2016 Economic Outlook -...

Recap of 2015

In 2015 we encountered: increased volatility driven by the Greek debt fiasco in

the late Spring, concerns over China’s slowing growth in late summer, and speculation

over the timing of a rate hike from the Federal Reserve.

With 2015 coming to a close, we have positioned our portfolio for the upcoming

year. Following our top-down investment approach, we have re-analyzed the

macroeconomic environment, and strategically positioned our holdings in each sector

accordingly.

Macroeconomic View

Moderately Bullish on the U.S. Economy

Neutral on the Canadian Economy

Growth opportunities in both countries stemming from areas related to consumer

spending, with more attractive opportunities in the U.S.

Expect the Canadian Dollar to continue to depreciate against the U.S. Dollar

Kyle Stolys

Portfolio Manager

B.Comm Finance, 2016

[email protected]

Kevin Pei

Quantitative Analyst

B.Comm Finance & IS, 2016

[email protected]

Max Yam

Consumers & Tech Manager


[email protected]

2016 Economic Outlook

November 28, 2015

Chris McClure Koutsikaloudis

Energy & Materials Manager


[email protected]

Macro

econ

om

ic Research

Spencer Clarke

Financials & Health Care Manager

B.Comm, Minor in Math, 2017

[email protected]

Gwynne Cunningham

Industrials & Utilities Manager

B.Comm, 2015

[email protected]

SPROTT STUDENT INVESTMENT FUND

1

2016 ECONOMIC OUTLOOK

Macroeconomic View

We are moderately bullish on the U.S. economy, and neutral on the Canadian economy,

seeing growth opportunities in areas exposed to consumer spending. We expect the U.S. economy to

grow at a faster rate than Canada’s over the short to intermediate term. The global arena is mixed; as

a result of slow or negative economic growth, many countries have cut interest rates in an effort to

boost economic activity. China – the big story of 2015 – is experiencing slower growth rates, due in

part to the country’s unprecedented industrial build out that caused a commodity boom during the

2000’s. We believe that while areas related to industrials in China will continue to struggle, the

Chinese middle class will grow stronger and China will continue its shift towards being a consumer-

based economy. In South America we believe growth will be challenged over the next 1-2 years as

several of these countries are heavily dependent on commodities. This exposure combined with the

prospect of Federal Reserve rate hikes which will result in greater interest payments on USD-

denominated debt, leaves us concerned about the economic prospects of countries in these regions.

In Europe, many regions continue to struggle to grow; the ECB appears prepared to undergo a second

round of Quantitative Easing, which could provide a boost to Eurozone economies. All in all, the U.S.

economy is in our opinion the most attractive market to invest in currently.

Within the U.S. economy there are several discrepancies across growth and performance.

Industries that are exposed to commodities have performed poorly over the last 1-2 years and the

outlook is bleak. Some of our holdings such as: Monsanto, Union Pacific, Jacobs Engineering, and our

three energy holdings have all had horrific performance in 2015 due entirely to their commodity

exposure. However, sectors unrelated to commodities such as consumer goods, technology, and

financials have performed well in 2015. On an aggregate basis we expect such trends to continue into

2016.

The unemployment rate in the U.S. (figure 1) has fallen to a level many economists believe is

the natural unemployment rate (US. Congressional Budget Office, 2015). This is forcing the labour

market to grow tighter which should lead to wage growth in the future - boding well for consumer

spending. U.S. consumer confidence (figure 2) (while volatile in recent months) has been on a multi-

year rise. It currently sits at a significant margin above where it lay 1 and 2 years ago, as well as above

the long-term average. U.S. retail sales (figure 3) haven’t been particularly strong, but certain pockets

such as automotive (figure 4), clothing, and furniture have grown at 5%+ YoY in 2015. With all of the

uncertainty in today’s market we see the greatest stability and growth in areas related to the U.S.

consumer. Therefore we expect companies that service the U.S. consumer to experience the strongest

growth over the near and intermediate term.


