FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Contents
1
Equity Research - Contents
Global Equity research
Economic Outlook
 1st half 2000 - a brief review
 2000 Outlook - 2nd half
 USA
 Europe
 Japan
 The Long Term View : A changed
economic landscape
Investment Outlook
 Our Investment Process
 Macroeconomic Outlook
 Investment Environment
 Investor Behavior
 Valuation
 Investment Themes
 Investment Strategy
 Sector Fundamentals
 Sector Allocation
 Core List
Advisor to ZT- Zurich Trust
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Economic Outlook
1st half 2000 a brief review
After an exceptional 1999, driven by technology stocks, 2000 opened with a boom, as
technology again took the lead and roared off to a 25% gain by early march. As we
expected however (see January 2000 outlook) the party was not to last. Having gotten
slightly ahead of itself, the market reacted violently to fears of inflation, Fed tightening and
over-valuation.
These fears, and subsequent monetary tightening sparked a technology sector rout which
lasted into June and sent investors reeling. The NASDAQ fell nearly 40% from its peak.
The hardest hit were the internet pure play stocks (with many falling to 10% of their precrash values) whose growth and future promise provided little in the way of support to a
market tired of the profitless business model. Blue chip stocks held up the best, as their
cash flows and proven business models provided a baseline for investors to cling to in
rough waters. As an example, pharmaceutical companies, which after 18 dismal months
finally rebounded and outperformed significantly in the second quarter. After falling
precipitously during the first two months, deep cyclical and chemical stocks rose as much
as 20% in the March/April period (although they remain negative for the year).
Global Equity research
In May technology stocks bottomed and started a slow recovery, which is now being tested,
and the old economy stocks for the most part slipped back into their under-perform mode.
This pattern has become commonplace recently, as investors rotate into the “old economy”
(both cyclical and pharmaceutical stocks) during each tech correction.
2
As a result of these wild swings the first half of 2000 was a difficult one for most money
managers. Fear of inflation, interest rate rises, outlandish valuations and growing anxiety
over a slowdown all contributed to the challenge. As of July, technology stocks are still
lagging the broader S&P while energy, health care, financial and consumer non-durable
sectors have outperformed.
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
2000 Outlook - 2nd half
Economic Growth - lowering expectations...
While the growth in the US economy in 1999 was beyond all
expectations, it was not based upon normal economic conditions.
This time around, the cycle was impacted by the force of a
technological revolution combined with the Y2K phenomenon.
Residential Fixed
Investment
% Change annual
In what was the ninth year of this unprecedented cycle of growth,
the consumer was conspicuously absent. As non residential
investments remained strong throughout the year, spiking in early
2000, residential investments faltered. Even retail spending, while
at historically high levels appeared to peak in early 1999.
The growth in the economy in the final quarters of 1999 and early
2000 was fueled by massive spending on the part of corporate
America in Information Technology and less so by the American
consumer. Part of this spending (the Y2K expense) has now
disappeared, and that will likely have an impact on growth going
forward. Moreover, real earnings growth peaked approximately 24
months ago and as rates have risen the real estate market has clearly
fallen off (see graphs).
Non-Res. Fixed
Investment
% Change annual
US GDP growth is based upon the sum of consumer, government
and corporate spending and net exports, with the consumer making
up approximately 60% of the total. Going forward we believe that
the consumer sector will remain weak - especially in high ticket
consumer durable area - and will certainly not offset any slack in
corporate spending. In short, a subdued consumer combined with a
moderate slowdown in corporate spending will contribute to a slow
down in US growth rates to well below 1999 levels.
Real Earning
4%
12 month % Change
3%
2%
1%
0%
-1%
Global Equity research
-2%
3
1050
We believe that investors will take some time to adjust to the new
levels of growth and in some sectors the transition could be a
painful one. This transition should bring with it increased volatility
as investors are faced with increasing uncertainty.
New House Starts
950
850
750
650
550
450
350
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
USA
The Economy
2000 Stock Index
Performance*
DOW JONES
-8.48%
S&P 500
-2.61%
NASDAQ
-7.43%
*in local currency, to July 31, 2000
NASDAQ vs. S &P 500 2000
 Sharp decline in money supply should limit GDP growth
over the coming months. We expect a moderate slowdown
for the economy, but believe that growth will remain
above the long term average.
