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Date4/2/2013

Analyst:KristenHecht

CIFSectorRecommendationReport(Fall2012)

SectorCND ReviewPeriod3/19/2013–4/2/2013

Section(A) SectorPerformanceReview

Copy/paste“SectorReviewSpreadsheet”(theentirespreadsheet)hereCND

Ticker Current Beg. Stop-loss Target

% Cap

# Shares Current

vs. Sector

vs. S&P 500

Price Price Price Price Gain Value S&P 500 $INX 1570.12 1552.10 1.16% Sector ETF XLY $53.06 $52.19 1.67% 3030 $160,771.80 0.51%

Current Holdings

DIS $57.46 $56.83 1.11% 700 $40,222.00 -0.56% -0.05%

Reviewsectorperformancerelativetothebroadmarket(SP500)andexplainwhy;Includeatwo‐week(forthetwo‐weekwindowreviewed)pricechartoftheSPDRsectorETFandSP500(onthesamechart)

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ThesectorhasoutperformedtheS&Pinthelasttwoweeksby.51%.Thisismostlikelyduetothefactthatconsumerdiscretionaryisacyclicalsectorandtendstodoverywellwhenthemarketisdoingwell,andduringmytimeperiodtheS&P500reachedanalltimehigh,soitmakessensethattheconsumerdiscretionarywouldbeoutperformingthemarket.

Highlightnoteworthyheadlinenewsfromthesector(company‐,industry‐,orsector‐levelnews)

ConsumerDiscretionaryasawholehasdoneextremelywellrecently.Theyhaveposted14straightquartersofearningsgrowth,andhaverisen40.4%sincethepreviousclosinghighinOctoberof2007.EightofthetwentybestperformingstockssinceOctoberof2007areintheconsumerdiscretionarysector,includingAmazon.comandNetflix.com(CNBC.com).RetailratesroseattheirfastestrateinfivemonthsinFebruary(CNBC.com).Overallthesectorhasdoneincrediblywellinthelastfewyears,andalsoveryrecently.

However,thelatesnow‐stormsintheMidwestmayhavecontributedtoalowerconsumerconfidenceindexof59.7inMarch,downfrom68inFebruary,whichisnotagoodsignfortheretailindustry(Foxbusiness.com).Thismayhaveespeciallyaffectedclothingretailerswhoarestuckwithspringinventorythatjustisn’tsellingduetocolderthanaveragetemperatures.Howeverifthenationstartstoexperiencewarmweathersoon,thistrendcouldbequicklyturnedaround.

TheRPI(RestaurantPerformanceIndex)droppedtobelow100inFebruarycitingaslowdowninsame‐storesalesandlesstraffic(NationalRestaurantAssociation.com).“Despitethesalesand

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trafficdeclineinFebruary,restaurantoperatorsremaingenerallyoptimisticaboutthebusinessconditionsinthemonthsahead(NRN.com).

Toys‘R’UsjustrecentlydecidednottogothroughwiththeirIPOciting“unfavorablemarketconditionsandchangesinexecutiveleadership”(CNBC.com).Howevertheyhadplummetingnetincomethisquarterandadecreaseinsamestoresales.Thiscouldbeawarningsignforthesectorasawholethatbrick‐and‐mortarstoreswillexperiencecontinuedhardshipsinthefuturetocompetewithtechnologyoptionsandonlineresources(CNBC.com).

Highlightthebiggest(+)andthebiggest(‐)moversfromthesectorholdingsduringthereviewperiod.Aretherenotablereasonswhythestockshadbigmoves(e.g.,earningssurprises,etc)?

Gamestopwasthebiggestwinnerduringthereviewperiodwithgainsof15.71%.Thisisduetoit’sshocktothemarketwithstrongfourthquarterresults.Theirnetprofitsgrew49%onayear‐to‐yearbasisandseveralanalystsrespondedtothisbygivingupgradestoGamestop(SchaeffersResearch.com).