2


Sector Views

We have developed views on each sector relative to the weighting that is in our benchmark.

Our benchmark consists of 65% S&P 500, and 35% S&P TSX (Appendix A1). In each view we have a 1-2

year time horizon, and we re-evaluate these views every 6 months. The qualitative views are

converted into actionable metrics through the use of our Tactical Sector Allocation model (TSA). The

TSA is a quantitative framework that takes into account, associated market risks, as well as posterior

returns, to output a set of optimal weightings. Figure 5 below illustrates the benchmark’s current

market capitalized weighting (blue dots) along with our strategic weighting (orange dots) for each

sector. As shown, the suggested weights are indeed aligned with our qualitative beliefs on how the

sector will perform in the coming years; we are currently making changes to shift our portfolio towards

this allocation. For a breakdown of our individual holdings and the main investment thesis of each, see

Appendix B.

Figure 1: U.S. Unemployment Rate

Source: Federal Reserve Bank of St. Louis

Sep-15: 5.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

% U

nem

plo

yed

Figure 2: University of Michigan Consumer

Sentiment Index


Sep-15: 87.2

Average:85.3

50

60

70

80

90

100

110

120

Figure 3: Retail Sales (Excl: Food Services) YoY

Growth


Sep-15:

1.7

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

YoY

Ch

an

ge (

%)

Figure 4: Light Weight Vehicle Sales: Autos &

Light Trucks


Sep-15:18.1

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

Mil

lio

ns

of S

ale

s (M

on

thly

)


3


Figure 5: Summary of Sector Positioning

Basic Materials - Underweight

SSIF Weighting: 3.0% | Benchmark Weighting: 5.2%

Commodity markets across the board have performed negatively over the past two years.

During the past decade strong growth from China urged commodity producers to invest significantly in

additional capacity. In 2011, China’s industrial growth began to slow, but capacity continued to come

online. In our opinion this has caused a commodity supercycle that will continue to worsen before it

gets better. As a result we are underweight the basic materials sector.

Consumer Discretionary – Overweight


As the United States continues its recovery, we expect the U.S. consumer to become more

confident, resulting in increased consumer spending. And we see areas exposed to the U.S. consumer

as attractive for investment. We believe that our current holdings will continue to benefit from the

recovery and deliver strong returns. As a result we are overweight the consumer discretionary sector,

with a tilt towards companies with U.S. exposure over Canadian.

Consumer Staples – Overweight


The U.S. economy has experienced a relatively slow economic recovery. Normally, during a

recovery, one would expect the consumer staples sector to underperform the broader market. While

we are bullish on the U.S., we expect to see moderate growth similar to the last three years. It is our

view that the U.S. consumer will continue to grow stronger, benefiting both the consumer

discretionary and consumer staples sectors - albeit the former to a greater degree. We believe that

Sector PositioningBenchmark

Weighting

SSIF

WeightingSummary

Basic Materials Underweight 5.2% 3.0%

Consumer Discretionary Overweight 11.1% 13.9%

Consumer Staples Overweight 7.8% 10.1%

Energy Overweight 11.5% 14.1%

Financials Underweight 23.8% 16.7%

Health Care Overweight 10.4% 12.8%

Industrials Equalweight 9.5% 8.8%

Technology Overweight 14.5% 17.6%

Telecommunications Underweight 3.5% 0.0%

Utilities Equalweight 2.7% 3.0%


4


being overweight in both sectors is an effective hedge. If we are wrong in our view and the U.S.

economy enters a recession, the staples sector will likely outperform the broader market as staples are

a basic necessity. The consumer staples sector is a very attractive area of investment in our view,

meshing well with our investment philosophy. As a result, we are overweight the consumer staples

sector.

