please read through the Investment Thumbnails on 13 of the stocks that I analyzed and included in my small cap value mutual fund portfolio during the 2006-7 time frame. These were originally put in a training manual to help explain our investment philosophy.

1: Reading the descriptions, what patterns do you see in the investment rationales? In other words, what type of catalysts motivated our purchase of the stocks?

2:Financial ratios are cited in the descriptions. What ratios seemed to be most important in our selection process? What were the levels of these ratios that seemed to be our sweet spot? Do any of the ratios seem to be outliers

SANDERSON FARMS 1/10/06 Stock has been beaten down on Katrina impacts and Avian influenza fears. Dark Meat exports slow at year end because of Katrina, Russia nearing import quotas and Avian flu jitters. Barring human-to-human spread, Avian flu should fade as an issue in April/May time frame. New processing facility in GA is increasing capacity and efficiency. Low cost producer in fresh chicken. 2006 cap ex will lower production costs in further processed chicken. Feed costs are being locked in at historically very low levels.Strong balance sheet........essentially no debt. PP/B=1.5, P/CF=5.5, P/S=0.5 Div Yld is 1.8%. SCHNITZER STEEL 9/5/06 As with most steel firms, SCHN has been enjoying good times. Their diversification may help them in bad times. They are vertically integrated with 3 synergystic parts. Auto parts (both full-service and self-service) is a counter- cyclical portion of the business that has good growth opportunities as SCHN consolidates a fragmented industry. These stores provide fodder for the metal recycling business which is well-positioned in port areas and has high barriers to entry. New mega shredders and induction sorting to cull out non ferrous metals should increase productivity. SCHN is the leading exporter of scrap and benefits from China's growth. Lastly, the efficient minimill has a secure supply of scrap, and produces bar products for the CA & Pacific northwest markets. This stock has the benefit of running with the bulls in an up market (beta=1.46), but more than other steel stocks can have some potential protection from a US downturn via scrap exports and increased demand for autoparts in a recession. The debt level is low (LTD/Cap=13%). P/B=1.5, P/CF=8.0, P/S=0.7. An SEC investigation into payment practices in Asia lead to a new management team in 2005. The company seems to be fully cooperating and has reserves established for a penalty in the $15 million area. ENERSYS 4/12/06 ENS is the strongest global player in the industrial battery market. ENS was an LBO by current management and Morgan Stanley Capital Partners of Yuasa's non- Asian business. The company is focused on profitable growth. They avoid the low margin automobile battery business, and are growing their military business such as batteries for tanks and submarines. Submarine batteries sell for $1.5 MM. A major factor for ENS is the price of lead. A 1 cent increase in commodity lead prices is a $4.5 million change in ENS' bottom line. Lead is up 35 cents/lb. since 2002. Significant mine and smelter capacity additions came in 2005, inventories are building, and China is a net producer of lead. Much of the increase appears to be a general speculation on metals, and not well grounded in fundamentals. A decline in lead could have a strong positive impact on earnings. Currently, the company has little hedging in place as they believe that lead prices are unsustainable by fundamentals. The company has done well managing through the rise in prices, with hedging and price increases. In 2005 the stock fell 30% in a month, and a month and a half later had fully recovered. The cause was selling on higher lead prices, followed by a preannouncement at the high end of the range. The company is spending to develop new products, not to add capacity, to keep pricing firm. P/B=1.4, P/CF=8.2, P/S=0.5. UNITED BANKSHARES 3/12/0% Richard Adams (CEO) (60). Steve Wilson (CFO), and Joe Wilson (EVP) have led the bank since its founding in 1982. UBSI is West Virginia's largest bank, with an even larger part of the bank in the Northern VA (West of DC), DC, and Maryland marketplace. The bank's ROE is over 20% in WW given low compensation and occupancy costs and a low cost of funds. Overall the ROE is 14% and the ROA is 1.38%. The efficiency ratio is an excellent 47%. NPAs are 15 bps. Credit quality has been traditionally strong. In WV the focus is on C&I loans, in the DC area