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1
THE HENRY FUND
2009 Annual Report November 30, 2009
2
TABLE OF CONTENTS
Letter From the Investment Team 3
Fund Overview 4
Acknowledgments 5
Fund Performance 6
Summary of Transactions 9
Economic Overview 10
Basic Materials 12
Consumer Discretionary 13
Consumer Staples 16
Energy 19
Financials 23
Healthcare 30
Industrials 34
Technology 36
Utilities 41
Telecommunications 42
Statement of Security Holdings 44
Income Statement 45
3
From the Investment Team
Dear Stakeholders,
As 2009 comes to a close and we reflect upon the turbulent market we have experienced over the past year, we feel
it is our duty to convey the sincerest of thanks to those who have made it possible for us to demonstrate our skill set
by managing a portion of the University of Iowa endowment portfolio. The large amount of market changing events
that has taken place over the past year has made this an exceptional learning experience for us and the Henry Fund
analyst team counts itself fortunate to have had the opportunity to learn under these arduous circumstances.
We‘d first like to thank Dr. Todd Houge, our class professor, mentor, and friend. The Henry Fund could not be
successful without his expert instruction, constant support, and tireless dedication. His enthusiasm for the subject
matter and the Fund were evident from the first class period in January to the final portfolio rebalancing in
December. We are better analysts because of him and we truly appreciate his efforts.
The investment team is also indebted to the Henry Fund Advisory Board. This group of alumni is committed to the
excellence of the Henry Fund experience, and dedicates its time each semester to provide an invaluable real world
environment and ensure our preparation for the professional world. Their unwavering high standards and
continuously insightful guidance have served to shape the direction of the fund and inspire creativity in our research.
We are grateful for their service.
Finally, we‘d like to thank Henry Royer and Henry B. Tippie for the generous contributions that were so
instrumental to the Fund‘s creation. Through their selfless actions these gentlemen have made a tremendous and
lasting impact on the students of the Henry Fund, the University of Iowa MBA program, and the Tippie College of
Business.
To the aforementioned people and a great many others, the 2009 Henry Fund Analyst team is grateful for an
educational experience it will never forget. Never did we think it possible to learn so much in a short a time. We
thank you for the honor of managing the Fund.
Sincerely,
The Henry Fund Class of 2009
Alan Adams Energy
John Culley Materials & Energy
Iana Stahov Consumer Discretionary
Monty Gupta Consumer Staples
Ibeth Molina Healthcare
Samantha Lane Healthcare
Sebastian Bock Financials
Anil Ramchandani Financials
Arindam Majumdar Technology
Jiarong Xia Technology
Carl Schumacher Telecom & Utilities
4
Fund Overview
The Henry Fund, named after its two founding benefactors, was established in the spring of 1994 to provide University
of Iowa MBA students with a forum to blend academic rigor with real-world portfolio management experience. Henry
Royer, Henry Tippie, and the University of Iowa Foundation contributed the initial $50,000 investment that established
the Henry Fund.
The Henry Fund is an equity portfolio listed as an outside investment by The University of Iowa Foundation. The Fund
is required to meet the same basic performance guidelines as equity accounts in the long-term investment pool of The
University of Iowa Foundation. In keeping with these requirements, managers of the Henry Fund seek to achieve the
highest level of return while assuming risks similar to those of the S&P 500 index. The Henry Fund team, therefore,
recommends a targeted portfolio of stocks from a broad set of industries, investing in well-managed, profitable
businesses without unnecessarily exposing the fund to economic or industry risks.
The Fund is divided into three separate accounts: active, passive and cash. The active account, comprising approximately
97.97% of the Fund‘s assets, currently consists of equity positions in 36 companies. This account represents the primary
measurement of the manager‘s stock selection ability. The passive account (1.10%) consists of holding in a financial
sector ETF – Rydex S&P Equal Weight WTF (RYF). The Henry Fund scholarship payments necessitate that the fund
keep cash in a money market account in order to meet its annual commitment. This account also receives dividends and
is used to pay brokerage fees and other expenses incurred during the year.
The managers of The Henry Fund are students in the Applied Securities Management course (6F: 221 and 6F: 222) at
The University of Iowa‘s Henry B. Tippie School of Management. The two-semester course is limited traditionally to
twelve students. Students are selected by blind review based on a research report application at the end of the fall
semester of the first year of the MBA program. This year there were 11 analysts in the fund and were assigned to one of
10 economic sectors: basic materials; consumer cyclical; consumer services; consumer non-cyclical; energy and utilities;
financial services; healthcare; industrials and transportation; technology; and telecommunications. Because of the
growing importance of financial services, technology and health care, two analysts are assigned to each of these areas to
promote expanded coverage and wider diversification of our holdings. Three analysts covered the Industrials sector in
the fund due non-availability of a dedicated Industrials sector analyst.
Each manager develops a fully integrated investment review, based on a top-down approach that incorporates an
extensive economic, industry, and company-specific analysis. Once the analyst evaluates the value drivers of each
industry, he or she researches specific companies for potential investment. Each security is modeled using a variety of
valuation techniques including: discounted cash flow analysis (DCF), economic value added (EVA), fundamental
multiple analysis, and relative multiple valuation.
Fund managers are expected to act as both sector analysts and portfolio managers, providing basic industry research,
proposing investment ideas and evaluating the ideas of the other managers. Investment recommendations are presented
to the Investment Advisory Committee for review and then voted on by The Henry Fund managers. In addition, the
managers perform the administrative tasks of portfolio management, including marketing the fund to outside donors and
producing an annual report.
THE HENRY SCHOLAR
A portion of the Henry Fund dividend income supports annual scholarships to MBA students, the recipient of which is
called The Henry Scholar. It is approximately $1000 per $100,000 of the value of the portfolio. The scholarship is
renewable for a second year based on the student‘s academic performance. Thus, $2,000 in scholarship money is
transferred annually to the university cash account designated for Henry Scholars. The goals of The Henry Scholar
Program are to encourage and prepare students for careers in investments as well as to attract outstanding Henry Fund
candidate.
5
Acknowledgments
FOUNDERS Henry Royer
Henry B. Tippie
Henry Royer attended Colorado College, where he received a BA in 1953. Following college graduation, he
became a grain merchandiser with Pillsbury Mills. He joined the Peavey Company in 1957, became Treasurer and a
board member of Lehigh Sewer Pipe and Tile in 1961, where he remained until 1965. From 1965 to 1983 Mr.
Royer held various positions with First National Bank (Norwest), Duluth, Minnesota. In 1983, he joined Merchants
National Bank of Cedar Rapids (Firstar), where he served as chairman and president until August 1994. He
subsequently served as president and CEO of River City Bank in Sacramento, California. He is now executive vice
president of Berthel Fisher & Company Planning, Inc., Cedar Rapids, Iowa.
Wherever he has been, Henry Royer has been active in both business and civic organizations. While in Iowa he
served on the Board of Visitors of the College of Business Administration. Currently, he is on the boards of IES
Industries, CRST International, Inc., Berthel Growth & Investment Trust, River City Bank, Families First, Inc.,
United Way, the Sacramento Symphony, the Sacramento Tree Foundation and the Sacramento Commerce and Trade
Organization.
Henry B. Tippie grew up in Belle Plaine, Iowa, and, after serving in the Army Air Force, earned a BSC in
accounting from The University of Iowa in 1949. He began his forty-nine year professional involvement with
Rollins in 1953, starting by balancing the small firm‘s checkbook. Today, four Rollins companies trade on the
NYSE and one on the Amex. In addition, Tippie is still involved with Rollins enterprises, serving on the board of
directors for all five publicly traded companies and as chairman of the board for two companies. He runs several of
his own ventures from his offices in Austin, Texas. Tippie has been a tremendous asset to The University of Iowa,
endowing a chair in business administration and several professorships in the business school. He also has endowed
two two-year accounting scholarships and, for graduates of Belle Plaine Community Schools, two four-year
scholarships. To help fund the completion of the Pappajohn Business Administration Building, he donated funds to
build a 175-seat auditorium, a student lounge and Pat‘s Diner, named for his wife, Patricia. For his numerous
contributions, Tippie received The University of Iowa‘s Distinguished Service Alumni Award and Outstanding
Accounting Alumni Award. In 1996 he was a recipient of the nationally prestigious Horatio Alger Award. In
February 1999, Tippie made a major commitment to the College of Business to support its students and faculty. In
recognition of his past, present, and future support that will exceed $30 million, the college was named the Henry B.
Tippie College of Business. Mr. Tippie was awarded the Hancher-Finkbine Alumni Medallion in 2002.
We were saddened to learn that on December 2nd, 2009, Jeff Rahm, a
member of the Henry Fund Investment Board passed away at St. Mary‘s
Hospital in Madison, WI. Jeff graduated from the Tippie MBA program in
2005. He was a Henry Fund alum having been the Henry Fund energy sector
analyst in 2004. He also had a BS degree in Mathematics and Physics from
Southwestern College. After receiving his MBA, Jeff worked for the State of
Wisconsin Investment Board as a credit analyst. Jeff was a great champion of
the Tippie MBA program and the Henry Fund, actively participating in the bi-
annual Investment Board meetings, helping students with invaluable career
advice and also actively seeking to place fresh graduates in the industry. Jeff
Rahm will be greatly missed at the Tippie College of Business and also as a
distinguished member of the Henry Fund Investment Board. We convey our
deepest condolences to his family and loved ones.
6
ACADEMIC ADVISORS
Todd Houge, Ph.D., CFA
BROKERAGE SERVICES
E*Trade
INVESTMENT ADVISORY COMMITTEE
John Everhart
Scott Hassenstab, CFA
AEGON USA Investment Management, Inc.
Dirk Laschanzky, CFA
Principal Global Investors
Daniela Spassova, CFA
Principal Global Investors
Mihail Dobrinov, CFA
Principal Global Investors
Kevin Laub, CFA, CPA
Dean Investment Management
Keith Mitchell*, CFA
Mobilians International, Inc.
Marshall Bridges, CFA
HNI Corp.
John McClain
University of Iowa Foundation
Jeff Rahm*
State of Wisconsin Investment Board
Fund Performance
The Henry Fund recovered 31.44% of its value in 2009 compared to a dividend adjusted change of 22.44% in the
S&P 500 Index. Within our portfolio, 60% of our holdings (21 securities) outperformed the market, with the
remaining fourteen securities producing returns below the benchmark. The top four best performing stocks
averaged returns above 80%, while the four lowest-return stocks producing negative returns below -8%. The 6.66%
excess in the portfolio return above the benchmark was driven by the strong performance of the energy and
technology sectors together with the recovery of the financial sector. Following this section is a brief narrative
summary of individual sector performance. An expanded look at each sector can be found later on in the report. It
is important to note that the majority of the content in this report was written following the November month end
close. Therefore, any reference to YTD or annual performance shall represent the time period January 1, 2009
through November 30, 2009. Additionally, the “Key Stock Statistics” data that is shown in the detailed sector
sections has been prepared as of November 30, 2009.
7
Basic Materials:
The materials sector has a 4.41% weight in our portfolio as compared to 3.58% in the S&P 500 Index, representing a
relative overweight position of 23.21%. The S&P Materials Index was up 43.14% year-to date, over performing the
S&P 500. The Fund‘s sector holdings Sherwin-Williams Co. and BHP Billiton returned 1% and 68.9% respectively.
Strong performance from BHP Billiton led to the significant overweight position in the sector. In May, we trimmed
both holdings within this sector as we decided to reduce the overweight of the sector.
Consumer Discretionary:
The consumer discretionary sector has a weight of 9.31% in our portfolio, slightly below the 9.36% in the S&P 500
Index, representing a relative underweight position of 0.5%. The S&P Discretionary Index increased by 35.14%
year-to-date outperforming the S&P 500 Index. The Fund‘s sector holdings DirectTV Group, Target, and Walt
Disney returned 38.1%, 34.8% and 33.2% respectively. All three of our holdings delivered a superior performance
compared to the benchmark. A new holding was added to the portfolio in May: Apollo Group with a weight just
above 1%. Over the holding period, the Apollo produced a negative return of 4.6%.
Consumer Staples:
The consumer staples sector accounts for 8.06% of our portfolio as compared to 11.67% in the S&P 500 Index. This
sector has a relative strong underweight position of 30.96%. The overall return for the S&P Consumer Staples
Index is 13.32% year-to-date, significantly below the S&P 500 return. The recovery of the stock market, the weak
economy and the nature of the sector explain its poor performance. Our current holdings are Central European
Distribution, Procter & Gamble and Safeway Inc. These companies returned 41.5%, 0.9%, and -5.3%, respectively.
No trades were made in this sector during 2009.
Energy/Utilities:
The energy sector underperformed the S&P 500 Index with a return of 17.08%. The current weight of the energy
sector in the S&P 500 Index is 12.19% and in our portfolio it has a weight of 14.29% representing an overweight of
17.25%. The utilities sector in the S&P 500 Index has returned 5.55% year-to-date, underperforming the
benchmark. Currently we hold a 2.84% position in utilities, whereas the S&P 500 index weight for utilities is
3.57%, representing a relative underweight of 20.55%. Almost all of our holdings‘ returns exceed the benchmark
with Peabody Energy Corp., Noble Corp., Schlumberger, and Chesapeake Energy Corporation posting returns of
95.4%, 87%, 50.9%, and 47.9% respectively. Only Exxon underperformed the benchmark with negative return of
6%. In the utilities sector FPL Group posted a return of 3.3% significantly below the S&P 500 index and the sector
index. In May, we reduce our position in FPL by selling 24% of our shares in that stock. That proved to be the right
movement as the stock‘s price has significantly reduced ever since.
Financials:
The financials sector has a 12.66% weight in our portfolio as compared to 14.47% in the S&P 500 Index,
representing a relative underweight position of 1.81%. The S&P Financials Index was up 15.93% year-to date,
underperforming the S&P 500. Despite a rough end to 2008, the sector rebounded lead by the Fund‘s sector
holdings Banco Santander and Franklin Resources Inc. with returns of 82.3% and 69.4% respectively. Other
holdings included Bank of America, The Chubb Corporation and the Rydex S&P Financials ETF with returns of
75%
80%
85%
90%
95%
100%
Peabody Energy Corp.
Google Noble Corp. Banco Santander
Best Performers
-10%
-8%
-6%
-4%
-2%
0%
Apollo Group Safeway Inc. Exxon-Mobil Corp.
China Mobile
Worst Performers
8
12.6%, 23.4% and 12.8% In May, we closed our positions in The Travelers Companies and Equifax in order to
purchase The Chubb Corporation and Rydex S&P Financials ETF.
Healthcare
The healthcare sector has a weight of 13.67% in our portfolio, slightly above the 12.51% in the S&P 500 Index,
representing a relative overweight position of 1.16%. The S&P Health Care Index increased by 16.1% year-to-date
underperforming the S&P 500 Index. The Fund‘s sector holdings Abbott Laboratories, Forest Laboratories, Johnson
& Johnson, Stryker Corporation, and Thermo Fisher Scientific returned 20.8%, 20.4%, 5.0%, 26.2%, and 38.6%
respectively. Due to the acquisition of all of Genentech‘s shares outstanding by Roche for $95.00 per share cash, we
took a 2.94% interest in Abbott Laboratories.
Industrials:
The industrials sector accounts for 10.75% of our portfolio as compared to 10.43% in the S&P 500 Index. This
sector is barely overweight by 0.32%. The overall return for the S&P Industrials Index is 18.4% year-to-date, just
below the S&P 500 return, despite the difficult economic conditions. Our current holdings include Eaton
Corporation, FedEx, Honeywell International, and Norfolk Southern with returns of 28.5%, 31.6%, 17.2%, and
9.2%. As the economy slowly recovers, we feel this segment may begin to see returns at or above the S&P 500
level. No additions were made to this sector in 2009 as we were short an industrials analyst. However, all current
holdings were covered by other sector analysts.
