PRIVATE CLIENT INSIGHT

PRIVATE
CLIENT
INSIGHT
VOL. 15, ISSUE 4/WINTER 2014
Market Commentary
W. Moultrie Dotterer, CFA
The Correction That Never Was
Managing Director
Equity Strategy
(804) 780-3279
[email protected]
Regular Features
Inside Cover Snapshot:
Research Platform Addition: Morningstar
What Others Are Saying
Chart Watch
Current Buy List
BB&T Capital Markets Focus List
Sterling Portfolios
Special Opportunities
Equity Income
Leaders
SMID
Insight
150%
Indexed Price Performance
Russell 2000
DJ Industrial Average
Price (Indexed to 0)
NASDAQ Composite Index
S&P 500
125%
100%
75%
50%
25%
0%
-25%
-50%
-75%
2005
2006
Established in 1893
2007
2008
2009
BBTScottStringfellow.com
2010
2011
2012
2013
2014
Source: FactSet Prices
Member FINRA/SIPC
FOR R E Q UIR E D DI SC L OS UR E S , I N CL U D I N G A NA LY S T CE R T IF ICA T IO N , P LE A S E R E FE R TO T HE
IMP OR TA N T D IS CL O S U R E S SE C TIO N TH A T B E GI N S O N P A GE 1 7 O F T HI S R E POR T
RESEARCH
Source: Morningstar
2 | Private Client Insight
PLATFORM
ADDITION:
MORNINGSTAR
MARKET
COMMENTARY
The Correction That Never Was
As we wrote about in last quarter’s
Private Client Insight, we were worried
about trajectory of the market and the
potential for a correction as the pause
that refreshes. Well, we got it! From the
peak on 9/9/14 (2,010) to the trough on
10/16/14 (1,863), the S&P 500 pulled
back 7.3%. However, the rebound has
been swift. We are now hitting new highs
just two weeks after the trough. It now
seems like “the correction that never
was.” During the selloff, a number of
events combined to create the volatility
that led to the selloff. Short-term events
include the rallying dollar, commodity
selloffs, Ukraine and Middle East
tensions, Ebola pandemic fears, and
European and Chinese economy
slowdown worries. We are left to
conclude that investors determined that
these issues weren’t enough to dissuade
them from continuing to purchase
equities. The long-term events for which
investors seem to be positioning
portfolios are the end of The Fed’s
quantitative easing program and the
potential for the increase in the Fed
fund’s rate. The ideal scenario is The Fed
being able to manage monetary policy at
just the right pace to allow the economy
to accelerate and inflation to remain in
check. As we look out to 2015, the S&P
500 is trading at 15.5x earnings—which is
reasonable, in our view.
Source: BLS, Credit Suisse
Source: Federal Reserve, Credit Suisse
Ok, it’s official. The Fed ended the
quantitative easing program at the end of
October. Obviously the market had
priced it in. The language from the
minutes of the meeting was encouraging:
“The Committee judges that there has
been a substantial improvement in the
outlook for the labor market since the
inception of its current asset purchase
program. Moreover, the Committee
continues to see sufficient underlying
strength in the broader economy to
support ongoing progress toward
maximum employment in a context of
price stability.” The cumulative impact of
the three quantitative easing programs is
the injection of $4.5 trillion of liquidity
into the monetary system since
November 2008. Going forward, the
question is, when will The Fed will start
raising interest rates. The language in the
minutes still uses “considerable time” for
increases to begin. Most economists
expect that The Fed will start to increase
interest rates sometime in mid-2015.
Two trends to note are the decline in the
price of oil and the strengthening of the
US dollar. They are related, since the
price of oil is priced in US dollars. As the
dollar strengthens, those buying oil in
foreign currencies see the price of oil go
up. Moreover, the “buy oil on the
weakening dollar” trade has been
unwinding, and there may be more to go
on the downside. We see a number of
implications from this dynamic. First, a
strong dollar negatively impacts the
revenue of US-based multinational
companies as their goods become more
expensive to purchasers using foreign
currency. There is also a negative
accounting translation impact as US
companies convert foreign earnings back
to dollars. For the former, it is very tough
to quantify the impact since you can’t
determine who forgoes the purchase of
products priced in dollars. For the latter,
most investors look through the impact
Volume 15, Issue 4 | 3
MARKET
since it is an accounting convention and
look at sales in local currency to
determine if sales are growing. The
impact of oil is bad for most oil and gas
investors but good for the consumer and
companies with oil as an input cost. For
example, airlines benefit since fuel costs
are 30%–40% of total costs. The impact
on the large integrated oils is muted by
the fact that most have oil refining
operations (input cost) and retail gas sales
where demand could improve. For the
consumer, the price of gas has a positive
impact since oil is anywhere from 2.5% to
12.7% of the total household budget. The
economists at Credit Suisse estimate that
every $10/barrel drop in the price of oil
frees up $33B in household income.
With the results of the much-anticipated
election, we thought it might be
interesting to look at the potential
impacts for investors. One potential
outcome would be for the Keystone
Pipeline project to be approved.
According to JP Morgan, the ACA will
Source: FactSet
4 | Private Client Insight
COMMENTARY
stay mostly intact, although a Republican
Congress will likely look to change pieces
of it, such as “risk corridors” (providing
federal money to health insurers to cover
heavy claims costs) and the med tech tax
(which may be repealed). The employer
mandate that goes into effect at the end
of the year could be overturned or
modified. Both sides are pushing for
immigration reform, but this may get
pushed to the 2016 presidential election.
Tax reform, always an unknown, could be
pushed both at the individual and
corporate level. Corporate tax reform
seems to demand more attention given
the pursuit of tax inversion deals to take
advantage of lower taxes in other
countries. Other issues that could be
brought to the forefront would be
Fannie/Freddie reforms, debt reduction
plans, trade reform, and tweaks to the
Dodd Frank financial reform. Beyond all
that, will the market do better if
Republicans control both Houses of
Congress? If history is a guide, yes.
According to Standard & Poor’s, equity
returns were 10.1% when Republicans
controlled both Houses going back to
1945.
Third-quarter corporate earnings are
concluding, and overall the results have
been positive. As of the end of October,
73% of the companies in the S&P 500
have reported earnings. Seventy eight
percent have reported earnings that
exceeded analyst expectations. Not only
is this percentage higher than average, but
it is also the highest since Q2’10,
according to FactSet. Earnings are up
7.3% over the third quarter of 2013.
However, estimates for Q4 have been
coming down. Thus far, 46 companies
have cut guidance for the quarter while
18 have raised it. The growth forecast for
the fourth quarter now stands at 5.2%.
For 2015, the best growth is expected to
come from the consumer discretionary
and the materials sectors while the
weakest growth is coming from energy
and utilities.
FEATURE
What Others are Saying
QE3 is very likely to end as planned with
a final $15B taper on October 29. For its
forward guidance, the Committee may
choose to keep its “considerable time”
language, but we wouldn’t be surprised to
see new wording that would still give the
Fed a great deal of latitude. Weak (but
not disastrous) global growth seems an
unlikely reason for the Fed to delay, in
our view. US growth has been steady and
not very sensitive to global shocks. Also,
we expect faster wage growth by the
middle of next year. Lower oil prices also
help the outlook for US households. On
the other hand, short-term downside risks
to US inflation are re-emerging. And
unquantifiable risks—such as Ebola panic
and geopolitical concerns—are worth
considering. This volatile mix of factors
has disrupted financial markets, but a
resilient US labor market, rising wages,
and improving household cash flows may
trump global concerns, soft inflation, and
the “known unknowns.”
James Sweeney, Economics Research, Credit
Suisse, 10/21/14
We now expect the Federal Reserve to
hike rates by 25 bps in the second quarter
of next year, most likely in June, with the
IOER rate and the top of the fed funds
target range reaching 1.25% by year end.
Furthermore, we think the words
“considerable time” will disappear in the
October FOMC statement, as QE ends.
In forecasting a June hike, our
expectation for the first hike moves
closer to the market’s expectation, but we
think the pace of hikes will be faster once
tightening begins. Caution on early hikes
has seemed warranted for several reasons.
First, we have expected momentum in US
growth to slow somewhat. Second, we
have expected financial conditions to
tighten via rising five- to ten-year interest
rates. Third, core inflation data are
running well below 2%. Fourth, we
acknowledge that there are many more
surprise events that can push the first
hike out later than there are events that
can make it come sooner.
Economic Research Department, Credit Suisse,
10/03/14
Despite flagging the deterioration in
crude market fundamentals since early
August, oil prices have fallen faster and
further than we have anticipated in recent
weeks. We retain the view that the
seasonal uptick in refinery runs ahead of
the northern hemisphere winter should
help tighten crude markets. However,
while cash margins are positive, they are
not particularly strong. Moreover,
forward margins remain lackluster in both
Europe and Singapore. Thus, the
incentive to ramp-up runs aggressively
remains capped at this point in time.
Moreover,
increased
competition
between suppliers of crude from the
Middle East Gulf and West Africa in
Asia, as witnessed by a sharpening of
OSP (official selling price) differentials by
key OPEC producers to preserve market
share, has contributed to the increasingly
bearish outlook for markets.
David Martin, Global Commodities Research,
JP Morgan, 10/17/14
Dollar cycles tend to last eight years,
implying another five years to run (and
bull markets have seen the dollar TWI
rise by c50% on average, compared with
21% so far). We think we are in a
secular bull market for the dollar
owing to: a sharp improvement in the US
current account; more advanced private
sector deleveraging than elsewhere,
implying that the US can withstand
higher real rates; strong FDI inflows (due
to the cheapness of the US as a
manufacturing base); and, tactically, as the
US is the only region where consensus
GDP growth is still being revised up,
with GDP 7% above previous peak
(much more than Europe & Japan). Real
rates and PMIs point to €/$1.20 but
further out, we think the euro might have
to weaken another 10% to generate the
inflation the ECB needs. We see
downside risk to both sterling (PPP
according to the OECD is £/$1.44) and
the yen (our FX team forecast $/¥118 on
a 12-month view).