CRE has been more prominent. The stock is currently at a 52 week low. Excellent footprint for potential acquisition. P/B = 1.5 JO-ANN STORES 8/7/06 New CEO and Head Buyer recently hired. Limited Street coverage, mostly negative. Wachovia upgraded to market perform today. Two private equity firms own almost 20% of the stock. Short interest is 28% of the float. Rumor that WMT may exit fabric business. If true, a huge positive, but a minor consideration relative to other factors. P/B=0.8, P/CF=9.6, P/S=0.2. UMB FINANCIAL 7/20/06 This bank was founded by the Kemper family and for years was run with little regard to profit maximization. The efficiency ratio was, until recently, over 80%. No branches had ever been closed, until recently. The bank did not have performance linked incentive plans, until recently. Management was very in-bred, you guessed it, until recently, when a number of talented and experienced leaders were brought in. Mariner Kemper is the first family member who is really a skilled and professional banker. He is taking the right steps to cut costs, increase sales, and funding is heavily skewed to low cost core deposits. The normalized return analysis has shortcomings for this stock. Finding the level of profitability the , and develop the wealth management business. His father nor only retired as chairman, but has left the board. Very importantly, though, the bank's solid credit culture remains bank has demonstrated on a normalized basis far understates the bank's potential. More realistic would be a scenario in which the bank began to approach the typical bank's level of profitability. This would produce a value far higher than I have calculated here. I anticipate that as the bank evolves our normalized value will be revised upward. This is not, however, speculating on a new product or growth scenario, it is simply saying the bank can do what hundreds of other banks do. Given the substantial cultural change taking place, I think this is very realistic. P/B=1.7, Div Yld = 1.6% RAILAMERICA 5/21/06 RRA is a story that can improve organically or through acquisitions, or by being acquired. RailAmerica has underperformed operationally for a number of years. Management seems to be getting their arms around the problems. One indication is the sharp drop in train accidents and personal injuries. This has a direct ramification in insurance expense in addition to overall implications for efficiency. Revenues are up as the railroad has been working to revise pricing agreements with the Class I railroads. Surcharges have been doing a good job of covering much of the fuel cost increases. A festering sore, that is cash flow negative, is the Ohio region. Management has cut losses in half in recent quarters and pledged to fix or dispose of the problems by year end. While many management initiatives are just beginning and may not yet be a catalyst, I think the addition of M&A catalysts makes this a buy now. RRA has disposed of Australian, Chilean, and Albertan operations and has cash to do an accretive deal such as the previous purchase of Alcoa's railroads. More interesting is the fact that Genessee & Wyoming has disposed of their Australian operations and with that pile of cash could be a potential acquirer of RRA. P/B=1.0, P/CF=6.4, P/S=1.0. ORTHOFIX 6/11/06 Nice mix of businesses: 2nd largest firm in bone stimulation, largest in cold/pain therapy, plus have positions in braces & softgoods and internal and external fixators. OFIX has the only FDA approved product for cervical spine stimulation. No debt, and cash is available for acquisitions. Management is looking for accretive acquisitions and has a history of making good ones in rationally-related areas to its current business. International has been a relative problem. Have just internally promoted someone to head Europe and are looking for a new head for all of International. Light liquidity would require that this be a smaller holding in the portfolio. Current headquartered in the Netherlands Antilles, but given diminution of tax benefits may relocate situs to US. P/B=1.7, P/CF=12.7, P/S=2 ALBANY INTERNATIONAL 3/6/07 Leading firm in paper machine clothing (PMC). 