Inside The Buy-side Q3'20 Earnings Primer

Q3’20 Earnings Primer Investor Sentiment Survey October 8, 2020 | IF IT’S CORBIN, IT’S ACTIONABLE |

Inside The Buy-side® Q3’20 Earnings Primer

ISSUE: 44 DATE: OCTOBER 8, 2020 Market Performance

For 13 years, we have surveyed global investors quarterly on the equity markets, world economies and business climate. At the start of every earnings season, we publish our leading-edge research, Inside The Buy-side®, which captures realtime Voice of Investor® sentiment and trends.

Q3’20

YTD1

U.S. 7.6%

(2.7%)

NASDAQ

11.0%

24.5%

Leveraging our deep understanding of capital markets, cutting-edge technology and best practice knowledge, our research demonstrates the value we add by remaining at the forefront of global market trends, investor sentiment and effective communication strategies.

S&P 500

8.5%

4.1%

Russell 2000

4.6%

(9.6%)

Survey Scope: 83 participants globally, comprising 65% buy side and 35% sell side; equity assets under management total ~$3.4 trillion

FTSE 100

(4.9%)

(22.2%)

Stoxx 600

0.2%

(13.2%)

Survey Timeframe: Sep. 10 – Oct. 1, 2020

Asia

(4.0%)

(16.8%)

7.8%

5.5%

DJIA

Europe

Hang Seng Shanghai 1

1

BY TYPE Generalist Multi

BY REGION

Financials

5%

Industrials

5%

As of 9’30’19

BY INVESTMENT STYLE

76% 8%

As of Sep. 30, 2020

GARP

26%

18%

52%

Core Value

21%

Core Growth

21%

30% Comm. Services

3%

Technology

1%

REIT

1%

Materials

1%

CORBIN ADVISORS

Hedge Fund

North America EMEA APAC

VC/Private Equity Deep Value

18% 8% 6%

2

Word Cloud: Frequency of Occurrence Visual representation of investment community focus areas, trends in frequency of word occurrence and underlying tone

Though Uncertainty Remains, Trends Point to More Upbeat Views

Q4’19

Q1’20

Q2’20

Q3’20

Q4’19

Q1’20

Q2’20

Q3’20

Q/Q

COVID-19

0

98

56

42

 14

Election

9

7

13

34

 21

Economy

22

10

6

12



6

Debt

9

7

4

11



7

Demand

5

12

11

10

 1

Top Mentions

Key: Underlying Sentiment

⚫ ⚫ ⚫

Positive

Neutral Negative

CORBIN ADVISORS

3

Survey Findings: Investor Sentiment Continues to Climb and the “TINA Effect” is in Full Swing

#1

Following Last Quarter’s Earnings Results, which Exceeded Consensus at Record Levels, the Worst is Believed to Be Behind and Expectations Are For Continued Recovery

▪

62% of surveyed investors and analysts affirm last quarter’s earnings were better than they had expected, the first time ever in our survey that contributors did not report earnings were In Line with expectations, dispelling the phenomenon of investor illusory superiority

▪

36% believe Q3’20 earnings will be Better Than consensus, up from 22% last quarter

▪

More investors believe key metrics – EPS, Organic Growth, FCF and Margins – will Improve QoQ; fewer than one-quarter of the group expect these KPIs to worsen

▪

40% describe themselves as Neutral to Bullish or Bullish, up from 26% last quarter; 37% also describe executive tone as upbeat, an increase from 26% in Q2

▪

71% believe we are in an economic recovery, with 30% suggesting a W-shape and 23% a hockey stick; China is cited as the economy most expected to Improve over the next six months, followed by the U.S. (62%) and India (47%); only Latin America has more investors expecting worsening conditions

#2

Investors Shrug Off Lofty Valuations and Report Net Buying at a Record Level Amid the TINA Effect (There is No Alternative)

▪

Despite 68% classifying U.S. equities as Overvalued, marking the 12th consecutive quarter in which valuations are described as “rich” and the best two-quarter performance for the S&P 500 and NASDAQ since 2009, 41% believe equity valuations will Expand for the remainder of 2020, up from 18% last quarter

▪

Furthermore, 46% report Net Buying, the highest percentage ever recorded in our survey, while only 11% are Net Selling, a decrease from 16% last quarter

▪

Clear sector bets emerge, with Technology, Biotechnology and Healthcare remaining the top picks, while Energy bears nearly double and Financials and REITs remain in the doghouse

▪

54% note companies that took a stand on racial injustice on earnings calls last quarter had a Positive impact on their investment decisions in the context of ESG; none report a Negative impact

▪

Of note, 64% of investors are in favor of a traditional IPO, compared to just 27% for direct listings, while the remainder assert “It Depends”

