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BERNSTEIN RESEARCH CALL October 22, 2003

Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663


Ann Marie Larson larsonam@bernstein.com +1-212-756-4235
Wally Cheung cheungwk@bernstein.com +1-212-756-4020
Matthew 8. Rothman, Ph.D. rothmanms@bernstein.com +1-212-823-2893
Doreen Hughes hughesdm@bernstein.com +1-212-756-4187
Christine D. Hanson, Product 8pecialist hansoncd@bernstein.com +1-212-756-1902
See last page of this report for analyst certifications and important disclosures.
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Ouantitative Research Update: October, 2003
Measuring Earnings Ouality: A Comprehensive Balance 8heet
Approach
Highlights
This month we take the important step of moving beyond the narrow definition of accruals based on non-
cash working capital. In particular, we extend our analyses of the net accruals measures by
incorporating changes in the net non-current operating assets (NNCO) and changes in the net financial
assets (FIN). Inclusion of these items provides a better picture of earnings quality, and serves as a more
powerful signal of relative stock performance.
Addition of NNCO captures excessive capital spending and growth in intangible assets. Its incorporation
improves the Q1 minus Q5 spread by 480bp per year, versus use of the traditional net accrual measure.
Roughly 3/4
th
of the improvement in efficacy came from a better identification of the underperformers
(i.e. Q5).
Efficacy of the new accrual measures remained robust under the sector-neutral constraint. The signals
performance was consistent over different time periods and did not deteriorate through the bubble.
Improvement in the new accrual metric performance (vs. the traditional definition) was evident at the
sector level, with greatest improvement for transports and telecom services. This largely reflects the high
capital spending and acquisition activity by companies in those sectors during the recent years.
During September, greatest outperformance accrued to attractively valued stocks with rising revisions
and/or improving balance sheets; while momentum stocks, with deteriorating balance sheets had the
greatest underperformance.
nvestment Conclusion
Telecom, technology, and commodities industries dominate list of stocks with favorable accruals.
Unfavorable accruals are primarily in energy, medical products and services.
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Details
In this months feature, we extend our work on earnings quality to include additional balance sheet items
over which management has considerable discretion. Specifically, where our previous measure of accruals
only included changes in non-cash working capital, our new measure also includes changes in net non-
current operating assets and changes in net financial assets. We believe that by including these additional
items we are able to obtain a fuller picture of discretionary revenue and expense items and ultimately a
better metric of the quality of a firms earnings.
We find that the magnitude and the persistence of mispricing related to earnings accruals are far greater
than we had previously believed. By using the information contained within non-cash working capital and
the non-current operating assets accrual components we can achieve significantly superior returns over
using the non-cash working capital component alone. On the other hand, the accrual component of changes
in net financial assets behaves quite differently and consequently detracts from our ability to predict future
stock returns (see Exhibit 1). Our new measure of accruals works well in large cap stocks (Exhibit 2), small
and mid cap stocks (Exhibit 3), and in growth as well as value stocks (Exhibit 4). The measure is effective
whether it is constructed on a sector-by-sector basis or across the entire market universe. Moreover, we find
it to be remarkably stable across time-periods.
We believe this line of research should be of interest to analysts, portfolio managers and all investors who
are concerned with understanding the persistence and reliability of earnings, as well as the markets reaction
to the various components of earnings.
Exhibit 1
Market Relative Summary Table
Largest 1500 Companies
Relative Returns
1978 - 2003
Comprehensive
Accruals
Comprehensive Accruals
Excluding Changes In
Financial Assets
Changes in
Working Capital
Changes in Non-
current Operating
Assets
Changes in
Financial Assets
Existing Net
Accruals
Measure
Lowest Accruals Q1 1.60% 2.32% 1.33% 1.64% -2.01% 1.34%
Q2 0.42% 1.31% 0.49% 1.65% 0.37% 0.93%
Q3 -0.23% 0.94% 0.23% 0.30% 0.62% -0.28%
Q4 -0.65% -0.31% -0.11% -0.35% 1.52% 0.09%
Highest Accruals Q5 -3.12% -6.47% -3.12% -5.46% 0.35% -2.68%
Q1 - Q5 4.72% 8.79% 4.45% 7.10% -2.36% 4.01%
Sector Relative Summary Table
Largest 1500 Companies
Relative Returns
1978 - 2003
Comprehensive
Accruals
Comprehensive Accruals
Excluding Changes In
Financial Assets
Changes in
Working Capital
Changes in Non-
current Operating
Assets
Changes in
Financial Assets
Existing Net
Accruals
Measure
Lowest Accruals Q1 1.45% 2.55% 1.54% 1.54% -1.54% 1.84%
Q2 1.12% 1.80% 0.44% 0.44% -0.05% 0.29%
Q3 0.31% 0.79% 1.04% 1.04% 0.71% 0.86%
Q4 -0.19% -0.74% 0.11% 0.11% 0.95% 0.20%
Highest Accruals Q5 -3.02% -4.71% -2.66% -2.66% 0.49% -2.45%
Q1 - Q5 4.47% 7.26% 4.20% 4.20% -2.02% 4.28%
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Exhibit 2
Summary Table
Largest 500 Companies
Market Relative Returns
1978 - 2003
Comprehensive
Accruals
Comprehensive Accruals
Excluding Changes In
Financial Assets
Changes in
Working Capital
Changes in Non-
current Operating
Assets
Changes in
Financial Assets
Existing Net
Accruals
Measure
Lowest Accruals Q1 1.99% 1.18% 1.37% 0.68% -0.20% 1.32%
Q2 0.41% 0.80% 0.75% 0.78% -0.58% 1.19%
Q3 -0.72% -0.71% -0.42% 0.39% 0.37% -0.68%
Q4 -1.40% -0.45% -1.09% -1.75% -0.05% -0.45%
Highest Accruals Q5 -2.70% -3.18% -1.69% -2.45% 0.38% -1.23%
Q1 -Q5 4.69% 4.36% 3.05% 3.13% -0.58% 2.55%
Exhibit 3
Summary Table
Largest 501 - 1500 Companies
Relative Returns
1978 - 2003
Comprehensive
Accruals
Comprehensive Accruals
Excluding Changes In
Financial Assets
Changes in
Working Capital
Changes in Non-
current Operating
Assets
Changes in
Financial Assets
Existing Net
Accruals
Measure
Lowest Accruals Q1 1.00% 2.57% 1.53% 1.15% -2.20% 1.47%
Q2 0.36% 1.55% 0.90% 2.12% 0.72% 0.83%
Q3 0.02% 0.92% 0.16% 0.81% 0.77% -0.17%
Q4 0.23% -0.17% 0.63% 0.17% 1.84% 0.66%
Highest Accruals Q5 -2.98% -6.31% -3.80% -5.73% 0.27% -3.47%
Q1 -Q5 3.97% 8.88% 5.33% 6.87% -2.47% 4.93%
Exhibit 4
Summary Table
Growth Universe
Market Relative Returns
1978 - 2003
Comprehensive
Accruals
Comprehensive Accruals
Excluding Changes In
Financial Assets
Changes in
Working Capital
Changes in Non-
current Operating
Assets
Changes in
Financial Assets
