Boyar's Intrinsic Value Research Forgotten fourty

7/27/2019 Boyar's Intrinsic Value Research Forgotten fourty

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ASSETANALYSIS FOCUS FORGOTTEN FORTY FACT SHEETS

Volume XXXIX, Issue XI & XII Winter 2013

TABLE OF CONTENTS

Letter to Subscribers ........................................................................................ pp. i - vii

Company Symbol Price Page

AMC Networks Inc. AMCX $ 65.04 1

Bank of America Corporation BAC $ 15.25 2

The Bank of New York Mellon Corporation BK $ 32.84 3

Bed Bath & Beyond Inc. BBBY $ 76.52 4

Callaway Golf Company ELY $ 7.50 5

Carnival Corporation CCL $ 35.34 6

The Charles Schwab Corporation SCHW $ 24.80 7Coach, Inc. COH $ 55.52 8

Comcast Corporation CMCSK $ 47.22 9

Constellation Brands, Inc. STZ $ 70.09 10

Crocs, Inc. CROX $ 12.71 11

Devon Energy Corporation DVN $ 59.42 12

DIRECTV DTV $ 67.02 13

Discover Financial Services DFS $ 52.59 14

Hanesbrands Inc. HBI $ 67.20 15

International Speedway Corporation ISCA $ 33.16 16

JPMorgan Chase & Co. JPM $ 56.31 17

Kohl's Corporation KSS $ 54.97 18

Laboratory Corporation Of America Holdings LH $ 87.75 19Legg Mason, Inc. LM $ 40.63 20

Liberty Interactive Corporation LINTA $ 27.30 21

Liberty Media Corporation LMCA $ 147.43 22

Live Nation Entertainment, Inc. LYV $ 18.51 23

The Madison Square Garden Company MSG $ 54.30 24

Microsoft Corporation MSFT $ 37.22 25

Molson Coors Brewing Company TAP $ 53.42 26

Regal Entertainment Group RGC $ 19.40 27

The Scotts Miracle-Gro Company SMG $ 59.89 28

SLM Corporation SLM $ 25.58 29

Staples, Inc. SPLS $ 15.51 30

Starz STRZA $ 27.71 31Time Warner Inc. TWX $ 65.82 32

The Travelers Companies, Inc. TRV $ 86.63 33

Vivendi S.A. VIV.PA 17.92 34

Vulcan Materials Company VMC $ 54.41 35

W.R. Berkley Corporation WRB $ 42.44 36

Weight Watchers International, Inc. WTW $ 31.42 37

The Wendys Company WEN $ 8.20 38

The Western Union Company WU $ 16.64 39

Whistler Blackcomb Holdings Inc. WB.TO $ 16.12 40

Appendix Share Ownership A-1

Published by: BOYAR'S INTRINSIC VALUE RESEARCH LLC

6 East 32 Street 7 thFloor New York, NY 10016 Tel: 212-995-8300 Fax: 212-995-5636

www.BoyarValueGroup.com

Asset Analysis Focus is not an investment advisory bulletin, recommending the purchase or sale of any security. Rather it should beused as a guide in aiding the investment community to better understand the intrinsic worth of a corporation. The service is notintended to replace fundamental research, but should be used in conjunction with it. Additional information is available on request.

The statistical and other information contained in this document has been obtained from official reports, current manuals and othersources which we believe reliable. While we cannot guarantee its entire accuracy or completeness, we believe it may be acceptedas substantially correct. Boyar's Intrinsic Value Research LLC its officers, directors and employees may at times have a position inany security mentioned herein.

Boyar's Intrinsic Value Research LLC Copyright 2013.


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The outstanding characteristics of financialmarkets are shortness of memory and

ignorance of history. John Kenneth Galbraith

A Look Back at Our 2013 Pred ictions

1) Revisiting the Fiscal Cliff

As we anticipated, the kick the can approach to the federal budget crisis continued in2013 with several partial budget acts and temporary debt ceiling extensions culminating in theSeptember-October fiasco and partial government shutdown. Another 3-month extension was

passed in October, although Congress is reportedly closer to reaching a long term (i.e. 2-year)solution just in time for winter recess. On the other hand, our prediction that the stock marketwould continue to weather any short-term federal budget related setbacks also came true. TheS&P 500 barely reacted to the 2013 budget crises and has continued its ascent to all-timehighs.

2) Investors Continue to Shun Equities for Bonds

We have been highlighting the potential bubble in the bond market for some time now,and this was among the issues we raised in our 2013 Forgotten Fortypredictions. The historicshift from equities to bonds was large and extended in scope, reflecting lingering investoranxiety created by the market volatility of recent years. After examining the overall marketlandscape in 2013 and the robust performance of equities, it appears this heavy emphasis on

fixed income is beginning to abate. Certainly, a second year of double-digit appreciation of theS&P 500 helps to illustrate the change in investor sentiment. Importantly, the shift into equitiesis also illustrated by flow activity within the mutual fund industry. According to a December 2013report by Morningstar, overall equity funds have received $198 billion in net inflows during 2013(through the end of November), positioning the equity fund industry to realize its best year since2000. Conversely, year-to-date outflows from bond mutual funds have exceeded $70 billion, andare projected to realize their first year of net outflows in roughly a decade. These respectivefund flow figures reflect an important new reality: Retail investors are shifting their assets backinto the equity market again, and this may be just the beginning.

3) Geopolitical Uncertainty

In last years edition we observed that the world continued to be a scary place in termsof geopolitical stock market risk. There was the danger/uncertainty of escalating tensionsbetween China and Japan, regime change in Venezuela, and European economic malaise. Wenoted however, as value investors it is important to ignore the noise and focus on individualcompanies business fundamentals. Investors would have been wise to heed our advice as theU.S. stock market continued its upward trajectory despite the above-referenced issues, as wellas continued conflict in the Middle East, the constant talk of a taper, and other ugly headlinesthat make you want to hoard cash. So to quote again from Warren Buffetts 2008 Op-Ed thatappeared in the New York Times(we quoted from a different section of this same piece in lastyears edition of The Forgotten Forty):

Let me be clear on one point: I cant predict the short-term movements ofthe stock market. I havent the faintest idea as to whether stocks will be higher orlower a month or a year from now. What is likely, however, is that the

market will move higher, perhaps substantially so, well before either sentiment orthe economy turns up. So if you wait for the robins, spring will be over.

4) Dividend Paying Stocks

In last years Forgotten Fortywe noted that even though many pundits believed the taxon dividends would increase in 2013, high dividend payers, as measured by the VanguardDividend Appreciation ETF, outperformed the S&P 500 as a whole from the period immediatelyfollowing the U.S. presidential election through last years Forgotten Forty publication date. Wespeculated that the outperformance was caused in part by companies issuing dividends early ordeclaring onetime special dividends to combat the tax uncertainty in Washington. In 2013 thattrend has reversed itself and that same ETF advanced approximately 22% this year,underperforming the S&P by about 300 basis points. That trend also demonstrated itself in thisyears Forgotten Forty performance as none of the top ten performing names had outsizeddividend yields.


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5) Firs t Year Market Performance of an Incumbent President

As we mentioned in the last edition of the Forgotten Forty, market performance for thefirst year of an incumbent president has been mixed from a historical perspective. Marketmovements were positive following the re-elections of Presidents Reagan, Clinton, and Bush(up 20% on average), while returns following the re-elections of Presidents Eisenhower andNixon were decidedly weaker (average declines of approximately 15%). Clearly, many other

factors can impact returns outside of presidential elections, but the past year has been a robustone within this political context. With a likely appreciation of well over 20% for the S&P 500during 2013, the market performance during President Obamas first year of his incumbency willrival some of his best performing peers of the past 50 years.

6) Where Have All the Housing Names Gone?

In last years Forgotten Forty, we noted that while we still found the housing sector to besomewhat inexpensive from a valuation perspective, we did not include any of the namesfeatured in our 2011 Summer Issue detailing how to profit from an eventual U.S. housingrecovery. We reasoned that while some of those names were still somewhat inexpensive, wesaw better opportunities in names in ancillary sectors that would benefit from a U.S. housingrecovery. We said companies like JPM, BAC, BRK, CVC, and CMCSA would be beneficiaries of

a housing rebound and in our opinion were the more attractive way to participate in thisparticular trend. Clearly we were wrong. You would have been much better off investing innames we highlighted in our 2011 housing issue such as Whirlpool, or Mohawk that had moredirect exposure to U.S. housing than the ancillary names we featured.

A Closer Look at the Per fo rmance of the 2013 Forgot ten For ty

Although not quite up to the 2012 relative performance, when the Forgotten Fortyoutperformed by over 1,350 bps, the performance of the 2013 Forgotten Forty (+34.84%) waseven stronger on an absolute basis and again outperformed the S&P (+24.13%) by more than1,000 basis points. Twenty-nine of the stocks in the 2012 Forgotten Forty outperformed theS&P 500, with two stocks posting returns just shy of 100%, including Yahoo +99.8% and LiveNation +99.2%. Two of the underperforming stocks, Heinz and Dole, were acquired during theyear, and their relative performances vs. the S&P 500 would be much improved if we dated tothe acquisition close. Round two of our Amazon short (-50.2%; we also included the short in2006) also shaved nearly 200 bps off the 2013 Forgotten Fortys relative performance. Fool meonce, shame on you. Fool me twice, shame on me

The Performance of the Forgot ten Forty fo r the Past Ten Years

Despite the wide outperformance in 2013, the Forgotten Fortys 10-year performanceslipped slightly versus the S&P 500 due to the roll-off of the Forgotten Fortys strongoutperformance in 2003 (+33.07% vs. +18.09%). Nonetheless the historical trailing 10-yearperformance results of the Forgotten Forty remains strong. Over the last 10 years, the ForgottenForty has demonstrated a compound annual growth rate of +6.79% per year versus +4.90% for

the S&P 500.