Energy – Overweight


Oil prices fell tremendously during the latter half of 2014, and continued to drop in early

2015. In our last update in April we believed that while opportunities had begun to arise in the oil

market, things could get worse before they got better, and we would look to shift our portfolio to an

overweight energy weighting by year-end 2015. Given the events since April (expanded on below), we

continue to hold this view. Oil production in the U.S. began to decline in May, an indicator of a

bottoming process (Appendix A2), and although OPEC has aimed to defend its market share by

bleeding out higher cost competitors from North America, this strategy can only be used as long as the

Governments of its member nations have the reserves to sustain their public budgets. As the majority

of OPEC member nations depend primarily on oil reserves to fund their national budgets, we are

already seeing these countries burn through reserves at an increasing pace. We believe this is

unsustainable and can already see evidence of weakness from Saudi Arabia and Venezuela’s

governments (see Appendix A3 and A4). Given our long-term investment horizon we feel that WTI

Crude prices at $45 have presented attractive opportunities for investment. As a result we are

overweight the energy sector.

Financials – Underweight


The Financials sector is our benchmark’s largest weighting and in our opinion is too exposed

to financials for a portfolio with our mandate. As a result we are underweight the financials sector.

However, the question becomes: how underweight are we? Banks, which are the majority of the

financial sector have seen their net interest margins (the primary driver of profits) squeezed in today’s

low rate environment. While the consensus is that the U.S. Federal Reserve will begin raising rates in

the near term, it appears this will occur at a very slow pace, and banks will continue to operate at low

net interest margins over the foreseeable future. Outside of banking, we find the insurance business as

attractive with an ability to generate strong returns over the long term. Overall, we feel moderate

about the financials sector and have targeted a portfolio weighting between 14-19%.


5


Health Care – Overweight


The Health Care sector performed very well during the first half of 2015 but has since turned

negative due to investor worry over the potential for an incoming U.S. president to implement price

caps on drugs, hurting potential pharmaceutical profits. While this is a cause for concern, we feel that

the market has over-reacted to the event and has sold off anything related to health care as a result.

The undeniable fact within the health care sector is that the Canadian and U.S. populations are aging

and will need additional health support in the future. The U.S. currently outspends every other country

in health care as a percentage of GDP (Deloitte, 2015). This percentage is forecasted to increase to

17.9% by 2018 (The World Bank, 2015) (see Appendix A5). This is due, in part, to the aging U.S.

population (Appendix A6) and recent implementation of the Affordable Care Act (ACA); more citizens

can afford basic care. The ACA aims to cover 95% of American citizens by 2019, a 10% increase from

current coverage figures (Deloitte, 2015). The discrepancy in U.S. health care expenditure compared to

other nations is attributed to their lack of a national health care budget: as of 2015, they are the only

country without one (Deloitte, 2015). This provides a tailwind for the health care sector that we are

confident in and want to remain exposed to. As a result we are overweight the health care sector.

Industrials – Equalweight


The Industrials sector is a very diverse sector, including businesses related to airplanes,

consulting, railroads, engineering, etc. Given its diverse nature we see the industrials sector almost as

a proxy for the U.S. economy, which we feel confident in. Within the industrials sector we feel strongly

about certain areas such as infrastructure, and transportation but do not have a view on many of the

other segments, and as a result are equalweight the industrials sector.

Information Technology – Overweight


We feel confident in our current holdings in the technology sector and many other areas of

the sector. We do however feel uneasy about the valuations of certain industries, where we believe

that the market has priced in more aggressive growth than is likely to come to fruition. In particular,

industries with exposure to the Internet of Things and Big Data, are segments that we expect to

become more prevalent in the future. We believe they will experience steady growth over the next

decade, but at a slower rate than the market consensus. We maintain an overweight position in

technology as we believe there are an ample number of investment opportunities available in the

sector.


6


Telecommunications – Underweight (Zeroweight)


The Telecommunications sector is unattractive in our view. While the demand for internet

service, and wireless communication is expected to grow, it is our view that to meet this demand

telecom companies will be forced to undergo heavy investment into new infrastructure. This will likely

lead to a period of consolidation which will cause the sector to behave as more of a utility.