Nikealsohadgrowthof7.57%duringthereviewperiodandcameinasthesecondlargestgainerduringtheperiod.GoldmanSachsresumedcoverageofNikeandassignedthema‘buy’ratingandsaidtheyexpecttoseethestockpriceincreasebyabout20%to$70.00,andupto20%EPSgrowthin2014(Dividend.com).ThestockpriceincreasealsocomesontheheelsoftheirstrongquarterperformanceannouncedinMarch.

JCPennywasdown9.09%.OverthereviewperiodBMOCapitaldowngradedthestocktounder‐performandslasheditspricefrom$18to$12(Fool.com).Thisisamidstextremelyhardtimesfortheretailer,whocan’tseemtocompetewithhigherqualitybrandlikeNordstromorSaks,norcantheycompetewithWalMartandTargetwhoalsoselldiscountedclothingandaccesories.JCPtraditionallyhadtodiscountmerchandisetomoveitoutthedoor,butinthepastyearhasadoptedano‐discountmodel.HowevertheCEORonJohnsonwhowashiredfromAppleinordertoturnthebusinessaroundreceivednobonusesorstockoptionsthisyearduetothepoorperformanceofthecompany(Rueters.com).

PVHwasdown7.05%.PVHCorpownsavarietyofapparelandaccessoriesbrandssuchasCalvinKlein,TommyHilfiger,KennethCole,SeanJohn,andMichaelKors.TheyannouncedonThursdayMarch28ththatanacquisitionwillrequiremoreinvestmentthanoriginallythought,andwillhurtearningsfor2013(AssociatedPress.com).TheacquisitionwasforWarnacoGroupfor$2.9billion,howevertheyannouncedtheywillneedtomoremoneyintotheinvestmenttosolidifytheCalvinKleinDenimandUnderwearbusinesses.Althoughtheirfourthquartermorethandoubledtheirnetincomeandtheybeatestimates,theannouncementthattheearningsfor2013coulddecreasebyasmuchas$0.25drovethestockpricedown.

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Highlightthelargesttwoholdingsfromthesectorandnoteanyheadlinenewsonthecompanies

Comcast,whichconsistsof6.83%ofthesector,hadasuccessfulweekendattheboxoffice.G.IJoe:Retaliationopenedatnumber1attheboxofficeovertheweekend,bringingin40.5milliondollarsinticketsales.Howevertheystillfell1%onMonday,whenthemarketseemedtorespondabittotherecordhighonThursdayatclosing(Yahoo.finance.com).ThisdropismostlikelyduetoanappealscourtrulinginfavorofAereo,astart‐upthattakesbroadcastT.Vinstantlytointernetdevices.TheU.SAppealscourtruledthatthecompanycouldcontinuesellingit’sservicesuntillitigationbetweenthestart‐upandlargemedianetworkswasresolved(Investors.com).

HomeDepotmakesup6.42%offthesector.Theyjustrecentlysettledan$8millionlawsuitwithCalifornia’sSouthCoastAirQualityManagementDistrict,inwhichtheyadmittedtheysoldcoatingstheyknewcontainedexcessivelevelsofsmogcreatingchemicals(Fools.com).HomeDepothita13‐yearhighearlyinMarchof$71.45.Theyhavegained39%growthinthelast12months,dueinparttoresponsefromHurricaneSandyaswellastheboominthehousingmarket.InFebruarytheyalsoapprovedanew$17billionstockrepurchaseprogramthatwillbeineffectthroughtheendoffiscalyear2015(SeekingAlpha.com).

AlthoughduringmyreviewperiodHomeDepotwasthesecondlargestholderinthesector,on4/5/2013ForbesannouncedthatWaltDisneywasnowthe28thlargestcompanybasedonmarketcapitalization,surpassingHomeDepot.Thatwouldmakethemforthenextsectorreport,thesecondlargestholdingintheXLYbasedonmarketcap.

