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Date Dear.............: Re: Selection of Stocks for Coverage in Value Line One of the questions most frequently asked is how we decide what stocks are added to The Value Line Investment Survey (Standard Edition). We have the capacity to cover approximately 1,700 stocks. yet, there are far more than 1,700 stocks that could be considered worthy of our attention. So, many are not covered for the simple reason that there is no room. This needn't, however, be the final word. Our research universe is a changing one, as companies are dropped from coverage because they are acquired or because their business prospects deteriorate to such an extent that we believe our subscribers will no longer be interested in the stock. As companies are dropped, others are added. So we are constantly on the lookout for new companies to add to our universe. A company is eligible for coverage if, in our opinion, our subscribers will be interested in it's stock. This is a subjective test. To help us sort through the numerous candidates for coverage, we have established some numerical guidelines. At the present time, they are as follows: 1. Market Capitalization should be at least $400 million; 2. The stock should trade for at least $10 per share; 3. The float should be at least 10 million shares; 4. For companies in fairly mature industries, annual sales should be at least $50 million, and annual net income should be at least $5 million. We also prefer companies where the degree of insider ownership is not excessive (there is no fixed percentage here, since 50%, for instance, might be excessive for a company whose stock doesn't trade much and has few public shareholders while 75% may be satisfactory for a company with a large number of public shareholders and a stock that trades very actively). Also, we prefer companies that have been around long enough to have some sort of a performance history. Ideally, that would be several years, so that we would have enough data to compute a Timeliness rank. But, that's often hard to achieve nowadays. So at least a year is what we aim for. Exceptions which might justify earlier coverage are companies that are spun off from other companies Value Line covers and new companies in a new industry that generates an unusually large amount of investor interest (e.g., we launched coverage of biotech companies at a fairly early stage, since investors, and presumably our readers, were especially interested in this sector). Finally, we try to bring in stocks whose future business prospects are satisfactory or better. Note, however, that it is very difficult to find companies that meet each and every criterion. Often we have to bend in some areas for companies that look very attractive on some of the other standards. Remember, the overriding consideration here is potential subscriber interest and in the end, this comes down to a subjective decision. Anyone wishing to propose a company for Value Line coverage (keeping in mind the subjective and objective criteria discussed above) should do so in a letter addressed to: Value Line, Inc. We would consider it helpful if you would include information regarding the six quantitative tests listed above. If coverage is being proposed at the initiative of the company, an up-to-date information packet (or at least the latest annual and quarterly reports) should be submitted. All proposals for coverage will be reviewed. Regarding companies that are deemed eligible, we regret that we are unable to provide any indication as to when coverage may commence. This will depend on such impossible-to-predict factors as the pace at which openings for new companies occur and our interest in covering the company in question relative to our interest in the other companies in our new coverage backlog. (Bear in mind that subscriber interest is the dominant theme. It's not necessarily first come first served.) Sincerely,
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