Date Published Forgotten Forty 1, 2 S&P 500

2013 34.84% 24.13%

2012 28.87% 15.31%

2011 -6.37% -2.31%

2010 20.71% 11.84%

2009 43.65% 25.29%

2008 -48.19% -39.16%

2007 -6.12% 2.06%

2006 18.68% 13.45%

2005 -1.04% 3.55%

2004 19.70% 12.90%

10 Year CAGR 6.79% 4.90%

1Equal weighted portfolio exclusive of dividends. S&P 500 also exclusive of dividends.

2The 2004 through 2013 returns were prepared in-house. Returns exclude dividends and represent the approximateperformance of the hypothetical Forgotten Forty from the periods December 16, 2003 through December 29, 2004;December 29, 2004 through December 27, 2005; December 27, 2005 through December 19, 2006; December 19,2006 through December 18, 2007; December 18, 2007 through December 18, 2008; December 18, 2008 throughDecember 16, 2009; December 16, 2009 through December 13, 2010; December 13, 2010 through December 14,2011; December 14, 2011 through December 17, 2012.; December 17, 2012 through December 12, 2013.


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Results of the 2012-2013 Forgotten Forty by Company

SYMBOL Company

Price

12/17/2012

Price

12/12/2013

%

ChangeTOP 10

YHOO Yahoo! Inc. $19.69 $39.35 99.8%LYV Live Nation Entertainment, Inc. $9.29 $18.51 99.2%HBI Hanesbrands Inc. $35.93 $67.20 87.0%

AMP Ameriprise Financial, Inc. $62.49 $106.52 70.5%LM Legg Mason, Inc. $25.77 $40.63 57.7%

WDFC WD-40 Company $46.75 $73.50 57.2%

LMCA Liberty Media Corporation1 $114.14 $147.43 53.4%VIAB Viacom Inc. $53.38 $80.72 51.2%

CORE Core-Mark Holding Company, Inc $48.82 $72.47 48.4%

IILG Interval Leisure Group, Inc. $19.81 $28.61 44.4%MIDDLE 20

DIS The Walt Disney Company $49.28 $69.63 41.3%LINTA Liberty Interactive Corporation $19.34 $27.30 41.2%SMG The Scotts Miracle-Gro Company $42.69 $59.89 40.3%BAC Bank of America Corporation $11.00 $15.25 38.6%CVS CVS Caremark Corporation $49.04 $67.57 37.8%

MSFT Microsoft Corporation $27.10 $37.22 37.3%TWX Time Warner Inc. $47.94 $65.82 37.3%PLL Pall Corporation $60.33 $81.96 35.9%ENR Energizer Holdings, Inc. $80.09 $108.79 35.8%

POST Post Holdings, Inc. $35.00 $46.50 32.9%DTV DIRECTV $50.56 $67.02 32.6%

CMCSK Comcast Corporation $36.24 $47.22 30.3%BBBY Bed Bath & Beyond Inc. $58.99 $76.52 29.7%JPM JPMorgan Chase & Co. $43.48 $56.31 29.5%

AMCX AMC Networks Inc. $51.09 $65.04 27.3%BRK.A Berkshire Hathaway Inc. $134,850.00 $171,500.00 27.2%XYL Xylem Inc. $26.55 $33.51 26.2%WU The Western Union Company $13.23 $16.64 25.7%MAR Marriott International, Inc. $36.84 $46.02 24.9%TAP Molson Coors Brewing Company $43.49 $53.42 22.8%

BOTTOM 10

ISCA International Speedway Corporation $27.12 $33.16 22.3%

HNZ H. J. Heinz Company2 $59.86 $72.50 21.1%MSG The Madison Square Garden Company $44.84 $54.30 21.1%

DOLE Dole Food Company, Inc.3 $11.59 $13.50 16.5%ELY Callaway Golf Company $6.52 $7.50 15.0%DVN Devon Energy Corporation $52.13 $59.42 14.0%CVC Cablevision Systems Corporation $14.89 $16.02 7.6%

CSCO Cisco Systems, Inc. $20.11 $20.51 2.0%LH Laboratory Corporation of America Holdings $87.17 $87.75 0.7%

AMZN Amazon.com, Inc. (Short) $253.86 $381.25 -50.2%

1LMCAs % Change reflects the performance of Starz, which was spun off from LMCA on January 14, 2013.Liberty Media shareholders received 1 share of Starz for each share of LMCA.

2HNZs closing price reflects the acquisition price of $72.50 a share, which closed on June 7, 2013.

3DOLEs % Change reflects the acquisition price of $13.50 a share, which closed in 3Q 2013.


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A Look Ahead

1) Where Do We Go From Here?

It is hard to believe but it has been over 5 years since the collapse of Lehman Brothers.Stocks certainly have had quite a run since that period, advancing by approximately 162%, asmeasured by the S&P 500 from its March 2009 lows.

Time has a way of dulling the pain from traumatic shocks such as the most recentfinancial crisis (making investors more risk averse, and allowing new speculative bubbles toemerge). It is clearly more difficult to find bargains today than when stocks like CBS traded for$6 per share (current price $58.17), or when Saks was trading at a $1.85 per share (recentlyacquired for $16 per share). For the moment (at least in our opinion), the days of six or sevenbaggers are over. So where do we go from here?

The current bull market is ~57 months long; the average bull market since 1921lasted 29 months.

The average price increase from the bottom in the past 17 bull markets has been~153% vs. the ~162% jump in the S&P 500 from March 9, 2009.

The longest and strongest bull market which ended with the bursting of the techbubble lasted 113 months and climbed 417%.

Two of the four bull markets since 1982 have seen significantly better stock marketadvances than the one we are currently experiencing. As mentioned above, one bullmarket saw a 417% advance, and the bull market from 1982 to 1987 saw anadvance of 229%.

The average price to earnings ratio since 1999 has approximated 16.6x. Theprojected 2014 P/E of the S&P 500 is currently around 14.6x.

Typically bull markets come to an end following a period of extraordinary performance.As Mark Hulbert in Barrons observed, some of a bull markets best returns occur right beforeit dies. Remember the NASDAQs performance in the 4th quarter of 1999 when it

advanced ~48%? The NASDAQ hit its all-time high four months later, just before the partyended. In the months leading to market tops there are striking similarities that often occur.Growth stocks outperform value stocks and small capitalization stocks outperform their largerbrethren. There are early signs today that such a trend has commenced.

So let us revisit the grand daddy of all bull markets, the Internet craze andNASDAQ 5000 to see if there are any similarities with todays richest companies in terms ofstock market valuations and the leaders of that era. Bill Gates aptly once stated:

I think the multiples of technology stocks should be quite a bit lower thanthe multiples of stocks like Coke and Gillette, because we are subject tocomplete changes in the rules. I know very well that in the next ten years, ifMicrosoft is still a leader, we will have to weather at least three crises.

The magnitude of Internet stocks price increases and market valuations in the late1990s dwarfed what longtime market watchers recall in previous speculative frenzies like thatfor biotechnology stocks in 1991. Compared with AOLs P/E of 418, the 95x earnings Polaroidsold for in the late 1960s was a model of value investing.

Currently there are a number of companies that have captured Wall Streets fancy, eachwith multiples of 100x or more. They include names like Netflix, Zillow and LinkedIn. Tesla isanother example of a high multiple stock (with no current earnings). The company delivered just1400 cars in July or about 1% of Ford Motor Companys sales for the same month. Today Teslacommands a market valuation of ~ $18 billion. This is about 30% of Fords market capitalization.

Before the dot com bubble imploded, Yahoo! commanded a price multiple of more than400x earnings. So when it purchased Mark Cubans fledgling Broadcast.com for $5.9 billion, the

acquisition price, based on future potential, was not widely criticized. This site is now defunctand redirects to Yahoo!s home page. Yahoo! also purchased GeoCities during that era, paying$3.65 billion for a company that is no longer in business. Did Yahoo! make the same mistakeyet again? Just recently it purchased blogging site Tumblr ($13 million in sales last year) for$1.3 billion.

Although there are some early indications that the U.S. equity market is gettingsomewhat frothy, it could still have some more room to run. Yes, it is true the more speculativetechnology-laden NASDAQ and the small capitalization Russell 2000 have become the marketleaders. Momentum stocks, such as Tesla (even with the recent pullback and based on forwardearnings) and Netflix, each with triple-digit P/E ratios, have also become market darlings.

On the other hand during the 1990s large capitalization stocks such as Microsoft, Pfizer,

Cisco and Intel commanded outsized price/earnings multiples of 40x to 150x. Today, the P/Eratios of these same companies average approximately 12x, well below the multiples of most of


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the companies within the S&P 500. These companies also yield 3% or more, with the capabilityof multiple dividend increases during the next five years.

There are a number of other factors that could help continue the stock markets advancefor at least a while longer. While this report was going to press the Federal Reserve announcedthat it will begin a modest taper of $10 billion per month and stated it will continue to taper even

more if the economy shows sustained improvement. However even after the initial taperingbegins, the amount of bonds the government is buying each month is still massive. In addition, itappears as if the Federal Reserve intends to keep short-term rates low for an extended periodof time. So for now it appears as if the green light is still flashing to purchase riskier assets suchas stocks, but we do not know when the light will change. What gives us great concern is theviolent reaction in terms of both interest rates and stock market performance that occurred inMay of this year (the S&P declined by 6.3% while long-term government bonds lostapproximately 6%) when the market thought the Fed would begin to taper in earnest. We do notknow what will happen when the market believes the Fed is close to a significant, and whatwould appear to be a permanent, wind down in purchasing securities.