Andrew Garthwaite, Equity Strategy, Credit
Suisse, 10/14/14
Through stomach-churning swings in
financial markets this week we maintain
our key near-term view: that a material
upturn in global growth started in
September. This view rests on the large
disconnect between global factory output,
which stalled in the six months through
August, and our proxy for global final
goods demand, which appears to have
expanded at a solid pace over the same
period. The alignment of output to
demand should by itself produce a
material acceleration in the manufacturing
sector, one that also realigns output with
the signal being sent by our global
manufacturing PMI. We expect next
week’s flash October reading to move
down modestly from its elevated
September level but still point to output
gains around a 3.5% annualized pace.
Importantly, this momentum swing
should be amplified by the boost to final
demand from the sharp drop in
commodity prices, which could see global
consumer goods spending expanding
near a robust 5% annualized pace
through the current quarter.
Bruce Kasman, Economic Research, JP Morgan,
10/17/14
Volume 15, Issue 4 | 5
FEATURE
Chart Watch
AVERAGE PERFORMANCE OF
EQUITIES BASED ON MONTHLY
INTEREST-RATE CHANGES
This analysis examines how stocks
performed in various interest-rate
environments. Stocks were divided into
four buckets based on the size of their
dividend yield. For example, stocks in the
Highest 30% group are stocks with
dividend yields in the top 30% of the
dividend companies. Monthly changes in
the interest rate were tracked since July
1927, then ranked based on direction and
magnitude. Periods of rising rates were
defined as the top 20% of all 1,037
months. Neutral rates were defined as the
middle 60%, and falling rates as the
bottom 20%.
6 | Private Client Insight
Returns during the different periods are
calculated by averaging the monthly
returns and annualizing the monthly
average. For example, in the risinginterest-rate period, the returns of nodividend stocks in the top 20% of
months were averaged and then
annualized to get a 6.6%. This analysis is
only hypothetical and is not intended to
follow stocks over long performance
periods. Instead, it is based on monthly
changes in interest rates to show the
impact of large interest-rate changes on
stock prices and is not indicative of longterm trends.
bonds (they pay consistent income).
When interest rates go up, new bonds are
issued that pay the newer, higher rates,
and investors may choose to sell their
dividend stocks and buy bonds, to try and
preserve income while potentially
assuming lower risk. On the flip side,
however, high-dividend stocks posted the
highest returns during periods of neutral
and falling rates, as well as for the full
time period analyzed. Stocks with higher
dividends, while sensitive to interest rates
in the short term, delivered the highest
month-to-month returns among all
equities over the long term.
Dividend stocks were the worst
performing during rising interest rates,
because they tend to be more similar to
—Morningstar
FEATURE
Current Buy List
The goal of the Current Buy List is to
utilize the multiple sources of research to
which we have access, including our inhouse BB&T Capital Markets research,
JPMorgan, Credit Suisse, Morningstar,
Inc., industry conferences, the extensive
information in business publications, and
the information available on the Internet.
Just among our three primary research
sources (BB&TCM, JPMorgan, and
Credit Suisse), hundreds of stocks are
recommended for purchase.
As independent, experienced analysts, we
add value by focusing investors on stocks
that look attractive on a near- to
intermediate-term basis. The impetus of
our stock recommendations is to give
new ideas to clients to potentially add to
existing portfolios. With so many names
to consider, part of the process is to
quantitatively screen the universe of
stocks for attributes such as value, yield,
capitalization, growth, etc. The next step
is basic fundamental analysis using a
bottom-up approach that considers
industry trends, company specifics such
as earnings, balance sheet, cash flow,
management, valuation, and near-term
catalysts. For inclusion on the list, a stock
must be covered by at least one of our
three primary resources (BB&TCM,
JPMorgan, and Credit Suisse). Should
there be a loss of coverage, the stock will
be removed from the Current Buy List
once a replacement is found. Stocks may
be removed and replaced at the
discretion of the Equity Strategy Group
for reasons such as capital appreciation,
weak fundamentals, or better perceived
upside in other stocks.
The Large-Cap/Blue Chip category will
focus on valuation opportunities in
stocks that are widely recognized by
investors. The Yield category will focus
on high current yield and/or the
potential for rising dividends, and the
Small/Midcap/Aggressive category will
focus on valuation opportunities within
the higher-risk, higher-return potential
area. There will be no more than five
stocks in each category.
ADDITIONS TO THE LIST
With the continued weak oil price
outlook, we are using the market
pullback to swap Chevron (CVX) with
the less commodity-sensitive Williams
Companies (WMB). About 70% of
WMB’s earnings is from fee-based
businesses. Williams Cos. is the general
partner and a holding company that owns
two major LP companies, Access
Midstream Partners (ACMP) and
Williams Partners (WPZ). Together
they move about 10% of the natural gas
in the US. WMB also processes and
refines natural gas liquids, a major
feedstock for petrochemical plants that is
refined to make everything from plastic
to carpet. It is an infrastructure company
that moves these products up and down
the Eastern Seaboard and from the
Midwest to the West. In addition, WMB
has oil pipelines going from the
deepwater Gulf of Mexico to onshore, as
well as operations in Canada and assets in
LNG that will eventually be an export
market. The crown jewel is its assets in
the Marcellus Shale, which is the most
prolific shale play in the US. WMB
dominates this shale play and is building
out assets to capitalize.
As a general partner, there is no K-1 for
investors (just 1099s). The dividend yield
and dividend growth potential is
attractive. The current yield is more than
4.0%. Also, management just increased
the dividend by 32% based on the
acquisition of a controlling interest in
Access Midstream Partners, and it has
laid out a timeline for dividend increases:
$1.96 for 2014, $2.46 for 2015, $2.82 in
2016, and $3.25 in 2017. We take this as a
sign of management’s confidence in the
outlook. Doing the math, that is a 45%
increase from the current $2.24 (latest
quarter annualized). If an investor bought
the stock today in the mid-$50s, the yield
in three years would be close to 6.0%—
not to mention the potential for share
price appreciation. The consensus price
target is $64, which is 15% upside—
basically 20% total return potential
over the next 12 months without
taking significant risk, in our opinion.
We are playing contrarian and adding
REIT Plum Creek Timber (PCL) to
the Current Buy List. The stock is down
25% from its high of $54 reached in mid2013, and PCL has underperformed its
peers, including REITs and paper
companies. So expectations are low, and
we think there is more upside potential
than downside risk. With sluggish
housing start numbers, saw log prices
have remained at recession levels in the
South. In Q2 management announced
the withholding of some tree harvest
until pricing gets better. So the stock and
earnings have come down. For dividend
investors, this is an opportunity for a
4.3% yield. Management raised the
dividend in 2013 for the first time since
the recession and, remarkably, it did not
have to cut it during the Great Recession.
Owning timber lands and real estate
acreage has proved to be a stable source
of cash flow for PCL. PCL owns 6.8M
acres of timberlands in the US with 1.1M
acres held for higher and better use
purposes (i.e., real estate sales),
development, and conservation. In
addition, PCL has a wood manufacturing
division and natural resources assets
(land with gravel, sand, and other
aggregates). Of the five operating
divisions, Southern timber is the largest,
followed by manufacturing.
Key investment considerations: (1)
Management has ample cash flow to
pay the dividend at the current level
and potentially increase as log prices
recover. PCL increased the dividend 5%
in 2013 to the current annual rate of
$1.76/sh. Last year, PCL generated
$350M in free cash flow (operating cash
flow less capital expenditures) and paid
$290M in dividends. JP Morgan is
Volume 15, Issue 4 | 7
FEATURE
modeling $353M in free cash flow this
year with the dividend at $312M. PCL
paid $1.68/sh in 2007 and maintained it
until the 2013 increase. (2) Dividends
are taxed as long-term capital gains
and not ordinary income. Since 2006,
100% of PCL’s dividend has been taxed
at the long-term capital gains rate. Plum
Creek derives substantially all of its
operating income from the sale of timber
under pay-as-cut contracts; income from
them is treated as a long-term capital
gain. So this might be a good idea for
investors in high-income tax brackets. (3)
The beauty of owning timber is that
the sun and rain grow your assets for
free! The South is the biggest region and
log prices have remained low, although
pulp wood has recovered. Other
divisions are growing, such as
manufacturing, Northern timber (prices
are strong in the Pacific Northwest), and
energy and natural resources. Another
potential growth area is fuel pellets,
which are harvested from pulp wood
trees, especially with Europe moving
away from coal to generate electricity. (4)
Housing starts have recovered but
still remain below the normalized
levels since the early 1990s. A return to
normalized levels will likely firm up
timber pricing in the South. (5) Balance
sheet and earnings. As mentioned,
management guided down expectations
for this year so consensus is for earnings
of $1.15 (vs $1.36 in 2013) and $1.46 for
2015. Long-term debt is 64% of total
capitalization and S&P has an
investment-grade rating of BBB.
REMOVALS FROM THE LIST
We removed ABB Limited (ABB).
ABB has been on the list since October
2006 and delivered a total return of 97%,
which is above the S&P 500 total return
of 74% during the same time period.
We are moving to the sidelines on Chevron Corp (CVX), which has been on
the list since December 2010. On a
total return basis, the stock was up 43%
versus 65% for the S&P 500 during the
same time period. The price of oil has
broken down with a rising dollar and
worries of about slowing economic
growth. Therefore, we think it is going to
be tough going for the major oils.
