Qtr 1 2008-09 Haslam Fund Manager's Report.doc

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  • 1. 1
  • 2. TABLE OF CONTENTS EXECUTIVE SUMMARY.............................................................................................................4 INVESTMENT THESIS.................................................................................................................6 FUND PERFORMANCE METRICS..............................................................................................7 Portfolio Gain/Loss Analysis.....................................................................................................................7 Performance Relative to Benchmark.......................................................................................................7 Portfolio Dividend Yield...........................................................................................................................7 Sector Allocation......................................................................................................................................8 Q1 TRANSACTION HISTORY...................................................................................................10 Acquisitions...........................................................................................................................................10 Liquidations...........................................................................................................................................11 *Not Including transaction fees.............................................................................................................11 Dividends Recieved................................................................................................................................11 INDIVIDUAL STOCK SUMMARIES.........................................................................................11 Consumer Discretionary........................................................................................................................11 Consumer Staples..................................................................................................................................11 Altria Group, Incorporated (MO).......................................................................................................11 Philip Morris International, Inc. (PM).................................................................................................12 Proctor and Gamble Company (PG)...................................................................................................12 Energy....................................................................................................................................................13 AmeriGas Partners, LP (APU).............................................................................................................13 Lufkin Industries, Incorporated (LUFK)..............................................................................................13 Noble Corporation (NE).....................................................................................................................13 Financials...............................................................................................................................................14 American Capital, Ltd. (ACAS)............................................................................................................14 Goldman Sachs Group (GS)................................................................................................................14 Pinnacle Financial Partners, Incorporated (PNFP)..............................................................................15 Healthcare.............................................................................................................................................15 Amgen, Incorporated (AMGN)...........................................................................................................15 Bristol-Myers Squibb Company (BMY)...............................................................................................15 Johnson & Johnson (JNJ)....................................................................................................................16 2
  • 3. Pharmaceutical Product Development, Incorporated (PPDI).............................................................16 Becton, Dickinson and Company (BDX)..............................................................................................17 Novo Nordisk A/S (NVO)....................................................................................................................17 Stryker Corporation (SYK)..................................................................................................................17 Industrials..............................................................................................................................................17 FedEx Corporation (FDX)....................................................................................................................17 DryShips, Incorporated (DRYS)...........................................................................................................18 General Electric Company (GE)..........................................................................................................18 Information Technology........................................................................................................................18 Accenture Ltd. (ACN).........................................................................................................................18 Adobe Systems Incorporated (ADBE).................................................................................................19 Cisco Systems, Incorporated (CSCO)..................................................................................................19 Intel Corporation (INTC).....................................................................................................................19 Materials................................................................................................................................................19 Celanese Corporation (CE).................................................................................................................19 Vulcan Materials Company (VMC).....................................................................................................20 Telecommunications..............................................................................................................................20 Utilities..................................................................................................................................................20 ECONOMIC OVERVIEW............................................................................................................20 HASLAM FUND MANAGEMENT TEAM.................................................................................21 FUND CHARTER.........................................................................................................................22 REFERENCES..............................................................................................................................23 3
