IndustrialsBy: Brandon Harlow,

Bhavik Khandhar,Tracy Marsolo & Matt Shubeck

Agenda• Sector Analysis• Business Analysis• Economic Analysis• Financial Analysis• Valuation Analysis• Recommendation• Q&A

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S&P 500 Weight vs. SIM Weight

S&P 500 Weight

SIM Weight

Industrials currently underweight in SIM Portfolio by 100 basis points.

Sector Analysis

Sector’s Performance as of 5/6/09

MTD QTD YTDEnergy 8.46% 13.68% -0.05%Materials 5.65% 21.59% 18.17%Industrials 6.33% 25.17% -2.08%Consumer Discretionary 3.65% 22.86% 12.28%Consumer Staples 1.88% 4.97% -6.90%Health Care 2.01% 1.10% -7.51%Financials 15.64% 41.28% -0.39%Info Tech 2.10% 14.40% 18.92%Telecomm 4.25% 6.58% -2.45%Utilities 3.59% 4.03% -8.31%

Industries in Industrials • Trucking • Trade Cos & Dist • Services-Office/Supp • Services-Environmental • Services-Employment • Research & Consulting • Railroads • Machinery Industrial • Machinery Const/Farm

• Ind'l Conglomerates • Electrical Component • Diversified Supp Ser • Construct. & Engineer. • Commercial Printing • Building Products • Airlines • Airfreight & Logistics • Aerospace/Defense

10 Biggest Stocks in Industrials• General Electric• Caterpillar• Southwest Airlines• Textron• Honeywell Int'l• CSX Corp• Boeing• United Technologies• Union Pacific• UPS

• Top 10 make up 59.28% of Industrials

36.11%4.39%3.14%2.66%2.51%2.26%2.11%2.07%2.05%1.98%

Business Analysis

Phases of Lifecycle• Most companies are established companies

competing with a few major competitors.

Industrial Sector

Industrial’s Price vs. S&P 500

Manufacturer’s Inventories

Industrial Production, Capacity, & Utilization

Economic Analysis

Industry and Economic Life Cycle

Financial Analysis

Net Profit Margin

ROE

EPS YOY Growth

EPS YOY Growth

Trailing P/E Relative toS&P 500

Forward P/E Relative toS&P 500

P/CF Relative to S&P 500

P/B Relative to S&P 500

Valuation Analysis

Specific Industries in SectorRecommend• Industrial Conglomerates • Electrical Components

Avoid• Service-Employment• Building Products• Airlines

Industrials

vs. S&P 500

P/E 1.2 0.66 1.1 0.73

P/S 1.1 0.8 1 0.9

P/B 1.4 0.9 1.1 1.1

P/CF 1.2 0.8 1.1 0.9

Industrials Sector

High Low Median Current

P/E 30.5 7.1 20.4 9.7

P/S 1.9 0.6 1.5 0.8

P/B 6.1 1.4 3.3 2.3

P/CF 16.7 4.9 12 6.7

Conglomerates

Electrical Components

Electrical Components

Services-EmploymentServices-Employment

High Low Median Current

P/E 1582.3 7.7 30.1 13.3

P/S 3.2 .5 1.9 .9

P/B 10. 1.7 5.2 2.6

P/CF 49.7 5.8 21.6 10

Building Products

Airlines

Final Recommendation

Increase position in portfolio by 100 basis points. Match the S&P 500

Q & A

Q & A