 The rise in interest rates has put considerable pressure on
second tier company profitability, as evidenced by the
widening credit spread.
 Rising interest rates has also weakened the housing market
and caused consumer demand to moderate slightly.
 Business investment remains high, while investment in IT
continues to top the list (see chart pg.3).
 Inflation risk reduced, as leading indicators appear to have
peaked, along with potential peak (likely in the second half
of 2000) in oil and commodity prices.
The Market
14%
Money Supply (US)
12%
10%
8%
6%
4%
2%
0%
-2%
Global Equity research
-4%
4
12%
8%
4%
0%
Real interest rates (US)
 Earnings outlook remains good, but comparisons become
unfavorable as growth in earnings begins to slow.
 Valuations have become more reasonable across the board,
yet earnings revisions have peaked so we look for more
normal market returns going forward.
 Inverted yield curve and corporate spread indicate lowered
inflation/growth expectations.
 Rate hikes probably behind us bode well for the market in
the second half.
 Sector rotation remains an issue, however we maintain our
view that high quality growth companies in select sectors
will continue to out-perform.
 Historically presidential election years have been positive
ones for the markets and we expect that their impact this
year could offset earnings/growth worries until Q1 2001.
-4%
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Europe
 The Economy
2000 Stock Index
Performance*
CAC 40
9.80%
SMI
10.01%
DAX
3.34%
FTSE
-8.1%
*in Euro to July 31, 2000
CAC, SMI, DAX 2000
CAC, SMI, DAX 2000
280
260
Global Equity research
240
5
CRB Index
 Moderate slowdown in US economy, combined
with continued rise in Euroland interest rates,
should work to slow progression in EU growth.
 Energy price rises and weak Euro place pressure
on consumer prices, while wages and input prices
put pressure on corporate profitability.
 Business investment remains high, while
investment in IT continues to top the list.
 Unemployment continues its downward pace,
giving end demand in Europe some support.
 The Market
 As rates rise and margins begin to show strain,
earnings outlook begins to deteriorate in early
2001.
 Valuations remain high in certain markets and
correction appears more likely as the year draws to
a close.
 Continued rate hikes keep short term paper more
attractive than bonds. Rates will likely peak out by
early 2001, at which time longer term bonds
should be favoured.
220
200
180
160
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Japan
 The Economy
2000 Stock Index
Performance*
Nikkei
-17.24%
Topix
-15.39%
*in Yen to July 31
 Corporate earnings continue to rise, as economy
maintains slow climb out of recession.
 Corporate Investment remains the main driver of
the economic recovery.
 Key concern is the state of Japanese government
budget and its ability to pay for programs initiated
to spur demand.
 Unemployment has bottomed, setting the stage for a
consumer recovery beginning near the end of 2000.
 The end of the Zero interest rate policy signals
confidence in the Japanese economic recovery.
 Consumer spending continues to lag investment
spending through out the year.
Nikkei vs. Topix 2000
Global Equity research
 The Market
6
 Corporate restructuring no longer the watchword,
earnings, growth and management become key in
stock selection
 With interest rates on the rise, some Japanese
investors (traditionally very conservative) may
choose to remain in interest bearing accounts thus
giving less impetus to domestic equity investment.
 Heavy IPO schedule and low volumes (lack of
domestic investors) may keep lid on the Nikkei
until the end of the year.
 Market valuation has entered more reasonable
levels, as earnings begin to rise.
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
The Long Term View
A changed economic landscape
The muted business cycle - short and shallow…
US Inventories to Sales Ratio
1991 to 2000
Although many factors have contributed to the recessionary cycle
historically, none have had more impact than inventory adjustments.
In post war years, all recessions have been accompanied by an
inventory correction. Inventories are built for one of two reasons voluntarily in periods of high inflation and involuntarily when
inefficiencies in the production chain or poor information regarding
final demand leave unsold goods at all levels of the chain.
The advent of drastically improved communications and inventory
management technology has led to a significant reduction in inventory
levels in the US economy. This decrease has been accompanied by
general stability in prices, but has also allowed the supply chain to
carry less slack, become more dynamic and allow for better product
management.