Information Technology:
The information technology sector has a 19.69% weight in our portfolio as compared to 19.22% in the S&P 500
Index, representing a relative overweight position of 0.47%%. The S&P Information Technology Index was up
54.40% year-to date, over performing the S&P 500 by nearly double. Strong performance by Google and Microsoft
with returns of 89.5% and 51.1% respectively drove this sectors performance. The other holdings included Intel,
Oracle Corporation, and QualComm Inc. with individual returns all above the S&P 500 at 30.2%, 24.5%, and 25.6%
respectively. In May, we increased our position in both Microsoft and Intel, bringing our position to slightly
overweight.
Telecom:
The telecom sector has a weight of 2.97% in our portfolio, slightly below the 3.0% in the S&P 500 Index,
representing a relative underweight position of 0.03%. The S&P Telecom Index increased by only 0.9% year-to-date
grossly underperforming the S&P 500 Index. Verizon was up year-to-date only 5.2%, which was decent compared
to our other holding China Mobile which was down 7.8% year-to-date. Verizon was added to our portfolio in May
with a 1.77% weight. This addition has proved to be a good decision overall for the Fund‘s portfolio.
9
Summary of Transactions
Security # of Shares owned as of Net
Change 31-Dec-08 30-Nov-09
Abott Laboratories 0 600 600
Apollo Group 0 260 260
Banco Santander 2700 2700 0
Bank of America 1813 1813 0
BHP Billiton Limited (ADR) 527 474 (53) Central European Distribution 1324 1324 0
Chesapeake Energy Corp. 1358 1358 0
China Mobile 330 330 0
Chubb Corporation
790 790
DirecTV Group 1230 1230 0
Eaton Corporation 661 661 0
Equifax Inc. 1237 0 (1237)
ETF- Rydex S&P Financials 0 635 635
Exxon-Mobil Corp. 640 640 0
FedEx 392 392 0
Forest Laboratories Inc. 850 850 0
FPL Group 925 710 (215)
Franklin Resources Inc. 313 313 0
Genentech Inc. 272 0 (272)
Google 110 110 0
Honeywell International 1090 1090 0
Intel 2335 2590 255
Johnson & Johnson 748 748 0
Microsoft 2125 2380 255
Noble Corp. 850 850 0
Norfolk Southern 409 409 0
Oracle Corp. 1987 1987 0 Peabody Energy Corporation 850 850 0
Procter & Gamble 560 560 0
QualComm Inc. 570 570 0
Safeway Inc. 1466 1466 0
Schlumberger 509 509 0
Sherwin-Williams Co. 390 351 (39)
Stryker Corporation 615 615 0
Target Corp. 860 860 0
Thermo Fisher Scientific 830 830 0
Travelers Companies 804 0 (804)
Verizon 0 725 725
Walt Disney Holdings Co. 906 906 0
10
Economic Overview
Real GDP Growth Rate
The revision of Q3 2009 GDP growth from an advance estimate of 3.5% to a preliminary of 2.8% removed some
momentum expectations. This growth contrasts with a 0.7% real GDP decline in Q2 2009. Recent results indicate
we have seen the bottom and the economy is now positioned for recovery. We do not expect, however, a swift
turnaround of 5-6% growth as in some other economic cycles. This recession has hit the key economic engines and
shook the largest contributor to GDP – consumption. It will take another year for confidence in the markets and the
recovery of the consumer to return spurring key sectors such as manufacturing and construction. We would be
concerned to see an early run-up in oil prices as that could throw the economy backward and return the consumer to
a strong saving profile. We expect the pace of GDP growth to moderate after the jump in Q3 2009 and reach about
2% by FYE 2010. Looking a few years ahead we could see 2.7% growth but no single period with a strong run-up.
Given that personal consumption expenditures and exports were the key contributors to GDP growth the previous
quarter, we see a more confident consumer going into the holiday season and expect retail sales to be fairly robust
given the environment and high unemployment rate. Also, exports growth would indicate global markets are
recovering which would boost employment in the near-term. Our primary concerns at this point are potential
problems with commercial mortgages, a premature run-up in the stock market to further hit individual portfolios and
early recovery in oil prices.
Inflation
In October, the consumer price index increased 0.3% which was in line with the index excluding food and energy –
a 0.2% increase. The pace of CPI growth was unchanged from the month prior (another 0.2% increase). The
primary contributors to CPI growth were indices for used cars and trucks and new vehicles (accounting for 90% of
the growth). On average, during calendar year 2009 we have registered month-over-month increases in CPI of
0.25% after an average monthly decline of 1.1% in Q4 2008. Advances in CPI have not accelerated by FYE2009,
which indicates continued uncertainty and sluggish demand growth reflected in still moderate prices. While there
have been concerns about the stimulus plan putting downward pressure on the dollar and spiraling up inflation, we
do not see any significant inflationary pressures within the next 1-2 years. We anticipate CPI growth reaching about
2.8% within 2 years.
Unemployment
The unemployment rate continued climbing in FY2009 from 6.8% in November 2008 to 10.2% in October 2009. In
the most recent Employment Situation report, nonfarm payroll employment declined 190,000 with the largest losses
in construction, manufacturing and retail trade. October's drop in seasonally adjusted nonfarm payroll employment
followed declines of 154,000 in August and 219,000 in September. We see unemployment rate peaking around 10%
and reaching 9.85% by 1H 2010 and 7.3% in 2 years. While recovery is looming, we anticipate continued
uncertainty in the job market, as we have seen reflected in the sudden acceleration of nonfarm payroll employment
decline registered in September 2009.
Interest Rates
In the near term, with both moderate growth expectations and moderate inflation expectations, we believe that
interest rates will move little over the next 12 months, particularly short rates. While treasuries are no longer fiercely
sought after as a safe haven and investors are re-entering the stock market, we expect rates to continue climbing but
no significant steepening of the yield curve. The current Fed Funds target rate remains at 0-0.25%, which we
anticipate to remain unchanged as no tightening policy is in sight during the first half of FY 2010. Given only
moderate inflationary concerns over the next couple of years, we do not expect the federal funds rate to exceed the
target 2% in that timeframe.
11
Oil Prices
Energy prices remained highly volatile this year; in general, prices increased. Oil prices in particular ranged from
below $35 per barrel in December 2008 to over $80 per barrel in late 2009. The primary reason for the price
dropping below $35 was decreased demand due to recessionary conditions. As economic conditions improved
during the year though, oil prices increased. Now at the end of the year, though demand has increased, supply
exceeds demand and is pressuring prices lower. Annual international demand decreased for the first time in many
years in 2009 and additional supply was added. Relative stability in Nigeria, increasing production in Russia and
announcements in Iraq suggest supply will remain high going forward in relation to demand. OPEC has publicly
announced that it is comfortable with oil prices in the $68-73 per barrel price range. As of November 30, 2009, oil
was trading near $77 per barrel. We expect oil prices to average $78 per barrel throughout 2010 in part due to a
forecast of flat global demand for oil.
Consumer Confidence
Consumer confidence was depressed this year at historically low levels. Consumer confidence is an indicator of the
public‘s confidence about the health of the U.S. economy that reflects the public‘s optimism or pessimism and the
nation‘s mood. Low consumer confidence suggests low future consumer spending because consumers feel less
confident about their financial and employment prospects. As consumer spending accounts for more than two-thirds
of the economy, consumer confidence is very important to the health of the overall economy. Decreases in
confidence about the current and future state of economy usually trigger decreases in borrowing and spending. In
2009, rising unemployment, lower average wages and large drops in personal wealth encouraged consumers to focus
on paying off debt and saving, rather than spending.
Consumer confidence posted a slight gain in November 2009, up from all-time lows earlier in the year when the
Consumer Confidence Index was below 40. As of the end of November, the Consumer Confidence Index is 49, an
improvement from October‘s level of 48.7. Despite this slight increase, consumer confidence still remains low.
Rather than being viewed a sign of improving conditions, the short-term uptick in the confidence index was
attributed to a decrease in the percent of consumers expecting conditions to worsen. We expect consumer
confidence to slowly increase as unemployment stabilizes and the Obama Administration increases efforts to boost
the economy.
Foreign Exchange Rates
Foreign exchange rates can have great impact on both the operating and financial performance of U.S. export-
oriented companies, companies that have significant operations overseas, and foreign companies that are currently
listed on the U.S. stock market. The dollar has strengthened comparatively, however much of this strength was
attributed to a flight to safety. With expectations of continued low interest rates, continued expansion of the money
supply and skyrocketing national debt in the United States, we believe the dollar will weaken and this will be a trend
that lasts well into 2010.
12
Basic Materials 4.47% of the Active Portfolio
Analyst: John Culley 3.53% of the S&P 500 Index
The current holdings in the basic materials sector are BHP Billiton (BHP) and Sherwin-Williams (SHW). The
materials sector has seen commodity values rebound sharply over the past year as investors priced in a recovery and
moved cash back into riskier assets. Looking ahead to 2010, we make the case that commodity prices may climb
further in the first half of the year given the current low interest rate environment and additional economic stimulus
spending that will increase the demand for commodities. While overweighting the materials sector was a smart
decision in 2008, we see little upside in the sector currently and we look to bring the sector back to market weight.
With a portfolio weight of 4.47%, the fund‘s basic materials sector is currently 26.7% over weight compared with
the fund‘s S&P 500 benchmark, before rebalancing.
Of the 4.47% portfolio weighting, BHP Billiton became our major position as it outperformed our other materials
holding, Sherwin-Williams. While Sherwin-Williams outperformed our benchmark during the crisis last year, the
Company has not rebounded with its peers. Instead, the Company has underperformed due to its exposure to U.S.
consumer spending, the domestic real estate market, and as customers have shifted from away professional
contractor painting to do-it-yourself painting. We see Sherwin-Williams as fairly priced and look for the Company
to underperform our benchmark over the next six months. Therefore, we recommend selling Sherwin-Williams and
replacing it with Syngenta when we rebalance the Fund.
Sherwin-Williams (SHW) 1.68% of Active Portfolio SELL Recommendation
Key Stock Statistics
Price as of November 30, 2009 $60.84 Price/Earnings (ttm) 17.16
52-Week Price Range $42.19-64.13 Price/Book 4.10
52-Week Return 5.96% Price/Sales 0.97
Market Capitalization (B) $6.90B ROA (ttm) 9.44%
Shares Outstanding (M) 113.34 ROE (ttm) 24.45%
Institutional Ownership 73.60% 2008 EPS $4.08
Beta .64 2009 EPS (est.) $3.25
Dividend Yield 2.30% 2010 EPS (est.) $3.79
The Sherwin-Williams Company provides paint, coatings and related products to professional, industrial,
commercial and retail customers. Founded in 1866 with headquarters in Cleveland, Ohio, Sherwin-Williams
operates primarily in North and South America, but also conducts operations in Europe and Asia.
The Paint Stores Group operates 3,346 Sherwin-Williams retail outlets across the U.S. These outlets sell paints,
stains, coatings, caulks, applicators, wall coverings, floor coverings, spray equipment and related products. The paint
stores customers include: Do-it-yourselfers, professional painting contractors, home builders, property managers,
architects, interior designers, marine renovators, and original equipment manufacturers. The retail stores sell the
coatings and equipment under several highly recognizable brands including: Sherwin-Williams®, ProMar®,
SuperPaint®, A-100®, Duron®, PrepRite®, Duration®, Master Hide®, ProClassic®, Classic 99®, MAB™,
Columbia™, and Express Tech®.
BHP Billiton (BHP) 2.80% of Active Portfolio HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $75.30 Price/Earnings (ttm) 34.86
52-Week Price Range $33.09 - $78.75 Price/Book 5.06
13
52-Week Return 94.7% Price/Sales 4.00
Market Capitalization (B) $209.33 ROA (ttm) 13.08%
Shares Outstanding (M) 2,780 ROE (ttm) 15.01%
Institutional Ownership 7.20% 2009 EPS $1.06
Beta 1.44 2010 EPS (est.) $2.23
Dividend Yield 2.2% 2011 EPS (est.) $2.95
BHP Billiton is the largest diversified natural resources company in the world. The company extracts and produces
several commodities including: oil, natural gas, aluminum, copper, lead, zinc, gold, silver, diamonds, titanium,
phosphate, nickel, iron ore, metallurgical coal and thermal coal. At year end 2008, BHP Billiton was #1 supplier of
seaborne traded met coal, #3 supplier of iron ore, copper, silver, nickel, and lead, and the 10th largest petroleum
company in the world, based on production.
The Company was formed in 2001 when Broken Hill Proprietary Company (BHP) of Australia merged with Billiton
based in the United Kingdom. In its current form, BHP Billiton functions as a dual-listed with BHP Billiton Limited
shares trading on the Australian stock exchange and BHP Billiton Plc shares listed on the London Stock Exchange.
In addition, both shares are listed as ADR‘s on the New York Stock Exchange. While both companies have retained
separate corporate identities, they are operated and managed as if they were one unified company. The company
maintains its headquarters in Melbourne, Australia and reports year end results on June 30th.
The company operates in nine distinct Customer Sector Groups aligned with the company‘s diversified commodity
businesses. These sector groups include: Petroleum, Aluminum, Base Metals, Diamonds and Specialty Products,
Stainless Steel Materials, Iron Ore, Manganese, Metallurgical Coal, and Energy Coal.
Syngenta AG (SYT) Not Currently Held BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $53.51 Price/Earnings (ttm) 21.13
52-Week Price Range $30.80-57.74 Price/Book 3.74
52-Week Price Return 70.10% Price/Sales 2.38
Market Capitalization (B) $26.18 ROA (ttm) 6.58%
Shares Outstanding (M) 465.90 ROE (ttm) 17.96%
Institutional Ownership 7% 2008 EPS $2.95
Beta 0.42 2009 EPS (est.) $3.10
Dividend Yield 1.90% 2010 EPS (est.) $3.47
We looked at Syngenta AG because of its leading position in the agrochemicals industry. We expect long-term
growth of demand in agrochemicals and seeds as higher yields become a bigger concern for farmers. We believe
Syngenta should benefit from the trends in market and expect its stock to capture the long-term upside potential of
the growth in demand. Moreover, as we see the company investing in the portfolio conversion of its seeds segment,
we consider that SYT will gain a stronger position in the market over the long-term.
Consumer Discretionary 9.41% of the Active Portfolio
Analyst: Iana Stahov 9.36% of the S&P 500 Index
The Consumer Discretionary Sector includes the following industries: Apparel/Accessories; Appliance & Tools;
Audio & Video Equipment; Auto & Truck Manufacturers; Auto & Truck Parts; Footwear; Furniture & Fixture;
Jewelry & Silverware; Recreational products; Textile-Non Apparel; Tires and Retail Services. The current Henry
Fund Holdings in this sector as of November 30, 2009 are Target Corp. (TGT; Discount Retailing), DirecTV Group,
Inc. (DTV; Cable & Satellite), The Walt Disney Co. (DIS; Media Broadcasting & Entertainment) and Apollo Group,
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Inc. (APOL; Online Education).
The Consumer Discretionary sector performance is highly dependent on consumer spending, consumer confidence
and disposable income. The current weakened economy poses the biggest challenge on the sector as consumers still
have strong concerns about their future income and are more reluctant to spend on discretionary items. As the
consumer discretionary sector recovered though 2H 2009, DTV, TGT and DIS registered FY2009 appreciations of:
43.71%, 37.91% and 34.19%, respectively. Our holdings performed in line with the S&P500 Discretionary Index
(+39.81%) and performed twice better as the broad S&P500 at +22.25% YTD.