Existing Net
Accruals
Measure
Lowest Accruals Q1 3.59% 2.57% 1.93% 2.01% -1.30% 2.43%
Q2 -0.32% 1.76% 2.26% 0.83% -1.01% 1.27%
Q3 -0.09% 1.65% -1.13% 1.63% -0.21% -0.72%
Q4 0.63% -1.54% -0.08% -0.01% 1.92% 0.45%
Highest Accruals Q5 -4.25% -4.93% -2.66% -4.93% -0.12% -2.89%
Q1 -Q5 7.84% 7.50% 4.58% 6.94% -1.18% 5.32%
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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The mportance of 8tudying Accruals
The rationale for a detailed study of the accruals component of earnings stems from our belief that in order
predict earnings accurately investors need to understand both the cash flow and accrual components of
current earnings. Accrual based accounting attempts to record all the financial effects of a transaction in the
period the transaction occurs rather than piecemealing the transaction into the many periods in which the
cash is received or paid. This allows for revenues to be matched with their associated expenses. Under the
accrual basis of accounting, firm management must then decide when to recognize revenues and expenses
(timing questions) and how much to recognize (measurement questions).
Accrual accounting may also provide superior measurement of future performance since the activities of the
firm in future periods will bear their share of the costs and services the firm consumes. Consequently,
accrual accounting can be thought of as a tradeoff between increasing the relevance of the information
provided to investors and decreasing the reliability through greater management subjectivity.
We believe this difference in subjectivity is the driving force between the properties of the accrual and cash
components of earnings. Studies have documented that the persistence of current earnings is decreasing in
the magnitude of the accrual component and increasing in the magnitude of the cash flow component.
1
Since cash flow from operations involves much less subjectivity than does accruals, analysts believe that
companies with high levels of cash flow to net income have a higher quality of income and that these
companies are more likely to repeat their performance. In contrast, companies whose majority of income
comes from the accruals components and is not attributable to the cash flow component frequently have a
hard time duplicating their performance in future periods; their earnings are not persistent.
For portfolio managers the critical question is whether stock prices fully reflect the differences in
persistence among the different components of earnings. Do investors fully distinguish between the accrual
components and cash components of earnings when setting prices? The answer coming from a series of
academic papers and our own research is a resounding No. Stock prices act as if investors fixate on the
reported earnings and do not distinguish between the properties of the accrual and cash flow components of
earnings. Firms with relatively high levels of accruals experience negative future abnormal returns, and
conversely firms low levels of accruals experience positive future abnormal returns.
In our research feature this month, we take the important step of moving beyond the narrow definition of
accruals based on current operating accruals to a comprehensive definition of accruals based on the entire
balance sheet of a firm. We find that this improves the abnormal return prediction of accrual based
components and enhances the consistency and reliability of the measure.

1
See: Richard Sloan, 1996, Do Stock Prices Fully Reflect Information in Accruals and Cash Flows About Future
Earnings, The Accounting Review, Volume 71, Number 3, pp. 289-315; Paul Healy, 1985, The Effect of Bonus
Schemes on Accounting Decisions, Journal of Accounting and Economics, Volume 7, pp. 85-107; K.R.
Subramanyam, 1996, The Pricing of Discretionary Accruals, Journal of Accounting and Economics, Volume 22,
pp.249-281.
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Measuring and Defining Comprehensive Accruals
The convention both in academia and in practitioner based research is to define accruals as the change in
working capital excluding cash and depreciation expense. This definition, however, excludes both non-
current operating assets and non-current operating liabilities and financial assets and financial liabilities.
Following the lead of two recent academic working papers by Richardson, Sloan, Soliman and Tuna, we
expand our definition of accounting accruals to include these measures.
2
Specifically, as these two papers
show, total accruals represent the difference between accrual earnings and cash earnings, or, equivalently,
the change in non-cash earnings minus the change in liabilities. The intuition behind this definition is that if
there were no accruals then by construction the only asset or liability would be cash. So it must follow that
accruals are equal to the change in all non-cash assets less the change in all liabilities.
The important point to recognize is that unlike earlier definitions of accruals, our new definition includes
accruals from non-current operating assets and non-current operating liabilities. This includes assets such as
property, plant, and equipment and internally generated intangibles and liabilities such as long-term
payables, deferred taxes, and post-retirement benefit obligations. It also includes accruals from investing
such as financial assets and financial liabilities. These would include, for example, investments in long-term
marketable securities and long-term debt.
In mathematical terms, we can express this as,
FIN NNCO WC Accruals + + =
where AWC represents the change in non-cash working capital; ANNCO represents the change in net non-
current operating assets; and AFIN represent the change in net Iinancial assets.
We can then take the balance decomposition a step further by decomposing each one of these components
into their component parts. Specifically, the change in working capital (AWC) is equal to the change in
current operating assets (ACOA) less the change in current operating liabilities (ACOL). The change in
current operating assets is simply the change in current assets minus the change in cash and short-term
investments; the change in current operating liabilities is simply the change in current liabilities minus the
change in debt in current liabilities. Mathematically, we express this as:
( ) ( ) . . Liab Cur in Debt s Liabilitie Current STI and Cash Assets Current
COL COA WC
=
=

2
See Scott Ricardson, Richard Sloan, Mark Soliman, and Irem Tuna, 2003, Accrual Reliability, Earnings Persistence
and Stock Prices, working paper, University of Pennsylvania, Wharton School; and Scott Richardson and Richard
Sloan, 2003, External Financing and Future Stock Returns, working paper, University of Pennsylvania, Wharton
School.
