Sector Rotation Strategies

Using Old Wall Street Sayings

Sam Stovall
Chief Investment Strategist
Standard & Poor’s Equity Research Services
November 10, 2007

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Copyright (c) 2007 Standard & Poor’s, a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved.
 Let Your Winners Ride, But Cut Your Losers Short
Best/Worst S&P 500 Industries & Sectors

CAGR Std. Risk/ Freq. of

Since 1970 (%) Dev. Return Outperf.
S&P 500 7.5 16.1 0.46 NA
Worst 10 8.0 25.4 0.31 49%
Best 10 13.9 23.3 0.59 70%

Since 1990
S&P 500 9.5 16.4 0.65 NA
3 Best Sectors 11.0 20.5 0.63 71%
Source: Standard & Poor's Equity Research Services. Past performance is no guarantee of future results
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2.
 As Goes January, So Goes the Year

January Barom eter Portfolios

12-Mo. Return Freq. of

S&P 500 Rest of Correct Since 1970 C.A.G.R.s Outperf.
January Year Forecast S&P 500 7.8% NA
Perform ance Change 1945-06 JBP-Industries 16.4% 71%
Up 11.8% 85%
Dow n -0.7% 45% Since 1990
S&P 500 9.0% NA
JBP-Sectors 13.0% 75%

Source: Standard & Poor's Equity Research Services. Past performance is no guarantee of future results
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3.
 Sell in May and Then Walk Away
S&P 500 Sector Average Perform ances (Price Only) and
Frequencies of Market Outperform ance: 4/30/90-10/31/07

Nov.-April May-Oct.
Sector % Chg. F.O. % Chg. F.O.
Consumer Discretionary 10.9 53% (0.4) 39%
Consumer Staples 5.0 53% 5.3 61%
Energy 8.8 47% 3.5 50%
Financials 10.7 71% 2.9 56%
Health Care 6.4 47% 5.4 61%
Industrials 10.1 76% 0.6 22%
Information Technology 10.1 59% 4.2 61%
Materials 11.1 71% (1.5) 33%
Telecommunication Services 3.2 35% 2.5 61%
Utilities 3.9 35% 2.7 44%
S&P 500 7.8 - 2.3 -

Source: Standard & Poor's Equity Research Services. Past performance is no guarantee of future results
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4.
 Sell in May and Then Walk Away

Compound Annual Growth Rates

April 1990 - October 2007
14% 12.2% 12.3%
12%
10% 9.1%
8%
6%
4%
2%
0%
S&P 500 All Year S&P 500 N-A; S&P 500 N-A;
Cons.Staples M-O Health Care M-O

Source: Standard & Poor's Equity Research Services. Past performance is no guarantee of future results
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5.
 No Free Lunch on Wall Street – Who Says?

Annual Returns and Volatility 12/31/90-10/31/07

70%
0.61
60% 0.54
50%
0.43
40% 0.35
32.6%
30%
18.6% 20.2%
20% 16.0%
11.3% 11.4%
8.6% 8.6%
10%

0%
S&P 500 Index S&P 500 Info. Portfolio: CS & IT Portfolio: CD, I, IT,
Technology Sector TS

Compound Annual Growth Rate Standard Deviation Risk-Adjusted Return

Source: Standard & Poor's Equity Research Services. Past performance is no guarantee of future results
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6.
 Don’t Get Mad, Get Even!
Annual % Changes (no dividends)

S&P 500 R2000/

MCI EWI Beat? S&P 600 Beat?
1990 (6.6) (14.7) 0 (21.5) 0
1991 26.3 31.7 1 43.7 1
1992 4.5 12.7 1 16.4 1
1993 7.1 12.5 1 17.0 1
1994 (1.5) (1.6) 0 (3.2) 0
1995 34.1 28.9 0 28.6 0
1996 20.3 16.5 0 20.1 0
1997 31.0 26.7 0 24.5 0
1998 26.7 10.4 0 (2.1) 0
1999 19.5 10.2 0 11.5 0
2000 (10.1) 7.6 1 11.0 1
2001 (13.0) (1.9) 1 5.7 1
2002 (23.4) (19.4) 1 (15.3) 1
2003 26.4 38.7 1 37.5 1
2004 9.0 15.2 1 21.6 1
2005 3.0 6.4 1 6.7 1
2006 13.6 14.0 1 14.1 1
2007 9.2 6.9 0 7.7 0
Return %: 9.8 11.2 56% 12.5 56%
Risk (SD): 16.4 14.9 16.6
Rtn/Risk: 0.60 0.75 0.75

Source: Standard & Poor's Equity Research Services. Past performance is no guarantee of future results
Permission to reprint or distribute any content from this presentation requires the written approval of Standard & Poor’s.

7.
 Don’t Get Mad, Get Even!

Annual % Changes Since 1990 (no dividends)

Let Your Winners Ride % Chg. Risk (SD) Rtn/Risk Beat?

