Saniya Mussinova
Daniel Pierce
Michael Royer
Zane Stephens
Nicholas Stuart
Top 10 Holdings:
1 General Electric-10.95%
2 United Technologies-5.84%
3 Caterpillar-5.36%
4 United Parcel Services - 5.13%
5 3M-4.83%
6 Boeing-4.18%
7 Union Pacific Corp-3.77%
8 Honeywell International-3.45%
9 Emerson Electric-3.31%
10 Deere & Co-3.12%
1 Machinery-24.99%
2 Aerospace & Defense-24.51%
3 Industrial Conglomerates-17.94%
4 Airfreight & Logistics-9.03%
5 Road & Rail-8.49%
Government regulation, especially in rise of
green movement
 Public outcry for cleaner air, water, energy
 Losing market share overseas to Asia & Europe
 U.S. has 2nd highest corporate tax right behind
Japan
 Rising costs of taxes, healthcare, pensions,
utilities, commodities and litigation
 Tightening monetary policy in United States
(largest buyer) and rising federal debt
 Complex new technologies and processes are
being implemented, which require a highly
educated workforce…U.S. is lagging behind








Compared to other sectors, productivity growth is higher
Highly correlated to GDP,ECRI leading index up, hopefully
signaling increase in real GDP
Rising capacity utilization and industrial production
Prices held steady during recession, higher production and
utilization should lead to a rise in PPI
More emerging market exposure
Increase in global infrastructure spending
S&P Industrials Index moving to 17 week moving average
around 310, in bottom area of heavy chart resistance
After A Lull, Economic Growth Will Likely Improve In 2011
ECRI W eekly Leading Index Growth Rate
%, Lagged by 20 W eeks
Real Gross Domestic Product
% Change - Year to Year
30
10.0
20
7.5
10
5.0
0
2.5
-10
0.0
-20
-2.5
-30
-5.0
70
75
80
85
90
95
Sources: Haver Analytics, Bureau of Economic Analysis
00
05
10
Force
Analysis
Description
Effect
Supplier Power
Moderate to Low (+)
Lower acquiring costs
Buyer Power
Low (+)
Barriers to Entry
High (+)
Rivalry
High within sector, low
between sectors (+)
Low (+)
Common raw materials
such as silicon; some are
more exotic like
fluropolymer components
No availability of
substitutes for industrial
equipment leads to lower
buyer power.
Extreme events lead to
disruption in logistics,
increasing buyer power.
High start-up costs;
branding; R&D;
marketing costs.
Established global market
players.
Powerful global players
within industrial sector
Crucial industrial
equipment produced
Steady growth, with
occasional fluctuations
due to global events and
economic recession
Substitutes
Market Growth
Moderate (+/-), with
sensitivity to unexpected
external factors
Able to translate
increased expenses into
price increases
Increased market share
Price and quality
competition
Stability in market growth
Continued need for R&D
and global investment to
maintain market growth
Current
Customers
Oil and nuclear energy industries, common households.
Professional, medical, industrial and commercial
consumers.
Products
Industrial: heavy machinery, pumps, valves, pipes,
environmental, medical, life-sciences and industrial
technologies, sensors and controls
Household:
motors, appliances, tools
Geography
Widespread domestically and globally, worldwide
manufacturing locations.
Integration into growing markets such as China, India,
the UAE and Saudi Arabia.
Locations in highly sensitive Middle East and Japan.
Service
Aerospace & defense, building products, construction &
engineering, electrical equipment, conglomerates,
machinery, commercial services & supplies and
transportation.