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Similarly, we decompose the change in net non-current operating assets (ANNCO) as the change in non-
current operating assets (ANCOA) and the change in non-current operating liabilities (ANCOL). The
change in non-current operating assets is change in total assets minus the change in current assets and the
change in investments and advances. The change in non-current operating liabilities is simply the change in
total liabilities minus the change in current liabilities and the change in long-term debt. Mathematically, we
express this as:
( )
( ) Debt Term Long s Liabilitie Current s Liabilitie Total
s Investment Assets Current Assets Total
NCOL NCOA NNCO

=
=
Finally we can decompose the change in net financial assets (AFIN) into the change in Iinancial assets
(AFINA) less the change in Iinancial liabilities (AFINL). The change in Iinancial assets can be broken down
into the change in short-term investments plus the change in long-term investments. The change in financial
liabilities can be broken down into the change in long term debt plus the change in debt in current liabilities
plus the change in preferred stock. Again, we can express this in mathematical terms as,
( )
( ) Stock Preferred s Liabilitie Current in Debt Debt Term Long
s Investment Term Long s Investment Term Short
FINL FINA FIN
+ +
+ =
=
All of the accounting items are scaled by the total assets of the firm and each of the items is winsorized at
either +1 or -1 to correct for outliers and data errors. All of the accounting data in this study comes from
COMPUSTAT. Finally, we are using only the annual data items since several of the accounting items are
not reported on a quarterly basis. Consequently, all of the variables are measured as year-over-year changes.
This is one of the major drawbacks to this current measure relative to the conventional accruals measure
based upon quarterly data changes in non-cash working capital.
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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The Empirical Relationship among the Components of Accruals
To help us understand the behavior of the different components of earnings accruals, we calculated a series
of correlations on each part of the balance sheet decomposition. As seen in Exhibit 5, each of the
components is capturing diIIerent inIormation. The change in non-cash working capital ( WC) and the
change in net non-current operating assets ( NNCO) are positively correlated, highlighting that Iirms tend
to grow their current and non-current operating accruals in conjunction with each other. On the other hand,
both WC and NNCO are very negatively correlated with the change in net Iinancial assets ( FIN). This
would suggest that firms tend to finance growth in the current and non-current operating assets through
expending financial assets and issuing financial liabilities. The main point should be clear: changes in net
financial assets behave very differently from changes in non-cash working capital and changes in net non-
current operating assets.
Exhibit 5
Average Pairwise Correlation of Components
Largest 1500 Stocks
Comprehensive
Accrual Measure
Comprehensive Accruals
Excluding Change in Fin.
Assets
Change in
Working Capital
Change in Net Non-current
Operating Assets
Change in
Financial Assets
Existing Net Accruals
Measure
Comprehensive Accrual Measure 1 - - - -
Comprehensive Accruals
Excluding Change in Fin. Assets 0.48 1 - - - -
Change in Working Capital 0.30 0.56 1 - - -
Change in Net Non-current
Operating Assets 0.40 0.88 0.11 1 - -
Change in Financial Assets 0.55 -0.45 -0.23 -0.41 1 -
Existing Net Accruals Measure 0.31 0.53 0.93 0.12 0.21 1
It is also important to notice that the comprehensive accrual measure (CAM) and the comprehensive accrual
measure excluding changes in financial assets (CAMXCFA) both have relatively low correlation with our
existing net accruals measure. On the other hand, the change in non-cash working capital and our existing
net accruals measure are almost perfectly correlated. Consequently, we have several indications that both
CAM and CAMXCFA are capturing different information then what is in our existing measure.
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Relationship Between 8tock Returns and Accruals
The most important question for us to investigate is if investors understand the different properties of
accrual measures and accordingly price stocks in a way that reflects this understanding. If investors do
understand the properties of accruals, then there should be no relationship between the level of a firms
accruals and its future stock returns. However, if investors do not appreciate the lower persistence of the
accruals components of earnings, then there will be a negative relation between accruals and future stock
returns that is, firms with high current period accruals will have negative future stock returns.
As shown in Exhibit 6, this negative relationship between accruals and future stock returns is exactly the
relationship that exists. Among the largest 1500 stocks, stocks with current period high levels of
comprehensive accruals tend to dramatically underperform over the subsequent year while stocks with
current period low levels of comprehensive accruals tend to outperform over the same timeframe. It makes
little difference if the measure is constructed on an overall market basis that is, ranking all stocks
together regardless of their sector or ranking stocks on a sector relative basis. Both methodologies work
well. Additionally, the comprehensive accruals measure has been a remarkably consistent predictor of
returns, regardless of the broad time period. Additionally, in Exhibit 7, we show that if the holding period is
increased from one-year to two-years, the measure still proves to be efficacious.
