Richard E. Cripps, CFA
Chief Market Strategist
rcripps@leggmason.com
410.454.4472
Update & Review
October 2004
For a brief description of our equity models see page 24 of the Appendix.
• We are introducing an Equity Compass rating that integrates the Redline, PPS, and
SVI models to produce an overall investment opinion of Buy, Neutral, and Sell. The
new opinion also provides a risk/reward rating to use as a recommendation for
weighting portfolio positions.
• This Update & Review is being released in conjunction with our publication, “Solving
The Equity Performance Puzzle: Tools for Stock Selection & Portfolio Management,”
which is a comprehensive report on the methodology, performance, and strategies of
the Equity Compass models.
• Trend Following, by Michael Covel, is a new book gaining popularity among
investors. The book is challenging to the methods of conventional portfolio strategy.
We point out the similarities in the approach of trend following and the PPS model.
• There was improvement in the number of favorable ratings in the Equity Compass for
October. Utilities showed the sharpest improvement and joins Materials, Financials,
Industrials, and Telecommunications Services as sectors to Overweight.
• The S&P 500 Redline Strategy had a strong performance in September and is heavily
overweighted to the sector that is the most out-of-favor, Information Technology.
Michael S. Scherer
msscherer@leggmason.com
410.454.4731
Inside this issue:
Investment Commentary
2–3
Compass Overview
4–6
Model Monitor – Overview
Sector review of PPS
changes for October
7
Sweet Spot Strategy
Highest quality stocks with
favorable PPS ratings
8–9
LM Buy/Redline Low
Stock Selections
Illustration 1
Multi-Year
Time Horizon
Timothy M. McCann
tmmccann@leggmason.com
410.454.5333
SVI
Yearly
PPS
Quarterly
Monthly
10
S&P 500 Redline Strategy
11–12
Model Monitor
Rating changes &
Redline conditions
13–21
Appendix
LM Equity Compass
Performance Indices
& Model Overview
22–24
Redline
Weekly
News/
Trading
Noise
Valuation
Catalyst
Relative
Price
Strength
Relative
Valuation
Long-Term
Fundamentals
Variables Influencing Stock Performance
Source: Legg Mason
A complete list of PPS and SVI ratings is available from your Legg Mason representative.
All relevant disclosures and certifications appear on pages 25 and 26 of this report.
Legg Mason Wood Walker, Incorporated
Page 1
Update & Review, October 2004
Investment Commentary
Trend Following
The latest book making the rounds of investment theorists is
Trend Following, by Michael Covel.1 For investors willing to
engage in some insightful discussion of their core investment
philosophy, the book will challenge long-held beliefs. Perhaps
the most controversial argument is that Wall Street’s great
effort of analysis and projections of the future are of little or
no use to the serious investor. According to Covel, if the
objective is to have a defined strategy to put capital to work
for a profit, then investors are traders and the difference is
more than a parsing of semantics.
Trend Following is not an endorsement of day-trading and
technical analysis. The basic premise is that the most profit is
gained when a trader is harmonized to an enduring trend. To
do this, traders need to adopt a strict discipline that minimizes
behavioral bias (i.e., intuitive or “gut” feel), does not anticipate
a trend beginning or end, and acts when the trend changes.
This approach is diametrically opposed to long-term “buy and
hold,” which is viewed as a strategy that is best suited for
passive indexing.
The “how-to” portion of Covel’s book is more vague on the
mechanics of trend following than his conceptual logic and
extraordinary examples portray. However, we can’t help but
see similarities in approach to trend following in our
Performance Probability Score (PPS) model. PPS incorporates
analysis of relative valuation and relative price performance to
produce risk and reward expectations for individual stocks.
The core of the model is a binary separation of whether long-
term relative price performance is positive or negative (refer to
Illustration 3 on page 24 of the Appendix). Trend following is
doing the same.
We have three years of performance data for PPS that are
consistent with the concept of trend following (refer to
Chart 5 on page 22 of the Appendix). PPS ratings with a
definable positive trend of relative price strength (PPS 1–4)
have outperformed the S&P 500 handily while stocks with a
long-term negative price trend (PPS 6–9) generally have
underperformed. While we would argue that an overlay of
relative valuation provides an important consideration, the
basic rule of PPS is to stay with a positive or negative rating
until a definable change has occurred. In other words, PPS
does not anticipate changes in trend.
An example of trend following and PPS is the performance of
Tyco International (TYC). Chart 1 shows a price graph of
TYC from July 31, 2001 (inception of the PPS model) through
September 30, 2004. The long-term relative price portion of
PPS turned negative on TYC in January 2002 as the stock was
declining sharply. Trend following makes no claim of getting
investors out at a price peak. In reality, there is usually a
period of negative relative performance before a change in the
longer-term trend becomes definitive. At the time of the
negative change in PPS rating, there was no doubt skepticism
that the model was too late and the price weakness represented
an attractive buying opportunity given the extremely low
valuation of the stock.
Chart 1
Source: Legg Mason
1 Covel, Michael, Trend Following: How Great Traders Make Millions in Up or Down Markets, Financial Times
Prentice Hall Books, 2004
Legg Mason Wood Walker, Incorporated
Page 2
Update & Review, October 2004
Market Commentary (continued from page 2)
As it turned out, Tyco was to be front-page news and a “poster
child” of corporate malfeasance for most of 2002. The stock
bottomed at around $8 in July 2002 and began to move
steadily higher. As with a market peak, trend following is
unlikely to have a definitive change at the price bottom. From
a perspective of trend following, there needed to be a period of
positive relative performance before there was a confirmed
change. This did not occur for the PPS model on Tyco until
May 2003 at about $16. Again, there was no doubt skepticism
that the model was too late in recognizing the improvement in
TYC and the stock was approaching full valuation.
Other than using consensus estimates for determining relative
valuation, PPS provides an opinion that is independent of
analysts’ recommendations. The model is mechanical,
unemotional, adaptive to change, and confirms rather than
anticipates. Each of these characteristics is consistent with
Covel’s definition of successful trend following.
Legg Mason Wood Walker, Incorporated
Page 3
Investment books that have a lasting appeal offer insight that
resonates with a large number of investors. We believe
Michael Covel’s Trend Following will be such a book.
Importantly, Covel makes the case that investors are likely to
benefit from having a portion of their portfolio invested in a
non-traditional approach that adapts to whatever stock or asset
class is exhibiting definable trends. While this “trader”
mentality may strike some as inappropriate, this approach
appears to be becoming modus operandi for some of the most
sophisticated and successful long-term investors.
The purpose of the Tyco case history is to illustrate the
methodology underlying the PPS model. This security was
chosen because it demonstrates the characteristics the model
attempts to justify. This illustration is not an indication that
all stocks will perform similarly. There are securities in the
PPS model that do not justify this investing approach.
Update & Review, October 2004
Compass Overview
opinion. The process is not to synergize investment insights,
but rather, to integrate them for a coherent investment opinion.
There are three equity models in the LM Equity Compass.
Each model represents an investment insight appropriate for a
specific time horizon (see Illustration 1). The LM Compass
Recommendation is an integration of the models to produce a
conventional Buy/Neutral/Sell opinion as well as percentage
weighting for portfolio management purposes.
An example of reconciling the models is shown in Chart 2,
which is comprised of stocks in the S&P 500 with a Redline
condition. The chart portrays the four quadrants of PPS ratings
with a diamond shape separating the Redline High and Low
stocks. The Redline low stocks appear in green and are in the
interior of the diamond. Redline High appear in red and are
outside the perimeter of the diamond.
The core concept of the equity models is the monthly
calculation of a percentile ranking from as many as eight
valuation measures on approximately 1,500 stocks. Redline is
the shortest term of the models and identifies stocks with an
extreme divergence in their current relative valuation to their
12-month average. The Performance Probability Score
(PPS) uses a long-term measure of relative price performance
along with the relative valuation percentile rank to produce a
range of favorable or unfavorable risk/reward expectations.
The Shareholder Value Index (SVI) is a multi-year analysis
of fundamentals that create long-term shareholder value.
The lower left quadrant (PPS 1–2) is the most favorable in our
PPS model. Stocks inside the diamond are Redline Low and
have the most compelling short- and longer-term performance
expectations. Stocks that are outside the diamond have
favorable long-term expectations; however, the Redline High
condition is reason for exercising some caution. We view these
stocks as “Hold” in a portfolio. The upper left quadrant is
favorable for PPS; however, the higher relative valuation and
Redline High condition alter the investment opinion from
favorable to Hold/Profit taking.
Without the context of understanding what is being measured,
the investment insights of each model can be contradictory.
For example, Redline is a purely valuation-driven model that
can be opposite the relative price analysis of PPS. Strong
relative price performance of PPS can occur even though the
quality ranking in the SVI is the lowest. The Compass
Recommendation rationalizes and melds the investment
insights of each model to produce an overall investment
The upper right quadrant is the most unfavorable in PPS.
Stocks that are Redline Low are altered from Sell to Hold. The
lower right quadrant is unfavorable for PPS, but is also the
source of positively transitioning stocks. In particular, stocks
that are PPS 6–7 with a Redline Low condition are highly
Chart 2
S&P 500 / PPS Redline Report
September 2004
The stock symbols (green) inside the dotted line have a current relative valuation rank within our PPS universe that is
extremely below their average of the last 12 months. Symbols (red) outside the dotted lines have the opposite condition. We
believe wide deviations from the average are potential catalysts that accentuate or modify the longer-term PPS ratings.
(* denotes SVI quality rank of A or B)
PPS Ratings
Neutral
Favorable
PPS 3–4
GPC, MTB*, UST, CIN*, ASO*, YUM*, USB*,
PPL*, KMB*, DTE, AWE, WMB, HBAN*,
High Valuation
Unfavorable
AVY*, APD*,
PPS 8–9
PBG*, PPG*, ED*,
EDS, RF*, CPB,
PEG, HPC
THC, Q, EOP
TXT, BBT*, MI*, BDK*, CZN,
CMA*, SHW*, EOG*, MON*,
SFA*
g
kin
Ta
t
i
f
EQR, SPG, CLX*,
ro
uy
/P
gB
SOTR*, AIV
ld
lli n
Ho
e
mp
Co
UCL, CF*, PBI*, PLD,
Se
ll
Ho
ld
VRTS*, CTXS*, A, FRX*,
CPWR, SBL*
PPS 5
Low Valuation
PD*, AYE, JWN*, CC
Co
mp
ell
ing
Ho
Bu
ld
y
EK, NSC*, ZION*, KMG,
LSI, WPI, CAH*, NVLS, AMAT*, SANM,
CMX, QLGC*, MU, MYL, FDO*,
BBY, HMA*,
TER, NVDA,
TXN*, NSM*,
JBL, NAV, AMD,
CAT*, INTC*,
TIF*, ANDW,
NXTL*, RSH*,
UIS, AW
SRE, AT*, NCC*, EIX*
CTL*
PPS 1–2
APCC*
ld
Ho
e/
t
a
l
mu
ll
cu
Se
Ac
l d/
o
H
BLS*, KSE,
AEE, T
PPS 6–7
Source: Legg Mason
Legg Mason Wood Walker, Incorporated
Page 4
Update & Review, October 2004
Compass Overview (continued from page 4)
opportunistic by having a short-term performance catalyst that
sustains itself to cause a transition to the most favorable PPS
ratings (1–2). Stocks that are PPS 6–7 with a Redline High
condition are unfavorable and may warrant a further reduction
in position size.
The third model to rationalize with Redline and PPS is SVI.
The Shareholder Value Index (SVI) is the model oriented to
the longest time horizon. The consideration of fundamental
quality influences ratings by being more risk adverse on lowerquality stocks when relative valuations are high even though
momentum forces are strong, and more opportunistic on high
quality when valuations are low and out-of-favor. Stocks that
have a Redline High with lower-than-average quality are
viewed as unfavorable and Redline Low with above-average
quality is a favorable risk/reward condition.
Illustration 2
The Compass Recommendation provides a conventional
Buy/Neutral/Sell rating as well as a percentage representing
the conviction of risk/return expectations (Illustration 2). The
Buy rating is applied to stocks with favorable risk/return
expectations after considering all three models. We
recommend investors be mostly or fully invested in these
stocks relative to their normal portfolio constraints. Neutrally
rated stocks lack compelling risk/reward expectations and
those rated Sell/Avoid have the most unfavorable risk/reward
expectations of performance.
The risk/reward percentage rating is a useful tool for portfolio
management. From the standpoint of portfolio constraints that
are imposed from benchmarks, the percentage weighting is a
basis of over- and underweighting position size. Stocks with a
risk/reward expectation of 75%–100% are recommended to
overweight and 0%–50% are recommended to underweight
(Table 1).
