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CLICK HERE February 23, 2010

VALUATION WATCH: Our models find that overvaluation is approachinglevels typically seen when a market correction is imminent. Overvaluedstocks now make up almost 64% of our universe and 31% of the universe iscalculated to be overvalued by 20% or more. 15 of 16 sectors are nowcalculated to be overvalued.

Book Him Dano

Short Pick Book Retailer Barnes and Noble (BKS, $BKS) SuspendsDividend, Down BigBarnes & Noble, Inc. is engaged in the retail sale of trade books(generally

hardcover and paperback consumer titles, excluding educational textbooks andspecialized religious titles), mass market paperbacks (such as mystery, romance,science fiction and other popular fiction), children's books, off-price bargain booksand magazines. These collectively account for substantially all of the company'sbookstore sales. Bestsellers represent only a small portion of the Barnes & Noble, Inc.store sales.

Our Forecast Model selected Barnes & Noble, Inc. as a short-side pick last week when we re-balanced our VE Forecast 16 Market Neutral Portfolio Newsletter. Thisseemed contrarian at the time as bad news for Borders was being touted as a plus for Barnes & Noble, Inc.. The retailer was looking to scoop up Borders locations andgarner market share from the demise of its large brick and mortar rival. However, thestock has not faired well over the past few days and is currently is down more than20% since last Thursday's newsletter re-balance. Company officials announced thesuspension of the stock's $0.25/share dividend yesterday and so far today the ticker isdown more than 9%. Once more our Forecast Model is proving adept at stock picking under volatile market conditions.

ValuEngine has issued a HOLD recommendation for Barnes & Noble, Inc. onFeb. 23, 2011. Based on the information we have gathered and our resulting research,we feel that Barnes & Noble, Inc. has the probability to ROUGHLY MATCH averagemarket performance for the next year. The company exhibits ATTRACTIVE price/salesratio and expected EPS growth, but UNATTRACTIVE market valuation andmomentum.

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Based on available data as of Feb. 23, 2011, we believe that BKS should betrading at $6.7. This makes BKS 138.01% overvalued. Fair Value indicates what webelieve the stock should be trading at today if the stock market were perfectly

efficient and everything traded at its true worth. For BKS, we base this on actualearnings per share (EPS) for the previous four quarters of -$1.11, forecasted EPS for thenext four quarters of -$0.26, and correlations to the 30- year Treasury bond yield of4.61%.

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MARKET OVERVIEW Summary of VE Stock UniverseStocks Undervalued 36.10%

Stocks Overvalued 63.90%

Stocks Undervalued by 20% 15.51%

Stocks Overvalued by 20% 31.17%

SECTOR OVERVIEWSector Change MTD YTD Valuation Last 12-

MReturnP/E

RatioAerospace -2.22% -1.06% 3.32% 12.91% overv alu ed 32 .26% 1 8.87

Auto-Tires-Trucks -3.53% -2.54% -2.30% 9.92% overvalued 47.42% 22.49

Basic Materials -3.22% -0.57% -2.42% 17.13% overv alu ed 62 .86% 3 5.12

Business Services -2.41% 1.07% 2.16% 14.55% overv alu ed 21 .64% 3 8.17

Computer and Technology -3.10% 4.49% 9.19% 13.49% overv alu ed 40 .28% 3 9.33

Construction -4.15% -1.88% 1.94% 9.29% overvalued 14.43% 45.59

Consumer Discretionary -2.22% 2.97% 3.79% 8.60% overvalued 27.56% 30.34

Consumer Staples -2.08% -0.15% -0.76% 9.35% overvalued 18.57% 27.32

Finance -2.19% 1.81% 3.68% 9.65% overvalued 18.50% 24.87

Industrial Products -2.76% 1.03% 3.98% 11.17% overvalued 31.11% 28.7

Medical -1.79% 2.11% 7.32% 0.09% underval ued 18 .39% 4 4.65

Multi-Sector Conglomerates -3.22% -1.48% 2.67% 14.92% overv alu ed 34 .94% 2 9.22

Oils-Energy -1.79% 1.87% 7.82% 28.99% overv alu ed 46 .39% 4 2.98

Retail-Wholesale -2.36% 3.61% 1.98% 10.21% overv alu ed 30 .43% 2 8.27

Transportation -3.43% -1.33% -1.94% 14.66% overvalued 31.04% 26.9

Utilities -1.27% -0.13% 1.17% 7.63% overvalued 17.46% 26.33

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