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JUST “SITTIN” IN THE EASY CHAIR – “READIN” THE PAPER


BIGFOOT INVESTMENTS OPEN FORUM

Apr 25th, 2013

WELCOME!


AGENDA WELCOME! ADMIN NOTESQUOTE OF THE DAYOPTIMISM GAUGECHARTS OF INTERESTSO WHAT’S UP WITH: THE “MARKET” A CLOSER LOOK AT: PRGO DAVID’S CORNERSWAPS AND SPREADSLEE’S COMMENTS QUESTIONS/COMMENTS


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“NOTES”


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Screening/Scoring for MayACTION POSTING DATES

Stock Screen By 5pm CDST – Friday 4/30/2013*

Dividend Screen

ETF Selections

Stock Screening Friday May 3rd , 2013


QUOTE OF THE DAY:The only time my prayers are never answered…..

Billy Graham

….is on the golf course!


Optimism Gauge

As of: 4/25/2013

Indicator Current Value Prior/Metric Value Current Value

St Louis Fed Financial Stress Index -0.693 -0.645(Revised) +1.0

Chicago Fed National Act Index (3 Mon Mov Av) -0.01 0.12(Revised) -.50

Unemployment 7.7 7.9 (Revised) +.50Weekly Jobless Claims (4Wk Mov Av) 339,000 355,000(Revised) +.50

ECRI Weekly Index 6.6 6.4 (Revised) +.50Conf Board Leading Indicators (NEW) 94.7 94.8 -1.0

University of Michigan Sentiment - Final 78.6(Final – Mar 2013) 77.6(Final-Feb 2012) -.25Monthly Retail Sales (Adjusted) 416,990 416,070 +.50NFIB Small Business Sentiment 89.5 90.8 -.50ISM Manufacturing 51.3

(Expansion Line = 50) 54.2 +.50

Economic Capacity Utilization 78.5 78.3(Revised) +.50Stock Market Moving Averages Weekly Data Points >50-day MA/>100-Day MA N/A

+.50

S&P Case-Shiller 20 City Comp Index 146.14 145.95 (Revised) +.50

Total +2.75Last Update: 4/25/2013

Measuring Our Economy

NOTES/COMMENTS CURRENT READING: 63.4%

PRIOR READING: 59.1%

BIAS: SLIGHTLY BULLISH

9 OF 13 INDICATORS POSITIVE

TREND - INCREASING

EconomicOptimism

Index

15

25

35

45 65

75

85

95

63.4%

READING AS OF: 4/25/2013

POSITIVE AS OF: 8/17/2012

Current Reading Prior Reading

Measuring Our Economy


Charts of Interest!


S & P DATA!

http://www.standardandpoors.com/home/en/us


S & P DATA!


“HEADLINE” DATA IS GOOD!

Mar 2013: SAAR of 417,000 – Up 1.5% from revised Feb @ 411,000 and 18.5% above the

March 2012 estimate of 352,000.

Source: Calculated Risk


BUT THE “RATIO GAP” IS IMPORTANT

WE NEED A BETTER RATIO TO “BALANCE” THE MARKET

Source: Calculated Risk

Consistent for many years

Way out of balance


THE “BIG 5” – COST OF “LIVING” IS UP (NOTHING NEW HERE)

Source: BEA – Mar 28, 2013

Built By Advisors For AdvisorsSource: Bloomberg/Scott Grannis

Swap and credit spreads have typically been good coincident and forward-looking indicators of systemic risk and the health of the economy. Currently they are

showing no signs of any deterioration


FINE MESS YOU’VE GOT ME IN NOW???

Keep your finger crossed

Source: Markit – 4/23/2013


THE CARS OF THE FUTURE

Built By Advisors For AdvisorsSource: Census Bureau

A GLITCH – FOR NOW

Ex-Transportation: -1.4%Shipments up: 0.4%

NEW ORDERS

NEW ORDERSADVANCE RPT


SO WHAT’S UP WITH:THE MARKET

Looking P/E Multiples and History

Having reached all-time highs – can we go higher? Are multiples out of line? Will earnings falter? What if the Fed “pulls the plug?” WHAT IF?!!!!!

WHERE TO FROM HERE?

