EFTA Document EFTA01459640

Deutsche Bank Securities Inc. Strategy Flashcard Strategy Flashcard 5&P 500 to reach 2200 by 2O16 end ono long expansionary cycle of moderate growth 2016 end target: 2200 2017 end target: 2400 Div Yld: 2% 2014A 2015E 2016E Quarterly EPS EPS $118 $118 $118 1Q14A $28.00 1C11.5A $28.60 PE on yearend S&P targets 17.4 17.3 18.6 2Q14A $29.75 2Q15A $30.10 DPS $38 $41 $43 3Q14A $30.00 3Q1SA $30.00 EPS/DPS growth 6%/6% 0%/7% 0%/S% 4014A $30.25 4Q1SE $29.25 Market strategy and tactks: Lower S&P returns than history likely, but still decent and few alternatives - stay involved, buy on dips Consider lesson of 2014-2015: Interest rates stayed very low despite tighter labor market and initial Fed hike Next 5%+ move is likely: Up Risk of near-term correction: Diminished "5&P PE stands on the shoulders of bonds." Thematic and sector strategy: Tilt toward: 1) Secular Growth Sectors - industries with strong sales growth in the middle of economic cycles 2) Sales Growth near 5%- industries not dependent on margin expansion to drive 5%+ EPS growth 3) High ROE or long competitive advantage - ability to defend ROE/margins amidst low interest rates 4) Dividend Growth - stocks with ability to significantly raise dividend payout ratios 5) Debt Capacity - companies that can issue cheap debt for acquisitions and share buybacks Tilt away from: 1) Consumer companies w/tired brands or facing tough competition (seek unique products/experiences) 2) Smaller cap cyclical plays which are still expensive, prefer big-cap banks and select retailers 3) Commodity and industrial capital goods producers, prefer Transports Reasons to still buy stocks: 1) - 2% US GDP likely in 2016 2) S&P EPS steady/higher despite $/oil 3) PEs justifiable and been higher 4) Bond yields are nil after inflation Dare to ask: Why not 2500+ S&P cycle-high? 2500+ r. 18x 2018E EPS $140-145 5&P 500 avg. trailing 4qtr PE: 1960-2014 16.0 1985-2014 17.6 1995-2014 18.6 2005-2014 15.9 Sectors/Industries: Health Care, Tech Health Care, Tech, Consumer Disc. Tech, Health Care, some Consumer Big Banks, Mega-cap Tech Tech, Health Care, some Consumer Staples Be selective and valuation mindful Energy, Industrial Capital Goods Risks: - US tax on foreign profits, whether repatriated or not, threatens large multinationals and would cause margin contraction • EM economy weakness that causes a steep decline in commodity prices, especially oil, and threatens US exports and investment spending - A surge in long-term interest rates or any global economic shock would threaten our constructive view on the S&P for 2016 CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0120208 SDNY_GM_00266392 EFTA01459640