  • 4. EXECUTIVE SUMMARY About the Cover Edvard Munch's 1893 painting entitled "Skrik" ("The Scream") is his most famous interpretation of anguish, fear, and isolation - sentiments that have permeated throughout the investment community since the beginning of the protracted economic crisis in late 2007. Fourth quarter 2008 offered no relief, with stock prices dropping precipitously after liquidity issues hampered credit and lending, intense volatility in stock prices and continued bad economic news - including the largest contraction of consumer spending since the 1950's. Results At the beginning of our tenure, October 1, 2008, the Haslam Torch Fund portfolio had a balance of $183,251.34 (close of trading on September 30, 2008). At the close of trading on December 31, 2008, the portfolio held $143,865.83, yielding a net loss of $39,385.51, or 21.49% for the fund's first quarter. The S&P 500, our benchmark, returned a net loss of 21.94% (with dividends) over the same period. Thus, on a non risk-adjusted basis, the fund slightly outperformed the S&P 500 by 0.45%.1 On a risk-adjusted basis, the fund underperformed the S&P 500. For further details, please refer to the “Daily Risk-Adjusted Return” metrics on page 7. Heaviest Weighted Sectors At the close of trading on December 31, 2008, the three heaviest-weighted sectors, excluding dividends, in the portfolio were: Healthcare (28.42%), Consumer Staples (16.74%), and Industrials (11.68%). Least Weighted Sectors At the close of trading on December 31, 2008, the three least weighted sectors, excluding dividends, were: Consumer Discretionary (0.00%), Utilities (0.00%), and Telecom (0.00%). Transactions On November 5th, the fund purchased 400 shares of General Electric Company. The following day, 100 additional shares of GE were purchased following a sharp drop in stock price. The fund’s full position in Stryker Corporation was liquidated on November 26th, due to concern that demand for its surgical devices would be limited in the near future. On December 8th, the fund purchased 100 shares of Becton-Dickinson and on December 10th, 100 shares of Novo-Nordisk. For complete transaction details, please refer to the Q1 Transaction Section on page 10. Best Performers The best performers for the portfolio came from the healthcare industry: Bristol-Myers Squibb (13.00%), Becton, Dickinson (4.66%), and Novo Nordisk A/S (1.30%). 4
  • 5. Worst Performers Our three worst performing stocks came from three different sectors: Financials, Energy, and Industrials. They were: American Capital (-83.18%), DryShips, Inc. (-69.40%), and Lufkin Industries (-56.21%). Economic Outlook During the past quarter, the international economy sunk into a deep recession. The Fed lowered its interest rate target to 0.00-0.25% and hinted in its December 2008 meeting that the unprecedented low target may be in effect for some time.2 The incoming Obama Administration has plans for a new stimulus program centered around job creation, infrastructure improvement, and green energy initiatives – all of which, if enacted in a timely manner, may serve to jumpstart the now stagnant economy. We believe that investor concern will continue to weigh heavily on the fund's holdings, as consumer spending shows no sign of acceleration any time soon. 5
  • 6. INVESTMENT THESIS In a time marked by intense volatility, major broad market downturns, and barrage of solemn economic news, it may be difficult for investment managers to maintain focus on achieving long- term goals. As Haslam Torch Fund managers, we understand that current market conditions will eventually subside and that investment decisions based on fundamental quality and thorough research will yield positive long-term results for our client. We believe that although most business sectors are experiencing major downturns, there are companies whose necessity to consumers, solid fundamentals, and strong leadership will allow them to pass through these turbulent times with positive returns for their shareholders. Through our investment decisions over the quarter, we believe that the healthcare industry is a boon among many busts. The recent performance of the two recently acquired companies (BDX and NVO, who participate heavily in diabetes research and treatment) is tribute to our beliefs. Shifting the allocation of the portfolio to the essentials that people need to survive is going to be key to the portfolio’s success during this period. Looking forward, we aim to move more toward healthcare and consumer staples and move away from cyclical companies whose value may be more sensitive to economic conditions. The Haslam portfolio also places importance on companies who issue annual dividends – an important source of income when stock prices may be temporarily depressed by market conditions. Corporate confirmation of dividend payments and support via corporate cash balances are key drivers to our acquisition decisions. With these principles in mind, we move forward, gaining perspective through experiencing such unique market and macroenvironmental conditions, and applying them in order to achieve our goal through the capital appreciation of our fund. 6
  • 7. FUND PERFORMANCE METRICS Portfolio Gain/Loss Analysis Portfolio Value at Close of 9/30/08 $183,251.34 Portfolio Value at Close of 12/31/08 143,865.83 Net Loss for Quarter $39,385.51 Performance Relative to Benchmark For the Quarter 9/30/2008 – 12/31/2008 1Q Haslam Portfolio -21.49% 4Q 2008 S&P 500 Index -21.94% For the quarter ended 12/31/08, the Haslam Portfolio generated a 0.45% higher return than the S&P 500 benchmark on a non-risk adjusted basis. Daily Risk-Adjusted Return Standard Treyno For the Quarter 9/30/2008 – 12/31/2008 Beta Deviation Sharpe r 1Q Haslam Portfolio 0.83 3.63% -2.07 -1.72 4Q 2008 S&P 500 Index 1 4.25% -1.7 -1.38 Although the Haslam Portfolio is considered less risky (volatile), as implied by the portfolio beta and standard deviation, the Haslam portfolio actually underperformed the broad market on a risk adjusted basis (in terms of Sharpe1 and Treynor2 measures). Portfolio Dividend Yield3 1Q Haslam Portfolio 2.46% 4Q 2008 S&P 500 Index4 3.41% 1 The Sharpe measure utilizes total risk measured by the standard deviation of the portfolio returns. 2 The Treynor method utilizes systematic risk measured by the beta of the portfolio returns. 3 Annualized dividend yield. 4 Taken from Bloomberg Analytics. 7
  • 8. Sector Allocation Sector Portfolio Excl. Dividends S&P 5005 Consumer Discretionary 0.00% 8.40% Consumer Staples 16.74 12.88 Energy 8.96 13.34 Financials 11.25 13.29 Healthcare 28.42 14.79 Industrials 11.68 11.08 Information Technology 9.77 15.27 Materials 6.13 2.93 Telecommunications Services 0.00 3.83 Utilities 0.00 4.19 Cash 7.05 0.00__ Total 100.00% 100.00% 5 S&P 500 sector allocation excluding dividends taken at close of 12/31/2009, retrieved from Bloomberg LP. 8
  • 9. INDIVIDUAL STOCK PERFORMANCE AND ANALYSIS6 Weight as of Market Value as Q1 Ticker 12/31/2008 of 12/31/2008 Return Consumer Staples Altria Group, Inc. MO 2.09% 3,012.00 -22.48% Proctor & Gamble PG 8.59% 12,364.00 -10.72% Phillip Morris International, Inc. PM 6.05% 8,702.00 -8.42% Total Consumer Staples 16.74% 24,078.00 Energy AmeriGas Partners APU 1.96% 2,813.00 -5.46% Lufkin Industries, Inc. LUFK 2.40% 3,450.00 -56.21% Noble Corporation NE 4.61% 6,627.00 -49.59% Total Energy 8.96% 12,890.00 6 Portfolio weight and market value excludes dividends. 9