Commentonshort‐termoutlookofthesector(includingnoteworthyupcomingevents)Theshort–termoutlookforthesectorwillbelargelydependantonearnings,asthefirstquarterof2013endedonMarch31stformostcompanies.TheconsumerconfidenceindexwasdowninMarch,andsomereportsindicatethatrestaurantsandretailerslackedtrafficandmayhavelostsalesthislastquarter.ThesectorasawholehasoutperformedtheS&P500thisyearsofar,andthatisanaccomplishmentwiththerecentupswinginthemarket,andrecord‐breakinghighs.Whatisworrisomeiswhetherthemarket,andthemorecyclicalsectorssuchasdiscretionarywillbeabletomaintainsuchgrowth.Morningstarsaystheoutlookforconsumerdiscretionaryis“cautiouslyoptimistic”(MorningStar.com).Intheshort‐runtheincreasedpayrolltaxesandausteritymeasurescoulddamperconsumerspending.ConcernsoverEuropecouldaddtoslowinggrowthforequity.Howevermostmanagementteamsintheconsumerdiscretionarysectorstillexpectgrowthfor2013.Ibelievethequarterlyearningsreportswillbegoodbutnotgreatforthesector,andtheywillexperiencegrowth,butnotatsuchafastpacedastheyhaveseensofarin2013.

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Section(B) SectorHoldingUpdates

Company#1:WaltDisneyCorporation(DIS)

DateRecommended:03/08/2013

DateRe‐evaluated:04/08/2013

CompanyUpdate

Brieflyupdatewhathappenedtothecompanythelasttwoweeks(upthroughyourre‐evaluationdate).Thisshouldincludenoteworthyheadlinenewsonthestock(e.g.,earningsannouncement,management’scommentsoncompanyoutlookand/orstrategicchanges,changesinanalystrecommendationsorestimaterevisions,newproductlaunch,managementturnover,legalorregulatoryissues,merger/acquisitionannouncement,restructureannouncement,newsfrommajorcompetitors,etc.)LikeComcast,DisneytookasmallblowintherulingthatAereocouldcontinuetosellit’sservicesintheUnitedStatesuntilfurtherlitigationhappens.Disney,likeNewscorpandComcast,arguesthatAereoisunlawfully“capturingandredistributingtheirsignalsandcopyrightsmaterials”(Investors.com).ThisrulingisaminorsetbackforDisney,butcouldhavelargerimplicationsdowntheroad.IftheongoinglitigationrulesinfavorofAereo,itcouldthreatentheirabilitytocontrolsubscriptionfeesandadvertisingrevenue,whichisamajorsourceofrevenueforDisney.DisneyannouncedonTuesdaytheywillbereleasing“FindingDory”inNovember2015,asasequeltotheOscarwinningandcommercialsuccessofFindingNemoin2003.ThesequelwillstarEllenDeGeneres,whowillbereprisingherroleastheforgetfulfish,Dory.TheoriginalFindingNemobroughtin$922millioninticketsalesworldwide(Reuters.com).DisneyalsoannouncedonThursday4/04/2013thattheywillbeginlayoffsinthemarketingandhomeentertainmentdivisionsaspartofcorporaterestructuring.Thereisnoindicationofhowmanylayoffsitwillbe,Disneyrespondedtothisnewswitha.2%gaininthemarketon4/05/2013(LATimes.com).However,onearticleclaimsthattheselayoffsarenotsignsofweaknessesinthecompany,ratherthatwithsomanyacquisitionstherearenumerouspositionsthatareredundant,andthatthisismoreofaprofitmarginsfocusedlayoffthanDisneyneedingtocutexpenses,withsomanyjobsbecomingunnecessarywiththeimprovementoftechnology(WallStreetCheatStreet).

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RelativePerformance

Reviewrelativeperformanceofeachsectorholding,overthetwo‐weekreviewperiod,bothrelativetotheSP500andtotherespectiveSPDRsectorETF.Relateyourcommentsonrelativeperformancetotheupdatesdiscussedabove

OverthetwoweekperiodDisneyhasunderperformedthesectorandtheS&P500.Ithinkthiscanbemainlycontributedtoithavingrecentlyachieveda52‐weekhighalittleearlierthanthemarketreallypickedupspeedandtheS&Pachievedandbroketherecordfortheit’salltimehighonThursdayMarch28th.Disneydidunderperformthesectorandthemarket,andthatisnotaverygoodsign,howeveritdidachieveapositivereturnduringthereviewperiodandwasoutperformedbythesecotrbylessthan1%.

