11-9-09 weekly report.ppt

Penn State Investment Association

PresidentPresidentTom WatersVice PresidentVice PresidentJohn BrozickCIOCIOSteve MurraySecretarySecretaryAdam BrownTreasurerTreasurerPaul Russ

Summary Highlights The Nittany Lion Fund LLC returned 3.21% for the week ending

November 6, 2009, while the S&P 500 returned 3.24%. Year to date, the Fund has returned 20.54% versus the S&P 500 which has returned 20.11%. Since inception the Fund has returned 0.68% on an annualized basis while the S&P 500 has returned -0.89%. Performance this week was driven by the Industrials, Consumer Discretionary, and Healthcare sectors.

There were 5 presentations last week. The Consumer Discretionary sector presented a buy recommendation for Under Armor (UA) and a sell recommendation for VF Corporation (VFC). The Energy sector presented a buy recommendation for Transocean Ltd. (RIG). The Financials sector presented a buy recommendation for the bench for Hudson City Bank (HCBK) and a hold recommendation for Metlife (MET). All recommendations were approved except for Under Armor (UA).

There are 6 presentations this week. The Healthcare sector will be presenting a buy recommendation for McKesson (MCK). The Information Technology sector will be presenting a buy recommendation for the bench for Quality Systems Inc. (QSII). The Materials sector will be presenting a sell recommendation for Monsanto (MON). The Consumer Discretionary sector will be presenting a sell recommendation for VF Corp. (VFC). The Utilities sector will be presenting a buy recommendation for The AES Corporation (AES). The Industrials sector will be presenting a hold recommendation for Bucyrus (BUCY).

Weekly Update: November 9, 2009

Board of Directors

Economic Outlook:► Looking forward, the bond markets will close on Wednesday, but

the stock markets will remain open. On Thursday, the Treasury Department reports the federal budget reading for October. On Friday, reports are due on international trade, import and export prices, and consumer sentiment. During the week, earnings reports are expected from Ticketmaster, Tyco, Wal-Mart, and Walt Disney.

YTD Return (%)

-30.00%

-10.00%

10.00%

30.00%NLF S&P



Directors of PAGNéstor [email protected]

Steven [email protected]


Board of Directors


Returns (TTM)

-60.00%-50.00%-40.00%-30.00%-20.00%-10.00%

0.00%

Oct Dec Feb Apr Jun Aug Oct

NLF S&P500

Nittany Lion FundPerformance* Weekly YTD Inception1 NLF Portfolio

Nittany Lion Fund 3.21% 20.54% 0.68% Base Portfolio Value $3,341,311

S&P 500 Index 3.24% 20.11% (0.89%) Current Portfolio Value $4,027,561

NLF vs. S&P 500 2 (0.03%) 0.43% 1.57% Cash Balance $184,2311 Annualized & Net of fees; 2 Uses arithmetic calculation

Weekly Trades Price Shares Key Statistics NLF S&P 500

SVB Financial Group Buy $41.78 1200 Portfolio Beta 0.97 -

BHP Billiton Limited ADR Buy $67.04 525 Sharpe Ratio 1.05 0.84

Volatility (26 week) 18.57% 20.57%

Weighted Ave. Market Value $65.13 billion $79.76 billion

P/ E (TTM)* 18.51 15.29

YTD Turnover Ratio 31.39% 3.40%

*Normalized for negative earnings

P/E vs. S&P

Sector 3Market Cap vs.

S&P Sector 3 Sector Weightings

Sector Analysis Weekly 4 Weeks YTD vs. S&P 500 4 NLF Target Current S&P 500

Consumer Discretionary 5.05% 2.57% 18.55% (9.14%) 0.93 1.71 7.59% 7.66% 9.33%

Consumer Staples (0.74%) (2.16%) 4.12% (5.09%) 1.00 0.92 12.51% 12.06% 11.78%

Energy 2.80% (0.05%) 31.47% 16.96% 0.82 0.61 15.48% 15.79% 12.33%

Financials 3.06% (5.48%) 38.76% 21.70% 1.18 1.22 14.16% 13.63% 14.48%

Healthcare 4.52% 0.91% 7.12% (2.06%) 1.28 0.91 12.06% 12.28% 12.55%

Industrials 8.48% 10.06% 29.95% 14.82% 0.75 0.36 10.27% 10.26% 10.38%

Information Technology 2.82% (0.41%) 55.60% 4.63% 1.27 0.55 17.35% 17.89% 19.05%

Materials 4.48% (1.30%) 37.40% 1.75% 2.85 10.80 4.49% 4.60% 3.46%

Telecommunications 2.36% 1.83% 10.03% 18.08% 1.89 0.74 3.19% 3.13% 3.02%

Utilities 0.75% (2.31%) 1.19% 2.19% 1.06 0.77 2.91% 2.69% 3.63%3As a ratio of NLF/S&P market cap weighted averages; 4 Excludes dividends

NLF Holdings Purchase Current NLF Target Weight P/E Ratio % Off High5

Relative Performance Since

High6 Weekly Overall

The Walt Disney Company 23.77$ 28.56$ 32.00$ 1.97% 15.96 4.39% (2.31%) 4.35% 20.16%

McDonald's Corp. 55.30$ 61.72$ 65.50$ 2.05% 16.17 3.18% (27.82%) 5.31% 11.61%

Autozone Inc 138.41$ 140.32$ 171.00$ 1.06% 11.87 0.00% 0.00% 3.70% 1.38%

V F Corp. 78.99$ 74.47$ 90.00$ 1.22% 15.26 11.70% (1.51%) 4.83% (5.72%)

Lowe's Companies 18.98$ 20.94$ 27.75$ 1.36% 16.23 12.20% (18.01%) 7.00% 10.33%

Coca-Cola Co 51.46$ 54.49$ 59.12$ 1.98% 17.98 1.66% 6.49% 2.21% 5.89%

Philip Morris International Inc 47.66$ 48.83$ 51.00$ 1.97% 15.16 12.73% (3.83%) 3.10% 2.46%

CVS Caremark Corp. 27.88$ 29.79$ 35.00$ 2.13% 11.64 21.63% (21.36%) (15.61%) 6.85%

Ralcorp Holdings Inc 54.28$ 54.78$ 68.00$ 1.35% 13.23 15.24% (20.29%) 2.01% 0.92%

Diageo PLC 61.55$ 66.58$ 84.00$ 2.08% 13.44 0.00% 0.00% 2.40% 8.17%

Procter & Gamble Co 49.41$ 61.04$ 64.50$ 2.54% 16.91 0.00% (22.10%) 5.24% 23.54%

Apache Corp. 126.66$ 98.87$ 107.92$ 2.93% 18.13 32.65% 2.42% 5.05% (21.94%)

Exxon Mobil 65.71$ 72.58$ 84.51$ 3.11% 16.92 12.70% (21.10%) 1.27% 10.46%

Noble Corp. 37.66$ 42.34$ 47.17$ 4.40% 6.69 37.72% (4.49%) 3.93% 12.43%

Schlumberger Ltd. 43.80$ 64.40$ 74.48$ 1.73% 20.51 8.99% (5.01%) 3.54% 47.03%

Chesapeake Corp. 34.11$ 24.22$ 31.48$ 1.84% 8.87 65.10% (33.50%) (1.14%) (29.00%)

Southwestern Energy 23.12$ 44.74$ 56.73$ 1.79% 33.14 10.82% (6.85%) 2.66% 93.51%

The Goldman Sachs Group 134.58$ 171.78$ 200.00$ 2.79% 18.31 30.71% 26.74% 0.95% 27.64%

Blackrock Inc. 191.84$ 227.51$ 240.00$ 1.69% 42.60 3.84% 1.96% 5.09% 18.59%

Metlife, Inc. 30.30$ 33.52$ 44.00$ 1.17% 15.74 17.90% (11.86%) (1.50%) 10.63%

Invesco Ltd 16.14$ 23.09$ 25.00$ 1.34% 35.52 3.67% 5.42% 9.17% 43.06%

JPMorgan Chase & Co. 38.05$ 43.48$ 55.00$ 3.74% 28.42 7.80% 0.68% 4.09% 14.27%

Credit Suisse Group 54.56$ 55.68$ 64.00$ 1.61% 9.22 6.95% 2.14% 4.47% 2.05%

SVB Financial Group 41.78$ 41.35$ 48.70$ 1.29% 51.69 1.66% (1.21%) 0.24% (1.04%)

Gilead Sciences, Inc. 40.34$ 46.26$ 59.64$ 2.63% 17.66 18.98% (6.53%) 8.72% 14.68%

Abbott Laboratories 47.00$ 51.53$ 64.00$ 2.75% 14.31 1.34% (0.08%) 1.90% 9.64%

Teva Pharmaceutical 41.61$ 52.03$ 55.00$ 3.10% 11.80 4.09% (8.01%) 3.07% 25.04%

Johnson & Johnson 61.15$ 60.30$ 76.46$ 1.65% 13.25 6.42% (12.13%) 2.12% (1.39%)

Haemonetics Corp 49.84$ 55.18$ 62.00$ 2.15% 20.82 6.92% (10.68%) 7.15% 10.71%

Waste Management Inc 30.40$ 31.64$ 37.50$ 1.42% 16.06 0.00% 0.00% 5.89% 4.07%

Bucyrus International Inc. 29.90$ 50.40$ 60.00$ 2.43% 12.63 0.92% (2.15%) 13.46% 68.56%

Northrop Grumman Corp 47.28$ 52.37$ 65.00$ 1.70% 9.84 0.72% (0.96%) 4.47% 10.77%

Union Pacific Corp 63.41$ 62.36$ 65.00$ 1.99% 16.32 2.93% (1.66%) 13.09% (1.66%)

Honeywell International Inc 34.14$ 37.70$ 40.50$ 2.72% 11.32 6.15% (4.70%) 5.04% 10.43%

Intl Business Machines 80.81$ 123.49$ 128.00$ 3.21% 12.73 3.79% (3.29%) 2.39% 52.82%

Google Inc. 456.46$ 551.10$ 570.00$ 3.30% 29.49 25.71% (4.04%) 2.79% 20.73%

Cerner Corp. 44.53$ 77.45$ 85.00$ 3.14% 35.37 9.43% (8.97%) 1.85% 73.93%

Amphenol Corp. 34.35$ 41.93$ 45.15$ 2.20% 22.42 19.29% (11.39%) 4.51% 22.06%

Mantech Intl Corp 41.21$ 45.00$ 58.00$ 1.71% 15.10 17.73% (25.74%) 2.60% 9.20%

Synopsys Inc 21.22$ 23.09$ 29.51$ 1.98% 14.71 1.54% (1.04%) 4.86% 8.81%

Sybase Inc 34.79$ 40.23$ 46.00$ 2.34% 19.16 4.21% (3.70%) 1.69% 15.64%

Freeport Copper & Gold Inc. 64.88$ 79.56$ 91.51$ 1.11% 27.25 36.79% (1.90%) 8.45% 22.63%

BHP Billiton Limited ADR 67.04$ 67.96$ 85.12$ 0.93% 18.33 0.00% 0.00% 3.63% 1.37%

Praxair Inc. 87.76$ 81.71$ 84.19$ 0.45% 20.84 17.88% 14.49% 2.86% (6.89%)

Monsanto Co 80.96$ 69.14$ 91.59$ 1.12% 16.12 24.71% (48.32%) 2.92% (14.60%)

Greif Inc 52.46$ 56.61$ 83.22$ 0.99% 17.37 1.24% 3.85% 5.77% 7.91%

Cisco Systems, Inc. 26.00$ 23.82$ 25.50$ 0.80% 21.85 9.67% 17.97% 4.43% (8.38%)

American Tower Corp. 32.46$ 38.76$ 41.00$ 0.81% 57.85 3.29% (2.89%) 5.27% 19.41%

Verizon Communications 30.29$ 29.56$ 37.77$ 1.52% 12.01 8.51% (4.35%) (0.10%) (2.41%)

OGE Energy Corp. 31.51$ 32.78$ 37.00$ 0.85% 12.61 5.97% (5.63%) (1.32%) 4.03%

FPL Group Inc. 48.28$ 49.76$ 62.00$ 0.91% 11.93 17.14% (4.10%) 1.34% 3.07%

Wisconsin Energy Corporation 37.05$ 44.61$ 48.00$ 0.93% 14.44 3.57% (1.92%) 2.15% 20.40%5 % difference between most recent price and highest weekly closing price since purchase6 % difference between the stock's performance since its high and the sector's performance since the stock's high

*NLF performance is calculated to reflect the changes in net portfolio value for a specified period of time. Returns include dividends.