  • 10. Financials American Capital, Ltd. ACAS 0.34% 486.00 -83.18% Goldman Sachs Group GS 4.69% 6,751.20 -33.80% Pinnacle Financial Partners PNFP 6.22% 8,943.00 -3.21% Total Financials 11.25% 16,180.20 Healthcare Amgen, Inc. AMGN 8.03% 11,550.00 -2.56% Becton, Dickinson and Company BDX 4.75% 6,839.00 4.66% Bristol-Myers Squibb BMY 4.85% 6,975.00 13.00% Johnson and Johnson JNJ 5.20% 7,478.75 -12.98% Novo Nordisk A/S NVO 3.57% 5,139.00 1.30% Pharmaceutical Product Dev., Inc. PPDI 2.02% 2,901.00 -29.54% Total Healthcare 28.42% 40,882.75 Industrials DryShips, Inc. DRYS 0.93% 1,332.50 -69.40% FedEx Corporation FDX 5.13% 7,377.25 -18.84% General Electric Company GE 5.63% 8,100.00 -18.02% Total Industrials 11.68% 16,809.75 Materials Celanese Corporation CE 1.30% 1,864.50 -55.32% Vulcan Materials Corporation VMC 4.84% 6,958.00 -5.95% Total Materials 6.13% 8,822.50 Information Technology Accenture, Limited ACN 3.42% 4,993.50 -12.39% Adobe Systems, Inc. ADBE 1.48% 2,129.00 -46.06% Cisco Systems, Inc. CSCO 2.83% 4,075.00 -27.75% Intel Corporation INTC 2.04% 2,960.00 -20.98% Total Information Technology 9.77% 14,157.50 . Q1 TRANSACTION HISTORY Acquisitions Date Company Ticker Share Price Cost Basis* 11/05/08 General Electric GE 400 $20.03 -$8,011.12 11/06/08 General Electric GE 100 18.55 -1,854.78 12/08/08 Becton Dickinson BDX 100 65.24 -6,524.00 12/10/08 Novo-Nordisk NVO 100 50.62 -5,062.00 Total 700 -$21.451.90 10
  • 11. Liquidations Date Company Ticker Share Price Cash Flow* 11/26/08 Stryker Corporation SYK 100 $38.23 $3,823.20 Total 100 $3,823.20 *Not Including transaction fees. Dividends Recieved Issued Company Ticker Dividend 10/10/08 Philip Morris PM $108.00 10/10/08 Altria Group MO 64.00 10/14/08 American Capital ACAS 157.50 10/31/08 DryShips, Inc. DRYS 25.00 11/01/08 Celanese CE 6.00 11/03/08 Bristol-Myers Squibb BMY 93.00 11/14/08 Proctor & Gamble PG 80.00 11/17/08 Accenture, Ltd. ACN 75.00 11/18/08 Amerigas Partners APU 64.00 11/24/08 Goldman Sachs GS 28.00 12/01/08 Noble Corporation NE 12.00 12/01/08 Intel Corporation INTC 28.00 12/09/08 Johnson & Johnson JNJ 57.50 12/10/08 Vulcan Materials VMC 49.00 12/10/08 Lufkin Industries LUFK 25.00 12/29/08 Pharmaceutical Prod. PPDI 12.50 Total Dividends $884.50 Total Transaction Fees -54.75 Total Interest Earned on Cash Held 5.62 Total Change in Cash -$16,793.33 INDIVIDUAL STOCK SUMMARIES Consumer Discretionary No companies held. In light of tightened consumer spending on non-essential items, we believe that companies whose revenues are dependent on the sales of discretionary items will underperform in the near-term. Consumer Staples Altria Group, Incorporated (MO) Altria Group is a holding company. Through its various subsidiaries, it holds a portfolio of companies who manufacturer tobacco for cigarettes and other tobacco products.3 11
  • 12. MO is down 22.48% during the quarter; however, the company just completed a $10.4 billion acquisition of smokeless tobacco maker UST. This is considered a smart strategic move, as smoking bans in public places have become more widely accepted. MO owns Phillip Morris USA, manager the Marlboro cigarette brand, which has rooted itself as the dominant cigarette brand, owning 41% of the cigarette market share.4 MO also owns the Black & Mild, Skoal, and Copenhagen brands. As competitors lower prices of their tobacco products, MO has started to lower its prices for its tobacco products, hoping to increase market share amid tightening consumer spending. MO has initiated several cost management objectives, one of which aims to reduce costs at a rate that exceeds the decline in cigarette sales volume.5 Morningstar gives MO a 5-star rating (out of 5) for its fundamental quality.6 The stock has generated solid returns on its short-term investments, and its recent acquisition looks to raise its net and operating margins. With a trailing 12-month dividend yield of 10.653%,7 we believe that its dividend payout rate gives this company value within our portfolio during a time when the economic environment at large may keep stock prices depressed. Considering MO’s portfolio, size, scope, and position for growth, we believe that it is a firm hold. Philip Morris International, Inc. (PM) Philip Morris International was recently spun off by Altria Group (MO). It produces, markets, and distributes a wide range of branded cigarettes, including: Benson & Hedges, Marlboro, Merit, Parliament, and Virginia Slims. PM is currently the largest publicly-traded manufacturer and marketer of tobacco products. After its spinoff from Altria Group in early 2008, PM has implemented ambitious cost-cutting initiatives expected to widen net margin with a savings of over $1 billion.8 PM owns an extensive cigarette portfolio, which comprises 7 of the top 15 cigarette brands. 9 PM also has a viable growth strategy, has identified several Asian countries such as India, Bangladesh, and Vietnam as potentially lucrative growth markets.10 PM has also entered agreements with Chinese companies for the licensed manufacture of Marlboro and other branded cigarettes in China, which otherwise has a state-run tobacco monopoly (China National Tobacco Company).11 PM has an expansionist growth plan and industry-leading margins. New growth opportunities abound in Southeast Asia, Pakistan, and other developing markets, in which tobacco use is rampant, and market share is dominated by locally owned tobacco companies. PM also pays out an attractive dividend, with a January 9, 2009, of 5.06%. We view PM and Altria to be defensive positions, and they should fare well as consumers become acclimated to the economic slowdown. Addiction and the necessity to satisfy more basic needs will fuel growth through coming years. Proctor and Gamble Company (PG) Proctor and Gamble is a household products company with 146 brands operating in more than 180 countries. The Company provides products in the laundry and cleaning, paper, beauty care, food and beverage, and healthcare segments.12 PG has seen tremendous volatility over the past 16 months, experiencing a period high of $75.18 on 12/12/2007 – near the speculative beginning of the recession. During 2008 it tested the $60 12
  • 13. level in June before rising back to its 52-week high of $73.57 on 9/15/08. However, PG’s extensive portfolio of household products could not prevent its drop as the broad market fell sharply in October. A quarter marked with intense volatility – a swing of over $11 on November 25 guided PG to its 52-week low. Despite PG’s 10.72% drop over the quarter, its fourth quarter earnings were down only $0.02/share. Analysts have estimated a consensus first quarter 2009 earnings per share of $1.03 – a 28.75% increase versus the previous quarter. Investors fleeing to largely-capitalized companies with necessary product offerings immensely bid up PG’s stock price; however, the downswing and the testing of its 52-week low lead us to believe that we should maintain our “hold” position. We are carefully monitoring its share price in the event a new low is tested, which might represent an attractive buy opportunity. Energy AmeriGas Partners, LP (APU) AmeriGas Partners is the United States’ largest propane retailer by volume, serving approximately 1.3 million residential, commercial, industrial, motor fuel, and agricultural customers.13 It markets propane, propane equipment, and related services from over 600 locations in 46 states.14 The stock lost over one-third of its value in the first ten days of our tenure, from the 9/30 closing price of $30.43 to $19.59 on the close of 10/10, reflecting steeply dropping oil and wholesale propane prices. Actual earnings per share amounted to a $0.36 