Exhibit 6
Comprehensive Accruals Measure
Largest 1500 Companies
Relative Returns
Annual Holding Period
1978 - 2003 1978 - 1986 1987 - 1995 1996 - 2003 1978 to 2003 1978 - 1986 1987 - 1995 1996 - 2003
Lowest Accruals Q1 1.60% 0.88% 0.57% 3.39% 1.45% 0.98% 0.48% 2.92%
Q2 0.42% 1.91% -0.92% 0.48% 1.12% 1.92% 0.40% 1.15%
Q3 -0.23% 1.69% -0.81% -1.40% 0.31% 1.17% -0.39% 0.25%
Q4 -0.65% -0.54% -1.25% -0.13% -0.19% -0.89% 0.00% 0.25%
Highest Accruals Q5 -3.12% -5.71% -1.34% -3.21% -3.02% -3.19% -0.98% -5.07%
Q1-Q5 4.72% 6.59% 1.91% 6.61% 4.47% 4.16% 1.46% 7.98%
Market Relative Measure Sector Relative Measure
Exhibit 7
Comprehensive Accruals Measure
Largest 1500 Companies
Relative Returns
Two Year Holding Period
1978 - 2003 1978 - 1986 1987 - 1995 1996 - 2003 1978 to 2003 1978 - 1986 1987 - 1995 1996 - 2003
Lowest Accruals Q1 1.08% 1.43% -0.50% 2.85% 1.40% 1.03% 1.42% 1.87%
Q2 -1.14% 2.75% -3.92% -1.97% 0.91% 3.44% -0.59% -0.05%
Q3 -1.70% 2.52% -2.33% -5.79% 0.36% 2.45% -1.49% 0.36%
Q4 -1.69% -2.38% -3.93% 1.99% -1.56% -2.20% -0.51% -2.25%
Highest Accruals Q5 -2.85% -9.45% 0.26% 1.11% -2.36% -4.22% -1.38% -1.43%
Q1-Q5 3.93% 10.88% -0.76% 1.75% 3.76% 5.25% 2.80% 3.29%
Market Relative Measure Sector Relative Measure
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Arguably our most important exhibit of this piece is Exhibit 8 which shows the performance of the
comprehensive accrual measures excluding changes in financial assets (CAMXCFA). The predictive power
of this factor is truly remarkable, generating on average, over the prior 25 years, a spread of 8.60% net of
the market. The returns for this factor are uniformly increasing as the levels of accruals decrease. It has
been remarkably stable over a variety of time periods. And again, it does not seem to matter whether the
measure is constructed on a market relative basis or a sector relative basis. While slightly more of the
returns are due to the short side of the signal then the long side (Q5 vs. Q1), there is still considerable
outperformance being generated from the long side. The holding period for these reported results is one-
year, so we do not believe that these excess returns will be completely eaten up by transactions costs.
Exhibit 8
Comprehensive Accruals Measure Excluding Changes In Financial Assets
Largest 1500 Companies
Relative Returns
Annual Holding Period
1978 - 2003 1978 - 1986 1987 - 1995 1996 - 2003 1978 to 2003 1978 - 1986 1987 - 1995 1996 - 2003
Lowest Accruals Q1 2.14% 1.69% 2.16% 3.06% 2.55% 2.25% 2.37% 3.00%
Q2 1.31% 2.25% 0.07% 1.74% 1.80% 2.42% 0.81% 2.28%
Q3 0.94% 1.53% -0.25% 1.65% 0.79% 1.61% 0.23% 0.62%
Q4 -0.31% 1.14% -2.06% 0.20% -0.75% -0.67% -1.14% -0.41%
Highest Accruals Q5 -6.47% -8.34% -3.77% -7.55% -4.71% -5.47% -2.82% -5.99%
Q1-Q5 8.60% 10.03% 5.93% 10.61% 7.26% 7.72% 5.19% 8.99%
Market Relative Measure Sector Relative Measure
Of course, it is interesting to compare the performance of CAMXCFA reported above with the performance
of our existing current accruals measure (see Exhibit 9). Clearly our existing signal is a strong performing
signal; and, indeed, during the recent period of market turbulence regarding the efficacy of quantitative
metrics (please see our August and September research features), our net accruals measure has been an
especially reliable signal. However, CAMXCFA appears to provide superior returns.
Exhibit 9
Exisitng Net Accruals Measure
Largest 1500 Companies
Relative Returns
Annual Holding Period
1978 - 2003 1978 - 1986 1987 - 1995 1996 - 2003 1978 to 2003 1978 - 1986 1987 - 1995 1996 - 2003
Lowest Accruals Q1 1.34% 1.01% 2.49% 0.44% 1.84% 2.11% 2.23% 1.19%
Q2 0.93% 2.19% 0.37% 0.39% 0.29% 0.56% 0.63% -0.30%
Q3 -0.28% 0.64% -0.90% -0.47% 0.86% 1.56% 0.33% 0.79%
Q4 0.09% 0.79% -1.01% 0.62% 0.20% -0.17% -0.14% 0.88%
Highest Accruals Q5 -2.68% -5.69% -1.75% -0.96% -2.45% -3.67% -1.69% -2.14%
Q1-Q5 4.01% 6.69% 4.24% 1.40% 4.28% 5.78% 3.93% 3.33%
Market Relative Measure Sector Relative Measure
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Examining the ndividual Components of Accruals Return Prediction Ability
We also examined the relationship between each of the component parts of the comprehensive accruals
measure and future stocks returns. This will allow us to understand how important each component is in the
overall metric. Exhibit 10 - Exhibit 12 show the relationship between changes in non-cash working capital
( WC) and Iuture returns, changes in net non-current operating assets ( NNCO) and Iuture returns, and
changes in net Iinancial assets ( FIN) and Iuture returns, respectively. As is apparent Irom the correlations
reported in Exhibit 5, WC and NNCO both behave in the same manner, having an expected negative
relationship with returns. On the other hand, FIN has the opposite relationship, with high level oI net
financial asset accruals being associated with positive future stock returns. In general, the predictability
associated with FIN appears to be weaker than with the other components. Both WC and NNCO
appear to be strong predictors of future returns.
