1

Security Analysts’ Summary Recommendations

Company Ticker AnalystVoting Item?

RecommendationStock is in the

portfolio?Rio Tinto RIO Garett Mahoney YES SELL Yes

PPG Industries PPG Marin Dacaudaveine YES SELL Yes

Chevron CVX Edward Weagel No BUY Yes

Honeywell HON Benjamin Yang No BUY Yes

Kinder Morgan Energy Partners KMP Robert Nagaki No BUY Yes

Pepsico PEP Chase Eggleston No BUY Yes

Schlumberger SLB Jordan Fuentes No HOLD Yes

Stryker SYK Bryan Deshayes No BUY Yes

Union Pacific UNP Kathy Hollingsworth No BUY Yes

Walgreen WAG Thai Yaparwong No BUY Yes

2

Rio Tinto (Ticker: Rio)Analyst: Garett Mahoney

Recommendation: “Sell”

Target Price: $39

Today’s Price: $55.01

3

Rio Tinto (Ticker: Rio)Analyst: Garett Mahoney

47%

22%

11%

10%

8% 3%

Segment Revenues

Iron Ore

Aluminium

Copper

Energy

Diamonds & Minerals

Other Operations

Segments:

1. Iron Ore2. Aluminium3. Copper4. Energy5. Diamonds

& Minerals

4

Rio Tinto (Ticker: Rio)Analyst: Garett Mahoney

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Price of Aluminium

5

Rio Tinto (Ticker: Rio)Analyst: Garett Mahoney

Copper (₵/lb) Oyu Tolgoi

Largest New Copper Mine Disputes with Mongolian

Government Regarding Expansion Expansion Required in order to

turn profit. Turquoise Resources estimates

current operating output to decline.

Northern Dynasty 19.1% stake gifted to Charities

2009 2010 2011 2012 2013 2014 2015 2016 2017200

250

300

350

400

450

6

Rio Tinto (Ticker: Rio)Analyst: Garett Mahoney

May-13 Nov-13 Jun-14 Dec-14 Jul-15 Jan-16 Aug-16 Mar-17$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

Price of Iron Ore

7

Rio Tinto (Ticker: Rio)Analyst: Garett Mahoney

China’s Influence

8

Rio Tinto (Ticker: Rio)Analyst: Garett Mahoney

9

Rio Tinto (Ticker: Rio)Analyst: Garett Mahoney

Source: Spring 2014 portfolio management class

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Recommendation SELL

China’s economic and political changes will negatively impact multiple segment revenues.

Significant impact on iron ore prices.

Development of GHOST Cities cannot be sustained. China’s consumption will be cut.

Aluminium demand and price increase will be overshadowed by Chinese policy changes.

Copper price decrease.

Poor HPR and Risk-Adjusted Returns shows investment would be more beneficial in Sector ETF.

Target Price: $39

Today’s Closing Price: $55.01

11

Recommendation for PPG Industries (Ticker: PPG)Analyst: Marin Decaudaveine

Recommendation: SELL

Target price (6/30/2015): $181

Closing Price (5/7/2014): $198.74

12

Performance coatings

53%

Industrial coatings

40%

Glass7%

2013 Sales

PPG Segments Overview

Performance coatings:Aerospace, Marine,

Architectural coatings

Industrial coatings:Automotive OEM,

Packaging, Specialty coatings

Glass: Fiber Glass, Flat Glass

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• Very high return since its purchase: 210.32% since 4/8/2010 (S&P 500 return in the same time: 58.31%). Sell PPG to secure these gains.

Why sell PPG?

Morningstar

14

Why sell PPG? (cont)

• Exposure to the risk of raw materials inflation. Titanium dioxide purchases are 70% to 80% of the cost of goods sold of the coatings business (93% of the total revenues of PPG in 2013). Only one large supplier, Henan Billions.

• Architectural coatings business (29% of revenues) weaker than other coatings businesses, despite the construction market recovery. Due to fewer competitive advantages, based on technological leadership and not on prices.