Compass Recommendation
Buy
100%
75%
100%
75%
Neutral
Mostly
Invested
50%
Fully
Invested
50%
Neutrally
Invested
25%
25%
Mostly
Uninvested
• Most favorable
risk/reward
expectations
• Favorable
risk/reward
• Concerns for
extreme high
valuation and
poor quality
• Lack of
compelling
risk/reward
expectations
• Concerns for
high valuation
and lower than
average quality
Source: Legg Mason
Table 1
Sell/Avoid
• Risk/reward
expectations
unfavorable
0%
Not
Invested
• Most
unfavorable
risk/reward
• Extreme low
valuation or
high quality
reason for
retaining partial
position
Portfolio Weighting Recommendation
Risk/Reward Rating Weighting Recommendations
100%
Significantly Overweight
75%
Slightly Overweight
50%
Slightly Underweight
25%
Significantly Underweight
0%
Eliminate Position
Source: Legg Mason
Source: Legg Mason
Legg Mason Wood Walker, Incorporated
Page 5
Update & Review, October 2004
Compass Overview (continued from page 5)
Table 2
Equity Compass Valuation Profile
Ent. Val /
Price to
Price to Cash
Price to Book
Price to Sales
PEG Ratio
EBITDA
Earnings
Flow
Value
#
Stocks Cap Wgt. Median Cap Wgt. Median Cap Wgt. Median Cap Wgt. Median Cap Wgt. Median Cap Wgt. Median
By PPS Rating
PPS -1
PPS -2
PPS -3
PPS -4
PPS -5
PPS -6
PPS -7
PPS -8
PPS -9
115
277
246
127
192
83
136
191
82
5.5
8.6
10.4
19.8
10.0
11.7
9.1
11.4
15.4
6.0
8.1
11.5
16.7
8.5
6.5
7.8
11.1
16.0
10.5
13.7
17.4
29.4
13.5
9.5
13.8
17.8
28.0
10.9
14.2
17.3
25.1
14.2
11.3
14.9
18.3
25.1
5.5
8.1
13.8
26.0
15.5
4.0
11.1
14.1
21.5
6.4
8.6
13.2
21.8
9.8
7.1
9.5
14.6
22.1
0.7
1.1
1.9
4.5
1.3
0.4
1.4
1.9
3.4
0.7
1.1
2.2
4.3
1.2
0.6
1.2
2.3
4.4
1.7
2.2
3.6
5.4
2.6
1.6
2.3
3.3
4.9
1.6
2.1
2.8
4.5
2.0
1.4
1.8
2.7
3.9
0.7
1.2
1.4
1.6
0.9
0.7
1.0
1.2
1.3
0.9
1.3
1.5
1.5
1.2
0.8
1.1
1.3
1.2
273
77
85
206
143
179
292
96
26
72
8.4
10.0
6.2
13.5
11.5
8.5
10.8
8.9
6.0
8.0
8.2
9.5
7.8
12.6
10.6
9.5
11.0
8.5
6.1
7.8
14.8
15.9
13.6
11.2
17.0
16.8
19.1
14.2
15.3
13.5
14.7
15.6
15.3
12.3
16.9
16.0
19.4
14.4
13.1
13.6
8.5
12.5
7.5
12.1
15.1
12.0
14.7
9.8
5.8
6.5
9.9
11.5
7.9
10.5
13.7
11.5
15.6
9.0
5.9
6.6
0.8
1.0
0.9
1.8
2.2
1.3
2.2
1.2
1.5
1.0
0.9
1.0
1.8
3.0
2.6
1.1
2.3
1.0
1.8
0.9
2.1
4.4
2.2
1.9
4.1
3.0
3.5
2.7
2.4
1.7
2.2
2.8
2.2
2.0
3.2
2.6
2.6
2.4
2.0
1.6
1.0
1.4
0.9
1.1
0.9
1.2
1.1
0.9
1.4
2.6
1.1
1.5
1.4
1.3
1.1
1.2
1.2
1.5
1.5
3.0
Dow Jones Ind. Average
S&P 500
S&P 100
Nasdaq 100
S&P Barra Growth
S&P Barra Value
S&P Mid-Cap
Russell 1000
29
476
96
95
160
316
327
820
9.3
10.1
9.9
13.7
11.4
9.2
9.2
10.1
9.9
9.5
9.9
12.9
11.2
8.7
8.9
9.5
15.2
15.2
15.0
21.6
17.4
13.5
15.1
15.4
15.6
15.2
15.0
20.4
17.9
14.0
15.2
15.1
12.1
11.6
13.3
19.2
14.1
9.9
10.2
11.7
10.9
11.1
10.4
18.1
15.0
9.0
11.0
11.4
1.7
1.4
1.6
3.2
2.0
1.1
1.1
1.4
1.7
1.5
1.5
3.4
2.3
1.2
1.4
1.7
3.3
2.8
3.0
4.4
4.8
2.0
2.3
2.8
3.3
2.6
2.8
3.2
4.7
2.0
2.2
2.5
1.4
1.3
1.4
1.2
1.2
1.2
1.1
1.2
1.4
1.4
1.4
1.3
1.4
1.4
1.2
1.3
Compass Universe
1449
9.5
9.4
14.9
15.3
10.6
11.0
1.3
1.5
2.6
2.3
1.0
1.3
By Sector
Consumer Discretionaries
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Telecommunication
Utilities
By Index
Source: Legg Mason
Table 3
Sector Opinion - October 2004
S&P Sector
Financials*
Information Technology
Health Care
Industrials*
Consumer Discretionary*
Consumer Staples*
Energy
Telecom Services
Materials
Utilities*
S&P Weight
(%)
20.6
16.1
12.9
11.6
11.1
10.5
7.5
3.7
3.1
2.9
PPS
3.9
6.3
5.7
4.1
4.7
4.5
2.6
3.8
2.9
3.7
SPPS
4.0
5.9
5.3
4.1
5.0
4.7
2.8
4.1
3.1
4.1
October
Overweight
Underweight
Underweight
Overweight
Equal Weight
Underweight
Overweight
Overweight
Overweight
Overweight
September
Equal Weight
Underweight
Underweight
Equal Weight
Underweight
Equal Weight
Overweight
Overweight
Overweight
Equal Weight
August
Underweight
Underweight
Underweight
Overweight
Underweight
Overweight
Overweight
Equal Weight
Overweight
Underweight
Source: Legg Mason
* Denotes a change in opinion since the prior month
Legg Mason Wood Walker, Incorporated
Page 6
Update & Review, October 2004
Model Monitor — Overview
We provide an alphabetical listing of stocks with an Equity Compass rating change and Redline Low or High condition for the
current months (pages 13–21). Rating changes are a result of changes in the PPS, Redline, and SVI models. Stocks with a
negative rating change should be reviewed for a reduction in holdings within a portfolio and positive changes to a Buy should be
reviewed for position initiation or an increase in size. We also provide a Portfolio Analyzer for isolating rating changes and
overall portfolio positioning relative to the equity models. Please ask your Legg Mason representative for more information.
Below is a brief opinion overview for the S&P sectors for the latest month.
• Consumer Discretionary – The sector showed
improvement for October and is being upgraded to an Equal
Weight. Approximately 45% of the stocks have a positive
Compass rating. This is a diverse sector with the sub-industry
groups showing sharply favorable and unfavorable ratings.
Retailers remain out-of-favor while Autos, Hotels, and
Textiles are positive. Time Warner (TWX) is a new Sell rating
(PPS–7).
• Consumer Staples – The sector showed the most
deterioration for October and moves to an Underweight
opinion. The sector opinion was downgraded last month from
Overweight to Equalweight. Approximately 49% of the stocks
in Consumer Staples have a positive Compass rating. Stocks
with downgrades include Colgate (CL), Walgreen (WAG), and
PepsiCo (PEP), all of which are rated (PPS–5). The sector is
still carrying a premium valuation to its 12-month average and
may experience further contraction.
• Energy – About 93% of the stocks in this group have a
positive Compass rating, which is the highest of any sector in
our model since inception. However, current valuations are
moving to a premium compared to the last 12 months. While
we do not believe this is a sign of deterioration, it is a
cautionary sign that the momentum of improvement is likely to
decelerate. Since March, our opinion has been to Overweight
the sector and remains so for the current month.
• Financials – Improvement in the latest month has caused
an upgrade to Overweight, as 65% of the stocks in this sector
have a positive rating. However, Financials are showing one of
the highest relative valuation premiums overall. Commercial
Banks, in particular, appear vulnerable to a period of
consolidation. One notable downgrade in the sector, Berkshire
Hathaway Class A (BRK, PPS–5) shares are now rated Sell.
• Health Care – With 39% of the stocks having a positive
Compass rating, Health Care is the second most unfavorable
sector. Merck (MRK, PPS–7) was previously rated Sell and
Legg Mason Wood Walker, Incorporated
Page 7
was upgraded to Neutral with the sharp price decline that
lowered the relative valuation of the shares. The sector was
downgraded to Underweight in July and remains so for
October.
• Industrials – The sector showed improvement for
October, warranting an upgrade to Overweight. Approximately
63% of the stocks in the sector have a favorable rating, with
the transportation stocks uniformly positive. Airline stocks,
however, remain one of the most unfavorable segments among
the 62 S&P industry groups.
• Information Technology – Only 22% of the stocks in
the sector have a positive Compass rating, which is near the
lowest of any sector since our model inception. The sector also
contains the largest number of Redline Low stocks in the
coverage universe. These indicators suggest the sector is
deeply oversold and ripe for a trading bounce. Information
Technology has had an Underweight sector opinion since May
and remains so for the current month.
• Materials – This sector ranks second in terms of positive
Compass ratings. Additionally, the sector remains at a
valuation discount to its 12-month average and there are
several Redline Low stocks, such as Phelps Dodge (PD,
PPS–1). Materials has maintained an Overweight opinion
since July and remains so for October.
• Telecommunication Services – Sixty-two percent of the
stocks in this sector have a positive Compass rating, up from
55% in the prior month. It was upgraded in September to
Overweight and remains so for October.
• Utilities – This sector showed the sharpest improvement
in positive Compass ratings. The sector improved to an Equal
Weight opinion last month and goes to overweight for
October. Sixty-four percent of the stocks in the sector have a
positive Compass rating.
Update & Review, October 2004
Sweet Spot Strategy
In December 2002, we introduced the Shareholder Value
Index (SVI) as an independent complement to our PPS model.
The objective of SVI is to measure the quality of a stock from
growing revenues and improving operating margins (i.e., cash
flow) relative to a change in financial condition, share dilution,
and increased dividends. The highest quality stocks are rated A
and the lowest D.
Sweet Spot performed exceptionally well in September with
strong relative performance to the S&P 500 (Table 4). Unlike
2003, higher-quality stocks have generally outperformed lower
quality and this trend will likely continue in a cautious market
environment. The risk-adjusted return (i.e., Sharpe ratio)
demonstrates the benefits of owning high-quality stocks with
positive relative price strength (i.e., favorable PPS).
We began the Sweet Spot Strategy with the inception of SVI to
track the performance of what our models were indicating as
the best risk/reward stock opportunities relative to the
performance of the S&P 500. This is a hypothetical exercise
and is a test of model efficacy rather than an actual portfolio.
On a monthly basis, we select from each of the 10 S&P sectors
five stocks with the highest SVI rankings and favorable PPS
rating (PPS 1–4). The list is reconstituted each month
reflecting changes in PPS rating or SVI ranking. Table 4
shows the monthly and cumulative performance of the Sweet
Spot Strategy since December 2002.
There were nine changes in the Sweet Spot list for October
(Table 5). Changes in the list occur as a result of a negative
change in PPS, or more commonly, a slight variation in the
quality ranking that cause stocks to move just above or just
below the five-stock limit of each sector. Four of the nine
changes were due to negative PPS change. Three of the sectors
had no changes for the month.
Sweet Spot Indexed Performances
(11/29/2002 - 09/30/04)
Table 4
Month
December-02
January-03
February-03
March-03
April-03
May-03
June-03
July-03
August-03
September-03
October-03
November-03
December-03
January-04
February-04
March-04
April-04
May-04
June-04
July-04
August-04
September-04
Annualized
**Sharpe Ratio
Monthly Returns
Sweet Spot*
S&P 500
-1.07%
-6.03%
-2.01%
-2.74%
1.34%
-1.70%
2.40%
0.84%
4.59%
8.10%
5.39%
5.09%
1.12%
1.13%
1.37%
1.62%
1.84%
1.79%
-1.70%
-1.19%
5.30%
5.50%
1.86%
0.71%
4.44%
5.08%
2.12%
1.73%
4.28%
1.22%
-0.45%
-1.64%
-3.71%
-1.68%
0.52%
1.21%
3.50%
1.80%
-2.27%
-3.43%
0.99%
0.23%
4.59%
0.94%
Cumulative Returns
Sweet Spot*
S&P 500
-1.07%
-6.03%
-3.06%
-8.61%
-1.76%
-10.16%
0.60%
-9.41%
5.22%
-2.07%
10.89%
2.91%
12.13%
4.08%
13.67%
5.77%
15.77%
7.66%
13.80%
6.37%
19.83%
12.22%
22.06%
13.02%
27.47%
18.76%
30.17%
20.81%
35.74%
22.28%
35.74%
22.28%
30.71%
20.23%
31.39%
21.68%
35.99%
23.87%
32.91%
19.62%
34.22%
19.90%
40.38%
21.02%
15.73%
10.57%
1.69
0.92
* Assumes equal weighted positions rebalanced monthly
Dividends excluded
** Calculated as: the annualized return divided by the annualized
standard deviation of monthly returns. Sweet Spot 9.31%, S&P 500 11.44%
Source: Legg Mason
Legg Mason Wood Walker, Incorporated
Page 8
Update & Review, October 2004
Sweet Spot Strategy (continued from page 8)
Table 5
October 2004 "Sweet Spot Strategy"
5 Highest SVI Rated Stocks in Each Sector With Favorable PPS Ratings (1-4)
Consumer Discretionary
Symbol
CLE
WPO
TM
HDI
RYL
Name
Claire's Stores
Washington Post*
Toyota Motor ADR
Harley-Davidson
Ryland Group*
Consumer Staples
CLX
AVP
ADM
PAS
PG
Clorox Co.
Avon Products
Archer Daniels Midl'd
PepsiAmericas Inc.
Procter & Gamble
Energy
NHY
IMO
TOT
APA
BR
Norsk Hydro ADR
Imperial Oil Ltd.
Total ADR
Apache Corp.
Burlington Resources
Financials
MCO
DFG
GDW
BOH
TMK
Moody's Corp.
Delphi Fin'l `A'
Golden West Fin'l
Bank of Hawaii
Torchmark Corp.
Health Care
SYK
Stryker Corp.
MDT
Medtronic Inc.*
BDX
Becton Dickinson
AVE
Aventis ADR*
UNH
UnitedHealth Group
*Denotes new addition since prior month
Source: Legg Mason
9/30/04
Price
$25.04
920.00
76.38
59.44
92.66
Indicated
Dividend
Yield (%)
1.28
0.76
1.12
0.67
0.43
PPS
2
4
1
3
1
9/30/04
Price
$53.30
43.68
16.98
19.10
54.12
Indicated
Dividend
Yield (%)
2.03
1.28
1.77
1.57
1.85
PPS
3
4
2
2
3
9/30/04
Price
$73.24
51.71
102.17
50.11
40.80
Indicated
Dividend
Yield (%)
1.90
1.30
2.33
0.64
0.83
9/30/04
Price
$73.25
40.17
110.95
47.25
53.18
Indicated
Dividend
Yield (%)
0.41
0.80
0.36
2.54
0.83
9/30/04
Price
$48.08
51.90
51.70
84.42
73.74
Indicated
Dividend
Yield (%)
0.15
0.65
1.16
0.90
0.04
Legg Mason Wood Walker, Incorporated
SPPS
3
4
1
3
1
SVI
Score
100%
100%
99%
99%
98%
SVI
Grade
A
A
A
A
A
SPPS
3
4
2
2
3
SVI
Score
100%
99%
96%
95%
92%
SVI
Grade
A
A
A
A
A
PPS
1
2
1
2
2
SPPS
1
3
1
2
2
SVI
Score
100%
98%
97%
95%
94%
SVI
Grade
A
A
A
A
A
PPS
4
1
3
3
2
SPPS
4
1
3
3
2
SVI
Score
100%
99%
98%
96%
95%
SVI
Grade
A
A
A
A
A
SPPS
3
3
2
3
2
SVI
Score
100%
98%
97%
96%
95%
SVI
Grade
A
A
A
A
A
PPS
4
4
3
3
2
Page 9
Industrials
Symbol
PCAR
GGG
JH
ITW
CNI
Name
PACCAR Inc.
Graco Inc.
Harland (John H.)
Illinois Tool Works
Can. National Railway*
Information Technology
QCOM
ADP
KYO
HRS
PLT
Qualcomm Inc.
Automatic Data Proc.
Kyocera Corp. ADR
Harris Corp.*
Plantronics Inc.
Materials
PKX
FRK
EXP
NUE
AEM
POSCO ADR
Florida Rock
Eagle Materials
Nucor Corp.
Agnico-Eagle Mines*
Telecomm Svcs
CTCO
CTL
AT
SBC
TDS
Commonwealth Tel.
CenturyTel Inc.*
ALLTEL Corp.
SBC Communications
Telephone & Data
Utilities
ELE
EQT
GAS
EXC
EGN
ENDESA ADR
Equitable Resources
NICOR Inc.
Exelon Corp.
Energen Corp.*
9/30/04
Price
$69.12
33.50
31.35
93.17
48.50
Indicated
Dividend
Yield (%)
1.16
1.11
1.59
1.20
1.23
PPS
2
4
1
3
2
SPPS
2
4
1
3
2
SVI
Score
99%
98%
97%
97%
96%
SVI
Grade
A
A
A
A
A
9/30/04
Price
$39.04
41.32
70.40
54.94
43.24
Indicated
Dividend
Yield (%)
0.72
1.36
0.72
0.87
0.46
PPS
4
3
2
3
4
SPPS
4
3
1
2
3
SVI
Score
96%
94%
93%
87%
85%
SVI
Grade
A
A
A
A
A
9/30/04
Price
$37.85
48.99
71.30
91.37
14.28
Indicated
Dividend
Yield (%)
3.06
1.63
1.68
1.14
0.21
PPS
1
3
2
1
4
SPPS
1
3
3
1
4
SVI
Score
100%
99%
98%
96%
95%
SVI
Grade
A
A
A
A
A
9/30/04
Price
$43.55
34.24
54.91
25.95
84.17
Indicated
Dividend
Yield (%)
0.00
0.67
2.70
4.82
0.78
PPS
2
2
2
2
2
SPPS
3
2
3
2
2
SVI
Score
96%
92%
85%
81%
73%
SVI
Grade
A
A
A
A
B
9/30/04
Price
$19.11
54.31
36.70
36.69
51.55
Indicated
Dividend
Yield (%)
3.85
2.80
5.07
3.33
1.49
PPS
1
3
2
2
2
SPPS
1
4
5
2
2
SVI
Score
100%
99%
96%
94%
93%
SVI
Grade
A
A
A
A
A
Update & Review, October 2004
LM Buy/Redline Low Stock Selections
The Legg Mason Wood Walker Equity Research Department
has 38 senior-level analysts covering approximately 400
stocks. Their efforts are directed to perform fundamental
research of industries and companies to produce an investment
recommendation. Each month, we screen for the Buy
recommendations in the LMWW coverage universe that are
also Redline Lows in the Equity Compass models. This
approach combines a favorable “bottom-up” opinion with an
independent confirmation from a “top-down” quantitative
process.