Given our projections of sustainable high unemployment around 9.85% in 1H 2010 and deceleration in Real GDP
growth along with increasing consumer confidence and flat oil prices, we anticipate sluggish recovery in
discretionary through 2010. As such, we have decided to neutral-weight our position in the Consumer Discretionary
sector. Besides the new holding Apollo Group, Inc. added in 1H 2009 we have not added new securities. After
executing the 2H 2009 trades, we will remain with the same holdings: Target, DirecTV, Walt Disney and Apollo
Group.
Target Corp. (TGT) 3.11% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $46.56 Price/Earnings (ttm) 16.25
52-Week Price Range $25.00- $51.77 Price/Book 2.38
52-Week Return 37.9% Price/Sales 0.55
Market Capitalization (B) $35.02 ROA (ttm) 5.7%
Shares Outstanding (M) 752.2 ROE (ttm) 15.1%
Institutional Ownership 87.7% 2008 EPS $2.86
Beta 1.09 2009 EPS (est.) $3.16
Dividend Yield 1.40% 2010 EPS (est.) $3.53
Target Corporation (TGT) is the second largest discounter in the U.S., after Wal-Mart, and, as of November 5, 2009,
it operates 1,743 stores across the country. Target is a relative up-scale discount retailer compared with other
discount stores, with a focus on providing quality, fashion, private and exclusive brand products to consumers.
Target has experienced a tough year as consumers have been trading down to deep-discounters such as Wal-Mart.
TGT is positioned in the middle between the typical department stores and the deep-value retailers, which we
believe provides TGT with leverage during a sluggish economic recovery. As consumers start trading up and
drifting away from deep-discounters to more quality and designer-oriented retailers, they will be attracted by Target.
A slow economic recovery will not warrant an immediate return to the typical department stores just yet. The
company‘s same-store sales were basically flat in October (-0.1%) after a 1.7% decline in September. We assess its
comparable store sales have bottomed and believe that TGT‘s fundamentals are attractive, as it has continued to
diversify its product line into consumables and commodities and invest in new stores in underserved markets. We
anticipate the recent addition of fresh produce to its sales mix to increase store traffic and volume to spill-over into
non-necessities product categories. Moreover, the company‘s current stock price remains attractive at forward P/E
of about 13.1 versus industry average of 15.6. We believe the company‘s stock has limited downside risk and
substantial upside potential. Therefore, we recommend a Buy on Target.
DirecTV (DTV) 3.02% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $31.63 Price/Earnings (ttm) 24.56
52-Week Price Range $18.81 - $31.91 Price/Book 7.23
52-Week Return 43.7% Price/Sales 1.41
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Market Capitalization (B) $30.27 ROA (ttm) 8.6%
Shares Outstanding (M) 956.9 ROE (ttm) 26.0%
Institutional Ownership 53.7% 2008 EPS $1.36
Beta 0.88 2009 EPS (est.) $1.38
Dividend Yield 0% 2010 EPS (est.) $2.21
The DirecTV Group is a world-leading provider of digital television entertainment services in the US and Latin
American. It engages in acquiring, promoting, selling and distributing digital entertainment programming via
satellite to residential and commercial subscribers. With about 81% U.S. subscribers, DTV has over 22.8 million
total subscribers as of Q3 2009, which translates in a 8.2% increase over 1 year ago. DirecTV has achieved
significant growth in the past years due to successful implementation of its competitive strategy which focused on
HD technology, exclusive premium sports content, and utilizing technology to provide value added service. Since
the company achieved the goal to provide the best customer experience in the industry, DirecTV continues to attract
new subscribers while maintaining high retention rate.
With steady growth in both revenue and net subscribers, in Q3 2009 DirecTV registered record free cash flow and a
robust share repurchase program at $1.8B to-date. The fact that about 2/3 of its new subscribers in the quarter signed
up for HD and/or DVR services (highest level ever), indicates the company is strongly positioned and its recovery
would likely be much stronger than for the economy as a whole. Going forward, we have strong confidence about
the company‘s superior competitive advantage and believe its ability to capitalize on the migration to HD. Based on
the April 2009 analyst report, we recommend a Buy on DirecTV stock.
The Walt Disney Co. (DIS) 2.13% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $30.22 Price/Earnings (ttm) 17.13
52-Week Price Range $15.14– $30.87 Price/Book 1.60
52-Week Return 34.2% Price/Sales 1.50
Market Capitalization (B) $55.00 ROA (ttm) 5.7%
Shares Outstanding (M) 1,820 ROE (ttm) 10.0%
Institutional Ownership 67.5% 2008 EPS $1.82
Beta 1.17 2009 EPS (est.) $1.88
Dividend Yield 1.20% 2010 EPS (est.) $2.18
The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with
operations in four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer
Products. The Company employed approximately 144,000 people as of October 3, 2009. The company‘s assets
include ESPN, ABC network and Disney Studios and Parks.
Disney is the most diversified media and entertainment company that is bale to cross-leverage content across all of
its segments. Like many other media companies, Disney‘s stock suffered in the recent economic downturn and its
FY2009 EPS declined 20% YoY but beat analysts‘ expectations by 12% in Q4. While operating margins in Media
remained flat (supported by strong cash flow from cable networks) and Parks declined only about 3%, margins in
Studios and Consumer Products dipped the most by 12 and 15%, respectively. Key headwinds to cash flow have
been declines in parks attendance, lack of a strong franchise in Studios and the contraction in consumer spending
on its branded products.
A key development has been Disney‘s announcement to acquire Marvel Entertainment for $50/ share or a 29%
premium at announcement. The deal is expected to be completed by the end of calendar 2009. We asses this
acquisition via Marvel‘s valuable character copyrights to add about $2.5 to Disney‘s stock. We anticipate strong
top-line synergies as MVL characters will be leveraged across Disney‘s segments and achieve the scale and
international reach stand-alone Marvel did not have. As a result, we recommend a Buy on Disney‘s stock.
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Apollo Group, Inc. (APOL) 1.15% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $57.07 Price/Earnings (ttm) 15.22
52-Week Price Range $52.79 - $90.00 Price/Book 7.62
YTD Return -4.6% Price/Sales 2.22
Market Capitalization (B) $8.84 ROA (ttm) 27.6%
Shares Outstanding (M) 154.8 ROE (ttm) 60.1%
Institutional Ownership 91.2% 2008 EPS $4.22
Beta -0.10 2009 EPS (est.) $5.26
Dividend Yield 0% 2010 EPS (est.) $6.15
Apollo Group, Inc. is the most recent addition to the Consumer Discretionary Portfolio (included in May 2009) and
primarily known for its University of Phoenix. Online education companies have a recessionary-resistant profile
and, given the outlook of a sluggish recovery and still high unemployment levels we anticipate enrollment at
Apollo‘s schools to continue robust. Even post-downturn, given that many companies targeting aggressive cost
controls moved operations abroad, we anticipate many manufacturing jobs to be lost. As a result, people would
have to respecialize and, preferably, quickly and at a lower cost, an opportunity offered via Apollo‘s various online
education programs. Overall, we believe there are two key drivers for online education programs: wage gaps that
will push people to pursue degrees and the U.S. continued shift from a manufacturing to a knowledge-based
economy. As traditional schools simply do not have the capacity to absorb the entire 19.1M fall 2011E enrollment,
online schools such as Apollo will capture increasing enrollment.
After APOL stock reached $75.5 in mid-October 2009 or a 28% appreciation relative to our purchase price (mid-
May), the stock dipped 24% due the SEC investigation into the company‘s revenue recognition practices. It is
anticipated the investigation will spill-over into other online education stocks. Part of a new emerging industry,
these companies are vulnerable to regulation compliance mishaps before better controls are established. APOL is
currently trading at a 9 forward P/E which reflects a significant discount given the continued robustness of its cash
flow and enrollment. We will continue monitoring the evolution of the SEC investigation.
Consumer Staples 8.14% of the Active Portfolio
Analyst: Monty Gupta 11.72% of the S&P 500 Index
The Consumer Staples sector has been the slowest growth sector in 2009. Year to date through November 30, 2009,
while the S&P 500 registered a growth of 22%, the Consumer Staples appreciated by 13%. In the year of economic
recovery and stock market rebound, the Consumer Staples stocks are expected to bounce back less than other
sectors. In anticipation of this slower than other sectors growth for Consumer Staples, we took a substantially
underweight position and invested only 8.14% of our portfolio in staples against 11.72% weight of Consumer
Staples in S&P 500. Over the past two years of stock market rollercoaster ride, Henry Fund has continuously
changed its exposure to Consumer Staples sector to take advantage of our analysts‘ economic prediction, and the
decision has reaped substantial advantages.
At the beginning of 2009, the Consumer Staples portfolio included three stocks: Safeway (SWY), Proctor & gamble
(PG) and Central European Distribution Company (CEDC). All these stocks have relatively high-end product
portfolio from Consumer Staples sector point of view. As we were witnessing the economic rebound in March 2009,
we were comfortable holding all these stocks to take advantage of the economic recovery. However, by November
2009, as the economy has turned around and the early benefits of an economic recovery have been harvested, we
believe that some of these stocks do not have a large upside left. Moreover, due to major changes in the individual
companies in our portfolio as well as in couple of companies outside of our portfolio, we are changing our position
in few Consumer Staples holdings. We have decided to exit CEDC and SWY and add Wal-Mart (WMT) and Kraft
17
Foods (KFT) to our portfolio.
Henry Fund firmly believes that the global economy is on the cusp of strong recovery. We estimate that in the next
6-12 months, the Consumer Staples sector will not witness as fast growth as other sectors. Therefore, we will
underweight the sector by close to 25% in comparison to the benchmark S&P500.
Wal-Mart Stores Inc. (WMT) Not Currently Held BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $54.63 Price/Earnings (ttm) 15.03
52-Week Price Range $46-59 Price/Book 3.08
52-Week Return -0.18% Price/Sales 0.51
Market Capitalization (B) $211B ROA (ttm) 8.59%
Shares Outstanding (B) 3.85 ROE (ttm) 20.29%
Institutional Ownership 36.5% 2008 EPS $3.13
Beta 0.2 2009 EPS (est.) $3.39
Dividend Yield 2.1% 2010 EPS (est.) $3.62
With revenues of $401 billion and market capitalization of $198 billion, Wal-Mart is by far the largest retail chain in
North America. The company operates retail stores in various formats across the globe and provides a broad
collection of merchandise and services at Every Day Low prices (EDLP).
The company operates in an extremely competitive industry offering stiff competition both in US and the countries
globally it serves. Because of its format and product offerings WMT faces strong competition from other department
stores, discount store, supermarkets, drug stores, specialty stores, and warehouse clubs. Many of WMT competition
are regional, national or international brick-and-mortal retail stores, as well as catalogue businesses and internet-
based retail companies. WMT operations are divided into three divisions including Wal-Mart US, Sam‘s Club and
Wal-Mart International. In 2009, Wal-Mart US is the largest contributor with 63.7% of total revenue, followed by
Wal-Mart International at 24.6% and Sam‘s Club at 11.7%.
WMT is well positioned to gain market share in this slow growing economic environment as customers trade-down
both in the quality of the products they select and the stores they chose for shopping. WMT‘s aggressive pricing
strategy backed-up by creative initiatives like ‗productivity loop‘, higher investment in inventory processes resulting
in lower costs and reduced shrinkage, will empower WMT to offer better prices. In addition, the ongoing stores
remodel project will improve customer experience and drive traffic, as well as bring cost savings. WMT will start
reaping the gains next year onwards. WMT‘s thrust on online sales and leveraging brick-and-mortar model to
empower online sales will generate substantial cyber sales.
Kraft Foods Inc. (KFT) Not Currently Held BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $26.68 Price/Earnings (ttm) 15.74
52-Week Price Range $20.81-29.84 Price/Book 1.57
52-Week Return -0.48% Price/Sales 0.98
Market Capitalization (B) $39.4 ROA (ttm) 5.06%
Shares Outstanding (B) 1.48 ROE (ttm) 9.40%
Institutional Ownership 57.2% 2008 EPS $1.95
Beta 0.6 2009 EPS (est.) $1.96
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Dividend Yield 4.4% 2010 EPS (est.) $2.15
Kraft Foods is one of the leading manufacturer and distributor of branded packaged food and beverages in the
World. It operates in five major consumer segments, namely Beverages, Cheese, Convenient Meals, Grocery and
Snacks. Kraft‘s major brands include Oscar Mayer, Kool-Aid, Jell-O, Maxwell House, Velveeta, Oreo, Honey Maid,
Nabisco and Ritz. Kraft markets foods in 150 countries and has production facilities in 68 countries.
With revenues of $42 billion and a market capitalization of $39 billion in 2008, Kraft Foods is one of the largest
branded food and beverage companies in the World. Kraft Foods has nine brands with annual global sales of $1
billion each. These brands include Kraft Cheese and Kraft Dinners and Dressings; Maxwell House Coffee; Oscar
Mayer meats; Nabisco cookies and crackers and Oreo brand; Philadelphia cream cheese; Jacobs coffees; Milka
chocolates; and LU biscuits.
We are recommending a buy for Kraft Foods in anticipation of improved net profit and higher profit margins. We
are also expecting lower labor costs due to implementation of a restructuring program and higher cost synergies
because of product portfolio revamp. While the net revenue will be lower than 2008 because of overall reduction in
consumer spending and lower product costs, it will not impact KFT profitability.
Proctor & Gamble (PG) 2.71% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $62.24 Price/Earnings (ttm) 14.50
52-Week Price Range $43-64 Price/Book 2.78
52-Week Return 6.25% Price/Sales 2.34
Market Capitalization (B) $182 ROA (ttm) 7.25%
Shares Outstanding (B) 2.92 ROE (ttm) 17.05%
Institutional Ownership 58.8% 2008 EPS $3.86
Beta 0.57 2009 EPS (est.) $4.18
Dividend Yield 2.8% 2010 EPS (est.) $4.45
Procter & Gamble is the largest consumer staples companies in the world and among the top-10 market capitalized
companies. P&G is an undoubted leader in the household durable product category. With a 171-year history, Procter
& Gamble has grown substantially over the years because of its strong management, nimble-footedness, and
receptiveness to change.
Procter & Gamble will continue to be one of the safest investment prospects. It will continue to generate higher
revenue, increased margins, and high return on invested capital because of its superior product offerings, diversified
product portfolio, geographic diversification, and creation of product synergies through acquisitions and divestitures.
The company has announced continuous product portfolio restructuring, strengthening its portfolio through
acquisition and divestiture. Further restructuring – disposing underperforming brands and acquiring brands that
provide cost and brand portfolio synergies, will assist in improving bottom lines due to revenue synergies and cost
savings PG is shifting its product portfolio focus towards health, beauty and grooming products. Higher profit
margins and increased demands for innovative products will boost profit margins.
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CEDC 3.0% of Active Portfolio SELL Recommendation
Key Stock Statistics
Price as of November 30, 2009 $27.51 Price/Earnings (ttm) 15.34
52-Week Price Range $6-36 Price/Book 1.09
52-Week Return 29.52% Price/Sales 1.12
Market Capitalization (B) $1.59 ROA (ttm) 3.12%
Shares Outstanding (M) 58 ROE (ttm) 7.01%
Institutional Ownership 61.3% 2008 EPS $(0.38)
Beta 3.09 2009 EPS (est.) $3.34
Dividend Yield NA 2010 EPS (est.) $4.14
Central European Distribution Corporation (CEDC) is an integrated alcoholic beverage company. Headquartered in
Poland, CEDC exports its Vodka products to other countries and imports and distributes other alcoholic beverages
like wines, spirits and beer in Poland, Russia and Hungary. CEDC offers a portfolio of over 700 brands in various
categories and is the third largest alcoholic beverage company in the world by market capitalization.
