Fisher College of Business – Student Investment Management Materials Sector Analysis July 28th, 2009 Yerim Kim

Fisher College of Business – Student Investment Management Agenda Sector Overview Business/Economic Analysis Sector Performance Relative Valuation Recommendations Questions

Fisher College of Business – Student Investment Management Sector Composition –Chemicals Agricultural Specialty Commodity Diversified –Metals and Mining Specialty Precious Steel Aluminum –Plastic, and Glass Containers –Paper Packaging Paper Products Construction Materials

Fisher College of Business – Student Investment Management S&P500 Sector Weighting as of 7/21/2009

Fisher College of Business – Student Investment Management Business Analysis SuppliersCustomers CompetitionNew EntrySubstitutes HighMid to HighHighLow Highly cyclical High economic exposure High international exposure Mature Stage Growth through acquisition Highly cyclical High economic exposure High international exposure Mature Stage Growth through acquisition Porter’s Five Forces

Fisher College of Business – Student Investment Management S&P 500 vs. SPBMS Index over 10 years

Fisher College of Business – Student Investment Management Sector Performance Against Benchmarks Average Price Change (%) as of 7/21/2009 Sector or Benchmark 1 Month3 MonthsYTD1 Year3 Year1 aYear Materials5.36%15.46%21.91%-33.97%-10.83%4.52% NASDAQ4.86%16.57%23.57%-15.94%-5.16%2.23% Russell %12.49%8.61%-24.51%-22.38%-10.11% S&P %12.29%7.18%-24.24%-23.04%-12.73%

Fisher College of Business – Student Investment Management Industry Performance Against S&P500 Industries1 Month3 MonthsYTD1 Year S&P %12.29%7.18%-24.24% Materials5.36%15.46%21.91%-33.97% Chemicals5.43%10.51%22.53%-29.44% Construction Materials-2.39%-13.40%-38.79%-30.08% Containers & Packaging11.98%35.61%14.07%1.54% Metals & Mining1.86%21.23%27.57%-46.28% Paper & Forest Products18.64%30.17%30.86%-29.90% Average Price Change (%) as of 7/21/2009 GREAT YTD RETURNS SO FAR

Fisher College of Business – Student Investment Management Materials Sector Valuation: P/S Absolute Price to Sales Ratio Price to Sales Relative to S&P500

Fisher College of Business – Student Investment Management Materials Sector Valuation: P/CF Absolute Price to Cash Flows Ratio Price to Cash Flows Relative to S&P500

Fisher College of Business – Student Investment Management Price to Book Value Relative to S&P500 Materials Sector Valuation: P/BV Absolute Price to Book Value Ratio RELATIVELY CHEAP: VALUE STOCKS

Fisher College of Business – Student Investment Management Materials vs. Commodity Prices * Materials sector is 72% correlated with the Commodity Index over past 10 years. Materials sector is 82% correlated with Export trends over past 10 years. *Materials sector is 55% correlated with S&P 500 Price Index over past 10 years.

Fisher College of Business – Student Investment Management Materials vs. Export Trends

Fisher College of Business – Student Investment Management Baltic Dry Index

Fisher College of Business – Student Investment Management S&P 500 and SIM Sector Weights (as of 7/14/2009) S&P 500 WeightSIM Weight +/- Consumer Discretionary 8.97%7.50% -1.46% Consumer Staples 12.32%12.36% 0.04% Energy 12.05%10.68% -1.37% Financials 13.70%9.33% -4.37% Health Care 14.06%13.58% -0.49% Industrials 9.79%11.57% 1.78% Information Technology 18.43%20.19% 1.76% Materials 3.20%4.12% 0.92% Telecommunication Services 3.39%3.28% -0.11% Utilities 4.10%3.87% -0.23% Cash 0.00%3.53% Total100.00% 0.00%

Fisher College of Business – Student Investment Management Current SIM Holdings in Materials Sector CompanyDow ChemicalsAlcoaMaterials Sector TickerDOWAASPBMS Beta Purchase Price$8.26$11.47 Shares25,55527,10052,655 Total Cost$211,084.30$310,742.15$521, Current Price$15.38$9.59 Market Value$393,035.90$259,889.00$652, % Gain/(Loss)86%(16%)25% Unrealized Gain/(Loss)$181,952($50,853)$131,098.45

Fisher College of Business – Student Investment Management Portfolio Return Analysis ALCOA vs. DOW vs. S&500

Fisher College of Business – Student Investment Management Summary Positive Factors Expected continued fall in the dollar Recent stimulus by the Chinese government, indicating aggressive growth. Low steel inventories coupled with rising Baltic Dry Index Higher pricing in certain areas Negative Factors Unsustainable demand growth in China High correlation with auto and house sales Higher aluminum production in China

Fisher College of Business – Student Investment Management Recommendation Short-term: Remain 92 basis points overweight –Increase weight next quarter (near future) when economy shows definite signs of improvement Long-term: Increase weight even more Current SIM WeightCurrent S&P weight 4.12%3.20%

Fisher College of Business – Student Investment Management Questions? But really, don’t feel obligated…