#3

All Eyes on Earnings Season and the U.S. Presidential Election

▪

The U.S. Presidential election (63%), COVID-19 (43%) and fiscal/monetary policy (32%) are the leading investor concerns heading into the final quarter of 2020

▪

With a tumultuous election season underway, investors are bracing for continued volatility in the months ahead; 64% believe former Vice President Joe Biden will win and Energy, Financials, Communication Services and Healthcare sectors are believed to have the most at stake

▪

FCF generation and capital deployment uses are the leading topics of interest for upcoming earnings calls, ahead of demand trends and margin outlook

▪

Corporate debt levels remain in focus; nearly 60% of contributors still cite debt paydown as the preferred use of cash, with the ideal Net Debt-to-EBITDA level remaining at 2.0x or below, followed by reinvestment (48%) and dividend growth (40%), the latter of which nearly doubled QoQ

▪

With a recovery unfolding, few prefer M&A / consolidation relative to organic growth stories; of those who encourage M&A, more than 60% favor bolt-ons

CORBIN ADVISORS

4

Sequential Earnings Momentum Baked In with Consensus Viewed as Being More In Line with Reality Following a record number of S&P 500 earnings beats last quarter (and at a record level above consensus), nearly half believe Q3 results will be In Line with consensus; 36% are expecting more beats despite recent upward revisions Q3’20 EARNINGS EXPECTATIONS VS. PRIOR QUARTER

Q3’20 EARNINGS EXPECTATIONS VS. CONSENSUS 84% 80%

76%

54%

54% 41%

31%

27% 15%

10%

6%

Better Than

Mar '20

22%

19%

5%

In Line Dec '19

28%

Jun '20

53%

49%

36% 21% 25%

22%

24%

15%

3%

Worse Than

Better Than

Sep '20

Better Than

In Line Dec '19

Mar '20

In Line

Worse Than

Jun '20

Sep '20

Worse Than

“Strength of earnings in many industries.” Buy Side,

“Cost-out very strong theme.” Buy Side, Generalist,

“More uncertainty on rebound of activities.” Buy Side,

Generalist, N. America

Australia

Generalist, Europe

“Strong consumer income.” Buy Side, Generalist,

“A slow reopening but faster than expected.” Buy Side,

“We expect a freefall.” Buy Side, Generalist, Europe

N. America

Generalist, N. America

“Cybersecurity continues to be very strong.” Sell Side,

“Analysts have been revising their estimates upward for both earnings and revenue. Also, it appears that company guidance has been skewed to the positive.”

Comm. Services, N. America

“Pickup from weak Q2.” Buy Side, Generalist, Europe “Economy emerging from the thaw of lockdowns, a lot of personal savings.” Buy Side, Generalist, Australia “Better news flow from D.C.” Sell Side, Generalist, N. America

“Demand recovery in various customer segments.”

Buy Side, Generalist, N. America

“Even in the face of upward revisions by analysts, which began in June, final earnings exceeded the revamp in estimates. This was more so evidenced by the breadth of the spread between the number of companies beating versus those companies that missed estimates. I expect more in line this quarter.”

Buy Side, Generalist, N. America

Sell Side, Materials, Europe

“For most companies, lower revenues than last year.”

Buy Side, Generalist, N. America

“Better PMI than expected in July and August.”

Buy Side, Generalist, Europe

“The economic recovery will help firms to generate higher earnings.” Sell Side, Generalist, Europe CORBIN ADVISORS

5

All KPIs Trending More Positive as Investors Believe the Worst is Behind Us More than 50% believe EPS, organic growth and FCF will Improve sequentially, while 46% believe the same for operating margins

ORGANIC GROWTH

FCF

EPS

88%

OPERATING MARGINS 89%85%

83%81%

84%80%

67% 54% 18% 2%

Improving

56%

51% 24% 10%15%

26%

22% 3%

Staying the Worsening Same

14%

13%

Improving

46% 27%

23%

6%

3%

Staying the Worsening Same Dec '19

10%

Improving

Mar '20

8% 5%

16%16%

20%

0% 4%

Staying the Worsening Same

Improving

Staying the Worsening Same

Jun '20

Organic Growth

EPS Growth 100% 80% 60% 40% 20% 0%

100% 80% 60% 40% 20% 0%

FCF

Margins1

100% 80% 60% 40% 20% 0%

100% 80% 60% 40% 20% 0%

Improving 1

34% 17%

Staying the Same

Worsening

Data collection commenced Sep ‘15 CORBIN ADVISORS

6

Topics of Interest for Upcoming Earnings Calls Cash is king; demand outlook dethroned as the leading topic as investors shift their focus to FCF generation and uses

1

FCF generation and uses

2

Demand trends

3

Margin outlook, cost containment

4

Organic growth opportunities

5

Talent management (work-fromhome productivity)