Disclosures: BB&T Corporation, parent
company of BB&T Securities, owns shares of
ABB; AT&T; Williams; ConocoPhillips;
Health Care REIT; Intel; JP Morgan; Nucor;
PepsiCo; UDR, Inc.; and Zimmer.
EQUITY STRATEGY
Current Buy List
W. Moultrie Dotterer, CFA  804-780-3279
Return
Consensus Earnings
Date
Price
Price
Since
Price
Ticker
Added
Added
10/29/14
Add.
Target
Large Cap/Blue Chip
ConocoPhillips
Intel Corp
Pepsico
Williams Cos
Zimmer Holdings
COP
INTC
PEP
WMB
ZMH
5/24/12
$52.14
$70.22
34.7%
$88
$
5.89 $
8/30/07
$24.91
$33.74
35.4%
$35
$
2.24 $
1/12/09
$52.66
$95.26
80.9%
$100
$
10/20/14
$52.00
$55.70
7.1%
$64
8/27/10
$48.01
$108.15
125.3%
Yield
AT&T Inc.
General Electric
Health Care REIT
JP Morgan
Kinder Morgan MLP
T
GE
HCN
JPM
KMP
1/14/13
$34.16
$34.40
2/21/12
$19.41
$25.66
4/8/14
$60.34
$69.70
9/19/11
$32.69
7/25/13
Small/Mid Cap/Aggressive
Delta Air Lines
DAL
Freeport McMoran
FCX
Nucor
NUE
Plum Creek Timber
PCL
UDR, Inc.
UDR
Mkt
13 to 14 14 to 15
2014E
2015E
P/E Ratio
Ind.
Cap
Div.
(Bil)
Yield
Salient Points
(catalysts, fundamentals)
Growth
Growth
2014
2015
5.55
3%
-6%
11.9x
12.7x
86.3
4.1%
Oil and natural gas liquids
2.39
19%
6%
15.1x
14.1x
167.0
2.7%
New chip cycle, corporate upgrades
4.61 $
4.92
5%
7%
20.7x
19.4x
142.6
2.8%
Global brands and growth
$
0.94 $
1.42
16%
52%
nmf
nmf
41.6
4.0%
Yield and growth
$122
$
6.06 $
6.64
5%
10%
17.9x
16.3x
18.3
0.8%
Demographics, cash flow
0.7%
$36
$
2.57 $
2.61
3%
2%
13.4x
13.2x
178.4
5.3%
Growth in data, free cash flow
32.2%
$29
$
1.68 $
1.81
2%
8%
15.3x
14.2x
257.5
3.4%
Energy exposure, dividend growth
15.5%
$69
$
4.13 $
4.37
21%
6%
16.9x
16.0x
22.6
4.6%
Aging of population
$59.63
82.4%
$67
$
5.47 $
5.96
26%
9%
10.9x
10.0x
224.3
2.7%
Valuation, LT growth potential
$85.82
$94.26
9.8%
$100
$
2.66 $
2.62
10%
-2%
nmf
nmf
30.8
6.0%
Growing yield, management
5/17/13
$18.54
$39.84
114.9%
$53
$
3.25 $
4.04
3%
25%
12.3x
9.9x
33.3
0.9%
Profitability, fewer players, balance sheet
10/16/12
$40.55
$29.03
-28.4%
$38
$
2.24 $
2.50
-20%
11%
13.0x
11.6x
30.2
4.3%
China and Asia growth
3/3/11
$47.97
$53.42
11.4%
$58
$
2.23 $
3.48
50%
56%
24.0x
15.4x
17.0
2.8%
Return to cylical growth
9/8/14
$41.12
$40.03
-2.7%
$43
$
1.16 $
1.34
-17%
16%
34.6x
29.9x
7.0
4.4%
Yield, improving housing starts
1/10/14
$23.56
$29.54
25.4%
$31
$
1.54 $
1.63
8%
6%
19.2x
18.1x
7.5
3.5%
Contrarian, yield
This information should not be used as the primary basis for investment decisions nor should it be construed as advice since it may not consider the individual needs of
the investor, and as such should not be considered an investment recommendation by BB&T Scott & Stringfellow or BB&T Capital Markets. While the information above is
from sources that we believe to be reliable, we do not guarantee their accuracy or completeness. Additional information available upon request. Price targets and
estimates based on consensus data from FactSet or from our research correspondents.
Securities and insurance products or annuities sold, offered or recommended by BB&T Scott & Stringfellow are not a deposit, not FDIC insured,
not guaranteed by a bank, not guaranteed by any federal government agency and may lose value.
8 | Private Client Insight
FEATURE
BB&T Capital Markets Focus List
We are initiating coverage of lululemon
athletica inc. (LULU) with a Buy rating
and $50 price target. After a challenging
year and a half for the company, we think
lulu is poised to stabilize results. We
expect gradual near-term improvement
due to new merchandising and design
strategies, new traffic-driving initiatives,
and better public sentiment toward the
brand. lulu's significant long-term growth
potential should also limit downside,
creating a positive risk/reward. We
expect lululemon's comp sales trends to
gradually stabilize and improve in coming
quarters due to four key factors: (1) new
CEO Laurent Potdevin and CPO (chief
product officer) Tara Poseley are working
to deliver a better product assortment
over H2'14, with an improved product
mix in Q3 and better styles in Q4; (2) a
successful
Summer/Fall
transition
delivery in July bodes well for the product
strategy; (3) public sentiment toward lulu
has improved since last year's negative PR
issues; and (4) new traffic-driving
initiatives coming in Q4 should help get
more customers into stores and onto
lulu's website, supporting comps. Longterm growth potential is still
outstanding. lulu still boasts one of the
longest and most compelling growth
runways in specialty retail. The company
can still nearly double US store count,
and it is beginning to roll out new stores
in Europe and Asia, each of which should
add to lulu's growth potential. A new goto-market strategy should support
margins as the merchandising/design
organization and supply chain become
more efficient and effective. Lastly, we
believe ivivva and men's present
additional
long-term
growth
opportunities. We think the bear case
concerns about lululemon are overstated.
Multiple measures of brand sentiment
(General Sentiment scores, Google
Trends, and Facebook comments) show
that the public's perception of lulu
bottomed in November 2013 but has
been gradually improving since. Further,
lulu's connection with its customers
should continue to improve as the
company works to improve its image
directly (through grass-roots marketing
and customer engagement) and indirectly
(through ongoing efforts to improve
quality assurance). We also view the
threat of competition as overstated. We
think lulu's high quality and store
environment differentiate it from most of
its competitors, and we estimate that the
negative impact of Athleta (lulu's most
direct imitator) on lulu's comps amounts
to only ~1%. Our $50 price target is
based on a 23.0x P/E multiple using our
FY'15 EPS estimates. This reflects a
premium to the specialty retail group
average of 15.0x, but we think a premium
is warranted given lulu's best-in-class
square footage growth and long-term
growth potential. We also believe that
23.0x is also undervalued relative to lulu's
historic average, and versus a group of
other high-growth consumer companies.
While we believe lulu should trade at a
discount to the high-growth peer set, as
recent results have been soft, we think a
stabilization in comps will result in
upward earnings revisions and multiple
appreciation.
We have been recommending Clarcor
(CLC) for a number of reasons,
including the stronger recent trucking
trends and compelling acquisitions, and
more
recently
its
limited
international/forex exposure and its
tendency to outperform bad markets (this
is happening again—it remains our best
performer since industrials peaked in
June). The company has built a significant
oil & gas franchise, however, which we
still view as underappreciated by the
Street, so that warrants some discussion
given the carnage in energy stocks. We
see little risk from sub-$80 oil as CLC's
mix is ~4% oil and 96% nat gas/aviation
fuel, and there appears to be a multiyear
growth story here. CLC pulled back from
its recent highs as industrials sold off
sharply, but it continues to outperform
this challenging market. In fact, the
Industrial index is -8% since peaking on
6/9/14, and our coverage is -13% during
that period with CLC the only gainer at
+1%. We have noted that CLC has
historically outperformed in challenging
markets. The overriding investor
concerns about international growth,
forex rates, and oil are well documented
at this point, so we think it makes sense
to continue favoring names such as CLC
and Mueller Water Products (MWA$8.76-Buy), the #2 performer in our
coverage since 6/9, that have little
international exposure (CLC is ~70% US
with only ~9%/4% in Europe/China;
MWA is essentially all NorAm with only
~4% Europe). However, CLC does have
an oil & gas filtration franchise that has
been growing nicely and now represents
~22% of legacy CLC FY'14E sales and
18% of total sales including the recent
acquisitions. This aspect of the story is
still underappreciated by the Street, in our
view. So given the carnage in all things oil
& gas, should investors be concerned
about this piece of CLC rolling over? We
don't think so.
Dycom (DY) could double earnings
when the 1GB cycle starts. We have
analyzed potential spending from a
number of providers, including AT&T,
CenturyLink, Comcast, Google, and Time
Warner (~55% of revenue last quarter).
On an annual basis, 1GB spending from
these customers could add incremental
EPS of $1.25. Over the coming years, we
believe that telecom and cable providers,
and perhaps new industry entrants
(Google),
will
make
significant
investments in wireline networks in order
to provision 1GB to the home speeds.
Some announcements have already been
made. AT&T could potentially target 100
cities, Google 34, and CenturyLink 16.
This likely represents a fraction of the
total opportunity this cycle and we would
expect additional announcements over
the coming quarters (particularly from
Comcast/Time Warner)…. Dycom is by
far the largest wireline contractor in the
Volume 15, Issue 4 | 9
FEATURE
US. The company generates ~$1.5B
annually from wireline construction.
