THE SCRATCH REPORT -
Investment Recommendations in Mid and Large-Cap Companies

COMPREHENSIVE ANALYSIS RECOMMENDATIONS

The Scratch Report focuses on domestic companies with market caps above $10 billion and derives investment
decisions based upon a philosophy consistent with value investing. Accordingly, recommendations will typically
have low valuations based on earnings, sales, book value, cash flow or some other appropriate valuation measure.
At times, these securities will trade below a reasonable estimate of their intrinsic value thereby providing a large
margin of safety with respect to valuation contraction risk. However, to avoid the common mistake that befalls
several low multiple stocks, to qualify for purchase, recommendations are based primarily upon foreseeable
catalysts that will permit expansion in both profitability and shareholder returns. To a large degree, this service
employs an event-driven strategy to identify those equity investments that are not only undervalued by the
investment community, but are also uniquely positioned for share price expansion within a 6 to 12 month time
horizon.

The Scratch Report focuses on companies with sustainable business models with the ability to generate high and
sustainable returns on invested capital. While heavily leveraged companies are often avoided, occasionally such
companies will be highlighted when considerable cash flow could be utilized toward debt reduction or share
repurchases.

Recommendations will often maintain a leading or improving market position, undervalued asset or product
portfolio, credible management or are in a position to capitalize on some impending event that will create a high
level of future earnings growth. The Scratch Report also identifies, on occasion, special situations whereby the
investment is currently out of favor or mis-priced, yet possesses the necessary financial assets or market position to
reverse the current situation. In these restructuring or turnaround instances, a certain amount of risk is inherently
present, yet is mitigated through a thorough understanding of the business fundamentals that which provides the
appropriate level of confidence that a high or normalized level of profitability will resume within a reasonable
duration of time.

The Scratch Report specializes in identifying companies in which the consensus believes the business is
permanently impaired by irreversible circumstances, while our analysis indicates that the company’s problems to be
transitory in nature with a high likelihood of financial improvement.

THE SCRATCH REPORT COMPENDIUM

The Scratch Report Compendium, published on a monthly basis, provides an effective forum for Murray Stahl to
discuss additional recommendations and inefficiencies in the space not ordinarily addressed by Wall Street
Research. Murray also discusses specific industries and concepts he believes are central to the investment
environment. These situations will be revisited in the Compendium, with the most compelling situations expounded
upon in full length research reports.