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Fisher College of Business Student Investment Management Materials Sector Analysis Theo Constantinou Vikram Rao Ryan Rettig

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Fisher College of Business Student Investment Management Overview Sector Size and Composition Business/Economic Analysis Relative Valuation Recommendations Current Materials Sector SIM Holding Questions

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Fisher College of Business Student Investment Management Sector Composition Chemicals Commodity Chemicals Diversified Chemicals Specialty Chemicals Industrial Gasses Metals and Mining Aluminum Gold Silver Steel Other Precious Metals and Materials Containers and Packaging Metal, Plastic, and Glass Containers Paper Packaging Forestry and Paper Products Timber Paper Products Construction Materials

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Fisher College of Business Student Investment Management S&P 500 and SIM Sector Weights (as of 4/30/2009) SectorS&P 500 WeightSIM Weight+/- Consumer Discretionary9.52%7.93%-1.59% Consumer Staples12.04%13.06%1.02% Energy12.51%11.31%-1.20% Financials12.19%8.14%-4.05% Health Care13.83%17.74%3.90% Industrials10.44%9.44%-1.00% Information Technology18.40%19.92%1.52% Materials3.37%3.88%0.51% Telecommunication Services3.71%2.40%-1.32% Utilities3.98%2.50%-1.49% Cash0.00%3.69%

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Fisher College of Business Student Investment Management S&P 500 Weights by Sector (as of 4/30/2009)

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Fisher College of Business Student Investment Management Historical Performance Sectors (as of 4/30/2009) Market Cap (in millions) MTDYTD5 Years+/- vs. S&P 500 YTD S&P 500 7,585,4829.4%-3.4%-4.8% Consumer Discretionary 721,919 18.5%8.3%-6.2% 11.7% Consumer Staples 913,657 3.0%-8.6%4.4%-5.2% Energy 948,939 4.8%-7.8%13.4%-4.4% Financials 924,373 22.2%-13.9%-12.5%-10.5% Health Care 1,049,425 -0.9%-9.3%-0.8%-5.9% Industrials 792,036 17.7%-7.9%-1.6%-4.5% Information Technology 1,395,938 12.0%16.5%-5.8%19.9% Materials 255,334 15.1%11.9%-1.4%14.5% Telecommunication Services 281,800 2.2%-6.4%3.8%-3.0% Utilities 302,059 0.4%-11.5%8.3%-8.1%

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Fisher College of Business Student Investment Management S&P 500 vs. SPBMS Index Over Past 2 Years

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Fisher College of Business Student Investment Management S&P 500 vs. SPBMS Index Over Past 20 Years

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Fisher College of Business Student Investment Management 10 Year Cumulative Total Return

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Fisher College of Business Student Investment Management Top 10 Companies (as of 4/30/2009) CompanyTickerIndustry Market Cap ($Mil) Price as of 4/30/09 BetaP/E 1 Year Return BHP Billiton Ltd.BHP Div. Metals & Mining 133,950$48.141.6319.8-34.97% BHP Billiton PLCBBL Div. Metals & Mining 116,420$41.841.7416.7-36.48% Companhia Vale do Rio Doce RIO Div. Metals & Mining 87,146$16.511.9314.1-51.19% Rio Tinto PLCRTP Div. Metals & Mining 52,305$162.951.9413.3-62.53% Monsanto Co.MON Fertilizers & Agricultural Chemicals 46,333$84.890.9716.7-27.91% BASF S.E.BASFYDiv. Chem.34,857$37.951.4123.8-37.41% ArcelorMittal SAMTSteel32,210$23.582.0122.4-69.05% Anglo American PLCAAUK Div. Metals & Mining 28,357$10.772.167.5-63.29% POSCOPKXSteel26,843$76.971.7621.2-29.32% Potash Corp. Of Saskatchewan Inc. POT Fertilizers & Agricultural Chemicals 25,540$86.491.819.9-51.47% Average:1.73616.54-46.36%

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Fisher College of Business Student Investment Management Largest Market Cap vs. SPBMS (Materials)

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Fisher College of Business Student Investment Management Business Analysis Highly cyclical Growth through acquisition Dow Chemical Acquires Rohm and Haas International exposure Weaker Dollar => High Commodity Prices Commodity prices higher without significantly weak Dollar Exposed to wide array of industries

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Fisher College of Business Student Investment Management Business Analysis 5 Forces Analysis Suppliers - High Oligopolies (Oil companies for Chemical companies & Mining companies for Metals companies) Customers High/Middle High in some industries (Auto Makers) Middling in some industries (Chemical) Rivalry - High Global competition & cheap imports Mature companies fighting for market share Many mergers & acquisitions during economic booms Threat New Entrants Low High entry barrier High capital costs High fixed costs Substitutes - Low

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Fisher College of Business Student Investment Management Materials vs. Commodities/GDP *79 % of movement in the Materials sector explained by the commodity index over past 10 years *63% of movement in the Materials sector is explained by real GDP over past 10 years *77% of movement in the Materials sector is explained by S&P 500 index over past 5 years

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Fisher College of Business Student Investment Management S&P 500 and Real GDP Trends

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Fisher College of Business Student Investment Management Export Trends

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Fisher College of Business Student Investment Management Economic Analysis Life Cycle

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Fisher College of Business Student Investment Management Forward P/E (Absolute) Forward P/E (Relative to S&P500) Forward P/E (Absolute) VALUATION

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Fisher College of Business Student Investment Management VALUATION Trailing P/E (Absolute) Trailing P/E (Relative to S&P500)

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Fisher College of Business Student Investment Management VALUATION P/BV (Absolute) P/BV (Relative to S&P500)

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Fisher College of Business Student Investment Management VALUATION (Industry) P/BV (Aluminum) P/BV (Diversified Chemicals) P/BV (Containers Metal/Glass)

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Fisher College of Business Student Investment Management VALUATION (Industry) Trailing P/E (Aluminum) Trailing P/E (Diversified Chemicals) Trailing P/E (Containers Metal/Glass)

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Fisher College of Business Student Investment Management VALUATION P/CF (Absolute) P/CF (Relative to S&P500)

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Fisher College of Business Student Investment Management Conclusion Cyclical business materials sector will start to outperform more rapidly Increase in exports expected Expected future GDP/ global economic growth Eventual rise in commodity prices Commodity prices high despite dollar value

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Fisher College of Business Student Investment Management Recommendation Remain overweight by 51 bps Forward looking, if the economy recovers, an even more overweight position may be in order. Relative to specific Industries in the Material Sector Current SIM Weight Overweight at 3.88% S&P 500 Weight 3.37%

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Fisher College of Business Student Investment Management Current / Potential SIM Holdings vs. Overall SIM Assuming Initial Investment of $300,000 CompanyDow ChemicalsAlcoaGreifS&P (3/30 5/8) TickerDOWAAGEF- Beta2.352.181.551 Purchase Price$8.26$6.69$33.07$787.53 Current Price$17.50$10.01$49.24$929.23 Shares36,26044,8439,072381 Market Value$580,160$448,878446,705$354,037 % SIM4.00%--- % Gain/(Loss)93%50%49%15% Unrealized Gain/(Loss)$280,000$148,878$146,694$53,988

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Fisher College of Business Student Investment Management Questions?