We have issued a sell rating for CEDC because the stock is within our projected price range. We are also afraid that
with a beta of 3.09, this stock is extremely volatile and if the current economic weakness continues, CEDC would be
hit hard.
CEDC has inherent risks related to currency exchange rate that are neither predictable nor easy to mitigate.
Furthermore, with exception to inorganic growth through acquisitions, we do not see a strong business plan for
organic growth. Being extremely volatile and uncorrelated to the US market, CEDC takes away the stability which
the Consumer Staples stocks are expected to add to the portfolio. We are therefore, closing our position in CEDC.
ENERGY 14.45% of the Active Portfolio
Analyst: Alan Adams 12.19% of the S&P 500 Index
The current holdings in the energy sector are Exxon Mobil Corporation (XOM), Schlumberger (SLB), Peabody
Energy (BTU), Noble Corporation (NE), and Occidental Petroleum (OXY). This past year was marked by large
fluctuations in oil and natural gas prices. Oil prices declined below $40 per barrel earlier in the year and ended
November near $80 per barrel. Natural gas prices started the year above $7 per MMBTU, dropped to below $2 per
MMBTU and have gyrated between $2.5 to $5 per MMBTU at the end of the year. The volatility in prices was
primarily due to uncertainties in demand and increasingly high levels of inventory and supply. As global economies
recovered, the energy sector experienced gains in tandem with oil and gas prices, with the notable exception of
Exxon Mobil.
Going forward, we expect global energy demand to remain flat or to grow slightly during 2010 as economies across
the globe recover from the economic downturn. We hold companies in the energy sector that will provide the
portfolio with substantial returns when the economy recovery occurs and will thrive in any additional downturn as
well. The fund started the year holding Exxon Mobil, Schlumberger, Noble Corp., Peabody Energy and Chesapeake
Energy. Although Chesapeake had promising natural gas assets and increasing production, we sold it in December
due to poor corporate governance, expectations of depressed natural gas prices and oversupply of natural gas in the
U.S. It is our belief that alpha will come from our energy sector holdings with a bias toward oil, greater exposure to
international operations and strong balance sheets. Each of our energy holdings is well capitalized and able to make
opportunistic acquisitions as other firms increasingly sell assets to fund operations. We positioned the energy sector
for a slow recovery and are slightly overweighting it going into 2010.
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Exxon Mobil Corp. (XOM) 3.73% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $75.07 Price/Earnings (ttm) 16.96
52-Week Price Range $61.86 - $83.64 Price/Book 3.20
52-Week Return -4.85% Price/Sales 1.28
Market Capitalization (B) $346 ROA (ttm) 7.22%
Shares Outstanding (B) 4.75 ROE (ttm) 18.10%
Institutional Ownership 48.20% 2008 EPS $8.78
Beta 0.35 2009 EPS (est.) $3.71
Dividend Yield 2.30% 2010 EPS (est.) $4.59
ExxonMobil is the world‘s largest integrated oil and gas company. ExxonMobil was formed from the merger of
Exxon and Mobil in 1999. Both organizations were originally part of the Standard Oil Trust formed back in 1882
by John D. Rockefeller. ExxonMobil competes in every aspect of the hydrocarbon exploration, production and
supply chain. The business is divided into three major operating units: Upstream, Downstream, and Chemical.
The Upstream portion of ExxonMobil‘s business deals with the exploration, development, production, and gas and
power marketing. Downstream refers to the refining and marketing of petroleum products such as motor fuels and
lubricants. The Chemical business unit holds leadership positions for some of the largest-volume and highest-
growth petrochemicals in the world.
Exxon Mobil is expected to outperform the market and its peers based on its financial strength, the diversity of its
business, and its ability to increase reserves at a rate higher than production. Large natural gas facilities in Qatar
will help it boost its production and profits in 2010, and beyond.
Schlumberger (SLB) 2.53% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $63.89 Price/Earnings (ttm) 21.30
52-Week Price Range $35.05-71.10 Price/Book 3.81
52-Week Return 40.05% Price/Sales 3.10
Market Capitalization (B) $73.70 ROA (ttm) 8.98%
Shares Outstanding (B) 1.20 ROE (ttm) 18.78%
Institutional Ownership 76.9% 2008 EPS $4.54
Beta 1. 81 2009 EPS (est.) $2.77
Dividend Yield 1.4% 2010 EPS (est.) $3.03
Schlumberger was founded in 1916 and is the world‘s leading oilfield services company supplying technology,
project management and information solutions to optimize performance in the oil and gas industry. Schlumberger is
comprised of two business segments: Oilfield Services and WesternGeco. Schlumberger‘s Oilfield Services is the
world‘s premiere oilfield services company providing technology services and solutions to the petroleum industry.
WesternGeco is the largest and most technologically advanced surface seismic company. Schlumberger Oilfield
Services is run through its 29 oilfield services Geomarket regions that are grouped into 4 geographic areas: North
America, Latin America, Europe/CIS/Africa and Middle East & Asia. WesternGeco is the world‘s leading seismic
company providing comprehensive reservoir imaging, monitoring, and development services. Schlumberger‘s
geographic diversification and superior technologies will continue to make it a leader in oilfield services. We expect
its reliance on international revenues and its increasing number of deepwater projects to enable it to outperform its
peers in 2010.
The maturation of existing oil wells and development of new technologies will continue to drive demand for
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Schlumberger‘s services. Oil and natural gas are becoming more difficult to find and recover. With oil and gas
companies constantly striving to replace their reserves, Schlumberger is natural partner and beneficiary. We expect
Schlumberger to have an improved year in 2010.
Occidental Petroleum (OXY) Not Currently Held BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $80.79 Price/Earnings (ttm) 25.44
52-Week Price Range $47.50- 85.20 Price/Book 2.19
52-Week Return 32.10% Price/Sales 4.20
Market Capitalization (B) $61.69 ROA (ttm) 6.33%
Shares Outstanding (B) 811.67 ROE (ttm) 8.78%
Institutional Ownership 81.20% 2008 EPS $8.39
Beta 1.02 2009 EPS (est.) $3.42
Dividend Yield 1.70% 2010 EPS (est.) $6.86
Occidental Petroleum Corporation is international oil and gas exploration and production company, and a major
North American chemical manufacturer. The company was founded in California in 1920. In 1961, OXY made its
first major discovery in the Sacramento Valley. The company expanded operations through a number acquisitions:
Cities Services Company in 1982, the U.S. Department of Energy‘s interest in the Elk Hills Naval Petroleum
Reserve in 1998, Altura Energy in 2000, and Vintage Petroleum assets in 2006. At the end of 2008, OXY was the
fourth-largest U.S. oil and gas company, based on equity market capitalization. Occidental has three segments: 1)
Oil and Gas; 2) Chemicals; and 3) Midstream, Marketing, and Other.
We expect recent acquisitions, including Phibro L.L.C., discoveries in California and new agreements in the
Middle East to enable the company to exceed current expectations. Also, given recent prices favoring oil and the
relative strength of international economies versus the U.S., OXY‘s focus on oil and international exposure
position it well to outperform its peers.
Chesapeake Energy (CHK) 2.52% of Active Portfolio SELL Recommendation
Key Stock Statistics
Price as of November 30, 2009 $23.92 Price/Earnings (ttm) N/A
52-Week Price Range $13.27-30.00 Price/Book 1.26
52-Week Return 38.51% Price/Sales 1.77
Market Capitalization (B) $14.92 ROA (ttm) -17.11%
Shares Outstanding (M) 647.71 ROE (ttm) -43.57%
Institutional Ownership 76.0% 2008 EPS $3.55
Beta 1.32 2009 EPS (est.) $2.02
Dividend Yield 1.30% 2010 EPS (est.) $2.44
Chesapeake Energy Corporation is a natural gas and oil company. It explores, develops and acquires properties for
production of natural gas and crude oil, and it provides marketing and midstream services for natural gas and oil for
other working interest owners in properties in which it operates. It has properties in: Alabama, Arkansas,
Colorado, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, New Mexico, Nebraska, New York,
Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, Virginia, and West Virginia. As of December 31, 2008,
all of Chesapeake‘s twelve trillion cubic feet equivalent (Tcfe) of proved reserves were onshore in the U.S., 94% of
which are natural gas.
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We sold Chesapeake in December due to poor corporate governance, expectations of depressed natural gas prices
and oversupply of natural gas in the U.S. Although demand is expected to increase by 22% over the next 25 years in
part due to the fact that it is the cleanest fossil fuel, supply of natural gas in the U.S. has doubled in the last six years
and international LNG imports to the U.S. are expected to increase. Chesapeake is currently in a position now in
which it must produce more gas in order to pay for capital expenditures.
Peabody Energy Corp. (BTU) 2.96% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $44.46 Price/Earnings (ttm) 17.33
52-Week Price Range $16.00-88.69 Price/Book 3.01
52-Week Return 91.23% Price/Sales 1.73
Market Capitalization (B) $11.91 ROA (ttm) 6.58%
Shares Outstanding (M) 267.83 ROE (ttm) 18.33%
Institutional Ownership 85.20% 2008 EPS $3.55
Beta 1.34 2009 EPS (est.) $1.56
Dividend Yield 0.70% 2010 EPS (est.) $2.65
With sales of almost $6 billion in 2008, Peabody Energy Corporation1 is the world‘s largest private sector coal
company. Peabody operates primarily as a thermal coal producer in the U.S., but also has thermal and met coal
operations in Australia and Venezuela. The company owns, operates or has interests in 41 coal mines under three
segments: Western U.S. Mining, Midwestern U.S. Mining and Australian Mining. In addition, Peabody operates a
coal trading segment that supplements its mining operations.
Of all the coal companies in our universe, we think Peabody will be the least impacted by potential environmental
regulation changes, such as the Waxman-Markey bill that has yet to pass through the Senate. The Company‘s
domestic operations are primarily in clean coal, which will most likely be less penalized than the dirtier coal in the
Eastern U.S. Also, Peabody is expanding its metallurgical coal operations in the Asia-Pacific region, which will
benefit from increasing demand in those local emerging markets. We maintain our BUY recommendation on
Peabody with a six month target price of $46.
Noble Corp. (NE) 2.75% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $41.31 Price/Earnings (ttm) 6.37
52-Week Price Range $20.03-45.18 Price/Book 1.61
52-Week Return 54.84% Price/Sales 2.87
Market Capitalization (B) $10.82 ROA (ttm) 17.42%
Shares Outstanding (M) 261.94 ROE (ttm) 29.01%
Institutional Ownership 76.30% 2008 EPS $5.90
Beta 1.04 2009 EPS (est.) $6.33
Dividend Yield 0.90% 2010 EPS (est.) $5.41
Noble Corp provides contract drilling services for the oil and gas industry worldwide. The company operates a fleet
of 63 mobile offshore drilling units consisting of 43 jackups, 13 semisubmersibles, four drillships and three
submersible rigs. The rig count includes five units under construction, including one premium jackup, one ultra-
deepwater drillship and three deepwater semisubmersibles. Of the rigs under construction, all have acquired
customer contracts to be executed upon completion except for the drillship, which was built on a speculative basis.
Noble operates in various regions around the world, with offices in the U.S, Canada, Switzerland, Nigeria, Mexico,
The Netherlands, Brazil, Singapore, and the U.A.E. As of December 31st, 2008, the company had 6,000 employees.
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At the time the report was written, in early 2009, we placed a BUY recommendation on the stock with a target price
of $34. Since then, fundamentals for the energy services industry have improved dramatically with the price of oil
doubling to over $75 a barrel and energy companies rethinking their conservative capital spending plans for 2009
and 2010. We maintain our BUY recommendation on the stock.
FINANCIAL SERVICES
Analysts: Sebastian Bock and Anil Ramchandani
Our holdings in the financial sector currently represent 12.28% of the entire portfolio, which is underweighted
compared to the S&P index weight of 14.47%. Since financial sector was hit hard in the last year we continued to be
underweight on financials. More write-offs may have pushed this sector downwards and created a huge risk for our
portfolio. All of our holdings in the sector had positive returns. Our holdings include Banco Santander, Bank of
America, Franklin Resources, Chubb, and ETF Rydex - Financials. Returns were 74.4%, 8%, 70.8%, 19%, and
14.0%, respectively. In May, the fund purchased a Rydex Financials ETF because we did not have a stock
recommendation which could fill the huge underweight on this sector. At year end, the fund proposed sell on Rydex
Financials ETF and Franklin Resources. The fund also proposed acquiring Goldman Sachs and State Street.
TRAVELERS (TRV) Sold Position SELL Recommendation
Key Stock Statistics
Price as of November 30, 2009 $52.39 Price/Earnings (ttm) 8.97
52-Week Price Range $33.07 – 54.47 Price/Book 1.00
52-Week Return 34.96% Price/Sales 1.17
Market Capitalization (B) $28.62 ROA (ttm) 2.34%
Shares Outstanding (M) 546.37 ROE (ttm) 11.87%
Institutional Ownership 87.20% 2008 EPS $4.90
Beta 0.63 2009 EPS (est.) $5.00
Dividend Yield 2.40% 2010 EPS (est.) $6.06
The Travelers Companies, Inc. was created by the merger of Travelers Property Casualty Corporation and The St.
Paul Companies, Inc in 2004. The holding is one of the oldest property and casualty insurance organizations dating
back to 1853, and today it is among the top 10 players in the industry. The headquarters of the company is situated
in St. Paul, Minnesota, but it also has worldwide operations in Canada, Great Britain and Ireland. The main
operating segments are: Business Insurance, Financial, Professional & International Insurance and Personal
Insurance.
Although Travelers has a strong business, we wanted to position ourselves to take advantage of the performance of
emerging markets and be with the company which has strong core business. With its portfolio of mostly AAA rated
securities and municipal bonds, Travelers‘ investment portfolio had a less upside than its other competitors‘
portfolio. Moreover, a rise in combined ratio of Travelers meant that its core business is not performing well. The
overall consolidated GAAP combined ratio for Travelers was 92.5%, compared to 90.0% in 2007. As we found a
company whose investment portfolio was more exposed to emerging markets and had a more profitable core
business than Travelers, we recommended that we SELL Travelers‘ stock.
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CHUBB CORPORATION (CB) 3.08% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $50.14 Price/Earnings (ttm) 8.90
52-Week Price Range $34.44 – 53.79 Price/Book 1.08
52-Week Return -3.30% Price/Sales 1.32
Market Capitalization (B) $17.13 ROA (ttm) 3.44%
Shares Outstanding (M) 341.57 ROE (ttm) 13.01%
Institutional Ownership 85.10% 2008 EPS $5.00
Beta 0.52 2009 EPS (est.) $5.65
Dividend Yield 2.90% 2010 EPS (est.) $6.32
The Chubb Corporation (Chubb) was incorporated as a business corporation under the laws of the State of New
Jersey in June 1967. Chubb and its subsidiaries are referred to collectively as the Corporation. According to
A.M. Best, the P&C Group is the 11th largest U.S. property and casualty insurance group based on 2007 net written
premiums. The Chubb Group is divided into three strategic business units i.e. Commercial Insurance, Specialty
Insurance, and Personal Insurance. The Chubb group provides insurance coverage principally in the United States,
Canada, Europe, Australia, and parts of Latin America and Asia.