US Industrial Production
9%
YoY change %
7%
5%
3%
1%
-1%
We believe that this improvement in business methods has created an
environment of muted business cycles. That is to say that fluctuation
in growth will be far smaller in the years to come and recessions will
be of shorter duration (the chart on the left illustrates this trend as
production corrections have certainly been shorter and less violent than
in times past).
-3%
-5%
US Productivity
In the future, advances in productivity combined with new efficiencies
in inventory management, should work to reduce the volatility in GDP
growth. While we expect the future level of growth to be lower than in
1999, we also expect it to be more predictable which should be positive
for the overall markets.
per hours worked
U.S. Business Cycle Expansions and Contractions
Global Equity research
Post WW-II Period
7
Trough
Peak
Oct-45
Nov-48
Oct-49
Jul-53
May-54
Aug-57
Apr-58
Apr-60
Feb-61
Dec-69
Nov-70
Nov-73
Mar-75
Jan-80
Jul-80
Jul-81
Nov-82
Jul-90
Mar-91
Avg. ‘45-’00 (9 cycles)
Contraction
Expansion
8
11
10
8
10
11
16
6
16
8
11
37
45
39
24
106
36
58
12
92
124*
50
* Current Cycle to July 31, 2000
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Central Banking - all bark and no bite?…
But if the cycle becomes shorter, with say 6 to 9 month recessions
and longer expansionary periods, what implication does this have for
central banks? Given that any round of tightening generally has no
effect for 9 to 12 months and that corporate spreads, established by
the market tend to lead fed rate hikes, does the fed serve a true
purpose.
We believe that central bank impact has been greatly diminished in
the overall trend of the economy. The key function today is not
controlling rates in the event of a predicted recession, but rather
managing money supply to prevent liquidity driven crises.
Technology % of Non
Residential
Fixed Investment
49%
A rising tide no more…
47%
45%
The impact of the muted business cycle and slower growth going
forward will make it necessary to focus on the stocks whose long
term growth is more predictable.
43%
41%
39%
37%
35%
98
Q1 99
Q2
Q3
Q4
Q1 00
Q2
While we are aware of the sell on the news mentality and the disdain
most investors have for 10% growth companies (as opposed to rising
technology stars posting 50%+), some of these traditional stocks will
once again become attractive.
Personal Income
10%
In the past, the rising tide lifted all boats - yachts and skiffs alike.
Going forward, investors will be forced to select companies
positioned in the right current if they are to enjoy the returns to
which they have become accustomed.
1991 to 2000
8%
6%
4%
2%
0%
Global Equity research
Jul-91
8
Jul-93
Jul-95
Jul-97
Jul-99
What impact might this have on some of the sectors we follow? The
muted business cycle certainly will go a long way to help the leaders
in global industrial sectors as they will enjoy more predictable and
stable growth. In addition the technology build out, while no longer
supported by the Y2K phenomenon, continues to be strong. In an
effort to preserve those productivity gains most companies remain
committed to technology investment, as witnessed by the importance
of technology to fixed investment spending (see chart on this page).
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Investment Outlook:
Our Investment Process
Once we have established our global macro outlook we need to translate this into a model of the
investment environment and simulate the behavior of the financial markets as time goes by and
as information flows, taking into account:
•The impact of information on investor psychology
•How will the investor react to a given scenario?
•Will he look past the economic downturn (the valley) and invest in the future?
•The depth and length of the economic cycle which differ between countries markets
and industries.
•What impact does our outlook have on perceived valuations?
With this model in mind we can mold a set of investment themes, which will guide our sector
choices. These decisions take into account the above as well as fundamental business impact,
market trends and sector growth. Finally we apply our stock selection process to identify the
best companies in those sectors.
Macro - Economic Outlook
9
GROWTH
Global Equity research
Investment Environment
Investment Themes
Investment Strategy
Sector Fundamentals
Sector Allocation
Stock Selection
Core Holdings
Copyright Forum Finance Group S.A.
