1. 1 October 5, 2011 Bender Trust Research Project Overview Greg Francfort

2. The Bender Trust Started by alumni David Bender $120,000 principal Currently worth $1,600,000 Used for scholarships 2

3. Greg Francfort Rutgers undergraduate in engineering Wharton MBA graduate LIBOR co-founder First Boston Corp. Sell-side analyst, Assoc. Research Director Neuberger Berman Portfolio Manager, Research Director Securities Analysis at Columbia University 3

4. 4 Part I: Fundamentals

5. 5 Summary There is no such thing as present tense in performance management. 1980-2005 S&P 500 12.5% Average mutual fund 10% Mutual fund investor 7.3%

6. 6 Anheuser Busch (BUD) $53.02 52 week range: 49.05 – 64.77 S&P 500: 1,156 2010A2011E2012E EPS$3.13$3.76$4.22 P/E16.914.012.5 S&P EPS$78$85$94 S&P P/E14.911.910.9 Relative P/E113%118%115%

7. 7 Hewlett Packard (HPQ) $24.72 52 week range: 21.50 – 49.39 S&P 500: 1,156 2010A2011E2012E EPS$3.78$4.84$4.76 P/E 5.05.15.2 S&P EPS$78$85$94 S&P P/E14.911.910.9 Relative P/E34%43%48%

8. 8 Company Description One paragraph What does the company do to make money? What products / services do they sell? What are the costs of production?

9. 9 Competitive Analysis One page: Porters Five Forces Identify customers / suppliers What are the competitive advantages / disadvantages? Size, market share? Is the business getting more or less competitive? Is there a moat around the company? Be succinct!

10. 10 Part II: Analysis

11. 11 Earnings Outlook What are the prospects the company can grow its business? Growth from price or volume increases? What is the danger of cost increases? Likelihood of positive or negative earnings surprise compared to consensus estimate of EPS for 2011?

12. 12 Build a Model? Revenue minus expenses = profits Profits / shares outstanding = EPS Earnings Outlook

13. Forecast Revenue Use 2010 as a base to forecast 2011 revenue Project 2011 growth for the industry What factors will drive growth? Try to use units or volume How might your companys market share change? Product or service price in 2011 vs. 2010? 13

14. 14 Case Study: BUD

15. 15 U.S. Beer Industry Unit Demand Population Beer consumer specific population Weather Income Gasoline prices, employment rate Consumer taste Health issues Mad cow for beer? Low carb/healthier diets Social trends Price of beer Price of substitutes Advertising by suppliers of beer Advertising by suppliers of substitutes Legal issues Stricter penalties for DWI Changes in legal drinking age New Products or Market segments

16. 16 Expenses COGS Variable costs: raw materials to make and deliver beer? Fixed costs: depreciation S,G&A Interest expense Income taxes

17. 17 Valuing the Earnings Calculate P/E on consensus 2011 EPS forecast Relative P/E to: S&P500 at 1097; S&P500 EPS 2010 est $85 S&P500 P/E on 2010 = 12.9x Does our Company deserve a premium or a discount? Depends on growth and on risk

18. Other Valuation Tools DCF P/Book Value per Share P/Asset value EV/EBITDA 18

19. 19 Recommendation Convincing case of earnings surprise (positive or negative) Persuasively assert the stock deserves a larger / smaller relative P/E multiple on 2009 EPS than present level Possible takeover potential or some other corporate event that unlocks or reduces value

20. 20 Summary Maximum three pages Five minute presentation Only the important information More effort = more knowledge

21. 21 Resources Yahoo! Finance EDGAR 10-K, 10-Q, etc. Company websites Customers, employees, competitors, suppliers Creative intellect!

22. 22 Stock List Marlin Business Svcs. Corp.MRLNTravelers InsuranceTRV Oracle Corp.ORCLFedexFDX AppleAAPLBP Wal-Mart Stores Inc.WMTRange ResourcesRRC Lowe's Companies Inc.LOWViacom, Inc.VIA-B The Home Depot, IncHDValero Energy Corp.VLO Comcast Corp.CMCSABoeing Co.BA CarMax Inc.KMXKapStone PackagingKS Occidental Petroleum Corp.OXYIntelINTC Packaging Corp. of America AT&T PKG T Cedar Fair LP Mohawk Industries FUN MHK

23. 23 Deadlines Part I Late November/Early December Part II April

24. 24 Questions? gfrancfort@nb.com rulibor@gmail.com