Additionally, at this current time, the sector is very competitive, with most firms competing solely on

price, which in our view will lead to poor returns on the largescale future investment. As a result, we

do not see opportunities within the telecommunications sector and have a zero-percent weighting.

Utilities – Equalweight


The utilities sector is marked by low but stable returns. We currently view other sectors as

more attractive areas of investment but are confident in our single utility holding – Public Service

Enterprise Group.


7


References

Bloomberg Terminal. (2015).

Deloitte. (2015). 2015 health care providers outlook.

EIA. (2015, September 30). U.S. FIeld Production of Crude Oil. Retrieved October 28, 2015, from

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS2&f=M

Federal Reserve Bank of St. Louis. (2015). FRED Economic Data. Retrieved from

https://research.stlouisfed.org/fred2/

McGraw Hill Financial. (2015, September 30). S&P 500 Index. Retrieved October 28, 2015, from

http://ca.spindices.com/indices/equity/sp-500

McGraw Hill Financial. (2015, September 30). S&P TSX Composite Index. Retrieved October 28, 2015,

from http://ca.spindices.com/indices/equity/sp-tsx-composite-index

The World Bank. (2015). World DataBank.

US. Congressional Budget Office. (2015, October 28). Natural Rate of Unemployment (Long-Term)

[NROU]. Retrieved from FRED, Federal Reserve Bank of St. Louis:

https://research.stlouisfed.org/fred2/series/NROU


8


Source: EIA

Appendix A

Figure A1: Benchmark Weighting Breakdown, as at October 2015

Figure A2: U.S. Monthly Crude Oil Production

Basic Materials 9.5% 2.9% 5.2%

Consumer Discretionary 7.3% 13.2% 11.1%

Consumer Staples 4.3% 9.7% 7.8%

Energy 19.6% 7.1% 11.5%

Financials 37.8% 16.2% 23.8%

Health Care 2.6% 14.6% 10.4%

Industrials 8.3% 10.2% 9.5%

Information Technology 2.8% 20.8% 14.5%

Telecommunications 5.6% 2.4% 3.5%

Utilities 2.2% 2.9% 2.7%

Benchmark Weightings as at

Oct-15

S&P/TSX

(35%)

S&P 500

(65%)

Benchmark

Weighting

Apr-15 (Peak) 9,601

Jul -15:

9,358

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

9,500

10,000

U.S

. M

on

thly

Cru

de

Oil

Pro

du

cto

n

(00

0's

/da

y)

Source: McGraw Hill Financial


9


Sep-15:654,541

400,000

450,000

500,000

550,000

600,000

650,000

700,000

750,000

800,000

Mil

lio

ns

of U

SD

Figure A3: Saudia Arabia foreign currency reserves

Source: Bloomberg

Figure A4: Venezuela foreign currency reserves

Source: Bloomberg

Nov-15:14,655

10,000

15,000

20,000

25,000

30,000

35,000

Mil

lio

ns

of U

SD


10


2014: 14.4%

11.0%

11.5%

12.0%

12.5%

13.0%

13.5%

14.0%

14.5%

15.0%

% o

f P

op

ula

tio

n

Figure A6: U.S. Population ages 65 and over (% of total)

Source: World Bank

2013: 17.1% | $9,146

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

$0

$2,000

$4,000

$6,000

$8,000

$10,000

% o

f G

DP

Per

ca

pit

a

Health expend. (per capita) L Health expend. (% of GDP) R

Figure A5: U.S. Health expenditure per capita and % of GDP

Source: World Bank


11


Company Ticker Exchange Sector Description Thesis

Monsanto MON US Basic

Materials

Monsanto Company provides

agricultural products for farmers. The

Company's business segments are seeds

and genomics. Monsanto produces a

wide range of seeds and develops

biotechnology traits that assist farmers

in controlling insects and weeds as well

as provides other seed companies with

genetic material and biotechnology traits

for their seed brands.