Until recently, individual investors had not taken the Feds bait. And who can blamethem? Over the last decade or so they have been badly bruised by three financial bubbles

bursting: First came the Internet bubble, followed by a real estate collapse of monumentalproportion and finally the financial meltdown which almost destroyed the entire economicsystem.

Individual investors usually show up late for the party, but they usually do show up. As aresult of both individual and institutional investors fleeing the equity markets en masse duringthe 2007-2009 period, common stocks are currently under-owned, while bonds have a muchhigher weighting than normally is the case. A higher asset allocation into stocks could prolongthe stock market advance.

To summarize, the overall stock market is probably fairly valued. Stocks are not on thebargain basement table as they were in 2008-2009. Temper your expectations in terms ofexpected future returns, and be wary of momentum stocks with triple-digit P/E ratios (or no

current earnings at all). A higher cash balance might also be appropriate.

2) Where to Look For Opportunities in Current Market

This has certainly (at least in our view) turned into a stock pickers market. The broadmarket is not blatantly overvalued, but is close to being fairly valued. This is the hardest time tobe in the investment business, as you really do not know whether you should be playing offenseor defense. While the overall market may be somewhat picked over, that does not mean thereare not opportunities for good old fashioned stock picking. We think turnarounds that arestarting to show signs of progress (such as Callaway, which is regaining market share) areinteresting places to search for investment ideas. Other potential turnarounds such as WeightWatchers that have not yet shown signs of progress, but have a significant margin of safety interms of valuation, a great consumer franchise, and an identifiable catalyst are worth looking

further into. Another example of a company that we believe presents an attractive opportunity isCarnival Cruise Lines. The Company has not participated in the broad stock market advance, ishated by Wall Street, has problems that we believe can be remedied and is looking to cut costsafter being run by the son of the Companys founder for more than three decades.

Spinoffs continue to be a fertile ground to find investment ideas. Recent spinoffs thatwere featured in last years Forgotten Forty such as LMC/Starz, AMC, and Post Holdings,significantly outperformed the market and were among the best performers in the 2012-2013Forgotten Forty class. In 2014, we will continue to scour the market for spinoff opportunities,such as reviewing the upcoming Time Inc. spinout. Time Warner has enhanced shareholdervalue under Jeff Bewkes tremendously by spinning out both AOL and Time Warner Cable andrepurchasing a significant amount of stock at attractive prices. Look for TWX to possibly selltheir valuable NYC headquarters in 2014. It would be our dream that TWX will continue its

spin-out spree and take advantage of the high value that the market is currently placing onNetflix and spin-out HBO. While we know of no plans for them to do this, we believe that themarket would assign a premium valuation to HBO as a standalone entity.

3) IPOs and Insiders Signaling Bubbly Conditions

In recent months, The Boyar Value Group has made several mentions of the sky-highvaluations attached to a certain group of new technology stocks and recent IPOs. We think it isparticularly noteworthy that even the CEOs of some of these companies have recently voicedconcerns with the exuberance attached to their stocks. In his 3Q 2013 letter to investors, NetflixCEO Reed Hastings compared Netflix shares recent performance to 2003 when momentum-fueled investor euphoria made Netflix the top NASDAQ performer during the year. Netflixshares went on to decline by 77% in 2004. This October, Tesla CEO Elon Musk also went so far

as to say about his shares, The stock price that we have is more than we have any right todeserve. While long-term shareholders of some of the current high-flyers may be rewarded, wefear the ride will be too bumpy for many to stomach.


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In another sign of the times, there were 222 IPOs in 2013 to date, the highest numbersince the year 2000. This partially reflects the end result of the pre-crisis LBO boom, and IPOsare still far below the 400-500 annual count reached during the tech bubble, but recent IPOperformance gives us pause. IPOs averaged a remarkable 17% first-day rise in 2013 and theRenaissance IPO Composite Index is up 59% YTD or well over 2x the S&P 500. IPOs tend tocome in waves, and the recent performance could spur even more issuers next year. But while

IPOs historically exhibited positive abnormal short-term returns, they also exhibit negativeabnormal long-term returns. Given their unusually strong outperformance in 2013, we wouldremain on the sidelines with the current batch of IPOs.

4) Rotation from Fixed Income to Equity

As discussed in the summary of last years predictions, the shift from fixed income toequities is beginning to show signs of traction. Although this reversal has been significant overthe past 12 months, we believe this trend could continue for the foreseeable future barring asignificant market correction. In particular, we would highlight the strong likelihood of interestrate increases during the next 1-2 years, and the negative ramifications such a scenario couldhave for bond values. Future declines in bond values could be meaningful, and may forceinvestors to reassess their continued heavy exposure to that asset class. According to Fidelity

Research, just a 3% increase in interest rates could lead to a greater than 25% loss forinvestors holding 10-year U.S. Treasury bonds. As the following charts illustrate, investments intaxable bond funds remain near historic highs, partially explained by the substantial declines ininterest rates during recent years. According to Lipper data, U.S. taxable funds now holdroughly $3.8 trillion, up from $720 billion in 2000. In our view, the heavy exposure to fixedincome that remains among retail investors, combined with the likelihood of higher interest ratesin the future, argues that the rotation from bonds to equities should continue and potentiallyaccelerate going forward.

5) Emerging Market Credit Growth

In multiple previous Forgotten Forty issues we warned of the emergence of bubble-likeconditions in China, particularly surrounding infrastructure and real estate construction. ChineseGDP growth is on pace for its weakest year since 1999 and Chinese stocks have drasticallyunderperformed in recent years, but (fortunately for the global economy) China has avoided abust to date. However, the Chinese banking sector has shown some cracks from the lendingspree that pulled China through the global financial crisis. Non-performing loans in the Chinese

banking sector increased at the fastest rate in 8 years during 3Q 2013, albeit from a low levelif the official numbers are to be believed. The largest Chinese banks tripled loan write-offs in1H 2013 and ICBC chairman Jiang Jianqing recently admitted non-performing loan rates areunsustainably low. In particular, he warned of the growth in high return and high risk loansfrom smaller, less regulated private companies. Continued loan growth may forestall a creditcrisis for several more years, but with total Chinese non-federal, non-financial debt alreadyhaving exploded to >200% of GDP in China, the bust will inevitably grow in proportion with theboom that precedes it.

6) Rising Rates and Improving Economy

When considering the market outlook, issues such as future interest rates and theoverall economic backdrop are among the key factors to take into account. As discussed in this

years summer issue ofAsset Analysis Focus, both interest rates and economic growth appearpoised for meaningful increases during the coming years. Already, aspects of this thesis arestarting to take hold. Unemployment trends are moving in a constructive direction, with the mostrecent report indicating a 7.0% unemployment rate in the U.S., down from the 10% level


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experienced during the 2009-2010 period. Labor participation remains depressed from ahistorical perspective, but this metric should show gradual improvement as the labor marketrecovers. Other metrics such as GDP growth have shown steady advances during recentquarters, further suggesting that Federal Reserve monetary policy will likely be lessaccommodative going forward. We believe this scenario could have multiple beneficiaries froman investment perspective. Certainly, financial institutions with significant exposures to net

interest income are among the prime examples (Forgotten Forty stocks such as CharlesSchwab, Bank of New York, and Sallie Mae to name a few). Additionally, companies thatprovide economically sensitive commodities such as Devon Energy (oil and gas) and VulcanMaterials (construction aggregates) represent other ways for investors to capitalize onimproving growth. Conversely, higher rates could create potential challenges. Several years ofhistorically low interest rates have allowed firms to issue or refinance debt at very attractivelevels. Going forward, higher rates could have negative ramifications for company balancesheets and cash flow, potentially diminishing the return of capital to shareholders via dividendsand share repurchases. Moreover, companies that possess elevated levels of debt could faceincreased risk of financial distress.

We welcome your feedback at any time, and wish you a Happy, Healthy and ProsperousNew Year.

Sincerely yours,

Mark A. BoyarChief Investment Officer


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INVESTMENT RESEARCH SUMMARYPRICED DECEMBER 12,2013

- 1 -

AMC Networks Inc.

Balance Sheet Data Catalysts /Highligh ts(in millions) 9/30/2013 2012 2011

Favorable renegotiation of affiliate fees and

advertising growth should continue in 2014 Building value in underpenetrated IFC and

Sundance channels

Pending Chellomedia acquisition introducesa large-scale platform for internationaldistribution

AMC is an attractive acquisition candidatefor a larger cable network

Cash $ 510 $ 611 $ 216Current Assets 1,205 1,347 566TOTAL ASSETS $ 2,525 $ 2,596 $ 870

Current Liabilities $ 414 $ 813 $ 344Long Term Debt 2,155 2,153 2,291

Shareholders Equity (613) (882) (1,037)TOTAL LIABILITIES ANDSHAREHOLDERS EQUITY

$ 2,525 $ 2,596 $ 2,184

Fiscal Year EndingDecember 31

P&L Analysis($ in millions except per share items)

2012 2011 2010 2009

Revenues 1,353 1,188 1,078 974

Net Income

137 126 118 89Earnings Per Share 1.89 1.79 1.71 1.28Dividends Per Share NA NA NA NAPrice Range 53.00-35.55 43.50-30.28 NA NA

INVESTMENT RATIONALE

AMC shares rallied 31% YTD, continuing their ascent since the June 2011 spinoff from Cablevision. This reflects theflagship AMC channels continued viewership gains with hit series such as The Walking Dead(highest rated cable drama everrecorded) and Breaking Bad(series finale viewership up 300% from previous season) shattering their own records in 2013.