We keep a cumulative monthly index of performance for
stocks that are LMWW Buy and Redline Low (Chart 3). The
index begins in July 2002, inception of Redline Low model,
through the latest month. Stocks are equally weighted and
dividends are excluded. It should be noted that the index is a
hypothetical illustration with an objective of demonstrating the
Redline model characteristics. However, as with all
hypothetical illustrations, past performances are no guarantee
of future results.
Chart 3
Indexed Performances
(06/30/02 - 09/30/04)
70%
60%
Assumes equal weightings rebalanced monthly.
Dividends excluded.
59.3%
50%
40%
30%
20%
12.6%
10%
0%
S&P 500
LM "Buy" & Redline Low
Source: Legg Mason
See Table 6 for the stock selections that meet the LMWW Buy and Redline Low condition for this month. Please contact your
Legg Mason representative for research reports on the stocks that are listed.
Table 6
October 2004 - Legg Mason "Buy" Rated & Redline Low
Symbol
TXN
STM
PD
INTC
EDMC
IACI
OCR
TIF
RI
Company Name
Texas Instruments
STMicroelectronics
Phelps Dodge
Intel Corp.
Education Mgmt.
IAC/InterActiveCorp
Omnicare Inc.
Tiffany & Co.
Ruby Tuesday
Price Dividend
09/30/04 Yield (%)
$21.28
0.47
$17.28
0.52
$92.03
1.09
$20.06
0.80
$26.64
-$22.02
-$28.36
0.32
$30.74
0.78
$27.87
0.16
Valuation
Percentile
37.1%
22.8%
13.1%
42.7%
58.0%
62.2%
7.1%
51.7%
21.9%
12M Avg
Valuation
Percentile
69.2%
52.7%
40.1%
66.4%
78.9%
82.4%
27.1%
68.7%
37.5%
Mean
Valuation
Deviation
-32.1%
-29.9%
-27.0%
-23.7%
-20.9%
-20.2%
-20.0%
-17.0%
-15.6%
RL
L
L
L
L
L
L
L
L
L
Sector
Information Technology
Information Technology
Materials
Information Technology
Industrials
Consumer Discretionary
Health Care
Consumer Discretionary
Consumer Discretionary
Oct SVI
Grade
A
A
B
A
B
D
B
B
C
Legg
Mason
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Source: Legg Mason
Legg Mason Wood Walker, Incorporated
Page 10
Update & Review, October 2004
S&P 500 Redline Strategy
The S&P 500 Redline Strategy is another of our simulated
equity portfolios using quantitative techniques for stock
selection and portfolio discipline. As with all hypothetical
illustrations, past performances are no guarantee of future
results. Due to extreme levels of volatility, the strategy is only
appropriate for investors with a high tolerance for risk. The
strategy involves a high amount of stock turnover, which
increases transaction costs. We advise implementing the
strategy in programs that charge an annual fee in lieu of
commissions for each transaction. For a complete description
of the Legg Mason Equity Compass models, please ask your
advisor for the report titled “Legg Mason Equity Model
Guide.”
The simulation performance shown in Table 7 reflect results
beginning June 28, 2002, the first month in which Redline data
were available from our regular monthly reports, and starts
with a $300,000 initial investment. The strategy involves the
following parameters.
• We selected the 15 stocks in the S&P 500 with the widest
Mean Valuation Deviation (MVD, i.e., Redline Low) and
equally weighted the positions.
• In each subsequent month, we removed the two stocks
with the narrowest MVD and replaced them with two stocks
having the widest MVD that were not already in the portfolio.
In October, we removed LSI Logic (LSI) and Louisiana
Pacific (LPX) and used the proceeds to buy National
Semiconductor (NSM) and Texas Instruments (TXN). See
Table 8 for the current list of stocks in the S&P 500 Redline
Simulation Strategy. See Table 9 for the list of 15 stocks with
the widest MVD for October 2004.
Table 7
PPS Redline Strategy Simulation Results
S&P 500 Redline Portfolio
Beginning
Month
Value
July-02 $300,000
August-02 $307,247
September-02 $321,312
October-02 $277,682
November-02 $309,516
December-02 $412,789
January-03 $357,580
February-03 $347,764
March-03 $363,367
April-03 $346,544
May-03 $396,711
June-03 $444,886
July-03 $438,250
August-03 $434,859
September-03 $443,668
October-03 $431,423
November-03 $456,043
December-03 $468,899
January-04 $524,121
February-04 $529,033
March-04 $563,746
April-04 $566,493
May-04 $542,326
June-04 $570,360
July-04 $590,449
August-04 $554,827
September-04 $548,460
Ending
Value
Return
$307,247
2.4%
$321,312
4.6%
$277,682
-13.6%
$309,516
11.5%
$412,789
33.4%
$357,580
-13.4%
$347,764
-2.7%
$363,367
4.5%
$346,544
-4.6%
$396,711
14.5%
$444,886
12.1%
$438,250
-1.5%
$434,859
-0.8%
$443,668
2.0%
$431,423
-2.8%
$456,043
5.7%
$468,899
2.8%
$524,121
11.8%
$529,033
0.9%
$563,746
6.6%
$566,493
0.5%
$542,326
-4.3%
$570,360
5.2%
$590,449
3.5%
$554,827
-6.0%
$548,460
-1.1%
$589,857
7.5%
Cumulative Return
Annualized
Standard Deviation of Monthly Returns
Annualized SD of Monthly Returns
Total Portfolio Turnover
Annualized Portfolio Turnover
S&P 500 Index
Cumulative TurnReturn
over
2.4%
13.3%
7.1%
20.9%
-7.4%
14.6%
3.2%
16.5%
37.6%
19.1%
19.2%
13.8%
15.9%
13.4%
21.1%
15.1%
15.5%
11.1%
32.2%
18.0%
48.3%
15.2%
46.1%
15.2%
45.0%
13.3%
47.9%
12.4%
43.8%
15.3%
52.0%
14.7%
56.3%
14.8%
74.7%
8.4%
76.3%
15.0%
87.9%
14.2%
88.8%
11.2%
80.8%
12.3%
90.1%
15.7%
96.8%
13.4%
84.9%
16.1%
82.8%
12.0%
96.6%
11.7%
96.6%
35.1%
8.9%
30.8%
Beginning
Value
989.81
911.62
916.07
815.28
885.76
936.31
879.82
855.70
841.15
848.18
916.92
963.59
974.50
990.31
1,008.01
995.97
1,050.71
1,058.20
1,111.92
1,131.13
1,144.94
1,126.21
1,107.30
1,120.68
1,140.84
1,101.72
1,104.24
Ending
Value
911.62
916.07
815.28
885.76
936.31
879.82
855.70
841.15
848.18
916.92
963.59
974.50
990.31
1008.01
995.97
1050.71
1058.20
1111.92
1131.13
1144.94
1126.21
1107.30
1120.68
1140.84
1101.72
1104.24
1114.58
Return
-7.9%
0.5%
-11.0%
8.6%
5.7%
-6.0%
-2.7%
-1.7%
0.8%
8.1%
5.1%
1.1%
1.6%
1.8%
-1.2%
5.5%
0.7%
5.1%
1.7%
1.2%
-1.6%
-1.7%
1.2%
1.8%
-3.4%
0.2%
0.9%
Cumulative
Return
-7.9%
-7.4%
-17.6%
-10.5%
-5.4%
-11.1%
-13.5%
-15.0%
-14.3%
-7.4%
-2.6%
-1.5%
0.1%
1.8%
0.6%
6.2%
6.9%
12.3%
14.3%
15.7%
13.8%
11.9%
13.2%
15.3%
11.3%
11.6%
12.6%
11.6%
5.0%
4.5%
15.6%
386.7%
171.9%
Source: Legg Mason
Legg Mason Wood Walker, Incorporated
Page 11
Update & Review, October 2004
Redline Focus–S&P 500 Redline Strategy (continued from page 11)
Table 8
PPS Redline Strategy Simulated Portfolio—October 2004
Simulated Portfolio Beginning July 2002
$300,000
$589,857
Beginning Value
Ending Value
Symbol Company Name
TXN
Texas Instruments*
QLGC
QLogic Corp.
PVN
Providian Fin'l
LNC
Lincoln Nat'l Corp.
NXTL
Nextel Communic. 'A'
NVDA
NVIDIA Corp.
WPI
Watson Pharmac.
NVLS
Novellus Sys.
CAT
Caterpillar Inc.
NSM
National Semic.*
AMD
Advanced Micro Dev.
PD
Phelps Dodge
NAV
Navistar Int'l
MU
Micron Technology
TER
Teradyne Inc.
Portfolio Totals
* Denotes addition since prior month
Sector
Information Technology
Information Technology
Financials
Financials
Telecommunication Services
Information Technology
Health Care
Information Technology
Industrials
Information Technology
Information Technology
Materials
Industrials
Information Technology
Information Technology
09/30/2004
Valuation
Percentile
37.1%
69.3%
37.4%
10.3%
40.4%
44.0%
21.3%
54.0%
19.9%
33.0%
23.6%
13.1%
18.4%
20.2%
23.0%
12M
Average
Valuation
69.2%
68.0%
37.6%
13.8%
44.8%
58.4%
36.4%
74.2%
40.3%
67.8%
48.1%
40.1%
50.8%
59.4%
65.1%
Price
MVD 09/30/04
-32.1% $21.28
1.3%
$29.71
-0.2%
$15.54
-3.4%
$47.00
-4.3%
$23.84
-14.4% $14.52
-15.1% $29.46
-20.2% $26.64
-20.4% $80.45
-34.8% $15.49
-24.5% $13.00
-27.0% $92.03
-32.4% $37.19
-39.2% $12.03
-42.1% $13.40
Shares
1624.6
1239.7
3090.0
672.6
1290.6
2634.1
1469.0
1343.4
595.8
2231.9
2675.5
661.2
1019.5
3300.2
2611.2
Value
$34,572
$36,830
$48,018
$31,612
$30,769
$38,246
$43,276
$35,789
$47,934
$34,572
$34,782
$60,850
$37,914
$39,702
$34,990
$589,857
Source: Legg Mason
Table 9
15 Stocks in the S&P 500 with the Widest MVD for October
Current 15 Lowest Stocks in the S&P 500 by MVD
Symbol
TER
MU
NSM
NAV
TXN
SLR
SFA
PD
VRTS
AMAT
JBL
AMD
A
SANM
INTC
Company Name
Teradyne Inc.
Micron Technology
National Semic.
Navistar Int'l
Texas Instruments
Solectron Corp.
Scientific-Atlanta
Phelps Dodge
VERITAS Software
Applied Materials
Jabil Circuit
Advanced Micro Dev.
Agilent Technologies
Sanmina-SCI Corp.
Intel Corp.
Price
09/30/04
$13.40
$12.03
$15.49
$37.19
$21.28
$4.95
$25.92
$92.03
$17.80
$16.49
$23.00
$13.00
$21.57
$7.05
$20.06
Valuation
Percentile
23.0%
20.2%
33.0%
18.4%
37.1%
38.4%
45.0%
13.1%
57.0%
50.6%
26.9%
23.6%
58.0%
39.1%
42.7%
12M Avg
Valuation
Percentile
65.1%
59.4%
67.8%
50.8%
69.2%
68.7%
73.3%
40.1%
83.4%
76.8%
51.6%
48.1%
81.9%
63.0%
66.4%
Mean
Valuation
Deviation
-42.1%
-39.2%
-34.8%
-32.4%
-32.1%
-30.3%
-28.3%
-27.0%
-26.4%
-26.3%
-24.7%
-24.5%
-24.0%
-23.9%
-23.7%
Sector
Information Technology
Information Technology
Information Technology
Industrials
Information Technology
Information Technology
Information Technology
Materials
Information Technology
Information Technology
Information Technology
Information Technology
Information Technology
Information Technology
Information Technology
Source: Legg Mason
Legg Mason Wood Walker, Incorporated
Page 12
Update & Review, October 2004
Model Monitor
Rating Changes & Redline Conditions
Model Monitor - October 2004
Symbol
TW
ACN
ACDO
ATVI
ACXM
ADPT
ADTN
AAP
AMD
AD
A
AEM
AHO
APD
AKS
ALB
AL
ALA
ARE
AYE
ATI
AW
MDRX
AT
ALO
ANAT
APCC
ACF
AMKR
APH
AMR
ANDW
ADRX
AGL
ANN
ANST
ANT
AIV
APOL
AMAT
WTR
AGY
ARRS
ARW
ATSN
ASH
ASIA
ASML
ASPT
AZPN
ASBC
AWE
ATML
ANZ
AVB
AVY
AVT
BOH
Company Name
21st Century Ins. Group
Accenture Ltd.
Accredo Health
Activision Inc.
Acxiom Corp.
Adaptec Inc.
ADTRAN Inc.
Advance Auto Parts
Advanced Micro Dev.
ADVO Inc.
Agilent Technologies
Agnico-Eagle Mines
Ahold ADR
Air Products & Chem.
AK Steel Holding
Albemarle Corp.
Alcan Inc.
Alcatel ADR
Alexandria Real Estate
Allegheny Energy
Allegheny Technologies
Allied Waste
Allscripts Healthcare Solutio
ALLTEL Corp.
ALPHARMA Inc.
Amer. Nat'l Ins.
Amer. Power Conv.
AmeriCredit Corp.
Amkor Technology
Amphenol Corp 'A' New
AMR Corp.
Andrew Corp.
Andrx Group
Angelica Corp.
AnnTaylor Stores
Ansoft Corp
Anteon Int'l
Apartment Investment
Apollo Group `A'
Applied Materials
Aqua America
Argosy Gaming
Arris Group Inc
Arrow Electronics
Artesyn Technologies Inc
Ashland Inc.
AsiaInfo Holdings Inc
ASML Holding N.V.
Aspect Communications
Aspen Technology Inc.
Assoc. Banc-Corp
AT&T Wireless Serv.
Atmel Corp.
Australia & N Z Bkg Group
AvalonBay Communities
Avery Dennison
Avnet Inc.
Bank of Hawaii
Sector
Financials
Info. Tech.
Health Care
Info. Tech.
Info. Tech.
Info. Tech.
Info. Tech.
Cons. Disc.
Info. Tech.
Cons. Disc.
Info. Tech.
Materials
Cons. Staples
Materials
Materials
Materials
Materials
Info. Tech.
Financials
Utilities
Materials
Industrials
Health Care
Telecom. Svcs.
Health Care
Financials
Industrials
Financials
Info. Tech.
Info. Tech.
Industrials
Info. Tech.
Health Care
Industrials
Cons. Disc.
Info. Tech.