FIRST – LET’S LOOK AT HISTORIC MULTIPLES: The Average P/E since 1870’s - about 15 Since 1970 – 18.8 If you “toss” the 3 highest and 3 lowest numbers – 17.6*

*Note: This will take out the recession “swings.”

WHAT ABOUT EARINGS: The Average earnings since 1970 - $35.25 If you toss the 3 highest and 3 lowest numbers – $32.74 Take that number and “deflate” it = about $99.28 (using aver rate of 4.4%)

SO:

The current multiple (17.5) is about average (from last 43 years at 17.6)

Current projected earnings at $109.52 (according to S&P) are not that disjointed from the average real earnings of $99.28

NOW LET’S TOSS IN THE INFLATION FACTOR

According to Wells Fargo research, if inflation is below 4%...…historic P/E multiples are above the norm almost 70% of the time.

They use 15 as the long term P/E multiple

Since 1945, the odds are better (70% beat)

KNOWNS: Multiples do not appear to be out of balance The Fed (plus all Central Banks) have the power Crisis “residual” and constant negatives depress confidence There has not been a fund “rotation” of any significance (Bonds –M/M) Even slow, continued growth improves confidence There are no competing markets at this juncture Earnings forecasts seem negative – more wait and see attitude Business in uncertain Excessive regulation is tough Markets are LEADING INDICATORS

KNOWNS AND UNKNOWNS

KNOWNS AND UNKNOWNS

UNKNOWNS Europe Government The Fed’s “unwind” Global Central Banks Emerging Markets China Global Business Climate Consumer Employment Alternative Markets Inflation

MULTIPLES ABOVE 20 ARE NOT THAT UNCOMMON

CONCLUSIONS: 60/40 is not protection In the “hands” of the Fed (they made it – they can break it) Fed raising rates is actually a necessity…. ……But –the exit strategy is critical Slow growth is OK World economies are important To capture the market’s potential we will need a pullback Inflation is a critical factor The balance between multiples and earnings is not clear –

don’t make too many assumptions Biggest risk is uncertainty

CITY #1 Good Fed exit Inflation remains at target 2.5 to 3.0% 3.5% GDP growth next 3 years Market multiple of 17.5 Earnings increase at 3.5% (now about $98) Target S&P = 1900

A “TALE OF TWO CITIES”

CITY #2 Bad Fed exit Inflation soars above 4% Less than 3% GDP growth next 3 years Market multiple of 14 Earnings increase at 2.5% (now about $98) Target S&P = 1477 (Ouch!)


A CLOSER LOOK AT: PRGO


Enters Portfolio

Perrigo Co. (PRGO)Perrigo Company, through its subsidiaries, develops, manufactures, and distributes over-the-counter (OTC)

and generic prescription (Rx) pharmaceuticals, infant formulas, nutritional products, and active pharmaceutical ingredients (API) worldwide. The company operates in four segments: Consumer

Healthcare, Nutritionals, Rx Pharmaceuticals, and API. The Consumer Healthcare segment offers a line of OTC pharmaceutical products in the areas of analgesics, cough/cold/allergy/sinus, gastrointestinal, and

smoking cessation, as well as in the areas of feminine hygiene, diabetes care, and dermatological care. The Nutritionals segment develops, manufactures, markets, and distributes infant and toddler formula

products, infant and toddler foods, and oral electrolyte solution products, as well as vitamin, mineral, and dietary supplement products. The Rx Pharmaceuticals segment develops, manufactures and markets a

portfolio of generic prescription drug products in topical dosage forms, such as creams, ointments, lotions, gels, shampoos, foams, suppositories, sprays, liquids, suspensions, solutions, and powders, as well as

controlled substances, injectables, hormones, and oral liquids and oral solid dosage forms. The API segment develops, manufactures, and markets API used by the generic drug industry and branded pharmaceutical

companies. Perrigo Company also manufactures and markets branded prescription drugs; and imports pharmaceutical, diagnostics, and other medical products. The company sells its products through chain drug stores, wholesalers, distributors, hospital systems, and group purchasing organizations, as well as

retail drug, supermarket, and mass merchandise chains. It has joint development agreements with Medicis Pharmaceutical Corporation, and M. Arkin, Ltd. Perrigo Company was founded in 1887 and is

headquartered in Allegan, Michigan.