6

Supply chain management

Views from N. America

Views from EMEA

Views from APAC

“Capex, margins, COVID-19.” Buy Side, Generalist

“Next six-month forecasts, cash cycle management, supply chain management.” Buy Side, Generalist

“Permanent changes to operating model/cost structure, real-time demand data, growth opportunities.” Buy Side,

“COVID-19, competitive environment, durability of earnings.” Buy Side, Generalist “Cash flow, margins, growth.” Buy Side, Generalist

Generalist

“Sector strength, margins.” Buy Side, Generalist

“Cost containment, R&D, organic growth.” Buy Side,

“Development of end market demand, FCF generation, potential impact from major macro or geopolitical events (e.g., energy transition, digital disruption, U.S. election, U.S./China trade war).” Sell Side, Multi

Generalist

“Near-term outlook and response, permanent changes beyond the virus, opportunities.” Buy Side, Generalist

“Outlook, digital, cost cuts.” Sell Side, Multi

“Impact from oil prices.” Sell Side, Industrials

“Pipeline, productivity improvements, acquisitions.”

“Volume and price development in Q3 and beyond, outlook, risks.” Sell Side, Materials

“COVID-19, WFH/changes to structure of doing business.” Sell Side, Generalist

“Future clarity, stability in business, productivity increases.”

Buy Side, Generalist

Buy Side, Generalist

“Sustainability within current environment, margins, organic or inorganic growth and cost-cutting, cash return to shareholders.” Buy Side, Generalist

“Next quarter guidance, impact of COVID-19, global environment.” Buy Side, Information Technology

“Strategies to improve earnings, how much will be invested for capex, how much budget will be spent for M&A.” Sell Side, Multi

“Demand, difficulty in acquiring new logos, 2021 outlook assuming vaccine widely available.” Buy Side, Multi “Sustainability, growth, use for cash.” Sell Side, Multi

“How to supervise employees at home, how to get teams back into the office, what happens with Biden as president.” Sell Side, Multi

CORBIN ADVISORS

7

Most Companies Expected to Return to Pre-COVID Guidance Practices in 2021 Overarching Investor preference is reporting on a fiscal or calendar year, provide both annual and quarterly guidance

Methodology

▪ To assess company and investor alignment on 2021 guidance, we surveyed:

2021 INVESTOR GUIDANCE PREFERENCE / EXPECTATIONS FOR COMPANIES REPORTING Q4 AND FISCAL YEAR EARNINGS THIS QUARTER 71%

- 81 investors and analysts on their preference and expectations for 2021 guidance – for companies entering fiscal year 2021 this quarter and those that will report full year 2021 early next year - 59 IROs across market caps and sectors on their initial expectations for 2021 guidance

Key Insights

50%

15%

20%

15% 5%

4% Quarterly

▪ To baseline preferences, pre-COVID, ~70% of investors preferred companies issue both quarterly and annual guidance, in line with our historical averages

▪ For companies reporting fourth quarter and fiscal year 2020 earnings this quarter, as well as those reporting fourth quarter and full year 2020 earnings next quarter, investors largely prefer (and ~50% expect) companies to provide both quarterly and annual 2021 guidance

20%

Annual

Preference

Both

No Guidance

Expectations

2021 INVESTOR GUIDANCE PREFERENCES / EXPECTATIONS FOR COMPANIES REPORTING Q4 AND FULL-YEAR EARNINGS NEXT QUARTER 65% 52%

▪ 48% of IROs believe their companies will provide annual 2021 guidance (compared to 58% last year), while 14% believe they will give quarterly only (compared to 7%) and 16% will provide no formal guidance (compared to 9%) ▪ Early indications reveal the majority of investors expect companies to return to pre-COVID guidance practices, and most IROs suggest the same, though many caveat that the situation remains fluid and “nothing is set in stone”

CORBIN ADVISORS

20%

23%

16%

8%

4% Quarterly

Annual

Preference

Both

12%

No Guidance

Expectations

8

More Upbeat Management Tone Drives Bullish Investor Sentiment to Pre-COVID Levels After improving last quarter from March’s record bearishness, 40% of investors are Neutral to Bullish or Bullish, largely in line with perceived management tone INVESTOR SENTIMENT 4%

26%

MANAGEMENT TONE

7%

22%

40%

33% 26%

29%

Bullish Neutral to Bullish Neutral Neutral to Bearish Bearish

36%

48%

25%

31%

12%

6%

Jun '20

Sep '20

26%

37%

28% 39% 41%

46%

22% 5% Jun '20

24%

2% Sep '20

Neutral to Bullish

Neutral

Neutral to Bearish

“Consumption has held up better than I expected given unemployment levels and lack of additional stimulus.”