**vs. S&P 500 is the performance relative to S&P 500 Index. Individual performance against S&P 500 Index is measured using returns against the unadjusted index.

***U/R designates an "under review" status



Economic/Market Weekly Wrap-up


Economic Analysis Group

► At the close of markets on Friday, November 6, 2009 the Dow finished at 10023.42 up 310.69 points (+3.20%) from last Friday’s close. In addition, the NASDAQ closed at 2112.44 up 67.33 points (+3.29%) and the S&P 500 finished at 1657.27 up 51.99 points (+3.24%). YTD, the indices have returned +14.21%, +33.95% and +20.11%, respectively

Week in Review

► Unemployment Rate/Nonfarm Payrolls–The Bureau of the Labor Statistics and the U.S. Department of Labor reported that the unemployment rate increased 0.4% in the month of October to stand currently at 10.2%. This came in worse than expectations as the street was expecting an increase to only 9.9%. Further, nonfarm payrolls declined by 190K, which also came in worse that expectations, as the street was expecting a decline of 175K. As we move towards an economic recovery, unemployment can be expected to continue to increase, as more workers will re-enter the work force, amidst an improving job market. However, over the past two months, this trend has not been evident. The civilian labor force declined by 571K and 31K in September and October, respectively. The main causes for the increase to the unemployment rate were due to increases in unemployed workers and decreases in employed workers. The street appeared to have had a mixed reaction, as the markets traded into marginally positive territory on Friday, although the initial market reaction was met with more volatility

► Durable Orders–The Census Bureau of the Department of Commerce reported that total durable goods orders for the month of September increased by 1.0%, which came in line with the street’s expectations. This comes after a decline of 2.6% in the month prior. Despite seeing some healthy increases to auto and home sales, largely resulting from stimulus payments, as well as a recent boost to consumer spending, manufacturers inventories continue to remain low, as the view on the long-term sustainability of economic recovery continues to keep firms cautious. On one hand, this is encouraging, as it suggests that firms are more conservatively managing their production and inventory processes, however, on the other hand, it suggests that the business investment outlook continues to remain weak

► Wholesale Inventories–The Census Bureau of the Department of Commerce reported that wholesale inventories declined by 0.9% in the month of September, coming in marginally above the consensus estimate of a 1.0% decline. The inventory/sales ratio currently stands at 1.18, down from 1.28 in May. As manufacturers remain cautious of an economic recovery, we expect this ratio to continue to decrease

Economic Calendar for the Next Week

11/12/09 – Initial Claims: Consensus: N/A Prior: N/A

11/12/09 – Treasury Budget: Consensus: -$150.0B Prior: -$155.5B

11/13/09 – Trade Balance: Consensus: -$31.9B Prior: -$30.7B

11/13/09 – Michigan Consumer Sentiment: Consensus: 71.8 Prior: 70.6

Director of Director of EAGEAGJon [email protected]

Director of Director of Investor Investor RelationsRelationsMinaz [email protected]

EAG AnalystsEAG AnalystsGoutham [email protected]

Rahul [email protected]

Lin [email protected]



Sector Wrap-up



Consumer Discretionary Sector► The S&P Consumer Discretionary sector has returned 4.70% month

to date as of November 6, 2009. YTD, the sector has returned 30.47%

Commentary:

► The Consumer Discretionary sector returned 4.70% during the week while the S&P 500 returned 3.24% over the same period. A group of 1,200 marketing and advertising executives at the 99th annual conference of the Association of National Advertisers in Phoenix are anxious about the economy, but many see opportunity as they look toward 2010. Executives from Walmart ( WMT), McDonald’s ( MCD) and MillerCoors on Friday spoke about how their companies, which sell “value” products, have profited from the recession and changes in their businesses. The takeaway message from these executives: Don’t be too distracted by fads and trends, and stay focused on customers and the brand basics

Sub-sector News/ Trends:

Restaurants:

► McDonald’s Corp. (MCD) is setting a course to add a dollar menu for breakfast starting in January, according to a document reviewed by Dow Jones Newswires, as it looks to head off a slowdown in morning sales. The fast-food chain’s national advertising fund has “overwhelmingly approved” backing the dollar breakfast menu with a nationwide campaign during the first six months of 2010, according to the document. The matter will be put to a vote of regional advertising groups, but it comes with the blessing of the national council and a sense of urgency “to ensure that breakfast continues to be a strong contributor to our overall sales, guest count and profit growth,” the document said. Danya Proud, a McDonald’s spokeswoman, said the chain would not comment on information obtained from unauthorized sources. “Matters concerning the future of our business and internal discussions are confidential and proprietary to the McDonald’s system,” she said

Media:

► After a courtship of about 20 years, the Walt Disney Company (DIS) has won approval from the central government of China to build a Disneyland-style theme park in Shanghai, Robert A. Iger, Disney’s chief executive, said Tuesday. Analysts estimate the initial park, not including hotels and resort infrastructure, will cost $3.5B, making it one of the largest-ever foreign investments in China. The initial resort, with a mix of shopping areas, hotels and a Magic Kingdom-style theme park, will sprawl across 1,000 acres of the city’s Pudong district - with the theme park occupying about 100 of those acres. It would be a little bigger than Disneyland in Anaheim, Calif., and on par with the parks in Paris and Tokyo. It is expected to open in five or six years








Sector Wrap-up

Consumer Staples Sector► The S&P Consumer Staples sector has returned 1.76% month to date

as of November 6, 2009. YTD, the sector has returned 9.71%

Commentary:

► The Consumer Staples sector returned 1.76% during the week while the S&P 500 returned 3.24% over the same period. The holiday-shopping price war between mega-retailers has expanded into the DVD market, with Wal-Mart (WMT), Target (TGT) and Amazon (AMZN) cutting online prices for pre-ordered DVDs well below cost. TGT on Friday said that it was cutting prices for 10 highly anticipated DVDs to $10, matching a price set Thursday by WMT. AMZN made similar cuts. By Friday, WMT had taken its cuts further, shaving another two cents off the DVDs, to $9.98. It is not known exactly how much the retailers pay studios for the movies, though it’s certainly more than $10. A $14.99 price point is common for major new releases, for example, and even that’s considered a loss-leading, promotional price rather than a moneymaker. But with all businesses scrambling for every dime as the economy claws its way out of a recession, the biggest retailers are willing to lose money on a relatively small slate of products if it means bringing in customers that will make other purchases too

Sub-sector News/Trends:

Consumer Goods:

► CVS Caremark (CVS) shares slid 20% Thursday after CVS said Caremark, its pharmacy-benefit manager, was bleeding major clients. The move wiped about $10B off the market value of CVS, reflecting fears Caremark will struggle to improve anytime soon. The bombshell from CVS, which merged with Caremark in 2007, raised concerns that competition will erode the profits of other benefit managers. Shares of independents Medco Health Solutions and Express Scripts (ESRX) swooned early Thursday and trailed a broad market rally

Consumer Goods:

► The U.S. Food and Drug Administration (FDA) sent a warning letter Friday to Procter & Gamble Co. (PG) saying the company was illegally marketing two Vicks cold and flu medicines containing vitamin C. The FDA said the single-dose combinations of drug and dietary ingredients in Vicks DayQuil Plus Vitamin C and Vicks Nyquil Plus Vitamin C cannot be marketed legally because they have not been proven safe and effective. The agency also said it had previously determined that there was insufficient data to show vitamin C is safe and effective in preventing or treating the common cold. Earlier this month the agency issued a similar warning letter but then quickly retracted it. FDA spokesman Christopher Kelly said Friday the letter was “issued prematurely - it had not completed our internal clearance process”










Sector Wrap-up


Energy Sector► The S&P Energy sector has returned a gain of 2.85% month to date

as of November 6, 2009. YTD, the sector has returned a gain of 12.40%

Commentary:

► The Energy sector gained 2.85% during the week while the S&P 500 returned a gain of 3.24% over the same period. On the New York Mercantile Exchange, Nymex crude future traded relatively flat this week ending at $77.43 from last week’s $77. After two weeks of continuous losses, this week, the Energy Sector gained with some better than expected economic data. The ISM index came in better than expected and the market also reacted positively to sharp increase in productivity in the third quarter


Major Integrated Oil and Gas :

► According to an article in the Associated Press, Murphy Oil Corp.(MUR) says it plans to pump more oil out of the ground as a rally in crude prices helps it recover from a tough third quarter. The El Dorado, Ark.-based oil company reported Wednesday that net income from July to September tumbled 68% to $188.9M, or $0.98 a share. Profit was $584.4 M, or $3.04 a share, a year earlier. Revenue fell 37% to $5.18B from $8.17B. Like many of its peers, Murphy Oil responded by pumping more crude to boost revenues. The company, which has petroleum exploration and refining operations in the U.S. and the United Kingdom, said it increased oil and gas production by 28% in the third quarter. Shares of MUR closed at $60.40 on Friday

Oil & Gas Refining and Marketing :

► According to a news release by the company, Sunoco, Inc. (SUN) today reported a net loss attributable to Sunoco shareholders of $312M for the third quarter of 2009 versus net income attributable to Sunoco shareholders of $549M for the third quarter of 2008. Excluding special items, Sunoco had a loss for the 2009 third quarter of $34M ($0.29 per share diluted) versus 2008 third quarter income of $559M ($4.78 per share diluted). “During the third quarter, refining and chemicals results continued to be impacted by weak demand, but our other businesses continued to generate steady earnings,” said Lynn L. Elsenhans, Sunoco’s Chairman and Chief Executive Officer. Shares of SUN ended Friday trading at $28.21
















Financial Service Sector► The S&P Financial Service sector has returned a gain of 1.81%

month to date as of November 6, 2009. YTD, the sector has returned a gain of 14.02%

Commentary:

► The Financial Service sector returned a gain of 1.81% during the week while the S&P 500 returned a gain of 3.24%. After a 10.2% unemployment report, the New York Times reported that the Federal Reserve decided to keep interest rates at its all-time lows. Also, the Times reported that analysts expect these rates to remain low for at least 6 months. Reuters reported that Warren Buffett showed his confidence in the economy as Berkshire Hathaway (BRK/A), with reported profits of $3.24B, announced the takeover of Burlington Northern Santa Fe Corp. (BNI.N), the nation’s second-largest railroad operator


Banking:

► UBS AG (UBS) reported a loss of $542M. However, putting a one-time $2.4B accounting charge aside, their pre-tax profit was $1.5M. Oswald Gruebel, CEO, says that business is returning to normal, and they are focused on risk reduction and capital strength. The banks bright spot laid in it investment banking fixed income business