S&P 500 (MCW) 10.7% 16.4 0.65 NA
EW Sectors 14.9% 18.8 0.79 76%

As Goes January
S&P 500 (MCW) 10.1% 16.0 0.63 NA
EW Sectors 15.5% 15.3 1.01 83%

Source: Standard & Poor's Equity Research Services. Past performance is no guarantee of future results
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8.
 Don’t Fight The Fed – At Least for Too Long

Six Month After 12 Months After

Average Freq. of Average Freq. of
U.S. Equity Benchm arks % Chg. Rise % Chg. Rise
S&P 500 (Since 1954) 12.3 64% 18.8 91%
>S&P 500 Grow th (1974) 16.1 57% 18.6 86%
>S&P 500 Value (1974) 10.1 57% 13.1 86%
Russell 2000/S&P SC 600 (1980) 5.9 67% 19.5 100%
Nasdaq (1974) 13.4 57% 23.0 86%

Source: Standard & Poor's Equity Research Services. Past performance is no guarantee of future results
Permission to reprint or distribute any content from this presentation requires the written approval of Standard & Poor’s.

9.
 Sector Performances After Rate Cuts Since 1954

Freq. Of Avg.
Avgs. of Component Industries Rise % Chg.
Info. Technology 73% 23
Consumer Discretionary 91% 19
Industrials 73% 16
Telecommunication Services 50% 15
Consumer Staples 82% 14
Health Care 82% 13
Financial 73% 12
Materials 73% 10
Energy 64% 9
Utilities 64% 6

Source: Standard & Poor's Equity Research Services. Past performance is no guarantee of future results
Permission to reprint or distribute any content from this presentation requires the written approval of Standard & Poor’s.

10.
 Year-To-Date Performances Through 10/31/07

"Let Winners Ride" January Barometer

2007 Portfolios % Changes 2007-08 Portfolios % Changes
Top 10 Industries 15.3 Top 10 Industries 4.5
Top 3 MCW Sectors 12.6 Top 3 MCW Sectors 11.6
Top 4 EW Sectors 9.5 Top 4 EW Sectors 6.3
500 YTD 9.2 S&P 500 7.7
"Sell in May" "No Free Lunch"
2007 Portfolio % Changes 2007 Portfolio % Changes
Consumer Staples 4.8 CS & IT 16.9
Health Care 0.1 CS, E & IT 20.8
S&P 500 4.5
Don't Get Mad, Get Even
2007 Indexes: % Change
Equal-Weighted S&P 500: 6.9
Cap-Weighted S&P 500: 9.2

Source: Standard & Poor's Equity Research Services. Past performance is no guarantee of future results
Permission to reprint or distribute any content from this presentation requires the written approval of Standard & Poor’s.

11.
 Required Disclosures
S&P Global STARS Distribution -- In the U.S.-As of September 30, 2007, research analysts at Standard & Poor’s Equity Research Services U.S.
recommended 34.1% of issuers with buy recommendations, 57.6% with hold recommendations and 8.3% with sell recommendations. In Europe-As of
September 30, 2007, research analysts at Standard & Poor’s Equity Research Services Europe recommended 44.8% of issuers with buy
recommendations, 36.0% with hold recommendations and 19.2% with sell recommendations. In Asia-As of September 30, 2007, research analysts at
Standard & Poor’s Equity Research Services Asia recommended 45.5% of issuers with buy recommendations, 46.8% with hold recommendations and
7.7% with sell recommendations. Globally-As of September 30, 2007, research analysts at Standard & Poor’s Equity Research Services globally
recommended 36.5% of issuers with buy recommendations, 53.7% with hold recommendations and 9.8% with sell recommendations. 5-STARS (Strong
Buy): Total return is expected to outperform the total return of a relevant benchmark, by a wide margin over the coming 12 months, with shares rising in
price on an absolute basis. 4-STARS (Buy): Total return is expected to outperform the total return of a relevant benchmark over the coming 12 months,
with shares rising in price on an absolute basis. 3-STARS (Hold): Total return is expected to closely approximate the total return of a relevant benchmark
over the coming 12 months, with shares generally rising in price on an absolute basis. 2-STARS (Sell): Total return is expected to underperform the total
return of a relevant benchmark over the coming 12 months, and the share price is not anticipated to show a gain. 1-STARS (Strong Sell): Total return is
expected to underperform the total return of a relevant benchmark by a wide margin over the coming 12 months, with shares falling in price on an
absolute basis. Relevant benchmarks: In the U.S. the relevant benchmark is the S&P 500 Index, in Europe and in Asia, the relevant benchmarks are
generally the S&P Europe 350 Index and the S&P Asia 50 Index.
Relevant benchmarks: In the U.S. the relevant benchmark is the S&P 500 Index, in Europe and in Asia, the relevant benchmarks are generally the S&P
Europe 350 Index and the S&P Asia 50 Index.
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12.
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