PriceCharts

Insertapricechartofthestockforthemostrecentthreemonths.Youshouldincludeonthesamechart(1)theSPDRsectorETF,(2)andtheSP500pricesforthesameperiod

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Insertapricechartofthestockforthemostrecentoneyear.Youshouldincludeonthesamechart(1)theSPDRsectorETF,(2)andtheSP500pricesforthesameperiod

BothstockchartsshowDisneyoutperformingthesectorandthemarket.HoweverthisisdifferentfromthetwoweekstockchartwhereDisneyisoutperformedbyboththesectorandthemarket.

ValuationsAnalysis

OriginalAnalysis

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Copy/pasteP/E(TTM),P/S(TTM),P/B(MRQ),P/CF(TTM)ofthestock,theindustry,andthesectorfrom“ratioanalysis”sectionoftheoriginalstockrecommendationreport(fromCIFwebsite,“reports”tab)

RatioAnalysisCompanyIndustrySector P/E(TTM) 17.6220.61 14.25 P/S(TTM)2.38.131.34 P/B(MRQ)2.391.051.44 P/CF(TTM)12.1315.328.38

Re‐evaluationAnalysis

Copy/pastetherequestedvaluationmultiplesfromhttp://www.reuters.com/,“Financials”tab

Company Industry Sector

P/ERatio(TTM) 18.34 21.47 22.27

PricetoSales(TTM) 2.39 8.41 1.28

PricetoBook(MRQ) 2.49 1.20 1.46

PricetoCashFlow(TTM) 12.63 14.80 8.26

BrieflydiscussthechangesAllfourofDisney’sratioshaveactuallyincreasedslightlysincetheoriginalvaluation.IbelievethisisbecauseDisney’sstockpriceshaveincreasedsincethevaluationdate,thusdrivingtheratiosup.HoweverinallbutP/BDisneystilldoesappeartobecheapwhencomparedottheindustryandsectorasawhole.HistoricalSurprises

OriginalAnalysis

Copy/paste“HistoricalSurprises”Tablefromtheoriginalstockrecommendationreport(fromCIFwebsite,“reports”tab)

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EstimatesvsActualEstimateActualDifferenceSurprise% SALES(inmillions)

Re‐evaluationAnalysis

Copy/Pastethe“HistoricalSurprises”Tablefromhttp://www.reuters.com/,“Analysts”tab(includebothrevenueandearnings;makenotethatrevenuesmightbein“millions”)HistoricalSurprisesSalesandProfitFiguresinUSDollar(USD)EarningsandDividendFiguresinUSDollar(USD)

EstimatesvsActual Estimate Actual Difference Surprise%

SALES(inmillions)

QuarterEndingDec‐12 11,210.10 11,341.00 130.91 1.17

QuarterEndingSep‐12 10,921.50 10,782.00 139.52 1.28

QuarterEndingJun‐12 11,298.20 11,088.00 210.18 1.86

QuarterEndingMar‐12 9,563.77 9,629.00 65.23 0.68

QuarterEndingDec‐11 11,181.20 10,779.00 402.20 3.60

Earnings(pershare)

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QuarterEndingDec‐12 0.76 0.79 0.03 3.82

QuarterEndingSep‐12 0.68 0.68 0.00 0.09

QuarterEndingJun‐12 0.92 1.01 0.09 9.34

QuarterEndingMar‐12 0.55 0.58 0.03 4.96

QuarterEndingDec‐11 0.71 0.80 0.09 11.95

BrieflydiscussthechangesTherewerenochangesbetweentheoriginalvaluationdateandthecurrentstatus.ConsensusEstimates

OriginalAnalysis

Copy/paste“ConsensusEstimatesAnalysis”Tablefromtheoriginalstockrecommendationreport(fromCIFwebsite,“reports”tab)