30% market share to its nearest competitor. #1 in North America, Europe, and Asia. Market is currently 50% NA, 40% EUR, and 10% AS, but VERY high growth in Asia. Chinese paper consumption is 10% per capita of US. $150 million capacity add in Asia, will make AIN more dominant there than in any other market. PMC is 2% of cost of papermaking, but has a disproportionate impact on productivity and quality. Thus, pricing power and high risk in switching to a new supplier. PMC provides the cash flow to ramp up three higher growth businesses: 1. Aerospace composite parts. Produced with proprietary PMC technology - allows automated 3D production rather than 2D manual layering of composites. Producing jet engine blades, etc. 2. Application of PMC expertise to other industries that need permeable conveyor belts. 3. High performance industrial doors (opens very fast and high cycle...for forklifts in factories, etc.). Gameplan is to ramp up Asian PMC in '07 & '08. Cash flow should turn positive in late '08. Should be strongly positive in later years. P/B=1.9, P/CF=8.3, Div Yld=1.2%. MARTEN TRANSPORT 8/8/07 MRTN, along with other truckers, has sold off in 2007 (down 19% ytd). Unlike many truckers, MRTN is differentiated by its fleet/cargo: it is a refrigerated line. This has positives in the current environment. First, as reefer traffic is dominated by perishable consumer staples, the haulage is somewhat more sheltered from an economic downturn. Second, industry orders of new reefers have been weak, the backlog is declining and cancellations rising. Thus supply may be constrained when demand increases. Randy & Christine Marten own around 30% of the company so there is definitely alignment with shareholder interests. Valuation is very attractive with P/B=1.4, P/B=0.6, P/CF=4. TSAKOS ENERGY NAVIGATION 3/20/06 Tsakos is one of the largest transporters of energy in the world. Unlike many of its competitors, Tsakos has long-term contracts for utilization of most of its fleet with major oil companies (Shell, ExxonMobil, and PetroBras, among others). This smoothes earnings compared to those generated by spot operators. The fleet is currently 35 tankers with another 16 scheduled for delivery over the next two years. Many of the new tankers are ice class, making Tsakos the leader in ice class ships needed to move Russian sub-Arctic crude. Also, TNP is adding to its refined product tankers as with refinery constraints in the US, more crude is being refined in the Third World. Demographics of oil shipping are positive as China and India have per capita consumption of oil well below that of the developed world. As their economies grow, they will need more imports. The Tsakos family owns 40% and is threatening to take the company private if the stock price doesn't come up to NAV ($56). They feel they deserve a double digit P/E given the stable earnings profile. In a recession when oil consumption dips, it is the spot operator that falls off the cliff, not TNP with its long term relationship with the majors. The headaches of Sarbanes-Oxley aren't worth it to them at this valuation The dividend yield is an attractive 5.7%. P/E=6.4, P/B=1.4, P/CF=4.9, P/S=2.6. EDO 2/8/07 Murphy's law poster child EDO has missed consensus four consecutive quarters, 6 out of the last 7, and 8 out of the last 11. Sell-side analysts currently rate the stock with 3 buys, 12 holds, and 3 sells. Management has a job to do to restore credibility. Nonetheless, the seeds are sown for a recovery in the company's fortunes A huge negative in 2006 was the Warlock counter-IED system. Production of Warlock dropped sharply from 2005. Lessened sales and unabsorbed overhead hurt both the topline and margins. In 2007, Warlock is essentially ignored by analysts. Nonetheless, some sales potential remains, and EDO is a strong contender for the next two generations of counter-IED systems (one to receive production funding and one to receive R&D funding). The big ramp up in sales in 2007 should be for a Marine Corps battlefield communications system, TSM. Beyond TSM, EDO has a diverse set of projects spread among all the armed services, intelligence services, and foreign governments. Such diversification helps, but the company is still very subject to volatility from specific projects such as Warlock and TSM. After many misses, management and reporting structure has been substantially revamped in recent quarters. P/B=1.9, P/CF=16, P/S=0.8. nEPS=$1.54,Rel P/E=1.05,g=11%. OIL STATES INTERNATIONAL 9/27/06 ols has prominent market positions in diverse portions of the North American market. In well-site services they are the number one provider of accommodations and catering in the Canadian Tar Sands region, competing with firms such as Aramark. They also rent tools in the Gulf Coast region and drill in the Permian Basin. In offshore products they are #1 in heavy duty mooring systems for offshore platforms. They are in