loss, which should rebound through a slightly cooler winter than previous years and a favorable upturn in natural gas prices. Favorable conditions and an expansionist view from the company – increasing availability throughout the country, improving operating efficiencies, as well as growth through acquisitions and internal sales lead us to believe that there is still room for growth for APU. Lufkin Industries, Incorporated (LUFK) Lufkin Industries designs, engineers, manufactures, sells, installs and services high quality and oil field equipment and power transmission products across the globe.15 It also provides global engineering consulting and solutions for field equipment and transmission products. The fourth quarter of 2008 served a heavy blow to companies in the energy sector, especially in the “oil & gas equipment and services sub-industry. Decreased demand for oil and its $100 per barrel price drop led to a sharp and pronounced decline in stock price as the need for its pumping and transmission units fell off. We believe that the days of “cheap oil” are soon coming to an end. Although the United States is currently stockpiling oil reserves to avoid the more expensive later-dated oil reserves,16 increasing oil prices during later stages in our tenure as fund managers will boost LUFK’s price. Noble Corporation (NE) Noble Corporation is a leading provider of diversified services for the oil and gas industry. The Company performs contract drilling services with its fleet of 63 mobile offshore drilling units located in key markets worldwide, including the U.S. Gulf of Mexico, Middle East, Mexico, the North Sea, Brazil, West Africa and India.17 NE also provides labor contract drilling services, well site and project management services, and engineering services.18 13
  • 14. NE suffered the same steep drop-off in stock price as oil prices tumbled almost 60% from its mid-year high. A comparison to OIL, the Goldman Sachs Crude Oil Total Return, shows almost an exact correlation with the change in oil price performance. We believe that the depressed oil price will trend upwards, carrying with it many beleaguered oil and gas companies. NE also has a storied 87-year history in the drilling and engineering industry, and is known for its expertise and customer satisfaction for deep-water drilling. Its versatile, well-maintained fleet translates to better efficiency and lower fixed asset costs moving forward.19 Looking forward, NE has the fleet as well as the expertise to drill in deep-water environments as the demand for gas increases, so we view this stock as a “hold.” Financials American Capital, Ltd. (ACAS) American Capital Ltd. is an alternative asset manager. ACAS, directly and through its global asset management business, invests in employee and management buyouts, private equity buyouts, and early stage and mature private and public companies. ACAS provides debt and equity to fund growth, acquisitions, recapitalizations, and securitizations.20 Our holding in ACAS incurred the greatest percent depreciation in value of any stock in the Haslam portfolio, suffering an 83.18% loss. During the quarter, the company announced it would suspend dividend payments and retain the capital gains from its investments. The stock price dropped 42.85% on the day of the announcement, November 10 and has led to a class action lawsuit being filed against the company. The suit alleges that ACAS and its directors misled the investing public about the company’s intentions to alter its dividend policy. The managers believe that ACAS shares have reached a bottom, and it would be imprudent sell the stock at this time. The fund will continue to hold the stock, reevaluating it as new information becomes known.21 Goldman Sachs Group (GS) Goldman Sachs is one of the world’s foremost investment banking and securities companies. It specializes in investment banking, trading, asset management and securities services.22 On September 21, GS changed its business structure into a bank-holding company. During a horrific quarter for nearly all investment banks, the portfolio’s position in GS suffered a 33.8% loss. GS’s transformation into a holding company – giving it key access to TARP relief funds and providing increased liquidity support as its transitions between structures – has not spared it from the write-downs and losses suffered by its investment bank’s operations involving leveraged loans and commercial exposure.23, 24 To mitigate these losses, GS has generated large amounts of capital in an attempt to reduce leverage and clean up its balance sheet. Looking forward, we expect GS shares to recover some of the value lost during the course of the quarter. While the stock may never reach the multi-year highs it experienced in 2007, we believe that the firm’s conversion into a holding bank with strong fundamentals as an innovative and storied investment bank will produce desirable returns for shareholders. 14
  • 15. Pinnacle Financial Partners, Incorporated (PNFP) Pinnacle Financial Partners is a holding company for Pinnacle National Bank. PNFP’s banking arm operates as a community bank emphasizing personal banking relationships with individuals and businesses located in its primary service area, comprising metropolitan Nashville, Tennessee, area and surrounding counties.25 PNFP performed well in the quarter relative to financial sector as whole. The fund’s position saw a loss of -3.21%. The firm has minimal risk to the subprime mortgage market and remains well positioned on its balance sheet. Pinnacle National Bank, the parent company for PNFP, applied for and was granted preliminary approval for $95 million in government stimulus funds. The bank was already considered well-capitalized and will use the funds to expand its lending operations.26 PNFP is well-positioned to succeed as we look to the future and we will continue to hold the stock in the fund. Healthcare Amgen, Incorporated (AMGN) Amgen specializes in the development, manufacture, and delivery of human therapeutics based on advances in cellular and molecular biology. Focusing on ground-breaking treatments for more serious illnesses, AMGN offers a range of products treating diseases from rheumatoid arthritis to cancer. In the fourth quarter of 2008, AMGN’s stock price, like most stocks in the portfolio, took a hit from the accelerated economic downturn; however, its position in the healthcare segment likely safeguarded it from any worse losses. Fiscal third quarter earnings included a 7% increase in revenues, and the company raised its 2008 earnings per share estimate range from $4.25-$4.45 to $4.45-$4.55. Sales of two of its best-selling products, Aranesp and Neulasta, remained strong, despite downward price pressures, and the FDA approved the Nplate treatment for a chronic platelet condition. Most analysts agree that AMGN’s future growth largely hinges on denosumab, an antibody being tested for effectiveness in treating both postmenopausal osteoporosis and bone loss in patients being treated for breast or prostate cancer. In mid- December, the company submitted a biologic license application (BLA) to the FDA, who, at press time, had not released its approval timeline.27 28 Because AMGN’s pharmaceutical products are necessary rather than discretionary, we consider the stock to be a strong hold in the current market. Bristol-Myers Squibb Company (BMY) Bristol-Myers Squibb is a multi-faceted healthcare company, specializing in the development, manufacture, and distribution of various pharmaceutical products worldwide. Its product offering includes well-known drugs such as Plavix and Erbitux. Additionally, it operates Mead Johnson, a company specializing in infant and children’s nutrition. BMY was one of three stocks in the portfolio to experience positive growth across the first quarter of our tenure. Fiscal third quarter earnings included a 18% increase in net sales for the company’s pharmaceutical division, fueled by strong performances by Plavix and Abilify. Eli Lilly outbid BMY for the purchase of ImClone Systems, but BMY management remains open to 15