AMCs net revenues and AOCF are each up over 17% YTD 3Q 2013. Looking forward, many investors may be somewhatjustifiably concerned over AMCs programming slate as its hit series reach their conclusions. However, we would note thatseason 4 of AMCs record-breaking hit The Walking Deadwill resume in February 2014 and AMC recently renewed the seriesfor a 5th season. Mad Menwill return for a final season as well, to be split across 2014 and 2015. AMC also announced that aspinoff series from The Walking Deadis planned for 2015 and a Breaking Badprequel Better Call Saulis scheduled for 2014.The Company is also investing in several additional new original series. This will negatively impact margins next year andthere is uncertainty whether AMC can replicate recent successes given the increased competition for high quality originaldramatic programming. However, management has a tremendous track record and we also believe their strategy of leveragingSVOD platforms (e.g. Netflix) with relatively short windows has proven successful in building an audience for later seasons ofdramas that might otherwise go unnoticed on its channels. For example, according to NPD Group, Breaking Badwas themost-streamed SVOD TV show still airing on cable/network TV in 2013, while The Walking Dead ranked third. Clearly, thishas only benefited network viewership. AMC and Sony recently reached a distribution agreement with Netflix to make BetterCall Saul episodes available on demand shortly following the completion of season 1 in the U.S.

Perhaps most importantly, we believe carriage contracts, which are multi-year contracts with staggered renewaldates across distributors, are still playing catch-up to AMCs viewership and consumer brand recognition gains. We expect ahigh single- to double-digit annual growth rate over the next several years. CEO Josh Sapan has stated the flagship AMCchannel should become a $0.75/month affiliate fee network over the long-term, which would equate to close to 2x currentrates. Additionally, while advertising growth will be choppy going forward, we believe advertising revenues still remain belowpotential when compared to AMCs viewership, demographics (heavy concentration in the attractive 18-49 category) andaffiliate fees. Advertising still represented less than 40% of revenue (vs. greater than 50% at mature cable peers) despite

increasing a whopping 36% to $149 million in 3Q13. We also view AMCs ancillary channels as highly attractive assets overthe long-term. While AMC (99 million subs) is fully penetrated, WE tv (84.8 million), IFC (70.9 million) and Sundance (57million) still have plenty of room for incremental subscriber gains following sub growth between ~40%-140% at each channelsince 2006. The latter two channels are also still only 1-2 years into the transition to ad-supported networks. AMC has begunsyndicating AMC series like Breaking Badon Sundance to support the channel, as well as using cross-promotion to buildawareness for new original programming being launched on the sister channels.

In October, AMC announced the acquisition of Liberty Globals international content business, Chellomedia, for750 million in a deal expected to be completed in 1Q 2014. Chellomedias portfolio of channels covers a variety of genresand reaches 390 million subscribers across 138 countries, with significant distribution in Latin America and Central Europe.This transformative transaction will add ~1 turn of leverage, which will push back any potential timetable for a sharerepurchase programwhich we had hoped to see in 2014, as following the spinoff AMCs leverage rapidly declined from 5.4xto just 3.2x as of 3Q13. On the other hand, the implied purchase price of ~9x EBITDA is accretive and we like the synergies.Without a network of its own or a full slate of programming, AMC/Sundance Global struggled to gain scale and continued topost operating losses. Now, AMC has the longer-term opportunity to leverage its content internationally through Chellochannels, many of which are movie and dramatic entertainment. AMCs growth prospects and FCF should also allow the

Company to comfortably de-lever once again, reopening the possibility of share repurchases in a couple of years. As perhapsthe largest independent programmer globally following the Chellomedia acquisition, we believe AMC is a prime candidate forconsolidation given the carriage fee negotiation leverage provided by scale. Additionally, AMCs underpenetrated/under-watched secondary networks could be built up more rapidly under a larger programmers umbrella. Valuing AMC at 11x 2015E

AOCF (a discount to historical cable network transactions), we estimate AMCs intrinsic value is approximately $79 per share.

Symbol: AMCX

Exchange: NASDAQCurrent Price: $65.04Current Yield: NACurrent Dividend: NAShares Outstanding (MM): 72.7Major Shareholders: Dolan Family Group 21%;70% voting

Average Daily Trading Volume (MM): 0.752-Week Price Range: $72.35-$49.18Price/Earnings Ratio: 17.5xStated Book Value Per Share: NA


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Bank of America Corporation

Balance Sheet Data Catalysts/Highlights

(in millions) 09/30/13 2012 2011 Loan and deposit growth coupled withNew BAC expense reductionsaccelerate earnings growth

Strong regulatory capital ratios driveincreasing return of capital toshareholders

Continued settlements of mortgageclaims reduces uncertainty andexpands BAC valuation

Cash $ 121,233 $ 110,752 $ 120,102Total Securities 320,998 360,331 311,416TOTAL ASSETS $ 2,126,653 $ 2,209,974 $ 2,129,046

Total Deposits $ 1,110,118 $ 1,105,261 $ 1,033,041Long Term Debt 255,331 275,585 372,265Shareholders Equity 232,282 236,956 230,101

TOTAL LIABILITIES ANDSHAREHOLDERS EQUITY

$ 2,126,653 $ 2,209,974 $ 2,129,046



2012 2011 2010 2009

Revenues 83,334 93,454 110,220 119,643Net Income 4,188 1,446 (3,595) (2,204)Earnings Per Share 0.25 0.01 (0.37) (0.29)Dividends Per Share 0.04 0.04 0.04 0.04Price Range 11.61-5.80 15.25-4.99 19.86-12.96 18.59-3.14


Bank of America, once again, remains one of our Forgotten Forty. Despite surging by greater than 100% from our 2011Forgotten Forty to our 2012 edition and another 39% this past year, we believe BAC shares still present significant upside. The pastgains rewarded investors who were able to see through the myriad of challenges BAC faced, while upcoming gains should be basedmore on positive operating results. While still having a long way to resolution, the Banks mortgage rep resentations and warrantiesexposure has seen significant progress in 2013 and has become more of a quantifiable risk as opposed to a litigation black hole.

During the first nine months of 2013, BAC delivered significant operational positives, which support our belief that theCompanys earnings will continue to accelerate. Total deposits grew by 4.4% YTD (and now total $1.1 trillion) while, more importantly,total loans and leases grew even faster at a 4.6% clip (5th consecutive quarter of growth) led by commercial and non-residential

consumer loans. Consumer loans experienced a second consecutive quarter of growth after 4 years of decline. BAC s adjusted netinterest margin (NIM) had its first increase in 4 quarters in 3Q 2013 jumping 8 basis points to 2.44% led by reduced funding costs.Full-time employees fell ~9% YOY and 3.6% sequentially led by a reduction in consumer real estate services (the entire residentialmortgage industry slowed as refinancings fell). Total non-interest expenses (ex-litigation and legacy assets and servicing) for 3Q 2013were basically flat YOY aided by the New BAC expense reduction initiative, which included a 5% decline in the number of bankingcenters. Finally, improving credit quality remains a major positive for BAC and bodes well for coming quarters. Annualized netcharge-offs were 0.73% of average loans and leases for the current quarter versus 1.86% in 3Q 2012 the lowest since 2005.Non-performing loans were 2.10% of loans and leases outstanding as of 9/30/13, down from 2.68% at the end of 3Q 2012, and theallowance for loan losses/annualized charge-offs stood at a healthy 2.9x versus 1.6x. BAC expects further credit improvement beforestabilization during 2014.

The Bank has done an excellent job of building regulatory capital over the past few years although regulators receive partialcredit (reducing BACs annual dividend to its current $0.04 per share and blocking share repurchases). At the end of 3Q 2013, BAC isin full compliance with all currently proposed regulatory capital requirements, including the Basel III Tier 1 common ratio minimum ofsomewhere between 7%-9.5% (BAC=9.9%). The strength in BACs capital position is evidenced by the Feds approval in March 2013of the Companys request to buyback $5 billion of common stock and retire $5.5 billion of high cost preferred stock (8.20% and8.625% stated dividend rates). During the first nine months of 2013, BAC retired the preferred stock, bought back $1.9 billion of

common stock and reduced long-term debt by over $20 billion. Looking ahead to 2014, we anticipate that the Companys capital planwill include a dividend increase, but will still favor share repurchases. Due to the Feds rejection of a dividend increase in theCompanys 2011 capital plan, management remains fairly mumabout the issue. We look for an increased dividend rate resulting in abelow-market dividend yield of approximately 1.0%-1.5%.

With operations on the upswing, the remaining dark cloud hanging over BAC is its mortgage reps and warranties exposure although recent progress is encouraging. During 2013, the Bank has settled significant claims by MBIA and FNMA, and currentlyawaits the outcome (expected by year end) of a just concluded trial contesting a 2011 $8.5 billion settlement agreement with BNYMellon as trustee for numerous Countrywide mortgage securitizations. As almost 60% of the original objectors have dropped out, webelieve BAC will likely prevail in the outcome. The Banks3Q 2013 reserve for future settlements totaled $14.1 billion although BAChas estimated that settlements could amount to $4 billion over its reserve (down from a $5 billion estimate at 12/31/2011). Overall,BAC has already paid $21.7 billion in claims. The improved housing market has helped with respect to estimated losses by claimantsand should continue to do so.