•Our Long term Scenario
•Global
•Regional
•Linking Macro to stock markets
•Investor behavior
•Cycle Depth/Length
•Over the valley
•Valuation
•Linking market outlook to Trends
•Regional Growth
•Sector outlooks
•Valuation
•Linking Trends to Sectors
•Investor Confidence
•Valuation
•Past the Valley - cyclical impact
•Linking Sectors to Companies
•Management
•Leadership
•Quality
•Growth
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Macro Economic Outlook
Our long term scenario





The Fed succeeds in prompting a soft landing, and the economy rebounds in
late 2001/early 2002 as central banks begin to loosen monetary policy.
European economies lag US trends by one to two quarters and we expect the
same for the coming slowdown and as such see a slowdown in Europe
developing in the mid 2001, likely followed by an upturn into late 2002.
The Japanese economy continues its slow climb out of recession, peaking in
mid 2002 along with the peak in the US economic cycle.
US growth will bottom at 2.5-3% and peak in 2002 at a much lower rate than
1999.
Secular global growth will trend down to historic levels.
The Economic Cycle
USA
Europe
9%
Japan
6%
Global Equity research
3%
1
0%
Dec 99
June 00
Dec 01
Copyright Forum Finance Group S.A.
June 02
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Investment Environment
Investor Behavior
Under certain circumstances investors will be willing to look over the
valley and disregard a forthcoming slowdown.
The degree to which they will anticipate and discount the future depends
upon a number of factors
 Anticipated length of the cycle
 Anticipated depth of the cycle
 Valuation (investors will place a floor on prices)
 Investor confidence in consensus numbers.
The market tends to react ahead of the economic indicators. The lag
between business fundamentals improvement and market movement can
be anywhere from 3 to 9 months
As shown in the table (pg.8) outlining the business cycle peaks and
troughs, the average deceleration period is 11 months (having been as
short at 6mths - 1980-81)
We believe that this slowdown will be a short one, lasting between six
and 9 months and will be one of slowing growth rather than outright
contraction.
Investors will be attracted to valuations in various sectors and supported
by the relative moderation of this cycle will remain positive on the
investment outlook as a whole.
Relative fundamental performance and a classic business cycle
Consumer
Discretionary
Consumer
Durables
Capital
Goods
Energy
Global Equity research
Chemicals
1
Financials
Consumer
Staples
Pharma
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Valuation
Regional Valuation
EU earnings growth will slow into 2001…
Regional valuations
PE
‘01
Europe
France
Germany
UK
Switz.
Sweden
Italy
Holland
EPS
Growth
‘00 ‘01
Rising interest rates, a cyclical slowing in the US work to decrease
earnings growth in Europe in 2001. Moreover, the acceleration of
growth in Europe in 1999 and 2000 brought an acceleration in
earnings growth to making future profit growth comparisons more
difficult for 2001.
Making European stocks expensive...
22x 21% 13%
30
18
22
19
21
18
16
25
25
12
15
18
27
19
14
19
10
11
13
13
12
France, Italy and the Scandinavian markets all appear to be the most
at risk of correction into 2001, as they will experience the most
pronounced growth reductions and remain relatively expensive. The
more defensive German, Swiss and Benelux markets hold out the
most potential in the expected market slowdown
And the US follows its lead…
Japan
55
13
16
USA
25
17
12
Est. from Morgan Stanley Dean Witter research
After seven rate hikes the specter of slowing US growth is now upon
us and while 2000 has thus far been a banner year for earnings
growth, it has made for some tough comparisons. We expect that
earnings revisions going forward will be to the downside, and that
after the euphoria of the presidential elections is behind us, a
premium will be paid for stable growth.
Global Equity research
But Valuation has leveled off...
1
But outside of the technology sectors, valuations have come down to
relatively reasonable levels. We believe that the US market is trading
near fair value levels, and that any broad market sell off would be
short lived.
While Japanese consumption appears to have bottomed….
The most recent Tankan survey, as well as various leading indicators
appear to indicate that unemployment has leveled off, and that
consumer confidence is beginning to rise. While most retailers have
not yet felt the effects, we believe that the bottom in the consumer
market (as we outlined in January) is now being reached.
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
And Earnings are set to resume normalized growth
patterns….
Japanese companies after a nine year slump, have realized
significant operating earnings growth in 2000 and we now
expect that normalized earnings growth can be expected.