Exhibit 10
Changes in Net Working Capital Excluding Cash
Largest 1500 Companies
Relative Returns
Annual Holding Period
1978 - 2003 1978 - 1986 1987 - 1995 1996 - 2003 1978 to 2003 1978 - 1986 1987 - 1995 1996 - 2003
Lowest Accruals Q1 1.33% 1.25% 2.51% 0.10% 1.54% 1.65% 2.43% 0.42%
Q2 0.49% 1.15% -0.32% 0.77% 0.44% 1.13% 0.36% -0.12%
Q3 0.23% 1.81% -0.62% -0.36% 1.04% 1.69% 0.56% 0.96%
Q4 -0.11% 0.14% -0.92% 0.55% 0.11% -0.39% -0.42% 1.19%
Highest Accruals Q5 -3.12% -5.36% -2.72% -1.31% -2.66% -3.57% -2.08% -2.40%
Q1-Q5 4.45% 6.60% 5.23% 1.41% 4.20% 5.22% 4.51% 2.82%
Market Relative Measure Sector Relative Measure
Exhibit 11
Changes in Non Current Operating Assets
Largest 1500 Companies
Relative Returns
Annual Holding Period
1978 - 2003 1978 - 1986 1987 - 1995 1996 - 2003 1978 to 2003 1978 - 1986 1987 - 1995 1996 - 2003
Lowest Accruals Q1 1.64% 2.03% 0.40% 2.61% 1.54% 1.90% 1.02% 3.20%
Q2 1.65% 1.65% 0.98% 2.37% 0.44% 1.97% 1.14% 1.66%
Q3 0.30% 0.76% -0.85% 1.08% 1.04% 1.06% -0.16% 1.38%
Q4 -0.35% -0.59% -1.10% 0.66% 0.11% -1.05% -0.33% -0.97%
Highest Accruals Q5 -5.46% -5.56% -3.30% -7.62% -2.66% -3.79% -2.22% -5.81%
Q1-Q5 7.10% 7.60% 3.70% 10.23% 4.20% 5.68% 3.24% 9.02%
Market Relative Measure Sector Relative Measure
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Exhibit 12
Changes in Financial Assets
Largest 1500 Companies
Relative Returns
Annual Holding Period
1978 - 2003 1978 - 1986 1987 - 1995 1996 - 2003 1978 to 2003 1978 - 1986 1987 - 1995 1996 - 2003
Lowest Accruals Q1 -2.01% -2.02% -3.01% -0.93% -1.54% -2.57% -1.49% -0.64%
Q2 0.37% -0.37% -0.25% 1.72% -0.05% -0.62% -0.64% 1.13%
Q3 0.62% 1.42% 0.84% -0.34% 0.71% 1.15% 0.41% 0.62%
Q4 1.52% 2.06% 0.96% 1.60% 0.95% 1.96% 0.49% 0.52%
Highest Accruals Q5 0.35% -0.25% 2.21% -1.10% 0.49% 0.98% 1.69% -1.25%
Q1-Q5 -2.36% -1.77% -5.22% 0.17% -2.02% -3.55% -3.18% 0.61%
Market Relative Measure Sector Relative Measure
Exhibit 13 - Exhibit 15 show similar results but now for a two-year holding period. At this time-horizon
both WC and NNCO still have strong predictive ability Ior stock returns. FIN, however, loses some oI
its negative predictive power on a market relative basis while maintaining its negative ability on a sector
relative basis.
Exhibit 13
Changes in Net Working Capital Excluding Cash
Largest 1500 Companies
Relative Returns
Two Year Holding Period
1978 - 2003 1978 - 1986 1987 - 1995 1996 - 2003 1978 to 2003 1978 - 1986 1987 - 1995 1996 - 2003
Lowest Accruals Q1 1.09% -0.48% 2.74% 0.72% 1.75% 0.79% 3.07% 1.16%
Q2 -1.21% 1.41% -3.04% -1.94% 0.59% 2.76% -0.52% -0.58%
Q3 -0.91% 2.70% -3.02% -2.46% -0.12% 1.10% -0.57% -1.02%
Q4 -0.46% -0.89% -1.34% 1.30% 0.35% 0.11% -0.25% 1.44%
Highest Accruals Q5 -2.96% -6.71% -2.18% 0.52% -2.31% -3.89% -0.96% -2.22%
Q1-Q5 4.04% 6.23% 4.92% 0.20% 4.07% 4.68% 4.03% 3.38%
Market Relative Measure Sector Relative Measure
Exhibit 14
Changes in Non Current Operating Assets
Largest 1500 Companies
Relative Returns
Two Year Holding Period
1978 - 2003 1978 - 1986 1987 - 1995 1996 - 2003 1978 to 2003 1978 - 1986 1987 - 1995 1996 - 2003
Lowest Accruals Q1 0.37% 1.42% -2.10% 2.45% 1.75% 1.13% -0.07% 4.61%
Q2 -0.09% 1.86% -1.63% -0.34% 0.59% 3.05% 0.17% 0.46%
Q3 -0.29% 0.21% -1.80% 3.10% -0.12% 1.90% -0.91% 1.38%
Q4 -1.01% -2.40% -2.00% 1.94% -0.35% -1.41% -0.21% -0.44%
Highest Accruals Q5 -6.03% -5.72% -3.10% -10.20% -2.31% -3.99% -1.43% -8.15%
Q1-Q5 6.40% 7.14% 1.00% 12.65% 4.07% 5.12% 1.36% 12.76%
Market Relative Measure Sector Relative Measure
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Exhibit 15
Changes in Financial Assets
Largest 1500 Companies
Relative Returns
Two Year Holding Period
1978 - 2003 1978 - 1986 1987 - 1995 1996 - 2003 1978 to 2003 1978 - 1986 1987 - 1995 1996 - 2003
Lowest Accruals Q1 -1.97% -0.55% -3.60% -1.46% -1.74% -2.04% -1.76% -1.37%
Q2 -0.35% 0.01% -1.24% 0.40% -0.65% -0.58% -1.43% 0.29%
Q3 -0.35% 1.19% -0.47% -1.87% 0.62% 1.60% -0.08% 0.44%
Q4 1.44% 2.97% 0.86% 0.50% 0.61% 1.57% 0.28% -0.03%
Highest Accruals Q5 2.63% -1.31% 5.44% 3.44% 1.81% 1.90% 2.71% 0.54%
Q1-Q5 -4.60% 0.76% -9.03% -4.90% -3.55% -3.94% -4.48% -1.91%
Market Relative Measure Sector Relative Measure
8ector 8pecific Performance of the Comprehensive Accruals Measure
We also examined the performance of the comprehensive accrual measures excluding changes in financial
assets (CAMXCFA) on a sector specific basis. As shown in Exhibit 16, CAMXCFA performs remarkably
well across almost all sectors. Its performance is most notable in the growth sectors, but performs quite well
in almost all of the cyclical sectors with really only two exceptions. It is quite strong in consumer staples,
health care products, health care services, telcomms, transports, commodities, and capital equipment. Our
existing accruals measure also performs well in a number of sectors, CAMXCFA appears to have superior
performance in a number of sectors, such as transports, telcomms and commodities. We believe that this
uniform performance across sectors once again highlights that we are truly capturing an important
phenomena about investor behavior that is, these results are not just the product of a big data mining
expedition.