Info. Tech.
Financials
Industrials
Info. Tech.
Utilities
Cons. Disc.
Info. Tech.
Info. Tech.
Industrials
Energy
Info. Tech.
Info. Tech.
Info. Tech.
Info. Tech.
Financials
Telecom. Svcs.
Info. Tech.
Financials
Financials
Industrials
Info. Tech.
Financials
Legg Mason Wood Walker, Incorporated
Price
09/30/04
$13.35
$27.05
$23.57
$13.87
$23.74
$7.60
$22.68
$34.40
$13.00
$30.94
$21.57
$14.28
$6.39
$54.38
$8.16
$35.09
$47.80
$11.73
$65.72
$15.96
$18.25
$8.85
$9.00
$54.91
$18.29
$96.79
$17.39
$20.88
$3.65
$34.26
$7.33
$12.24
$22.36
$24.88
$23.40
$15.90
$36.65
$34.78
$73.37
$16.49
$22.11
$39.20
$5.22
$22.58
$9.98
$56.08
$4.88
$12.87
$9.93
$6.99
$32.07
$14.78
$3.62
$69.10
$60.22
$65.78
$17.12
$47.25
Compass
Rating
Buy
Buy
Neutral
Neutral
Neutral
Neutral
Neutral
Sell
Neutral
Sell
Sell
Buy
Neutral
Buy
Buy
Buy
Buy
Sell
Sell
Buy
Buy
Neutral
Neutral
Buy
Sell
Buy
Sell
Buy
Sell
Buy
Sell
Sell
Neutral
Sell
Buy
Neutral
Sell
Buy
Sell
Sell
Buy
Buy
Neutral
Neutral
Sell
Neutral
Neutral
Sell
Neutral
Neutral
Buy
Neutral
Buy
Buy
Buy
Neutral
Neutral
Buy
Page 13
Prior
Compass
Rating
Sell
Neutral
Neutral
Sell
Buy
Neutral
Sell
Buy
Neutral
Neutral
Sell
Neutral
Sell
Sell
Buy
Buy
Sell
Sell
Sell
Buy
Neutral
Neutral
Sell
Buy
Sell
Buy
Buy
Buy
Neutral
Sell
Neutral
Neutral
Neutral
Buy
Buy
x
Sell
Sell
Neutral
Buy
Sell
Buy
Neutral
Neutral
Neutral
Buy
x
Neutral
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Sell
Sell
Neutral
Buy
Risk/
Reward
75%
75%
50%
50%
50%
50%
50%
25%
50%
25%
0%
75%
50%
100%
100%
75%
100%
0%
25%
100%
100%
50%
50%
100%
0%
100%
25%
100%
25%
75%
0%
0%
50%
0%
75%
50%
0%
75%
0%
25%
75%
75%
50%
50%
0%
50%
50%
25%
50%
50%
75%
50%
75%
100%
75%
50%
50%
75%
Prior
Risk/
Reward
25%
50%
50%
0%
75%
50%
25%
100%
50%
50%
0%
50%
25%
25%
100%
75%
25%
0%
25%
100%
50%
50%
0%
100%
25%
100%
75%
100%
50%
0%
50%
50%
50%
75%
75%
x
0%
25%
50%
75%
0%
100%
50%
50%
50%
100%
x
50%
50%
50%
100%
50%
75%
50%
25%
25%
50%
75%
Valuation
Percentile
11.8%
80.1%
24.0%
44.1%
65.7%
41.7%
69.4%
17.7%
23.6%
60.7%
58.0%
94.1%
12.5%
58.8%
14.1%
50.1%
8.6%
57.7%
87.1%
45.5%
69.8%
15.3%
95.3%
49.1%
45.1%
8.0%
73.4%
27.9%
42.0%
76.5%
51.3%
50.3%
36.1%
55.6%
4.4%
90.7%
78.0%
65.8%
85.4%
50.6%
93.4%
33.3%
42.5%
9.2%
59.5%
60.9%
38.5%
59.6%
39.2%
36.4%
64.7%
80.9%
40.8%
36.3%
89.2%
76.4%
12.8%
75.9%
12M Avg
Valuation
Percentile
26.9%
79.8%
56.6%
62.8%
51.7%
58.5%
85.7%
27.2%
48.1%
51.0%
81.9%
87.4%
38.9%
50.7%
60.6%
36.0%
15.1%
86.1%
68.5%
68.8%
85.7%
36.8%
95.4%
30.4%
24.3%
30.8%
63.9%
50.2%
53.5%
70.8%
65.1%
64.8%
56.1%
32.2%
26.6%
90.7%
63.3%
56.2%
91.3%
76.8%
82.2%
20.5%
73.1%
43.1%
72.0%
32.5%
69.5%
85.5%
55.9%
64.0%
46.8%
61.3%
66.1%
31.5%
77.0%
64.4%
44.1%
58.3%
Redline PPS
L
6
3
L
5
L
5
H
3
L
7
L
8
5
L
5
8
L
8
4
L
6
3
L
1
H
3
1
L
8
H
4
L
2
L
3
L
5
4
H
2
H
7
L
1
8
L
2
7
3
8
8
L
5
H
5
L
6
4
H
5
3
9
L
8
4
H
2
L
5
L
6
8
H
3
L
7
L
8
L
7
L
5
H
3
H
3
L
5
2
4
5
L
5
H
3
SVI
Grade
B
-D
C
-C
A
D
C
B
D
A
-A
D
B
C
D
D
D
D
D
-A
D
B
B
D
D
-D
D
C
C
B
-C
D
-B
B
--C
-C
----B
C
B
B
C
A
D
A
Update & Review, October 2004
Model Monitor (continued from page 13)
Symbol
BNK
BAX
BBT
BZH
BEBE
BDX
BLS
BNG
BRKA
BBY
BEV
BSTE
BDK
BLK
HRB
BMC
BOBE
BBA
SAM
BXP
BSX
BYD
BRE
BAB
BRKL
BRKS
BRO
BFB
BW
CWP
COG
CACH
CDN
CZR
CPKI
CBC
CAH
CECO
CMX
KMX
CRE
POS
CAT
CDWC
CLS
CD
CTL
CEPH
CEN
CHG
CRAI
CKFR
CKP
CPG
CHFC
CBI
CHS
PLCE
CHZ
CHH
Company Name
Banknorth Group
Baxter Int'l Inc.
BB&T Corp.
Beazer Homes USA
bebe stores inc
Becton Dickinson
BellSouth Corp.
Benetton Group S.p.A. ADR
Berkshire Hathaway
Best Buy Co.
Beverly Enterprises
Biosite Inc.
Black & Decker
BlackRock Inc Cl A
Block (H&R)
BMC Software
Bob Evans Farms
Bombay Co.
Boston Beer 'A'
Boston Properties
Boston Scientific
Boyd Gaming
BRE Properties
British Airways ADR
Brookline Bancorp
Brooks Automation
Brown & Brown
Brown-Forman 'B'
Brush Engineered
Cable & Wireless ADR
Cabot Oil & Gas 'A'
Cache Inc.
Cadence Design Sys.
Caesars Entertain.
California Pizza
Capitol Bancorp Ltd
Cardinal Health
Career Education
Caremark RX
CarMax Inc.
CarrAmerica Realty Corp
Catalina Marketing
Caterpillar Inc.
CDW Corp.
Celestica Inc.
Cendant Corp.
CenturyTel Inc.
Cephalon Inc.
Ceridian Corp.
CH Energy Group
Charles River Associates
CheckFree Corp.
Checkpoint Systems
Chelsea Ppty Group Inc
Chemical Financial
Chicago Bridge & Iron
Chico's FAS
Children's Place
Chittenden Corp.
Choice Hotels Intl Inc
Sector
Financials
Health Care
Financials
Cons. Disc.
Cons. Disc.
Health Care
Telecom. Svcs.
Cons. Disc.
Financials
Cons. Disc.
Health Care
Health Care
Cons. Disc.
Financials
Industrials
Info. Tech.
Cons. Disc.
Cons. Disc.
Cons. Staples
Financials
Health Care
Cons. Disc.
Financials
Industrials
Financials
Info. Tech.
Financials
Cons. Staples
Materials
Telecom. Svcs.
Energy
Cons. Disc.
Info. Tech.
Cons. Disc.
Cons. Disc.
Financials
Health Care
Industrials
Health Care
Cons. Disc.
Financials
Cons. Disc.
Industrials
Info. Tech.
Info. Tech.
Industrials
Telecom. Svcs.
Health Care
Info. Tech.
Utilities
Industrials
Info. Tech.
Info. Tech.
Financials
Financials
Industrials
Cons. Disc.
Cons. Disc.
Financials
Cons. Disc.
Legg Mason Wood Walker, Incorporated
Price
Compass
09/30/04
Rating
$35.00
Buy
$32.16
Neutral
$39.69
Buy
$106.89
Buy
$21.12
Buy
$51.70
Buy
$27.12
Sell
$24.17
Buy
$86,650.00
Sell
$54.24
Sell
$7.57
Neutral
$48.96
Neutral
$77.44
Buy
$73.49
Neutral
$49.42
Neutral
$15.81
Sell
$27.16
Sell
$7.33
Sell
$25.20
Neutral
$55.39
Neutral
$39.73
Sell
$28.15
Neutral
$38.35
Sell
$37.63
Neutral
$15.67
Sell
$14.15
Neutral
$45.70
Sell
$45.80
Sell
$20.71
Buy
$5.26
Neutral
$44.90
Neutral
$15.00
Sell
$13.04
Sell
$16.70
Neutral
$21.85
Neutral
$29.34
Buy
$43.77
Buy
$28.43
Buy
$32.07
Neutral
$21.55
Sell
$32.70
Neutral
$23.08
Buy
$80.45
Buy
$58.03
Neutral
$12.70
Neutral
$21.60
Neutral
$34.24
Buy
$47.90
Sell
$18.41
Neutral
$45.80
Neutral
$38.29
Sell
$27.67
Neutral
$15.57
Neutral
$67.10
Sell
$36.52
Buy
$29.99
Buy
$34.20
Sell
$23.91
Neutral
$27.25
Buy
$57.59
Sell
Page 14
Prior
Compass
Rating
Buy
Buy
Buy
Sell
Sell
Buy
Sell
Sell
Buy
Neutral
Neutral
Neutral
Buy
Neutral
Buy
Buy
Neutral
x
Buy
Neutral
Neutral
Neutral
Sell
Sell
x
Neutral
Neutral
Neutral
Buy
Sell
Neutral
Neutral
Neutral
Neutral
Buy
Sell
Buy
Buy
Neutral
Neutral
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Sell
Buy
Sell
Sell
Sell
Neutral
Neutral
Neutral
Neutral
Sell
Risk/
Reward
75%
50%
75%
100%
75%
75%
25%
100%
25%
25%
50%
50%
75%
50%
50%
25%
25%
0%
50%
50%
25%
50%
25%
50%
0%
50%
25%
0%
100%
50%
50%
25%
25%
50%
50%
100%
75%
75%
50%
0%
50%
75%
100%
50%
50%
50%
100%
0%
50%
50%
25%
50%
50%
25%
75%
75%
0%
50%
75%
25%
Prior
Risk/
Reward
75%
75%
75%
25%
0%
100%
25%
25%
100%
50%
50%
50%
75%
50%
75%
75%
50%
x
100%
50%
50%
50%
25%
25%
x
50%
50%
50%
100%
25%
50%
50%
50%
50%
100%
25%
75%
75%
50%
50%
50%
75%
100%
100%
50%
100%
50%
50%
100%
75%
0%
100%
25%
25%
0%
50%
50%
50%
50%
25%
Valuation
Percentile
70.3%
72.3%
55.8%
0.7%
65.1%
67.0%
48.7%
4.8%
59.2%
28.5%
9.0%
67.9%
53.9%
94.1%
22.5%
51.6%
14.2%
56.1%
84.5%
70.0%
82.8%
57.2%
85.4%
1.1%
94.5%
26.5%
87.8%
81.3%
22.0%
9.4%
53.7%
29.4%
45.3%
58.9%
52.1%
40.1%
5.2%
31.4%
46.1%
65.4%
66.1%
78.6%
19.9%
51.2%
28.7%
13.9%
30.0%
53.7%
55.5%
31.1%
84.3%
62.4%
23.5%
88.7%
67.2%
62.9%
77.0%
10.4%
60.4%
92.6%
12M Avg
Valuation
Percentile
50.4%
51.9%
38.5%
1.0%
69.3%
50.1%
26.8%
7.9%
56.6%
39.1%
25.5%
51.5%
34.4%
70.7%
23.3%
58.3%
13.9%
23.4%
70.2%
49.5%
87.0%
44.1%
70.7%
10.4%
94.5%
65.5%
72.5%
80.6%
52.4%
36.8%
33.4%
41.8%
58.8%
43.6%
37.3%
41.2%
22.2%
77.4%
61.2%
62.9%
42.1%
50.0%
40.3%
65.8%
55.9%
20.0%
15.6%
74.7%
62.5%
24.5%
66.5%
70.0%
38.3%
69.8%
66.0%
50.5%
87.3%
33.0%
50.2%
73.5%
Redline PPS
H
3
H
3
H
3
1
3
H
3
H
7
1
5
7
L
5
H
3
H
3
H
4
7
8
6
H
8
H
4
H
3
8
H
3
H
4
5
5
L
7
H
5
8
L
2
L
5
H
3
5
7
H
3
H
3
2
L
6
L
7
L
7
8
H
3
H
3
L
2
L
8
L
7
6
H
2
L
8
5
7
H
4
5
L
5
H
4
3
3
8
L
5
3
H
4
SVI
Grade
B
C
A
D
-A
A
-B
C
D
C
A
B
A
A
C
-B
D
B
-C
B
-D
A
-D
-C
-D
D
C
D
B
B
-D
C
A
A
A
D
B
A
D
B
A
-A
C
C
D
--D
D
--
Update & Review, October 2004
Model Monitor (continued from page 14)
Symbol
CBR
CINF
CTAS
CRUS
CZN
CYN
CKR
CCU
CLX
CNA
CGNX
CSTR
CL
CNB
CBH
CBU
CBSS
CPWR
CMVT
CNXT
ED
CAL
CAM
COCO
CPO
OFC
CMOS
CREE
CK
CSX
CUNO
CYMI
CY
CYT
CYTC
DCX
DCN
DF
DE
DAL
DRTE
XRAY
DBD
DRIV
DMN
DNEX
DLTR
DPL
DTE
DD
DRE
DNB
DPMI
ELNK
EWBC
EDMC
AGE
EFII
ERTS
EMMS
Company Name
CIBER Inc.
Cincinnati Financial
Cintas Corp.
Cirrus Logic
Citizens Communic.
City National Corp.
CKE Restaurants
Clear Channel
Clorox Co.
CNA Fin'l
Cognex Co.
Coinstar Inc
Colgate-Palmolive
Colonial BncGrp. 'A'
Commerce Bancorp NJ
Community Bank Sys.
Compass Bancshares
Compuware Corp.
Comverse Technology
Conexant Systems
Consol. Edison
Cont'l Airlines
Cooper Cameron
Corinthian Colleges
Corn Products Int'l
Corp. Office Pptys
Credence Systems
Cree Inc.
Crompton Corp.
CSX Corp.
CUNO Inc.
Cymer Inc.
Cypress Semic.
Cytec Inds.
Cytyc Corp.
DaimlerChrysler AG
Dana Corp.
Dean Foods
Deere & Co.
Delta Air Lines
Dendrite Intl Inc
Dentsply Int'l
Diebold Inc.
Digital River Inc
Dimon Inc
Dionex Corp.
Dollar Tree Stores
DPL Inc.