• Transitions optical business separation, which was very profitable, and had excellent margins (29.2% versus 15.5% for the whole company)

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However, PPG has some strengths

• Current PPG’s portfolio shift. Focus on coating activity (2004: 56%, 2014: 93%). Strong acquiring activity, and a lot of divestitures. Coatings manufacturing industry benefits from many positive points. Low capital intensive and consolidating industry. High growth potential. Results improved in the long run.

• 25% of the firm's sales are from emerging regions. It will drive growth, because the western regions expand at a slower rate.

• High return of cash to shareholders ($1.35 billion in 2013), through shares repurchases and dividends.

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Questions?

17

Chevron Corporation (Ticker: CVX)Analyst: Edward Weagel

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Recommendation for Chevron (CVX)

Recommendation: BUY Target Price (12/31/2015): $141

Closing Price (05/06/2014): $126.23

Reasoning Behind the Recommendation The company is investing heavily in new US and International projects. Barrels of Oil Equivalent per day (BOEPD) production is projected to

increase into 2017. CVX outperformed the other supermajors in profit per barrel. The company reliably pays dividends. For the past decade, dividends have grown at 9.8% per annum. Cash is also used for stock buybacks.

Industry OutlookBecause of new technology, global liquid production is still growing

despite several analysts claiming that it would peak in the 2000’s.

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Strengths

Upstream Strengths Greater than 90% of earnings come from 27% of revenue Production per day is projected to increase to 3.1 million bpd of BOE. New Projects

Angola LNG project started shipping its product. Australia – Wheatstone LNG project Delaware Basin Kurdistan Region – 80% stake in Qara Dagh Block Marcellus Shale

Downstream Strengths Demand is expected to rise for refined products in the next 15 years. US Gulf Coast Petrochemicals Project

20

Weaknesses

Risk-adjusted performance during the past 5 quarters The sector performed worse than the S&P. The company performed worse than the sector.

Upstream WeaknessesExploration expense is at a high for the past 5 years at $1.8 billionCapital and Exploratory expenditures are at a high for the past 5 years The increasing reliance on offshore drilling means more risks.

Downstream Weaknesses Historically, the segment is vulnerable to low margins. This segment contributes less than 10% to earnings. For both US and International, sales decreased for refined products.

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Questions?

22

Recommendation for Honeywell International (Ticker: HON)Analyst: Benjamin Yang

Recommendation: BUY Target price (12/2015): $103

Closing Price (5/7/2014): $92.92

2013 Sales: $39.1 B (+4%)

2013 Net Income: $3.96 B (+12%)

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Strengths Ties to macroeconomic trends with positive outlook

High expected earnings growth through M&A

Transportation

Global Economy

Construction

Green Technology

Aerospace

ACS

PMT

2008 2010 2012 2014 2016 2018 2020$0.00

$5.00

$10.00 EPS

2X EPS

Year

EP

S (

$)

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Weaknesses and Risks Defense and Space (Aero) faces headwinds (Target: bottom out in 2014)

Net income margin improvement capacity uncertain beyond 2015 (Target: continued improvement in 2014)

Risk: M&A could be poorly managed. Target: monitor to ensure organic

growth for PMT and ACS in the 1%-4% range or better in 2014-2018.

2012 2013 2014 2015 2016 2017 2018 2019 $-

$5,000

$10,000

$15,000 AeroDe-fense

Year

Aer

o R

even

ue

($M

)

2012 2013 2014 2015 2016 2017 2018 20190.0%

10.0%

Year

Net

In

com

e M

arg

in

25

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Recommendation for Kinder Morgan Energy Partners LP (Ticker: KMP)Analyst: Robert Nagaki

Recommendation: BUY Target price (12/2015): $90

Closing Price (5/07/2014): $75.09

Industry Overview

- Energy Transportation and Storage

Business Segments

- Natural Gas Pipelines

- CO2 Pipelines

- Product Pipelines

- Terminals

- Kinder Morgan Canada *Source of basic data company 10-k

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Positives

Tennessee Gas Pipeline

El Paso Natural Gas

Jones Act Tankers

$16.2 billion in future growth projects

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Negatives

Interest Rates

Alternative forms of Energy Transportation

Terrorist Attacks

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Questions?