demand as producers want to strengthen their protection against large hurricanes. They are also #1 in oil country tubular goods. Even considering a normalized earnings level substantially below current earnings, substantial potential return is available. The stock is down 35% from its peak in May. P/B=1.8, P/CF=6.8, P/S=0.8. SANDERSON FARMS 1/10/06 Stock has been beaten down on Katrina impacts and Avian influenza fears. Dark Meat exports slow at year end because of Katrina, Russia nearing import quotas and Avian flu jitters. Barring human-to-human spread, Avian flu should fade as an issue in April/May time frame. New processing facility in GA is increasing capacity and efficiency. Low cost producer in fresh chicken. 2006 cap ex will lower production costs in further processed chicken. Feed costs are being locked in at historically very low levels.Strong balance sheet........essentially no debt. PP/B=1.5, P/CF=5.5, P/S=0.5 Div Yld is 1.8%. SCHNITZER STEEL 9/5/06 As with most steel firms, SCHN has been enjoying good times. Their diversification may help them in bad times. They are vertically integrated with 3 synergystic parts. Auto parts (both full-service and self-service) is a counter- cyclical portion of the business that has good growth opportunities as SCHN consolidates a fragmented industry. These stores provide fodder for the metal recycling business which is well-positioned in port areas and has high barriers to entry. New mega shredders and induction sorting to cull out non ferrous metals should increase productivity. SCHN is the leading exporter of scrap and benefits from China's growth. Lastly, the efficient minimill has a secure supply of scrap, and produces bar products for the CA & Pacific northwest markets. This stock has the benefit of running with the bulls in an up market (beta=1.46), but more than other steel stocks can have some potential protection from a US downturn via scrap exports and increased demand for autoparts in a recession. The debt level is low (LTD/Cap=13%). P/B=1.5, P/CF=8.0, P/S=0.7. An SEC investigation into payment practices in Asia lead to a new management team in 2005. The company seems to be fully cooperating and has reserves established for a penalty in the $15 million area. ENERSYS 4/12/06 ENS is the strongest global player in the industrial battery market. ENS was an LBO by current management and Morgan Stanley Capital Partners of Yuasa's non- Asian business. The company is focused on profitable growth. They avoid the low margin automobile battery business, and are growing their military business such as batteries for tanks and submarines. Submarine batteries sell for $1.5 MM. A major factor for ENS is the price of lead. A 1 cent increase in commodity lead prices is a $4.5 million change in ENS' bottom line. Lead is up 35 cents/lb. since 2002. Significant mine and smelter capacity additions came in 2005, inventories are building, and China is a net producer of lead. Much of the increase appears to be a general speculation on metals, and not well grounded in fundamentals. A decline in lead could have a strong positive impact on earnings. Currently, the company has little hedging in place as they believe that lead prices are unsustainable by fundamentals. The company has done well managing through the rise in prices, with hedging and price increases. In 2005 the stock fell 30% in a month, and a month and a half later had fully recovered. The cause was selling on higher lead prices, followed by a preannouncement at the high end of the range. The company is spending to develop new products, not to add capacity, to keep pricing firm. P/B=1.4, P/CF=8.2, P/S=0.5. UNITED BANKSHARES 3/12/0% Richard Adams (CEO) (60). Steve Wilson (CFO), and Joe Wilson (EVP) have led the bank since its founding in 1982. UBSI is West Virginia's largest bank, with an even larger part of the bank in the Northern VA (West of DC), DC, and Maryland marketplace. The bank's ROE is over 20% in WW given low compensation and occupancy costs and a low cost of funds. Overall the ROE is 14% and the ROA is 1.38%. The efficiency ratio is an excellent 47%. NPAs are 15 bps. Credit quality has been traditionally strong. In WV the focus is on C&I loans, in the DC area CRE has been more prominent. The stock is currently at a 52 week low. Excellent footprint for potential acquisition. P/B = 1.5 JO-ANN STORES 8/7/06 New CEO and Head Buyer recently hired. Limited Street coverage, mostly negative. Wachovia upgraded to market perform today. Two private equity firms own almost 20% of the