DTE Energy
Du Pont
Duke Realty Corp.
Dun & Bradstreet
DuPont Photomasks
EarthLink Inc.
East West Bancorp Inc
Education Mgmt.
Edwards (A.G.)
Electrncs For Imging
Electronic Arts
Emmis Communications
Sector
Info. Tech.
Financials
Industrials
Info. Tech.
Telecom. Svcs.
Financials
Cons. Disc.
Cons. Disc.
Cons. Staples
Financials
Info. Tech.
Industrials
Cons. Staples
Financials
Financials
Financials
Financials
Info. Tech.
Info. Tech.
Info. Tech.
Utilities
Industrials
Energy
Industrials
Cons. Staples
Financials
Info. Tech.
Info. Tech.
Materials
Industrials
Industrials
Info. Tech.
Info. Tech.
Materials
Health Care
Cons. Disc.
Cons. Disc.
Cons. Staples
Industrials
Industrials
Health Care
Health Care
Info. Tech.
Info. Tech.
Cons. Staples
Info. Tech.
Cons. Disc.
Utilities
Utilities
Materials
Financials
Industrials
Info. Tech.
Info. Tech.
Financials
Industrials
Financials
Info. Tech.
Info. Tech.
Cons. Disc.
Legg Mason Wood Walker, Incorporated
Price
09/30/04
$7.52
$41.22
$42.04
$4.77
$13.39
$64.95
$11.05
$31.17
$53.30
$24.01
$26.20
$23.30
$45.18
$20.45
$55.20
$25.13
$43.82
$5.15
$18.83
$1.60
$42.04
$8.52
$54.84
$13.48
$46.10
$25.62
$7.20
$30.50
$9.49
$33.20
$57.75
$28.66
$8.84
$48.95
$24.15
$41.42
$17.69
$30.02
$64.55
$3.29
$16.12
$51.94
$46.70
$29.78
$5.89
$54.70
$26.95
$20.58
$42.19
$42.80
$33.20
$58.70
$17.04
$10.30
$33.59
$26.64
$34.62
$16.24
$45.99
$18.06
Compass
Rating
Neutral
Neutral
Sell
Sell
Neutral
Buy
Buy
Sell
Buy
Sell
Sell
Neutral
Neutral
Neutral
Neutral
Buy
Neutral
Sell
Neutral
Neutral
Neutral
Sell
Neutral
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Buy
Sell
Neutral
Buy
Buy
Sell
Sell
Sell
Sell
Buy
Sell
Sell
Buy
Neutral
Neutral
Sell
Sell
Sell
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Buy
Sell
Sell
Sell
Neutral
Sell
Neutral
Page 15
Prior
Compass
Rating
Neutral
Buy
Neutral
Sell
Neutral
Buy
Buy
Sell
Neutral
Buy
Neutral
Buy
Buy
Neutral
Buy
Sell
Neutral
Sell
Buy
Neutral
Sell
Sell
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Sell
Sell
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Sell
Neutral
Buy
Buy
Buy
Sell
Neutral
Neutral
Neutral
Neutral
Sell
Sell
Buy
Neutral
Buy
Sell
Sell
Neutral
Sell
Buy
Sell
Risk/
Reward
50%
50%
25%
25%
50%
75%
100%
25%
75%
25%
25%
50%
50%
50%
50%
100%
50%
0%
50%
50%
50%
0%
50%
50%
75%
50%
50%
50%
75%
100%
25%
50%
75%
100%
25%
25%
25%
25%
100%
0%
0%
75%
50%
50%
0%
0%
25%
50%
100%
50%
100%
50%
50%
100%
25%
25%
25%
50%
25%
50%
Prior
Risk/
Reward
50%
75%
50%
0%
50%
75%
75%
25%
50%
100%
50%
75%
100%
50%
75%
0%
50%
0%
75%
50%
25%
25%
100%
50%
100%
50%
50%
50%
25%
25%
75%
50%
75%
100%
75%
100%
100%
100%
100%
0%
50%
100%
75%
75%
25%
50%
50%
50%
50%
25%
25%
75%
50%
100%
25%
25%
50%
25%
100%
0%
Valuation
Percentile
22.3%
33.8%
79.3%
68.9%
65.2%
60.4%
20.7%
51.7%
78.3%
10.5%
79.6%
50.7%
62.9%
72.4%
56.3%
66.9%
67.3%
64.2%
93.6%
49.3%
35.8%
51.8%
79.1%
25.3%
25.9%
57.1%
34.9%
90.1%
49.9%
11.0%
86.1%
36.5%
25.0%
38.6%
94.9%
13.5%
5.7%
21.2%
27.7%
94.4%
53.1%
78.5%
45.8%
87.4%
61.4%
86.2%
19.2%
69.1%
37.8%
61.8%
72.7%
84.2%
13.0%
15.1%
84.8%
58.0%
29.6%
47.9%
76.0%
48.2%
12M Avg
Valuation
Percentile
38.7%
34.5%
79.0%
89.5%
52.6%
41.4%
41.5%
72.5%
64.2%
14.8%
84.1%
31.1%
69.6%
51.4%
51.3%
57.5%
52.5%
79.7%
91.2%
73.6%
31.5%
38.0%
59.8%
70.7%
13.4%
41.3%
59.5%
73.5%
26.9%
8.5%
73.1%
66.9%
48.7%
25.6%
78.2%
19.4%
5.5%
24.0%
44.9%
74.1%
60.4%
63.1%
56.4%
81.1%
29.3%
80.4%
29.6%
55.3%
31.1%
63.1%
67.8%
75.2%
52.1%
38.3%
68.0%
78.9%
37.4%
75.7%
79.0%
70.5%
Redline PPS
L
5
7
8
L
8
H
3
H
3
L
2
L
8
H
3
5
8
H
3
5
H
3
5
3
H
3
L
8
4
L
7
5
H
8
H
3
L
7
H
2
H
3
L
7
H
4
H
2
1
H
4
L
5
L
7
H
2
H
4
5
5
5
L
2
H
9
8
H
3
7
4
H
8
9
5
H
3
2
5
3
4
L
6
L
1
H
4
L
8
5
L
5
5
L
7
SVI
Grade
-A
A
C
C
A
D
B
A
D
A
-A
D
A
C
C
D
D
D
B
D
C
C
C
D
D
A
C
C
C
C
B
A
C
C
D
D
C
D
-B
A
--B
D
C
D
B
C
--C
C
B
D
-A
--
Update & Review, October 2004
Model Monitor (continued from page 15)
Symbol
ELX
ENMC
EGN
ENR
EFX
EQT
EOP
EQR
ERES
ERICY
FDO
FSS
FAF
FR
FED
FMER
FLEX
FL
FRX
FOSL
FDRY
FELE
BEN
FRED
FUJIY
AJG
GME
GY
GGP
GPC
GLG
GLT
GLBL
GPN
GGG
GPT
GLK
GTK
HAE
HAL
HRS
HHS
HE
HCC
HMA
HR
HELX
HPC
HIB
HB
HNI
HRL
DHI
HPT
HOTT
HBAN
HTCH
HYSL
IACI
IEX
Company Name
Emulex Corp.
Encore Med Corp
Energen Corp.
Energizer Holdings
Equifax Inc.
Equitable Resources
Equity Office P'ptys
Equity Residential
eResearchTechnology
Ericsson ADR
Family Dollar Stores
Federal Signal
First Amer Corp
First Indl Rlty Tr Inc.
FirstFed Fin'l-CA
FirstMerit Corp.
Flextronics Int'l
Foot Locker
Forest Labs.
Fossil Inc.
Foundry Networks
Franklin Electric
Franklin Resources
Fred's Inc. 'A'
Fuji Photo ADR
Gallagher (Arthur J.)
GameStop Corp Cl A
GenCorp Inc.
General Growth Pptys New
Genuine Parts
Glamis Gold Ltd
Glatfelter
Global Inds.
Global Payments Inc
Graco Inc.
GreenPoint Fin'l
G't Lakes Chemical
GTECH Holdings
Haemonetics Corp.
Halliburton Co.
Harris Corp.
Harte-Hanks
Hawaiian Elec.
HCC Insurance Hldgs.
Health Mgmt. Assoc.
Healthcare R'lty Trust
Helix Technology
Hercules Inc.
Hibernia Corp. `A'
Hillenbrand Inds.
HNI Corp.
Hormel Foods
Horton D.R.
Hospitality Properties
Hot Topic Inc.
Huntington Bancshs.
Hutchinson Techn.
Hyperion Solutions Corp
IAC/InterActiveCorp
IDEX Corp.
Sector
Info. Tech.
Health Care
Utilities
Cons. Staples
Industrials
Utilities
Financials
Financials
Health Care
Info. Tech.
Cons. Disc.
Industrials
Financials
Financials
Financials
Financials
Info. Tech.
Cons. Disc.
Health Care
Cons. Disc.
Info. Tech.
Industrials
Financials
Cons. Disc.
Cons. Disc.
Financials
Cons. Disc.
Industrials
Financials
Cons. Disc.
Materials
Materials
Energy
Info. Tech.
Industrials
Financials
Materials
Cons. Disc.
Health Care
Energy
Info. Tech.
Cons. Disc.
Utilities
Financials
Health Care
Financials
Info. Tech.
Materials
Financials
Health Care
Industrials
Cons. Staples
Cons. Disc.
Financials
Cons. Disc.
Financials
Info. Tech.
Info. Tech.
Cons. Disc.
Industrials
Legg Mason Wood Walker, Incorporated
Price
09/30/04
$11.52
$4.98
$51.55
$46.10
$26.36
$54.31
$27.25
$31.00
$13.33
$31.24
$27.10
$18.58
$30.83
$36.90
$48.88
$26.31
$13.25
$23.70
$44.96
$30.94
$9.49
$39.60
$55.76
$17.96
$32.86
$33.13
$18.51
$13.55
$31.00
$38.38
$18.73
$12.39
$6.18
$53.55
$33.50
$46.26
$25.60
$25.32
$32.84
$33.69
$54.94
$25.01
$26.54
$30.15
$20.43
$39.04
$13.60
$14.25
$26.41
$50.53
$39.58
$26.78
$33.11
$42.49
$17.04
$24.91
$26.73
$33.99
$22.02
$33.96
Compass
Rating
Neutral
Sell
Buy
Buy
Neutral
Buy
Sell
Buy
Sell
Neutral
Buy
Neutral
Buy
Buy
Buy
Sell
Neutral
Sell
Sell
Neutral
Sell
Buy
Buy
Buy
Buy
Buy
Buy
Sell
Buy
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Buy
Sell
Buy
Neutral
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Buy
Sell
Neutral
Sell
Buy
Buy
Neutral
Buy
Sell
Sell
Sell
Neutral
Page 16
Prior
Compass
Rating
Neutral
x
Buy
Sell
Sell
Buy
Sell
Sell
Buy
Buy
Buy
Buy
Neutral
Neutral
Buy
Sell
Neutral
Neutral
Sell
Buy
Buy
Buy
Sell
Buy
Neutral
Neutral
Sell
Sell
Neutral
Neutral
Sell
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Sell
Neutral
Buy
Sell
Buy
Sell
Buy
Sell
Buy
Buy
Neutral
Neutral
Neutral
Buy
Buy
Buy
Sell
Buy
Risk/
Reward
50%
0%
100%
100%
50%
75%
0%
100%
25%
50%
75%
50%
100%
75%
75%
0%
50%
25%
25%
50%
25%
75%
100%
75%
100%
100%
100%
25%
75%
100%
50%
100%
50%
50%
50%
75%
100%
25%
75%
50%
75%
75%
50%
75%
50%
50%
75%
75%
75%
0%
50%
25%
100%
100%
50%
75%
25%
0%
0%
50%
Prior
Risk/
Reward
50%
x
100%
25%
25%
75%
0%
25%
75%
75%
75%
75%
50%
50%
75%
25%
50%
50%
25%
100%
75%
75%
25%
75%
50%
50%
25%
25%
50%
50%
0%
100%
50%
75%
100%
75%
50%
75%
100%
75%
100%
100%
25%
50%
100%
25%
75%
0%
75%
0%
75%
100%
50%
50%
50%
75%
75%
75%
0%
100%
Valuation
Percentile
43.0%
77.4%
35.5%
48.6%
75.2%
68.3%
63.2%
70.9%
75.1%
87.6%
36.1%
62.7%
0.5%
65.8%
53.3%
87.2%
20.4%
14.9%
59.9%
73.7%
52.7%
80.8%
79.8%
20.4%
16.9%
44.2%
5.9%
93.0%
62.1%
50.6%
99.0%
26.6%
73.7%
85.9%
88.0%
56.7%
44.8%
58.3%
63.3%
79.0%
70.6%
76.0%
60.3%
5.8%
27.6%
77.2%
28.1%
49.7%
58.6%
53.2%
49.6%
43.7%
6.9%
67.8%
34.0%
57.5%
39.8%
53.0%
62.2%
68.0%
12M Avg
Valuation
Percentile
60.5%
78.6%
20.8%
43.6%
64.0%
47.8%
50.1%
71.8%
85.6%
92.1%
51.2%
49.6%
0.5%
55.2%
36.9%
72.5%
46.6%
20.5%
80.7%
55.7%
77.9%
62.8%
71.2%
40.7%
10.3%
38.5%
3.4%
38.5%
52.5%
39.1%
95.7%
44.5%
48.9%
77.1%
70.2%
35.2%
47.2%
55.2%
50.4%
65.0%
57.9%
61.4%
45.2%
11.7%
40.1%
61.7%
70.5%
29.5%
35.5%
40.4%
47.5%
39.6%
8.1%
59.1%
51.5%
42.8%
22.9%
66.0%
82.4%
54.6%
Redline PPS
L
7
8
H
2
2
5
H
3
H
8
3
5
4
L
7
H
3
1
3
H
3
H
5
L
5
6
L
8
H
3
L
8
H
3
3
L
7
2
2
1
H
4
3
3
4
L
2
H
3
4
H
4
H
3
2
8
H
3
H
3
H
3
H
3
H
3
6
7
H
3
L
5
H
2
H
3
H
8
7
5
1
3
L
7
H
3
H
7
8
L
8
H
3
SVI
Grade
C
-A
C
A
A
C
C
B
D
B
D
B
D
B
C
D
C
B
C
B
A
B
B
B
B
-D
D
C
-C
D
-A
A
A
A
B
D
A
A
D
A
A
D
B
D
A
B
A
C
B
C
C
B
B
-D
C
Update & Review, October 2004
Model Monitor (continued from page 16)
Symbol
N
NDE
IFX
KPA
IDTI
INTC
IDC
IPG
ISIL
IBM
IRF
INTU
IVGN
SFI
JCOM
JBL
JJZ
KPP
KBH
KEM
KSE
KFRC
KMB
KIM
KLAC
KFT
KKD
KLIC
KYO
LH
LANC
LDR
LSTR
LSCC
EL
LEH
LBY
LNCR
LFUS
LNR
LMT
STAR
LSI
LTXX
LYO
MRD
CLI
MAG
MBG
HCR
MAN
MMC
MI
MAT
MMS
MBI
MCK
MEG
MEDI
MDT
Company Name
Sector
Inco Limited
Materials
IndyMac Bancorp Inc.
Financials
Infineon Technologies AG
Info. Tech.
Innkeepers USA Trust
Financials
Integrated Device
Info. Tech.
Intel Corp.
Info. Tech.
Interactive Data
Cons. Disc.
Interpublic Group
Cons. Disc.
Intersil Corp. 'A'
Info. Tech.
Int'l Business Mach.
Info. Tech.
Int'l Rectifier
Info. Tech.
Intuit Inc.
Info. Tech.
