JT Munch

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• JT Munch
• Johann Peck
• Adam Reno
• Derek Rogers

Industrial Sector
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Recommendations

• New position We recommend buying 200bps of Shaw
  Group (SGR)
• Sell entire existing 200bp position in Rockwell
  Automation (ROK)
• Sell 150bps of General Electric (GE) position,
  reducing holding to 2 of SIM

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Sector Analysis
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Sector Overview

• Objective Decrease weight of Industrial Sector
  to 8 of SIM portfolio
• 296 bps below SP 500 Weighting

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Current Weights (SIM Portfolio)

• General Electric Company (GE) 3.52
• The Boeing Co. (BA) 1.92
• Rockwell Automation 2.06
• OshKosh Corp (OSK) 1.45
• Total
  8.96

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Recommended SIM Weights

• General Electric Company (GE) 2.0
• The Boeing Co. (BA) 2.0
• Shaw Group Inc. (SGR) 2.0
• OshKosh Corp (OSK) -- 2.0
• Total
  8.0

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Business Analysis Of Companies
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Pros Cons of Industrial Sector

• Positives
• Negativity priced is priced in SP-20 down 26
  vs. SP down 22 since 9/1/08
• Lower commodity prices good for ST margins
• Significant risks
• US dollar appreciation
• Oil/gas mining CAPEX decimated by commodity
  price declines
• Emerging markets are bigger risk than perceived

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General Electric CO. (GE)
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Rockwell Automation (ROK)
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ROK Valuation
Target Price 26.82 Downside 1
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OshKosh Corp. (OSK)
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The Boeing Co. (BA)
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Shaw Group Inc. (SGR)

• The Shaw Group (SGR) founded in 1987 has become
  one of the leading engineering procurement and
  construction services firms worldwide. Shaw
  generates more than 85 of sales from services
  performed in the US.
• The company participates in four key end markets
  
• Fossil Power
• Nuclear Power
• Environment Infrastructure
• Chemicals

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Shaw Group Inc. (SGR)
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Shaw Group Inc. (SGR)

• Regulated Utilities
• Solid balance sheets backed by the ability to
  recover costs through the regulatory process
• Capital projects are long-term (multi-decade)
  investments not subject to short-term economics
• U.S. Government
• Spending should remain strong
• As focus likely to remain on economic stimulus,
  military transformation, terrorism, and
  infrastructure improvements

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Shaw Group Inc. (SGR)

• Approximately 84, or 13B, of backlog is
  comprised of regulated utilities, national or
  international oil companies.
• U.S. Government, who provide financial strength
  and stability. (32)
• Ranked 1 in Power by ENR magazine
• Signed first 2 nuclear EPC contracts and an
  interim agreement for another.
• Received credit rating upgrades of BB from BB
  and Ba1 from Ba2 from SP and Moodys
  respectively.
• Increased credit facility from 850M to 1.05B
• Nuclear opportunity along with healthy
  fundamentals for other segments should enable SGR
  to robustly grow its backlog through the end of
  the decade.

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Financials
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2008 Financial Highlights
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Record Cash Growth
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Financial Snapshot
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Backlog
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Valuation Recommendation
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Daily Price Volume
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Absolute Valuation
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Relative Valuation (SP-20)
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Relative Valuation (SP 500)
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Multiples Valuation
Target Price 28.02 Upside 85
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Discounted Cash Flow Valuation
Target Price 30.85 Upside 103.89
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Public Comps
Implied Value Per Share 1.67 11.9x 19.83
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Valuation Range
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Target Price
Target Price 27.39 Upside 81
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Recommendations

• New position We recommend buying 200bps of Shaw
  Group (SGR) 81 upside
• Sell entire existing 200bp position in Rockwell
  Automation (ROK) 1 downside
• Sell 150bps of General Electric (GE) position,
  reducing holding to 2 of SIM short / medium
  term challenges
• Reduces Industrial weighting to 8 of SIM, 296bps
  under market