30

Recommendation for PepsiCo (PEP)Analyst: Chase Eggleston

Recommendation: BUY Target price (12/2015): $94

Closing Price (05/07/2014): $86.80Segments• PepsiCo Americas Foods

• Frito-Lay North America (FLNA)• Quaker Food North America (QFNA)• Latin American food businesses (LAF)

• PepsiCo Americas Beverage (PAB)• Europe• Asia, Middle East and Africa (AMEA)

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Reasons for RecommendationPositives:

Return to Shareholders Share Repurchases Dividends

- $2.27 per share to $2.62 per share

SizeCash FlowsRevenue VolatilityLow Risk Growth Potential

Emerging Markets Shanghai’s DisneyLand At Home Beverage Production

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Reasons for RecommendationThings to be aware of:

Consumer TrendsCommodity PricesCurrency ExchangeCompetitors

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Sources

1. IBIS World

2. Mergent

3. PepsiCo 2013 10-k

4. PepsiCo 2012 10-k

5. http://seekingalpha.com/article/2059583-pepsi-tingyi-take-aim-at-coke-with-disney-win

6. http://www.fool.com/investing/general/2014/03/17/pepsico-enters-at-home-carbonation-market-before-c.aspx

7. http://seekingalpha.com/article/2018301-pepsico-ceo-discusses-q4-2013-results-earnings-call-transcript?part=single

8.  http://advisor.marketscope.com/SP/msa/reports.pdf?reportURL=/indsurv/fnb/fnb.pdf

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Recommendation for Schlumberger Ltd (Ticker: SLB)Analyst: Jordan Fuentes

Recommendation: HOLD Target price (12/2015): $114.00

Closing price (5/07/2014): $101.88

% of Revenues

Reservoir Characterization DrillingProduction Eliminations & Other

27.05%

38.26%

35.19%

-0.49% % of Revenues

North America Latin AmericaEU/CIS/Africa MidEast/AsiaElimination & Other

17.12%27.32%

23.88%

0.98%

30.70%

Segments: Regions:

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Recommendation for Schlumberger Ltd (Ticker: SLB)Analyst: Jordan Fuentes

Recommendation: HOLD Target price (12/2015): $114.00

Closing price (5/07/2014): $101.88

Positives:• Technological innovation and efficiency• Financial performance against competition• Industry outlook bullish

Negatives:• Highly dependent on expenditures from oil and gas industry related to the

exploration and production (E&P) of hydro-carbons. • Subject to risk related to foreign exchange and geo-political events• Alternative energy production

Competitors:

Halliburton Company (HAL) Baker Hughes Incorporated (BHI)

Weatherford International (WFT)

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Technological Innovation: SLB• 1.2 billion invested into

R&E in 2013 (2.46% of revenues)

• Over 125 R&E facilities worldwide

• Involved in optimization of hydro-carbon rigs.

• Improved efficiency for customers

• Shale, fracking, and deep-water E&P

• PowerDrive Vortex drill bit can penetrate 92% further than traditional drills bits.

• OneSubsea Joint Venture: world record for shortest time between exploration and production: 14 Months

• Wearable Intelligence:Google Glass

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Financial Advantage• Expanding margins• Double digit EPS growth• Shareholder approved

buyback program: 2.6 of 10 billion spent

• Improved 2013: asset utilization, inventory management

SLB

HAL

BHI

WFT

0% 5% 10% 15% 20% 25%

Operating Margins: Annual

2012 2013

38

Recommendation Stryker Corporation (Ticker: SYK)Analyst: Bryan Deshayes

Recommendation: BUY Target price (12/2015): 93

Closing Price (5/07/2014): 79.42

Company Overview 2013 Revenue : $9.02 Billion

- 4.2% Increase from 2012

Segments- Reconstructive (4.8% increase)- MedSurg (2.9% increase)- Neurotechnology and Spine (5.6% increase)

