DJIA: 11,577.51  S&P 500: 1,257.64  Russell 2000: 783.65

January 2011

Money is better than poverty, if only for financial reasons
-Woody Allen

Despite all the economic hand-wringing, 2010 was another great year for investors. Since the market's bottom in March 2009 the Standard & Poor's 500 has produced a jaw-dropping total return of 93%.

How can that be? What about all those ominous financial headlines; Greece, Fed Easing, Double Dip?

 Stocks are driven primarily by earnings. Other variables are like the first three quarters of an NBA game-they usually don't count for much. Corporate earnings have been just plain terrific and are expected to reach record levels in 2011.

Small Was Beautiful

While the S&P 500 rose almost 13% last year, small cap stocks produced nearly twice that return. Although it came with lots of volatility, the average stock followed by BURKENROAD REPORTS was up 40%. This outperformance by small cap stocks is a healthy sign for the overall economy because small stocks tend to fare better in the early stages of an economic recovery.

BURKENROAD REPORTS continues to attract national media attention and serves as a valuable career springboard for Tulane students. Since the inception of this academic program, nearly 500 students have moved on to positions in investment related fields.

Our students produce investment research on each of the 40 companies in our coverage universe. These full length reports and conference registration information are available at www.burkenroad.org

SAVE THE DATE!

Please join us for our 15th Annual BURKENROAD REPORTS
Investment Conference on Friday, April 15, 2011,
at the Sheraton New Orleans Hotel.

This popular event is free and open to the public and provides individual and institutional investors an opportunity to meet management and to learn more about some of the region's top companies.

Well, Well, Well...

Despite last summer's disastrous oil spill in the Gulf of Mexico, energy stocks produced some of 2010's best returns. Some standout performances in other sectors include Craftmade International whose shares lit up after multiple buyout offers from rival Litex. The value of Rollins crept up thanks in part to a national resurgence of bed bugs.

Finally, improving consumer confidence opened wallets and bolstered investor interest in Crown Crafts, Hibbett Sports, Susser Holdings, and AFC Enterprises, the parent company of Popeye's Chicken & Biscuits.

Energy was a truly bi-furcated market in 2010. Oil prices rose sharply and closed the year near $90 per barrel while natural gas prices continued to sink under the pressure of new supplies coming in from the onshore shale discoveries being made in some Southwestern and Northeastern states.

Long term, we are very bullish on the outlook for natural gas and natural gas related stocks. Compared to crude oil-based fuels, natural gas is greener, cheaper, and nearly entirely domestically produced. It can be used to heat homes, to generate electricity, and to power cars. Natural gas is clearly one of the answers to the nation's enormous energy needs.

Shotgun Weddings Ahead?

Merger and acquisition activity appears set to soar, and this is good news for investors. Stock valuations are historically cheap, and interest rates are near record lows. Deals are likely to come from three sources; Strategic Acquisitions, Private Equity, and International Buyouts. There is now a record $2 trillion in corporate coffers and companies that have been conservatively hoarding cash find themselves as attractive targets.

We've had 25 of our BURKENROAD REPORTS companies bought out since we started the program in 1993. The current environment is ripe for more. It's also important to note that small cap stocks have usually been bought out at higher premiums than their large cap brethren.

The Burkenroad Mutual Fund

Since its inception on December 31, 2001 the Burkenroad Mutual Fund (ticker symbols HYBUX and HHBUX) has outperformed 99% of the nation's 5,383 equity mutual funds. The fund is managed by Hancock Bank and now has nearly $60 million in assets. Hancock's managers utilize our student-produced research reports (as well as other sources) in the management of the Burkenroad Fund.

What's Up Down Here?

Not only is this region home to nice weather, wonderful food, and some fine performing stocks, there's plenty else for us to be proud of:

This fall Tulane hosted CNBC's "Mad Money" program with Jim Cramer on campus.

Our students enjoyed a tour of the floor of the NYSE (picture below).

Tulane had a record 44,000 applications for just 1600 freshman slots. In fact, the university received more admission applications than any other private university.

Oh, did we mention that after years of frustration the Saints are the Super Bowl champions!

We would like to thank Aaron Selber and the Burkenroad family for their continued generosity and encouragement through both bull and bear markets.

Peter Ricchiuti
Founder & Director of Research
BURKENROAD REPORTS