Growth Revisions
Jan
‘00
%
Integrated Oils
10
Oil Services
33
Basic Materials
33
Technology
31
Telecomm
16
Healthcare
14
Industrials
13
Consumer staples 13
Finance
11
Utilities
10
Consumer Durables 4
Aug Est
‘00 ‘01
% %
10 1
88 90
29 23
35 23
6.9 24
14 16
13 15
10 13
10 12
12 10
10 10
*I/B/E/S Estimates for 1999/2000
Valuation by Sector
Global Equity research
Sector
1
Oil Services
Integrated Oils
Basic Mat.
Technology
Transportation
Telecoms
Healthcare
Capital Goods
Consumer Stpl.
Finance
Utilities
Consumer Cyc.
1999
PE
60
10
19
54
14
28
38
27
30
18
18
17
4yr
Avg
30
15
27
32
16
30
35
26
34
17
17
20
Sector Valuation
Where are the profits?
As is evident from the charts below, both the technology and Oil
services sectors enjoyed the strongest earnings growth revisions
in the market.
We believe that the easy money in these sectors has now been
made, as upward revisioning has probably reached its peak.
Sectors where earnings growth is accelerating include
industrials, healthcare, consumer staples, and financials. With
the exception of the industrial group (which include many
companies with Emerging market exposure), these represent the
more defensive sectors of the market.
In regard to valuations, all of the sectors are trading near to or
above their 4 year moving averages, with the notable exception
of basic materials - whose forward looking earnings outlook has
been steadily deteriorating - and consumer staples, where stock
prices have begun to move up.
We view this as a sign that the market, as previously mentioned,
is fairly valued at these levels, and that stock selection therefore
is of the utmost importance.
*Bloomberg L.P., based upon current
year’s earnings
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Investment Themes
Capital Investment & Restructuring:
Growth &
Technology
At FFG our investment
focus is based on
growth. We search out
those stocks and sectors
that
will
maintain
sufficient growth over
the long term to
outperform the market.
This philosophy has
lead us to focus upon a
number of sectors most
notably of which is
technology.
Global industrial growth encourages capital investment and
favours European and Japanese cyclical companies (ABB,
Holderbank, Kaneka) where economies have not yet peaked.
We think that US industrials (3M, Dupont) will begin to look
attractive in the months to come, as valuations should bottom
and investors look over the valley.
Strong Asian economies, continued EU growth and higher
energy prices support further rise in oil stocks (although we
will look to sell these companies in early 2001).
Continued restructuring and focus of companies on core
business support further gains in business services/outsourcing
companies.
Global Growth:
At this stage of the cycle global growth favours global
companies such as Heineken, McDonalds, Nestle.
Mixed bag of growth places focus on regional differences.
 In the consumer sector - Rotation from staples to
discretionary then to durables as the cycle plays out.
 In the Asian & Latin America markets where growth is
accelerating we focus on luxury goods and global
industrials.
 In Europe consumer and industrials should outperform.
 In the US we avoid consumer discretionary and durables
for now and look to accumulate in early 2001.
Global Equity research
Technology, & Life Sciences Growth:
1
Capital Investment continues to favour IT spending (see
chart pg.5)
Secular build out in communications industry far from over
Internet revolution continue to dominate trends.
Aging population and medical technology advances spur life
sciences growth. The deceleration of S&P earnings provides
support for the pharma group.
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Investment Strategy
Sector Fundamentals
(Recessionary Phase) Slowing US economy into 2001:
The Business Cycle
While the study of the
business cycle aids in the
development
of
an
investment outlook, caution
is required. Rarely does a
cycle repeat itself exactly,
and its impact on broad
sectors is difficult to
pinpoint.
This study
therefore acts as general
guidelines
for
such
analysis.
 Short term rates (US) have peaked and should start going down.
 Fundamental business impact across the board is negative.
 Cyclical- Fixed cost industries suffer most in this period i.e.. Consumer
Durable, Housing, Capital goods. Due to rising cost of capital and the
invariability of their cost base
(Trough) Bottoming out of slowdown in Mid/late 2001:
 As trough is reached, consumers feel more comfortable in their economic
future and begin to make more discretionary purchases. When interest rates
bottom businesses see opportunity to begin expansion anew.
 Fundamental business impact is positive for Consumer discretionary
(retailers) and certain Financials (Lending banks).
