OSIG WEEKLY

OSIG WEEKLY

Agenda for 11/08/13 Mike Meade-Fixed Income Update Emily Durr-Financial Sector Pitch Chelsea Garza-Technology Sector Pitch

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Sector Updates

Consumer Goods Update ? Brian Dinh

SBUX-Starbucks, the company that reinvented the modern coffee shop, is turning its attention to another venue: the teahouse. Last year the 19,000-cafe giant acquired Teavana, a chain of mall stores that sell tea and tea ware. It plans to open 1,000 stores in North America within 10 years. They have confidence and excitement and optimism about the tea bar concept in the U.S and North America. --Seeking Alpha, " Tea Noses Ahead Of Coffee For

Starbucks"

CL-The shares of Colgate-Palmolive Co. reached a new 52-week high of $66.05 on Oct 30, 2013, gaining momentum from the company's recently reported strong top- and bottom-line results for third quarter 2013 and an impressive full-year outlook. --Zacks Equity Research

Financial Sector Update ? Emily Durr

JPM-After being fined over $13 billion to clear JPM of their criminal charges, JPM faces another fine from the European Union. The EU antitrust regulators are poised to fine six world banks including JPMorgan for alleged rigging of benchmark Eurozone interest rates. This marks the first punishments handed out by Brussels in a worldwide inquiry. This is important to the market, because we continue to see an increase in government regulations on large banks to prevent economic failures. --November 5, 2013

BLK: None

HCP-HCP priced an offering of $800 million of 4.25% senior unsecured notes due 2023. The net proceeds from the offering after expenses are approximately $789 million, which will be used to pay the $400 million of HCP's 5.65% senior unsecured notes due December 15, 2013. The remaining net proceeds will be used to repay amounts of outstanding credit and corporate purposes.

Offering unsecured notes is a healthy sign for HCP. Issuing notes may signal HCP is raising capital for share repurchase, acquisitions, etc. --November 5, 2013

V: None

Healthcare Sector Update- Blake Hendricks

CEO of SIGA Technologies, Eric Rose, announced the company's intent to collaborate with a partner for the development of their Dengue Fever drug candidates. Dengue Fever is the world's fastest growing tropical

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disease, infecting about 100 million people yearly, and there is currently no specific treatment for it. This represents over a billion dollar opportunity. (Hold on to your seats, SIGA may be pitched next term)

Thursday, November 7th Celgene (CELG) announced that they will be presenting the phase III data results from the testing of REVLIMID as a first line treatment of Multiple Myeloma (MM). The presentation will happen on Sunday, December 8th at the 55th American Society of Hematology annual meeting in New Orleans. REVLIMID is currently approved in 70 countries for the treatment of MM patients who have had at least one prior therapy. First line of defense approval will boost sales worldwide.

IMEU Sector Update ? Jordan Hopper

Stanley Black & Decker (SWK) is up this week as concerns over its lowered earnings outlook have settled. The company's credit rating was affirmed at "A-"after there was concern earlier in the week. 2014 expectations are optimistic as analysts predict the acquisition of Infastech will show increased revenue and wider operating margins. Likewise, the company looks to lower its leverage heading into 2014, addressing concerns earlier this week when it was reported its debt to EBITDA ratio was 2.8x (compared to 2x a year ago). Which investors feel is relatively high.

Alcoa (AA) has been steadily creeping up since it reported earnings, and is continuing to cut costs. Jim Cramer, from Mad Money, claimed that this stock is a buy. There is high hope for Q4 earnings.

Noble's (NE) bullish gains this week are correlated it beating earnings and future outlook of the energy market. NE has experienced stellar returns in northeast Colorado and plans to expand its operations in this region.

KMP is getting close to reaching a deal to build a pipeline in Alberta, B.C., however hurdles still remain. This should be watched, because this could bump the stock price if this deal gets approved.

XOM will be issuing a dividend of $0.63 on Thursday, November 7. Shares are up this week almost 4%.

PPG announced it will issue a $0.61 dividend in December.