44%

37%

19%

Sales

Reconstructive

MedSurg

Neurotechnology and Spine

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Stryker Corporation Future Industry Outlook

- Change in government regulation- Reduced Cost Trend for Healthcare Providers- Emerging Markets – Growing middle class

Strengths- Recent Acquisitions : MAKO, Trauson, Patient

Safety Technologies- Research and Development - Fast Long-Term Growing Dividend

40

Stryker CorporationOpportunities

- International Expansion : Emerging Markets- Aging Population (Over 65 to double by 2030)- Increased Obesity

Threats- New Entrants in the Market/Competition- Regulation- Litigation/Lawsuits

41

Stryker Corporation

Questions?

Recommendation for Union Pacific Corporation (Ticker: UNP)Analyst: Kathy Hollingsworth

Recommendation: BUY Target price (12/2015): $216

Closing Price (5/7/2014): $188.35

Diversified Commodity mix

Current leader in the industry

Strong Brand Recognition

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Commodity Market Share2012 Market Share

Agriculture 30.6% Automotive 37.5% Chemicals 35.1% Coal/Energy 23% Industrial Products 14.3% Intermodal 44.9%

Agricu

lture

Autom

otive

Chem

icals

Coal/E

nerg

y

Indu

stria

l Pro

ducts

Inte

rmod

al0%

20%

40%

60%

80%

100%

3280 1807 32383912 2494

3955

7442 3070 597813094 14948

4848

Union Pacific 574 Companies

*Commodity Total Revenues from the Association of American Railroads

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Positives

• Operations are tied to the economy

• Only railroad to have all six ports to Mexico -More manufacturing moving to Mexico (especially auto industry)

• $60 million buybacks until 2017

• Investing in technology for locomotives to improve fuel efficiency

• Best transportation industry to turn to when fuel prices spike

• Investing capital into networks and infrastructure to grow

45

Negatives

• Legacy contracts

• Railroad Unions

• Volatile fuel costs; Enforcement of fuel surcharges

• Pending law suits regarding price fixing

• Coal Industry/Natural Gas Competition

46

Conclusion

Union Pacific Corporation Leading the Rail Industry Maintaining strong financials Railroads are the best choice among industry competitors as fuel costs

rise Preparing itself to grow with the forecasted economic rise Taking care of their investors

It’s a buy.

50

Walgreens Company (WAG)

51

Walgreens Company (WAG)Analyst: Thai Yaparwong

Recommendation: BUY Target price (12/2015): $76.00

Closing Price (5/07/2014): $69.87

Company OverviewOver 8,600 Locations

- 408 Healthcare ClinicsRevenue: $72.2 B (+0.8%)Net Income: $2.3 B (+10.6%)

Prescription DrugsFront End Products

63%

27%

10%

2013 Revenue Breakdown

Prescription Drug Sales

General Merchandise

Non-prescriptions Drug Sales

52

Walgreens Company (WAG)Analyst: Thai Yaparwong

Recommendation: BUY Target price (12/2015): $76.00

Closing Price (5/07/2014): $69.87

Reasons for RecommendationStrategic Partnerships

Alliance BootsEurope, Asia & AfricaNew Products2016 Revenue Forecast: $130B

AmerisourceBergen10yr. Distribution Agreement

Global Platform Synergies2014 Projected: $425M2016 Goal: $1B

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Walgreens Company (WAG)Analyst: Thai Yaparwong

Recommendation: BUY Target price (12/2015): $76.00

Closing Price (5/07/2014): $69.87

Market Presence & Reputation Iconic Brand

Loyalty Rewards ProgramDividend

38 Consecutive Years

Key DriversCreating a Well ExperienceAdvancing Community PharmacyEstablishing an Efficient Global Platform

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Walgreens Company (WAG)Analyst: Thai Yaparwong

Recommendation: BUY Target price (12/2015): $76.00

Closing Price (5/07/2014): $69.87

Risks Uncertainty of International EconomiesUncertainty of Government Regulation

BuyStable, Sustainable GrowthLong Term Gains Increasing Dividends