Re-acceleration of growth in late 2001:
 As the economy begins to re-accelerate, firms that reduced inventories
during recessions must increase production, resulting in an improved outlook
for both employees and business.
 Consumers, spurred by low interest rates and increased confidence, begin to
consider purchase of larger ticket items.
 Fundamental business impact positive for Consumer durables, industrials and
capital goods
Confirmed growth pattern 2001/2002
 Having reached maximum capacity companies are obliged to increase
capital expenditure to meet new increased demand.
 Increased economic activity begins to have impact on demand for
commodity goods and deep cyclical products.
 Fundamental business impact is positive for chemicals (late stage cyclicals)
and energy.
Relative fundamental performance and a classic business cycle
Global Equity research
Consumer
Staples
1
Capital
Goods
Energy
Consumer
Discretionary
Financials
Consumer
Durables
Pharma
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Sector Allocation
Technology 28%
Why Technology:
•Competitive Pressures
•Capital Investment acceleration
•Solid EPS Growth
Focus on:
•Software
•Internet Infrastructure
•Broadband Communications
•Risks:
•Semiconductors - look for top in mid 2001
•Wireless - could see short term weakness in sector
before 3rd generation build out begins.
•Valuation
Life Sciences 15%
Why Life Sciences:
•Earnings to outperform broader market
•Aging population
•Technology enhanced productivity
•Consolidation potential
•Genome advances creating new product cycle in biotech
Global Equity research
Focus on:
1
•Biotech
•Cash rich Pharma
•Mid sized take out targets
•Accelerating EPS with limited patent Expiry
•Risks:
•Political fallout from a Democratic Presidential victory
•Generic drug competition
•Medicare reform
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Financials 20%
Why Financials:
•End of interest rate hikes in the US
•Sector Consolidation
•Recovery of insurance sector
•Emerging market recovery
•Cost cutting potential
Focus on:
•Asset Management
•Internet Strategy
•Global reach
•Brokers and European take out candidates
•Insurance (Glass Steagal)
•Risks:
•Economic downturn more severe than expected - increasing loan
risk
•Financial market weakness may hurt investment gains
•Lending volumes may peak with economic growth
•Trading income slows with equity markets
•Tech driven M&A activity slows in US in 2001 due to new
regulations.
Consumer 15%
Why Consumer:
•US slowing favors defensive US names
•European growth and confidence still intact
•Positive correlation to rising incomes
•Emerging market recovery
•Historical valuation discount
Global Equity research
Focus on:
1
•Internet strategy
•European consumption
•Luxury
•Global Brands & Global Reach in distribution
•Media & Advertising
•Risks:
•Asian recovery slows
•European slowdown arrive more quickly than expected
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Cyclical/Industrial 22%
Why Cyclicals:
•Investors will look past the short slowdown in US
•Emerging market recovery
•Oil price recovery
•Increased oil E&P activity (benefits services, engineering
& construction firms)
•Capital Investment acceleration
•Solid EPS Growth
Focus on:
•Infrastructure
•Business Services
•Energy - Look to reduce in early 2001
•Basic Materials
•Value Added Chemicals
•Risks:
Global Equity research
•Valley is longer than expected
•Emerging market slowdown
•Oil price weakness
1
Copyright Forum Finance Group S.A.
July/August 2000
FORUM FINANCE GROUP S.A
FFG
Investment Perspectives 2000
Core List
Technology 40%
•Intel
•Cisco Systems
•Sun Microsystems
•EMC
•ST Microelectronics
•Texas Instruments
•Nortel
Cyclical/Industrial 20%
•AOL
•Microsoft
•Oracle
•Nokia
•Alcatel
•Lucent
•Kyocera
•ABB
•General Electric
•Elf Total Fina
•Royal Dutch
•Schlumberger
Life Sciences 15%
Financials 15%
•Roche
•Aventis
•Novartis
•Pfizer
•Pharmacia
•Yamanouchi
•Credit Suisse
•Citigroup
•Zurich Allied
•Nomura
•Kaneka
•3M
•Fanuc
•Adecco
Global Equity research
Consumer 10%
1
•Sony
•Walt Disney
•Nestle
•Carrefour
•LVMH
•Jusco
Copyright Forum Finance Group S.A.
July/August 2000