► Royal Bank of Scotland (RBS) reported a loss of $2.98B. Total income fell 17% from the past year, while impairment losses jumped to $5.5B. This large loss was an improvement over the previous quarter. The Economic Times reported that regulatory pressure requires banks to have higher margins than they had previously; RBS has struggled doing this

Credit Card Companies:

► MasterCard Inc. (MA) reported a profit of $452M, resulting in earnings of $3.45 per share, which outpaced analyst forecasts of $2.94 per share. Investors.com reported that these profits were bolstered by continued cost-cutting measures; on the other hand, Robert Selander, CEO, says that the economic downturn keeps affecting consumer spending

Mortgage Lenders:

► US Federal National Mortgage Association (FNM) reported a loss of $18.9B, resulting in a loss of $3.47 per share. Bloomberg reported that with $44.9B in federal aid to date, Fannie Mae is seeking another $15B in aid from the U.S. Treasury to keep it afloat

► US Federal Home Loan Mortgage Corp. (FRE) reported a $5B loss, which is a large improvement over the previous year’s $25.3B loss. Freddie Mac had received $50.7B in government aid and says it does not need anymore aid, Bloomberg reported

Sector Wrap-up



Sector Wrap-up

Healthcare Sector► The S&P Healthcare sector has returned a gain of 3.79% month to

date as of November 6, 2009. YTD the sector has returned a gain of 9.37%

Commentary:

► The S&P Healthcare sector returned a gain of 3.78% during the past week, while the S&P 500 returned a gain of 3.24%. Among developments last week for this sector were: ABT completed its acquisition of Evalve for $320M, SNY and BMY won a patent ruling against generic drug maker Apotex, NVS announced investments in China amounting to over $1B, GSK and PFE launched joint venture to develop HIV treatments, TEVA reported higher profit on higher sales for the third quarter


Major Drugs

► Sanofi-Aventis SA (SNY) and partner Bristol-Myers Squibb Co. (BMY) won a pivotal legal case on Monday when the Supreme Court rejected generic-drug maker Apotex’s appeal challenging a patent for the blockbuster blood-thinning drug Plavix. This case highlights the battle between pharmaceutical companies seeking to extend patent exclusivity and generic drug makers angling to break into the lucrative market. The patent for Plavix was extended from 2003 to 2011 under this patent ruling. With $9.5B in annual sales, reaffirmation of this patent extension was a major win for SNY/BMY and major loss to Apotex who is barred from selling their generic version of Plavix (clopidogrel bisulfate)

► Novartis AG (NVS) announced on Tuesday it's investing $1B over five years for research and development in China, including $250M in a new global technical center and $125M in cash for an 85% stake in Zhejiang Tianyuan Bio-Pharmaceutical Co., a privately held company that is the third-largest maker of vaccines for a variety of viral and bacterial diseases

► GlaxoSmithKline (GSK) and Pfizer (PFE) launched a joint venture on Wednesday to develop HIV treatments. A new company, ViiV Healthcare, will assume control of current GSK and Pfizer HIV treatments, which generated about $2.9B in sales in 2008 and represent about 19% of the HIV market. This venture highlights a tactic to supplement pharmaceuticals pipelines while reducing development risk: GSK gets access to Pfizer’s pipeline by providing current HIV drug revenue to offset the costs and financial risk of developing the pipeline. The pipeline boost is needed, as GSK’s current HIV drug earnings are forecast to drop by more than 50% by 2014 as patents expire

Biotechnology & Drugs

► Teva Pharmaceutical Industries Ltd. (TEVA) reported that third-quarter net income rose 2.9% on 25% higher sales. Earnings reached $649M, or $0.72 a share, up from $631M, or $0.77 a share in the year ago period. Sales rose to $3.55B up from $2.84B










Sector Wrap-up


Industrials Sector► The S&P Industrials sector has returned a gain of 6.06% month to

date as of November 6, 2009. YTD, the sector has returned a gain of 13.18%

Commentary:

► The Industrials sector gained 6.06% during the week while the S&P 500 returned a gain of 3.24% over the same period. This week the market surged ahead led by the cyclical sectors. The Industrial sector was the best performing sector as the week saw better than expected economic data. ISM index, factory orders and pending home sales all came in better than expected in the first part of the week. The market got the biggest boost for week as non farm productivity numbers came in much better than what economists had expected for the third quarter


Railroads :

► According to a news article in the CNN, Warren Buffett’s Berkshire Hathaway said Tuesday it will buy railroad operator Burlington Northern Santa Fe for $44B. Berkshire (BRKA), which already has major stake in Burlington Northern(BNI), said it would acquire the remaining 77.4% of the company in a cash-and-stock offer worth $100 per share. Buffett called his firm’s investment an “all-in wager on the economic future of the United States.” “Our country’s future prosperity depends on its having an efficient and well-maintained rail system,” Buffett said in a statement. Shares of BNI ended Friday trading at $97.23

Auto Manufacturers- Major :

► According to a press release by the company, Ford, Lincoln and Mercury October U.S. sales totaled 132,483, up 3% versus a year ago and 21% higher than September. October marks the third time in the last four months Ford sales have increased. October retail share was up for the 12th time in 13 months. “Consumer demand for our new high-quality, fuel-efficient products is driving Ford’s market share gains,” said Ken Czubay, Ford vice president, U.S. Marketing Sales and Service. “Ford vehicles are among the ‘freshest’ available by any automaker, with more than 80% of our sales in October coming from our new 2010 models.” Ford estimates its total market share in October was more than 15 percent - higher than a year ago and higher than its share in the first nine months of 2009. Shares of Ford ended Friday trading at $7.75









Sector Wrap-up


Information Technology Sector► The S&P Information Technology sector has returned a gain of

3.10% month to date as of November 6, 2009. YTD, the sector has returned a gain of 48.71%

Commentary:

► The Information Technology sector has returned a gain of 3.10% during the week while the S&P 500 returned a gain of 3.24% over the same period. The tech sector has closed out the third quarter with excellent performance. Despite being somewhat bullish in this sector since the end of the first quarter, we are seeing signs that may point to this sector’s outperformance slowing relative to the overall market, although this week tech traded, more or less, in line with the overall market. Many big tech names have performed very well over the past few weeks on good earnings, however, other larger firms have reported earnings numbers below expectations. Year to date, tech has outperformed the broader S&P by 23.81% and additionally, quarter to date, tech has outperformed by 141 basis points. Although we can still see areas and sub-sectors that have room for revenue growth, the price increases that we have witnessed are not to be ignored and we are reducing our exposure in this sector to mitigate any risks created around earnings volatility in this quarter, as well as to take profits


Semiconductors:

► Actions Semiconductor Co., Ltd. (ACTS) reported a third quarter net loss of $0.6M, or $0.01 per share, compared to net income of $7.3M, or $0.09 per share in the year ago period. Revenue was $13.4M, compared to revenue of $27.3M in the year ago period. Gross margin was 30.8% for the third quarter. “Our third quarter results were driven by improving demand in our automotive MP3 and low end as well as advanced Portable Media Player (“PMP”) product categories,” stated Mr. Nan-Horng Yeh, CEO of Actions Semiconductor. “During the third quarter, our market share in these product categories continued to grow and sales in these categories accounted for more than half of our total revenue. We are pleased to report an improvement in gross margin for the third quarter compared to the second quarter of 2009, which reflects the positive impact from our manufacturing cost reduction initiatives as we have been migrating to a smaller geometry”

► Computer Software:

► FARO Technologies, Inc. (FARO) reported a third quarter net loss of $1.3M, or $0.08 a share, down from a net income of $2.0M, or $0.12 per diluted share, in the year ago period. Sales decreased $13.4M, or 27.3%, to $35.7M, down from $49.1M in the year ago period. New order bookings for the third quarter were $35.8M, compared with $49.2M in the third quarter of 2008. “Market conditions remain difficult, so we took additional steps in August to reduce our operating costs through one more reduction in force. As a result, I believe we are positioned well for the fourth quarter and beyond,” stated Jay Freeland, FARO’s President and CEO









Sector Wrap-up


Materials Sector► The S&P Materials sector has returned a gain of 4.98% month to

date as of November 6, 2009. YTD, the sector has returned a gain of 35.03%

Commentary:

► The Materials sector has returned a gain of 4.98% during the week while the S&P 500 returned a gain of 3.24% over the same period. Materials stocks have continued to outperform the broader index, although we are cautious about a near-term pull-back. However, this week, the sector did outperform the market. Many firms remain well positioned to generate revenues alongside of a rebounding economy, and also possess diversified revenue streams that will help weather any further economic decline. However, there are certain segments that have experienced significant price run-ups, despite stalling fundamentals. We have been very bullish in this sector since the first quarter, and despite materials only marginally outperforming the overall market in the second quarter, this sector in the third quarter has extended its outperformance and currently the outperformance stands at 12.42% year to date


Chemicals – Major Diversified:

► Intrepid Potash Inc. (IPI) reported an adjusted net income for the third quarter of 2009 of $13.3M, compared to adjusted net income of $49.8M, in the year ago period. The average net realized sales price for potash in the third quarter was $458 per short ton ($505 per metric ton) compared to $623 per short ton ($687 per metric ton) in the same period of 2008. Excluding $5.8M of abnormal production costs expensed during the quarter, the potash cost of goods sold was $177 per short ton. Additionally, potash sales in the third quarter were 111K short tons compared to 204K short tons in the third quarter of 2008. Potash production was 112K short tons compared to 200K short tons in the year ago period. “The third quarter began to show some signs of a moderate recovery in the domestic potash market,” said Bob Jornayvaz, Intrepid’s CEO. “Although the potash market in the United States remains a just-in-time market, our forward warehousing efforts have provided Intrepid the opportunity to participate in sales that we would have otherwise not realized”

► CF Industries Holdings Inc. (CF)’s board recently rejected a final takeover offer by Agrium Inc. (AGU). Agrium described this as its “best and final” takeover offer. CF believes that AGU “continues to substantially undervalue” CF. Agrium added $5 a share to its offer for CF, which now consists of $45 plus one Agrium share. This values the total offer at about $93 a share, or a total of $4.3B










Telecommunications Sector► The S&P Telecommunications sector has returned a gain of 1.01%

month to date as of November 6, 2009. YTD, the sector has returned a loss of 6.82%

Commentary:

► The Telecommunications sector returned a gain of 1.01% during the week while the S&P 500 returned a gain of 3.24% over the same period. The telecom sector has outperformed the S&P 500 when the markets rallied in the week. Telecom generated most of the revenues coming from domestic markets, which has matured over the past ten years, making the sector likely to underperform during the coming ten years as growth in the U.S. slows. As a defensive sector, Telecom is also likely to perform in line or underperform the market as the broad market extends its move upward. One of the major developments is that Verizon Wireless (VT) will introduce an HTC Android-powered smartphone Friday alongside the Motorola Droid, the carrier said. The $99 handset, which Verizon Wireless has dubbed the Droid Eris, has similar features to the HTC Hero, the Wall Street Journal reported. Verizon Wireless also said last week that it was “very pleased” with the initial sales of Research in Motion’s BlackBerry Storm 2, which launched Wednesday


Integrated Telecommunication Services:

► Sprint Nextel (S) has partnered with Dell to enter the mini-laptop market, the carrier said Monday, in a move that mirrors steps taken by rivals Verizon Wireless and AT&T as telecoms aim to branch out, reported by CEDMagazine.com. Sprint will sell the Dell Inspiron Mini 10 netbook, which will run on its EV-DO Rev A network and cost $200 under a two-year package that starts at $60 a month. In an expected move, Sprint also expanded its WiMAX network as part of its Clearwire partnership with 4G services rolling out in 10 new cities, including Chicago, Dallas and parts of North Carolina