Central Banks & Regulatory Policy-Prachet Bhatt

The Fed is currently doing everything they can to reduce unemployment and spur economic growth. Lately, they have been turning to mind games. One method they have been employing is called `forward guidance.' In the past, the Fed has been known to be very unclear about what their estimates or goals have been. This has forced the media and Wall Street to guess what their overall strategy or goals may be. However, since the financial crisis, they Fed have tried being more open about their goals hoping to spur growth and reduce the after effects of the financial crisis. They've done this by putting out statements like keeping interest rates low for an, "extended period," or not stopping QE until unemployment is, "closer to 6.5%." This tactic is to keep Wall Street at bay, and lower the risk of misinterpretation in a time of high volatility in the market. However, the Fed is at odds on how to end QE, which makes public statements less clear. The Fed knows they have to come to a conclusion on what to do with QE, but they are also aware of what happened last March when Chairman Bernanke first introduced the idea. Markets responded in a negative manner. Keeping Wall Street at bay and spurring economic growth is one of the most daunting task the Fed have ahead of them. Hopefully,

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Janet Yellen, the current presidential Fed nominee has a trick or two up her sleeve. ?An article from The Economist

titled, "Renouncing Stable Prices," was referenced

Stagnant October for Employment-Brandan Hopper

November 6, 2013: The US Labor Department is expected to report 120,000 new jobs in October, which is 28,000 less than September's total. The unemployment rate will likely stay around 7.2 percent.

The official numbers are scheduled to be released Friday. An important aspect to note is the Bureau of Labor Statistics said any furloughed worker from the shutdown will be reported as unemployed and on temporary layoff.

These numbers do not really reflect how businesses are doing. Many businesses are doing pretty well but are just a bit hesitant on adding workers. This projection will not have any adverse effects on the group; it is just good to know. --Source: Moran Zhang, International Business Times

Activist Investors-Chris Koenig

An activist investor is an individual or group that aims to create change in a company by buying a significant portion of a company's stock. Companies that are sometimes targeted by activist investors are those that are managed poorly or have high costs. The goal of activists is to make the company's value grow and then usually sell their shares at a large profit after the company has fixed their problems.

Carl Icahn (previously mentioned in the OSIG Weekly from week 4) argues that there has been no better time for activist investors than right now. One reason that activism is at its finest right now is because of low interest rates which make acquisitions much cheaper. The second reason activism is hot right now is because hedge funds or pension funds, also called institutional investors, know the quality of management in a company. This means that it makes companies easier target for activists.

Additionally Icahn contends that activist investing is the most effective method of investing as a whole, but then of course he is heavily biased because he is one of America's top activists but it is very hard to argue with his results.

"An investment in IEP stock made at the beginning of 2000 has increased by approximately 1,500%, or an average annual return of 22%, through October 31, 2013," said Icahn in their most recent earnings call. IEP is Icahn's own activist firm. This quarter net income has risen dramatically to $472 billion compared to only $84 billion this time last year.

However the time when activism is at its finest may soon be over as the Fed's quantitative easing is supposedly letting up soon and interest rates will climb back up. --An article by Nat Rudarakanchana titled "Icahn: Activist Investing Has Never Been Better" in the International Business Times was referenced.

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Energy Revolution-William Sun

The recent energy boom within the US is having considerable ripple effect into other areas of the market. Tanker production has increased to keep up with the demand for more LNG. 65 new tankers have been ordered from Scorpio Tankers Inc. (STNG) as demand for tankers to ship US energy increases. --Energy Boom Drives Demand for Tankers by Costas Paris was referenced

Asian Markets-Alex Markgraff

South Korean Markets Attract Investors-Investors have been quickly moving into South Korean markets during a time of economic success, this move into new markets is due to the trade surplus that South Korea is experiencing. This past month (Oct. 2013) South Korea reported a recent high for their trade surplus of $4899 Million U.S. dollars. Along with the high trade surplus, the South Korean Kospi Composite Index has been trading near a two-year high, and South Korea is experiencing a budget surplus, further encouraging investors to enter into South Korean Markets.