stock. Short interest is 28% of the float. Rumor that WMT may exit fabric business. If true, a huge positive, but a minor consideration relative to other factors. P/B=0.8, P/CF=9.6, P/S=0.2. UMB FINANCIAL 7/20/06 This bank was founded by the Kemper family and for years was run with little regard to profit maximization. The efficiency ratio was, until recently, over 80%. No branches had ever been closed, until recently. The bank did not have performance linked incentive plans, until recently. Management was very in-bred, you guessed it, until recently, when a number of talented and experienced leaders were brought in. Mariner Kemper is the first family member who is really a skilled and professional banker. He is taking the right steps to cut costs, increase sales, and funding is heavily skewed to low cost core deposits. The normalized return analysis has shortcomings for this stock. Finding the level of profitability the , and develop the wealth management business. His father nor only retired as chairman, but has left the board. Very importantly, though, the bank's solid credit culture remains bank has demonstrated on a normalized basis far understates the bank's potential. More realistic would be a scenario in which the bank began to approach the typical bank's level of profitability. This would produce a value far higher than I have calculated here. I anticipate that as the bank evolves our normalized value will be revised upward. This is not, however, speculating on a new product or growth scenario, it is simply saying the bank can do what hundreds of other banks do. Given the substantial cultural change taking place, I think this is very realistic. P/B=1.7, Div Yld = 1.6% RAILAMERICA 5/21/06 RRA is a story that can improve organically or through acquisitions, or by being acquired. RailAmerica has underperformed operationally for a number of years. Management seems to be getting their arms around the problems. One indication is the sharp drop in train accidents and personal injuries. This has a direct ramification in insurance expense in addition to overall implications for efficiency. Revenues are up as the railroad has been working to revise pricing agreements with the Class I railroads. Surcharges have been doing a good job of covering much of the fuel cost increases. A festering sore, that is cash flow negative, is the Ohio region. Management has cut losses in half in recent quarters and pledged to fix or dispose of the problems by year end. While many management initiatives are just beginning and may not yet be a catalyst, I think the addition of M&A catalysts makes this a buy now. RRA has disposed of Australian, Chilean, and Albertan operations and has cash to do an accretive deal such as the previous purchase of Alcoa's railroads. More interesting is the fact that Genessee & Wyoming has disposed of their Australian operations and with that pile of cash could be a potential acquirer of RRA. P/B=1.0, P/CF=6.4, P/S=1.0. ORTHOFIX 6/11/06 Nice mix of businesses: 2nd largest firm in bone stimulation, largest in cold/pain therapy, plus have positions in braces & softgoods and internal and external fixators. OFIX has the only FDA approved product for cervical spine stimulation. No debt, and cash is available for acquisitions. Management is looking for accretive acquisitions and has a history of making good ones in rationally-related areas to its current business. International has been a relative problem. Have just internally promoted someone to head Europe and are looking for a new head for all of International. Light liquidity would require that this be a smaller holding in the portfolio. Current headquartered in the Netherlands Antilles, but given diminution of tax benefits may relocate situs to US. P/B=1.7, P/CF=12.7, P/S=2 ALBANY INTERNATIONAL 3/6/07 Leading firm in paper machine clothing (PMC). 30% market share to its nearest competitor. #1 in North America, Europe, and Asia. Market is currently 50% NA, 40% EUR, and 10% AS, but VERY high growth in Asia. Chinese paper consumption is 10% per capita of US. $150 million capacity add in Asia, will make AIN more dominant there than in any other market. PMC is 2% of cost of papermaking, but has a disproportionate impact on productivity and quality. Thus, pricing power and high risk in switching to a new supplier. PMC provides the cash flow to ramp up three higher growth businesses: 1. Aerospace composite parts. Produced with proprietary PMC technology - allows automated 3D production rather than 2D manual layering of composites. Producing jet engine blades, etc. 2. Application of PMC expertise to other industries that need permeable conveyor belts. 