• Continued growth in global demand for

food products will continue to be driven by an

increasing population and larger food portion

sizes

• MON’s product line allows farmers to

harvest crops more efficiently and yield greater

volume per acre.

• MON has been effective in increasing its EPS

on a consistent and stable basis. Management

has targeted a diluted EPS of $5.75 - $6 and

this goal will likely be accomplished

Gentex GNTX US Consumer

Discretionary

Gentex Corporation designs,

manufactures, and markets products

that use electro-optic technology. The

Company's product lines include

automatic-dimming rearview mirrors and

fire protection products. Gentex's Night

Vision Safety Mirror automatically

darkens to the degree required to

eliminate rearview headlight glare. The

Company sells its products around the

world.

• Gentex is set to benefit from an increasing

global automobile production, a rising

demand for safety features, and a stronger US

vehicle demand.

• Gentex dominates the electrochromic mirror

industry with 90% marketshare. This segment

accounts for 20% of the automotive mirrors in

auto's

• Strong ROIC (15% +) and 29% operating

margins, which are very high compared to the

average in the auto industry

Home Depot HD US Consumer

Discretionary

The Home Depot, Inc. is a home

improvement retailer that sells building

materials and home improvement

products. The Company sells a wide

assortment of building materials, home

improvement and lawn and garden

products and provide a number of

services. Home Depot operates

throughout the U.S. (including Puerto

Rico, the Virgin Islands and Guam),

Canada, China, and Mexico.

• Home Depot is the leading home

improvement retailer in North America.

• Home Depot has generated an ROIC of over

15% for the past 5 years and has had an

increasing EVA spread since 2010.

• Home Depot has been expanding its online

presence over the past few years. Currently 5%

of sales are online, and these online sales are

expected to grow at 25%.

• The housing market continues to recover,

leading to a greater number of home

renovations. As such, Home Depot is expected

to grow at mid-single digits.

Michael Kors KORS US Consumer

Discretionary

Michael Kors Holdings Limited is a global

luxury lifestyle brand. The Company

operates in retail, wholesale, and

licensing with a strategically controlled

global distribution network focused on

company-operated retail stores, leading

department stores, specialty stores and

select licensing partners.

• The luxury goods industry is favourable,

competing on brand versus price delivering

consistently high operating margins and ROIC

• Management has demonstrated that they

have a long-term focus and have successfully

operated with the same corporate strategy in

place since 2006

• Concerns over brand value loss, and the

coinciding share price drop is overdone

resulting in a buying opportunity at fwd

EV/EBITDA of 6x vs. peer average of 10x.

Appendix B – Current Holdings: Description & Thesis


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CVS Health CVS US Consumer

Staples

CVS Health Corporation is an integrated

pharmacy health care provider. The

Company's offerings include pharmacy

benefit management services; mail order,

retail and specialty pharmacy; disease

management programs; and retail clinics.

The company operates drugstores

throughout the U.S., the District of

Columbia, and Puerto Rico.

• Affordable Care Act to drive prescription

volumes. It is anticipated that 30 million

people will receive increased coverage by

2018. We expect that this will provide strong

single digit growth for the company moving

forward.

• Low correlations with other staples in the

portfolio and a business segment we did not

have exposure to

• ROE in excess of 10% for the past 10 years

The North West

Company

NWC CN Consumer

Staples

North West Company, Inc. retails food,

family apparel, housewares, appliances,

outdoor products, and offers services

such as quick-service prepared food,

special ordering, money transfers and

check cashing. The Company operates

in underserved rural communities in

Canada, Alaska, the South Pacific, and

the Caribbean.

• Due to the niche nature of the business

NWC is able to sustain operating margins

higher than all other Canadian grocers

• NWC operates grocery and discount stores

in regions in which competition is sparse.