South Korean based company Samsung Electronics Co. has embraced the economic calm and announced it will be issuing an increase in dividends. Analysts are predicting that this time of economic success and political tranquility will last, however a couple of risks were highlighted in The Wall Street Journal:

"Furthermore, like many emerging markets, South Korea has benefited from the U.S. Federal Reserve's extraordinary stimulus measures put in place after the financial crisis. When the Fed begins to pare back its bond purchases--expected in the coming months--it could spark a broad selloff in emerging markets similar to the one experienced this past summer, some analysts say." "Yet another risk for South Korea is its strengthening won, which could make the country's exports less competitive." --Anjani Trivedi, WSJ

European Markets-Nelson Ribeirinho

11/07/2013, a date NOT to be overlooked-Investors are awaiting for major announcements from ECB, BoE and obviously statistics regarding US growth rate. As a matter of facts, it happens that Mario Draghi will make his declaration at the exact same time as the Bureau of Statistics will. Which leads us to the conclusion that European stock markets indexes could significantly fluctuate. Positively, if U.S features a better growth rate than expected and if Mario Draghi decides either to tapper into interest rates, but, as I mentioned it last week, he would have to face stumbling blocks to achieve that, or to implement LTRO (long term refinancing operation, attempting to facilitate access to credit for banks. Negatively, if the contrary. In a few words this week and probably the next one will be animated by high volatilities of stock prices and indexes.

E.U to undergo deflation issues-So far as we know, E.U starts to experience not only disinflation but also, more recently, deflation, which is synonym to price decrease, a direct consequence of the restrictive policy led by ECB and the EU to optimize public budget (note: "golden rule"). Deflation can shred any economy (see Japan), and hence threat companies' performance. If ECB does not take all the necessary measures to redress the trend, the consequences could be tremendous. Considering, BoJ, BoE, BoC and Fed with its $80 Bn QE intend to make their currency depreciate, it is not an easy task.

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The European real estate bubble-Another concern in Europe is the real estate market bullish trend. Indeed, England and Germany see their house prices skyrocket. A 6.9% prices increase has been observed during this year. Combined with low interest rates policy, this contributes to the formation of a real estate bubble, yet, it offers a wide range of investment opportunities.

--[NL_cloture]-20131106

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Business Tidbits- Mitchell Vogt

Twitter's IPO-Twitter had their Initial Public Offering yesterday (November 8th). Unfortunately this was due before the IPO, so I have no new news to report. The expected price is $25-28 per share, offering 70 million shares, which is a poor investment according to most analysts. They believe fair value for the company is much lower, but the excitement is driving up the price. --The Wall Street Journal

SAC Insider Trading Scandal-SAC Capital Advisors plead guilty to insider trading violations. They had to pay around $1.2 billion dollars (other sources said as much as $2 billion) for their violations, a record for largest fine ever in the spectrum of insider trading punishments. The company focused their investments on mergers and acquisitions as well as market moving events such as earnings reports. They managed $15 billion dollars at their peak, but their business will be greatly affected by this scandal. Company executives remain optimistic, but experts predict that an indictment of SAC might cause some of their hedge funds to collapse. --The New York

Times

South American Markets-John Neri

Mexico Peso Rallies after Three Week Low-About three weeks ago I remember writing an article about the Mexican peso declining to a low that it hadn't hit in months. After doing some research on the peso and how it is doing currently it looks like the peso has rebounded from that low that it once was at. The currency went up .3% rising to 13.12 pesos per dollar which was very promising given the poor performance of the peso recently. Looking at the data it looks like the peso has been rising along with other currencies, and looking further into it many of the foreign currencies are driven by how well the U.S. is performing so given solid performance in the U.S. foreign currencies were driven up as a result. The peso was at its lowest point in two months November 5th which was unfortunate but it was good to see it rebound after that sort of decline. The peso could gain more should lawmakers approve changes to further expand the energy industry so that is something to look into further.

PUBLISHED BY PRACHET BHATT

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