We chose to substitute Travelers with Chubb Corporation due its stronger core business than Travelers. In addition,
Chubb‘s portfolio consisted of various emerging market securities. As emerging markets were not witnessing the
same decline in their GDP as developed market did and moreover, as capital markets had taken a hit in emerging
markets, we expected emerging markets to rebound sooner than domestic market. This move diluted our exposure to
domestic markets. The overall consolidated GAAP combined ratio for Chubb was 88.7% in Q1 2009, compared to
82.9% in 2007. As this combined ratio was significantly lower than that of Travelers‘ 92.5%, Chubb came out to be
as a better pick than Travelers. After buying Chubb‘s shares, Obama announced a policy which will charge revenues
generated in other nations. Obama‘s new policy increased Chubb‘s effective tax rate by approximately 2%. By
incorporating this new data, Chubb was as good a Buy as Travelers was in terms of ―% upside‖ from current levels.
It is advised for the next analyst to keep an eye on any such policy changes which may negatively hamper ―Free
Cash Flow to Equity‖ and the combined ratio of the company.
FRANKLIN RESOURCES (BEN) 2.63% of Active Portfolio SELL Recommendation
Key Stock Statistics
Price as of November 30, 2009 $108.03 Price/Earnings (ttm) 28.11
52-Week Price Range $37.11 – 116.39 Price/Book 3.25
52-Week Return 77.83% Price/Sales 5.91
Market Capitalization (B) $24.77 ROA (ttm) 8.32%
Shares Outstanding (M) 229.25 ROE (ttm) 12.20%
Institutional Ownership 51.30% 2008 EPS $6.72
Beta 1.48 2009 EPS (est.) $3.55
Dividend Yield 0.80% 2010 EPS (est.) $5.85
Franklin Resources, Inc is a holding company for various subsidiaries that, together with the company, are referred
to as Franklin Templeton Investments, a global investment management organization offering investment choices
under the Franklin, Templeton, Mutual Series, Bissett, Fiduciary, and Darby brand names in over 30 countries
around the world and offers investment solutions and services in more than 150. Franklin Templeton Investments
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and its predecessors have been engaged in the investment management and related services business since 1947. The
company's headquarters are located in San Mateo, California. BEN employed 8,233 workers and had assets under
management (AUM) totaling $495.7B at August 31, 2009 in comparison to $507.3B at 30th
September 2008.
Net cash flows have remained under pressure over the last year. Although AUM grew significantly in last 1 year, net
cash flow was negative 1%. Thus, it means that Franklin Resources‘ AUM grew only on the back of market
appreciation. In addition, market appreciation of AUM was way less when compared to the market appreciation of
AUM of Goldman Sachs and State Street Global Advisors. With their high management fee and lower performance,
Franklin would lose lot of its business to its competitors. Hence, we believe that Franklin Resources should be sold
at such rich valuation.
GOLDMAN SACHS (GS) Not Currently Held BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $169.66 Price/Earnings (ttm) 37.27
52-Week Price Range $59.13 – 193.60 Price/Book 1.46
52-Week Return 114.79% Price/Sales 3.85
Market Capitalization (B) $87.22 ROA (ttm) 0.23%
Shares Outstanding (M) 514.08 ROE (ttm) 4.33%
Institutional Ownership 76.60% 2008 EPS $4.47
Beta 1.42 2009 EPS (est.) $19.51
Dividend Yield 0.90% 2010 EPS (est.) $16.22
Goldman Sachs (GS) is a global investment banking, securities and investment management firm that provides a
wide range of services to corporations, financial institutions, governments and high-net-worth individuals. Founded
in 1869, the firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and
other major financial centers around the world.
Goldman Sachs has sufficient liquidity and a fundamentally strong business. The FICC segment of Goldman Sachs
has been outperforming in recent past giving them some abnormal returns than what they have got in past. It can be
attributed to wide spreads in the market which were created during this crisis.
As we think that spreads will become narrower, FICC segment may start giving more normal returns as it has in the
past. However, other volume based businesses such as underwriting and financial advisory will do better. With
greater liquidity in market, stock markets and Asset Management business of Goldman Sachs will perform better.
Leverages generally tend to increase in a more liquid environment and this will help Security Services business of
Goldman Sachs.
State Street (STT) Not Currently Held BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $41.30 Price/Earnings (fwd) 9.22
52-Week Price Range $14.43 – 55.87 Price/Book 1.51
52-Week Return -1.92% Price/Sales 2.27
Market Capitalization (B) $21.23 ROA (ttm) 0.70%
Shares Outstanding (M) 494.67 ROE (ttm) 11.78%
Institutional Ownership 86.20% 2008 EPS $4.33
Beta 1.34 2009 EPS (est.) $4.07
Dividend Yield 0.04% 2010 EPS (est.) $4.31
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State Street Corporation, through its subsidiaries, provides a range of products and services for the institutional
investors worldwide. It operates in two divisions, Investment Servicing and Investment Management. These
divisions provide a range of products and services, which include mutual funds, collective investment funds and
other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and
other investment pools, and investment managers. The company was founded in 1832 and is headquartered in
Boston, Massachusetts. It operates in 27 countries and more than 100 geographic markets worldwide.
Assets under Custody (AuC) and Assets under Management grew by 9.5% and 11.54% in third quarter, respectively,
on the back of market appreciation of equity and fixed income assets, and new business.
We believe that State Street stock is suppressed due to litigations from CalPERS and CalSTERS. This litigation is
more tilted towards State Street. However, State Street has provided a loss provision for this litigation. Apart from
this, State Street, along with Goldman Sachs, are finance industry‘s fastest growing companies. State Street is not
directly exposed to the turbulences in the market as majority of its revenue come from Investment Servicing and
hedge funds and other institutional investors do not terminate their critical services even in the worst recession. State
Street‘s assets under custody and administration and assets under management have grown due to market
appreciation and by securing more business for the company and not many companies were able to do that in the last
quarter. Hence, we have a buy rating on this stock. A downgrade in STT‘s rating and a liquidity crunch (Tier 1
capital ratio below 6%) will trigger a sell discipline.
Moody’s Corp. (MCO) Not Currently Held BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $23.23 Price/Earnings (ttm) 15.36
52-Week Price Range $15.41-31.79 Price/Book N/A
52-Week Return 11.33% Price/Sales 3.44
Market Capitalization (B) $5.95 ROA (ttm) 23.55%
Shares Outstanding (M) 235.89 ROE (ttm) N/A
Institutional Ownership 98.40% 2008 EPS $1.87
Beta 1.18 2009 EPS (est.) $1.67
Dividend Yield 1.60% 2010 EPS (est.) $1.85
Moody‘s Corp (MCO) is a leading provider of global credit ratings, research, and analysis, covering fixed income
securities, other debt instruments and the entities that issue such instruments in the capital markets, and credit
training services. The company markets quantitative credit risk assessment products and services and credit
processing software to banks, corporations and investors in credit sensitive assets through its analytics division. The
company provides credit ratings over 11,000 corporate issuers, approximately 26,000 public finance issuers, and 100
sovereign nations.
The global financial crisis and the credit crunch have greatly affected Moody‘s. During the last two years, Moody‘s
stock price has been underperformaced because of both the shrinking of debt market and uncertainty of legal claims
that the company is facing. With improved sentiment and spread narrowing boosting issuance in recent months and
sign of global economy recovering, we believe that Moody‘s business will improve. We also think the legal risk of
Abu Dhabi ruling remains low. However, we think MCO shares will be volatile near term given ongoing legal and
regulatory headlines. At the time the report was written, we believe its share price is undervalued and recommend a
―BUY‖ for the stock.
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Banco Santander (STD) 3.66% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $17.30 Price/Earnings (ttm) 8.30
52-Week Price Range $2.53-24.92 Price/Book 1.41
52-Week Return 106.7% Price/Sales 7.3
Market Capitalization (B) $136.5 ROA (ttm) NA
Shares Outstanding (B) 8.00 ROE (ttm) 15.0%
Institutional Ownership 1.06% 2008 EPS $1.22
Beta 1.97 2009 EPS (est.) $1.25
Dividend Yield 4.3% 2010 EPS (est.) $1.66
Banco Santander is a leading provider of financial services ranging from retail banking to asset management. It is
Europe‘s largest bank by market capitalization. Based on our quantitative and qualitative analysis, we maintain our
BUY recommendation on the company.
As the company announced 2Q09 figures above analysts‘ expectations, STD remains one of the best performing
international banks. With superior diversification, strong fundamentals, significant cost-cutting potential, and
promising synergy prospects, we expect Santander‘s success story to continue. Unless regulators fail to address new
rules for the industry, STD will get a boost from higher solvency requirements and tighter control by national and
international authorities. Moreover, we anticipate positive surprises for 2010 coming from an improving consumer
in beaten down markets like Mexico and Spain, while increased market share in the European markets should
already be reflected in 2009 results. Also, we believe in the abilities of the CEO, Mr. Sáenz, to follow an external
growth strategy, as past acquisitions are comprehensible and fit in Santander‘s strategic positioning.
Bank of America (BAC) 2.25% of Active Portfolio HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $16.25 Price/Earnings (ttm) 28.91
52-Week Price Range $2.53-24.92 Price/Book 0.8
52-Week Return 2.5% Price/Sales 2.52
Market Capitalization (B) $149.33 ROA (ttm) 0.35%
Shares Outstanding (B) 8.52 ROE (ttm) 3.28%
Institutional Ownership 1.6% 2008 EPS $0.56
Beta 1.97 2009 EPS (est.) -$0.49
Dividend Yield 0.2% 2010 EPS (est.) $1.89
The Bank of America Corporation is a bank holding company that provides a range of financial services
domestically and internationally. The Company‘s business operations are organized into three divisions, which are
further subdivided according to operational specialty. The three business lines are Global Consumer and Small
Business Banking (GCSBB), Global Corporate and Investment Banking (GCIB), and Global Wealth and Investment
Management (GWIM).
We have put a HOLD recommendation on BAC. Latest 3Q09 figures below analysts‘ expectations reminded us of
the uncertainties still surrounding the banking industry. Even though the Merrill deal has started to pay off, BAC is
not out of the crisis yet. The company is still highly exposed to credit losses and very dependent on a strengthening
consumer. A significant improvement in company‘s financials is not anticipated before credit losses peak, which is
unlikely to happen before the end of 2010. From the regulatory side, we may see tighter capital requirements and
28
increased scrutiny of trading operations. Expected changes towards a reduction of credit card interchanges may put
more pressure on company‘s earnings going forward. In the near term, we expect some upside for the stock coming
from the repayment of TARP funds at year-end. Also, a quick decision on the CEO succession planning may push
the stock up.
Intercontinental Exchange (ICE) Not Currently Held BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $106.79 Price/Earnings (ttm) 28.81
52-Week Price Range $50.10 - 121.93 Price/Book 3.32
52-Week Return 45.10%% Price/Sales 8.21
Market Capitalization (B) $7.82 ROA (ttm) 2.62%
Shares Outstanding (M) 73.26 ROE (ttm) 13.81%
Institutional Ownership 91.00% 2008 EPS $3.33
Beta 1.18 2009 EPS (est.) $5.28
Dividend Yield NA 2010 EPS (est.) $6.31
ICE operates regulated global futures exchanges and over-the-counter (OTC) markets for agricultural, energy, equity
index, and currency contracts, as well as credit derivatives. ICE offers these products to participants around the
world through its technology market infrastructure and trading platforms, together with clearing, market data, and
risk management services. Since its foundation in 2000, ICE has been developing rapidly. While the beginning
mission was to transform an open OTC energy market, ICE expanded into the futures markets by acquiring the
International Petroleum Exchange in 2001, now ICE Futures Europe, and launched its market data services through
ICE Data in 2002. In 2005, ICE completed its IPO on the New York Stock Exchange and is now a member of the
Russell 1000 and the S&P 500 indices. The Company continued to buy into new markets with the acquisition of the
New York Board of Trade (NYBOT), now known as ICE Futures U.S., ChemConnect's NGL, the Winnipeg
Commodity Exchange, and Chatham Energy. In 2008, ICE acquired YellowJacket and Creditex—the later as part
of their initiative to enter the CDS market. In addition, ICE has most recently announced plans to acquire The
Clearing Corporation (TCC).
ICE announced 4Q08 figures in line with analysts‘ estimates; also, interim Q1 numbers look good with regard to
ongoing market turmoil and unstable economic conditions. Rebounding OTC trading after a depressed market in the
second half of 2008 particularly surprised us. Recent approval by the SEC to enter the $27 trillion credit default
swaps (CDS) market has opened new growth opportunities for the Company and is considered as an additional
revenue driver in the long term. Moreover, we expect solid energy volume trends fueled by increasing hedging
business should shelter ICE against a continuing down market to some extent. Overall, the Company is well
positioned to succeed in an increasingly competitive environment and should be able to take on the opportunity of
OTC business shifting onto exchanges. We believe the strong ICE management team will continue to drive global
expansion and we see significant upside potential for the stock in a stabilizing environment. Nevertheless, the
business for derivatives is marked by high uncertainty, and according to its relative valuation, the market seems to
have high expectations in ICE. We put a BUY recommendation on ICE, however the increased stock price at the
date of purchase did not allow us to act on our recommendation.
Equifax (EFX) Sold Position SELL Recommendation
Key Stock Statistics
Price as of November 30, 2009 $28.65 Price/Earnings (ttm) 16.23
52-Week Price Range $19.63 - 30.50 Price/Book 2.45
52-Week Return 12.57% Price/Sales 2.11
Market Capitalization (B) $3.81 ROA (ttm) 8.13%
29
Shares Outstanding (M) 126.60 ROE (ttm) 15.91%
Institutional Ownership 82.40% 2008 EPS $ 2.02
Beta 1.12 2009 EPS (est.) $ 2.09
Dividend Yield 0.70% 2010 EPS (est.) $ 1.37
Equifax Inc. (Equifax) is a leading credit report provider in the U.S. and is considered one of the "Big 3" in the
credit reporting market. We expect the domestic market for credit reporting to remain weak and marked by high
uncertainty. In addition, Equifax‘s international operations are unlikely to carry the company as foreign markets
have become equally exposed to the current economic downtown. Therefore, our investment recommendation is a
SELL.
We have downgraded Equifax to SELL. As the company announced 4Q08 figures in line with analysts‘ fears,
interim Q1 numbers continue to look weak with regard to ongoing market turmoil and unstable economic
conditions. As credit activity remains restrained in the U.S., Equifax‘s core business should be tempered in the
near-term and beyond, unless we see substantial improvement in credit sentiment. Moreover, ongoing tight cost
control will protect high margins only to some extent. With mostly fixed costs, we expect falling reporting volume
to cause accelerating margin contraction. The likelihood that we see relief from the International segment, the
former growth engine of the Company, is considered low as foreign markets are highly exposed to the economic
backdrop and unwilling to fiscally stimulate their economies. The fact that management did not provide a FY09
guideline adds further risk, and contribution of the growth segment TALX to total revenues is too low to navigate
Equifax through the next 6 – 12 months.
Ameritrade (AMTD) Not Currently Held HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $19.64 Price/Earnings (ttm) 16.94
52-Week Price Range $10.09 - 21.30 Price/Book 3.07
52-Week Return 47.67% Price/Sales 4.61
Market Capitalization (B) $10.91 ROA (ttm) 3.75%
Shares Outstanding (M) 587.56 ROE (ttm) 19.88%
Institutional Ownership 35.40% 2008 EPS $1.35
Beta 1.18 2009 EPS $1.09
Dividend Yield NA 2010 EPS (est.) $1.38
TD Ameritrade Holding is a leading provider of discount brokerage services for private and institutional clients with
the vast majority provided online. With more than 40% market share of daily average revenue trades, it is the
largest U.S. discount broker. Based on our quantitative and qualitative analysis, we put a HOLD recommendation
on the company.
