The document provides an agenda and overview for a presentation on basic materials. It discusses current holdings in Alcoa and Deere & Co, sub-industries in the materials sector, sector leaders, and the macroeconomic outlook. It then provides more detailed analyses of Deere & Co and Alcoa, including financial performance, recent news, investment rationales, and recommendations to sell Alcoa. It concludes with an overview of the SPDR Gold Trust ETF and the case for gold as an investment.

1. BASIC
MATERIALS
Ryan Shelley Bill McCarran Thao
Truong

2. AGENDA
 Current Holding
 Sub-Industries
 Sector Leaders
 Materials Outlook
 Deere & Co (DE)
 Alcoa (AA)
 SPDR Gold Trust (GLD)
 Recommendations
 Q&A

3. Current Holdings
 Alcoa (AA) Purchase:XXX
 Purchased 9/14/11 8/31/11:XXX
 283 shares @ $11.73 YTD: XXX
 Deere & co (DE) Purchase:XXX
 Purchased Feb 25th 20118/31/11:XXX
 25 Shares @ $90.49 YTD: XXX
 S&P Basic Materials Weighting:
3.7%
 Atkins Basic Materials Weighting:
5.3%

4. Sub Industries
 Chemicals
 The Chemicals Industry in the Materials Sector includes producers of
commodity, diversified, fertilizers, agricultural, and specialty chemicals. It also
includes manufacturers of industrial gases
 Construction Materials ()
 The Construction Materials Industry in the Materials Sector includes
manufacturers of construction materials including
sand, clay, gypsum, lime, aggregates, cement, concrete, and bricks. Other
finished or semi-finished building materials are classified in the Building Products
industry
 Containers & Packaging
 The Containers and Packaging Industry in the Materials Sector includes
manufacturers of metal, glass, or plastic containers (including corks and
caps), and manufacturers of paper and cardboard containers and packaging
 Metals & Mining
 The Metals and Mining Industry in the Materials Sector includes producers of
aluminum and related products; companies engaged in diversified metals and
mining production or extraction of gold, precious metals, minerals and related
products; and producers of iron, steel and related products
 Paper & Forest Products
 The Paper and Forest Products Industry in the Materials Sector includes
manufacturers of timber, related wood products, and all grades of paper. It
includes manufacturers of lumber for the building industry, and excludes

5. Sector Leaders
 Du Pont 10.71%
 Monsanto 10.18%
 FreePort-McMoran 8.82%
 Praxiar 7.96%
 Newmont Mining 7.88%
 Dow Chemicals 4.82%
 Air Prods & Chem 4.49%
 Mosaic Co 4.24%
 PPG Ind Inc 3.50%
 EcoLab 3.32%

6. Macro Overview
 GDP Q4 2.8%
 ISM manufacturing :
54.1
 Durable Goods: +1.7%
 China Q4 GDP 9.2%
 PMI 50.5
 Baltic Dry Index
 Eyes on Europe’s
 QE3?
 Trade Deficit
widening

7. JOHN DEERE

8. DE Overview
 Headquarters (Founded) Moline, IL. (1837)
 Market Cap $34.8 billion
 Industry Farm and construction machinery
Operation Profit by
Segment Revenue by
Geography
16%
Agriculture & Turf 8%
9%
Construction & 22% US & Canada
Forestry Outside
Financial
75% Other
Services 70%

9. Agriculture 2012 Outlook
Monthly U.S. agricultural exports
$ billion
14
• Excess Supply, crop
2008
12
2009
10
2010
8
price 2012 are projected 6
4
2011
2012
OCT JAN APR JUL
to decrease Fiscal years
Monthly U.S. agricultural imports
• Farm Profits and $ billion
12
2008
exports are forecast at 10
8
2009
2010
all times high and 6
4
2011
2012
continue to grow OCT JAN APR JUL
Fiscal years
• Global food cost 2011
down 11% while US
farm income up 28%
• Forecast: Farm corn

10. Holding Rationale
 Need for Agricultural output Increase Globally
 Long-term macroeconomic tailwind in BRIC-
countries
 Low used-inventory, machinery has high resell
value
 Geographically diversified
 Operations and manufacturing efficiency
 Corn-based ethanol as an alternative form of
fuel in the U.S.
 Repurchase activity