► T-Mobile USA restored full services early this morning to the nearly 1.7M customers affected by an outage that began late Tuesday afternoon, PC World reported. The outage disrupted voice and data services to about 5% of the telecom’s subscriber base

► Economies of scale from the Embarq merger sparked CenturyTel (CTL)’s profit to more than triple in the third quarter, outpacing analysts’ forecasts as revenue grew almost 200%, the rural telecom carrier reported. WSJ reported that the telecom company, which will soon change its name to CenturyLink, earned $280.8M on revenue of $1.87B

► Denver Business Journal reported that Qwest Communications International Inc. will freeze thousands of managers’ salaries in 2010 and stop future pension contributions for them in moves that, along with annual health care plan adjustments, are estimated to save the company $100M next year







Sector Wrap-up



Sector Wrap-up

Utilities Sector► The S&P Utilities sector has returned a gain of 1.62% month to date

as of November 6, 2009. YTD the sector also has returned a loss of 0.98%

Commentary:

► The S&P Utilities sector returned a gain of 1.62% during the past week, while the S&P 500 returned a gain of 3.24%. Among developments last week for this sector are: Losses on fuel hedges cut deeply into Mirant Corp.’s third-quarter profit, OGE Energy Corp. (OGE) reported third quarter earnings per share (EPS) of $1.40, AES Corp announced Friday it has tapped into China Investment Corp. to raise capital for its expansion plans, MGE Energy, Inc. (MGEE) reported $0.55 a share earnings for the three months ended September 30


Electric Utilities

► Losses on fuel hedges cut deeply into Mirant Corp.’s third-quarter profit. The Atlanta-based energy company (MIR) had net income of $55M and earnings of $0.38 a share, compared with net income of $1.7B and earnings of $8.69 a share in the third quarter of 2008. Results for 2009 include $174M in unrealized losses, principally on hedges, compared with $1.4B in unrealized gains on hedges for 2008. Operating revenue for the third quarter dropped 70% to $454M

► OGE Energy Corp. (OGE) reported third quarter earnings per share (EPS) of $1.40, topping the Zacks Consensus EPS estimate of $1.34. However, EPS in the reported quarter came a dime short, compared to the year-ago EPS of $1.50. Earnings were boosted in the reported quarter by strong results at Oklahoma Gas and Electric Company (OG&E), offset by cooler weather in the OG&E service territory, lower commodity prices in the Enogex midstream pipeline business and an increase in the number of shares outstanding. Revenue fell to $845.3M in the reported quarter from $1.3B in the year-ago quarter due to a tepid economy and a cooler summer affecting demand for electricity

► AES Corp, the Virginia-based global power company, proudly announced Friday it has tapped into the Mother Lode to raise capital for its expansion plans: China Investment Corp. In exchange, CIC gets 15% stake in AES. The deal also includes a letter of intent to sell 35% of AES’s wind power business to this colossal Chinese sovereign wealth fund

► MGE Energy, Inc. (MGEE) reported earnings for the three months ended September 30, 2009, of $12.7M or $0.55 per share, compared to $17.3M or $0.78 per share for the same period in the prior year. It recognized a one-time $2.8M pretax gain for the three months ended September 30, 2008. Earnings from the electric utility decreased $2.7M for the quarter ending September 30, 2009, compared to the third quarter of 2008











Equity Research: Focus on Consumer Discretionary

Director of Director of Equity Equity ResearchResearchT.J. [email protected]

Consumer Consumer DiscretionaryDiscretionaryLead AnalystLead AnalystMahir [email protected]

Associate Associate AnalystAnalystHarry [email protected]

Associate AnalystNathan [email protected]

Company 4 Week Company Performance 4 Week Sector Performance Purchase Price Current Price (11/6/09) Target Price Since PurchaseLowe's 0.00% 2.57% $18.98 $20.94 $27.75 10.33%McDonald's 8.85% 2.57% $55.30 $61.72 $65.50 11.61%VF Corp -0.39% 2.57% $78.99 $74.47 $90.00 -5.72%Disney -0.28% 2.57% $23.77 $28.56 $32.50 20.15%AutoZone -3.84% 2.57% $138.41 $140.32 $171.00 1.38%

McDonald’s Corp. (MCD) ►Sub-sector: Restaurants►Status: Purchased on 10/20/08 at $55.30►Current Price: $61.72►Target Price: $65.50►Trailing P/E: 15.96►Forward P/E: 14.03►LT EPS Growth Rate: 11.69%►Market Cap: $67.36 Billion►% of Total Portfolio: 1.95%

Commentary►Shares of McDonald’s rallied 5.3% last week, slightly outperforming the benchmark

Lowe’s Companies Inc. (LOW) ►Sub-sector: Home Retail►Status: Purchased on 5/28/09 at $18.98►Current Price: $20.94►Target Price: $27.75►Trailing P/E: 16.32►Forward P/E: 15.63►LT EPS Growth Rate: 9.57%►Market Cap: $30.94 Billion►% of Total Portfolio: 1.30%

Commentary►Bank of America upgraded its view of the home improvement retail sector, as well as both Lowe’s and Home Depot to “Buy” from “Underperform.” The firm also raised its price target for Lowe’s to $23►UBS initiated coverage of Lowe’s with a “Buy” rating►Shares of Lowe’s rose 7% for the week, outperforming the benchmark by over 200 basis points



VF Corp. (VFC) ►Sub-sector: Apparel►Status: Purchased on 4/2/08 at $78.99►Current Price: $74.47►Target Price: $90.00►Trailing P/E: 16.25►Forward P/E: 13.20►LT EPS Growth Rate: 10.2% ►Market Cap: $8.26 Billion►% of Total Portfolio: 1.17%

Commentary►Lazard analyst Todd Slater lowered his outlook on the retail, apparel and footwear sector last week. The analyst cut his rating on American Eagle Outfitters, Jones Apparel Group, and several others, while maintaining his “hold” rating on VF Corp►Shares of VF Corp traded up 4.83% for the week, in-line with the benchmark





Walt Disney Co. (DIS) ►Sub-sector: Media►Status: Purchased on 5/28/09 at $23.77►Current Price: $28.56►Target Price: $32.50►Trailing P/E: 16.92►Forward P/E: 15.27►LT EPS Growth Rate: 9.95%►Market Cap: $53.08 Billion►% of Total Portfolio: 1.88%

Commentary►Disney won approval from the Chinese government to build a theme park in Shanghai, giving it access to consumer in mainland China’s richest city►Disney announced that the company plans to rename its sports complex in central Florida after its ESPN unit, in a move to strengthen the brand’s ties with young athletes►Disney rose 4.34% last week, in-line with the benchmark








AutoZone, Inc. (AZO) ►Sub-sector: Auto Parts Retail►Status: Purchased on 10/22/09 at $138.41►Current Price: $140.32►Target Price: $171.00►Trailing P/E: 11.96►Forward P/E: 9.52►LT EPS Growth Rate: 12.4% ►Market Cap: $7.00 Billion►% of Total Portfolio: 1.01%

Commentary►AutoZone rose 3.7% last week, underperforming the benchmark by about 100 basis points












Bench Stocks: Status:

1. Best Buy Co. Inc. (BBY) Approved for bench

2. Dick’s Sporting Goods, Inc. (DKS) Approved for bench

3. Darden Restaurants, Inc. (DRI) Approved for bench

4. Under Armour, Inc. (UA) Approved for bench

Focus List: Status:

1. Coach Inc. (COH) Initiated coverage

2. Polo Ralph Lauren Corp. (RL) Initiated coverage

3. Home Depot Inc. (HD) Initiated coverage

4. Black & Decker Corp. (BDK) Initiated coverage

5. Brinker International Inc. (EAT) Initiated coverage

6. Panera Bread (PNRA) Initiated coverage

7. Staples, Inc. (SPLS) Initiated coverage

8. Kohl’s Corp. (KSS) Initiated coverage

9. Burger King Holdings, Inc. (BKC) Initiated coverage





Coca-Cola Co. (KO)►Sub-sector: Beverages – Soft Drinks►Status: Purchased on 7/7/08 at $51.46►Current Price: $54.49►Target Price: $59.12►Trailing P/E: 20.17►Forward P/E: 15.93►LT EPS Growth Rate: 8.93%►Market Cap: $126.26 Billion►% of Total Portfolio: 1.95%

Commentary►Coca-Cola Co.’s competitor Dr. Pepper Snapple reported third quarter earnings of $0.54 a share, which topped estimates of $0.49 a share. The company trimmed 2009 sales views as they believed consumers were still frugal with soft drink purchases. Dr. Pepper Snapple’s results echoed in Coca Cola Co.’s earnings, which were reported a couple weeks prior. Coca-Cola Co. posted disappointing sales results and cautioned that consumer spending would remain constrained►Hansen Natural Corp posted higher third-quarter results, but missed market expectations as it spent more to promote its energy drinks in international markets. Shares fell 9%. Hansen has a distribution agreement with Coca-Cola Co. under which Coke distributes the Monster energy drink to many European markets. International sales make up 15% of Hansen’s overall revenue


Equity Research: Focus on Consumer Staples


Consumer Consumer StaplesStaplesLead AnalystLead AnalystRishin [email protected]

Associate Associate AnalystAnalystEric [email protected]

Associate Associate AnalystAnalystDiem [email protected]

Philip Morris Int’l (PM)►Sub-sector: Cigarettes►Status: Purchased on 3/28/08 at $47.66►Current Price: $48.83►Target Price: $51.00►Trailing P/E: 15.47►Forward P/E: 12.88►LT EPS Growth Rate: 10.00%►Market Cap: $94.10 Billion►% of Total Portfolio: 1.94% Commentary►The Federal Reserve announced that they will continue targeting interest rates close to zero. This fares well for Philip Morris Int’l, because the firm benefits from a weaker US dollar. Philip Morris Int’l rose 3.10% nominally

Company 4 Week Company Performance 4 Week Sector Performance Purchase Price Current Price (11/6/09) Target Price Since PurchaseCoca-Cola -0.29% -2.16% $51.46 $54.49 $59.12 5.89%Philip Morris International -2.71% -2.16% $47.66 $48.83 $51.00 2.45%Ralcorp Holdings, Inc. -2.65% -2.16% $54.28 $54.78 $68.00 0.92%CVS/Caremark Corporation -18.34% -2.16% $27.88 $29.79 $39.25 6.85%Proctor & Gamble Co. 6.05% -2.16% $49.41 $61.04 $64.50 23.54%Diageo -2.71% -2.16% $61.55 $66.58 $84.00 8.17%



Ralcorp Holdings, Inc. (RAH)►Sub-sector: Processed & Packaged Goods►Status: Purchased on 4/15/2009 at $54.28►Current Price: $54.78►Target Price: $68.00►Trailing P/E: 11.78►Forward P/E: 11.11►LT EPS Growth Rate: 8.00%►Market Cap: $3.10 Billion►% of Total Portfolio: 1.33%

Commentary►Ralcorp Holdings will report its third quarter earnings on November 10 after the bell. Analysts expect Ralcorp to earn $1.24 per share, up from earnings per share of $0.83 for the third quarter of last year. The significant increase in analysts expectations is due to the Post acquisition►TreeHouse Foods, Inc., producer of generic brand soups, jams and jellies, baby food, pickles and more reported adjusted earnings of $0.54 a share, up from $0.41 a share, a year ago. This holds well for Ralcorp Holdings, who manufactures and distributes private label food products in groceries, foodservice, and mass merchandise channels







