Haley Large Cap Fund Sector Captain Presentations

Haley Large Cap Fund

Sector Captain Presentations

SECTOR CAPTAIN PRESENTATION

Real Estate Investment Trusts

Consumer Durables

Kevin Hylinski

Liberty Property TrustPS Business ParkAnnaly Capital ManagementRedwood TrustHatteras FinancialBoston PropertiesDigital RealtyDuke Realty CorporationHighwoods PropertyDouglas EmmettBrandywine Realty TrustBiomed Realty TrustFranklin StreetEquity ResidentialUDR IncApartment InvestmentsBRE PropertiesHome PropertiesAmerican CampusEquity Lifestyle

Mid-America ApartmentsSimon PropertyFederal Realty InvestmentsRegency CentersRealty IncomeAlexander’s IncHost Hotels & Real EstateVentas IncHealth Care REITPlum Creek Timber

Real Estate Investment Trusts Consumer Durables

Garmin LTD

Whirlpool Corporation

Tupperware Brand

Homebuilders:

Pulte Homes Inc

DR Horton Inc

Lennar Corporation

• A few REITs do look attractive in the SMF model• Time-line => Current Market• Corporate Bankruptcies (69% 1Q 2009, 35% 2Q 2009)• “Extend and pretend” - Capmark • Vacancy (12.5% 2Q 2007 and 16.5% 3Q 2009)• Rental Rates• Cap Rates = NOI/Value (5% vs. 10%)• Shorter Lease Terms

Real Estate Investment Trusts

• Home Builders– Cost of Goods Sold (95% - 115% of sales 2Q 2009)– Housing Market – Lending

• Garmin ($30.90)– Undervalued by almost 50% (SMF model)– S+P Fair Value $42.60 (37.86%)– Strong Balance Sheet

• No Debt• $1 billion cash

– Doubled R+D spending over the past 2 years• ROIC of 20%+ over the past 10 years

– Entered the smart phone business - Nuvifone - AT&T

Consumer Durables

SECTOR PRESENTATIONEnergy and Internet

– Alpha Natural Resources– Chesapeake Energy– Consol– Patriot Coal – Southwest Energy – CVR Energy – Danbury

Energy

• Priceline• Amazon

Internet

• Priceline• Denbury

What we went with

• Increasing Sales• International Exposure (2/3rds of gross profits)• Low Capex• Growth pipeline into emerging areas

– Dubai – Singapore

– Growth – USA online penetration is only 36% vs Europe 29%

Priceline

• Strong Sales growth ( ~30% ) • Strong in the Gulf Coast• Volatility might be a problem

• Projecting 10% growth still value of ~$19 as compared with $15 currently

Denbury

• Arch Coal • Chesapeake• Patriot• Natural Resource Partners

Companies that Failed

SECTOR PRESENTATIONBrendan Kearney

• Model: 36.25• Actual: 28.68• Industry: Systems Software• MSFT dominates the market and should

continue to do so • Windows 7 recently released, sales boost

Microsoft (MSFT)

• Model: 78.37• Actual: 77.42• Industry: Household Products• Solid / stable company – even in downturn• Demand for household products relatively

static

Colgate (CL)

• Model: 54.11• Actual: 21.37• Industry: Steel• Good prospects as economy turns around• Specialty metals producer• Closely tied to aerospace / energy /

consumer industries

Carpenter Tech (CRS)

• Model: 185.57• Actual: 43.28• Industry: Steel• Cyclical company• Good growth prospects – largest US steelmaker,

20% of US mkt, relatively diverse product set• Easing downward pressure on sale of steel

products

Nucor (NUE)

• Model: 35.58• Actual: 34.76• Industry: Metals & Mining• Good growth prospects, strength is in

copper• As economy picks up, so will global

demand for copper – particularly in China

Southern Copper (PCU)

• Model: 45.54• Actual: 25.46• Industry: Construction and Engineering• Low cost of D, conservative growth outlook, faring

better than competitors• Gradual rebound in energy projects as prices

improve• Increased infrastructure activity as result of

stimulus packages

Emcor (EME)

• Model: 39.37• Actual: 16.63• Industry: Oil & Gas Drilling• Primarily provides contract drilling• 2nd largest operator of land-based drilling rigs

– 3rd most active rigs in industry

• Con: Sensitive to natural gas prices– 80% of land drilled in US is for natural gas

Patterson-UTI (PTEN)

• Model: 68.91• Actual: 37.30• Industry: Oil & Gas Equipment and Services• Segments: Well Sites, Offshore Products,

Tubular Services• Expectations of continued oil consumption

+ thin spare capacity = good business

Oil States International (OIS)

COSTCO WHOLESALE CORP.

Security Analysis

Bob Goslin

• Membership warehouse club– Similar to Sam’s Club and BJ’s Wholesale

• Product mix:– Fresh food– Packaged food– Sundries (candy, snack foods)– Hardlines (appliances, electronics, etc.)– Softlines (apparel, housewares, furnishings)

Company Background

• Annual sales growth (last ten years):– Average: 9.3%

• Historic sales growth:– 2006: 13.63%– 2007: 7.91%– 2008: 11.67%– 2009: -1.43%

Performance

• Superior supply-chain management

• High rate of asset turnover

• High membership renewal and sign-up

rates

• Expected increase in market share

Upside

• Profitability highly dependent on diesel fuel

prices

• Retail industry highly competitive

– Entire industry engaged in pricing wars

– Target’s move to “Low Value Everyday” pricing

model

Downside

• Appears to be accurately valued

• Only Costco is outperforming S&P 500

• Last price

– Costco 60.40

– Wal-Mart 52.90

– Target 50.11

– BJ’s 36.59

Evaluation

• Cautious Buy:

– Correlation to Walmart’s Q3 earnings ??

– Expected release of Costco’s next quarterly

earnings on December 11

– Same-store sales returned to positive territory

in September and October

Recommendation