  • 16. other takeout deals. Additionally, Mead Johnson filed registration statements with the Securities and Exchange Commission for its initial public offering.29 The FDA approved Reyataz for HIV treatment, while trials for the anti-blood clotter apixaban, developed with Pfizer, continue. Despite the market downturn, BMY’s profit continues to climb, and it has a large amount of cash on its balance sheet. We believe the firm’s prospects are strong for the coming quarters and consider it a strong hold going forward. Johnson & Johnson (JNJ) Johnson & Johnson manufactures healthcare products and provides related services for the consumer, pharmaceutical, and medical devices and diagnostics markets. The company sells products such as skin and hair products, acetaminophen products, pharmaceuticals, diagnostic equipment, and surgical equipment in countries throughout the world. JNJ holds a unique position in the healthcare sector, as, unlike our other holdings, it has a broad consumer staples segment. While 40% of its 2007 sales came from its pharmaceutical division, 23% came from its consumer goods division. In October, JNJ reported fiscal third quarter overall sales increased 6.4%, boosted by the over-the-counter release of Zyrtec, the international sales of its Baby Care products, and its various skin care lines, including Neutrogena and Clean & Clear. In December, JNJ officials announced the acquisition of Omrix Biopharmaceuticals, a biosurgical products manufacturer. JNJ’s stock price has taken a hit recently, as many analysts are uncertain how patent expirations will affect 2009 growth. The company had four primary drug patent expirations in 2008, including one for Topamax, which represented 4% of 2007 sales. In 2009, the patents for Natrecor and Invega will expire, leaving room for generic competition in their respective markets. We will continue to evaluate these issues as the next quarter progresses, but given JNJ’s diversification, we consider it to be a safe holding for the fund. Pharmaceutical Product Development, Incorporated (PPDI) Pharmaceutical Product Development is a leading global contract research organization providing discovery, development, and post-approval services as well as compound partnering programs. Working with pharmaceutical, biotechnology, medical device, academic, and government organizations, PPDI applies innovative technologies to deliver safe and effective therapeutics to patients. In October, PPDI announced its fiscal third quarter results. Net revenue increased 10.8% over the same period in 2007. The company had to lower its 2008 outlook, however, as the FDA announced it would be unable to return a review of PPDI’s application for its diabetes treatment, alogliptin by the October deadline.30 PPDI would have received a $25 million payment from its collaborator. PPDI suffered the largest quarterly return hit of all healthcare stocks in the portfolio. PPDI’s forte lies in Phase III and IV clinical trials, and with the tightening of FDA standards for Phase I and II clinical trials, PPDI’s contract growth rate has slowed. Additionally, more companies have entered into its specialty, of being a contract research organization, and labor costs have increased. As the global economy slows, capital investment into healthcare (and therefore research) may slow as well. Despite these threats, PPDI has proven itself resilient, and we expect its expansions into Ireland and Singapore will provide additional avenues for growth in the coming quarters. 16
  • 17. Becton, Dickinson and Company (BDX) Becton, Dickinson and Company manufactures and sells a variety of medical supplies and devices and diagnostic systems. The company’s products are used by healthcare professionals, medical research institutions, and the general public. Novo Nordisk A/S (NVO) Novo Nordisk A/S develops, produces, and markets pharmaceutical products. The company focuses on diabetes care and offers insulin delivery systems and other diabetes products. Novo Nordisk also works in areas such as haemostatis management, growth disorders, and hormone replacement therapy. Investment Thesis NVO and BDX were our choices to fill the gap in the healthcare portfolio left by Stryker. The National Institutes of Health estimated that 7.8% of people living in the U.S. have either diagnosed or undiagnosed diabetes. The World Health Organization estimates that the number of people worldwide living with diabetes will double to 366 million by 2030.31 In 2007, NVO derived 72% of its revenues from its diabetes care segment, while 13% of BDX’s 2008 revenues came from its diabetes devices. We viewed the two companies as complements: NVO primarily manufactures insulin treatments, while BDX specializes in insulin devices (needles, monitors). Thus, these two stocks appear poised to offer steady growth in coming quarters, given our research into diabetes diagnoses. Stryker Corporation (SYK) Stryker Corp. and its subsidiaries operate a medical technology company, concentrating in two segments: Orthopedic Implants and MedSurg Equipment. The Orthopedic Implants segment offers various reconstructive and implant systems; the MedSurg Equipment segment offers advanced and innovative surgical equipment and patient handling solutions. SYK was the only stock we voted to liquidate during the first quarter of our tenure. The stock price fell by 38%, and we felt that Stryker’s future growth prospects were not broad enough to merit holding onto the stock. Intuitively, sales of SYK’s main offerings, big ticket surgical devices, likely will take a hit in 2009, as hospitals and healthcare providers lack the ability to secure capital for growth. Its fiscal third quarter results came in below estimates, and the stock had not rebounded from the January 2008 recall of SYK’s Trident hip implant. These issues, combined with the management shakeup in November, ultimately led us to sell our shares in SYK in lieu of another investment thesis: diabetes. Industrials FedEx Corporation (FDX) FedEx Corporation is primarily known for its established U.S. and international package and freight delivery services. The company also has a significant IT segment, offering supply chain and office solutions to businesses. Our position in FDX has lost 18.8% during the quarter. FDX has struggled with the slowing economy and reducing global shipping demand. For FDX’s fiscal quarter ended November 30, revenue is up only 1% compared to the previous year.32 This revenue translates to earnings of 17