CVS/Caremark Corporation (CVS)►Sub-sector: Drugstores►Status: Purchased on 2/17/09 at $27.88►Current Price: $29.79►Target Price: $35.00►Trailing P/E: 13.22►Forward P/E: 10.24►LT EPS Growth Rate: 13.53%►Market Cap: $42.99 Billion►% of Total Portfolio: 2.10%

Commentary►CVS reported third quarter profit increases of 39% and adjusted EPS of $0.65, beating expectations by a cent, down $0.04 from the year ago quarter. Revenue rose 18%, while the company raised the lower end of its 2009 guidance to $2.61 to $2.64 per share. The company also announced a $2.5 billion share repurchasing program►CVS’ strong pharmacy service segment grew 23% for the quarter, but was overshadowed by management’s comments on its PBM unit. CVS lost almost $3.7 billion PBM contracts since the last quarter, bringing the year-to-date total to $4.8 billion. CEO Tom Ryan provided little guidance on the issue, and management lacked any detailed action plan, creating a lot of uncertainty►We believe CVS Caremark will benefit from several industry trends, such as Baby Boomers and generic drug utilization. The integrated model has a lot of strengths such as efficient drug distribution and synergies from the Caremark acquisition. Given recent outlook revisions, we have lowered our target price to $35 and recommend a hold in the short term



Proctor & Gamble Co. (PG)►Sub-sector: Household Products►Status: Purchased on 4/24/09 at $52.44►Current Price: $61.04►Target Price: $64.50►Trailing P/E: 14.23►Forward P/E: 15.11►LT EPS Growth Rate: 8.04%►Market Cap: $178.34 Billion►% of Total Portfolio: 2.50%

Commentary►Procter & Gamble’s competitor Unilever reported strong third quarter sales growth of 3.4%, after a 4.1% rise in the previous quarter. This beat estimates of 2.7% growth. The company’s growth was attributed to a 3.6% increase in volumes with an increase in prices►Procter & Gamble may sell Iams, the pet food business it bought in 1999 for $2.3 billion, as the company focuses on business categories where it sees greater long-term potential for increasing sales. The Company identified beauty and grooming, consumer health and well-being and household care as its key areas for boosting sales and profits. Food, whether for animals or humans, is receiving a lesser emphasis as Procter & Gamble sold off Folgers coffee and Jif peanut butter brands in recent years







Diageo plc (DEO)►Sub-sector: Beverages – Alcohol►Status: Purchased on 10/12/09 at $61.55►Current Price: $66.58►Target Price: $84.00►Trailing P/E: 15.41►Forward P/E: 12.59►LT EPS Growth Rate: 9.00%►Market Cap: $41.21 Billion►% of Total Portfolio: 2.05%

Commentary►Diageo’s competitor, Pernod Ricard, issued cautious guidance in line with estimates. Guidance was lower than in previous years as the premium markets have been dented by consumers cutting spending in wines and spirits. Management pointed out that they have begun seeing signs of improvement in certain markets, particularly in Europe, even if the general economic environment remains difficult for the premium spirits market. Diageo, whose product portfolio is made up of approximately 60% of premium spirits, will benefit from these market improvements ►Diageo issued $500 million in notes for a coupon rate of 3.25%, which will mature January 15, 2015. The low coupon rate signals investors’ confidence in Diageo’s financial position




1. William Wrigley Jr. Co. (WWY) Approved for bench

2. Target Corporation (TGT) Approved for bench

3. Bare Escentuals, Inc. (BARE) Approved for bench

4. NBTY, Inc. (NTY) Approved for bench

5. Tupperware Brands Corporation (TUP) Approved for bench

Focus List: Status:

1. H.J. Heinz Co. (HNZ) Initiated coverage

2. Perdigao S.A. (PDA) Initiated coverage

3. Unilever PLC (UL) Initiated coverage

4. Companhia de Bebidas Das Americas (ABV) Initiated coverage

5. Walgreen Co. (WAG) Initiated coverage





Exxon Mobil Corp. (XOM) ►Sub-sector: Integrated Oil & Gas►Status: Purchased on 10/13/08 at $65.71►Current Price: $72.58►Target Price: $84.51►Trailing P/E: 16.91►Forward P/E: 12.56►LT EPS Growth Rate: 8.00% ►Market Cap: $344.56 Billion►% of Total Portfolio: 2.96%

Commentary►Reuters reported that an Exxon Mobil has beaten rival Russian, French and Chinese groups to bag initial rights to develop Iraq's West Qurna field, the oil ministry said. The initial deal was signed in Baghdad but needs cabinet approval before it can be finalized►Dow Jones reported that China Petroleum & Chemical Corp., or Sinopec, expects to sign a deal Wednesday to buy liquefied natural gas from Exxon Mobil Corporation led LNG project in Papua New Guinea, said a person familiar with the matter. No further details were immediately available

Apache Corp. (APA) ►Sub-sector: Exploration and Production►Status: Purchased on 4/15/08 at $126.66►Current Price: $98.87►Target Price: $107.92►Trailing P/E: 18.10►Forward P/E: 10.61►LT EPS Growth Rate: 12.80% ►Market Cap: $33.24 Billion►% of Total Portfolio: 2.80%

Commentary►Apache traded up 4.75 or (5.05%) to $98.87 for the week on no new company specific news


Equity Research: Focus on Energy


EnergyEnergyLead AnalystLead AnalystCharles [email protected]

Associate Associate AnalystAnalystAmy [email protected]

Company 4 Week Company Performance 4 Week Sector Performance Purchase Price Current Price (11/6/09) Target Price Since PurchaseExxon Mobil Corp 4.76% -0.05% $65.71 $72.58 $84.51 10.46%Apache Corp. -0.85% -0.05% $126.66 $98.87 $107.92 -21.94%Noble Corp. 4.70% -0.05% $37.66 $42.34 $47.17 12.43%Chesapeake Energy 2.67% -0.05% $34.11 $24.22 $31.48 -28.99%Southwestern Energy -1.32% -0.05% $23.12 $44.74 $49.08 93.51%Schlumberger Ltd. 2.40% -0.05% $43.80 $64.40 $69.40 47.03%



Noble Corp. (NE) ►Sub-sector: Drilling and Exploration►Status: Purchased 12/21/06 at $43.50►Current Price: $42.34►Target Price: $47.17►Trailing P/E: 6.69►Forward P/E: 7.64►LT EPS Growth Rate: 15.00% ►Market Cap: $11.09 Billion►% of Total Portfolio: 4.19%

Commentary►Noble Corp traded up 1.60 or (3.93%) to $42.34 for the week on no new company specific news

Chesapeake Corp. (CHK)►Sub-sector: Exploration and Production►Status: Purchased 02/02/07 at $34.11►Current Price: $24.22►Target Price: $31.48►Trailing P/E: 8.9►Forward P/E: 9.65►LT EPS Growth Rate: 11.50% ►Market Cap: $15.62 Billion►% of Total Portfolio: 1.76%

Commentary►Chesapeake Energy reported third-quarter net income of $186 million, or $0.30 a share, from $3.29 billion, or $5.62 a share, a year earlier. Excluding one-time items, the company earned $440 million, or $0.70 a share, in the latest quarter, down from $495 million, or $0.87 a share, a year ago. Revenue for the three months ended Sept. 30 fell to $1.81 billion from $7.49 billion. Analysts polled by FactSet Research had predicted the company would earn $0.65 a share on $1.83 billion in revenue








Southwestern Energy (SWN)►Sub-sector: Exploration and Production ►Status: Purchased 10/11/07 at $23.12►Current Price: $44.74►Target Price: $49.08►Trailing P/E: 1405.81►Forward P/E: 19.28►LT EPS Growth Rate: 40.50% ►Market Cap: $15.45 Billion►% of Total Portfolio: 1.71%

Commentary►Southwestern Energy traded up 1.16 or (2.66%) to $44.74 for the week on no new company specific news

Schlumberger Ltd. (SLB) ►Sub-sector: Equipment and Services►Status: Purchased 3/27/09 at $43.80►Current Price: $64.40►Target Price: $69.40►Trailing P/E: 22.35►Forward P/E: 23.00►LT EPS Growth Rate: 9.00% ►Market Cap: $77.33 Billion►% of Total Portfolio: 1.65%

Commentary►Alstom and Schlumberger have announced the signature of an agreement for mutual collaboration in the joint offering of carbon capture storage studies. These studies will conduct a technical analysis of a power plant to identify how it should be adapted to accommodate an Alstom carbon capturing system. The offer is designed to facilitate the future conversion of power plants to carbon capture storage










1. Royal Dutch Shell (RDS/A) Approved for bench

2. Peabody Energy Corp. (BTU) Approved for bench

3. Transocean Inc. (RIG) Approved for bench

4. Arch Coal, Inc (ACI) Approved for bench

5. Petrohawk Energy (HK) Approved for bench

6. Valero Energy Corp. (VLO) Approved for bench

7. National Oilwell Varco, Incorporated (NOV) Approved for bench

8. Tidewater Inc. (TDW) Approved for bench

Focus List: Status:

1. Chevron Corp. (CVX) Initiated coverage

2. Oceaneering International, Inc. (OII) Initiated coverage

3. EOG Resources, Inc. (EOG) Initiated coverage

4. XTO Energy Inc. (XTO) Initiated coverage

5. Mariner Energy Inc. (ME) Initiated coverage

6. Halliburton Corporation (HAL) Initiated coverage

7. Hercules Offshore, Inc. (HERO) Initiated coverage

8. Noble Energy Inc. (NBL) Initiated coverage




Equity Research: Focus on Financials


FinancialsFinancialsLead AnalystLead AnalystTaylor Destefano [email protected]

Associate Associate AnalystsAnalystsZachary [email protected]

Joseph [email protected]

Goldman Sachs Group Inc. (GS) ►Sub-sector: Investment Brokerage►Status: Purchased on 4/20/05 at $134.58►Current Price: $171.78►Target Price: $200.00►Trailing P/E: 38.40►Forward P/E: 9.12►LT EPS Growth Rate: 11.8% ►Market Cap: $90.76 Billion►% of Total Portfolio: 2.73%

Commentary►The Goldman Sachs Group, Inc. has agreed to sell half of its holding in Shineway Group, to a Chinese fund for about $150 million. Asia Special Situation Group (ASSG) of Goldman Sachs signed a deal last week to sell part of its stake in Shineway to CDH Investments ►The U.S. Treasury will block the sale of Fannie Mae tax credits to Goldman Sachs Group, Inc. The tax credits are incentives designed to bring more investment to low-income housing developments and are valued at $5.2 billion

BlackRock Inc. (BLK)►Sub-sector: Investment Management►Status: Purchased on 9/29/08 at $191.84►Current Price: $227.51►Target Price: $240.00►Trailing P/E: 44.94►Forward P/E: 22.26►LT EPS Growth Rate: 13.50% ►Market Cap: $30.55 Billion►% of Total Portfolio: 1.58%

Commentary►BlackRock Inc. returned 5.09% for the week ending November 6, 2009, on no company specific news


