Industrial Sector Overview and Stock Recommendations

The industrial sector overview highlights industries like Aerospace & Defense, Machinery, and top holdings such as General Electric and United Technologies Corp. Sector performance is closely tied to economic health, impacted by events like hurricanes. Relevant valuation matrices help in assessing stock values within the sector. The stock recommendations include updates on Precision Castparts Corp, Boeing Co, General Electric, and Caterpillar Inc.

• Industrial sector
• Aerospace
• Defense
• Stock recommendations
• Economic performance

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1. Industrial Sector By Chris Letcher, Bradley Barham and Eric Russell

2. Sector Overview Industries within sector: - Aerospace & Defense, Machinery, and Industrial Conglomerate Top Holdings: - General Electric, United Technologies Corp, United Pacific Corp.

3. Sector Performance News: Industrials closely linked to health of economy, severely affected by hurricane and production took a beating after. There has been much resistance at the $38 level, XLI breaching this level shows confidence in manufacturing business and bullish sentiment on the sector (finance.yahoo.com). Beta: 1.24

4. Relevant Valuation Matrices The Deep Cyclical nature of certain industries among the industrials sector causes P/CF & P/FCF to be difficult to value the stock P/E & P/B offer a better valuation

5. Precision Castparts Corp. (PCP) Date Recommended: 10/11/12 Original Recommendation: Buy Original Price: $162.20 CIF Decision: No Buy Current Price: $186.28 Recent News: - Q3 earnings came out January 24th - Reached new 52 week high - Recently acquired Titanium Metals Corp.

6. Boeing Co. (BA) Date Recommended: 10/16/12 Original Recommendation: Buy Original Price: $70.83 CIF Decision: No Buy Current Price: $74.29 Recent News: - Boeing 787 Dreamliner battery fire has grounded hundreds of flights. FAA continues to investigate

7. General Electric (GE) Date Recommended: 10/18/12 Original Recommendation: Buy Original Price: $22.64 CIF Decision: No Buy Current Price: $21.94 Recent News: - GE Healthcare has applied for a filed for a supplemental drug application to manufacture Optison

8. Caterpillar Inc. (CAT) Date Recommended: 10/23/12 Original Recommendation: No Buy Original Price: $83.86 CIF Decision: N/A Current Price: $96.85 Recent News: - Earnings will be released on January 28th - Recently has a 580 million dollar write off for fraud in China.

9. FedEx Corp (FDX) Recent News FedEx reported earnings December 19th. Investors feared big drop in earnings but drops were less than feared. Price dropped after earnings report then boomed in the weeks following fiscal cliff. Chief Executive said main reason for bad earnings was drop in air deliveries as consumers turn to slower, cheaper ways of shipping (www.thestreet.com). Date Recommended: 10/25/12 Original Recommendation: Buy CIF Decision: No Buy Original Price: $91.48 Current Price: $99.64

10. Dover Corp (DOV) Date Recommended: 11/06/12 Original Recommendation: Buy CIF Decision: Buy Original Price: $58.58 Current Price: $68.16 Recent News Dover comes out with Q4 earnings 24th of January. Dover has beat analyst estimates in the past 4 consecutive quarters and as the date approaches the stock hits its new 52-week high showing very bullish investor sentiment (http://wallstcheatsheet.com).

11. Emerson Electric Co (EMR) Recent News Next earnings report coming February 5th. Cramer noted the company has been doing very well because of presence in international market. Also seeking alpha noted EMR as one of six dependable stocks for 2013 returns (seekingalpha.com). Date Recommended: 11/08/12 Original Recommendation: No Buy CIF Decision: No Buy Original Price: $51.46 Current Price: $56.87

12. Lockheed Martin Corporation (LMT) Date Recommended: 11/11/12 Original Recommendation: No Buy CIF Decision: N/A Original Price: $89.98 Current Price: $96.07 Recent News The Pentagon and U.S. Navy banned the F-35 fighter jet due to an incident during a training exercise at Eglin Air Force base in Florida. Lockheed Martin is building three different models of the F-35 fighter jet for the U.S. military and eight other countries; 25 of the F-35 B-models have a defect in the takeoff system causing the pilot to eject during a training exercise. The Pentagon's director of testing and evaluation released an 18-page report detailing an array of problems with the $396 billion fighter program just before this incident.

13. United Parcel Service Inc (UPS) Date Recommended: 11/15/12 Original Recommendation: Buy CIF Decision: No Buy Original Price: $72.30 Current Price: $80.34 Recent News UPS' extensive shipping network produces industry-leading margins and returns on invested capital.

14. W.W. Grainger, Inc. (GWW) Date Recommended: 11/27/12 Original Recommendation: No Buy CIF Decision: N/A Original Price: $190.42 Current Price: $209.79 Recent News: W.W. Grainger has agreed to pay $70 million to resolve assertions that the hardware distributor overcharged federal government agencies

15. Works Cited http://www.thestreet.com/story/11819209/1/fedex-stock-hits-new-52-week-high- fdx.html?puc=yahoo&cm_ven=YAHOO http://wallstcheatsheet.com/stocks/dover-fourth-quarter-earnings-sneak-peek.html/?ref=YF http://seekingalpha.com/article/1121981-6-dependable-stocks-for-total-return-in-2013?source=yahoo http://www.reuters.com/article/2012/12/26/grainger-doj-idUSL1E8NQ7B720121226?symbol=GWW http://www.reuters.com/article/2013/01/18/us-lockheed-fighter- idUSBRE90H17E20130118?type=companyNews http://finance.yahoo.com/news/technical-industrial-etfs-ism-data-175730020.html http://www.reuters.com/finance/stocks/overview?symbol=CAT.N http://seekingalpha.com/article/1132121-precision-castparts-management-discusses-q3-2013-results- earnings-call-transcript?source=reuters http://www.sectorspdr.com/eqsnaps/?do=snapshot&symbol=XLI