Invitrogen Corp.
Health Care
iStar Financial Inc
Financials
J2 Global Communications Inc Info. Tech.
Jabil Circuit
Info. Tech.
Jacuzzi Brands Inc
Industrials
Kaneb Pipe Line Part
Energy
KB Home
Cons. Disc.
KEMET Corp.
Info. Tech.
KeySpan Corp.
Utilities
Kforce Inc
Industrials
Kimberly-Clark
Cons. Staples
Kimco Realty
Financials
KLA-Tencor
Info. Tech.
Kraft Foods
Cons. Staples
Krispy Kreme
Cons. Disc.
Kulicke & Soffa
Info. Tech.
Kyocera Corp. ADR
Info. Tech.
Laboratory Corp.
Health Care
Lancaster Colony
Cons. Staples
Landauer Inc.
Info. Tech.
Landstar Sys.
Industrials
Lattice Semiconductor
Info. Tech.
Lauder (Estee)
Cons. Staples
Lehman Bros. Holdings
Financials
Libbey Inc.
Cons. Disc.
Lincare Holdings
Health Care
Littelfuse Inc.
Info. Tech.
LNR Property
Financials
Lockheed Martin
Industrials
Lone Star Steakhouse
Cons. Disc.
LSI Logic
Info. Tech.
LTX Corp.
Info. Tech.
Lyondell Chemical
Materials
MacDermid Inc.
Materials
Mack-Cali R'lty
Financials
Magnetek Inc.
Industrials
Mandalay Resort Group
Cons. Disc.
Manor Care
Health Care
Manpower Inc.
Industrials
Marsh & McLennan
Financials
Marshall & Ilsley
Financials
Mattel Inc.
Cons. Disc.
MAXIMUS Inc.
Info. Tech.
MBIA Inc.
Financials
McKesson Corp.
Health Care
Media General 'A'
Cons. Disc.
MedImmune Inc.
Health Care
Medtronic Inc.
Health Care
Legg Mason Wood Walker, Incorporated
Price
09/30/04
$39.05
$36.20
$10.22
$12.44
$9.53
$20.06
$18.82
$10.59
$15.93
$85.74
$34.30
$45.40
$54.99
$41.23
$31.59
$23.00
$9.30
$51.77
$84.49
$8.09
$39.20
$8.38
$64.59
$51.30
$41.48
$31.72
$12.66
$5.65
$70.40
$43.72
$42.17
$46.93
$58.68
$4.91
$41.80
$79.72
$18.70
$29.71
$34.53
$61.91
$55.78
$25.83
$4.31
$5.41
$22.46
$28.96
$44.30
$7.47
$68.65
$29.96
$44.49
$45.76
$40.30
$18.13
$28.81
$58.21
$25.65
$55.95
$23.70
$51.90
Compass
Rating
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Sell
Sell
Sell
Neutral
Neutral
Buy
Sell
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Sell
Buy
Buy
Sell
Sell
Neutral
Sell
Buy
Buy
Neutral
Sell
Neutral
Sell
Sell
Neutral
Buy
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
Buy
Buy
Neutral
Sell
Neutral
Buy
Sell
Neutral
Neutral
Sell
Buy
Sell
Buy
Page 17
Prior
Compass
Rating
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Sell
Buy
Buy
Neutral
Sell
Neutral
Sell
Sell
Neutral
Sell
Sell
Neutral
Neutral
Sell
Neutral
Buy
Sell
Sell
Sell
Neutral
Neutral
Buy
Buy
Sell
Sell
Neutral
Neutral
Buy
Sell
Neutral
Buy
Buy
Neutral
Buy
Buy
Neutral
Neutral
Buy
Buy
Neutral
x
Buy
Buy
Neutral
Buy
Buy
Buy
Sell
Buy
Buy
Neutral
Sell
Sell
Risk/
Reward
100%
75%
50%
75%
100%
100%
75%
0%
25%
25%
50%
50%
75%
0%
75%
50%
100%
75%
100%
50%
100%
25%
75%
100%
25%
0%
50%
0%
100%
75%
50%
0%
50%
0%
25%
50%
75%
50%
100%
50%
75%
50%
50%
50%
50%
50%
50%
75%
75%
50%
25%
50%
75%
25%
50%
50%
25%
75%
0%
75%
Prior
Risk/
Reward
75%
100%
50%
100%
100%
100%
75%
0%
100%
75%
50%
25%
50%
0%
0%
50%
25%
0%
50%
50%
25%
50%
75%
25%
0%
25%
50%
50%
100%
75%
0%
0%
50%
50%
75%
25%
50%
75%
75%
50%
100%
75%
50%
50%
75%
75%
50%
x
75%
75%
50%
75%
75%
75%
25%
75%
100%
50%
0%
0%
Valuation
Percentile
12.0%
36.0%
11.8%
39.1%
33.1%
42.7%
78.1%
53.0%
52.2%
51.3%
25.0%
79.6%
47.3%
70.4%
79.0%
26.9%
48.7%
71.4%
1.3%
46.3%
32.7%
53.6%
67.4%
82.6%
68.0%
55.1%
31.8%
56.5%
30.0%
60.1%
47.0%
90.1%
82.8%
55.2%
80.0%
41.2%
5.5%
23.2%
60.5%
68.2%
60.7%
22.8%
24.4%
43.6%
84.4%
34.8%
65.5%
61.7%
57.1%
24.5%
43.3%
34.5%
57.3%
47.0%
27.2%
25.9%
4.6%
28.8%
96.2%
86.1%
12M Avg
Valuation
Percentile
34.3%
21.1%
32.0%
22.7%
68.0%
66.4%
61.8%
73.6%
64.8%
56.9%
67.3%
79.0%
72.1%
48.9%
66.8%
51.6%
40.2%
59.4%
0.8%
67.8%
22.7%
68.5%
53.7%
73.6%
88.4%
39.3%
61.3%
50.3%
46.1%
45.2%
34.6%
77.5%
65.5%
59.5%
79.7%
29.1%
20.4%
21.4%
79.0%
45.9%
46.9%
12.1%
47.4%
78.8%
84.6%
47.7%
50.8%
86.5%
40.0%
33.3%
51.1%
37.3%
43.4%
29.9%
42.3%
21.5%
11.7%
45.2%
83.5%
82.1%
Redline PPS
L
1
H
2
L
5
H
2
L
7
L
7
H
3
L
8
8
8
L
5
5
L
7
H
8
3
L
5
2
3
1
L
7
2
L
8
H
3
3
L
8
H
8
L
7
8
L
2
H
3
H
5
H
5
H
3
8
5
7
L
6
7
L
3
H
3
H
3
7
L
7
L
7
4
7
H
3
3
H
3
7
7
7
H
3
H
7
L
5
7
6
L
5
H
9
4
SVI
Grade
B
C
-D
A
A
B
D
A
A
D
A
B
D
-C
--B
C
C
-A
C
C
B
D
C
A
B
B
--C
A
B
B
A
-D
A
A
D
-D
A
C
-A
A
C
A
A
A
C
A
C
B
D
A
Update & Review, October 2004
Model Monitor (continued from page 17)
Symbol
MW
MNT
MENT
MRBK
MRK
MIK
MU
MDST
MCH
MIL
MLS
MNC
MOND
MON
MPS
MNS
MYL
NTE
NCC
NCF
NFG
NAP
NSM
NLS
NAV
NTY
NDC
NIPNY
NETE
NFLX
NTIQ
NTAP
NYB
NEM
NXTL
GAS
NSANY
NOK
JWN
NBP
NWAC
NWN
NVLS
NVO
NST
NUE
JNC
NVDA
NYM
OII
OLN
OCR
OKE
OPNT
OS
GOSHA
OSI
OMI
PKE
PDX
Company Name
Men's Wearhouse
Mentor Corp.
Mentor Graphics
Mercantile Bankshares
Merck & Co.
Michaels Stores
Micron Technology
Mid-State Bancshares
Millennium Chemicals
Millipore Corp.
Mills Corp.
Monaco Coach
Mondavi (Robert) 'A'
Monsanto Co.
MPS Group
MSC.Software
Mylan Labs.
Nam Tai Electronics Inc.
National City Corp.
National Commerce Fin'l
National Fuel Gas
National Processing
National Semic.
Nautilus Group
Navistar Int'l
NBTY Inc.
NDCHealth
NEC Corp. ADR
Netegrity Inc.
Netflix Inc.
NetIQ Corp.
Network Appliance
New York Community
Newmont Mining
Nextel Communic. 'A'
NICOR Inc.
Nissan Motor ADR
Nokia Corp. ADR
Nordstrom Inc.
Northern Border Partners LP
Northwest Airlines 'A'
Northwest Nat. Gas
Novellus Sys.
Novo Nordisk ADR
NSTAR
Nucor Corp.
Nuveen Investments Inc
NVIDIA Corp.
NYMAGIC Inc.
Oceaneering Int'l
Olin Corp.
Omnicare Inc.
ONEOK Inc.
OPNET Technologies Inc
Oregon Steel Mills
Oshkosh B'Gosh 'A'
Outback Steakhouse
Owens & Minor
Park Electrochemical
Pediatrix Medical
Sector
Cons. Disc.
Health Care
Info. Tech.
Financials
Health Care
Cons. Disc.
Info. Tech.
Financials
Materials
Health Care
Financials
Cons. Disc.
Cons. Staples
Materials
Info. Tech.
Info. Tech.
Health Care
Info. Tech.
Financials
Financials
Utilities
Info. Tech.
Info. Tech.
Cons. Disc.
Industrials
Cons. Staples
Health Care
Info. Tech.
Info. Tech.
Cons. Disc.
Info. Tech.
Info. Tech.
Financials
Materials
Telecom. Svcs.
Utilities
Cons. Disc.
Info. Tech.
Cons. Disc.
Energy
Industrials
Utilities
Info. Tech.
Health Care
Utilities
Materials
Financials
Info. Tech.
Financials
Energy
Materials
Health Care
Utilities
Info. Tech.
Materials
Cons. Disc.
Cons. Disc.
Health Care
Info. Tech.
Health Care
Legg Mason Wood Walker, Incorporated
Price
09/30/04
$29.05
$33.68
$10.97
$47.96
$33.00
$59.21
$12.03
$25.73
$21.21
$47.85
$51.87
$21.65
$39.17
$36.42
$8.41
$8.04
$18.00
$21.35
$38.62
$34.21
$28.33
$26.52
$15.49
$22.59
$37.19
$21.56
$16.05
$5.99
$7.51
$15.42
$10.70
$23.05
$20.54
$45.53
$23.84
$36.70
$21.66
$13.72
$38.24
$45.75
$8.21
$31.73
$26.64
$54.77
$49.10
$91.37
$29.60
$14.52
$21.89
$36.84
$20.00
$28.36
$26.02
$10.26
$16.63
$20.20
$41.53
$25.40
$21.20
$54.85
Compass
Rating
Buy
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Buy
Sell
Neutral
Buy
Sell
Buy
Neutral
Neutral
Sell
Sell
Buy
Buy
Buy
Sell
Buy
Buy
Neutral
Buy
Neutral
Neutral
Sell
Neutral
Sell
Buy
Sell
Sell
Neutral
Buy
Neutral
Sell
Buy
Neutral
Sell
Buy
Sell
Neutral
Neutral
Buy
Neutral
Sell
Sell
Neutral
Buy
Buy
Buy
Sell
Buy
Sell
Neutral
Buy
Buy
Neutral
Page 18
Prior
Compass
Rating
Sell
Neutral
Neutral
Buy
Sell
Buy
Neutral
Sell
Sell
Buy
Neutral
Buy
Sell
Buy
Sell
Neutral
Neutral
Neutral
Buy
Buy
Buy
Sell
Buy
Buy
Neutral
Neutral
Neutral
Neutral
Sell
Sell
Sell
Sell
Buy
Sell
Buy
Buy
Buy
Buy
Buy
Sell
Neutral
Neutral
Neutral
Neutral
Buy
Buy
Sell
Neutral
Sell
Buy
Sell
Buy
Buy
x
Buy
Neutral
Buy
Buy
Sell
Buy
Risk/
Reward
100%
50%
50%
75%
50%
100%
50%
50%
75%
0%
50%
75%
0%
75%
50%
50%
25%
25%
100%
75%
100%
0%
100%
75%
50%
75%
50%
50%
25%
50%
0%
75%
25%
0%
50%
100%
50%
25%
100%
50%
0%
100%
25%
50%
50%
100%
50%
25%
0%
50%
75%
75%
100%
0%
100%
25%
50%
75%
100%
50%
Prior
Risk/
Reward
25%
50%
50%
75%
25%
100%
50%
0%
25%
100%
50%
75%
0%
75%
25%
50%
50%
50%
100%
75%
100%
0%
100%
75%
50%
50%
50%
50%
25%
0%
0%
0%
75%
0%
75%
100%
75%
100%
100%
0%
50%
50%
50%
50%
75%
100%
0%
50%
0%
75%
0%
75%
75%
x
100%
50%
75%
100%
25%
75%
Valuation
Percentile
13.3%
83.9%
12.4%
77.2%
48.3%
39.2%
20.2%
57.0%
67.3%
70.1%
69.6%
9.6%
59.9%
62.7%
38.2%
28.4%
42.2%
49.4%
44.6%
76.7%
42.0%
81.8%
33.0%
70.0%
18.4%
10.7%
34.3%
13.6%
69.7%
30.6%
82.5%
97.5%
54.8%
91.8%
40.4%
32.5%
17.2%
52.8%
28.6%
73.1%
68.5%
36.2%
54.0%
94.8%
31.0%
0.7%
80.8%
44.0%
53.4%
53.8%
54.9%
7.1%
26.1%
74.3%
6.4%
74.1%
34.8%
35.2%
42.6%
41.6%
12M Avg
Valuation
Percentile
21.9%
67.9%
42.1%
58.8%
56.8%
26.6%
59.4%
40.7%
72.2%
77.4%
45.9%
40.0%
45.0%
48.8%
57.1%
43.8%
51.4%
61.4%
28.0%
58.5%
23.7%
64.0%
67.8%
52.2%
50.8%
33.6%
49.8%
36.1%
84.8%
76.6%
67.2%
96.9%
51.3%
78.0%
44.8%
19.2%
13.8%
45.3%
45.8%
56.6%
74.3%
30.0%
74.2%
76.8%
25.7%
16.7%
59.7%
58.4%
31.4%
31.3%
50.8%
27.1%
12.0%
86.0%
33.7%
63.5%
32.2%
22.2%
66.0%
58.5%
Redline PPS
1
H
4
L
6
H
3
7
H
2
L
7
H
3
3
8
H
3
L
5
H
5
H
3
L
7
L
7
7
7
H
2
H
3
H
2
H
5
L
5
H
3
L
5
L
6
L
7
L
5
L
5
L
7
H
8
4
8
H
9
5
H
2
7
8
L
2
H
3
8
2
L
8
H
4
7
L
1
H
3
5
H
8
H
3
3
L
6
H
2
8
L
1
8
7
H
2
L
7
L
7
SVI
Grade
C
A
D
B
A
B
C
C
D
C
D
B
D
B
C
D
--A
A
B
-A
B
D
B
D
C
C
D
C
B
A
A
B
A
A
A
A
-D
B
C
A
A
A
C
C
C
-D
B
A
--B
A
C
A
--
Update & Review, October 2004
Model Monitor (continued from page 18)
Symbol
PNG
PVA
PNR
PSFT
PBY
PBG
PEP
PKI
PFE
PD
PHLY
PHG
PHTN
PLAB
PNY
PIR
PBI
PDG
TUTR
PLXS
PII
POP
PCH
PPG
PRGX
PDE
PGR
PLD
PRV
PSB
QLGC
DGX
STR
RSH
RA
RBC
RF
RGS
RTRSY
REY
RAI
RFMD
RTP
RAD
RLI
ROG
ROH
ROST
RSE
RDC
RSAS
RI
RT
SFE
SWY
SNDK
SANM
SBC
SCHL
SGMS
Company Name
Penn American Group
Penn Virginia Corp.