Dycom constructed ~25% of Verizon's
FiOS network, but it is a larger company
today. In 2012, Dycom bought the #2
player in wireline construction, ten
subsidiaries of Quanta Services (PWR$33.71-Buy). We are assuming that
Dycom has one-third market share this
cycle…. For now, the 1GB cycle largely
remains in the planning/engineering/
permitting phase. This explains why the
CEOs of Dycom and MasTec (MTZ$27.48-Buy) are so bullish about the cycle
even while their customers have made
limited announcements…. As the cycle
enters full-scale deployment, we believe
that it could add ~$1.25 to annual EPS
for Dycom. Currently, we forecast EPS
of ~$1.25 in CY'14. Note that we
forecast FY'16 EPS of $2. This could be
20% too low if our 1GB projections
prove correct. As it relates to Dycom's
stock, we continue to recommend that
investors buy in now, while there is still
some uncertainty/doubt about the
coming cycle.
EQUITY
FOCUS LIST
BB&T Capital Markets is a division of BB&T Securities, LLC, member FINRA/SIPC, a wholly owned nonbank subsidiary of BB&T Corporation. The securities sold, offered or
recommended are not a deposit, not FDIC insured, not guaranteed by a bank, not guaranteed by any federal government agency and may go down in value.
10 | Private Client Insight
STERLING
The Sterling Equity Opportunities Group
manages the CHOICE portfolios, which
are designed to help clients meet their
financial goals using equity investments,
with an objective of maximizing returns
on a risk-adjusted basis. The CHOICE
offering consists of six portfolios, two of
which are also provided as mutual funds,
managed by a team with more than 150
years of combined investment and
business experience. Sterling Capital
Management now has more than $45B
under management.
In this publication, the Sterling Team will
continue to provide a snapshot of each of
the Equity Opportunities Group’s
portfolio holdings and highlight at least
one recent addition to the portfolios.
PORTFOLIO HIGHLIGHT—
STERLING SPECIAL
OPPORTUNITIES PORTFOLIO
PORTFOLIOS
intensive care units that handled
premature
and
sick
newborns,
MEDNAX has acquired many practices
over the years and is now the largest
practice company in the country with a
25% share (the next closest holds 2% of
the market). In 2007, MEDNAX
expanded into anesthesiology, another
hospital-based specialty (see chart) and
continues to grow by acquiring physician
practices nationwide.
Based on our examination of the
company’s growth prospects, the
prognosis is healthy. Given that
MEDNAX is the market leader and
controls only 5% of the potential market,
the opportunity to partner with more
physician groups appears to be in its early
days. In fact, on the company’s last
conference call with analysts regarding
acquisition opportunities, management
stated “the pipeline is very full” and it
appears potential transactions are
numerous.
SunTrust
Robinson
Humphrey Research characterized the
market as “still having plenty of running
room” and we agree. The untapped
potential in both physician markets
should provide a long runway of growth
for MEDNAX for years to come.
We added the shares of MEDNAX
(MD) in Q3. With healthcare costs in the
US approaching 18% of GDP and
growing at a faster pace than GDP,
increasing focus is being directed on
controlling healthcare expenditures. At
the
Morgan
Stanley
Healthcare
Conference last month, experts pointed
to an area where the greatest MEDNAX is benefitting from two
improvements in quality and costs can be significant trends at the current time.
attained—with the physicians making the First, as it relates to volume, the
decisions and delivering
care. MEDNAX is on the
forefront of improving
patient
outcomes
and
delivering healthcare in a
more efficient manner. Its
operating model has proven
itself over three decades and
is well positioned to take
advantage
of
secular
changes
occurring
in
healthcare, namely greater
efficiency, better outcomes,
and professionally managed
physician
practices.
Conceived by CEO Roger
Medel in 1979 to manage
and staff hospital-based
Source: MEDNAX
government is broadening healthcare
coverage through the Affordable Care
Act. This expansion of payments through
Medicaid and subsidized healthcare on
insurance exchanges is increasing the
pool of covered patients. Second, as it
relates to price, Washington is increasing
the prices MEDNAX receives on
Medicaid patients. Over the past couple
of years, the company has benefitted
from these price increases as the federal
government wants to make sure Medicaid
patients are accepted by treating
physicians. The net result of these actions
should be more profitable coverage of
more patients as additional states
consider expanding coverage.
Based on its unique position to affect
healthcare costs and a proven record of
delivering on its time-tested operating
model, the company appears to be poised
to deliver attractive returns by partnering
with physician practices in a market
where only a small fraction have joined
larger, more professional operators. The
expansion of healthcare coverage and
increasing focus on quality of care also
should play to the company’s strengths,
providing it with more opportunities to
differentiate. Combining these factors
together, we look for MEDNAX to birth
a healthy return for shareholders.
There are no assurances that securities identified
will be profitable investments.
The securities described are
neither a recommendation nor
a solicitation. Any implied
performance is not indicative
of future results and there is
no assurance that the
transactions in the future will
be profitable or will equal the
performance of the securities
detailed. Security information
is being obtained from
resources the firm believes to
be accurate, but no warrant is
made as to the accuracy or
completeness
of
the
information.
Volume 15, Issue 4 | 11
STERLING
PORTFOLIOS
Sterling Capital Special Opportunities Portfolio
Ticker
Price
10/31/14
52-Week
Range
Mkt
Cap
EPS (Calendar, $)
13
14E
15E
13
P/E (times)
14E
15E
EPS Growth (%)
13
14E
15E
Nt Dbt/ ROE
Cap (%) (%)
Yield
(%)
(Bil)
Financials
Capital One Financial
CBRE Group
Amer Campus Comm*
Ryman Hospitality*
13% of Portfolio
COF
CBG
ACC
RHP
Information Technology
Activision Blizzard
Akamai Tech
Apple
Cisco Systems
Citrix Systems
Check Point
eBay
Intuit
NCR Corp
ATVI
AKAM
AAPL
CSCO
CTXS
CHKP
EBAY
INTU
NCR
19.95
60.30
108.00
24.47
64.23
74.25
52.50
88.01
27.67
MDLZ
35.26
HCA
MD
MYGN
UNH
70.05
62.43
39.49
95.01
CMCSA
DISCK
DTV
F
LEN
55.35
34.99
86.79
14.09
43.08
24
64
108
26
73
74
59
88
38
-
17
44
71
20
53
58
48
70
24
39 - 32
73
64
42
95
-
44
51
21
69
57
44
88
18
44
-
47
33
63
14
33
NLSN
EXPD
JBHT
VRSK
42.49
42.66
79.77
62.35
APA
COG
EOG
HAL
77.20
31.10
95.05
55.14
50
46
80
68
-
39
38
70
57
14.3
10.7
633.4
124.8
10.6
14.2
65.2
25.1
4.7
0.94
2.02
5.87
2.04
3.02
3.43
2.71
3.32
2.81
59.6
1.51
-
73
28
78
48
7.62
1.69
2.37
3.78
7.72
1.93
2.49
4.47
1.32
2.42
6.75
2.10
3.23
3.70
2.96
3.07
2.63
1.42
2.77
7.84
2.21
3.68
4.06
3.28
2.99
2.96
1.67
1.87
30.3
6.3
2.9
92.3
3.41
2.78
2.10
5.50
142.6
15.7
43.6
54.6
8.8
2.47
1.52
5.17
1.62
2.20
4.51
3.15
2.15
5.64
5.03
3.47
2.04
6.13
2.95
1.87
5.64
1.12
2.73
3.31
2.22
6.33
1.62
3.27
16.2
8.3
9.3
10.3
2.02
1.68
2.87
2.21
29.5
12.8
52.0
46.7
7.92
0.71
4.11
3.15
2.51
1.85
3.12
2.40
2.77
2.08
3.72
2.71
10
18
7
1
1
14
5
18
42
48
51
63
10
20
9
32
1.4
3.9
4.5
21.2
29.9
18.4
12.0
21.3
21.6
19.4
26.5
9.8
15.1
24.9
16.0
11.6
19.9
20.1
17.8
28.7
10.5
14.1
21.8
13.8
11.1
17.4
18.3
16.0
29.4
9.3
(-20)
12
(-5)
6
5
8
15
8
13
41
20
15
3
7
8
9
(-8)
(-6)
7
15
16
5
14
10
11
(-2)
13
1
7
14
59
7
12
34
14
12
19
17
26
27
1.0
1.7
3.1
1.1
-
23.4
21.1
18.9
9
11
12
39
9
1.7
20.5
22.5
18.8
17.3
15.5
19.8
18.3
16.8
13.9
18.0
19.4
15.5
(-8)
15
37
4
32
13
2
3
12
10
(-5)
9
100
6
8
8
13
24
17
1.6
22.4
23.1
16.8
8.7
19.6
18.7
18.8
15.4
12.6
15.8
16.7
15.8
13.7
8.7
13.2
28
18
13
15
(-28)
20
23
9
(-31)
25
12
19
12
45
20
43
50
100
57
47
16
19
24
29
13
1.6
3.5
0.4
21.0
25.4
27.8
28.2
16.9
23.1
25.6
26.0
15.4
20.6
21.5
23.0
8
7
11
5
24
10
9
9
10
12
19
13
51
44
42
7
17
35
59
2.4
1.5
1.0
-
9.7
43.8
23.1
17.5
12.6
31.0
17.6
13.7
14.7
28.8
17.6
11.4
(-16)
115
45
5
(-23)
41
31
28
(-14)
8
(-0)
20
20
32
21
24
5
17
16
23
1.3
0.3
0.7
1.3
20.5x
18.9x
18.2x
17.0x
16.5x
15.7x
12%
6%
12%
11%
11%
9%
31%
29%
19%
15%
1.1%
2.0%
9% of S&P 500
6.11
1.00
5.40
4.03
5.25
1.08
5.39
4.83
Utilities
0% of Portfolio
3% of S&P 500
Telecom Services
0% of Portfolio
2% of S&P 500
2018 - 1742
13
17
16
NMF
10% of S&P 500
3% of S&P 500
2,018
10.7
16.6
15.8
11.0
12% of S&P 500
0% of Portfolio
SP50
10.9
18.9
16.6
13.0
14% of S&P 500
Basic Materials
Portfolio Average
S&P 500
11.9
22.4
17.7
13.2
10% of S&P 500
13% of Portfolio
103
42
118
74
6.96
1.43
2.22
3.74
20% of S&P 500
13% of Portfolio
Energy
Apache
Cabot Oil & Gas
EOG Resources
Halliburton
46.2
10.6
4.1
2.5
16% of Portfolio
Industrials
Nielsen Holdings
Expeditors Int'l
J.B. Hunt
Verisk Analytics
69
22
32
37
13% of Portfolio
Consumer Discretionary
Comcast
Discovery Comm
DirecTV**
Ford Motor Co
Lennar Corp
-
3% of Portfolio
Health Care
HCA Holdings**
MEDNAX
Myriad Genetrics
UnitedHealth Group
85
34
40
50
29% of Portfolio
Consumer Staples
Mondelez Intl
82.77
32.00
39.27
49.35
16% of S&P 500
51.9
37.7
106.66 118.71
128.88
*FFO (calendar) estimates listed rather than EPS
**These companies have negative GAAP equity; therefore we substitute Return on Capital for Return on Equity for a more meaningful comparison.