Overall, the company is telling a solid growth story. The shift to asset gathering helps AMTD to withstand intense
competition on prices, and the recent acquisition of thinkorswim broadens the product portfolio. In addition, we are
seeing a positive structural change in retail trading and believe management‘s decision to lever the company to
rising rates will pay off in the midterm. However, after a 50% run since April, and AMTD trading at a reasonable,
but not cheap, 14x 2010 EPS estimate, we believe AMTD is fairly valued.
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HEALTHCARE 13.52% of the Active Portfolio
Analysts: Samantha Lane and Ibeth Molina 12.51% of the S&P 500 Index
In 2009, the healthcare sector has been challenged by the ongoing approval process to the healthcare reform
proposed by Obama‘s administration. Moreover, as several of the best selling drugs in market are coming out of
patent in the next three years, the pharmaceutical industry saw a higher than usual number of mergers, especially
during the first half of the year. Being a defensive sector, healthcare outperformed the market in the first months of
the year, becoming an underperformer once the recovery of market began.
We started our coverage with two current holdings: Stryker Corporation (SYK) and Johnson & Johnson (JNJ).
Stryker has historically delivered strong operating results due to strong product innovation. We feel the greatest
growth lies within the spinal and endoscopy segments, supporting our buy recommendation. As a result, we decided
to continue to hold Stryker. Considering Johnson & Johnson‘s well diversified portfolio and in spite of some
patents‘ expirations, we believe the company has strong position for long-term growth. Thus, we decided to continue
holding the stock. As our position in Genentech was liquidated due to the acquisition by Roche, we placed those
funds in Abbott Laboratories (ABT), stock because of its strong product offering was added to our portfolio in May.
We also initiated coverage on Boston Scientific but due to negative ROE and overlap in product offerings from
current holdings we decided not to include this company in our portfolio.
Later in the year, we analyzed Forest Laboratories (FRX). As we found the company fairly priced, we have decided
to exit that position and bring Baxter International (BAX) to the healthcare portfolio. We believe BAX is well
positioned to outperform the sector as it has low exposure to impacts of the healthcare reform. Furthermore, we
evaluated a current holding Thermo Fisher Scientific. We found TMO‘s global expansion into China, India, and
Europe to be attractive and continue to hold this company within our portfolio. Finally, we initiated coverage on
WellPoint, Inc. and Covidien, Plc. We covered WellPoint as we were interested in diversifying the healthcare
portfolio as we currently do not own any health and welfare funds. Due to the uncertainty of Obama‘s healthchare
reform WellPoint stands to be greatly affected in the near future and therefore was not added to our portfolio.
Covidien‘s future growth due to the possible commercialization of four pharmaceuticals in the next two years
promoted our coverage of this stock. However, 68% of Covidien‘s revenue is from medical devices which stand to
be adversely affected by the medical device tax proposed by the Obama administration. As a result we decided not
to add Covidien and instead add Baxter as it is not exposed as much to this potential tax.
Stryker Corporation (SYK) 2.43% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $50.40 Price/Earnings (ttm) 19.06
52-Week Price Range $30.82-52.62 Price/Book 3.19
52-Week Price Return 29.09% Price/Sales 3.11
Market Capitalization (B) $20.64 ROA (ttm) 12.10%
Shares Outstanding (M) 397.74 ROE (ttm) 17.71%
Institutional Ownership 61.60% 2008 EPS $2.78
Beta 0.93 2009 EPS (est.) $2.94
Dividend Yield 0.50% 2010 EPS (est.) $3.27
Stryker continues to expand into high growth areas such as the spinal and endoscopy markets, while continuing to
excel in new product innovation within its largest market, orthopaedics. Because of its continued high growth
opportunities, we continue to hold Stryker in our portfolio. However, Stryker could be adversely affected by a
proposed medical device tax should it pass as part of healthcare reform.
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Johnson & Johnson (JNJ) 3.69% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $62.84 Price/Earnings (ttm) 14.06
52-Week Price Range $46.25-64.73 Price/Book 3.51
52-Week Price Return 10.53% Price/Sales 2.92
Market Capitalization (B) $173.44 ROA (ttm) 11.37%
Shares Outstanding (B) 2.78 ROE (ttm) 26.58%
Institutional Ownership 64.70% 2008 EPS $4.68
Beta 0.62 2009 EPS (est.) $4.56
Dividend Yield 3.1% 2010 EPS (est.) $4.93
We continue to hold JNJ in our portfolio because of its well diversified portfolio and worldwide presence. The
company has a robust pipeline with three possible blockbusters coming to market beginning 2010. Additionally, as
almost a third of JNJ‘s revenues come from the consumer segment, we believe the company is not as exposed as
others in its industry to healthcare policy adjustments.
Boston Scientific (BSX) Not Currently Held HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $8.37 Price/Earnings (ttm) N/A
52-Week Price Range $6.08-8.38 Price/Book 0.97
52-Week Price Return 15.22% Price/Sales 1.58
Market Capitalization (B) $12.81 ROA (ttm) 2.83%
Shares Outstanding (B) 1.51 ROE (ttm) -16.17%
Institutional Ownership 85.00% 2008 EPS -$1.36
Beta 1.20 2009 EPS (est.) $0.50
Dividend Yield N/A 2010 EPS (est.) $0.60
In April, we initiated coverage on Boston Scientific due to the low stock price and attractive product portfolio of
cardiovascular devices. Upon evaluation it was found that despite spending some $1B on R&D, BSX was achieving
an ROE of -14.40%. Since April, the ROE has continued to worsen to -16.17% confirming our decision not to
include this company in our portfolio.
Abbott Laboratories (ABT) 2.57% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $54.49 Price/Earnings (ttm) 14.57
52-Week Price Range $41.27-57.39 Price/Book 3.93
52-Week Price Return 2.13% Price/Sales 2.80
Market Capitalization (B) $83.18 ROA (ttm) 9.11%
Shares Outstanding (B) 1.55 ROE (ttm) 27.52%
Institutional Ownership 68.40% 2008 EPS $3.32
Beta 0.27 2009 EPS (est.) $3.69
Dividend Yield 2.9% 2010 EPS (est.) $4.15
We added Abbott to our portfolio in May at a price of $44.73 and have obtained a return of 21% over the holding
period. We decided to bring Abbott to the healthcare portfolio because we see it as one of the best managed
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companies in the healthcare industry with a strong portfolio and very well positioned-drugs in key markets. With
over 50% of revenues coming from outside of US, we consider the company has strong growth opportunities and we
believe that Humira, Xience and Trilipix offer significant upside potential for the company to outperform its peers.
Thermo Fisher Scientific (TMO) 3.08% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $47.23 Price/Earnings (ttm) 23.19
52-Week Price Range $28.52-48.95 Price/Book 1.29
52-Week Price Return 37.96% Price/Sales 2.00
Market Capitalization (B) $19.60 ROA (ttm) 3.21%
Shares Outstanding (M) 408.31 ROE (ttm) 5.75%
Institutional Ownership 95.10% 2008 EPS $2.29
Beta 0.27 2009 EPS (est.) $3.02
Dividend Yield 2.9% 2010 EPS (est.) $3.38
We continue to hold Thermo Fisher Scientific in our portfolio due to its attractive global expansion. TMO continues
to expand relationships and domestic manufacturing operations in China, India, and Europe which we believe, is the
primary growth opportunity.
Forest Laboratories (FRX) 2.04% of Active Portfolio HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $30.66 Price/Earnings (ttm) 12.92
52-Week Price Range $18.37-31.84 Price/Book 2.03
52-Week Price Return 31.26% Price/Sales 2.40
Market Capitalization (B) $9.42 ROA (ttm) 9.56%
Shares Outstanding (M) 301.77 ROE (ttm) 17.19%
Institutional Ownership 92% 2009 EPS $2.52
Beta 0.72 2010 EPS (est.) $3.51
Dividend Yield NA 2011 EPS (est.) $3.79
We looked at Forest Laboratories and because of its high dependency on two blockbusters (Lexapro and Namenda)
that will lose patent in the next five years and the absence of blockbuster potential in its pipeline, we have decided to
exit this position. We found that at the current trading price, FRX is fairly valued. We feel that at this point there
are better opportunities in the market to increase the return of the healthcare portfolio. Thus, we will liquidate our
FRX holding in December.
WellPoint Inc. (WLP) Not Currently Held HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $54.03 Price/Earnings (ttm) 11.75
52-Week Price Range $29.32-56.77 Price/Book 1.11
52-Week Price Return 56.98% Price/Sales 0.41
Market Capitalization (B) $25.56 ROA (ttm) 5.34%
Shares Outstanding (M) 458.35 ROE (ttm) 10.49%
Institutional Ownership 88.60% 2008 EPS $4.79
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Beta 1.16 2009 EPS (est.) $5.90
Dividend Yield N/A 2010 EPS (est.) $6.09
We initiated coverage of WellPoint looking to diversify our portfolio as we do not currently hold any companies
classified as Health and Welfare Funds. WellPoint‘s past success has been due to its focus on distinct customer
types, and developing benefit plans and services that meet their unique needs. However, increased unemployment
due to the economy and changes in healthcare policy due to Obama‘s proposed reform bill could adversely affect
WellPoint in the future. Thus, due to the uncertainty in healthcare reform, we chose not to add WellPoint at this
time.
Baxter International (BAX) Not Currently Held BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $54.55 Price/Earnings (ttm) 13.21
52-Week Price Range $45.46-60.99 Price/Book 4.81
52-Week Price Return 6.06% Price/Sales 2.79
Market Capitalization (B) $34.18 ROA (ttm) 10.71%
Shares Outstanding (M) 602.86 ROE (ttm) 31.14%
Institutional Ownership 85.60% 2008 EPS $3.22
Beta 0.4 2009 EPS (est.) $3.81
Dividend Yield 1.8% 2010 EPS (est.) $3.29
We looked at Baxter International because of its protagonist role in the biotech market. The decision to add this
stock to our holdings responds to the privileged position that Baxter has to continue extracting high margins, derive
strong growth and outperform its peers in the biotherapeutics market. Moreover, we believe this company will not
be considerably impacted by the healthcare reform as only 18% of its revenues are exposed to the adjustments in the
US market. Thus, we see significant upside potential for the stock going forward and we expect it will help our
healthcare holdings to exceed market returns.
Covidien Plc (COV) Not Currently Held BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $46.82 Price/Earnings (ttm) 26.25
52-Week Price Range $27.27-47.93 Price/Book 2.93
52-Week Price Return 32.41% Price/Sales 2.20
Market Capitalization (B) $23.54 ROA (ttm) 8.71%
Shares Outstanding (M) 499.30 ROE (ttm) 11.46%
Institutional Ownership 91.30% 2008 EPS $2.70
Beta 0.83 2009 EPS $1,79
Dividend Yield 1.40% 2010 EPS (est.) $3.47
We initiated coverage on Covidien as its products can be found in almost every US hospital. Covidien‘s strong
performance in the Medical Device segment and the potential for commercialization of four major pharmaceuticals
in the next 2 years are at the core of Covidien‘s value. However, 68% of its revenues are medical devices which
could fall victim to Obama‘s proposed medical device tax.
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INDUSTRIALS 11.01% of the Active Portfolio
Analysts: John Culley, Iana Stahov, Jiarong Xia 10.43% of the S&P 500 Index
The current holdings in the industrials sector are Eaton Corp (ETN), Fedex (FDX), Honeywell International (HON)
and Norfolk Southern (NSC). Contraction of credit has been a primary inhibitor for industrials throughout the
previous year. This did not only shave about 30% from their top-line but also leaves many with few growth projects
at the start of the economic recovery. After the Purchasing Managers Index and New Orders dipped to all-time lows
in January 2009, we have registered a recovery in the index reaching a 39-mo. high in October 2009. Some warning
signs, however, come from softening in new orders that turned south in the poat couple of months. We believe that
industrials with more exposure to the early cycle markets (that tend to recover first) such as Residential and Electric
will post a quicker recovery and outperform the market. However, companies with more exposure to late cycle
markets (i.e. Non-residential construction and Aerospace) will see a drag to their earnings through FY2010.
Entering 2010 we expect the global economy to begin to recover and a corresponding pickup in business activity for
industrials. We believe that the numerous infrastructure spending programs are also likely to boost the industrials
sector, principally in the second half of the year and more so in 2010.
Honeywell International Inc. (HON) 3.46% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30,2009 $38.47 Price/Earnings (ttm) 13.90
52-Week Price Range $23.06-40.96 Price/Book 3.24
52-Week Return 41.39% Price/Sales 0.97
Market Capitalization (B) $30.76 ROA (ttm) 5.73%
Shares Outstanding (M) 762.46 ROE (ttm) 22.72%
Institutional Ownership 75.5% 2008 EPS $3.16
Beta 1.34 2009 EPS (est.) $2.84
Dividend Yield 3.00 % 2010 EPS (est.) $2.51
Honeywell International Inc. is one of the leading technology and manufacturing companies in the US. The
company is engaged in providing aerospace products and services, control technologies for buildings, homes and
industry, automotive products, power generation systems, specialty chemicals; fibers, plastics and advanced
materials. Honeywell provides integrated avionics, engines, systems and service solutions for aircraft manufacturers,
airlines, business and is engaged in general aviation, military, space and airport operations. The company operates in
the following four segments: Aerospace, Automation and Control Solutions, Specialty Materials and Transportation
Systems.
As one of the cheapest large industrial companies, Honeywell has above-average potential to preserve earning
through this down-cycle. Honeywell trades at discounted PE of 13 and of 6.8 EBITDA, both are attractive compared
to the S&P500 and industrial peers. The company has implemented effective cost-cutting procedures and improved
its earning quality. In addition, we expect the company‘s earnings will increase as US economy recovers in 2010.
The trend towards energy efficiency solution and alternative fuel production will benefit Honeywell in the long run
because the company has been actively developing technologies in this area. At the time the report was written, we
believe its share price is undervalued and recommend a ―BUY‖ for the stock.
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Norfolk Southern Corp. (NSC) 1.65% of Active Portfolio HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $51.40 Price/Earnings (ttm) 16.25
52-Week Price Range $5.30-26.73 Price/Book 1.87
52-Week Return 7.37% Price/Sales 2.26
Market Capitalization (M) $18.91 ROA (ttm) 5.17%
Shares Outstanding (M) 367.89 ROE (ttm) 11.72%
Institutional Ownership 68.60% 2008 EPS $4.61
Beta 1.01 2009 EPS (est.) $2.75
Dividend Yield 2.60% 2010 EPS (est.) $4.47
Norfolk Southern Corporation operates a Class I rail network primarily in the eastern United States. The company
transports raw materials, intermediate products and finished goods to and from destinations in the Southeast and
Eastern regions of the U.S. and offers connections to the Western U.S. via five gateway terminals in the Midwest.
The company services a variety of industries including electrical generating facilities, mines, distribution centers and
various intermodal facilities. We think Norfolk is currently being discounted relative to its peers because of its large
intermodal operations. However, we see this segment as a major opportunity and a key driver of volume and
operating profit going forward. Based on valuation, we have a HOLD recommendation and a target price of $52 on
Norfolk Southern.