3. High performance industrial doors (opens very fast and high cycle...for forklifts in factories, etc.). Gameplan is to ramp up Asian PMC in '07 & '08. Cash flow should turn positive in late '08. Should be strongly positive in later years. P/B=1.9, P/CF=8.3, Div Yld=1.2%. MARTEN TRANSPORT 8/8/07 MRTN, along with other truckers, has sold off in 2007 (down 19% ytd). Unlike many truckers, MRTN is differentiated by its fleet/cargo: it is a refrigerated line. This has positives in the current environment. First, as reefer traffic is dominated by perishable consumer staples, the haulage is somewhat more sheltered from an economic downturn. Second, industry orders of new reefers have been weak, the backlog is declining and cancellations rising. Thus supply may be constrained when demand increases. Randy & Christine Marten own around 30% of the company so there is definitely alignment with shareholder interests. Valuation is very attractive with P/B=1.4, P/B=0.6, P/CF=4. TSAKOS ENERGY NAVIGATION 3/20/06 Tsakos is one of the largest transporters of energy in the world. Unlike many of its competitors, Tsakos has long-term contracts for utilization of most of its fleet with major oil companies (Shell, ExxonMobil, and PetroBras, among others). This smoothes earnings compared to those generated by spot operators. The fleet is currently 35 tankers with another 16 scheduled for delivery over the next two years. Many of the new tankers are ice class, making Tsakos the leader in ice class ships needed to move Russian sub-Arctic crude. Also, TNP is adding to its refined product tankers as with refinery constraints in the US, more crude is being refined in the Third World. Demographics of oil shipping are positive as China and India have per capita consumption of oil well below that of the developed world. As their economies grow, they will need more imports. The Tsakos family owns 40% and is threatening to take the company private if the stock price doesn't come up to NAV ($56). They feel they deserve a double digit P/E given the stable earnings profile. In a recession when oil consumption dips, it is the spot operator that falls off the cliff, not TNP with its long term relationship with the majors. The headaches of Sarbanes-Oxley aren't worth it to them at this valuation The dividend yield is an attractive 5.7%. P/E=6.4, P/B=1.4, P/CF=4.9, P/S=2.6. EDO 2/8/07 Murphy's law poster child EDO has missed consensus four consecutive quarters, 6 out of the last 7, and 8 out of the last 11. Sell-side analysts currently rate the stock with 3 buys, 12 holds, and 3 sells. Management has a job to do to restore credibility. Nonetheless, the seeds are sown for a recovery in the company's fortunes A huge negative in 2006 was the Warlock counter-IED system. Production of Warlock dropped sharply from 2005. Lessened sales and unabsorbed overhead hurt both the topline and margins. In 2007, Warlock is essentially ignored by analysts. Nonetheless, some sales potential remains, and EDO is a strong contender for the next two generations of counter-IED systems (one to receive production funding and one to receive R&D funding). The big ramp up in sales in 2007 should be for a Marine Corps battlefield communications system, TSM. Beyond TSM, EDO has a diverse set of projects spread among all the armed services, intelligence services, and foreign governments. Such diversification helps, but the company is still very subject to volatility from specific projects such as Warlock and TSM. After many misses, management and reporting structure has been substantially revamped in recent quarters. P/B=1.9, P/CF=16, P/S=0.8. nEPS=$1.54,Rel P/E=1.05,g=11%. OIL STATES INTERNATIONAL 9/27/06 ols has prominent market positions in diverse portions of the North American market. In well-site services they are the number one provider of accommodations and catering in the Canadian Tar Sands region, competing with firms such as Aramark. They also rent tools in the Gulf Coast region and drill in the Permian Basin. In offshore products they are #1 in heavy duty mooring systems for offshore platforms. They are in demand as producers want to strengthen their protection against large hurricanes. They are also #1 in oil country tubular goods. Even considering a normalized earnings level substantially below current earnings, substantial potential return is available. The stock is down 35% from its peak in May. P/B=1.8, P/CF=6.8, P/S=0.8