  • 18. $1.58 per diluted share, and FDX has provided an earnings estimate of only $0.69 to $1.94 per diluted share for the next two quarters combined. The company has announced a series of measures intended to reduce costs through the economic downturn, including a hiring freeze, layoffs, and reduction in pay to salaried personnel by at least 5%. We have chosen to hold onto this stock in part due to DHL’s announcement that it will be withdrawing from the U.S. domestic-only market on January 30.33 DryShips, Incorporated (DRYS) DryShips, Inc. is a dry bulk shipping company, operating a fleet of 58 vessels worldwide. It ships commodities used in production of other products, such as bauxite or coal. DRYS is a major source of unrealized losses for the fund this quarter, losing just under 70% of its value, due to the complete collapse of dry bulk shipping rates, as measured by the Baltic Dry Index (BDI). The BDI is down 74% during this quarter,34 and nearly all of the DRYS fleet has shipping rates based on the spot market or this index.35 The BDI has been a leading indicator of the economic slowdown, as it tracks the demand for commodities used for the production of finished goods. We have decided to hold this stock because there remains very little of our initial investment left to salvage after the global economic slowdown. The stock price has displayed extreme volatility, dropping down to $3.04 per share and rebounding to close the quarter at $10.60. General Electric Company (GE) General Electric Co. is a large conglomerate, encompassing significant segments in the media, energy infrastructure, technology infrastructure, and financial sectors. We purchased 400 shares of GE on November 4 and another 100 on November 5. So far our investment has yielded a dividend-adjusted loss of 13%. We bought this stock because we thought that market overreactions depressed the stock price lower than its intrinsic value. Additionally, GE has an attractive dividend yield, which was 6.2% at the time of our purchase. We felt GE was likely to benefit from increased government investment in infrastructure during the economic downturn, as the company has significant operations in water treatment, electrical distribution and the rail industry. Much of the decline is likely a result of the extent of the losses suffered by GE Capital, the company’s financial division, which may see revenues in 2009 drop 85% from the previous year.36 37 GE has announced that it will be maintaining previous dividend levels in 2009, and given that the company is very large, very diversified, and has a significant industrial division, we feel GE will be able to fulfill this promise. In the current volatile market, we find safety in the strong and consistent dividend returns. Information Technology Accenture Ltd. (ACN) Accenture Ltd. is a consulting firm covering a wide variety of business solutions. Its largest segment is management consulting, but ACN also offers IT consulting, financial solutions, outsourcing, and risk management. ACN saw a loss of 13.7% during the quarter. ACN's wide variety of consulting activities has largely insulated it from the economic downturn that has devastated many stocks in the IT sector. 18
  • 19. Its earnings for the fiscal quarter ended November 30 show minimal impact from the downturn, with revenues up 6% from last year.38 The company’s expected earnings growth of 6% to 10% for 2009 is a modest downgrade from earlier predictions of 9% to 12%. Diluted earnings per share are expected to be in the range of $2.78 to $2.85. ACN’s earnings remain strong heading into the slowdown, and there is good reason to believe it will make a solid recovery. Adobe Systems Incorporated (ADBE) Adobe Systems Inc. is a software company known primarily for its programs that aid developers in the creation of content. ADBE has created the very successful Acrobat, Photoshop and Flash software programs. This stock was severely affected by the downturn early in the quarter, losing 46% overall. ADBE is predicting expected revenues for the first quarter of 2009 to be down more than 7% from the previous year.39 The company has cut jobs and is predicting a tough year ahead but has so far managed to continue meeting earnings and sales expectations, and its products remain popular. The stock price’s extremely high volatility and the substantial loss of value immediately at the start of our tenure are the main reasons we have decided not to liquidate this stock. Cisco Systems, Incorporated (CSCO) Cisco Systems is a technology company focusing on the hardware necessary to connect computers via Internet protocols. This includes routers, switches, servers, modems, and network storage devices. CSCO shares lost 27.7% during the quarter, as concerns of reduced demand damaged the IT sector. CSCO had solid year-over year revenue growth of 8% for the quarter ending October 30 but has predicted revenues to be down 5% to 10% for the next quarter. 40 On the first quarter earnings conference call, CEO John Chambers reiterated that he felt the company had long term growth prospects in the 12% to 17% range, even if the next year will be somewhat soft. Given the volatility of the overall market and in the IT sector in particular, we did not want to sell this stock at a loss and potentially be left out for the next big rally. Intel Corporation (INTC) Intel Corporation manufactures and sells the microprocessors used in personal computers. Its chips can also be found in industrial equipment, digital music players, and flash memory devices. INTC lost 21.8% over the quarter, as the forecasts of reduced consumer spending hurt PC sales worldwide. Intel has twice lowered earnings estimates for the quarter ended December 31, from $10.2 billion in revenues down to $9B on November 12th, and then to $8.2B on January 7.41 Reduced consumer demand and reduced inventories by its channel partners have caused the drop in revenues. INTC’s dividend yield of 4% and the exceptional volatility of the IT sector provide ample reason to hold the stock into the future. Materials Celanese Corporation (CE) 19
  • 20. Celanese Corporation is a global industrial chemicals company. Its business involves processing chemical raw materials, such as ethylene and propylene, and natural products, including natural gas and wood pulp, into chemicals and chemical-based products.42 CE suffered through a difficult quarter and saw a loss of -55.32% per share. After decreased product demand, CE reduced its 2008 guidance and eventually pulled any guidance altogether. A major reason for demand shift is the downturn in the automotive industry for which CE is a major supplier. After a fire at one of its major chemical producing plants, the company was forced to declare “force majeure” on its contracts, further adding to its difficult quarter.43 The fund will continue to hold CE but will monitor its performance closely. Vulcan Materials Company (VMC) Vulcan Materials Company, based in Birmingham, Alabama, provides infrastructure materials required by the American economy. Vulcan is the nation’s largest producer of construction aggregates, a major producer of other construction materials including asphalt and ready-mixed concrete and is a leading producer of cement in Florida.44 The slow housing market hurt VMC during the quarter, as reflected in the stock price dropping to a low of $40.56 per share during the quarter. The stock enjoyed renewed optimism with investors upon the election of Barack Obama and his announcement of large infrastructure projects as part of his economic stimulus plan. The stock price rebounded to $69.58 per share to close the quarter. Vulcan is well-positioned for the new administration’s growth plans and will be held in the fund. Telecommunications No companies held. Utilities No companies held. ECONOMIC OVERVIEW The final quarter of 2008 was a momentous quarter in many aspects. The nation elected a Democratic House and Senate, as well as the first African-American president in Barack Obama. The primary focus of the new-look White House will be the recovery of the U.S. economy, which has undergone a long and protracted recession – the worst since the Great Depression. The United States government used half of its pledged $700 billion of public funds to bail out the financial industry, which has seen several large-profile casualties stemming from the collapse in the housing market, its fallout involving mortgage-backed securities, and the following waves of credit and liquidity problems. Furthermore, the “Big Three” American automotive companies revealed the severity of their financial distress, and approached Washington D.C. pleading for an infusion of government cash to stabilize their rapidly failing balance sheets. 20