With significant exposures to volatile capital markets, the mortgage financing environment and unsettled litigation, BACsearnings will remain choppy. However, we estimate the Bank will earn close to a combined $3 per share over the next two fiscal yearsas loan growth, expense controls and a slowly increasing NIM all take hold. Furthermore, we also believe BAC will gradually berewarded by the marketplace via multiple expansion for having rebuilt capital levels, reducing outstanding mortgage litigation claimsand continuing increases in the return of excess capital to shareholders. Utilizing our 2015E tangible book value per share of ~$16.50and a 1.3x multiple (currently ~1.1x), we derive an estimated intrinsic value per share of $21.50, representing over 40% upside fromcurrent price levels.

Symbol: BACExchange: NYSECurrent Price: $15.25Current Yield: 0.3%Current Dividend: $0.04Shares Outstanding (MM): 11,482Major Shareholders: Insiders own


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The Bank of New York Mellon Corporation


(in millions) 09/30/13 2012 2011 Investment Management segmentundervalued within bank structure

Increased net interest margin (NIM) andreduced money market fee waivers willsignificantly benefit earnings when short-term rates rise

Significant 2 year cost saving initiative($700 MM) to be reached by the end of 2013

Cash $ 102,823 $ 94,837 $ 94,418Total Securities 97,457 100,824 81,988TOTAL ASSETS $ 371,952 $ 358,990 $ 325,266

Total Deposits $ 255,560 $ 246,095 $ 219,094Long Term Debt 18,889 18,530 19,933Shareholders Equity 36,959 36,431 33,417


$ 371,952 $ 358,990 $ 325,266



2012 2011 2010 2009

Revenues 14,555 14,730 13,875 7,654Net Income 2,445 2,516 2,518 (1,367)Earnings Per Share 2.03 2.03 2.11 (0.93)Dividends Per Share 0.52 0.48 0.36 0.51Price Range 26.25-19.30 32.50-17.10 32.65-23.78 33.62-15.44


The Bank of New York Mellon Corporation is a world leader in Investment Services (includes custody, clearing, securitieslending, etc.) and Investment Management. The Banks Investment Services (IS) segment represents ~72% of revenues and pre-taxincome with Investment Management (IM) representing the balance. Of note, nearly 80% of the Banks revenue is fee-based whereastraditional banks generate the majority of their revenue from net interest income. At the end of 3Q 2013, the Bank was well-capitalizedin advance of the implementation of Basel III capital requirements (estimated Basel III Tier 1 common equity ratio of 10.1% or 11.1%under the advanced approach versus preliminarily estimates of a 7%-9.5% requirement. Despite 3 years of flattish financial results(see above) due to the lingering effects of the 2008/2009 financial crisis, the Bank has improved capital ratios, reduced sharesoutstanding (~8% reduction since YE 2010), enhanced technologies and attacked its cost structure.

The IM segment currently has in excess of $1.5 trillion of assets under management (AUM), making it one of the largest inthe world. The Bank has a multi-boutique stable of managers, which includes many well-respected firms such as Dreyfus, The BostonCompany, EACM, Insight, Standish and Walter Scott. AUM breakdown by asset class as of 3Q 2013 was: Equities 35%, FixedIncome 39%, Money Markets 19% and Alternative Investments 7%. With ~58% of AUM in fixed income and money markets andinstitutional clientele representing 68% of AUM, the segments average management fee of ~23 basis points is relatively lowcompared to other managers. We believe the low fee levels and an operating margin that is approximately equal to the rest of theCompany (resulting in no apparent need to value the segments differently) have obfuscated the intrinsic value of the IM segment. Webelieve a full or partial spin-off of IM would be beneficial to shareholders and result in a more focused Company. Additionally, wespeculate the spinoff would result in a lower cost structure as regulatory and compliance costs would be reduced since the segmentwould no longer be part of a highly-regulated bank holding company. Opportunities for the segment include adding more passivestrategies (especially in the fast-growing ETF marketplace) versus the current focus on active management.

We value IM by using a multiple of fee revenue as the metric eliminates the need to account for AUM asset classdifferences, differing levels of management fees and varying expense structures. Looking across the spectrum of large publicly-tradedasset managers, the range of fee revenue multiples is 1.8x-5.0x. The removal of outliers leaves the majority of firms in the 3.4x-4.0xrange. Utilizing a 3.7x revenue multiple on our 2015E fee revenues, our estimate of intrinsic value per share of the IM segment isapproximately $14.25.

The IS segment appears to be in the beginning of a positive turn in operations, which should accelerate by 2015. We seecontinued slow, steady growth in IS fee income and profitability as the lack of pricing power keeps a lid on growth. However, theCompany remains focused on lowering its expense structure. The real pressure on earnings has been due to the Feds zero interestrate policy and a relatively flat 0-2 year yield curve that have combined to crush the Companys net interest margin (NIM). Prior to2009, the Banks NIM averaged approximately 2%, but it has steadily declined and currently stands at a near record low 1.16%. Wecalculate that a normalized Fed Funds (FF) to 2-year US treasury notes yield curve would add at least 30 bps to the segments NIMand result in a $0.17 increase in EPS for every 10 bps increase in the yield curve. While not expecting a rise in FFs in the near-term,it is probable that the tapering of QEIII will result in curve steepening and positively affect the segments earnings in 2015.

Another result of the Feds policies is the Companys waiver of money market fund fees in order to keep yields positive.During 3Q 2013, fee waivers reached their highest level yet and cost the Bank ~$0.06 per share (evenly split between IS and IM).Equivalent to ~10% of adjusted EPS for the quarter, the eventual removal of this cost will provide a meaningful boost to normalizedearnings. However, while we believe the Fed will begin to taper QEIII in the not-too-distant future, a Fed Funds Rate rise is seen asless certain with speculation ranging from late 2014 to early 2016.

We estimate IS continues to grow revenues at 2% per year and slowly expands margins through 2015. Importantly, webelieve NIM expansion will take hold in 2015 and conservatively forecast a 10% improvement in net interest revenue (yield curvechanges take time to affect the NIM). Using the Banks 10 year average P/E multiple of 13.5x and our 2015E EPS, our estimate of ISintrinsic value is approximately $29.15 per share. Combining our estimates of intrinsic value per share for IM ($14.25) and IS ($29.15),we derive an estimated intrinsic value per share of the Company of $43.40, representing 32% upside from current price levels.

Symbol: BK Exchange: NYSECurrent Price: $32.84Current Yield: 1.8%Current Dividend : $0.60Shares Outstanding (MM): 1,153Major Shareholders : Insiders own ~1.1%

Average Daily Trading Volume (MM): 4.652-Week Price Range: $33.91-$24.72Price/Earnings Ratio: 18.0xStated Book Value Per Share: $30.82


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Bed Bath & Beyond Inc.

Balance Sheet Data Catalysts/Highli ghts(in millions) 8/31/13 2012 2011 BBBY possesses an attractive set of growth

opportunities; sales of $13 billion and EBITDA of$2.3 billion could be achievable by FY 2015.

Normalization of economic conditions andcontinued strength in U.S. real estate couldprovide additional tailwinds for profits.

BBBY has reduced its share base by 17% since2011, and buybacks should remain a recurringtheme.

Cash $ 839 $ 1,015 $ 1,789Goodwill 486 484 199TOTAL ASSETS $ 6,308 $ 6,280 $ 5,646

Long Term Debt $ 0 $ 0 $ 0Shareholders Equity 4,027 4,080 3,932


$ 6,308 $ 6,280 $ 5,646

Fiscal Year EndingFebruary 28


2012 2011 2010 2009

Revenues 10,915 9,500 8,759 7,829Net Income 1,038 990 791 600Earnings Per Share 4.56 4.06 3.07 2.30Dividends Per Share NA NA NA NAPrice Range 72.75-57.58 63.83-44.79 50.95-26.50 40.23-19.11


Bed Bath & Beyond Inc. is a major operator within the retail sector. BBBY operates over 1,400 stores throughoutNorth America. The stores are primarily located in the U.S., and consist of the following brands: Bed Bath & Beyond,Christmas Tree Shops, Harmon, buybuy BABY, and Cost Plus. BBBYs product line includes a wide range of domesticmerchandise and home furnishings. The firms multiple store concepts provide a means of accessing several geographicmarkets, industry niches, and customer segments. BBBY has achieved a track record of impressive growth over its history.

Although its past level of growth is unlikely to be repeated given the Companys increased store base, we believe the firmcontinues to possess an attractive set of opportunities for both growth and margin expansion during the coming years.

BBBY continues to hold a strong competitive position, with a strategy that emphasizes factors such as productassortment, customer service, and competitive pricing. Much of this competitive position can be attributed to strategicexecution by its experienced management team. BBBYs management team boasts an impressive roster of executives, whohave accumulated a significant amount of experience. These executives include co-founders Warren Eisenberg (age 82) andLeonard Feinstein (age 76), who possess a combined total of over 80 years of experience, and remain actively involved withthe Company they founded. CEO Steven Temares has held his current position for about a decade, and has been with BBBYfor about 20 years.

Looking ahead, we believe BBBY retains an attractive set of opportunities for growth and margin expansion. InBBBYs current geographic footprint, areas such as the Mountain West and West Coast are relatively under-penetratedrelative to other regions (especially true for the Bed Bath & Beyond concept), and BBBY has been gradually ramping up itsmarket presence in Canada. There are roughly 1,000 Bed Bath & Beyond stores across the U.S. and Canada, andmanagement believes this marketplace can support at least 1,300 stores. Moreover, some of its smaller concepts such asbuybuy BABY and Harmon have much lower market penetration, and will likely offer significant expansion opportunities formany years to come. The Company also launched a revamped web site earlier this year that should allow BBBY to betterrespond to demand within the e-commerce channel, an area that had been a source of investor concern in past years.