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Exhibit 16
Largest 1500 Companies
Relative Returns
1978 - 2003
Highest (Worst)
Accruals Quintile
Middle Accruals
Quintile
Lowest (Best)
Accruals Quintile
Highest (Worst)
Accruals Quintile
Middle Accruals
Quintile
Lowest (Best)
Accruals Quintile
Cyclicals
Autos and Housing -2.79% 1.39% 0.32% -1.06% -1.05% 0.39%
Capital Equipment -7.81% 0.16% 2.86% -4.89% 1.75% 2.72%
Commodities -3.32% 0.10% 4.00% -2.09% 1.36% 1.82%
Consumer Cyclicals -3.56% 1.47% -0.28% -2.16% 2.42% -0.67%
Transports -2.88% -1.34% 2.70% -0.01% 5.69% -2.89%
Growth
Consumer Staples -3.88% 0.74% 2.85% -2.84% -0.48% 1.54%
Health Care Products -6.58% 0.74% 2.71% -0.97% -1.67% 1.91%
Health Care Services -6.93% -6.20% 11.94% -11.54% 0.30% 11.86%
Technology -6.03% 2.38% 3.25% -5.04% -0.72% 3.15%
Telecommunications -7.25% 1.66% 3.36% -2.63% 3.13% -2.85%
Other
Defense -9.76% -0.03% 1.12% -3.93% 0.39% 6.13%
Energy -4.59% 1.97% -2.10% -2.40% -0.90% -1.14%
Utilities -0.91% -0.03% 0.49% -0.07% 0.45% -0.34%
Comprehensive Accruals Excluding Changes In Financial
Assets Existing Net Accruals Measure
Hit Rates of the Accruals Measure
Perhaps our most disappointing result concerns the hit rate associated with the accrual based factors. As
shown in Exhibit 17, none of the hit rates for these factors exceeds 50% on the long side. However, on the
short side, we are able to generate consistent and dramatic underperformance. Thus, while strong, consistent
and stable performance has been generated on the long end by our accrual measures, we believe some
caution is in order given these results. On the short end, these results give us even more confidence in this
phenomena. Importantly, these hit-rates are not unique to our new balance sheet decomposition metric.
They are also present in our existing accruals measure. Indeed, the hit-rates for our new accruals measures
represent an improvement over the hit-rates of our existing signal.
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Exhibit 17
Hit Rates
Largest 1500 Companies
Based on Sector relative Returns
Annual Holding Period
1978 - 2003
Comprehensive Accruals
Excluding Change in
Financial Assets
Existing Net
Accruals
Measure
Lowest Accruals Q1 49.4% 47.5%
Q2 49.1% 47.9%
Q3 47.1% 47.0%
Q4 44.1% 46.5%
Highest Accruals Q5 40.1% 42.8%
8ector and 8tock 8pecific Recommendation
Finally, we include two lists of stocks highlighting those firms having the highest levels of comprehensive
accruals excluding changes in net financial assets. Exhibit 18 details those stocks with abnormally large
accruals and thus are candidates to underperform over the next twelve months, while Exhibit 19 details
those stocks with abnormally small accruals and consequently are candidates to outperform. In Exhibit 20 -
Exhibit 21, we show individual sectors exposure to companies with both abnormally high and abnormally
low accruals. Technology and Telecomm have exposure on the long end while Energy has exposure on the
short end.
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Exhibit 18
Companies with the Lowest (Best) Comprehensive Accruals Excluding Fin. Assets
As of October 22, 2003
Largest 1500 Companies
Market Relative
Symbol Name Sector Name Price Capitalization
Value
Model
Rank
GMST GEMSTAR TV GUIDE INTL INC Consumer Cyclicals $4.84 $1,976 5
UST U S T INC Consumer Staples 33.61 5,595 3
UCOMA UNITEDGLOBALCOM INC Consumer Cyclicals 6.74 2,806 1
AMLN AMYLIN PHARMACEUTICALS INC Medical Products 27.62 2,569 5
LU LUCENT TECHNOLOGIES INC Technology 2.45 10,149 5
ARBA ARIBA INC Technology 3.60 972 3
TWX TIME WARNER INC Consumer Cyclicals 15.55 70,118 4
NTIQ NETIQ CORP Technology 11.79 667 1
ADCT A D C TELECOMMUNICATION Technology 2.75 2,211 4
T A T & T CORP Telcom 20.00 15,784 1
BRCM BROADCOM CORP Technology 31.50 9,450 4
CWP CABLE & WIRELESS PLC Telcom 6.77 5,378 1
CCU CLEAR CHANNEL COMMUNICATIONS INC Consumer Cyclicals 39.25 24,135 4
ISCA INTERNATIONAL SPEEDWAY CORP Consumer Cyclicals 43.30 2,304 5
AMCC APPLIED MICRO CIRCUITS CORP Technology 5.74 1,747 5
V VIVENDI UNIVERSAL Consumer Cyclicals 21.14 22,589 2
PCH POTLATCH CORP Commodities 31.30 898 2
TER TERADYNE IN Technology 20.37 3,811 2
AMKR AMKOR TECHNOLOGY INC Technology 17.34 2,883 1
RIG TRANSOCEAN INC Energy 19.54 6,250 2
CIEN CIENA CORP Technology 6.51 3,052 5
TOM TOMMY HILFIGER CORP Consumer Cyclicals 13.90 1,259 1
VFC V F CORP Consumer Cyclicals 42.33 4,536 2
ATI ALLEGHENY TECHNOLOGIES Commodities 7.57 613 3
COMS 3COM CORP Technology 6.65 2,463 5
PTV PACTIV CORP Capital Equipment 20.76 3,267 4
UIS UNISYS CORP Technology 15.30 5,036 2
AES A E S CORP Utilities 8.04 4,983 2
AV AVAYA INC Technology 13.45 5,140 1
TXU T X U CORP Utilities 23.24 7,481 2
ATML ATMEL CORP Technology 5.28 2,475 1
ARW ARROW ELECTRONICS INC Technology 20.12 2,029 2
YELL YELLOW CORP Transports 32.22 952 3
NT NORTEL NETWORKS CORP NEW Technology 4.55 17,951 1
AMT AMERICAN TOWER CORP Telcom 11.11 2,273 1
CZN CITIZENS COMMUNICATIONS CO Telcom 11.75 3,340 3