Pentair Inc.
PeopleSoft
Pep Boys
Pepsi Bottling Group
PepsiCo Inc.
PerkinElmer Inc.
Pfizer Inc.
Phelps Dodge
Philadelphia Consol Hldg
Philips Electronics NV
Photon Dynamics
Photronics Inc.
Piedmont Natural Gas
Pier 1 Imports
Pitney Bowes
Placer Dome
PLATO Learning
Plexus Corp.
Polaris Inds.
Pope & Talbot
Potlatch Corp.
PPG Inds.
PRG-Schultz Int'l
Pride Intl Inc
Progressive (Ohio)
Prologis
Province Healthcare
PS Business Parks
QLogic Corp.
Quest Diagnostics
Questar Corp.
RadioShack Corp.
Reckson Associates Realty
Regal-Beloit
Regions Financial
Regis Corp.
Reuters ADR
Reynolds & Reynolds
Reynolds American
RF Micro Devices
Rio Tinto PLC
Rite Aid Corp.
RLI Corp.
Rogers Corp.
Rohm and Haas
Ross Stores
Rouse Co.
Rowan Cos.
RSA Security
Ruby Tuesday
Ryerson Tull
Safeguard Scientifics
Safeway Inc.
SanDisk Corp.
Sanmina-SCI Corp.
SBC Communications
Scholastic Corp.
Scientific Games Corp.
Sector
Financials
Energy
Industrials
Info. Tech.
Cons. Disc.
Cons. Staples
Cons. Staples
Health Care
Health Care
Materials
Financials
Cons. Disc.
Info. Tech.
Info. Tech.
Utilities
Cons. Disc.
Industrials
Materials
Info. Tech.
Info. Tech.
Cons. Disc.
Materials
Materials
Materials
Industrials
Energy
Financials
Financials
Health Care
Financials
Info. Tech.
Health Care
Utilities
Cons. Disc.
Financials
Industrials
Financials
Cons. Disc.
Cons. Disc.
Info. Tech.
Cons. Staples
Info. Tech.
Materials
Cons. Staples
Financials
Info. Tech.
Materials
Cons. Disc.
Financials
Energy
Info. Tech.
Cons. Disc.
Materials
Info. Tech.
Cons. Staples
Info. Tech.
Info. Tech.
Telecom. Svcs.
Cons. Disc.
Cons. Disc.
Legg Mason Wood Walker, Incorporated
Price
09/30/04
$13.61
$39.59
$34.91
$19.85
$14.00
$27.15
$48.65
$17.22
$30.60
$92.03
$55.12
$22.91
$20.30
$16.62
$43.94
$18.08
$44.10
$19.88
$8.84
$11.04
$55.82
$17.60
$46.81
$61.28
$5.74
$19.79
$84.75
$35.24
$20.92
$39.85
$29.71
$88.22
$45.82
$28.64
$28.75
$24.19
$33.06
$40.22
$34.10
$24.67
$68.04
$6.34
$108.65
$3.52
$37.55
$42.49
$42.97
$23.44
$66.88
$26.40
$19.30
$27.87
$17.17
$1.87
$19.31
$29.12
$7.05
$25.95
$30.89
$19.10
Compass
Rating
Sell
Neutral
Buy
Sell
Neutral
Buy
Sell
Sell
Neutral
Buy
Buy
Neutral
Buy
Neutral
Buy
Neutral
Buy
Buy
Sell
Neutral
Buy
Buy
Neutral
Buy
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Sell
Buy
Buy
Buy
Neutral
Buy
Sell
Neutral
Sell
Sell
Buy
Sell
Buy
Neutral
Neutral
Buy
Buy
Neutral
Buy
Neutral
Buy
Neutral
Buy
Neutral
Sell
Sell
Neutral
Buy
Buy
Buy
Page 19
Prior
Compass
Rating
x
Buy
Buy
Sell
Neutral
Sell
Buy
Sell
Buy
Buy
Buy
Neutral
Sell
Neutral
Sell
Buy
Neutral
Sell
x
Neutral
Buy
Buy
Buy
Sell
Neutral
Sell
Buy
Sell
Neutral
Sell
Buy
Neutral
Buy
Buy
Neutral
Sell
Sell
Buy
Neutral
Sell
x
Buy
Sell
Neutral
Sell
Buy
Neutral
Buy
Neutral
Sell
Sell
Sell
Buy
Neutral
Buy
Neutral
Neutral
Buy
Sell
Sell
Risk/
Reward
25%
50%
75%
0%
50%
100%
25%
0%
50%
100%
100%
50%
75%
50%
100%
50%
100%
75%
0%
50%
75%
100%
50%
100%
50%
75%
50%
75%
50%
50%
25%
100%
75%
75%
50%
100%
0%
50%
0%
0%
100%
25%
75%
50%
50%
100%
100%
50%
75%
50%
75%
50%
100%
50%
25%
25%
50%
100%
100%
75%
Prior
Risk/
Reward
x
75%
75%
0%
50%
25%
100%
0%
75%
100%
100%
50%
25%
50%
25%
75%
50%
0%
x
50%
100%
100%
75%
25%
50%
0%
75%
25%
50%
25%
100%
50%
100%
75%
50%
25%
0%
100%
50%
0%
x
75%
0%
50%
25%
100%
50%
75%
50%
0%
0%
25%
100%
50%
100%
50%
50%
100%
25%
0%
Valuation
Percentile
2.7%
56.4%
67.0%
88.5%
2.2%
37.1%
74.5%
50.9%
35.6%
13.1%
8.9%
10.5%
47.5%
19.8%
46.9%
29.9%
74.1%
92.4%
62.4%
29.1%
58.1%
21.0%
62.3%
38.3%
57.5%
66.5%
23.2%
85.4%
54.6%
48.1%
69.3%
52.5%
54.5%
26.3%
59.3%
32.7%
55.7%
33.4%
60.8%
61.1%
18.1%
64.9%
71.5%
35.9%
16.6%
37.6%
61.4%
39.7%
95.1%
85.7%
90.2%
21.9%
2.4%
43.3%
16.6%
49.1%
39.1%
44.2%
25.1%
55.5%
12M Avg
Valuation
Percentile
4.2%
42.4%
43.3%
73.9%
29.5%
35.1%
72.3%
67.9%
48.0%
40.1%
24.8%
33.4%
76.8%
34.7%
43.9%
24.8%
67.0%
83.9%
73.6%
60.3%
32.3%
50.0%
48.6%
41.2%
34.4%
61.2%
26.0%
78.8%
36.4%
37.5%
68.0%
46.4%
36.1%
41.3%
41.8%
33.3%
36.9%
37.5%
85.6%
44.6%
18.1%
71.0%
64.6%
62.9%
18.7%
64.8%
58.3%
33.6%
82.7%
81.3%
88.1%
37.5%
33.4%
60.8%
17.0%
52.6%
63.0%
31.4%
19.6%
53.1%
Redline PPS
6
H
3
H
3
H
9
L
6
2
5
L
8
7
L
1
L
1
L
5
L
7
L
5
2
7
3
4
8
L
7
H
3
L
2
H
3
2
H
3
3
7
4
H
3
5
8
3
H
3
L
5
H
3
2
H
8
7
L
8
H
8
2
8
3
L
5
6
L
7
3
7
4
4
4
L
5
L
1
L
7
6
7
L
7
H
2
2
3
SVI
Grade
--B
C
D
A
B
D
A
B
C
C
B
D
A
A
A
B
-D
A
D
D
A
D
-A
C
-B
A
A
A
B
D
D
A
A
D
B
-B
-D
B
A
A
A
B
D
C
C
C
D
D
C
D
A
D
--
Update & Review, October 2004
Model Monitor (continued from page 19)
Symbol
SFA
CKH
STX
SEIC
SERO
SCI
SVM
SHW
SSTI
SPG
SKY
SLM
SJM
SNA
SLR
SONC
SON
SO
SOTR
SWX
SWWC
SWN
TSA
FON
STJ
STA
SR
SXI
STEL
STE
SWC
STM
STU
SUI
STI
SCM
SY
SBL
SYY
TSM
TTWO
TLB
SKT
TCO
TCB
TLD
TNL
NZT
TMX
THC
TER
TTEK
TXI
TXN
TRBS
TXT
TNB
TIF
TWX
TIE
Company Name
Scientific-Atlanta
Seacor Holdings
Seagate Technology
SEI Investments
Serologicals Corp.
Service Corp. Int'l
ServiceMaster Co.
Sherwin-Williams
Silicon Storage
Simon Property Group
Skyline Corp.
SLM Corporation
Smucker (J.M.)
Snap-on Inc.
Solectron Corp.
Sonic Corp.
Sonoco Products
Southern Co.
SouthTrust Corp.
Southwest Gas
Southwest Water
Southwestern Energy
Sports Authority
Sprint Corp.
St. Jude Medical
St. Paul Travelers
Standard Register
Standex Int'l
Stellent Inc
STERIS Corp.
Stillwater Mining
STMicroelectronics
Student Loan Corp.
Sun Communities Inc.
SunTrust Banks
Swisscom AG
Sybase Inc.
Symbol Technologies
Sysco Corp.
Taiwan Semic. ADR
Take-Two Interactive
Talbots Inc.
Tanger Factory Outlet
Taubman Centers Inc.
TCF Financial
TDC A/S ADS
Technitrol Inc.
Telecom N. Zealand
Telefonos de Mexico ADR
Tenet Healthcare
Teradyne Inc.
Tetra Tech
Texas Inds.
Texas Instruments
Texas Regional Bancshares
Textron Inc.
Thomas & Betts
Tiffany & Co.
Time Warner
Titanium Metals
Sector
Info. Tech.
Energy
Info. Tech.
Financials
Health Care
Health Care
Industrials
Cons. Disc.
Info. Tech.
Financials
Cons. Disc.
Financials
Cons. Staples
Cons. Disc.
Info. Tech.
Cons. Disc.
Materials
Utilities
Financials
Utilities
Utilities
Energy
Cons. Disc.
Telecom. Svcs.
Health Care
Financials
Industrials
Industrials
Info. Tech.
Health Care
Materials
Info. Tech.
Financials
Financials
Financials
Telecom. Svcs.
Info. Tech.
Info. Tech.
Cons. Staples
Info. Tech.
Info. Tech.
Cons. Disc.
Financials
Financials
Financials
Telecom. Svcs.
Info. Tech.
Telecom. Svcs.
Telecom. Svcs.
Health Care
Info. Tech.
Industrials
Materials
Info. Tech.
Financials
Industrials
Industrials
Cons. Disc.
Cons. Disc.
Materials
Legg Mason Wood Walker, Incorporated
Price
09/30/04
$25.92
$46.75
$13.52
$33.68
$23.33
$6.21
$12.86
$43.96
$6.37
$53.63
$40.05
$44.60
$44.41
$27.56
$4.95
$25.63
$26.44
$29.98
$41.66
$23.95
$12.25
$41.99
$23.20
$20.13
$75.27
$33.06
$10.50
$24.50
$7.71
$21.94
$15.50
$17.28
$141.75
$39.19
$70.41
$34.72
$13.79
$12.64
$29.92
$7.14
$32.85
$24.79
$44.78
$25.83
$30.29
$17.63
$19.50
$31.81
$32.27
$10.79
$13.40
$12.67
$51.44
$21.28
$31.09
$64.27
$26.82
$30.74
$16.14
$23.46
Compass
Rating
Buy
Neutral
Sell
Neutral
Sell
Sell
Buy
Buy
Buy
Buy
Neutral
Buy
Sell
Neutral
Neutral
Buy
Buy
Sell
Neutral
Buy
Buy
Buy
Neutral
Buy
Sell
Sell
Neutral
Neutral
Sell
Neutral
Buy
Buy
Sell
Sell
Sell
Buy
Neutral
Sell
Buy
Buy
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Sell
Neutral
Neutral
Buy
Buy
Neutral
Neutral
Buy
Sell
Sell
Neutral
Page 20
Prior
Compass
Rating
Neutral
Neutral
Sell
Sell
Neutral
x
Neutral
Buy
Buy
Sell
Buy
Sell
Neutral
Buy
Sell
Buy
Buy
Neutral
Neutral
Sell
x
Neutral
Neutral
Buy
Neutral
x
Sell
Sell
x
Buy
Neutral
Buy
x
Sell
Buy
Sell
Sell
Neutral
Sell
Buy
Neutral
Buy
Sell
Neutral
Neutral
Sell
Neutral
Neutral
Neutral
Sell
Neutral
Sell
Buy
Buy
Sell
Neutral
Sell
Buy
Buy
Neutral
Risk/
Reward
75%
50%
0%
50%
25%
25%
75%
75%
100%
100%
50%
100%
25%
50%
50%
75%
100%
25%
50%
100%
75%
100%
50%
75%
0%
25%
50%
50%
0%
50%
75%
100%
0%
0%
25%
100%
50%
25%
100%
100%
100%
75%
75%
50%
75%
50%
50%
100%
75%
0%
50%
50%
100%
100%
50%
50%
100%
25%
25%
50%
Prior
Risk/
Reward
50%
50%
0%
25%
50%
x
50%
75%
100%
25%
75%
25%
50%
100%
0%
100%
100%
50%
50%
25%
x
50%
50%
100%
50%
x
25%
25%
x
75%
50%
100%
x
0%
75%
25%
25%
50%
25%
100%
50%
75%
0%
50%
50%
25%
50%
50%
50%
0%
50%
25%
100%
100%
25%
50%
25%
75%
100%
50%
Valuation
Percentile
45.0%
65.7%
58.8%
86.7%
91.7%
48.1%
82.8%
52.9%
9.9%
71.9%
63.0%
77.9%
55.8%
25.6%
38.4%
65.4%
45.2%
50.2%
83.5%
25.4%
71.7%
37.0%
11.2%
33.0%
93.6%
1.1%
15.5%
18.0%
67.0%
34.2%
76.5%
22.8%
75.4%
70.6%
53.6%
36.0%
30.5%
68.1%
49.4%
25.8%
41.1%
11.5%
74.4%
77.8%
77.5%
15.9%
32.4%
53.4%
21.7%
91.6%
23.0%
10.5%
3.6%
37.1%
78.7%
59.9%
59.6%
51.7%
43.1%
63.5%
12M Avg
Valuation
Percentile
73.3%
48.4%
31.9%
75.3%
79.2%
48.1%
66.3%
33.9%
63.3%
73.4%
49.0%
76.5%
49.5%
33.9%
68.7%
52.1%
31.0%
44.5%
61.0%
19.1%
73.1%
29.2%
39.3%
18.0%
91.9%
9.3%
32.5%
17.8%
67.0%
32.1%
81.6%
52.7%
75.4%
53.7%
49.3%
25.6%
50.0%
80.6%
64.7%
58.2%
30.4%
32.5%
63.0%
61.7%
59.9%
20.3%
49.1%
45.8%
20.6%
74.1%
65.1%
39.2%
30.8%
69.2%
59.7%
46.1%
58.3%
68.7%
51.6%
50.4%
Redline PPS
L
5
H
3
H
8
5
H
4
7
H
3
H
3
L
5
3
H
3
3
8
5
L
5
H
3
H
2
8
H
4
2
3
2
L
6
H
2
9
6
L
6
7
5
7
3
L
7
8
H
8
8
2
L
5
8
L
7
L
7
2
L
6
3
H
3
H
3
5
L
7
3
5
H
9
L
5
L
6
L
1
L
5
H
3
H
3
3
L
8
7
H
3
SVI
Grade
B
--A
--B
A
A
C
-B
B
B
D
B
B
B
A
D
-C
-D
B
-C
B
-B
D
A
-D
A
-C
A
A
A
B
B
D
D
A
B
C
C
A
-D
D
C
A
C
C
C
B
D
--
Update & Review, October 2004
Model Monitor (continued from page 20)
Symbol
TJX
TSCO
TRP
RIG
TCBK
TRMB
TUP
USB
UIS
UDR
UNTD
UCL
USFC
UST
UTSI
VRX
VRC
VECO
VRSN
VRTS
VVI
VSH
VC
VOD
VNO
GRA
WNC
WAG
WM
WPO
WMI
WPI
HLTH
WRI
WSTC
WMAR
WABC
WWCA
WON
WGL
WMB
ZRAN
Company Name
TJX Companies
Tractor Supply
TransCanada Corp.