We have been encouraged by the Companys recent financial results, and believe the firm can carry its positiveoperational momentum into the foreseeable future. During fiscal 2Q-2013 (reported in September), BBBY achieved overallsales growth of 9%, and same store sales growth of nearly 4%, while EPS increased 18% year over year. Assuming generaleconomic conditions remain within a relatively normalized range during the coming years, BBBY should be well positioned forcontinued profit growth. Moreover, a continued recovery in U.S. residential real estate fundamentals should provide anadditional tailwind for store traffic and sales. Utilizing fairly conservative assumptions, we believe sales of $13 billion andEBITDA of $2.3 billion could be attainable by FY 2015 (year ending February 2016).

In our view, BBBY manages itself in a manner that reflects a long-term shareholder mindset. The Companys strongbalance sheet and consistent return of capital to shareholders helps to illustrate this approach. The firm has no debt, and itheld over $900 million in cash and investments as of the most recent quarter. BBBY generates a steady level of free cash flow(6% free cash flow yield), and the firm has consistently repurchased a significant amount of its own shares during recentyears. The Company has reduced its shares outstanding by approximately 17% since 2011, and BBBY bought back $257million of its own shares just during the recent quarter (BBBYs remaining repurchase authorization stood at $1.8 billion). It isconceivable that management could use BBBYs financial position to finance potential M&A opportunities, but we wouldexpect potential transactions to be relatively small, and bolt-on in nature (consistent with the firms past history).

The stock is currently trading at an EV/EBITDA multiple of about 6.5x, a modest multiple for BBBY from ourperspective. We have assumed that BBBY can trade at 8.5x FY 2015 on an EV/EBITDA basis (consistent with its historicalrange and industry averages). These assumptions produce an estimate of intrinsic value of $100 for BBBY shares, about 30%above the current valuation. In our view, this estimate of intrinsic value could prove conservative if BBBYs profitabilityexceeds our expectations, or if the firm potentially attracts the interest of private equity investors.

Symbol: BBBY Exchange: NASDAQ

Current Price: $76.52

Current Yield: NA

Current Dividend: NA

Shares Outstanding (MM): 214.7

Major Shareholders: Insiders own 3%

Average Daily Trading Volume (MM): 1,499

52-Week Price Range: $78.94-$54.33

Price/Earnings Ratio: 13.6x

Stated Book Value Per Share: $18.76


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- 5 -

Callaway Golf Company

Balance Sheet Data Catalysts /Highligh ts

(in millions) 9/30/13 2012 2011 Ongoing market share gains are translating

into improved top and bottom lineperformance

As profitability improves, ELY shouldgenerate an outsized amount of FCF due tosignificant operating loss carryforwards

Elimination of high cost preferred stockshould remove valuation overhang

Cash $ 38 $ 43 $ 43Current Assets 410 387 419TOTAL ASSETS $ 651 $ 638 $ 727

Current Liabilities $ 163 $ 162 $ 68Long Term Debt 108 107 0Shareholders Equity 335 322 513


$ 651 $ 638 $ 727



2012 2011 2010 2009

Revenues 834 887 968 951Net Income (123) (172) (19) (15)

Earnings Per Share (1.96) (2.82) (0.46) (0.33)Dividends Per Share 0.04 0.04 0.04 0.10Price Range 7.29-5.17 8.37-4.70 10.19-5.80 10.31-4.66


We believe that Callaway is in the early stages of executing a successful turnaround as the Company is regaining marketshare, which is translating into significantly improved top and bottom line results. Between 2007 and 2012, Callaways hard goods(woods, irons, putters, wedges and balls) market share in the U.S. steadily declined from 19.6% in 2007 to 13.9% in 2012. However,Callaway has begun to recapture share thanks to its strong new product development and improved marketing initiatives intended torevitalize the iconic Callaway brand. Year-to-date (August 2013), Callaways hard goods market share stood at 15.1%, up 110 basispoints on a Y-o-Y basis and management has noted that its fairway wood market share in the U.S. doubled in 2013, which hascontributed to a 26% increase in Callaways total woods sales (~32% of ELYs total sales). It is worth noting that the Companysmarket share gains are not confined to the U.S. market with the Company recording share gains in key markets including Japan (18%of ELYs sales) and the U.K, which is Callaway largest market in Europe (15% of total). Notably, the Companys YTD market sharegains in Japan of 350 basis points represented the highest share gain for any golf brand in that country helping to drive 31% local

currency growth through the first 9 months of 2013.A key component of Callaways turnaround plan has been improving the image of its iconic brand. As part of its plan to make

the Callaway brand more relevant, especially with avid golfers, Callaway has invested heavily in signing tour players to endorse itsbrand with an emphasis on attracting long-hitting, young dynamic professionals. New Callaway staff members for 2013 includedGary Woodland, Ryo Ishikawa, Nicolas Colsaerts and Chris Kirk. Notably, Callaway had two of its endorsers in the top ten in drivingdistance on each of the PGA and European tour at the end of the 2013 season. The Companys initiatives to make the brand resonatewith consumers are showing success with ELY experiencing brand strength for the first time in many years according to a recent

Attitude and Usagesurvey conducted by industry researcher Golf Datatech.

Callaways 3Q 2013 results suggest that not only is a turnaround unfolding, but it is actually gaining momentum withquarterly and YTD revenues increasing by 38% (constant currency) and 13%, respectively. Results in both time periods imply thatCallaway is outpacing the industry as conditions in the U.S. and Europe, two of the Companys largest markets accounting for 64% ofsales, continue to be soft. The strong results prompted the Company to increase its full year outlook (the first boost in many years) forrevenue with the Company now expecting to generate $836 million up from a prior outlook of $810-$820 million, which wouldrepresent a 13% increase on a pro forma basis. The Companys improved top line, aided by less discounting and new productsuccess, coupled with ongoing cost reduction and manufacturing efficiency initiatives to further streamline the organization are also

translating into significantly enhanced profitability. For the first nine months of 2013, Callaways gross margins on a pro forma basiswere 41%, up 350 basis points while operating expenses on a pro forma basis declined by 11% to $248 million compared with$279 million. As a result of Callaways progress this year, the Company expects to post positive net income on a pro forma basisduring 2013, which would be ELYs first annual profit since 2008.

In addition to its operational improvements, Callaway has made significant progress with its capital structure, which shouldhelp reduce expenses and bolster the Companys financial flexibility. During 2013, Callaway redeemed the remainder of its high cost(7.5%) convertible preferred stock. In our view the convertible preferred security has served as a valuation overhang on the shares inrecent years. While the Company still has $108 million of preferred stock outstanding, it carries a much lower coupon (3.5%) than theconvertible stock that was recently redeemed. In addition, as the Companys profitability continues to improve, ELY is likely togenerate an outsized amount of free cash flow thanks to $273 million in operating loss carryforwards at the end of 2012. With futuretax payments likely to be minimal, ELY should be well positioned to further improve its capital structure and have the ability to beginreturning value to shareholders via higher dividends or share buybacks.

We believe Callaways operating momentum should continue under the auspices of CEO Chip Brewer, who appears to beleading Callaway in the right direction and successfully orchestrated a prior golf industry turnaround while at Adams Golf. The pace ofnew product introductions is set to accelerate under Brewer (the Big Bertha is back), which should help the Company sustain itsrecent operating momentum. Our estimate of Callaways intrinsic value is $12 a share, which is derived by applying discountedmultiples (relative to recent golf industry transactions) to our estimate of 2016 sales and profitability. We note that CEO Brewer isheavily incentivized to see through a successful turnaround as he is in possession of 800k ELY stock options (avg. exercise price:$6.48 a share) and 300k restricted stock units that he received upon joining the Company as part of make-whole agreement forincentives he was forfeiting at his prior employer.

Symbol: ELY Exchange: NYSECurrent Price: $7.50Current Yield: 0.5%Current Dividend : $0.04Shares Outstanding (MM): 72.6Major Shareholders : Insiders 2.3%

Average Daily Trading Volume (MM): 0.852-Week Price Range: $8.97-$6.15Price/Earnings Ratio: N/AStated Book Value Per Share: $4.61


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Carnival Corporation


(in millions)8/31/2013 2012 2011

The Company is in the early stages ofundergoing a complete transformation withregard to its operating philosophy.

In our opinion, profits are well below potentialrelative to its own historic pricing as well asthat of its competitors.

We believe CCLs private market value is atleast 40% above its current market price.

Cash $ 981 $ 465 $ 450Current Assets 2,634 1,821 1,312TOTAL ASSETS $ 40,393 $ 39,161 $ 38,637

Current Liabilities $ 7,488 $ 7,340 $ 6,105Long Term Debt 7,792 7,168 8,053Shareholders Equity 24,260 23,929 23,832TOTAL LIABILITIES ANDSHAREHOLDERS EQUITY

$ 40,393 $ 39,161 $ 38,637

Fiscal Year EndingNovember 30


2012 2011 2010 2009

Revenues 15,382 15,793 14,469 13,157

Net Income 1,298 1,912 1,978 1,790Earnings Per Share 1.67 2.42 2.47 2.23Dividends Per Share 1.00 1.00 0.40 NilPrice Range 39.95-29.15 48.14-28.52 47.22-29.68 34.95-16.80


Investing in turnaround situations is not only complicated, but in the vast majority of instances requiressignificant amounts of patience. However, once an underachieving company finally fesses up to its past sins bycutting costs, paying down debt, eliminating unprofitable or non-core businesses, and intelligently articulates a newbusiness plan, the result is often a rapid rise in its share price (Home Depot and McDonalds are relatively recentexamples of this phenomenon). Furthermore, if the plan is orchestrated by a newly appointed CEO, the commonshares tend to advance even sooner.