• Stable and secure cash flows result in a very

low beta

• 80% of cash flows are paid as dividends at a

yield of 4.2%

Kinder Morgan KMI US Energy Kinder Morgan Inc. is a pipeline

transportation and energy storage

company. The Company owns and

operates pipelines that transport natural

gas, gasoline, crude oil, carbon dioxide

and other products, and terminals that

store petroleum products and chemicals

and handle bulk materials like coal and

petroleum coke.

• Largest energy infrastructure company in

North-America, with a stranglehold on the

midstream industry

• Fee-based revenue streams (94% of margins)

that offer a stable counterpoint to our other,

more volatile energy positions

• New corporate structure significantly

reduces cost of capital

Schlumberger SLB US Energy Schlumberger Limited is an oil services

company. The Company, through its

subsidiaries, provides a wide range of

services, including technology, project

management and information solutions

to the international petroleum industry

as well as advanced acquisition and data

processing surveys.

• SLB is strongly positioned, with the largest

market share (30%+), greatest level of global

exposure and leadership in offshore drilling

and technologies.

• SLB has 15%+ operating margins, and

generates ROIC >10%

• Recent acquisition of Cameron International

($18B acquisition) will increase its dominance

in offshore and deep water drilling.

• Large cash balances and low debt gives the

company some buffer in the low oil price

environment.

Total S.A. TOT US Energy Total SA explores for, produces, refines,

transports, and markets oil and natural

gas. The Company also operates a

chemical division which produces

polypropylene, polyethylene,

polystyrene, rubber, paint, ink,

adhesives, and resins. Total operates

gasoline filling stations in Europe, the

United States, and Africa.

• An improving product mix, as some

European assets are sold and upstream

projects come online in the next several years,

with a focus on LNG that will play into the

Asian gas story.

• Total is in the midst of an exploitation

phase, having invested significantly over the

past several years. This positions them well to

cut capex in the current price environment,

but still have production ramp up at a very low

marginal cost, allowing it to grow faster than

its peers, and remain more resilient to negative

commodity prices.


13



Bank of Nova

Scotia

BNS CN Financials Bank of Nova Scotia provides retail,

commercial, international, corporate,

investment and private banking services

and products.

• Canadian banks have excellent ROE, BNS is

~15%

• Diversified asset holdings and business

practices – BNS possesses one of the most

diversified securities lending and repo equity

portfolios in the world. Prime brokerage and

securities lending are able to secure high

margins because of their diverse holdings of

highly illiquid securities.

• Currently trading at historically low P/E ratio

Great-West Life

Co.

GWO CN Financials Great-West Lifeco Inc. is a financial

services holding company with interests

in the life insurance, health insurance,

investment and retirement savings, and

reinsurance businesses. The Company

serves the financial security needs of

people in Canada and the United States.

• LT focused management team, very

conservative

• Leading life insurer in Canada and leading

life assurance provider in Europe with 35%

market share

• Industry leading ROE (15%+)

Wells Fargo WFC US Financials Wells Fargo & Company is a diversified

financial services company providing

banking, insurance, investments,

mortgage, leasing, credit cards, and

consumer finance. The Company

operates through physical stores, the

Internet and other distribution channels

across North America and elsewhere

internationally.

• Diversified banking operations, higher net

interest margins and ROE in comparison to

competitors.

• Largest share of consumer banking in the

United States.

• Tier-1 levels well above the legal minimum

for American banks.

Lannett Co. LCI US Health Care Lannett Company, Inc. manufactures

and distributes pharmaceutical products

under its own trade name and under

generic names. The Company also

distributes competitive pharmaceutical

products manufactured by other

companies. The principal products

include antifungals, antacids,

dermatological preparations, and

analgesic sedatives.

• Highly cost effective and efficient. Vertical

integration allows the firm to maintain cost

competitiveness and significantly increase

profit margins in comparison to the

competition.