CLS CELESTICA INC Technology 16.94 3,613 1
IN INFONET SERVICES CORP Technology 2.48 1,150 3
SNDK SANDISK CORP Technology 77.81 5,432 1
MLHR MILLER HERMAN INC Capital Equipment 23.44 1,711 2
MNST MONSTER WORLDWIDE INC Consumer Cyclicals 25.26 2,829 2
CNP CENTERPOINT ENERGY INC Utilities 9.95 3,031 1
PHS PACIFICARE HEALTH SYS INC DEL Medical Services 54.91 2,059 1
HAS HASBRO INC Consumer Cyclicals 21.95 3,812 1
IDTI INTEGRATED DEVICE TECHNOLOGY Technology 15.70 1,635 4
SY SYBASE INC Technology 18.47 1,733 1
BCE B C E INC Telcom 22.11 20,347 3
HAL HALLIBURTON COMPANY Energy 24.33 10,657 5
GT GOODYEAR TIRE & RUBR CO Autos & Housing 6.81 1,194 3
CK CROMPTON CORP Commodities 5.70 634 1
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Exhibit 19
Companies with the Highest (Worst) Comprehensive Accruals Excluding Fin. Assets
As of October 22, 2003
Largest 1500 Companies
Market Relative
Symbol Name Sector Name Price Capitalization
Value
Model
Rank
SWKS SKYWORKS SOLUTIONS INC Technology $11.21 $1,556 4
AMGN AMGEN INC Medical Products 63.65 82,026 4
FCN F T I CONSULTING INC Capital Equipment 17.96 750 5
ECA ENCANA CORP Energy 37.02 17,766 5
KROL KROLL INC Capital Equipment 19.80 805 5
FIC FAIR ISAAC CORP Capital Equipment 61.68 2,973 1
SJM SMUCKER J M CO Consumer Staples 42.81 2,139 4
MATK MARTEK BIOSCIENCES CORP Medical Products 46.74 1,281 4
FNIS FIDELITY NATIONAL INFO SOLNS INC Capital Equipment 24.85 992 5
KPP KANEB PIPELINE PARTNRS -LP Energy 47.74 1,352 2
MDG MERIDIAN GOLD INC Commodities 12.20 1,208 5
ISIL INTERSIL CORP Technology 28.96 3,970 3
LEE LEE ENTERPRISES INC Consumer Cyclicals 41.61 1,855 2
POM PEPCO HOLDINGS INC Utilities 17.65 3,017 2
MHK MOHAWK INDUSTRIES INC Consumer Cyclicals 70.00 4,617 3
MLNM MILLENNIUM PHARMACEUTICALS INC Medical Products 17.25 5,144 5
RKY COORS ADOLPH CO Consumer Staples 54.26 1,972 3
RGC REGAL ENTERTAINMENT GROUP Consumer Cyclicals 19.66 2,787 1
SANM SANMINA SCI CORP Technology 10.58 5,397 1
EBAY EBAY INC Consumer Cyclicals 56.43 36,157 5
CMX CAREMARK RX INC Medical Services 23.33 6,038 5
MKSI M K S INSTRUMENTS INC Technology 22.46 1,157 1
GLG GLAMIS GOLD LTD Commodities 14.22 1,834 5
EPD ENTERPRISE PRODUCTS PARTNERS LP Energy 21.35 4,279 5
CSGS C S G SYSTEMS INTERNATIONAL INC Technology 9.24 483 1
APPX AMERICAN PHARMACEUTICAL PARTNERS Medical Products 27.60 1,916 1
DV DEVRY INC DEL Consumer Cyclicals 24.04 1,683 4
SNPS SYNOPSYS INC Technology 31.40 4,839 1
ABER ABER DIAMOND CORP Commodities 30.90 1,697 5
CMCSA COMCAST CORP Consumer Cyclicals 32.57 73,297 5
COP CONOCOPHILLIPS Energy 57.44 39,051 5
BVF BIOVAIL CORP Medical Products 28.36 4,500 4
UCO UNIVERSAL COMPRESSION HLDGS INC Energy 23.33 723 4
JBLU JETBLUE AIRWAYS CORP Transports 69.56 4,476 3
CDIS CAL DIVE INTERNATIONAL INC Energy 20.89 786 5
LLL L 3 COMMUNICATIONS HLDGS INC Defense 45.49 4,359 4
EEP ENBRIDGE ENERGY PARTNERS LP Energy 50.83 2,279 4
KKD KRISPY KREME DOUGHNUTS INC Consumer Cyclicals 41.81 2,462 5
IGT INTERNATIONAL GAME TECHNOLOGY Consumer Cyclicals 31.42 10,807 2
HPQ HEWLETT PACKARD CO Technology 21.71 66,194 1
PRX PHARMACEUTICAL RESOURCES INC Medical Products 71.56 2,394 1
COO COOPER COMPANIES INC Medical Products 41.49 1,305 2
CW CURTISS WRIGHT CORP Defense 74.13 765 4
LPNT LIFEPOINT HOSPITALS INC Medical Services 23.80 922 5
JNPR JUNIPER NETWORKS INC Technology 17.03 6,532 1
KMR KINDER MORGAN MANAGEMENT LLC Energy 39.89 1,890 4
SKE SPINNAKER EXPLORATION CO Energy 24.68 819 5
GRP GRANT PRIDECO INC Energy 10.53 1,278 5
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Exhibit 20
Percentage of Names in Lowest (Best) Decile of
Comprehensive Accruals Excluding Fin. Assets Measure
From A Given Sector
Largest 1500 Stocks
As of October 22, 2003
Sector Name
Percent
of Names
Within Sector
Percent of
Total Names
Capital Equipment 12% 14%
Consumer Cyclicals 19% 9%
Consumer Staples 3% 4%
Utilities 5% 8%
Autos & Housing 5% 16%
Energy 8% 9%
Transports 3% 9%
Technology 29% 16%
Commodities 8% 14%
Defense 2% 15%
Medical Products 1% 1%
Telecomm 5% 21%
Medical Services 1% 2%
Exhibit 21
Percentage of Names in Lowest (Best) Decile of
Comprehensive Accruals Excluding Fin. Assets Measure
From A Given Sector
Largest 1500 Stocks
As of October 22, 2003
Sector Name
Percent
of Names
Within Sector
Percent of
Total Names
Capital Equipment 8% 9%
Consumer Cyclicals 15% 7%
Consumer Staples 5% 7%
Utilities 3% 5%
Autos & Housing 3% 10%
Energy 17% 20%
Transports 2% 6%
Technology 18% 10%
Commodities 5% 9%
Defense 2% 15%
Medical Products 12% 14%
Telecomm 3% 13%
Medical Services 7% 15%
BERNSTEIN RESEARCH CALL October 22, 2003
Vadim Zlotnikov zvadim@bernstein.com +1-212-756-4663
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Performance 8ummary
During September, greatest outperfomance accrued to attractively valued stocks with rising revisions
and/or improving balance sheets; while momentum stocks, with deteriorating balance sheets had the
greatest underperformance (see Exhibit 22).