Source: FinViz.com, April 2013

PERRIGO ACQUISITION OF VELCERA, INC. -- KNOWN FOR ITS PETARMOR® FRANCHISE OF FLEA AND TICK

TREATMENTS -- CLOSES APRIL 1, 2013

Velcera, together with major retail partners, has been instrumental in developing an OTC market for pet health products traditionally

dispensed only by veterinarians. Retail sales of the PetArmor® franchise exceeded $100 million during calendar year 2012, the value-brand's first full year on the market, having launched in April 2011. Velcera sales for

calendar year 2012 were approximately $60 million. The PetArmor® franchise brand will be supported by a number of pipeline product

candidates in both flea and tick and health and wellness categories that will continue to bring additional vet technologies to the hands of

consumers in the mass market.

Slightly accretive to adjusted EPS/dilutive to GAAP EPS 2013 Expected $0.11 accretive adjusted EPS/neutral to marginally dilutive GAAP EPS 2014 Fully accretive 2015

Sources: Morningstar, March 2013

POSITIVES: Perrigo is the market leader in generic releases of prescription drugs that receive OTC approval, participating in roughly 80% of such domestic launches.

Possible concerns: Johnson & Johnson's eventual return to the OTC market and a gradually improving economy should slow Perrigo's market share gains in its store-brand consumer health segment.

Perrigo Co. (PRGO)


Against this backdrop of escalating costs, the Generic Drug Savings analysis shows conclusively that the use of lower cost generic prescription drugs is a vital component to holding down the growth rate of health care spending. As the study shows, generic drug

use has saved the U.S. health care system approximately $1.07 trillion over the past decade (2002 through 2011) with $192.8 billion in savings achieved in 2011 alone.

Considering that the government’s share of health care spending will soon exceed 30 percent as the oldest baby boomers become eligible for Medicare, the money saved by

using generic medicines is critical to bending the cost curve and providing sustainability to our health care system. Indeed, the NHEA report concluded that, while overall health care

costs continue to grow at a rate higher than national economic growth, the growth in drug spending is slowing (only 1.2 percent in 2010), driven by “continued increase in the

use of generic medications.”

Source: “Generic Drug Savings In the U.S.” – Generic Pharmaceutical Assoc

THINK ACA!!


BUY 3/4/2013 @$114.53Current $119.23


Trade Data

Price TargetMean

Expectancy

April 2013 Stock Picks

As of March 28, 2013 - Subject to change.

Industry:Major Drugs


NYSE Healthcare Index


PHLX Drug Index


FINVIZ SUMMARY


Value Line

$118.87


Value Line


THE CHARTS PLEASE!


DAVID’S CORNER


SWAPS & “SPREADS”

IGNORE AT YOUR PERIL


SWAPS AND SPREADSRATE PRIOR CURRENT STATUS*

Libor/OIS .140 .145

Euribor/Eonia .130 .123

DTCC RepoIndex

Agency .193 .110

MBS .208 .157Treas .180 .115

High Yield 4.78 4.71Federal ReserveCurrency Swaps

(ECB)USD million

7 Day 1,200 0Open 7,551 7,551

2-Year Swap Spread .150 .130 *Note: Status = No impact

Status = Negative Impact

As Of: 4/24/2013

CREDIT ANTICIPATES – EQUITY CONFIRMS


LEE’S COMMENTS

Built By Advisors For AdvisorsSource: Gartner Research

UNDERSTANDING EMOTION IN THE MARKET

PROCESS DESIGNED IN 1995 TO CYCLES IN THE TECH MARKET IDEA WAS TO EXPLAIN PRODUCT CYCLES AND DETERMINE IF A PARTICULAR TECHNOLOGY WAS “READY” SINCE THEN – APPLIED TO DIFFERENT INDUSTRIES COULD WELL BE APPLIED TO MARKETS GET’S TO THE HEART OF OVER-ENTHUSIASM POINTS TO PROCESS

Built By Advisors For AdvisorsSource: Gartner Research

UNDERSTANDING EMOTION IN THE MARKET


QUESTIONS & COMMENTS

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