Source: FactSet
Data as of date stated above
Portfolio weights are estimated and exclude cash
DISCLOSURES:
Past performance is no guarantee of future investing success. Asset allocation or investment timing cannot eliminate the risk of fluctuating prices and uncertain returns. Diversifying
DISCLOSURES:
Past performance is no guarantee of future investing success. Asset allocation or investment timing cannot eliminate the risk of fluctuating prices and uncertain returns. Diversifying
investments does not ensure against market loss. This information should not be used as the primary basis for investment decisions nor should it be construed as advice since it may not
consider the individual needs of risk tolerances of the investor. The actual characteristics with respect to any individual client portfolio may vary, but the information shown is generally
representative of a typical portfolio. The information included herein may be from outside sources that are believed to be reliable, but no verification of that information has been performed.
Individual investors cannot directly purchase an index. The S&P 500 is an unmanaged, weighted index of 500 stocks providing a broad indicator of price movements. Holdings, portfolio
characteristics, top sectors and current style are subject to change.
Specific securities identified and described do not represent all of the securities purchased, sold or recommended to clients. There are no assurances that securities identified will be profitable
investments. The securities described are neither a recommendation nor a solicitation. Any implied performance is not indicative of future results and there is no assurance that the
transactions in the future will be profitable or will equal the performance of the securities detailed. Security information is being obtained from resources the firm believes to be accurate, but
no warrant is made as to the accuracy or completeness of the information. Any additional supporting information is available upon request.
12 | Private Client Insight
STERLING
PORTFOLIOS
Sterling Capital Equity Income Portfolio
Price
Ticker 10/31/14
52-Week
Range
Mkt
Cap
EPS (Calendar, $)
13
14E
15E
13
P/E (times)
14E
15E
EPS Growth (%)
13
14E
15E
Nt Dbt/ ROE
Cap (%) (%)
Yield
(%)
5Yr Div
CAGR(%)
(Bil)
Financials
Metlife
4% of Portfolio
MET
Information Technology
Accenture
Maxim
Microsoft
Qualcomm
ACN
MXIM
MSFT
QCOM
81.12
29.34
46.95
78.51
GIS
PEP
PM
UL
51.96
96.17
89.01
40.23
ABT
ABBV
BAX
NVS
PFE
WLP
43.59
63.46
70.14
92.69
29.95
126.69
MAT
MCD
OMC
PSO
TWC
73
26
35
67
66.2
8.3
387.0
131.6
56
96
92
46
-
47
77
75
38
44
63
77
95
33
127
-
36
46
65
77
28
84
31.07
93.73
71.86
18.75
147.21
48
104
76
22
155
-
29
90
65
17
118
GE
UPS
25.81
104.91
CVX
ESV
KMI
OXY
SE
119.95
40.59
38.70
88.93
39.13
28 - 24
105 - 94
-
109
37
31
85
33
4.31
1.69
2.61
4.71
31.4
143.9
138.3
51.4
2.77
4.37
5.40
2.20
65.5
95.7
38.0
224.2
189.9
34.2
2.01
3.14
4.86
5.06
2.22
8.52
6.06
4.62
1.51
2.66
5.39
4.97
1.61
2.92
5.67
2.90
4.61
5.08
2.06
3.07
4.92
5.20
2.23
2.26
3.24
4.90
5.26
2.25
8.83
2.35
4.09
4.78
5.78
2.23
9.38
10.5
92.0
17.8
15.2
41.3
2.58
5.55
3.84
1.16
6.61
1.97
5.04
4.21
1.04
7.64
2.17
5.63
4.59
1.22
8.30
259.0
95.8
1.64
4.57
227.8
9.5
39.8
69.3
26.3
11.09
6.09
1.15
6.95
1.64
1.68
4.96
1.80
5.70
10.08
6.01
1.24
6.44
1.53
9.75
5.27
1.15
5.78
1.57
Utilities
0% of Portfolio
3% of S&P 500
Telecom Services
4% of Portfolio
2% of S&P 500
52 - 46
7
2
6
18
10
2.6
13.6
18.8
17.3
18.0
16.7
17.5
19.4
17.6
14.6
16.3
18.2
16.1
13.8
9
1
(-3)
20
7
(-11)
2
14
7
6
10
5
-
55
15
25
19
2.5
3.8
2.6
2.1
22.2
7.0
19.9
22.9
18.8
22.0
16.5
18.3
17.9
20.9
17.5
19.5
16.9
19.6
17.1
18.1
5
7
3
5
5
5
(-6)
(-6)
6
7
2
8
55
35
100
34
26
30
56
32
3.2
2.7
4.5
3.7
13.8
9.7
21.0
8.5
21.7
20.2
14.4
18.3
13.5
14.9
19.3
19.6
14.3
17.6
13.3
14.3
18.6
15.5
14.7
16.0
13.4
13.5
14
(-6)
7
(-4)
1
13
12
3
1
4
1
4
4
26
(-2)
10
(-1)
6
1
23
41
10
3
33
9
95
24
15
13
10
2.0
3.1
3.0
2.5
3.5
1.4
10.2
NA
17.9
12.4
(4.1)
NA
12.0
16.9
18.7
16.2
22.3
15.8
18.6
17.1
18.0
19.3
14.3
16.7
15.7
15.4
17.7
4
4
6
(-15)
15
(-24)
(-9)
10
(-10)
16
10
12
9
17
9
36
37
43
26
74
23
35
33
5
28
4.9
3.6
2.8
4.3
2.0
15.2
15.9
27.2
5.9
NA
15.7
23.0
15.4
21.1
14.3
18.4
8
1
2
9
8
15
57
42
12
79
3.4
2.6
(6.6)
8.3
10.8
6.7
33.7
12.8
23.9
11.9
6.8
31.3
13.8
25.6
12.3
7.7
33.5
15.4
24.9
(-8)
16
64
(-2)
15
(-9)
(-1)
8
(-7)
(-7)
(-3)
(-12)
(-7)
(-10)
3
5
28
74
9
60
14
3
9
14
12
3.6
7.4
4.5
3.2
3.4
17.7
14.4
13.1
22
23
10
82
63
4.4
9% of S&P 500
3% of S&P 500
50.25
9.0
10% of S&P 500
0% of Portfolio
VZ
9.5
12% of S&P 500
Basic Materials
Verizon
9.6
14% of S&P 500
18% of Portfolio
135
62
42
105
43
5.71
10% of S&P 500
7% of Portfolio
Energy
ChevronTexaco
Ensco PLC
Kinder Morgan
Occidental Petroleum
Spectra Energy
-
18% of Portfolio
Industrials
General Electric
United Parcel Service
85
35
48
82
5.63
20% of S&P 500
21% of Portfolio
Consumer Discretionary
Mattel
McDonald's
Omnicom Group
Pearson Plc
Time Warner Cable
60.7
14% of Portfolio
Health Care
Abbott Laboratories*
AbbVie*
Baxter Int'l
Novartis
Pfizer
WellPoint
57 - 47
14% of Portfolio
Consumer Staples
General Mills
PepsiCo
Phillip Morris Int'l**
Unilever
54.24
16% of S&P 500
208.5
2.84
3.50
3.83
Portfolio Average
99.3
17.5x 17.2x 16.3x
7%
1%
6%
33%
27% 3.3%
S&P 500
SP50
2,018 2018 - 1742 37.7 106.66 118.71 128.88
18.9x 17.0x 15.7x
6%
11%
9%
29%
15% 2.0%
*On January 2, 2013 ABT completed the tax-free separation/distribution of ABBV; combined the two positions currently represent a "full" position in the portfolio.
**These companies have negative GAAP equity; therefore we substitute Return on Capital for Return on Equity for a more meaningful comparison.