Eaton Corporation (ETN) 3.28% of Active Portfolio HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $63.90 Price/Earnings (ttm) 32.01
52-Week Price Range $30.02-$65.99 Price/Book 1.52
52-Week Return 37.9% Price/Sales 0.86
Market Capitalization (B) $10.59 ROA (ttm) 1.91%
Shares Outstanding (M) 165.8 ROE (ttm) 4.81%
Institutional Ownership 76.4% 2008 EPS $6.83
Beta 1.31 2009 EPS (est.) $2.46
Dividend Yield 3.10% 2010 EPS (est.) $3.55
Eaton Corp. is a large diversified global manufacturer with 55% of sales by final destination from international
markets and 1/5th
of total sales from international developing markets positioned for high growth. The company
operates in five business segments: Electrical systems and components serving for power quality, distribution and
control; Hydraulic systems serving industrial, mobile, and aircraft equipment; Aerospace products and services for
cockpit interface and circuit protection, motion control, propulsion sub-systems and air distribution; intelligent
Truck drive train for safety and fuel economy; and Automotive engine air management systems. Its Truck and
Automotive and Hydraulics segments have been hit the most in the recession with margins decreasing 15%, 8% and
8%, respectively, while the Electrical segment was the most resilient. In the latest Q3 2009 Eaton posted record
margins in the latter and improved orders and margins in the Truck segment. We believe the company‘s early cycle
markets have bottomed in Q2 2009 and its late cycle markets will continue deteriorating through FY2010. Given
that ETN‘s markets are spread fairly evenly between ―early‖ and ―late‖ ones, we believe the company will perform
in line with the market and do not see significant momentum in the near term. Also, still tight credit markets and
ETN spending less on R&D as a percentage of sales than peers would further impede it from posting stronger
growth during the economic recovery. Therefore, we recommend a Hold on ETN stock.
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TECHNOLOGY 19.68% of the Active Portfolio Analysts: Arindam Majumdar and Jiarong Xia 19.09% of the S&P 500 Index
The Technology Sector has outperformed the S&P 500 in the year 2009. Year to date through November 30th 2009,
the NASDAQ Computer index registered a 65.56% appreciation as compared to a 26.19% appreciation by the S&P
500 itself. This is because of the rebounding of the sector after the influx of the stimulus plan and the stabilization of
the financial sector in addition to the improving economic conditions throughout the year and in anticipation of
increased in IT spending by the corporations.
When we inherited the Fund from the class of 2008, the portfolio included four technology holdings: Google
(GOOG), Microsoft (MSFT), Intel (INTC), and Oracle (ORCL). During the first half of the year, we were
comfortable with these four stocks because of their market leader position and competitive advantage. As the
economic conditions improved, our investment philosophy was to take positions in diversified IT services
companies, which have a broad category of offerings in addition to a strong clientele. We believe that companies of
this kind remain would benefit most from the turn-around of the broader market thus injecting firms with the capital
to invest on new IT projects. We analyzed various companies that fit this investment philosophy and decided to add
Accenture to the portfolio holding onto Google, Microsoft, Intel, and Oracle. We also exited from our position in
Qualcomm due to the stock price approaching 10% of the target price, as analyzed during spring. Also, Qualcomm
sluggish growth was not in line with our aggressive investment thesis and we felt Accenture with its diversified
global IT services business model would have the potential for the most upside in 2010.
Microsoft Corp. (MSFT) 5.44% of Active Portfolio HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $29.87 Price/Earnings (ttm) 14.29
52-Week Price Range $14.87-30.37 Price/Book 6.42
52-Week Return 53.57% Price/Sales 4.69
Market Capitalization (B) $265.22 ROA (ttm) 16.58%
Shares Outstanding (B) 8.88 ROE (ttm) 36.82%
Institutional Ownership 63% 2008 EPS $1.90
Beta 0.96 2009 EPS (est.) $1.77
Dividend Yield 1.80% 2010 EPS (est.) $1.85
Microsoft is the world‘s largest software maker, driven by its monopolistic behavior in the operating systems
business. It generates revenues by - development, manufacturing, licensing and support of - software products and
services of various computing devices. Microsoft‘s software products and services include operating systems for
servers, personal computers, and intelligent devices, server applications for distributed computing environments,
information worker productivity applications, business solutions applications, high-performance computing
applications, software development tools, video games and consulting and product support services.
Microsoft‘s revenue is primarily generated from the sale of its licensed products such as the Windows line of
operating systems and its various server offerings, coupled with its foray into the e-entertainment and business vis-à-
vis media players and gaming consoles. Thus it is critical to the growth of the company that Microsoft continues to
constantly turnover its product offerings. Its new OS offering, Windows 7, which was released in mid 2009 has
generating a lot of buzz in the industry. Additionally, with users now having the option to migrate from XP to
Windows 7 directly, using Microsoft Deployment Tool 2010, Microsoft has ensured that adoption of Windows 7 is
easier for customers who aren‘t willing to upgrade to Vista. We believe Microsoft will see double digit growth in its
client business segment in 2009-2010 and will compromise almost 35% of its revenue stream. Additionally,
Microsoft is becoming more aggressive in the mobile phone application software industry. Its recent announcement
of launching Windows Mobile 6.5 and the new Windows Marketplace for hand-held mobile devices reflects the
changing face of Microsoft which has recognized Apple‘s success in the same vertical and is striving hard to
37
replicate it. We increased our holding in Microsoft from 5.00% to 5.5% over the summer in anticipation of the
upside that the stock would see due to the release of Windows 7.
Google Inc. 4.98% of Active Portfolio HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $591.50 Price/Earnings (ttm) 38.15
52-Week Price Range $282.75 – 594.83 Price/Book 5.54
52-Week Return 97.02% Price/Sales 8.24
Market Capitalization (B) $187.67 ROA (ttm) 14.03%
Shares Outstanding (Mil) 317.27 ROE (ttm) 16.11%
Institutional Ownership 80.10% 2008 EPS $16.50
Beta 1.06 2009 EPS (est.) $21.76
Dividend Yield N/A 2010 EPS (est.) $22.34
Google is a global technology leader focused on improving the way people connect with information. Google’s
innovations in Web search and advertising have made its Web site a top Internet destination and its brand one of
the most recognized in the world. In essence, Google is a search-engine and it maintains an online index of
websites and other content. This is made freely available to all users who can access a computer via the Internet.
While this activity by itself does not generate revenues, Google earns its revenues from businesses that utilize
Google‘s portal for online advertising to access millions of customers across the globe.
Google's basic strength is its cost-per-click business model in which advertisers pay for the ad only if the customer
clicks on the ad. Google uses the customer‘s search results data, finds ads pertaining to the results in its inventory,
and displays the ads alongside the search results. This helps businesses advertise only to their targeted customer
base and increase their ROI. Google is able to maintain its dominant market share in search business because of its
superior algorithms and strong advertising technologies such as ―PageRank‖, ―Adwords‖ and ―Adsense‖.
Given Google‘s emphasis on innovation, growth and its presence in emerging markets, we felt that Google was well
poised to perform extremely well in both the short and the long term. Despite huge investments, Microsoft and
Yahoo failed to increase their market share in search business. To diversity its revenue stream, Google has ventured
into different areas such as Android, Google Apps, Graphic ads and online video. We also feel that Google‘s entry
into the mobile OS business with its product Android will prove to be stiff competition to Microsoft‘s products.
Oracle Corp. (ORCL) 5.40% of Active Portfolio HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $22.59 Price/Earnings (ttm) 20.37
52-Week Price Range $13.8- 23.00 Price/Book 4.21
52-Week Return 37.24% Price/Sales 4.79
Market Capitalization (B) $113.25 ROA (ttm) 10.94%
Shares Outstanding (B) 5.01 ROE (ttm) 22.58%
Institutional Ownership 60.20% 2008 EPS $1.13
Beta 0.88 2009 EPS (est.) $1.30
Dividend Yield 0.90% 2010 EPS (est.) $1.47
Oracle is one of the leading enterprise software companies that develops, manufactures and distributes database,
middleware and applications software. Oracle operates in two businesses namely software and services, which are
further divided in to five operating segments. The software business is divided in to: (1) new software licenses (2)
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software updates and product support. The services business is comprised of (1) Consulting (2) On Demand and (3)
Education. The software business brings in 79% of revenues and the services business brings in 21% of revenues.
An active acquisition strategy is an important part of Oracle‘s corporate strategy. Since the 2005 acquisition of
PeopleSoft for $11.1 billion, Oracle has spent close to $40 billion to acquire a number of complimentary companies,
products services and technologies. This has helped it position itself as a global leader in enterprise software
products and solutions in addition to its increased footprint in the application software market. The inorganic growth
route has also increased Oracle‘s customer base, has given it critical economies of scale and added to shareholder
value.
Oracle‘s recent acquisition of Sun has added to its enterprise computing systems, software and services offerings.
But this acquisition has come under the European Commission‘s antitrust scanner. Apprehensive about Oracle
gaining control of Sun's widely used MySQL database, the Commission's antitrust regulators are currently debating
green-flagging the merger. If the Commission launches a full review, it could take as long as four months before a
decision is reached, according to Commission rules. The U.S. Department of Justice recently cleared the merger. But
the Justice Department's concerns centered more on licensing issues with Sun's Java software than MySQL. The
competition has already taken advantage of the uncertainty over the Sun-Oracle deal. Key players like IBM and
Hewlett-Packard have offered discounts and other incentives to lure Sun customers. They've also floated the idea
that Oracle may have a tough time trying to manage a hardware manufacturer like Sun. Despite Oracle‘s strong
performance in 2009 and its strong balance sheet and market position, we had a HOLD on it due to our fears of the
Sun acquisition as well as belief that IT services will be growth engine in the sector.
Accenture (ACN) Not Currently Held BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $42.68 Price/Earnings (ttm) 17.46
52-Week Price Range $26.25-43.33 Price/Book 9.12
52-Week Return 54.86% Price/Sales 1.14
Market Capitalization (B) $26.80 ROA (ttm) 14.67%
Shares Outstanding (Mil) 627.83 ROE (ttm) 58.59%
Institutional Ownership 79.00% 2008 EPS $2.77
Beta 0.66 2009 EPS (est.) $3.10
Dividend Yield 1.80% 2010 EPS (est.) $3.51
Accenture Plc (ACN) is one of the world‘s foremost management consulting, technology services and business
process outsourcing firms. Formerly known as Anderson Consulting, Accenture has emerged to be a market leader
in the IT services vertical with strong physical presence in North America, Europe and more important Asia. This
economies of scale associated with its size and service offerings, especially in the IT and business process
outsourcing business, has ensured its position as one of the market leaders in the IT consulting universe.
With increasing inter-connectivity between its management consulting, technology services and business process
outsourcing divisions, Accenture‘s strategy of being a one-stop-shop for the technology needs of its clients,
irrespective of the industry, is proving to be a winning strategy when compared to its competition. Despite
weakening revenue growth rates, attributed to the global economic meltdown, Accenture has continued to be a
strong player with service diversity being the cornerstone of its competitive advantage.
We believe that Accenture with its global delivery model, unique delivery suite, technology labs and more
importantly talented workforce, is best positioned to cash in on the expected surge in management consulting and IT
services requirements that will emerge from many of the beaten down sectors with projects seeing the light of day
39
after the imposed delay due to the conservatism seen in the market with more emphasis on holding cash rather than
investing in the business, from a technology standpoint. We feel that the share is undervalued with a potential
upside of 37% and so we recommend a ―BUY‖ for the stock.
Computer Sciences Corp. (CSC) Not Currently Held HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $55.72 Price/Earnings (ttm) 9.57
52-Week Price Range $29.13- 56.34 Price/Book 1.33
52-Week Return 83.41% Price/Sales 0.53
Market Capitalization (B) $8.49 ROA (ttm) 5.07%
Shares Outstanding (Mil) 152.42 ROE (ttm) 14.75%
Institutional Ownership 88.0% 2008 EPS $3.64
Beta 1.05 2009 EPS (est.) $8.12
Dividend Yield N/A 2010 EPS (est.) $5.96
Computer Sciences Corporation (CSC) provides information technology (IT) and business process outsourcing, and
IT and professional services to the commercial and government markets. The company‘s information technology
outsourcing services include the operation of customer‘s technology infrastructure, including systems analysis,
applications development, network operations, desktop computing, and data center management. CSC also offers
various business process outsourcing services, such as procurement and supply chain, call centers and customer
relationship management, credit services, claims processing, and logistics. In addition, the company provides
various IT and professional services, including systems integration that comprises designing, developing,
implementing, and integrating information systems; and consulting and professional services, such as advising
clients on the strategic acquisition and utilization of IT, as well as on business strategy, security, modeling,
simulation, engineering, operations, change management, and business process reengineering. Further, CSC licenses
software systems for the financial services and other industry-specific markets, as well as provides various end-to-
end business solutions; computer equipment repair and maintenance services; and credit reporting services. The
company provides its services to clients in industries, including aerospace and defense, automotive, chemical and
natural resources, consumer goods, financial services, healthcare, manufacturing, retail and distribution,
telecommunications, and technology, as well as to foreign government clients, civil departments and branches of the
military, and the department of homeland security. CSC is a multi-national firm with operations in North America,
Brazil, Europe, and the Asia Pacific region.
Though we are very bullish about IT services, we believe CSC faces a very tough price competitive market and with
concerns about certain pension obligations and a few corporate governance issues (multiple roles of chairman), we
put a HOLD recommendation on the stock.
Intel Corp. (INTC) 4.00% of Active Portfolio HOLD Recommendation
Key Stock Statistics
Price as of November 30, 2009 $19.20 Price/Earnings (ttm) 48.91
52-Week Price Range $20.03-21.27 Price/Book 2.83
52-Week Return 36.60% Price/Sales 3.37
Market Capitalization (B) $111.27 ROA (ttm) 6.31%
Shares Outstanding (B) 5.52 ROE (ttm) 5.96%
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Institutional Ownership 65.10% 2008 EPS $0.90
Beta 1.12 2009EPS (est.) $0.72
Dividend Yield 2.80% 2010 EPS (est.) $1.46
Intel Corporation was founded in California in 1968 and reincorporated in Delaware in 1989. As the world‘s largest
semiconductor chip maker, Intel manufactures integrated circuits for computers, servers, hand-held devices, and
communication products. The global recessionary environment has battered the whole semiconductor industry in
2009. Due to IT spending cutbacks from both corporate and individual consumers, the whole semiconductor
industry has much lower demand, particularly in the United States and Europe. However, compared to its
competitors, Intel is entering the recession in good shape with strong cash balance and is able to maintain a
successful R&D effort, develop new products and production processes, and improve their existing products and
processes at the same pace or ahead of their competitors. Intel also explored new markets such as netbook, mobile
computing devices and flash memory with aggressive strategies and new partnerships. We feel that Intel‘s current
share price is fairvalued and recommend a ―HOLD‖ for the stock.
eBay Inc. (EBAY) Not Currently Held HOLD Recommendation
Key Stock Statistics
Price as of November 30,2009 $23.20 Price/Earnings (ttm) 20.82
52-Week Price Range $9.91-25.80 Price/Book 2.17
52-Week Return 63.38% Price/Sales 3.50
Market Capitalization (B) $29.13 ROA (ttm) 7.22%
Shares Outstanding (M) 1,110 ROE (ttm) 11.96%
Institutional Ownership 76.10% 2008 EPS $1.36
Beta 1.74 2009 EPS (est.) $1.46
Dividend Yield 0% 2010 EPS (est.) $2.05
eBay Inc. was formed as a sole proprietorship in 1995 in California and reincorporated in 1996 in Delaware. eBay
now is the world's largest online marketplace - where practically anyone can sell practically anything at any time.