• Focus on pain medication, and Thyroid

deficiency (mental health treatment)

• High barriers to entry due to patents, and

their license to import raw poppy straw (1/7

licenses in US)

Jacobs

Engineering

JEC US Industrials Jacobs Engineering Group, Inc. provides

a broad range of technical, professional,

and construction services to a large

number of industrial, commercial, and

governmental clients around the world.

The Company's services include project

services, process, scientific, and systems

consulting, construction services, and

operations and maintenance services.

• Jacobs is positioned to capitalize on both

U.S. infrastructure and chemical capital

investment trends

• Historical focus on acquisitions will

continue to expand operations into Asia

Pacific growth regions for upcoming biotech

and pharmaceutical investment

• 90%+ revenues are derived from repeat

business

• 83% of total revenues are provided by cost

reimbursable contracts speaking to the

reputation Jacobs' has built as a quality

provider of services


14



Union Pacific UNP US Industrials Union Pacific Corporation is a rail

transportation company. The

Company's railroad hauls a variety of

goods, including agricultural,

automotive, and chemical products.

Union Pacific offersslong-haul routes

from all major West Coast and Gulf Coast

ports to eastern gateways as well as

connects with Canada's rail systems and

serves the major gateways to Mexico.

• Long term US imports are expected to

increase as the real exchange rate and

purchasing power of US consumers improves,

causing a rise in intermodal traffic/carload

shipments

• Agricultural shipments are forecasted to

increase alongside the US population growth

rates

• UNP is the only Class 1 railway with six

gateways to Mexico, which allows them to

capitalize on the Mexican auto production

boom

• Strong ROE in excess of 15% over the long

term

Apple AAPL US Technology Apple Inc. designs, manufactures, and

markets personal computers and related

personal computing and mobile

communication devices along with a

variety of related software, services,

peripherals, and networking solutions.

The Company sells its products

worldwide through its online stores, its

retail stores, its direct sales force, third-

party wholesalers, and resellers.

• A Unique ecosystem which facilitates

growth of future products

• Short product cycles, products are updated

often and are quickly and widely adopted by

the user base.

• Proven ability to continuously innovate and

consistently high ROIC of over 30% over the

past five years.

Taiwan

Semiconductor

TSM US Technology Taiwan Semiconductor Manufacturing

Company Ltd. manufactures integrated

circuits based on its proprietary designs.

The Company offers a comprehensive

set of integrated circuit fabrication

processes to manufacture CMOS logic,

mixed-mode, volatile and non-volatile

memory and BiCMOS chips. Taiwan

Semiconductor is an affiliate of Philips

Electronics N.V.

• The semiconductor industry has extremely

high barriers to entry.

• With a dominant market position

representing 71% of foundry services, TSM has

few significant competitors.

• TSM is well diversified and produces a wide

range of semiconductor products.

• TSM has had ROIC in excess of 20% since

2006 and has continued to grow and expand

their business.

Public Service

Enterprise

Group

PEG US Utilities Public Service Enterprise Group

Incorporated is a public utility holding

company. The Company, through its

subsidiaries, generates, transmits, and

distributes electricity and produces

natural gas in the Northeastern and Mid

Atlantic United States.

• Forecasted higher electricity prices will

enable top line growth

• Coal retirements are expected to benefit

existing power generators given increased

demand per generator

• ROE and profit margins in excess of 10%

long term

• Current dividend yield of 3.9%

SPDR

Pharmaceutical

ETF

XPH US ETF SPDR Pharmaceuticals ETF is an

exchange-traded fund incorporated in

the USA. The Fund's objective is to

replicate as closely as possible the

performance of the S&P

• Held in order to maintain exposure to the

health care industry. Assets will shift out of the

ETF as research in the sector progresses.

Current research is into Johnson & Johnson,

and Amgen

2016 Economic Outlook -...

Documents

Transcript of 2016 Economic Outlook -...