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Re‐EvaluationAnalysis

Copy/pastethe“ConsensusEstimatesAnalysis”Tablefromhttp://www.reuters.com/,“Analysts”tab(includebothrevenueandearnings)ConsensusEstimatesAnalysisSalesandProfitFiguresinUSDollar(USD)EarningsandDividendFiguresinUSDollar(USD)

#ofEstimates Mean High Low1YearAgo

SALES(inmillions)

QuarterEndingJun‐13 26 11,769.10 12,416.20 11,399.00 11,596.90

QuarterEndingSep‐13 26 11,653.60 12,143.30 11,373.00 11,586.40

YearEndingSep‐13 29 45,183.40 46,520.10 44,003.00 44,844.90

YearEndingSep‐14 29 47,966.80 49,689.00 46,825.00 47,347.20

Earnings(pershare)

QuarterEndingJun‐13 28 1.07 1.14 1.00 1.04

QuarterEndingSep‐13 28 0.83 0.94 0.75 0.80

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YearEndingSep‐13 30 3.45 3.66 3.37 3.40

YearEndingSep‐14 31 3.88 4.12 3.70 3.79

LTGrowthRate(%) 7 12.44 16.10 10.00 13.20

BrieflydiscussthechangesTherewasonemoreanalystwhoestimatedthesales,andthisincreasedthemeanestimatesforThequarterendingJun‐13,QuarterEndingSep‐13andtheyearendingSeptember‐14,butitdecreasedthemeanslightlyfortheyearendingSep13.Thisisamostlybullishindicatorthattheestimateshavemostlyincreased,especiallyfortheupcomingquarter.Theestimatesforearningsbarelychanged,buttheLTGrowthRatemeandidincrease.EstimateRevisionAnalysis

OriginalAnalysis(MM/DD/YYYY)

Copy/paste“EstimatesRevisionSummary”Tablefromtheoriginalstockrecommendationreport(fromCIFwebsite,“reports”tab)

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Re‐EvaluationAnalysis

Copy/pastethe“EstimatesRevisionsSummary”Tablefromhttp://www.reuters.com/,“Analysts”tab(includebothrevenueandearnings)EstimatesRevisionsSummary

LastWeek Last4Weeks

NumberOfRevisions: Up Down Up Down

Revenue

QuarterEndingJun‐13 0 1 1 2

QuarterEndingSep‐13 0 1 1 2

YearEndingSep‐13 0 0 2 0

YearEndingSep‐14 0 0 2 0

Earnings

QuarterEndingJun‐13 0 0 2 0

14

QuarterEndingSep‐13 0 0 1 1

YearEndingSep‐13 0 0 2 0

YearEndingSep‐14 0 0 1 0

Brieflydiscussthechanges

Originallythereweremuchmorerevisionsingeneralinthelastmonth,Iwouldcontributesomeofthistobeingclosertotheearningsdate,solessrevisionsarebeinginmade.Howeverthethemethatthereweremoreuprevisionsthandownrevisionsstayedconstantbetweentheoriginalvaluationdateandthecurrentnumbers.,andalsothattherewerenorevisionsduringthelastweek.Analysts’Recommendations

OriginalAnalysis

Copy/paste“AnalystRecommendationsandRevisions”Tablefromtheoriginalstockrecommendationreport(fromCIFwebsite,“reports”tab)

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Re‐EvaluationAnalysis

Copy/pastethe“AnalystRecommendationsandRevisions”Tablefromhttp://www.reuters.com/,“Analysts”tab(includebothrevenueandearnings)AnalystRecommendationsandRevisions

1‐5LinearScale Current1MonthAgo

2MonthAgo

3MonthAgo

(1)BUY 8 8 8 8

(2)OUTPERFORM 10 10 10 10

(3)HOLD 11 11 11 11

(4)UNDERPERFORM 0 0 0 1

(5)SELL 0 0 0 0

NoOpinion 0 0 0 0

MeanRating 2.10 2.10 2.10 2.17

BrieflydiscussthechangesTherearenochangesinthecurrentanalystrecommendations,thereisstillameanratingof2.1,whichindicatesanoutperformrating.

Section(C) SectorRecommendations

YouwillmakerecommendationsonwhetherCIFshouldcontinuetoownitssectorholdings

Provideyourviewsonthesector.Areyoubullish,bearishorneutralonthesector,andwhy?