Company 4 Week Company Performance 4 Week Sector Performance Purchase Price Current Price (11/6/09) Target Price Since PurchaseGoldman Sachs Group Inc. -9.26% -5.48% $134.58 $171.78 $200.00 27.64%BlackRock Inc. 5.06% -5.48% $191.84 $227.51 $240.00 18.59%MetLife -12.37% -5.48% $30.30 $33.52 $44.00 10.63%JP Morgan Chase & Co. -5.17% -5.48% $38.05 $43.48 $55.00 14.27%Invesco Ltd. -3.02% -5.48% $16.14 $23.09 $25.00 43.06%Credit Suisse Group -2.67% -5.48% $54.56 $55.68 $64.00 2.05%SVB Financial Group -5.44% -5.48% $41.78 $41.35 $48.70 -1.03%



JP Morgan Chase & Co. (JPM)►Sub-sector: Money Center Banks►Status: Purchased on 10/13/08 at $38.05►Current Price: $43.48►Target Price: $55.00►Trailing P/E: 27.12►Forward P/E: 13.42►LT EPS Growth Rate: 8.0%►Market Cap: $170.99 Billion►% of Total Portfolio: 3.54%

Commentary►The Federal Deposit Insurance Corp asked a court for control of over $3.7 billion claimed by both bankrupt holding company Washington Mutual Inc. and JP Morgan Chase & Co. In a court filing, the agency asked bankruptcy Judge Mary Walrath to lift the automatic stay of legal proceedings that accompanies a Chapter 11 filing to allow the FDIC to invoke a clause in the sale contract to take control of the disputed funds. The agency said, once returned, the funds would be held in a non-interest bearing account at a Federal Home Loan Bank until pending lawsuits over the funds were resolved ►According to the Securities and Exchange Commission, JP Morgan Chase & Co. will pay $75 million to settle charges in an unlawful payment scheme in the sewer financing of Jefferson County, Alabama ►JP Morgan Chase & Co. CEO Jamie Dimon's dad, Theodore Dimon, left Bank of America Merrill Lynch’s Global Wealth Management unit to join JP Morgan’s Bear Stearns Private Client Services group as one of a six-member wealth advisory team

MetLife Inc. (MET)►Sub-sector: Life Insurance►Status: Purchased on 6/24/09 at $30.30►Current Price: $33.52►Target Price: $44.00►Trailing P/E: 16.00►Forward P/E: 8.16►LT EPS Growth Rate: 10.75%►Market Cap: $27.44 Billion►% of Total Portfolio: 1.22%

Commentary►MetLife Inc. said that the current corporate debt rally has reversed more than $15 billion of unrealized losses in its bond portfolio, valued at more than $220 billion. The net unrealized gain on the securities was about $870 million as of Sept. 30, MetLife Inc. said in a regulatory filing. That compares with unrealized losses of $6.9 billion at the end of June and $15.4 billion at the end of March









Invesco Ltd. (IVZ)►Sub-sector: Asset Management ►Status: Purchased on 7/13/09 at $16.14►Current Price: $23.09►Target Price: $25.00►Trailing P/E: 38.94►Forward P/E: 16.40►LT EPS Growth Rate: 11.5%►Market Cap: $9.90 Billion►% of Total Portfolio: 1.21%

Commentary►Invesco Ltd. returned 9.17% for the week ending November 6, 2009, on no company specific news

Credit Suisse Group (CS)►Sub-sector: Investment Brokerage ►Status: Purchased on 10/5/09 at $54.56►Current Price: $55.68►Target Price: $64.00►Trailing P/E: 9.3►Forward P/E: 8.92►LT EPS Growth Rate: 10%►Market Cap: $65.98 Billion►% of Total Portfolio: 1.52%

Commentary►Credit Suisse Group returned 4.47% for the week ending November 6, 2009, on no company specific news









SVB Financial Group (SIVB)►Sub-sector: Regional Bank►Status: Purchased on 11/2/09 at $41.78►Current Price: $41.35►Target Price: $48.70►Trailing P/E: 67.46►Forward P/E: 26.01►LT EPS Growth Rate: 11.67%►Market Cap: $1.37 Billion►% of Total Portfolio: 1.21%

Commentary►SVB Financial Group returned 0.24% for the week ending November 6, 2009










1. CME Group Inc. (CME) Approved for bench

2. Hudson City Bancorp, Inc. (HCBK) Approved for bench

3. Hartford Financial Services Group Inc. (HIG) Approved for bench

4. Arch Capital Group Ltd. (ACGL) Approved for bench

5. Shinhan Financial (SHG) Approved for bench

6. Charles Schwab Corp. (SCHW) Approved for bench

7. Berkshire Hathaway Inc. (BRK-B) Approved for bench

Focus List: Status:

1. Bank of America Corporation (BAC) Initiated coverage

2. Uniao de Bancos Brasileiros (UBB) Initiated coverage

3. Banco Bradesco S.A.(BBD) Initiated coverage

4. Janus Capital Group (JNS) Initiated coverage

5. Allstate Corp. (ALL) Initiated coverage

6. US Bancorp (USB) Initiated coverage

7. Franklin Resources Inc. (BEN) Initiated coverage

8. Eaton Vance Corp. (EV) Initiated coverage

9. Banco Santander (STD) Initiated coverage





Gilead Sciences (GILD) ►Sub-sector: Biotechnology►Status: Purchased on 6/14/07 at $40.34►Current Price: $46.26►Target Price: $59.64►Trailing P/E: 17.89►Forward P/E: 14.83►LT EPS Growth Rate: 15.70%►Market Cap: $41.79 Billion►% of Total Portfolio: 2.51%

Commentary►Gilead Sciences traded up 8.41% on the week, settling at $46.26

Teva Pharmaceutical (TEVA)►Sub-sector: Generic Drug Manufacturer►Status: Purchased on 12/15/08 at $41.61►Current Price: $52.03►Target Price: $55.00►Trailing P/E: 47.60►Forward P/E: 11.56►LT EPS Growth Rate: 20.80% ►Market Cap: $45.84 Billion►% of Total Portfolio: 2.96%

Commentary►Teva's earnings rose 3% to $649 million, or $0.72 per share from third quarter last year of $631 million, or $0.77 per share. Teva had sales of $3.55 billion, up 25% over same quarter sales last year of $2.84 billion. Adjusted earnings were up 16% to $0.89 per share while analysts were estimating $0.88 per share

Equity Research: Focus on Healthcare

Director of Director of Equity Equity ResearchResearchTJ [email protected]

HealthcareHealthcareLead AnalystLead AnalystRyan [email protected]

Associate Associate AnalystAnalystAlex [email protected]

Associate Associate AnalystAnalystBrendan Brendan [email protected]


Company 4 Week Company Performance 4 Week Sector Performance Purchase Price Current Price (11/6/09) Target Price Since PurchaseGilead Sciences Inc. -2.12% 0.91% $40.34 $46.26 $59.64 14.68%Teva Pharmaceutical 0.99% 0.91% $41.61 $52.03 $55.00 25.04%Johnson & Johnson -2.33% 0.91% $61.15 $60.30 $76.46 -1.39%Abbott Laboratories 2.90% 0.91% $47.00 $51.53 $64.00 9.64%Haemonetics Corp. -1.50% 0.91% $49.84 $55.18 $62.00 10.71%



Johnson and Johnson (JNJ)►Sub-sector: Healthcare Conglomerate ►Status: Purchased on 10/13/08 at $61.15►Current Price: $60.30►Target Price: $76.46►Trailing P/E: 13.71►Forward P/E: 12.23►LT EPS Growth Rate: 8.40% ►Market Cap: $166.16 Billion►% of Total Portfolio: 1.57%

Commentary ►Johnson & Johnson will lay off 6-7% of its workforce in a restructuring designed to eliminate layers of management. Globally, 7,000 workers will lose their jobs

Abbott Laboratories (ABT)►Sub-sector: Pharmaceuticals►Status: Purchased on 3/27/09 at $47.00►Current Price: $51.53►Target Price: $64.00►Trailing P/E: 13.95►Forward P/E: 12.42►LT EPS Growth Rate: 11.30% ►Market Cap: $79.66 Billion►% of Total Portfolio: 2.62%

Commentary►Abbott announced that Xience Prime has received additional indications for the treatment of patients with diabetes from the European Union Member States. Coronary artery disease is one of the most common cardiovascular complications of diabetes and is the number one cause of death among European adults with diabetes






Associate AnalystBrendan [email protected]



Haemonetics (HAE)►Sub-sector: Medical Instruments & Supplies►Status: Purchased on 4/24/09 at $49.84►Current Price: $51.50►Target Price: $62.00►Trailing P/E: 21.81►Forward P/E: 17.52►LT EPS Growth Rate: 16.00% ►Market Cap: $1.42 Billion►% of Total Portfolio: 2.06%

Commentary ►Haemonetics Corp. released earnings last week of $18 million, or $0.69 per share representing growth of 22% and 20% respectively compared to a year ago. Revenues for the quarter arrived at $157 million demonstrating an 8% increase year over year. Earnings also beat consensus earnings estimates by $0.04; Analysts expected $0.65 per share






Associate AnalystBrendan [email protected]





Bench Stocks: Status

1. Novartis A.G. (NVS) Approved for bench

2. Covance Inc. (CVD) Approved for bench

3. Medco Health Solutions (MHS) Approved for bench

4. Icon plc (ADR) (ICLR) Approved for bench

5. Thermo Fisher Scientific (TMO) Approved for bench

6. Genzyme Corporation (GENZ) Approved for bench

7. Baxter International Inc. (BAX) Approved for bench

8. Stryker Corp (SYK) Approved for bench

Focus List: Status:

1. Intuitive Surgical (ISRG) Initiated coverage

2. GlaxoSmithKline plc (ADR) (GSK) Initiated coverage

3. Express Scripts (ESRX) Initiated coverage

4. Psychiatric Solutions Inc (PSYS) Initiated coverage



Waste Management (WM) ►Sub-sector: Waste Management►Status: Purchased on 9/8/09 at $30.40►Current Price: $31.64►Target Price: $37.50►Trailing P/E: 17.43►Forward P/E: 14.85►LT EPS Growth Rate: 11.00%►Market Cap: $15.49 Billion►% of Total Portfolio: 1.36% Commentary►Shares of Waste Management traded up 3.1% last week, underperforming the benchmark by 3.11% due to positive economic data that resulted in a higher appetite for highly volatile industrials holdings


Equity Research: Focus on Industrials


IndustrialsIndustrialsLead AnalystLead AnalystJim [email protected]

Associate AnalystDerek [email protected]

Associate AnalystCollin [email protected]

Union Pacific (UNP) ►Sub-sector: Transportation - Railroads►Status: Purchased on 11/10/08 at $63.41►Current Price: $62.36►Target Price: $65.50►Trailing P/E: 15.70►Forward P/E: 14.81►LT EPS Growth Rate: 10.80%►Market Cap: $31.46 Billion►% of Total Portfolio: 1.90%

Commentary►Value investor Warren Buffett purchased the remaining 77.4% of Burlington Northern Santa Fe’s shares for $26 billion, or a 30% premium. Buffett predicts positive industry trends as rails use fuel more efficiently than other methods of transportation ►The Association of American Railroads reported rail traffic for the week ended Oct. 31 fell 13.7% compared with the same period a year earlier. Increases in volumes were realized in four of nineteen categories, an improvement over prior weeks

Company 4 Week Company Performance 4 Week Sector Performance Purchase Price Current Price (11/6/09) Target Price Since PurchaseNorthrop Grumman Corp 2.19% 10.06% $47.28 $52.37 $65.00 10.77%Honeywell 1.43% 10.06% $32.78 $37.70 $40.50 15.01%Union Pacific 4.30% 10.06% $62.55 $62.36 $65.50 -0.30%Waste Management 10.47% 10.06% $30.40 $31.64 $37.50 4.08%Bucyrus 36.25% 10.06% $29.90 $50.40 $60.00 68.56%