Transocean Inc.
TRICO BANCSHARES
Trimble Nav. Ltd.
Tupperware Corp.
U.S. Bancorp
Unisys Corp.
United Dominion R'lty
United Online
Unocal Corp.
USF Corp.
UST Inc.
UTStarcom Inc.
Valeant Pharmac.
Varco International Inc.
Veeco Instruments
VeriSign Inc.
VERITAS Software
Viad Corp.
Vishay Intertechnology
Visteon Corp.
Vodafone Group ADR
Vornado Realty Trust
W.R. Grace & Co.
Wabash National Corp
Walgreen Co.
Washington Mutual
Washington Post
Waste Management
Watson Pharmac.
WebMD Corp.
Weingarten Realty
West Corp.
West Marine
Westamerica Bancorp
Western Wireless 'A'
Westwood One
WGL Holdings Inc.
Williams Cos.
Zoran Corp.
Sector
Cons. Disc.
Cons. Disc.
Energy
Energy
Financials
Info. Tech.
Cons. Disc.
Financials
Info. Tech.
Financials
Info. Tech.
Energy
Industrials
Cons. Staples
Info. Tech.
Health Care
Energy
Info. Tech.
Info. Tech.
Info. Tech.
Industrials
Info. Tech.
Cons. Disc.
Telecom. Svcs.
Financials
Materials
Industrials
Cons. Staples
Financials
Cons. Disc.
Industrials
Health Care
Health Care
Financials
Industrials
Cons. Disc.
Financials
Telecom. Svcs.
Cons. Disc.
Utilities
Energy
Info. Tech.
Price
09/30/04
$22.04
$31.44
$21.85
$35.78
$20.92
$31.60
$16.98
$28.90
$10.32
$19.83
$9.62
$43.00
$35.89
$40.26
$16.11
$24.12
$26.82
$20.97
$19.88
$17.80
$23.73
$12.90
$7.99
$24.11
$62.68
$9.45
$27.47
$35.83
$39.08
$920.00
$27.34
$29.46
$6.96
$33.01
$29.13
$21.38
$54.89
$25.71
$19.77
$28.26
$12.10
$15.72
Compass
Rating
Neutral
Buy
Buy
Sell
Neutral
Sell
Buy
Buy
Sell
Buy
Buy
Buy
Buy
Buy
Neutral
Sell
Neutral
Neutral
Sell
Sell
Neutral
Neutral
Sell
Buy
Neutral
Buy
Buy
Neutral
Neutral
Buy
Neutral
Neutral
Sell
Buy
Buy
Neutral
Buy
Buy
Sell
Neutral
Buy
Buy
Prior
Compass
Rating
Buy
Neutral
Sell
Buy
Buy
Buy
Buy
Buy
Neutral
Neutral
Buy
Neutral
Sell
Neutral
Neutral
Sell
Buy
Neutral
Buy
Sell
Neutral
Neutral
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Neutral
Buy
Neutral
Sell
Neutral
Sell
Neutral
Buy
Buy
Sell
Buy
Neutral
Neutral
Risk/
Reward
50%
75%
100%
25%
50%
25%
100%
100%
25%
75%
100%
100%
100%
100%
50%
0%
50%
50%
25%
25%
50%
50%
25%
100%
50%
100%
100%
50%
50%
75%
50%
50%
25%
100%
100%
50%
75%
100%
25%
50%
100%
75%
Prior
Risk/
Reward
75%
50%
0%
75%
100%
75%
100%
75%
50%
50%
100%
50%
25%
50%
50%
0%
100%
50%
100%
25%
50%
50%
100%
50%
50%
100%
100%
100%
75%
50%
100%
50%
25%
50%
25%
50%
75%
100%
25%
75%
50%
50%
Valuation
Percentile
24.8%
36.7%
56.0%
83.9%
72.8%
83.6%
28.3%
49.8%
37.9%
81.6%
11.7%
29.4%
4.7%
55.3%
0.3%
97.4%
61.1%
44.2%
94.6%
57.0%
10.8%
6.7%
0.4%
45.7%
66.0%
31.7%
37.3%
69.3%
22.5%
83.6%
46.4%
21.3%
54.4%
76.8%
41.9%
12.9%
75.7%
42.4%
66.0%
23.7%
34.2%
44.7%
12M Avg
Valuation
Percentile
31.3%
55.8%
44.6%
69.6%
53.3%
65.2%
44.0%
36.9%
51.6%
82.2%
55.3%
23.9%
8.7%
51.2%
26.0%
82.2%
47.7%
74.6%
80.6%
83.4%
40.4%
45.1%
8.9%
57.7%
53.4%
50.4%
63.9%
67.8%
13.5%
78.1%
52.7%
36.4%
72.8%
73.8%
30.4%
29.3%
56.6%
65.3%
83.5%
19.0%
36.8%
64.7%
Redline PPS
7
L
7
3
H
4
H
3
H
4
L
2
H
2
5
3
L
6
2
1
3
L
6
H
9
H
3
L
5
H
4
L
8
L
6
L
6
5
2
H
3
L
2
L
2
5
7
4
7
L
7
L
8
3
2
L
6
H
3
L
2
L
8
7
2
L
7
SVI
Grade
A
B
A
D
C
-D
B
D
D
A
B
C
C
C
D
-D
C
B
-C
C
B
D
--A
A
A
A
C
B
B
C
D
B
D
B
A
D
B
Source: Legg Mason
Note: Prior Compass rating shows the previous month’s opinion utilizing the methodology discussed on pages 4 and 5.
Legg Mason Wood Walker, Incorporated
Page 21
Update & Review, October 2004
Appendix—LM Equity Compass Performance Indices
We keep several indices to monitor the performance of PPS ratings. Indexed performances are calculated on a monthly basis and
represent the average (i.e., equally weighted) price change of stocks within each PPS rating category. The PPS Cumulative Index
is calculated geometrically from monthly index returns since the inception of our ratings (August 2001) through the most recent
month. Chart 4 shows results relative to the performance of the S&P 500. Chart 5 shows the absolute performance of PPS
ratings and S&P 500 for the same time periods. Dividends are excluded from all indices. Additional information, including
historical index constituents, prices, and PPS ratings are available upon request.
PPS Cumulative Index
Chart 4
Cumulative Monthly Returns Relative to the S&P 500 by PPS Category
(August 2001 - September 2004)
50%
38.40%
40%
Rel Return to the S&P 500
33.73%
29.27%
30%
17.92%
20%
13.24%
8.64%
10%
7.17%
0%
-10%
-20%
-9.01%
Indexed returns are calculated on an equal-w eighted basis w ith monthly rebalancing.
Dividends are excluded.
-18.15%
1
2
3
4
5
6
PPS Category
7
8
9
Source: Legg Mason
PPS Cumulative Absolute Results
Chart 5
Cumulative Absolute Returns by PPS Category
(August 2001 - September 2004)
40%
32.37%
35.33%
30%
25.01%
20%
11.47%
7.78%
10%
2.54%
1.55%
0%
-7.98%
-10%
-20%
-30%
-15.07%
Indexed returns are calculated on an equal-w eighted basis w ith monthly rebalancing.
Dividends are excluded.
1
2
3
4
5
6
PPS Category
7
-22.91%
8
9
S&P
500
Source: Legg Mason
Legg Mason Wood Walker, Incorporated
Page 22
Update & Review, October 2004
Appendix—LM Equity Compass Performance Indices (continued from page 22)
The Redline Cumulative Index is a cumulative index of monthly returns representing stocks that are identified as Redline Low in
our equity models. We show the cumulative performance of all Redline Low stocks from the inception of the model on June 30,
2002, as well as the 10 stocks with the widest monthly Redline Low deviations. For comparisons, we show the equal-weighted
performance of all stocks in our Compass universe and the market cap-weighted S&P 500. Dividends have been excluded from
all indices.
Redline Cumulative Absolute Returns
Chart 6
Cumulative Indexed Performances (06/30/02 - 09/30/04)
Assumes equally weighted positions rebalanced monthly.
Dividends excluded.
50%
46.4%
41.3%
40%
31.2%
30%
20%
12.6%
10%
0%
Redline 10 Lowest
All Redline Low
Compass Universe
S&P 500
Source: Legg Mason
Legg Mason Wood Walker, Incorporated
Page 23
Update & Review, October 2004
Appendix—Model Overview
The Legg Mason Equity Compass is a series of quantitative models to aid investors in the selection of individual stocks and
portfolio management. The models assess relative valuation, quality fundamentals, and relative price performance to produce
investment opinions for time horizons of six months and longer.
Performance Probability Score (PPS) – PPS is a rating
Illustration 3
scale of favorable (1–4), neutral (5), and unfavorable (6–9)
stock opinions corresponding to a framework that measures
relative valuation and long-term relative price performance.
PPS identifies stocks to avoid in particular (PPS 8–9) while
also identifying the favorable areas of market performance.
The PPS provides parameters that can discipline a diversified
portfolio for consistent performance and serve the strategy of
pruning underperforming stocks.
PPS Redline – The monthly Redline Report is our primary
stock selection tool. Each month we calculate a relative
valuation percentile rank for approximately 1,500 stocks.
The Redline identifies those stocks with the widest
deviations above or below their 12-month average relative
valuation rank. We believe a rank well below average
Source: Legg Mason
(Redline Low) identifies a potential valuation buying
catalyst. Redline High stocks have the opposite condition and are pushing into new high relative valuation territory that may or
may not be justified. We advise caution in buying, or taking profits in these stocks. The monthly Redline Report provides a range
of additional variables for stock selection.
Increasing
Shares
Out
Reducing
Dividends
A
Top 25%
Overall Composite
Ranking Score
Increasing
Debt
Dividend Growth Rank
Change in Shares
Outstanding Rank
Worsening
Revenues
Margins
Sweet Spot Strategy – The Sweet Spot is an ongoing test of
the investment principles that underlie the PPS and SVI
equity models. In each of the 10 S&P 500 sectors, we select
Value Creation
the five highest-quality stocks that also have favorable PPS
ratings (PPS 1–4). Our expectation is that this hypothetical
portfolio would provide a superior risk-adjusted return when Source: Legg Mason
compared to the S&P 500. We track the performance of the
Sweet Spot on a monthly basis.
Change in Long-Term
Debt Rank
Decreasing
Operating Margin Rank
Revenue Growth Rank
Highest
Lowest
Relative Ranking to Sector Peers
Shareholder Value Index (SVI) – SVI is a quality measure
Illustration 4
independent of the variables used in PPS or Redline. We
measure the growth in revenues and changes in operating
Shareholder Value Index
profit margins relative to the change in the company’s longterm debt, common share dilution, and growth in dividends.
Reducing
Increasing
Improving
Reducing
Increasing
Shares
SVI rankings are relative to peer stocks in the same sector
Revenues
Margins
Debt
Dividends
Out
and range from A (best) to D (worst). While quality is a
feature that is rewarded in the long term, the near term is
more ambiguous. We believe SVI is a reality check for
+
+
+
+
+
investors to moderate risk taking in poor-quality stocks and
to identify opportunities in those that are out-of-favor,
especially for those meeting the Redline Low criteria.
D
Bottom 25%
SVI Grade
Shareholder Benefits
The Legg Mason Equity Compass is updated monthly. We provide a range of analytical tools and related reports, including a
portfolio review using the Equity Compass models. For a more in-depth discussion of the models, please contact your Legg
Mason representative.
Legg Mason Wood Walker, Incorporated
Page 24
Update & Review, October 2004
Important Disclosures and Certifications
We, Richard E. Cripps, CFA, Timothy McCann, and Michael Scherer, certify that the views expressed in this research
report accurately reflect our personal views about the subject securities or issuers; and we, Richard E. Cripps, CFA,
Timothy McCann, and Michael Scherer, certify that no part of our compensation was, is, or will be directly or indirectly
related to the specific recommendation or views contained in this research report.
*PLEASE NOTE THAT THE OPINIONS EXPRESSED IN THIS REPORT ARE BASED SOLELY ON TECHNICAL
AND QUANTITATIVE ANALYSIS, AND MAY DIFFER FROM FUNDAMENTAL ANALYST OPINION. FOR A
COPY OF ANY LEGG MASON REPORT PLEASE CONTACT YOUR LEGG MASON REPRESENTATIVE.
For applicable current disclosures for all covered companies please write to the Legg Mason Research Department at the
following address.
Legg Mason Research Department
Legg Mason Wood Walker, Incorporated
100 Light Street
P. O. Box 1476
Baltimore, Md. 21203-1476
Legg Mason Wood Walker, Inc.'s research analysts receive compensation that is based upon (among other factors) Legg Mason
Wood Walker, Inc.'s overall investment banking revenues.
Our investment rating system is three tiered, defined as follows:
BUY -
We expect this stock to outperform the S&P 500 by more than 10% over the next 12 months. For
higher-yielding equities such as REITs and Utilities, we expect a total return in excess of 12% over
the next 12 months.
HOLD -
We expect this stock to perform within 10% (plus or minus) of the S&P 500 over the next 12 months.
A Hold rating is also used for those higher-yielding securities where we are comfortable with the
safety of the dividend, but believe that upside in the share price is limited.
SELL -
We expect this stock to underperform the S&P 500 by more than 10% over the next 12 months and
believe the stock could decline in value.
Of the securities we rate, 40% are rated Buy, 58% are rated Hold, and 2% are rated Sell.
Within the last 12 months, our firm has provided investment banking services for 45%, 43% and 14% of the companies whose
shares are rated Buy, Hold and Sell, respectively.
We also use a Risk rating for each security. The Risk ratings are Low, Average, and High and are based primarily on the strength
of the balance sheet and the predictability of earnings.
Additional Disclosures
The information contained herein has been prepared from sources believed reliable but is not guaranteed by us and is not a
complete summary or statement of all available data, nor is it considered an offer to buy or sell any securities referred to herein.
No investments or services mentioned are available in the European Economic Area to private customers or to anyone in Canada
other than a Designated Institution.
Legg Mason Wood Walker, Incorporated
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Update & Review, October 2004
Opinions expressed are subject to change without notice and do not take into account the particular investment objectives,
financial situation or needs of individual investors. Employees of Legg Mason Wood Walker, Inc. or its affiliates may, at times,
release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within.
Legg Mason Wood Walker, Inc. is a multidisciplined financial services firm that regularly seeks investment banking assignments
and compensation from issuers for services including, but not limited to, acting as an underwriter in an offering or financial
advisor in a merger or acquisition, or serving as a placement agent for private transactions.
Additional information is available upon request
© Copyright 2004 Legg Mason Wood Walker, Inc.
Legg Mason Wood Walker, Incorporated
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Update & Review, October 2004