It's an idea that BusinessWeek once called "nothing less than a virtual, self-regulating global economy."
During last four years, eBay‘s stock price has suffered due to its poor performance in its core marketplaces. But
eBay‘s recent earning report showed that the company‘s management was finally able to stop the decline in its
revenue. With the marketplaces improving and PayPal/Skype growing healthily, we believe that eBay will continue
to execute and perform well in 2009 and 2010. However, at the time the report was written, we believe its share
price is fair-valued and recommend a ―HOLD‖ for the stock.
Amazon.com, Inc. (AMZN) Not Currently Held HOLD Recommendation
Key Stock Statistics
Price as of November 30,2009 $135.91 Price/Earnings (ttm) 79.82
52-Week Price Range $47.52-145.91 Price/Book 2.62
52-Week Return 180.58% Price/Sales 15.86
Market Capitalization (B) $58.62 ROA (ttm) 7.86%
Shares Outstanding (M) 1110 ROE (ttm) 24.31%
Institutional Ownership 64.30% 2008 EPS $1.49
Beta 1.15 2009 EPS (est.) $1.46
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Dividend Yield 0% 2010 EPS (est.) $1.29
Amazon.com, Inc. was incorporated in 1994 in the state of Washington and reincorporated in 1996 in the state of
Delaware. Amazon.com opened their virtual doors on the World Wide Web in July 1995 and seek to be Earth‘s
most customer-centric company.
Amazon‘s primary source of revenue is the sale of a wide range of products and services to customers through its
website: www.amazon.com. the products include merchandise and content the company has purchased for resale
from vendors and products offered by third-party sellers. In addition, the company generates revenue through co-
branded credit card agreements and other marketing and promotional services, such as online advertising.
Amazon has provided customers more selection, less hassle, faster checkout, and competitive pricing. We believe
that the benefit of the company's business model is even more apparent during current recession. With less than 5%
of all retail sales done over the Internet, there's huge upside for e-commerce business. As the largest player in the
online retail segment, We believe that Amazon has huge growth room for its online retail business. However, at the
time the report was written, Amazon‘s stock was trading at a very high P/E ratio of 80. We believe its share price is
fair-valued and recommend a ―HOLD‖ for the stock.
UTILITIES 2.88% of the Active Portfolio Analyst: Carl Schumacher 3.57% of the S&P 500 Index
In 2009, the utility sector has underperformed the broader market. This past spring, as the market was down over
25% YTD, the utility sector follow the S&P down to the trough, however, the sector has not been as strong in its
rebound. YTD. We believe that our current utility holding, of FPL Group, has strong fundamentals and a renewable
energy portfolio that provides the opportunity for a growth story within the utility sector. We have rated the stock a
BUY as we see a long term value in this company.
FPL Group (FPL) 2.88% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $51.97 Price/Earnings(ttm) 12.49
52-Week Price Range $41.48-$60.61 Price/Book 1.69
52-Week Return 18.8% Price/Sales 1.34
Market Capitalization(B) $22.03 ROA(ttm) 3.76%
Shares Outstanding (M) 413.35 ROE(ttm) 13.8%
Institutional Ownership 65.8% 2008 EPS $3.30
Beta 0.71 2009 EPS $4.10
Dividend Yield 3.7% 2010 EPS (est.) $4.10
FPL Group is the holding company for Florida Power and Light Co., the nation‘s largest investor-owned regulated
electric utility company, and NextEra Energy Resources, a wholesale energy provider, which is also the largest
producer of renewable energy within the United States. FPL is well-positioned, as the company has a stable revenue
stream from its rate-regulated business and a renewable energy portfolio that presents the company with the
opportunity to be a growth story within the utility industry. FPL Group‘s dominance in the wind energy space is
will continue, as the company has plans to add an additional 1000-2000 MW in generating capacity annually in
2009-2013.
We feel that the FPL Group is well positioned to benefit from any clean energy legislation that would be passed in
the future. In June, the US House of Representatives passed the Waxman-Markley Bill, also known as the American
Clean Air Act, which would require that 20% of electricity come from renewable energy swources by 2020 and that
a cap and trade program on emissions be fully instituted by 2016. Such legislation would greatly benefit FPL
Group, due to the company‘s strong investment in renewable energy.
42
After both tracking and outperforming the S&P 500 index over the course of the first nine months of the year, FPL
has lagged the S&P 500 since September, and is up only approximately 5% YTD versus 20% for the S&P. Over the
longer term, however, we feel that the company‘s mix of stable cash flows and growth potential make FPL a viable
utility holding for the portfolio.
TELECOMMUNICATIONS 3.04% of the Active Portfolio Analyst: Carl Schumacher 3.00% of the S&P 500 Index
In 2009, Telecommunication sector has significantly lagged the broader market. As would be expected, the
telecommunications sector, traditionally a defensive play, has been largely flat YTD versus significant market
rebound, which has the S&P up 20% YTD. We expect that the telecommunications industry will continue to lag
the broader market as we continue to see a recovery moving forward.
This year, we reassigned Qualcomm to the technology sector and have introduced Verizon into the
telecommunications sector. We have reiterated our BUY recommendation on China Mobile; however, we are
considering replacing China Mobile with Syniverse Holdings, which we believe to have greater upside potential.
Verizon Communications, Inc
(VZ)
1.72% of Active Portfolio
BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $27.24 Price/Earnings(ttm) 44.26
52-Week Price Range $19.35-$46.10 Price/Book 3.79
52-Week Return -34.35% Price/Sales 6.89
Market Capitalization(B) $10.51 ROA(ttm) 4.33%
Shares Outstanding (M) 391.98 ROE(ttm) 4.92%
Institutional Ownership 100% 2008 EPS $0.06
Beta 1.15 2009 EPS $0.14
Dividend Yield N/A 2010 EPS (est.) 0.44
Verizon Communications, Inc. is one of the world‘s leading providers of communications services. Verizon derives
its revenues from its two main operating segments, Domestic Wireless and Wireline. In 2008, Verizon‘s Domestic
Wireless operating segment overtook the company‘s Wireline segment in total revenues. In 2008, revenues from
Domestic Wireless accounted for approximately 51% of the company‘s revenues, compared with 49% for Wireline.
More recently, Verizon announced a deal in which the company would be divesting a number of its wireline assets
in more rural areas. After the completion of this deal, it is anticipated that approximately 70% of the company‘s
revenues will be generated from wireless operations with the wireline segment accounting for the other 30%.
Moving forward, we expect Verizon to continue to see revenue gains as we emerge from one of the worst economic
periods in recent history. Despite the pressure on wireline revenues and the maturity of the voice services portion of
the wireless telecommunications industry, Verizon is well-positioned for the future due to its status as the largest
wireless service provider in the US and its strong investments in continued technology such as FiOS and the LTE
platform that will eventually allow it to rollout a 4G network. We believe that Verizon is poised to see more
revenue growth moving forward as AT&T loses its exclusivity on the iPhone and Verizon further benefits from its
technology investments in FiOS along with a greater focus on its wireless business.
43
Syniverse Holdings, Inc.
(SVR)
Not Currently Held BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $15.86 Price/Earnings(ttm) 17.05
52-Week Price Range $6.80-$19.56 Price/Book 1.92
52-Week Return 75.83% Price/Sales 2.52
Market Capitalization(B) $1.15 ROA(ttm) 6.88%
Shares Outstanding (M) 69.42 ROE(ttm) 11.99%
Institutional Ownership 94.5% 2007 EPS $0.78
Beta 0.87 2008 EPS $1.16
Dividend Yield n/a 2009 EPS (est.) $1.04
Syniverse Holdings, Inc. is a leading enabler of wireless voice and data services for telecommunications companies
worldwide. The company is one of the wireless industry‘s only operator-neutral intermediaries and its data
clearinghouse, network and technology services enable customers within the wireless industry to translate
incompatible communication standards and protocols and to simplify operator interconnectivity.
Demand for Syniverse services is driven primarily by wireless voice and data traffic, subscriber roaming activity,
SMS and MMS messaging, number porting and next generation IP applications. The company currently provides
services to more than 650 operators in over 140 countries; and serves most of the largest global wireless operators,
including AT&T, Sprint, T-Mobile, Verizon Wireless, China Telecom and many others. While over 70% of
Syniverse revenues in 2008 were derived from the US and Canada, the company also generated significant revenues
from Asia Pacific, the Caribbean and Latin America; and Europe, Middle East and Asia.
Despite the negative revenue growth that has plagued the company in 2009, we feel that Syniverse still has a strong
foothold in a necessary part of the wireless telecommunications industry, and the company will continue to grow
revenues as the world continues to increase its usage of mobile communications. We feel that the company‘s
strategic position and service offerings, recently bolstered by the acquisition of VeriSign‘s messaging business, will
continue to drive value for Syniverse moving forward, despite the potential for margins to be squeezed a because of
competitive and industry pressures in the future.
China Mobile Ltd. (CHL) 1.21% of Active Portfolio BUY Recommendation
Key Stock Statistics
Price as of November 30, 2009 $46.87 Price/Earnings (ttm) 12.2
52-Week Price Range $34.33-$59.22 Price/Book 2.08
52-Week Return 11.09% Price/Sales 12.09
Market Capitalization (B) $201.06 ROA (ttm) 13.59%
Shares Outstanding (B) 4.01 ROE (ttm) 25.87%
Institutional Ownership 1.70% 2008 EPS $3.18
Beta 0.98 2009 EPS $4.06
Dividend Yield 3.4% 2010 EPS (est.) $4.07
China Mobile Ltd. (CHL) is the world‘s largest telecommunications company by subscriber count. It offers mobile
services, such as mobile voice services, voice value-added services, data businesses, multimedia messaging services
and other miscellaneous services. The company caters to a subscriber base of approximately 500 million users and
enjoys a market share of 73% in China.
We expect the company to be able to successfully leverage its position as the dominant player within China‘s mobile
telecommunications space to successfully carry out its longer term customer growth strategy of further expansion
44
into more of the rural areas of China. The company‘s strong strategic position and past market dominance make
China Mobile a good bet to perform well for the foreseeable future.
Statement of Security Holdings
Shares Price Value Weight Shares Price Value Weight
Abott Laboratories ABT 600 54.49 32,694$ 2.5%
Apollo Group APOL 260 57.07 14,838$ 1.2%
Banco Santander STD 2700 17.30 46,710$ 3.6%
Bank of America BAC 833 16.95 14,119$ 1.5% 1813 15.85 28,736$ 2.2%
BHP Billiton Limited (ADR) BHP 421 38.21 16,086$ 1.7% 474 75.30 35,692$ 2.8%
Central European Distribution CEDC 715 20.00 14,300$ 1.5% 1324 27.88 36,913$ 2.9%
Chesapeake Energy Corp. CHK 833 14.47 12,054$ 1.3% 1358 23.92 32,483$ 2.5%
China mobile limited CHL 330 46.87 15,467$ 1.2%
Chubb Corporation CB 790 50.14 39,611$ 3.1%
DirecTV Group DTV 1447 22.79 32,977$ 3.5% 1230 31.63 38,905$ 3.0%
Eaton Corporation ETN 505 45.23 22,841$ 2.4% 661 63.90 42,238$ 3.3%
Exxon-Mobil Corp. XOM 490 78.20 38,318$ 4.0% 640 75.07 48,045$ 3.7%
FedEx FDX 392 63.65 24,951$ 2.6% 392 84.45 33,104$ 2.6%
Forest Laboratories Inc. FRX 850 23.50 19,975$ 2.1% 850 30.66 26,061$ 2.0%
FPL Group FPL 925 45.43 42,023$ 4.4% 710 51.97 36,899$ 2.9%
Franklin Resources Inc. BEN 363 61.98 22,499$ 2.4% 313 108.03 33,813$ 2.6%
Google GOOG 110 583 64,130$ 5.0%
Honeywell International HON 743 27.68 20,566$ 2.2% 1090 38.47 41,932$ 3.3%
Intel INTC 2625 14.30 37,538$ 3.9% 2590 19.20 49,728$ 3.9%
Johnson & Johnson JNJ 480 57.81 27,749$ 2.9% 748 62.84 47,004$ 3.7%
Microsoft MSFT 2125 20.60 43,775$ 4.6% 2380 29.41 69,996$ 5.4%
Noble Corp. NE 795 24.19 19,231$ 2.0% 850 41.31 35,114$ 2.7%
Norfolk Southern NSC 787 46.87 36,887$ 3.9% 409 51.40 21,023$ 1.6%
Oracle Corp. ORCL 3057 16.94 51,786$ 5.4% 1987 22.08 43,873$ 3.4%
Peabody Energy Corporation BTU 757 21.76 16,472$ 1.7% 850 44.46 37,791$ 2.9%
Procter & Gamble PG 825 59.79 49,327$ 5.2% 560 62.35 34,916$ 2.7%
QualComm Inc. QCOM 570 45.00 25,650$ 2.0%
Safeway Inc. SWY 1466 22.04 32,311$ 3.4% 1466 22.50 32,985$ 2.6%
Schlumberger SLB 420 42.01 17,644$ 1.8% 509 63.89 32,520$ 2.5%
Sherwin-Williams Co. SHW 630 56.24 35,431$ 3.7% 351 60.84 21,355$ 1.7%
Stryker Corporation SYK 615 39.84 24,502$ 2.6% 615 50.40 30,996$ 2.4%
Target Corp. TGT 860 37.98 32,663$ 3.4% 860 46.56 40,042$ 3.1%
Thermo Fisher Scientific TMO 830 47.23 39,201$ 3.0%
Verizon VZ 725 31.46 22,809$ 1.8%
Walt Disney Holdings Co. DIS 906 23.53 21,318$ 2.2% 906 30.22 27,379$ 2.1%
ETF- Rydex S&P Financials RYF 635 22.13 14,053$ 1.1%
Akamai technologies AKAM 1475 13.96 20,591$ 2.2%
American Captial Strategies ACAS 1020 3.37 3,437$ 0.4%
Charles River Labs CRL 554 24.25 13,435$ 1.4%
Deustche Bank' DB 307 36.05 11,067$ 1.2%
Equifax Inc. EFX 1237 24.22 29,960$ 3.1%
Genentech Inc. DNA 452 77.18 34,885$ 3.7%
Pediatrix Medical Group PDX 486 30.28 14,716$ 1.5%
Travelers Companies TRV 804 42.17 33,905$ 3.6%
iShares S&P Global Telecomm IXP 600 49.83 29,898$ 3.1%
Vanguard Financials ETF VFH 745 26.28 19,579$ 2.1%
Total Equity Portfolio 938,815$ 98.40% 1,274,705$ 99.04%
Money Market/Cash Account 15,261$ 1.60% 12,369$ 0.96%
Effective Portfolio Value 954,076$ 100.0% 1,287,074$ 100.00%
S&P500 (index change) $SPX.X 903.25 1,095.63
Security TickerNovember 30, 2008 November 30, 2009
45
Income Statement
November 30, 2009 November 30, 2008
Beginning Fund Balance 969,516.81$ Beginning Fund Balance 562,523.87$
Cash Added -$ Cash Added 1,000,000.00$
Dividend Income 20,982.57$ Dividend Income 23,011.97$
Interest Income 4.03$ Interest Income 99.18$
Total Income 20,986.60$ Total Income 23,111.15$
Total Capital Gains (Loss), Net 297,570.16$ Total Capital Gains (Loss), Net (615,495.71)$
Taxes and Fees -$ Taxes and Fees -$
Scholarship Application 1,000.00$ Scholarship Application 622.50$
Miscellaneous -$ Miscellaneous -$
Ending Fund Balance 1,287,073.57$ Ending Fund Balance 969,516.81$
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