11. Recent News
 2/7/2012 USDA To Release New Long-Term Agricultural
Projections
 2/7/2012 Farmers Plan Biggest U.S. Crop Boost Since
1984, Led by Corn: Commodities
 2/2/2012 Blackrock Favors Seed, Machinery Makers Over
Food as Investment
 2/2/2012 John Deere Sponsors National Ag Day to Celebrate
American Agriculture
 1/26/2012 John Deer Marks the Company’s 175th Anniversary
 11/15/2011 U.S. Farm Exports Reach Record $137.4 Billion
on China Buys
 11/10/2011 Deere & Company Announces Additional
Investments in Russia

12. Performance
 Q4 results and initial 2012 over-expectations

13. Financial Performance
 Trailing-12-Month Revenue $32.0 billion
 Return on Equity 42.81%
 Cash/Debt $3.7 billion / $26.7 billion
 Dividend Yield 1.9%
 Next Earnings Date: Feb 15, 2012
 Estimated growth FY 2012: +17.30
 Est. Q4 2011: 1.44 2011 EPS: 6.44
 Actual: 1.62 2012e EPS: 7.84
 Surprise: 12.4% 2013e EPS: 8.38
 Favorable currency-translation impact of about 3
percent

14. Cont’
GROWTH RATES % COMPANY INDUSTRY S&P 500
Sales (Qtr vs yr ago qtr) 19.6 24.3 11.7
Net Income (Qtr vs yr ago qtr) 46.5 42.1 14.4
Sales (5-Year Annual Avg.) 7.65 6.34 7.75
Net Income (5-Year Annual Avg.) 14.01 8.99 7.64
Dividends (5-Year Annual Avg.) 14.27 7.3 5.09
Yahoo Target Price $93
Morningstar Target $113.40

15. Financials
Market Q Rv Gross
Stock Cap Growth Margin EPS P/E 5 yr PEG P/S Beta ROE
DE 35.72B 0.196 0.2916 6.63 13.33 0.84 1.1 1.63 0.428
AGCO 5.14B 0.267 0.1972 3.92 13.5 0.84 0.59 2 0.448
CAT 73.73B 0.346 0.2616 7.4 15.4 0.44 1.19 2 0.403
CNH 10.44B 0.243 0.2376 3.91 11.13 0.8 0.52 2.89 0.121
Industry 1.79B 0.195 0.2916 4.32 10.6 0.84 0.72 0.204

16. Potential Risks
 Highly leveraged
 Weaken economic sentiments
 EU credits issues
 China residential construction risks
 USDA pointed to higher-than-expected
inventory levels for most crops

17. Alcoa- (AA)

18. Recommendation
 Sell, Sell, Sell!

19. Business Overview
 Worlds leading alumina & aluminum
producer
 Operating in 31 countries
Revenue by Segment
 Vertically integrated
Other Revenue by Region
7%
Engineered Alumina
Products 20% Asia
17% 16%
US
50%
Flat Rolled
25% Aluminum
Europe
38%
27%

20. Financials
 Market Cap- 11.36B
 P/E- 19.51
 PEG-1.03
 P/B- 0.8
 P/S- 0.5
 Sitting on nearly $2 billion of Liquid Assets
 Dividend-$0.03
 Beta 2.02

21. Recent News
 Alcoa Attended the Superbowl
 Australia Aluminum Smelter
 European and China Uncertainty

22. Original Investment Rationale
 Exposure to Aluminum
 Potential
global growth driving up prices
 Alum continues to replace other metals
 Alcoa
 Market leader
 Trending down the cost curve
 Healthy balance sheet

23. Sell Rationale
 Time horizon too long
 We’ve made our money back
 Macroeconomy
 China and Europe uncertainty
 Smelter restarts and new entrants
 Competitive expansion for Alumina
 Aluminum Supply

24. As a Future Investment
 Why Aluminum
 S&D driving up prices-China
 Demand from emerging markets
 Substitution factor
 Why Alcoa
 Largest global provider for a pure play-Rio
 Globally diverse w/ growing pos in China
 Exposed to up and downstream
 Stronger margins
 Strong balance Sheet

25. Alcoa Summary
 Solid fundamentals and production processes
undermined (pun intended) by Economic
uncertainty and Aluminum Prices
 Dead money
 Get out while we’ve got most of our money back
 No growth in our investment horizon
 Still consider as a future investment
 Consider buy around $12