  • 21. It was also a busy year in terms of monetary policy and control. The Federal Open Market Committee announced four rate cuts through the first three quarters, lowering the 2008 starting rate of 425 basis points to its April-announced target rate of 200 basis points. The fourth quarter showed aggressive action from the Fed with three more rate cuts, the last of which determined a Funds rate target between 0 and 25 basis points. The FOMC announced that previous inflationary expectations have subsided for the most part, and that the new stance of the Fed would be to stimulate sustainable economic growth.45 The end of the year brought about major contractions in the global market, with a U.S.-led global recession well underway. The relatively modest 0.5% real GDP decline during the third quarter gained downward momentum into a projected 3% for the final quarter of 2008 on the back of waning consumer spending.46 The U.S. Department of Commerce will release the final GDP on January 30, 2009. Current economic indicators released throughout have been predominantly negative, as the quarter showed a nationwide unemployment rate figure of 7.20% on December 8, the highest rate in 16 years.47, 48 Broad market indices suffered majored major setbacks throughout 2008 but none quite as complete as the global market contraction in the fourth quarter. The S&P fell from a September 19 level of 1213.11 to a year-ending 903.25. 49 Going forward into 2009, we believe that investor concern, waning consumer spending due to a newfound sense of thrift and conservatism, and a general lack of optimism leads us to think that new 52-week lows will be tested even as we progress through 2009. A ValueLine economic survey estimated that 1Q 2009 real GDP will drop by 2% or more – continuing American’s economic woes until the economy starts to mitigate its losses through late 2009.50 With the U.S. having led the world into an economic slowdown, we believe that recovery will be a slow process at best. President-elect Barack Obama has declared great infrastructural and energy plans aimed at accelerating the recovery of the US economy by creating jobs and stimulating business growth. Knowing this, we, as money managers, will look to derive value from industries perceived as being generally defensive – namely pharmaceuticals and industrials, as well as companies that will benefit from the new government infrastructural and energy plans. HASLAM FUND MANAGEMENT TEAM Emily Edwards Emily Michelle Edwards is a native Tennessean who graduated in 2007 from Washington and Lee University with a degree in Economics. Her internship experience includes two summers with Duncan-Williams, a Memphis-based fixed income broker dealer. She is currently a graduate assistant with the Finance Department at the University of Tennessee. 21
  • 22. Jon Epperson Jonathan Kent Epperson is a native Ohioan. He was a member of the NCAA men’s Division I soccer program at the Houston Baptist University, where he graduated with degrees in Business Administration and Finance. He is a former wealth management and investment analyst at Merrill Lynch and is currently a graduate assistant with the Finance Department at the University of Tennessee. Tom Newman Thomas Perry Newman a native of Chicago, Illinois. He graduated from the University of Illinois at Urbana-Champaign with a degree in humanities. He is a former recruitment manager with Alcoa Inc. He is currently studying Logistics and Finance. Mike Schachleiter Michael Tod Schachleiter is a native of Cincinnati, Ohio. He graduated Magna Cum Laude from Lees-McRae College, where he was a member of the men’s intercollegiate basketball team. He is a former commercial financial analyst with Fifth Third Bank in Cincinnati, Ohio, and is studying Finance and Marketing. FUND CHARTER The Haslam Fund is a long-equity fund actively managed for our client, Mr. James Haslam. As fund managers, we strive for the proper stewardship of our client’s funds as well as the long-term capital appreciation for the fund. We aim to maximize portfolio performance by making investment decisions founded on strong fundamentals, selecting companies with solid financials, sound operational conditions, and tolerable risk levels. In light of current market conditions, we have chosen to approach security selection using a top-down approach, assessing the economy and market conditions before proceeding to select individual companies. 22
  • 23. Thus, we measure risk: systematic risk in terms of beta; and total risk in terms of standard deviation. Returns to our client’s funds will be measured against the returns of the market – in our case, the Standard and Poor’s 500 Index. Returns against the S&P 500 will be assessed on an absolute, positive basis, in line with our objective of maximizing the returns on our client’s funds. The management team will operate under the following conditions: (1) decisions leading to the acquisition or liquidation of assets must be made on a majority basis, in that 3 out of the 4 managers must be in agreement; (2) in the case of a dissenting opinion, the dissenting manager(s) may prepare a case as to why they disagree, leading up to a second vote; (3) the second vote must maintain a three-fourths vote in order to proceed with the acquisition/liquidation; (4) during the academic term, mandatory meetings will be held weekly; (5) during academic recess (holidays and summer breaks), the group will meet weekly via videoconferencing, conference calls, Internet chat discussion, however the conditions may allow; (6) in the case of an emergency liquidation scenario, a manager may discuss the proper course of action with faculty advisor Dr. Deborah Murphy as they disseminate essential information to the other managers. The Haslam management team maintains a long-term perspective in decision-making. As a team, we are unified in our decision-making, and believe that our asset selection process is based on sound fundamentals, which will translate into long-term capital appreciation for our client. With the greatest respect and dedication, ____________________________ ____________________________ Emily M. Edwards Thomas P. Newman ____________________________ ____________________________ Jonathan K. Epperson Michael T. Schachleiter REFERENCES 23