11.1
100.3
NA
18.9
8.8
4.3
13.7%
11.9%
Source: FactSet
Data as of date stated above
Portfolio weights are estimated and exclude cash
DISCLOSURES:
Past performance is no guarantee of future investing success. Asset allocation or investment timing cannot eliminate the risk of fluctuating prices and uncertain returns. Diversifying investments does not ensure against
market loss. This information should not be used as the primary basis for investment decisions nor should it be construed as advice since it may not consider the individual needs of risk tolerances of the investor. The actual
characteristics with respect to any individual client portfolio may vary, but the information shown is generally representative of a typical portfolio. The information included herein may be from outside sources that are
believed to be reliable, but no verification of that information has been performed. Individual investors cannot directly purchase an index. The S&P 500 is an unmanaged, weighted index of 500 stocks providing a broad
indicator of price movements. Holdings, portfolio characteristics, top sectors and current style are subject to change.
Specific securities identified and described do not represent all of the securities purchased, sold or recommended to clients. There are no assurances that securities identified will be profitable investments. The securities
described are neither a recommendation nor a solicitation. Any implied performance is not indicative of future results and there is no assurance that the transactions in the future will be profitable or will equal the
performance of the securities detailed. Security information is being obtained from resources the firm believes to be accurate, but no warrant is made as to the accuracy or completeness of the information. Any additional
supporting information is available upon request.
Volume 15, Issue 4 | 13
STERLING
PORTFOLIOS
Sterling Capital Leaders Portfolio
Ticker
Price
10/31/14
52-Week
Range
Mkt
Cap
EPS (Calendar, $)
13
14E
15E
13
P/E (times)
14E
15E
EPS Growth (%)
13
14E 15E
Nt Dbt/ ROE
Cap (%) (%)
Yield
(%)
(Bil)
Financials
Citigroup
Markel
MetLife
Och-Ziff*
State Street Corp
17% of Portfolio
C
MKL
MET
OZM
STT
53.53
690.89
54.24
11.02
75.46
DOX
GLW
GOOGL
ORCL
MSFT
NCR
V
47.54
20.43
567.87
39.05
46.95
27.67
241.43
Information Technology
Amdocs
Corning
Google
Oracle
Microsoft
NCR Corp
Visa
WMT
76.27
ABT
BDX
HCA
PRGO
UNH
43.59
128.70
70.05
161.45
95.01
TWC
DIS
147.21
91.38
EMR
NLSN
RSG
R
64.06
42.49
38.40
88.47
XOM
OXY
SLB
96.71
88.93
98.66
AUY
3.98
7.6
26.2
385.2
173.0
387.0
4.7
184.0
2.98
1.23
22.22
2.79
2.61
2.81
7.96
81 - 73
44
130
73
168
95
-
36
105
44
127
69
155 - 118
91 - 67
70
50
40
94
-
59
39
32
64
104 - 90
105 - 85
118 - 86
11 - 4
AES
14.07
16 - 13
2,018
2018 - 1742
5.40
23.47
6.06
1.64
5.38
12.3
36.9
9.6
5.9
16.6
11.3
36.6
9.5
10.2
15.1
9.9
29.4
9.0
6.7
14.0
13
(-21)
7
58
15
8
1
2
(-42)
10
14
24
6
51
8
64
18
100
37
5
4
10
11
10
0.1
2.6
9.0
1.6
3.23
1.47
25.91
2.97
2.66
2.63
9.40
3.47
1.58
30.54
3.18
2.92
2.96
10.81
15.9
16.6
25.6
14.0
18.0
9.8
30.3
14.7
13.9
21.9
13.2
17.6
10.5
25.7
13.7
13.0
18.6
12.3
16.1
9.3
22.3
8
(-5)
13
8
(-3)
13
21
8
19
17
6
2
(-6)
18
7
7
18
7
10
13
15
59
-
13
6
15
24
25
27
20
1.3
2.0
1.2
2.6
0.8
15.0
15.2
14.5
3
(-2)
5
36
21
2.5
21.7
21.7
20.5
26.9
17.3
19.3
20.2
15.5
23.4
16.8
18.6
18.4
13.9
20.4
15.5
(-17)
8
(-8)
13
4
12
8
32
15
3
4
10
12
15
9
1
14
100
20
34
9
19
8
12
17
2.0
1.7
0.3
1.6
22.3
25.2
19.3
20.7
17.7
18.7
15
15
16
22
9
11
74
20
28
17
2.0
0.9
17.9
21.0
19.5
18.1
16.9
16.9
19.8
15.8
15.4
15.4
18.7
13.6
4
8
9
21
6
24
(-1)
14
10
10
6
16
20
51
46
68
24
14
9
15
2.7
2.4
2.9
1.7
13.1
12.8
20.8
13.1
13.8
17.6
14.0
15.4
15.5
(-9)
(-2)
14
(-0)
(-7)
18
(-6)
(-10)
13
8
9
12
20
14
18
2.9
3.2
1.6
11.1
27.9
15.9
(-61)
(-60)
75
21
4
1.5
10.9
10.7
9.9
4
2
8
74
2
1.4
18.2x
18.9x
17.4x 15.4x
17.0x 15.7x
5%
6%
5%
11%
13%
9%
31%
29%
15%
15%
1.8%
2.0%
10% of S&P 500
245.8
5.10
65.5
24.7
30.3
21.6
92.3
2.01
5.92
3.41
6.00
5.50
5.01
5.28
14% of S&P 500
2.26
6.37
4.51
6.90
5.64
2.35
7.01
5.03
7.92
6.13
12% of S&P 500
41.3
156.9
6.61
3.62
44.7
16.2
13.7
4.7
3.58
2.02
1.97
4.88
409.6
69.3
127.0
7.37
6.95
4.75
3.5
0.36
7.64
4.41
8.30
4.89
10% of S&P 500
3.79
2.51
1.94
5.58
4.15
2.77
2.05
6.49
9% of S&P 500
7.36
6.44
5.61
6.93
5.78
6.35
3% of S&P 500
0.14
0.25
3% of S&P 500
10.2
0% of Portfolio
SP50
4.72
18.85
5.71
1.08
5.00
20% of S&P 500
3% of Portfolio
Telecom Services
Portfolio Average
S&P 500
38
16
504
33
35
24
196
3% of Portfolio
Utilities
AES Corp
-
10% of Portfolio
Basic Materials
Yamana Gold
49
22
611
43
48
38
241
14% of Portfolio
Energy
Exxon Mobil
Occidental Petroleum
Schlumberger LTD
4.36
18.70
5.63
1.87
4.54
7% of Portfolio
Industrials
Emerson Electric
Nielsen Holdings
Republic Services
Ryder System
162.2
9.7
60.7
5.2
31.7
17% of Portfolio
Consumer Discretionary
Time Warner Cable
Walt Disney
46
529
47
10
63
3% of Portfolio
Health Care
Abbott Laboratories
Becton Dickinson
HCA Holdings*
Perrigo Co.
UnitedHealth Group
-
24% of Portfolio
Consumer Staples
Wal-Mart
55
691
57
16
76
16% of S&P 500
1.29
1.31
1.41
2% of S&P 500
97.0
37.7
106.66 118.71 128.88
*These companies have negative GAAP equity; therefore we substitute Return on Capital for Return on Equity for a more meaningful comparison.
Source: FactSet
Data as of date stated above
Portfolio weights are estimated and exclude cash
DISCLOSURES:
Past performance is no guarantee of future investing success. Asset allocation or investment timing cannot eliminate the risk of fluctuating prices and uncertain returns. Diversifying investments does not
ensure against market loss. This information should not be used as the primary basis for investment decisions nor should it be construed as advice since it may not consider the individual needs of risk
tolerances of the investor. The actual characteristics with respect to any individual client portfolio may vary, but the information shown is generally representative of a typical portfolio. The information
included herein may be from outside sources that are believed to be reliable, but no verification of that information has been performed. Individual investors cannot directly purchase an index. The S&P 500 is
an unmanaged, weighted index of 500 stocks providing a broad indicator of price movements. Holdings, portfolio characteristics, top sectors and current style are subject to change.
Specific securities identified and described do not represent all of the securities purchased, sold or recommended to clients. There are no assurances that securities identified will be profitable investments. The
securities described are neither a recommendation nor a solicitation. Any implied performance is not indicative of future results and there is no assurance that the transactions in the future will be profitable or
will equal the performance of the securities detailed. Security information is being obtained from resources the firm believes to be accurate, but no warrant is made as to the accuracy or completeness of the
information. Any additional supporting information is available upon request.