Carnival, the worlds largest cruise operator, was clearly in crisis mode throughout 2012 and 2013. Its

Costa Concordia vessel ran aground near the Italian coast in 2012, killing 32 people and generating an immenseamount of bad media coverage. That was followed by more negative incidents in 2013, including a fire aboard theCarnival Triumph in February that further tarnished the Companys image.

As a result of the aforementioned, Micky Arison, the son of the Company's founder and the Companyschief executive officer for 34 years, resigned and was replaced by Arnold Donald. Donald, who has been a Carnivalboard member for 12 years, is a highly regarded entrepreneur and has resigned all of his private equity positions sohe can devote his energy to literally righting the ship.

In the past CCLs key growth drivers have been adding new vessels and penetrating new markets. CCLstarted with a few ships, grew to a fleet, and now has an armada. The Company is in the early stages of undergoinga complete transformation with regard to its operating philosophy. One in which it is transitioning from focusing onunit growth in favor of significant cost cutting and retrofitting existing ships. As the Company adds fewer new shipsin the future, revenue growth will emanate from adding new cabins and innovative dining and bar concepts toexisting vessels. Retrofitting will only be done if a satisfactory return on capital can be attained.

Other initiatives being implemented by Donald include focusing on collaboration between the many brandsunder the Carnival umbrella, something that was lacking in the past. Redundancies will be eliminated, and crossmarketing will be initiated. Donald has already met with travel agents to repair relations that have frayed in recentyears. CCL has simplified its fare structure and incentivized those agents. A more aggressive campaign to win overmore travelers (currently about 35% who have never cruised before) has begun, as well as one intended torevitalize its tarnished brand.

Carnival will continue to discount prices throughout a good part of 2014 in order to fill its ships. As credibilityis restored a more aggressive pricing policy will be implemented. Investor expectations in terms of earnings andstock price have been sufficiently diminished to create a margin of safety. In our opinion, profits are well belowpotential relative to its own historic pricing as well as that of its competitors. By fiscal 2015 EPS could reach $2.70versus street estimates of $1.60 for the fiscal year ended Nov 30, 2013. Potential earning power based on CCLspeak 2008 net yield to its current fleet and expense structure is over $4.50 and even higher if compared to

competitors.We believe CCLs private market value is at least 40% above its current market price. We reach thisnumber by projecting future profit potential, as well as taking into consideration the difficult barriers to entry, and theunique consumer franchise that has been created over multiple decades.

Symbol: CCL Exchange: NYSECurrent Price: $35.34Current Yield: 2.8%Current Dividend: $1.00Shares Outstanding (MM): 776Major Shareholders: Micky Arison~22%

Average Daily Trad ing Volume (MM): 4.852-Week Price Range: $39.95-31.44Price/Earnings Ratio: 22.3xStated Book Value Per Share: $31.26


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The Charles Schwab Corporation

Balance Sheet Data Catalysts /Highligh ts(in millions) 9/30/2013 2012 2011 Increased short term interest rates will have

favorable impact on SCHWs spread-basedbusinesses and eliminate MMF fee waivers

Traction with new platforms includingSchwab Index Advantage, Schwab ETFOneSource and the upcoming/pendinglaunch of Schwabs ETF 401 (k) plans

SCHW is well capitalized, which shouldallow it to repurchase shares and increaseits dividend

Cash $ 7,362 $ 12,663 $ 8,679Total Securities 80,566 64,953 49,666TOTAL ASSETS $ 140,211 $ 133,637 $ 108,553

Total Deposits $ 91,187 $ 79,377 $ 60,854Long Term Debt 1,904 1,632 2,001

Shareholders Equity 10,053 9,589 7,714TOTAL LIABILITIES ANDSHAREHOLDERS EQUITY

$ 140,211 $ 133,637 $ 108,553



2012 2011 2010 2009

Revenues 4,883 4,691 4,248 4,193

Net Income 928 864 454 787Earnings Per Share 0.69 0.70 0.38 0.68Dividends Per Share N/A N/A N/A N/APrice Range 15.38-11.61 19.45-10.75 19.88-12.76 19.49-11.34


The Charles Schwab Corporation provides its clients a number of services including securities brokerage, banking, moneymanagement and financial advisory. Over the past two decades, Schwab has successfully transformed its business model fromcommission dependent to one that derives the vast majority of its revenues and profitability from either fee based or spread basedbusinesses. At 3Q 2013, asset management and administration fees (42% of 3Q 2013 net revenues) and net interest revenue (37%)accounted for nearly 80% of SCHWs total net revenues. Meanwhile, transactional based revenues (commissions, etc.) now represent

just 16% of total net revenues, down from 60% as recently as 1998.

By all accounts, the current Charles Schwab bears little resemblance to the upstart brokerage firm that successfullychallenged the full service model during the early 1970s. New assets entering Schwabs various platforms are increasingly generatingfees for the Company based on asset levels rather than commissions. Between 2009 and 2012, the Companys asset management and

administration fees (excluding money market fund fees) increased to $1.7 billion from $1.1 billion, representing a 17% CAGR. It shouldalso be noted that nearly half of Schwabs total client assets ($1 trillion out of $2.2 trillion) at 3Q 2013 were receiving some type ofongoing advice and hence generating an ongoing revenue stream for the Company.

We believe Charles Schwab will be a primary beneficiary of what we view as a rising interest rate environment. Persistentlylow rates have been particularly challenging for Schwab and have masked its true earnings power. Approximately 75% of SCHWsinterest-earning assets are currently tied to short-term rates. In addition to the pressure on net interest revenue, low interest rates haveforced the Company to provide fee waivers for its money market funds in order for investors in these products to earn a positive return.During 2012, fee waivers totaled a whopping $587 million, representing nearly 30% of SCHWs asset management and administrationfees. As a result, as short term rates begin to increase this revenue component should experience a significant acceleration and have adisproportionate impact on SCHWs overall profitability.

In the wake of the financial crisis with its competitors struggling, Schwab made a strategic decision to continue to invest in itsclient capabilities. Its hard to argue that this was not the right decision. Between 2008 and 2012, Schwab attracted $500 billion inassets, which is $200 billion more than its top four publicly traded competitors combined. While expenses continued to remain elevated,tracking in line with revenue growth in recent years, management recently stated that expense growth during 2014 should be mutedand trail revenue growth by ~300 to 500 bps. We believe this outlook is realistic reflecting Schwabs asset gathering progress(YTD-3Q 2013, SCHWs core net new assets of $108.8 billion represent an annualized growth rate of approximately 7.4%), the prospectfor higher rates, and the Companys disciplined expense management.

Schwab has recently embarked on a number of initiatives to further accelerate its fee based revenues. During 2012, theCompany launched Schwab Index Advantage to become a much greater participant in the $5 trillion 401 (k) market by offering low costmutual funds as well as professional advice. Recent results have been encouraging as Schwab was able to attract $4 billion from50 employers in just its first year. An ETF only 401 (k) program is also scheduled to launch shortly that should allow Schwab to makefurther inroads in the 401 (k) market. Schwabs recent decision to offer a marketplace of commission-free ETFs should also helpaccelerate fee based revenues. While Schwab foregoes a commission payment, it now generates an attractive long-term recurringrevenue stream tied to asset levels. According to Schwab management, early indications are that the flows into the ETF OneSourceplatform are coming out of commission oriented ETFs or commission equities rather than cannibalizing Schwabs profitable Mutual FundOneSource program.

Schwab is well capitalized and is poised to return a significant amount of value to shareholders in our view. At September 30,2013, Schwab Bank boasted a Tier 1 Risk-Based Capital ratio of 18.5%, well above the 6% level deemed to be well capitalized. Whilethe current interest rate environment has created its share of headwinds, SCHW has taken advantage of historically low rates to securecapital at attractive rates. As earnings growth accelerates, we would not be surprised if Schwab boosts its dividend and beginsrepurchasing shares as soon as the Company receives more clarity on future capital requirements.

Utilizing a sum-of-the-parts valuation, our estimate of Schwabs intrinsic value is $32 a share, representing 29% upside fromcurrent levels. We would not be surprised if this proves conservative, especially as SCHWs true earnings power emerges. In addition,dont rule out the potential for a takeout. Company founder Charles Schwab is 75 years old and controls over 14% of the stock.We believe that SCHWs fee based business would be attractive for a number of large financial institutions.

Symbol: SCHW Exchange: NYSECurrent Price: $24.80Current Yield: N/ACurrent Dividend : N/AShares Outstanding (MM): 1,296Major Shareholders : Charles Schwab: 14.1%

Average Daily Trading Volume (MM): 8.852-Week Price Range: $25.36-$14.00Price/Earnings Ratio: 35.4Stated Book Value Per Share: $7.76


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Coach, Inc.

Balance Sheet Data Catalysts/Highli ghts

(in millions) 9/30/13 2012 2011 Despite a slowdown in growth, COH continues topossess a strong market position, attractivemargins, and solid cash flow.

Recent sales weakness in North America haspenalized share performance, serving toovershadow future growth opportunities.

We believe COH is approaching an inflection pointin terms of growth expectations and valuation,creating a very favorable risk/reward scenario forlong-term investors.