Cerner Corp. (CERN) ►Sub-sector: Healthcare Information Services►Status: Purchased on 10/20/06 at $44.53►Current Price: $77.45►Target Price: $85.00 ►Trailing P/E: 31.59►Forward P/E: 27.37►LT EPS Growth Rate: 17.04%►Market Cap: $6.29 Billion►% of Total Portfolio: 3.14%

Commentary►Cerner traded up 1.85% for the week on no company specific news

Google Inc. (GOOG) ►Sub-sector: Internet Information Provider►Status: Purchased on 2/15/07 at $487.08►Current Price: $551.10►Target Price: $570.00 ►Trailing P/E: 35.57►Forward P/E: 20.95►LT EPS Growth Rate: 26.45%►Market Cap: $174.42 Billion►% of Total Portfolio: 3.30%

Commentary►Google announced a new search product, Google Commerce Search, which will allow customers to search more easily on online retail stores and e-commerce websites►Google announced a retail partnership with Best Buy Mobile to bring Google Mobile App to consumers

Equity Research: Focus on Information Technology


Director of Director of Equity Equity ResearchResearch T.J. [email protected]

Information Information TechnologyTechnologyLead AnalystLead AnalystBrian [email protected]

Associate Associate AnalystAnalystSantosh [email protected]

Associate Associate AnalystAnalystMatthew [email protected]

Company 4 Week Company Performance 4 Week Sector Performance Purchase Price Current Price (11/6/09) Target Price Since PurchaseGoogle 6.75% -0.41% $456.46 $551.10 $570.00 20.73%Cerner -8.25% -0.41% $44.53 $77.45 $78.00 73.93%Amphenol 10.02% -0.41% $34.35 $41.93 $45.00 22.07%International Business Machines -1.94% -0.41% $80.81 $123.49 $128.00 52.82%ManTech Corporation -7.71% -0.41% $41.21 $45.00 $58.00 9.20%Sybase -0.64% -0.41% $34.79 $40.23 $46.00 15.64%Synopsys 0.39% -0.41% $21.22 $23.09 $29.51 8.81%





Honeywell International Inc. (HON) ►Sub-sector: Conglomerate►Status: Purchased on 6/18/09 at $32.78►Current Price: $37.70►Target Price: $47.00►Trailing P/E: 13.00►Forward P/E: 14.56►LT EPS Growth Rate: 8.86%►Market Cap: $28.77 Billion►% of Total Portfolio: 2.60% Commentary►Honeywell appreciated 5.04% during the week ending November 6, due to better-than-expected economic data tied to manufacturing. The ISM Manufacturing Index report for the month of October was released; analysts expected the index to come in at 53.0, while the actual number increased to 55.7►On Wednesday, November 4, Honeywell signed an agreement with China National Petroleum Corp. to work on developing a range of biofuel technologies and projects in China. Honeywell is amidst establishing ties with various Chinese companies to increase exposure in Asia





Bucyrus International (BUCY) ►Sub-sector: Metals & Mining Equipment►Status: Purchased on 8/31/09 at $29.90►Current Price: $50.40►Target Price: $42.50►Trailing P/E: 12.82►Forward P/E: 15.95►LT EPS Growth Rate: 13.67%►Market Cap: $3.75 Billion►% of Total Portfolio: 2.32%

Commentary► Shares of Bucyrus proceeded to climb 13.46% last week, as investors finished selling off on positive earnings. Bucyrus also benefited from Berkshire’s purchase of BNI, as one of the industry’s most respected individuals takes a position on the future of energy prices



Northrop Grumman Corporation (NOC) ►Sub-sector: Aerospace and Defense►Status: Purchased on 6/18/09 at $47.28►Current Price: $52.37►Target Price: $65.00►Trailing P/E: N/A►Forward P/E: 9.45►LT EPS Growth Rate: 10.15%►Market Cap: $16.43 Billion►% of Total Portfolio: 1.63%

Commentary►Northrop Grumman has announced the sale of its TASC consulting unit to two private equity firms, General Atlantic and Kohlberg Kravis Roberts % Co., for $1.65 billion. After months of searching for potential suitors, the business segment was sold as critics complained of a conflict of interest. $1.1 billion of the proceeds will be allocated in directly repurchasing shares of the company. Northrop traded up 4.47% on the week










1. United Technologies Corp. (UTX) Approved for bench

2. General Electric (GE) Approved for bench

3. 3M Corp (MMM) Approved for bench

4. Deere & Co. (DE) Approved for bench

Focus List: Status:

1. Caterpillar Inc. (CAT) Initiated coverage

2. Lockheed Martin (LMT) Initiated coverage

3. Emerson Electric (EMR) Initiated coverage

4. ABB Ltd. (ABB) Initiated coverage





Cerner Corp. (CERN) ►Sub-sector: Healthcare Information Services►Status: Purchased on 10/20/06 at $44.53►Current Price: $77.45►Target Price: $85.00 ►Trailing P/E: 31.59►Forward P/E: 27.37►LT EPS Growth Rate: 17.04%►Market Cap: $6.29 Billion►% of Total Portfolio: 3.14%

Commentary►Cerner traded up 1.85% for the week on no company specific news

Google Inc. (GOOG) ►Sub-sector: Internet Information Provider►Status: Purchased on 2/15/07 at $487.08►Current Price: $551.10►Target Price: $570.00 ►Trailing P/E: 35.57►Forward P/E: 20.95►LT EPS Growth Rate: 26.45%►Market Cap: $174.42 Billion►% of Total Portfolio: 3.30%

Commentary►Google announced a new search product, Google Commerce Search, which will allow customers to search more easily on online retail stores and e-commerce websites►Google announced a retail partnership with Best Buy Mobile to bring Google Mobile App to consumers



Director of Director of Equity Equity ResearchResearch T.J. [email protected]




Company 4 Week Company Performance 4 Week Sector Performance Purchase Price Current Price (11/6/09) Target Price Since PurchaseGoogle 6.75% -0.41% $456.46 $551.10 $570.00 20.73%Cerner -8.25% -0.41% $44.53 $77.45 $78.00 73.93%Amphenol 10.02% -0.41% $34.35 $41.93 $45.00 22.07%International Business Machines -1.94% -0.41% $80.81 $123.49 $128.00 52.82%ManTech Corporation -7.71% -0.41% $41.21 $45.00 $58.00 9.20%Sybase -0.64% -0.41% $34.79 $40.23 $46.00 15.64%Synopsys 0.39% -0.41% $21.22 $23.09 $29.51 8.81%



International Business Machines Corp. (IBM)Sub-sector: Diversified Computer Systems►Status: Purchased on 10/27/08 at $80.81►Current Price: $123.49►Target Price: $128.00►Trailing P/E: 12.68►Forward P/E: 11.33►LT EPS Growth Rate: 13.55% ►Market Cap: $162.22 Billion►% of Total Portfolio: 3.21%

Commentary►IBM launched $2 billion in notes. The $750 million two year floating rate note launched at four basis points above Libor, while the $1.25 billion fixed rate note maturing in May 2013 was launched at 70 basis points over Treasury yields

Amphenol Corp. (APH) ►Sub-sector: Diversified Electronics►Status: Purchased on 11/9/06 at $34.35►Current Price: $41.93►Target Price: $45.15►Trailing P/E: 22.19►Forward P/E: 19.78►LT EPS Growth Rate: 17.50% ►Market Cap: $7.19 Billion►% of Total Portfolio: 2.20%

Commentary►S&P upgraded Amphenol from stable to outperform on its improved debt maturity schedule and on good operating results



Director of Director of Equity Equity Research Research T.J. [email protected]






ManTech International Corp. (MANT)►Sub-sector: Government Software and Services►Status: Purchased on 04/24/09 at $41.21►Current Price: $45.00►Target Price: $58.00►Trailing P/E: 15.11►Forward P/E: 13.43►LT EPS Growth Rate: 15.93% ►Market Cap: $1.62 Billion►% of Total Portfolio: 1.71%

Commentary► ManTech traded up 2.60% for the week on no company specific news







Synopsys (SNPS)►Sub-sector: Semiconductors►Status: Purchased on 08/24/09 at $21.22►Current Price: $23.09►Target Price: $29.51►Trailing P/E: 17.26►Forward P/E: 13.74►LT EPS Growth Rate: 9.50% ►Market Cap: $3.37 Billion►% of Total Portfolio: 1.98%

Commentary► Synopsys traded up 4.86% for the week on no company specific news









Sybase (SY)►Sub-sector: Business Software & Services►Status: Purchased on 08/24/09 at $35.03►Current Price: $40.23►Target Price: $46.00►Trailing P/E: 20.97►Forward P/E: 1553►LT EPS Growth Rate: 17.00% ►Market Cap: $3.22 Billion►% of Total Portfolio: 2.34%

Commentary► Sybase introduced new product offerings for the iPhone, including policy enforcement and database synchronization




1. Akamai (AKAM) Approved for bench

2. Blackboard Inc. (BBBB) Approved for bench

3. SAP (SAP) Approved for bench

4. Visa (V) Approved for bench

5. Microsoft (MSFT) Approved for bench

6. Check Point Software (CHKP) Approved for bench

7. Intel Corporation (INTC) Approved for bench

Focus List: Status:

1. SPDR S&P Semiconductor ETF (XSD) Initiated coverage

2. EMC Corporation (EMC) Initiated coverage

3. VMWare (VMW) Initiated coverage





Equity Research: Focus on Materials


MaterialsMaterialsLead AnalystLead AnalystDarrell [email protected]

Associate Associate AnalystAnalystJason [email protected]

Associate Associate AnalystAnalystMichael [email protected]


Freeport-McMoRan (FCX)►Sub-sector: Copper►Status: Purchased on 2/6/06 at $64.88►Current Price: $79.56►Target Price: $80.00►Trailing P/E: 27.27►Forward P/E: 11.65►LT EPS Growth Rate: 10.20%►Market Cap: $34.21 Billion►% of Total Portfolio: 1.06%

Commentary►Freeport has been added to the S&P 100 replacing Schering-Plough after Schering-Plough announced its merger with Merck►Freeport outperformed on the week even though copper prices were corrected as they moved from $2.97 to $2.94

Greif Inc. (GEF) ►Sub-sector: Metal and Glass Containers►Status: Purchased on 10/05/09 at $52.46►Current Price: $56.61►Target Price: $83.22►Trailing P/E: 29.27►Forward P/E: 13.45►LT EPS Growth Rate: 9.00% ►Market Cap: $2.65 Billion►% of Total Portfolio: 0.94%

Commentary►Greif traded up along with the rest of the Materials sector last week, as many companies had hit highs the week prior. Greif also benefited from a two year high in the ISM Manufacturing Index, showing continued growth in the manufacturing sector

Company 4 Week Company Performance 4 Week Sector Performance Purchase Price Current Price (11/6/09) Target Price Since PurchaseFreeport-McMoRan 5.06% -1.30% $64.88 $79.56 $91.50 22.63%Greif 0.89% -1.30% $52.46 $56.61 $83.22 7.91%Praxair -2.83% -1.30% $87.76 $81.71 $84.19 -6.89%Monsanto -9.97% -1.30% $80.96 $69.14 $91.59 -14.60%BHP Billiton -5.12% -1.30% $67.04 $67.96 $85.12 1.37%





Praxair Inc. (PX) ►Sub-sector: Industrial Chemicals►Status: Purchased on 4/8/08 at $87.76►Current Price: $81.71►Target Price: $84.19►Trailing P/E: 22.88►Forward P/E: 17.80►LT EPS Growth Rate: 11.80% ►Market Cap: $25.07 Billion►% of Total Portfolio: 0.43%