DiscusswhetheryourecommendCIFto(1)stayputwithitscurrentsectorholdings,or(2)selloutofthesector,andwhy?

IbelievethatweshouldcontinuetowonthesectorholdingsfortheXLY.NotonlybecauseweneedtodosoinordertostayconstantwiththeS&P,whichisourbenchmarkforthisclass,butalsobecausethesectorhasbeendoingwellandoutperformingthemarketsincethestartof

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2013,andIbelievewithearningsjustaroundthecorner,wewillseegoodsalesandearningsfromtheconsumerdiscretionarysectorcompaniesandtheywillcontinueto

Section(D) SectorHoldingRecommendations

Basedonyouranalysis,aretherestocksCIFcurrentlyownsfromyoursectoryouwouldrecommendto:

1. Sellandwhy?2. Adjust“targetprice”andwhy?Ifyourecommendanadjustment,youmustsuggestanew

“targetprice”3. Adjust“stop‐lossprice”andwhy?Ifyourecommendanadjustment,youmustsuggesta

new“stop‐lossprice”

Provideyourrecommendationsinthefollowingtable

Recommendation(ExplainWhy)

CompanyName

TickerSymbol

Date

Recommended

DateRe‐evaluated

Sell

Adjust“TargetPrice”

Adjust“Stop‐lossPrice”

WaltDisneyCorporation

DIS 3/08/2013 4/08/2013 No No No

IrecommendthatwedonotsellDisney,anddonotchangethetargetpriceorthestop‐lossprice.Althoughitunderperformedthesectorandthemarketduringthetwo‐weekreviewperioditclosedonFridayApril5thupto$57.70,whichishigherthanthe$57.37wepaidforI,tdespitethemarketbeingdown.43%.IthinkwiththeopeningofIronMan3onMay3rdandtheirfirstquarterearningsbeingreleasedonMay6ththatweshouldcontinuetoholdthisstockandthereisnopressingneedtochangethetargetpriceorthestop‐lossprice.Disney’sOz:TheGreatandPowerfulhasalreadypulledin$417millioninticketprices,andsomeanalystspredictthatIronMan3,hotoffthesuccessofTonyStark’scharacterin“TheAvengers”,couldtop$1billioninsales.

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WorksCited

http://www.reuters.com/article/2013/04/02/entertainment‐us‐findingdory‐idUSBRE9310SS20130402http://www.cnbc.com/id/100607287http://finance.yahoo.com/news/final‐glance‐media‐companies‐220442669.htmlhttp://news.investors.com/technology/040113‐649914‐aereo‐broadcaster‐spat‐may‐reach‐supreme‐court.htm?ven=yahoocp,yahoohttp://www.fool.com/investing/general/2013/04/01/home‐depot‐dreams‐california‐lawsuits‐go‐away.aspxhttp://seekingalpha.com/article/1312851‐is‐the‐housing‐market‐recovery‐still‐a‐boon‐for‐these‐5‐dividend‐stocks?source=yahoohttp://www.fool.com/investing/general/2013/03/25/is‐j‐c‐penney‐a‐lost‐cause.aspxhttp://finance.yahoo.com/news/penney‐ceo‐gets‐no‐bonus‐223121175.htmlhttp://www.dividend.com/news/2013/goldman‐sachs‐resumes‐coverage‐of‐nike‐at‐buy‐nke/http://www.schaeffersresearch.com/marketcenters/optionscenter/content/gamestop+corp+gme+swarmed+by+option+traders+post‐earnings/default.aspx?ID=115427http://www.forbes.com/sites/dividendchannel/2013/04/05/walt‐disney‐now‐28‐largest‐company‐surpassing‐home‐depot/http://www.latimes.com/entertainment/envelope/cotown/la‐et‐ct‐walt‐disney‐co‐layoffs‐expected‐20130405,0,5498621.storyhttp://wallstcheatsheet.com/stocks/are‐cuts‐by‐disney‐a‐positive‐development.html/?ref=YF