Cash $ 855 $ 1,135 $ 917Goodwill 373 345 376TOTAL ASSETS $ 3,487 $ 3,532 $ 3,104

Long Term Debt $ 0 $ 1 $ 1Shareholders Equity 2,379 2,409 1,993


$ 3,487 $ 3,532 $ 3,104

Fiscal Year EndingJune 30


2013 2012 2011 2010

Revenues 5,075 4,763 4,159 3,608Net Income 1,034 1,039 881 735Earnings Per Share 3.61 3.53 2.92 2.33Dividends Per Share 1.24 0.98 0.68 0.38Price Range 61.94-45.87 79.70-48.24 69.20-45.70 58.55-32.96


Coach Inc. is a well established provider of high-end accessories and gifts for men and women, such as leather handbags,travel accessories, shoes, watches, jewelry and other related items. Much of Coachs notable track record has been characterized byrobust growth and profitability. However, COHs stock performance and operational trajectory have significantly moderated duringmore recent years due to investor concerns about slowing growth and increased competition in the North American market (69% oftotal sales). Although past growth rates are unlikely to be repeated (EBIT CAGRs over 20%), we believe the Companys competitiveposition and future growth outlook are being overlooked. Moreover, the stocks weak recent performance (down over 10% since early2013) has created an opportunity to own an attractive business at a very reasonable price.

Just within the past 10-20 years, new competitors such as Kate Spade, Michael Kors, and Tory Burch have establishedthemselves as successful operators within the U.S. market for luxury handbags and accessories. However, it is important torecognize that COH has faced its share of challenges in the past, and it has a record of successfully adapting to a changingenvironment. COHs current strategy is designed to provide customers with innovative and unique products through its wellestablished distribution channels (both direct and wholesale), that are consistent with COHs well known market identity. TheCompany has an industry presence characterized by both a leading market share and global reach (about a third of sales are derivedfrom overseas). The firm continues to hold #1 share in the U.S. luxury handbag market, and is the leading foreign firm in Japan.

Looking ahead, a combination of international opportunities and product line expansion will likely be the Companys primarygrowth drivers. We would highlight the Asian market as an area of particular interest that will likely attract continued attention. Theoverall size of the market for premium handbags and accessories in Asia now stands at approximately $12 billion, and the growthrates in many of the regions emerging markets remain in the double-digits.The Chinese market is an especially important growthdriver, and COH has been building its presence there for several years. The number of COH stores in China has more than doubledsince just FY 2010, and longer-term prospects in other emerging markets such as Latin America are also promising.

In addition, COH has expanded its product line to increasingly cater to male customers. This category is oftenunderappreciated by investors. This segment is estimated to be a $5 billion market, and it is particularly prominent in overseas

regions such as Asia and Europe, and is continuing to gain traction in North America. Overall demand growth for Mens accessoriesis generally expected to remain in the double-digits for the foreseeable future. The Companys global presence and overall reach isalso enhanced by its growing e-commerce presence. E-commerce has been a growing distribution channel, with industry salesincreasing 25% annually, creating a total market size of approximately $10 billion.

Despite a less robust growth profile, profitability at COH has remained impressive. Over the past 5 years, COH hasachieved an average ROE of 49% (47% during FY13) with little or no leverage, while maintaining an operating margin of over 30%.The firm continues to hold a solid financial position, illustrated by its net cash position of over $850 million (about $3.00 per share).COH also generates a healthy level of cash flow; the Companys annual free cash flow has exceeded $1 billion during recent years,and we expect at least $1 billion of annual free cash flow to be sustainable over the long-term (implying a free cash flow yield of over6%). The firm returns capital to shareholders via a combination of dividends and opportunistic stock buybacks.

Barring a significant deterioration in overall economic conditions, we believe COH is approaching an inflection point in termsof growth expectations and valuation. In our view, the stocks decline and corresponding reduction in future expectations havecreated an attractive risk/reward scenario for contrarian, long-term investors. Assuming the low end of COHs historical valuationrange (9.0x EV/EBITDA), and applying that to our projections for FY 2015 EBITDA produces an estimated intrinsic value of about$75 per share, suggesting total return potential of over 35% from the current price. Moreover, the firms well established brand andstellar financial profile could potentially attract private equity investors. In our view, either internal or external catalysts couldeventually translate to an intrinsic value of at least $80-$90 per share over the long-term.

Symbol: COH Exchange: NYSECurrent Price: $55.52Current Yield: 2.4%Current Dividend: $1.35Shares Outstanding (MM): 284.5Major Shareholders: Insiders own 1%

Average Daily Trading Volume (MM): 3,76652-Week Price Range: $61.94-$45.87Price/Earnings Ratio: 14.5xStated Book Value Per Share: $8.47


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Comcast Corporation

Balance Sheet Data Catalysts/Highlights(in millions) 9/30/2012 2012 2011 Roll out of entertainment platform X1 should

be completed by year-end 2013 and shouldhelp increase customer loyalty and attractnew customers

Accelerated share repurchases and higherdividends with leverage migrating to low endof range following NBCU transaction

Cash $ 5,735 $ 12,415 $ 1,674Current Assets 13,407 19,991 8,573TOTAL ASSETS $ 156,595 $ 164,791 $ 157,818

Current Liabilities $ 18,666 $ 16,714 $ 13,241Long Term Debt 46,525 40,458 39,309

Shareholders Equity 50,134 49,796 47,274TOTAL LIABILITIES ANDSHAREHOLDERS EQUITY

$ 156,595 $ 164,971 $ 157,818



2012 2011 2010 2009

Revenues 62,570 55,842 37,937 35,756

Net Income

6,203 4,160 3,635 3,638Earnings Per Share 2.28 1.50 1.29 1.26Dividends Per Share 0.65 0.45 0.378 0.297Price Range 36.91-23.97 25.40-18.74 21.17-14.28 17.35-10.33


Comcasts cable business (65% of consolidated revenues) continues to fire on all cylinders with revenues andoperating cash flows increasing 5.2% and 6.2%, respectively, during 3Q 2013. The decline in video subs (loss of 129k subs vs.117k loss in the year-ago quarter) was the only item to really quibble over. We would note that these subscriber losses are beingmore than offset by continued strength in higher margin products such as High-Speed Internet (297k vs. 287k) and voicecustomers (169k vs. 123k). As we have noted previously, growth in these non-video products has a favorable impact onprofitability given the absence of programming expenses. In addition, Comcast continues to experience an increase in thenumber of customers (now 12.1 million) taking advanced services HD, DVRs, etc., with these subscribers representing 56% ofCMCKs video customer base. It is also worth noting the increased number of customers subscribing to at least two products

now stands at 78%, up from 70% just two years ago (43% take all three vs. 36% 3 years ago). As a reminder, subscribers tomultiple products tend to be more loyal and hence churn less. Another factor that should increase customer loyalty, andpotentially aid in new customer growth is the Companys X1 platform, which is an entertainment operating system platform.X1 had been deployed to over 90% of its footprint at 3Q 2013 and the Company expects the rollout to be complete by the end of2013. Further, Comcast has noted that a number of MSOs have expressed interest in licensing the platform, which would createa whole new revenue stream for the Company.

In early 2013, Comcast completed the acquisition of GEs remaining stake in NBC Universal (35% of revenues). Wehave previously expressed our enthusiasm for the deal, which was struck at an attractive valuation and on favorable terms.Comcast ended up acquiring the remaining stake about 5 years early given the future opportunities it continues to see withimproving its business. The Company has significantly improved the profitability of the theme parks business with EBITDA forthe division growing from ~$400 million (annually) at the time of the acquisition to ~$1 billion on a current run rate basis.Progress has been also made with the broadcast operations that are generating approximately $200 million in high-marginretransmission revenues, from virtually nothing when Comcast completed the acquisition. Perhaps a bigger opportunity is yet tocome with improvement in the Cable Networks business (68% of NBCU EBITDA), where management has noted that there is a~20%-25% monetization gap on the affiliate side (based on ratings of comparable cable networks). In addition, management

believes that the NBCUsportfolio of cable networks are also not being appropriately compensated in terms of advertising dollarsgiven their strong ratings.

While returns to shareholders have been strong in recent years, including $8 billion in share repurchases since 2009and a meaningful increase in the Companys dividend (up ~2.5x to $0.78 a share: 1.7% yield), we would not be surprised ifreturns accelerated in the coming years. Comcast experienced a modest increase in leverage associated with the NBCUpurchase (a majority of the purchase had been self- funded with NBCUs cash flow), but leverage is now approaching Companystargeted range of 2.0x. Barring Comcast acquiring Time Warner Cable outright (we believe there would be regulatory issues ifthis were to occur), we believe that the Companys large and growing stream of free cash flow will be incre asingly returned toshareholders via higher dividends and share buybacks. We note that the Company s payout ratio in the low 30%range providesplenty of room for further increases.

We believe that investors are applying a conglomerate discount to Comcast and not ascribing an appropriate multiplefor its first rate cable properties and attractive portfolio of content assets with good growth opportunities. Our estimate ofComcasts intrinsic value is $64 a share, which is derived by applying an 8x and 10x multiple to our estimates of 2015E EBITDAfor the Cable and NBCU segments, respectively. In our view, the multiples we have applied are conservative and represent a

discount to industry precedent transactions. We believe that further upside is possible and could be achieved if Comcast is ableto participate in the latest rumored cable industry consolidation or a greater than expected improvement in NBCUs performance.

Symbol: CMCSK/CMCSAExchange: NASDAQCurrent Price: $47.22Current Yield: 1.7%Current Dividend: $0.78Shares Outstanding (MM): 2,658Major Shareholders: Brian Roberts: 33% votingAverage Daily Trading Volume (MM): 1.952-Week Price Range: $48.78-$34.95Price/Earnings Ratio: 19.7xStated Book Value Per Share: $18.86


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Constellation Brands, Inc.

Balance Sheet Data Catalysts /Highligh ts(in millions) 8/31/2013 2/28/2013 2/29/2012 Transformative June 2013 transaction

obtained perpetual rights to Grupo Modelosbrands in the U.S. (includes Corona beer)and a Mexican brewery

Beer operating margin expansion due tovertical in

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