Commentary►Praxair announced price increases for gases and facility fess for bulk industrial and bulk medical gas customers taking effect November 15►Praxair announced its quarterly dividend of $0.40 per share payable on December 15, 2009

Monsanto Co. (MON) ►Sub-sector: Agriculture Chemicals►Status: Purchased on 4/24/09 at $80.96►Current Price: $69.14►Target Price: $91.59 ►Trailing P/E: 18.20►Forward P/E: 15.86►LT EPS Growth Rate: 14.70% ►Market Cap: $37.69 Billion►% of Total Portfolio: 1.07%

Commentary►Monsanto announced reduced pricing for the triple-stacked corn seed in order to combat competition and increase its customer base►Monsanto announced plans to open their first biotechnology research facility in China, in order to strengthen ties with the Chinese►Monsanto India Limited is planning to introduce genetically modified corn in India by 2012-2013









BHP Billiton Ltd. (BHP)►Sub-sector: Industrial Metals & Minerals►Status: Purchased on 11/2/09 at $67.04►Current Price: $67.97►Target Price: $85.12►Trailing P/E: 32.21►Forward P/E: 16.91►LT EPS Growth Rate: 11.80% ►Market Cap: $189.08 Billion►% of Total Portfolio: 0.89%

Commentary►BHP reported repair work to their Olympic Dam uranium and copper mine is on track and resumption if full production between January and March










1. Potash Corp. of Saskatchewan (POT) Approved for bench

2. Bunge Ltd (BG) Approved for bench

3. Dupont (DD) Approved for bench

4. U.S. Steel Corp. (X) Approved for bench

Focus List: Status:

1. Rio Tinto (RTP) Initiated coverage

2. Nucor (NUE) Initiated coverage

3. Ball Corp. (BLL) Initiated coverage

4. Alcoa Inc. (AA) Initiated coverage

5. International Flavors & Fragrances (IFF) Initiated coverage

6. PPG Industries (PPG) Initiated coverage




Equity Research: Focus on Telecommunications


TelecomTelecomLead AnalystLead AnalystJake [email protected]

Associate Associate AnalystAnalystHassan Hassan [email protected]

Associate AnalystAaron [email protected]

Verizon Communications (VZ) ►Sub-sector: Telecommunications Services ►Status: Purchased on 5/1/09 at $30.29►Current Price: $29.56►Target Price: $37.77►Trailing P/E: 15.16►Forward P/E: 11.82►LT EPS Growth Rate: 5.30% ►Market Cap: $83.97 Billion ►% of Total Portfolio: 1.45%

Commentary►Verizon Wireless on Friday, November 6 introduced a new smartphone Droid Eris by HTC

►Apple is to launch Verizon iPhone in Q3 2010. Apple has contracted to produce a UMTS/CDMA hybrid iPhone that will enable the company to sell a single global handset to all carriers. The iPhone will gain compatibility with CDMA2000 networks while retaining compatibility with UMTS 3G networks globally using a new hybrid chip produced by Qualcomm

Cisco Systems (CSCO) ►Sub-sector: Communications Equipment►Status: Purchased on 6/11/08 at $26.00►Current Price: $23.82►Target Price: $25.50►Trailing P/E: 22.75►Forward P/E: 14.98►LT EPS Growth Rate: 11.10% ►Market Cap: $137.90 Billion►% of Total Portfolio: 0.77%

Commentary►Cisco Systems reported first quarter net income of $1.8 billion, or $0.30 a share, down 19% from a year ago of $2.2 billion, or $0.37 a share. Cisco reported revenue of $9 billion, a 13% decline from the year-earlier quarter; however, sales were well above the analysts’ consensus estimate of $8.75 billion. Excluding charges for stock-option compensation, acquisitions and one-time items, Cisco earnings per share were $0.36, beating Wall Street estimates of $0.31►Cisco announced a definitive agreement to acquire the set top box business of DVN (Holdings) Limited. Cisco will pay up to $44.5 million for the set top box business of DVN

Company 4 Week Company Performance 4 Week Sector Performance Purchase Price Current Price (11/6/09) Target Price Since PurchaseVerizon 1.37% 1.83% $30.29 $29.56 $37.77 -2.41%Cisco Systems -0.87% 1.83% $26.00 $23.82 $25.50 -8.38%American Tower 5.67% 1.83% $32.46 $38.76 $34.00 19.41%






TelecomTelecomLead AnalystLead AnalystJake [email protected]

Associate Associate AnalystAnalystHassan Hassan [email protected]

Associate AnalystAaron [email protected]

American Tower (AMT) ►Sub-sector: Communications Services ►Status: Purchased on 10/13/08 at $32.46►Current Price: $38.76►Target Price: $34.00►Trailing P/E: 57.94►Forward P/E: 45.07►LT EPS Growth Rate: 18.50% ►Market Cap: $15.55 Billion►% of Total Portfolio: 0.77%

Commentary►American Tower reported 3Q earnings of $67.6 million, or $0.17 per share, on $444.1 million in revenues, as compared to last year's earnings of $60.6 million, or $0.15 per share, on $409.3 million in revenue. Analysts polled by FactSet Research expected $0.17 per share




1. Qualcomm Inc. (QCOM) Approved for bench

2. China Unicom (CHU) Approved for bench

3. China Mobile Limited (CHL) Approved for bench

4. Corning (GLW) Approved for bench

5. America Movil (AMX) Approved for bench

Focus List: Status:

1. Embarq (EQ) Initiated coverage

2. Vodafone Group plc (VOD) Initiated coverage

3. NII Holdings Inc. (NIHD) Initiated coverage

4. InterDigital. Inc. (IDCC) Initiated coverage

5. Starent Networks (STAR) Initiated coverage

6. Skyworks Solutions (SWKS) Initiated coverage

7. Equinix (EQIX) Initiated coverage





OGE Energy Corp. (OGE)Sub-sector: Diversified Electric & Gas UtilityStatus: Purchased on 8/31/09 at $31.51Current Price: $32.78Target Price: $37.00Trailing P/E: 12.49Forward P/E: 11.38LT EPS Growth Rate: 6.00%

Market Cap: $3.17 Billion% of Total Portfolio: 0.81%

Commentary ►On October 30, OGE Energy reported net income from continuing operations of $136.8 million, or $1.40 per share, compared to $139.5 million, or $1.50 per share, it earned during the third quarter last year. Revenue declined by 33% to $845.3 million from $1.25 billion. Analysts had expected EPS of $1.34 per share►On October 28, Oklahoma Gas & Electric received approval for $130 million in federal stimulus funds to speed up development of smart grid technology in service areas

Wisconsin Energy Corporation (WEC)►Sub-sector: Diversified Electric Utility►Status: Purchased on 5/21/09 at $37.05►Current Price: $44.61►Target Price: $48.00►Trailing P/E: 14.46►Forward P/E: 11.90►LT EPS Growth Rate: 9.00%►Market Cap: $5.22 Billion►% of Total Portfolio: 0.89%

Commentary ►On October 29, Wisconsin Energy reported net income from continuing operations of $59 million or $0.50 per share for the third quarter of 2009. This compares with net income from continuing operations of $77 million or $0.64 per share in the third quarter last year. Revenue fell to $821.9 million from $851.5 million from the same period in the prior year. Analysts were expecting earnings of $0.51 per share►On October 29, Wisconsin Energy announced that it has reached a definitive agreement to sell Edison Sault Electric Company, one of its regulated utility subsidiaries, to Cloverland Electric Cooperative of Dafter, Mich., for $61.5 million, which represents a premium of about $2 million above current book value


Equity Research: Focus on Utilities


UtilitiesUtilitiesLead AnalystLead AnalystAllen [email protected]

Associate Associate AnalystAnalystVinay [email protected]

Associate Associate AnalystAnalystSteve [email protected]

Company 4 Week Company Performance 4 Week Sector Performance Purchase Price Current Price (11/6/09) Target Price Since PurchaseOGE Energy Corp. -0.70% -2.31% $31.51 $32.78 $37.00 4.03%Wisconsin Energy Corp. 0.31% -2.31% $37.05 $44.61 $48.00 20.40%FPL Group Inc. -6.29% -2.31% $48.28 $49.76 $62.00 3.07%






UtilitiesUtilitiesLead AnalystLead AnalystAllen [email protected]

Associate Associate AnalystAnalystVinay [email protected]

Associate Associate AnalystAnalystSteve [email protected]

FPL Group Inc. (FPL) ►Sub-sector: Electric Utility►Status: Purchased on 2/18/09 at $48.28►Current Price: $49.76►Target Price: $62.00►Trailing P/E: 12.06►Forward P/E: 10.86►LT EPS Growth Rate: 8.80% ►Market Cap: $20.57 Billion►% of Total Portfolio: 0.86%

Commentary►On November 5, FPL Group issued $200 million of floating rate debentures, with a rate of 40 basis points above the 3 month LIBOR►On October 27, FPL reported third-quarter net income of $533 million, or $1.31 a share, from $744 million, or $1.92 a share in the year-ago period. Adjusted net income in the latest period totaled $1.38 a share. Revenue fell to $4.47 billion from $5.39 billion. Wall Street analysts expected earnings of $1.40 a share►On October 27, FPL Group lowered its 2009 adjusted earnings target to $4.10-$4.20 a share, from its earlier view of $4.20-$4.40 a share. It now sees 2010 earnings of $4.25 to $4.85 a share►On October 27, the Florida Public Service Commission decided to delay voting on FP&L’s requested rate increase until February 2010




1. Questar Corp. (STR) Approved for bench

2. Allegheny Energy (AYE) Approved for bench

3. Aqua America (WTR) Approved for bench

4. Exelon Corp. (EXC) Approved for bench

5. Public Service Enterprise Group (PEG) Approved for bench

6. SCANA Corporation (SCG) Approved for bench

Focus List: Status:

1. Xcel Energy Inc (XEL) Initiated coverage

2. PG& E Corp (PCG) Initiated coverage

3. Edison International (EIX) Initiated coverage

4. The AES Corporation (AES) Initiated coverage





Overall Portfolio Compliance►95.43% of the Fund’s net assets are currently in common stocksThe Fund Managers will pursue the objective of investing between 75%-100% of the Fund’s net assets in common stocks of U.S. issuers.► 52 different securities are currently being held in the portfolioAt any one time, the Fund Managers expect to hold the securities of between 30-50 different issues.►0% of companies in the portfolio have a market capitalization under $800 millionA portfolio security is generally expected to have a minimum market capitalization of $800 million.►0.97 is the portfolio’s current beta The target equity portfolio beta for the Fund will be between 0.75 and 1.25, but no assurances can be given that this will be accomplished.►0% of the portfolio is leveragedThe Fund will not use leveraging or short sales.►4.57% of the Fund is invested in cash, cash equivalents, money-market funds, and ETFsFor short temporary defensive purposes during periods of adverse market conditions the Fund may invest up to 100% of the Fund’s net assets in cash, cash equivalents, money-market funds, and ETFs.►4 sectors are currently market weight compared to the S&P 500 Index►2 sectors are currently over weight compared to the S&P 500 Index►4 sectors are currently under weight compared to the S&P 500 Index

Equity Presentations►There will be six equity presentations this week.

Current Holdings►Fourteen stocks have appreciated over 20% above their base value and will be held.

Weekly Compliance Report

Director of Director of ComplianceComplianceAbishek [email protected]


11-9-09 weekly report.ppt

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