Aerospace/Defense
Industrial Machinery
Median: 18.8
Median: 20.2
Current: 28.1
Current: 26.2
Construction
Machinery
Construction &
Engineering
Median: 26.8
Median: 7.2
Current: 32.3
Current: 8.9
Overall Sector
Median: 15.8
Current: 17.7
Relative to
S&P500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
1.2
1.2
1.4
1.1
1.2
0.66
0.82
0.9
0.8
0.8
1.1
1.1
1.1
1
1.1
1.2
1.1
1.3
1
1.2
Absolute Basis
High
Low
Median
Current
P/Trailing E
P/Forward E
P/B
P/S
P/CF
26.4
25.3
4.7
1.9
16.4
7.1
9.2
1.4
0.6
6
18.5
16.7
3.2
1.4
11.3
18.9
16.1
3.1
1.4
11.7
% Change
from Median
9.1%
0.0%
18.2%
0.0%
9.1%
% Change
from Median
2.2%
-3.6%
-3.1%
0.0%
3.5%
30
25
20
High
15
Low
Median
Current
10
5
0
P/Trailing E
P/Forward E
P/B
P/S
P/CF
1.6
1.4
1.2
1
High
0.8
Low
Median
Current
0.6
0.4
0.2
0
P/Trailing E
P/Forward E
P/B
P/S
P/CF
04/2011
12/2010
08/2010
04/2010
12/2009
08/2009
04/2009
12/2008
08/2008
04/2008
12/2007
08/2007
04/2007
12/2006
08/2006
04/2006
12/2005
08/2005
04/2005
12/2004
08/2004
04/2004
12/2003
08/2003
04/2003
12/2002
08/2002
04/2002
12/2001
08/2001
04/2001
1.30
1.20
1.10
1.00
0.90
0.80
0.70
0.60
04/2011
12/2010
08/2010
04/2010
12/2009
08/2009
04/2009
12/2008
08/2008
04/2008
12/2007
08/2007
04/2007
12/2006
08/2006
04/2006
12/2005
08/2005
04/2005
12/2004
08/2004
04/2004
12/2003
08/2003
04/2003
12/2002
08/2002
04/2002
12/2001
08/2001
04/2001
1.30
1.20
1.10
1.00
0.90
0.80
0.70
1.6
1.4
1.2
1
High
0.8
Low
Median
Current
0.6
0.4
0.2
0
P/Trailing E
P/Forward E
P/B
P/S
P/CF
04/2011
12/2010
08/2010
04/2010
12/2009
08/2009
04/2009
12/2008
08/2008
04/2008
12/2007
08/2007
04/2007
12/2006
08/2006
04/2006
12/2005
08/2005
04/2005
12/2004
08/2004
04/2004
12/2003
08/2003
04/2003
12/2002
08/2002
04/2002
12/2001
08/2001
04/2001
1.40
1.30
1.20
1.10
1.00
0.90
0.80
0.70
0.60
3
2.5
2
High
1.5
Low
Median
Current
1
0.5
0
P/Trailing E
P/Forward E
P/B
P/S
P/CF
04/2011
12/2010
08/2010
04/2010
12/2009
08/2009
04/2009
12/2008
08/2008
04/2008
12/2007
08/2007
04/2007
12/2006
08/2006
04/2006
12/2005
08/2005
04/2005
12/2004
08/2004
04/2004
12/2003
08/2003
04/2003
12/2002
08/2002
04/2002
12/2001
08/2001
04/2001
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
4.5
4
3.5
3
2.5
High
Low
2
Median
Current
1.5
1
0.5
0
P/Trailing E
P/Forward E
P/B
P/S
P/CF
04/2011
12/2010
08/2010
04/2010
12/2009
08/2009
04/2009
12/2008
08/2008
04/2008
12/2007
08/2007
04/2007
12/2006
08/2006
04/2006
12/2005
08/2005
04/2005
12/2004
08/2004
04/2004
12/2003
08/2003
04/2003
12/2002
08/2002
04/2002
12/2001
08/2001
04/2001
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
1.8
1.6
1.4
1.2
1
High
Low
0.8
Median
Current
0.6
0.4
0.2
0
P/Trailing E
P/Forward E
P/B
P/S
P/CF
04/2011
12/2010
08/2010
04/2010
12/2009
08/2009
04/2009
12/2008
08/2008
04/2008
12/2007
08/2007
04/2007
12/2006
08/2006
04/2006
12/2005
08/2005
04/2005
12/2004
08/2004
04/2004
12/2003
08/2003
04/2003
12/2002
08/2002
04/2002
12/2001
08/2001
04/2001
1.40
1.30
1.20
1.10
1.00
0.90
0.80
0.70
0.60
0.50
90
80
70
60
50
40
30
20
10


Maintain overweight by .12%
Industries within sector
 Overweight
▪ Machinery Stocks
 Underweight
▪ Aerospace & Defense