14 | Private Client Insight
STERLING
PORTFOLIOS
Sterling Capital SMID Opportunities Portfolio
Ticker
Price
10/31/14
52-Week
Range
Mkt
Cap
EPS (Calendar, $)
13
14E
15E
13
P/E (times)
14E
15E
EPS Growth (%)
13
14E
15E
Nt Dbt/ ROE
Cap (%) (%)
Yield
(%)
(Bil)
Financial Services
First Cash Financial
Och-Ziff*
Portfolio Recovery
12% of Portfolio
FCFS
OZM
PRAA
59.07
11.01
63.92
REITs
Amer Campus Comm**
Colony Financial
ACC
CLNY
39.32
22.17
DOX
AVGO
FFIV
FISV
GPN
NCR
47.44
86.00
123.14
69.40
80.70
27.44
INGR
77.00
ABC
VAR
85.71
83.93
PETM
72.59
BLT
BCO
HCSG
R
WCN
15.25
20.65
30.12
87.72
49.81
7.5
20.8
8.9
16.7
5.4
4.6
80 - 59
86 - 63
88 - 73
75 - 55
16
36
30
94
50
-
11
20
26
64
40
84.99
36.56
31.74
BLL
SMG
63.89
59.46
AES Corp
AES
14.00
Portfolio Average
Russell 2500
R25
1,100
Materials & Processing
118 - 76
62 - 35
45 - 23
5.7
20.7
5.9
18.5
19.9
10.2
17.5
17.5
6.7
13.2
5
58
40
4
(-42)
6
14
51
33
27
100
13
21
11
20
9.0
-
2.22
1.43
2.37
1.57
2.49
1.77
17.7
15.5
16.6
14.1
15.8
12.5
16
8
7
10
5
12
51
36
9
6
3.6
6.3
2.98
3.18
4.80
2.99
3.93
2.81
3.23
4.93
5.67
3.37
4.48
2.63
3.47
6.43
6.59
3.77
5.03
2.96
15.9
27.0
25.6
23.2
20.6
9.8
14.7
17.4
21.7
20.6
18.0
10.4
13.7
13.4
18.7
18.4
16.1
9.3
8
14
8
17
9
13
8
55
18
13
14
(-6)
7
30
16
12
12
13
49
47
49
59
13
12
20
23
25
27
1.3
1.1
0.1
-
5.05
5.47
6.01
15.2
14.1
12.8
(-9)
8
10
27
15
2.2
25.6
21.0
21.0
20.3
18.7
18.5
17
5
22
4
12
10
18
-
21
24
1.1
-
18.2
16.9
15.8
15
8
7
11
37
1.1
21.3
8.7
37.7
18.0
27.8
16.0
12.7
35.8
15.7
24.8
13.8
10.9
29.7
13.5
22.0
(-18)
3
23
21
16
33
(-31)
5
14
12
16
17
20
16
13
65
26
68
46
6
(0)
18
15
11
1.9
2.3
1.7
1.0
14.7
9.4
20.3
12.9
12.3
16.3
11.3
12.2
12.9
8
40
(-31)
13
(-23)
25
14
0
27
55
48
15
9
NMF
3.2
-
19.5
20.5
16.5
17.9
15.7
16.4
7
32
18
14
5
9
71
43
44
22
0.8
3.0
12% of Russell 2500
19.0
8.7
3.35
4.00
4.09
4.14
4.58
4.54
15% of Russell 2500
7.2
3.98
0.8
1.0
2.1
4.6
6.2
0.72
2.37
0.80
4.88
1.79
4.31
4.60
15% of Russell 2500
0.95
1.63
0.84
5.58
2.01
1.10
1.90
1.01
6.49
2.27
6% of Russell 2500
9.2
2.3
4.3
5.80
3.87
1.56
8.8
3.6
3.28
2.90
16 - 13
10.1
1.29
1.31
1.41
10.9
10.7
9.9
4
2
7
74
12
1.4
1144 - 1006
6.7
3.9
54.54
58.03
64.84
18.8x
20.2x
17.1x
19.0x
15.0x
17.0x
13%
10%
8%
6%
15%
12%
38%
30%
17%
11%
1.6%
1.3%
8% of Portfolio
Utilities
3.37
1.64
4.84
2% of Russell 2500
12% of Portfolio
HP
ROSE
NFX
Ball Corp
Scotts Miracle-Gro
38
43
79
52
60
24
19% of Portfolio
Energy
Helmerich & Payne
Rosetta Resources
Newfield Exploration
-
4% of Portfolio
Producer Durables
Blount International
The Brink's Co
Healthcare Services Gp
Ryder Systems
Waste Connections
49
90
128
69
81
38
2.97
1.08
3.65
12% of Russell 2500
8% of Portfolio
Consumer Discretionary
PetSmart
4.1
2.4
4% of Portfolio
Health Care
AmerisourceBergen
Varian Medical
40 - 32
23 - 20
2.86
1.87
3.45
8% of Russell 2500
23% of Portfolio
Consumer Staples
Ingredion
1.7
5.2
3.2
8% of Portfolio
Technology
Amdocs
Avago Technologies
F5 Networks
Fiserv
Global Payments
NCR Corp
64 - 48
16 - 10
64 - 48
16% of Russell 2500
68 - 48
63 - 53
6.58
2.98
1.95
7.51
2.99
2.46
8% of Russell 2500
4% of Portfolio
3.87
3.32
4.07
3.62
6% of Russell 2500
*These companies have negative GAAP equity; therefore we substitute Return on Capital for Return on Equity for a more meaningful comparison.
**FFO (calendar) estimates listed rather than EPS
Source: FactSet
Data as of date stated above
Portfolio weights are estimated and exclude cash
DISCLOSURES:
Past performance is no guarantee of future investing success. Asset allocation or investment timing cannot eliminate the risk of fluctuating prices and uncertain returns. Diversifying
investments does not ensure against market loss. This information should not be used as the primary basis for investment decisions nor should it be construed as advice since it may not
consider the individual needs of risk tolerances of the investor. The actual characteristics with respect to any individual client portfolio may vary, but the information shown is generally
representative of a typical portfolio. The information included herein may be from outside sources that are believed to be reliable, but no verification of that information has been performed.
Individual investors cannot directly purchase an index. The S&P 500 is an unmanaged, weighted index of 500 stocks providing a broad indicator of price movements. Holdings, portfolio
characteristics, top sectors and current style are subject to change.
Specific securities identified and described do not represent all of the securities purchased, sold or recommended to clients. There are no assurances that securities identified will be profitable
investments. The securities described are neither a recommendation nor a solicitation. Any implied performance is not indicative of future results and there is no assurance that the
transactions in the future will be profitable or will equal the performance of the securities detailed. Security information is being obtained from resources the firm believes to be accurate, but
no warrant is made as to the accuracy or completeness of the information. Any additional supporting information is available upon request.
Volume 15, Issue 4 | 15
STERLING
PORTFOLIOS
Sterling Capital Insight Portfolio
Ticker
Price
10/31/14
52-Week
Range
Mkt
Cap
EPS (Calendar, $)
13
14E
15E
13
P/E (times)
14E
15E
EPS Growth (%)
13
14E
15E
Nt Dbt/ ROE
Cap (%) (%)
Yield
(%)
(Bil)
Financials
Aon
Franklin Resources
GEO Group*
Loews
15% of Portfolio
AON
BEN
GEO
L
Information Technology
Activision Blizzard
Apple
Cisco
eBay
Google
Oracle
Visa
ATVI
AAPL
CSCO
EBAY
GOOG
ORCL
V
19.95
108.00
24.47
52.50
559.08
39.05
241.43
DEO
117.97
AET
CFN
82.51
57.37
ALV
CCL
CMCSA
DISCK
DLTR
GPC
91.74
40.15
55.35
34.99
60.57
97.08
CCK
47.93
24
108
26
59
596
43
241
-
17
71
20
48
510
33
196
133 - 110
85 - 63
58 - 38
108
42
57
44
61
97
-
86
34
47
33
50
78
51 - 40
14.3
633.4
124.8
65.2
379.2
173.0
184.0
0.94
5.87
2.04
2.71
22.22
2.79
7.96
74.6
6.41
96.71
38.70
88.93
98.66
104
42
105
118
-
90
31
85
86
5.64
3.80
2.71
2.90
6.09
3.92
2.86
3.41
1.32
6.75
2.10
2.96
25.91
2.97
9.40
1.42
7.84
2.21
3.28
30.56
3.18
10.81
6.34
6.46
29.0
11.6
5.85
2.24
6.66
2.52
7.09
2.82
8.3
32.5
142.6
15.7
12.5
14.9
5.82
1.60
2.47
1.52
2.70
4.19
6.7
2.99
5.83
1.90
2.95
1.87
3.02
4.60
6.71
2.31
3.31
2.22
3.47
5.02
3.42
3.87
409.6
39.8
69.3
127.0
7.37
1.15
6.95
4.75
7.36
1.24
6.44
5.61
6.93
1.15
5.78
6.35
4% of Portfolio
3% of S&P 500
T
34.84
37 - 32
SP50
2,018
2018 - 1742
Telecom Services
AT&T
Portfolio Average
S&P 500
15
9
16
3
8
3
5
18
33
59
34
16
21
12
3
1.2
0.9
5.7
0.6
21.2
18.4
12.0
19.4
25.2
14.0
30.3
15.1
16.0
11.6
17.8
21.6
13.2
25.7
14.1
13.8
11.1
16.0
18.3
12.3
22.3
(-20)
(-5)
6
15
13
8
21
41
15
3
9
17
6
18
7
16
5
11
18
7
15
1
7
-
7
34
14
17
15
24
20
1.0
1.7
3.1
1.2
0.8
18.4
18.6
18.3
4
(-1)
2
54
34
2.9
14.1
25.6
12.4
22.8
11.6
20.3
14
15
14
13
6
12
27
2
15
8
1.1
-
15.8
25.0
22.4
23.1
22.4
23.2
15.7
21.2
18.7
18.8
20.1
21.1
13.7
17.4
16.7
15.8
17.4
19.3
2
(-14)
28
18
9
4
0
18
20
23
12
10
15
22
12
19
15
9
25
43
50
13
15
11
6
16
19
37
21
2.4
2.5
1.6
2.4
16.0
14.0
12.4
6
14
13
89
10
-
13.1
33.7
12.8
20.8
13.1
31.3
13.8
17.6
14.0
33.5
15.4
15.5
(-9)
64
(-2)
14
(-0)
8
(-7)
18
(-6)
(-7)
(-10)
13
8
74
9
12
20
9
14
18
2.9
4.5
3.2
1.6
10.9
10.7
9.9
4
2
8
74
2
1.4
13.9
13.6
13.4
8
3
2
40
20
5.3
19.2x
18.9x
17.2x
17.0x
15.8x
15.7x
13%
6%
11%
11%
9%
9%
25%
29%
16%
15%
1.8%
2.0%
9% of S&P 500
Utilities
16 - 13
16
13
NA
108
10% of S&P 500
3% of S&P 500
14.07
14.1
14.2
14.0
12.8
12% of S&P 500
0% of Portfolio
AES
15.3
14.6
14.7
15.0
14% of S&P 500
Basic Materials
AES Corp
17.6
16.0
17.1
15.5
10% of S&P 500
15% of Portfolio
XOM
KMI
OXY
SLB
4.89
3.48
2.34
2.81
20% of S&P 500
4% of Portfolio
Energy
Exxon Mobil
Kinder Morgan
Occidental Petroleum
Schlumberger
25.0
34.6
2.9
16.5
22% of Portfolio
Industrials
Crown Holdings**
77
50
31
40
7% of Portfolio
Consumer Discretionary
Autoliv
Carnival
Comcast
Discovery Comm
Dollar Tree
Genuine Parts
-
4% of Portfolio
Health Care
Aetna
CareFusion
91
59
40
49
26% of Portfolio
Consumer Staples
Diageo
86.00
55.61
39.94
43.60
16% of S&P 500
10.2
1.29
180.6
2.50
4% of Portfolio
1.31
1.41
2% of S&P 500
2.57
2.61
105.1
37.7 106.66 118.71 128.88
*FFO (calendar) estimates listed rather than EPS
**These companies have negative GAAP equity; therefore we substitute Return on Capital for Return on Equity for a more meaningful comparison.