  • 24. 1 S&P 500 Return. Bloomberg Analytics. Retrieved January 4, 2009. 2 2008 FOMC Statements Side-By-Side: December 16/October 29 Text. Retrieved January 8, 2009. 3 Altria Group Website. Retrieved on January 5, 2009 from http://www.altria.com/. 4 Philip Gorham, CFA, Altria Group, Inc. Morningstar Investment Research Center. Retrieved on January 7, 2009 from http://library.morningstar.com.proxy.lib.utk.edu:90/stocknet/MorningstarAnalysis .aspx? Country=USA&Symbol=MO&stocktab=analysis. 5 Strategy for Financial Growth. Altria Group Investor Relations Website. Retrieved on January 3, 2009 from http://www.altria.com/investors/2_1_strategyfinancialgrowth.asp. 6 Morningstar Rating: Altria Group. Morningstar Investment Research Center. Retrieved on January 3, 2009 from http://library.morningstar.com.proxy.lib.utk.edu:90/stocknet/MorningstarRatings.aspx? Country=USA&Symbol=MO. 7 Altria Group, Inc. Bloomberg Analytics. Retrieved on January 8, 2009. 8 Philip Morris Intl. Standard and Poors. Retrieved on January 10, 2009. 9 Top 15 Cigarette Brands. Generation Research. Retrieved on January 2, 2009 from http://www.generation.se/?newsId=81. 10 Greggory Warren, CFA, Philip Morris International Inc. Morningstar Investment Research Center. Retrieved on January 2, 2009 from http://library.morningstar.com.proxy.lib.utk.edu:90/stocknet/ MorningstarAnalysis.aspx? Country=USA&Symbol=PM&CustId=&CLogin=&CType=&CName= 11 Philip Morris Gets China Approval for Full Production of Marlboro Brand. AFX News Limited. Retrieved from http://www.forbes.com/afxnewslimited/feeds/afx/2005/12/21/afx2409101.html. 12 Proctor and Gamble. Bloomberg Analytics. Retrieved on January 7, 2009. 13 Stuart J. Benway, CFA, Standard and Poors’ Americas Partners Stock Report. Retrieved on January 11, 2009. 14 Amerigas Investor Relations Website. Retrieved on January 11, 2009 from http://investor.shareholder.com/ugi/apu/index.cfm. 15 Lufkin Industries. Retrieved on January 4, 2009 from http://www.lufkin.com/. 16 Christian Schmollinger, Oil Extends Slump to Sixth Day on Speculation Stockpiles Rising. Retrieved from Bloomberg News on January 12, 2009. 17 Noble Corporation: Investor Relations. Retrieved on January 5, 2009 from http://phx.corporate-ir.net/phoenix.zhtml? c=98046&p=irol-irhome. 18 Noble Corp. Bloomberg Analytics. Retrieved on January 7, 2009. 19 Noble Corp. Morningstar Investment Research Center. Retrieved on January 8, 2009 from http://library.morningstar.com.proxy.lib.utk.edu:90/stocknet/MorningstarAnalysis.aspx? Country=USA&Symbol=NE&stocktab=analysis. 20 American Capital Ltd. Bloomberg Analytics. Retrieved to January 4, 2009. 21 Shareholder Class Action Filed Against American Capital Ltd. by the Law Firm of Barroway Topaz Kessler Meltzer & Check, LLP. Barroway Topaz Kessler Meltzer & Check, LLP. Retrieved on January 2, 2009 from http://finance.yahoo.com/ news/Shareholder-Class-Action-prnews-13838098.html. 22 Goldman Sachs. Bloomberg Analytics. Retrieved on January 2, 2009. 23 Craig Torres. Fed Allows Goldman, Morgan Stanley to Become Banks. Bloomberg Analytics. Retrieved on January 13, 2009. 24 Goldman Sachs. Standard and Poors. Retrieved on January 3, 2009. 25 Pinnacle Financial Partners. Bloomberg Analytics. Retrieved on January 2, 2009. 26 Pinnacle Financial Receives Preliminary Approval to Participate in the U.S. Treasury Capital Purchase Program. NewsWire. Retrieved on December 29, 2008 from http://finance.yahoo.com/news/Pinnacle-Financial-Receives- bw-13672883.html. 27 Amgen Fact Sheet. Amgen. Retrieved on January 6, 2009 from http://wwwext.amgen.com/pdfs/Fact_Sheet_Amgen.pdf 28 Amgen Submits Biologics License Application for FDA Approval of Denosumab in Women With Postmenopausal Osteoporosis and in Patients Undergoing Hormone Ablation for Either Prostate or Breast Cancer. Amgen Press Releases. Retrieved on January 7, 2009 from http://wwwext.amgen.com/media/media_pr_detail.jsp?year=2008&releaseID=1238183. 29 Bristol-Myers Squibb to Announce Results for the Third Quarter of 2008 on October. Reuters. Retrieved on January 7, 2009 from http://www.reuters.com/article/pressRelease/idUS247821+14-Oct-2008+BW20081014. 30 PPD meets 3Q earnings estimates but lowers full-year forecast. Austin Business Journal. Retrieved on January 3, 2009 from http://austin.bizjournals.com/austin/stories/2008/10/20/daily24.html?ana=yfcpc. 31 Diabetes Cases Increase 15 Percent in 2 Years. Bloomberg News. Retrieved on January 7, 2009. 32 Investor Relations. Federal Express Website. Retrieved on January 8, 2009. http://files.shareholder.com/downloads/FDX/ 512667746x0x259368/c859c90a-d05f-4ca8-880e-4175b9d404cf/FDX_News_2008_12_18_Earnings.pdf. 33 DHL Express To Focus U.S. Business ON International Services. DHL Website. Retrieved on December 27, 2008 from http://www.dhl-usa.com/about/pr/PRDetail.asp?nav=PressRoom/ PressReleases&year=2008&seq=1246.
  • 25. 34 Bloomberg.com 3 month Chart of Baltic Dry Index. Retrieved on January 12, 2009 from http://www.bloomberg.com/apps/cbuilder?ticker1=BDIY%3AIND. 35 Dryships Inc. Reports Third Quarter 2008 Results, released by Dryships Inc. November 2, 2008. Retrieved on January 12, 2009 from http://www.capitallink.com/ppress/ppressfile/23406845/ dryspr110308.pdf. 36 General Electric Co. 2007 Annual Report. Retrieved on January 12, 2009 from http://www.ge.com/ar2007/pdf/ge_ar2007_full_book.pdf. 37 GE Reports 3rd Quarter 2008 Earnings. Released by GE Co. October 10, 2008. Retrieved on January 12, 2009 from http://www.ge.com/pdf/investors/events/10102008/ge_earnings_press_release_10102008.pdf. 38 Accenture Reports Strong First-Quarter Fiscal 2009 Results. Released by Accenture Ltd. December 18, 2008. Retrieved on January 12, 2009 from http://media.corporate-ir.net/media_files/irol/12/129731/ACN%20Q1FY09%20Earnings %20Release_18Dec2008.pdf. 39 Adobe Reports Record Quarterly and Annual Revenue. Adobe Systems Inc. Retrieved on January 12 2009 from http://www.adobe.com/aboutadobe/pressroom/pressreleases/pdfs/200812/Q408Earnings.pdf. 40 Cisco Systems Inc. QY1F09 Earnings Conference Call, November 5, 2008. Retrieved on January 12, 2009 from http://files.shareholder.com/downloads/CSCO/512938942x0x247869/74bf558f- ce35-459a-8598-2278e9664fbc/Q1FY09_Prepared%20Remarks.doc.pdf. 41 Intel Releases Preliminary 4th Quarter Financial Information. Intel. Retrieved on January 12, 2009 from http://www.intc.com/releasedetail.cfm?ReleaseID=357860. 42 Celanese Corporation. Bloomberg Analytics. Retrieved on January 12, 2009. 43 Celanese Corporation. Retrieved on January 7, 2009 from https://www.tradethenews.com/stock- news/Materials/Celanese-Corporation/CE/481993. 44 Vulcan Materials. Bloomberg Analytics. Retrieved on January 5, 2009. 45 2008 FOMC Statements Side-By-Side: December 16/October 29 Text. Retrieved January 8, 2009. 46 Gross Domestic Product: Third Quarter 2008 (FINAL). Released December 23, 2009 by the Bureau of Economic Analysis, US Department of Commerce. Retrieved on January 12, 2009. 47 Bob Willis and Courtney Schlisserman, U.S. Economy: Spending Dropped Less Than Forecast in November. Retrieved from Bloomberg News on January 11, 2009. 48 Carrie Mason-Draffen, December's Job Losses Push Unemployment rate to 7.2 Percent, Newsday. Retrieved on January 12, 2009 from http://www.newsday.com/services/newspaper/printedition/saturday/ news/ ny- bzjobs105993713jan10,0,7495063.story on January 12, 2009. 49 $SPX:Market Data Express. Standard and Poors. Retrieved on January 12, 2009. 50 Economic and Stock Market Commentary. The Value Line Investment Survey. Retrieved on January 11, 2009 from http:// www.valueline.com.proxy.lib.utk.edu:90/news/vlvquarterly.html. Note: Cover image, banners, and graphics derived from original painting by Edvard Munch. Skrik (The Scream). 1896. National Gallery, Oslo. Retrieved on January 6, 2009. Edited by Jonathan K. Epperson.