26. SPDR Gold Trust
GLD: $167.33 Beta: .11
NAV: $167.07 Inst own: 42%
Mkt Cap: 71.46 B 1 GLD= 1/10 an ounce

27. Who Holds gold
 1. U.S. - $418 billion  4. Italy $ 126.12 billion
 2. Germany $174.7  5. France $125.28 billion
billion  6. SPDR Gold ETF
 3. IMF $144.76 billion $64.53 billion
World Gold Holdings
CBs
12% 20%
Jewlery 18%
Investments
50%
Industrial

28. Gold as an investment
1. Inflation
2. Economic uncertainty
3. Political uncertainty
4. Portfolio diversification
Weak Currencies
Low interest
rates
Fear

29. Gold Supply
 2011: 2% Recycle
d
 Driven by recycled 40% Mining
60%
China 14%
Australia 10%
US 9%
Africa 8%
Russia 8%

30. Gold Demand
 2011: +6%
 Investment driven: 33% yoy
 Central Banks buying

31. Central Banks
 Central Banks purchases were up 200%
 Signaling
concerns about weak currency
 WGC predicts purchases to continue for 2012
 Negative Real rates: continue to diversify to
Metals
 Gold as % of foreign reserves Brazil .5%
 Developed nations: 70% Russi 8.2%
 China: moving from Treasuries to a
Gold. +30% YoY India 8.5%
China 1.6%
Japan 3%

32. Today’s World
 Global debt crisis
 Devalue vs Default Debt/GD 10yr
P bond
1. Devalue:
Greece 140% 25.11%
 Target Int rates
Italy 119% 7.26%
 Increase MS
 Weak currency Ireland 96% 7.88%
2. Default: US 93% 1.95%
 Ugly Spain 60% 5.77%
Portug 180% 15.22%
al

33. Global MS vs Gold
 Loose Global Monetary Policies
 QE programs: US, JAPAN, UK
 ECB LTRO to inject liquidity

34. Gold and MS

35. United States
 US Debt at 100% GDP Graph: Monetary policy &
 Fed promises low int rates and possible stocks
QE3 •Rates low to mid 2013
•Operation Twist
 Operation twist •US $ iquidity
 Stocks P/B: 2.05 •ECB LTRO
•China stimulus
•Rates low to mid 2014

36. Dollar Index & Gold
 Weak dollar performance

37. US Real Interest Rates
 Gold inverse
relationship with real
int rates
 10 yr yield: 2%
 Real int rate: -.2%
 Fed promise to keep
rates low
 Limited downside risk

38. ECB
 ECB initiates LTRO
3 yr loans at 1%

39. Europe Crisis
Gold coin: “Heads I win, Tails you lose”
Bond Purchases Currency break No Resolution
up
Est $2.5 Trillions Faith
Greece returns disappears
Italy+France+Greece to Drachma
$5 Trillion Debt
outstanding Capital controls
3,4 times Feds QE Gold as
currency?

40. Japan
 Debt-GDP: 220%
 10yr yield .98%
 60% debt to roll over in next 5 yrs
 More borrowing
 April: $566 bill to fund budget
 2011 first trade deficit
 Sustainable?
 What’s the Trigger
 S&P warn of a downgrade
 Europe default: Greece, Portugal?

41. Political
 US gov, Eu gov, Iran vs gold

42. Portfolio Diversification
 Risk management
 Low Volitility
 Low Correlation
 Superior risk adjusted
return

43. Gold Performance charts

44. Risks
 Stronger economy no QE3
 Strong Dollar
 India demand
 CME Margin Hikes
 Further correction

45. Highlights
 Physical Demand > supply
 China and India
 Miners quit hedges
 Global MS outpacing gold prices
 Monetizing Debt
 More to liquidity to come
 Falling Real interest rates
 Political stand still: EU, US
 Diversification benefits

46. ETF VS MINING
 Cutting out the middle man
 Geographical & Political risks
 Africa
 High Energy Cost
 Hurting Margins
 Top 4 Miners coming up empty handed
 More $ chasing less Gold
Graph??????? Vs mining

47. Recommendations
 Option 1:
 HOLD DEERE
 SELL ALCOA
 BUY SPDR GLD
 Option 2:
 HOLD DE & AA

48. Q&A

49. Fear
 Correlation to VIX