Jul 7 report, 25p

Rising earnings coupled with stable margins should lift S&P 500 index by 8% to our year-end target
of 1750. Equities trade close to fair value but the Fed Model implies additional upside. Improving
US macro data supports continued Cyclicals outperformance led by Financials and Industrials. Our
high Sharpe Ratio basket has generated superior risk-adjusted returns for more than a decade,
beating S&P 500 and posting a better information ratio than most large-cap core mutual funds. We
highlight 23 stocks that meet several of our selection criteria. See page 16 for a list of companies.