Exhibit 22
Performance Summary
As of September 30, 2003
Total Return
This Last 3 Last 12 Year
Month Months Months to Date
S&P 500 -- Capitalization Weighted (1.1) % +2.6 % +24.4 % +14.7 %
Large Capitalization Stocks -- Capitalization Weighted (0.8) 3.0 24.9 15.0
Large Capitalization Stocks -- Equally Weighted (1.5) 5.7 40.9 24.3
Growth Stocks -- Capitalization Weighted (0.8) 3.2 24.0 16.2
Growth Stocks -- Equally Weighted (1.5) 5.8 49.7 30.1
Model Portfolios
Bernstein Quantitatively Derived Optimal Multifactor-Value Portfolio (0.8) 2.0 22.4 15.7
Bernstein Quantitatively Derived Optimal Multifactor Pure Growth-Stock Portfolio (1.2) 0.6 18.6 15.6
Large-Capitalization Quantitative Screens -- Equally Weighted
Value with a Catalyst
Undervalued Stocks Reporting a Positive Earnings Surprise (0.5) 4.1 32.3 14.6
Low Price-to-Sales Stocks with Upward Earnings Revisions (1.9) 3.3 18.8 20.8
Low Price-to-Free Cash Flow Stocks with Upward Earnings Revisions (0.6) 4.0 28.1 34.2
Turnaround Candidates (1.7) 3.0 35.5 20.2
Stocks Discounting Low-to-Moderate Earnings Growth, with Improving Price Trends (2.0) 2.6 12.3 12.9
Earnings and Momentum Trends
Triple Momentum (2.1) 7.3 24.1 26.8
Stocks with Easy Earnings Compares and Rising Estimates (0.6) 4.9 17.8 15.4
Stocks with Improving Margins and Rising Earnings Estimates (1.7) 6.4 27.1 22.7
Stocks with Favorable Residual Reversal Signals (0.6) 18.3 45.4 35.3
Stocks with Strong Short-term Momentum (0.8) 6.1 39.8 31.4
Capital Use
Low Capital Spenders (0.8) 8.0 24.4 24.3
Large Share Repurchases (0.1) 6.2 24.7 20.3
Attractive Value Stocks with Improving Balance Sheets (1.9) 8.6 40.7 29.1
Unattractive Value Stocks with Deteriorating Balance Sheets (3.0) 5.6 35.6 24.7
Merger and Acquisition Activity (1.7) 1.9 23.6 14.9
Dividend Increases and Initiations (0.3) 8.3 30.2 24.5
Growth-Stock Quantitative Screens -- Equally Weighted
Value with a Catalyst
Undervalued Growth Stocks Reporting a Positive Earnings Surprise (1.7) 7.0 32.4 16.6
Low Price-to-Sales with Upward Earnings Revisions +1.0 9.2 25.7 37.7
Low Price-to-Free Cash Flow with Upward Earnings Revisions 0.0 6.5 62.2 31.1
Turnaround Candidates (1.4) 7.6 71.2 46.4
Growth Stocks With Low Enterprise Value-to-EBITDA and Favorable Momentum (3.1) 6.9 24.4 35.8
Capital Use and Sustainability
Attractive Growth Stocks with Improvng Balance Sheets (0.1) 4.7 33.7 24.8
Unattractive Growth Stocks with Deteriorating Balance Sheets (1.1) 6.4 40.1 32.0
Earnings and Momentum Trends
Growth Stocks with Easy Earnings Compares and Rising Estimates (3.6) 2.5 114.8 41.5
Growth Stocks with Improving Margins and Rising Earnings Estimates (2.5) 6.3 18.6 18.4
Triple Momentum (9.8) 6.2 27.3 24.6
Growth Stock Purgatory
Watch List 0.9 15.2 82.7 48.8
Valuation Methodology
Risks
CERTIFICATIONS AND DISCLOSURES
Bernstein analysts are compensated based on aggregate contributions to the research franchise as measured by account
penetration, productivity and proactivity of investment ideas. No analysts are compensated based on performance in, or
contributions to, generating investment banking revenues.
Bernstein rates stocks based on forecasts of relative performance for the next 6-12 months versus the S&P 500 for U.S.
listed stocks and versus the MSCI Pan Europe Index for stocks listed on the European exchanges unless otherwise
specified. We have three categories of ratings:
Outperform: Stock will outpace the market index by more than 15 pp in the year ahead.
Market-Perform: Stock will perform in line with the market index to within +/-15 pp in the year ahead.
Underperform: Stock will trail the performance of the market index by more than 15 pp in the year ahead.
Bernstein currently makes or plans to make a market in every NASDAQ security contained within our coverage universe.
CERTIFICATION: I, Vadim Zlotnikov, certify that all of the views expressed in my report accurately reflect my personal views
about any and all of the subject securities or issuers and that no part of my compensation was, is, or will be, directly or
indirectly, related to the specific recommendations or views in this report.
One or more of the officers, directors, members or employees of Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein
Limited and/or its affiliates may at any time hold, increase or decrease positions in securities of any company mentioned
herein.
Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, or its or their affiliates may provide investment management
or other services for such companies or employees of such companies or their pension or profit sharing plans, and may give
advice to others as to investments in such companies. These entities may effect transactions that are similar to or different
from those mentioned herein.
Approved By: VZ
Copyright 2003, Sanford C. Bernstein & Co., LLC, a subsidiary of Alliance Capital Management L.P. ~ 1345 Avenue of the Americas ~ NY, NY 10105 ~ 212/ 486-5800. All rights reserved.
This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in any locality, state, country or other jurisdiction where such distribution, publication, availability
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jurisdiction. This report is based upon public sources we believe to be reliable, but no representation is made by us that the report is accurate or complete. We do not undertake to advise you of any change in the reported
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