Source: FactSet
Data as of date stated above
Portfolio weights are estimated and exclude cash
569
DISCLOSURES:
Past performance is no guarantee of future investing success. Asset allocation or investment timing cannot eliminate the risk of fluctuating prices and uncertain returns. Diversifying investments
does not ensure against market loss. This information should not be used as the primary basis for investment decisions nor should it be construed as advice since it may not consider the individual
needs of risk tolerances of the investor. The actual characteristics with respect to any individual client portfolio may vary, but the information shown is generally representative of a typical
portfolio. The information included herein may be from outside sources that are believed to be reliable, but no verification of that information has been performed. Individual investors cannot
directly purchase an index. The S&P 500 is an unmanaged, weighted index of 500 stocks providing a broad indicator of price movements. Holdings, portfolio characteristics, top sectors and current
style are subject to change.
Specific securities identified and described do not represent all of the securities purchased, sold or recommended to clients. There are no assurances that securities identified will be profitable
investments. The securities described are neither a recommendation nor a solicitation. Any implied performance is not indicative of future results and there is no assurance that the transactions in
the future will be profitable or will equal the performance of the securities detailed. Security information is being obtained from resources the firm believes to be accurate, but no warrant is made
as to the accuracy or completeness of the information. Any additional supporting information is available upon request.
16 | Private Client Insight
MPORTANT DISCLOSURES
To receive price charts on the companies mentioned in this report, please contact BB&T Capital Markets Research at 800-552-7757
x8785.
BB&T Capital Markets’ rating distribution by percentage (as of November 4, 2014):
All companies
All companies under coverage to which it has provided investunder coverage:
ment banking services in the previous 12 months:
Buy (1)
49.30%
Buy (1)
24.29%
Hold (2)
50.00%
Hold (2)
16.90%
Underweight/Sell (3)
0.70%
Underweight/Sell (3)
50.00%
Not Rated (NR)
0.00%
Not Rated (NR)
0.00%
BB&T Capital Markets Ratings System:
The BB&T Capital Markets Equity Research Department Stock Rating System consists of three separate ratings. The appropriate rating is determined by a stock’s estimated 12-month total return potential, which consists of the percentage price change to the 12-month price target
and the current yield on anticipated dividends. A 12-month price target is the analyst’s best estimate of the market price of the stock in 12
months. A 12-month price target is highly subjective and the result of numerous assumptions, including company, industry, and market fundamentals, both on an absolute and relative basis, as well as investor sentiment, which can be highly volatile.
The definition of each rating is as follows:
Buy (1): estimated total return potential greater than or equal to 10%, Hold (2): estimated total return potential greater than or equal to 0%
and less than 10%, Underweight (3): estimated total return potential less than 0%
B: Buy H: Hold UW: Underweight NR: Not Rated NA: Not Applicable NM: Not Meaningful SP: Suspended
Stocks rated Buy (1) are required to have a published 12-month price target, while it is not required on stocks rated Hold (2) and Underweight
(3).
BB&T Capital Markets Equity Research Disclosures as of November 4, 2014
BB&T Capital Markets makes a market in the securities of The Andersons, Inc., Alliance Resource Partners, L.P., Belden Inc., CIRCOR International, Inc., CLARCOR Inc., Canadian Pacific Railway Ltd., Covanta Holding Corporation, Covenant Transportation Group, Inc., Dollar Tree, Inc.,
Dorman Products, Inc., Dycom Industries, Inc., Expeditors Int'l of Washington, Inc., Freeport-McMoRan Inc., Fidus Investment Corporation,
GameStop Corp., Genuine Parts Company, Globe Specialty Metals, Inc., Ingredion Inc., J.B. Hunt Transport Services, Inc., Kirby Corporation,
lululemon athletica inc., MasTec Inc., Mueller Water Products, Inc., Natural Resource Partners L.P., Quanta Services, Inc., Ryder System, Inc.,
Republic Services, Inc., Steelcase Inc., U.S. Silica Holdings, Inc., South State Corporation, SunCoke Energy, Terex Corporation, Trex Company,
Inc., Tyson Foods, Inc., United Natural Foods, Inc., United Parcel Service, Inc., WESCO International, Inc. and Waste Connections, Inc..
BB&T Capital Markets has managed or co-managed a public offering of securities for Fidus Investment Corporation, Natural Resource Partners L.P. and Ryder System, Inc. in the last 12 months.
BB&T Capital Markets has received compensation for investment banking services from Fidus Investment Corporation, Natural Resource
Partners L.P. and Ryder System, Inc. in the last 12 months.
BB&T Capital Markets expects to receive or intends to seek compensation for investment banking services from The Andersons, Inc., Alliance
Resource Partners, L.P., Belden Inc., CIRCOR International, Inc., CLARCOR Inc., Canadian Pacific Railway Ltd., Covanta Holding Corporation,
Covenant Transportation Group, Inc., Dollar Tree, Inc., Dorman Products, Inc., Dycom Industries, Inc., Expeditors Int'l of Washington, Inc., Freeport-McMoRan Inc., Fidus Investment Corporation, GameStop Corp., Genuine Parts Company, Globe Specialty Metals, Inc., Ingredion Inc., J.B.
Hunt Transport Services, Inc., Kirby Corporation, lululemon athletica inc., MasTec Inc., Mueller Water Products, Inc., Natural Resource Partners
L.P., Quanta Services, Inc., Ryder System, Inc., Republic Services, Inc., Steelcase Inc., U.S. Silica Holdings, Inc., South State Corporation, SunCoke Energy, Terex Corporation, Trex Company, Inc., Tyson Foods, Inc., United Natural Foods, Inc., United Parcel Service, Inc., WESCO International, Inc. and Waste Connections, Inc. in the next three months.
Dorman Products, Inc., GameStop Corp., Natural Resource Partners L.P., Republic Services, Inc., Steelcase Inc. and U.S. Silica Holdings, Inc.
is, or during the past 12 months was, a client of BB&T Capital Markets, which provided noninvestment banking, securities-related services to,
and received compensation from Dorman Products, Inc., GameStop Corp., Natural Resource Partners L.P., Republic Services, Inc., Steelcase
Inc. and U.S. Silica Holdings, Inc. for such services. The analyst or employees of BB&T Capital Markets with the ability to influence the substance of this report knows the foregoing facts.
An affiliate of BB&T Capital Markets received compensation from The Andersons, Inc., Alliance Resource Partners, L.P., CIRCOR International,
Inc., Covanta Holding Corporation, Dollar Tree, Inc., Dycom Industries, Inc., GameStop Corp., Genuine Parts Company, Globe Specialty Metals,
Inc., Ingredion Inc., J.B. Hunt Transport Services, Inc., Kirby Corporation, MasTec Inc., Natural Resource Partners L.P., Quanta Services, Inc.,
Ryder System, Inc., Republic Services, Inc., Steelcase Inc., U.S. Silica Holdings, Inc., SunCoke Energy, Trex Company, Inc., Tyson Foods, Inc.,
United Natural Foods, Inc. and Waste Connections, Inc. for products or services other than investment banking services during the past 12
months. The analyst or employees of BB&T Capital Markets with the ability to influence the substance of this report know or have reason to
know the foregoing facts.
Volume 15, Issue 4 | 17
ADDITIONAL INFORMATION IS AVAILABLE ON REQUEST
For valuation methodology and related risk factors on BB&T Capital Markets Buy–rated stocks, please refer to the body text of this report or to
individual reports on covered companies referenced in this report.
The analyst(s) principally responsible for preparation of this report received compensation that is based upon many factors, including the
firm’s overall investment banking revenue.
ANALYST CERTIFICATION
The analyst(s) principally responsible for the preparation of this research report certify that the views expressed in this research report
accurately reflect his/her (their) personal views about the subject security(ies) or issuer(s) and that his/her (their) compensation was not, is
not, or will not be directly or indirectly related to the specific recommendations or views contained in this research report.
OTHER DISCLOSURES
The information and statistics in this report have been obtained from sources we believe are reliable but we do not warrant their accuracy or
completeness. We do not undertake to advise the reader as to changes in figures or our views. This is not a solicitation of an order to buy or
sell any securities.
BB&T Scott & Stringfellow and BB&T Capital Markets are divisions of BB&T Securities, LLC, member FINRA/SIPC, a wholly owned nonbank
subsidiary of BB&T Corporation. The securities sold, offered or recommended are not a deposit, not FDIC insured, not guaranteed by a bank,
not guaranteed by any federal government agency and may go down in value.
The opinions expressed are those of the analyst(s) and not those of BB&T Corporation or its executives.
18 | Private Client Insight
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TT
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