“Hope but the uncertainty of a solution to the virus and the behavior of people in returning to normal.” Buy Side,

Buy Side, Generalist, N. America

“The headwind of uncertainty on a number of fronts.

Upcoming election, ongoing concerns regarding COVID19 and the potential fiscal stimulus (lack thereof) to mitigate, continuation of restrained capex. On a positive note, the consumer continues to surprise via spending, housing, etc.” Buy Side, Generalist, N. America

“Uncertainty is slowly fading.” Buy Side, Generalist,

“Incompetence of the Congress and President.” Buy Side,

Buy Side, Generalist, N. America

“Market momentum plus large cash on sidelines.”

Europe

“Reopening trade, zero rates, fiscal stimulus, countered by election, COVID-19 spike in EU, CARES 2 stall.”

Generalist, N. America

“Eventual success managing COVID-19.” Buy Side,

Generalist, N. America

“Too much debt.” Buy Side, Generalist, N. America “Weak underlying demand with further prospect for recovery weakening, concern over prospect of U.S. election violence distracting from economic management efforts.” Buy Side, Generalist, Europe

Generalist, N. America

“Next wave of COVID-19.” Sell Side, REIT, N. America

“Stimulus is ending.” Buy Side, Multi, N. America

“Markets are up on stimulus and QE, overbought.”

Buy Side, Generalist, N. America

“Hope that the prevailing party remains in office and economic policies continue.” Sell Side, Multi, N. America “Most companies I talked to see their business picking up versus Q2, but all admit visibility is still very low as nobody knows how the COVID-19 pandemic will evolve.”

Sell Side, Multi, Europe

CORBIN ADVISORS

Sell Side, Generalist, Europe

“Uncertainty.” Buy Side, Generalist, Europe “COVID-19.” Buy Side, Generalist, Europe

“Soaring joblessness and social distancing.” Sell Side, Generalist, Europe

“The end of central banker infallibility.” Sell Side, Comm. Services, Asia

9

Top Concerns from around the Globe It’s that time again! U.S. Presidential election front-and-center, while COVID-19 and policy remain in focus

63%

43%

32%

29%

25%

U.S. Presidential Election

COVID-19

Fiscal, Monetary Policy

Geopolitics (Trade War)

Global Economy

Views from N. America

Views from EMEA

Views from APAC

“COVID-19, U.S. elections, China/U.S. relations.”

“Second wave of COVID-19, war, emerging market debt worries.” Buy Side, Generalist

“COVID-19, high valuation, tech antitrust overreaction.”

“Market behavior (herd), spread of COVID-19, politics in the U.S.” Buy Side, Multi

“U.S. election – fear a deadlock more than Trump or Biden, secondary lockdowns, none of the vaccine hopefuls show any efficacy/safety.” Buy Side, Generalist

Buy Side, Generalist

“Debt, inflation, valuations.” Buy Side, Generalist “Election, continued economic shutdown, primarily at the state & local levels, inflation, stagflation.” Buy Side,

Buy Side, Generalist

Generalist

“Overcrowded tech, extremely low yields in corporate, zombification of economy.” Buy Side, Generalist

“Election uncertainty, China/trade, inflation.” Buy Side,

“Growth, Trump, China, Russia and Turkey.” Buy Side,

Generalist

Generalist

“Fed, monetary policy, leverage.” Sell Side, Generalist

“Federal government governance, Federal debt, interest rates.” Buy Side, Generalist

“Fiscal mistakes, COVID-19.” Buy Side, Generalist

“Impact of COVID-19 and lockdowns, run-off of fiscal boost, underlying inflation.” Sell Side, Comm. Services

“Full reopening of the economy, consumer confidence, small business failures.” Buy Side, Generalist “COVID-19, economy, earnings.” Buy Side, Generalist

“US-election, fail of COVID-19 vaccine, trade war for US-China.” Buy Side, Generalist

“Intension on South China sea, war on Taiwan.” Sell Side, Multi

“COVID-19, U.S. elections, Brexit.” Sell Side, Materials

“Political turmoil in the U.S., trade war, fiscal deficits in the U.S. and abroad.” Buy Side, Generalist

“COVID-19 second wave/no vaccine, unemployment kicking in as furlough/temp payment schemes end, Trump re-election.” Sell Side, Multi

“Poor growth, weak consumer spending, China trade issues.” Buy Side, Generalist

“New conflict between U.S. and China, Brexit, government debt.” Sell Side, Generalist

“Recovery, debt deflation, wealth gap.” Buy Side,

“Second wave of COVID-19 cases in Europe and U.S., escalation of the U.S./China trade war.” Sell Side, Multi

Generalist

“Lack of fiscal stimulus, margin compression, concentrate single sector driving equity market.” Buy Side, Technology

“U.S. election uncertainty, a Biden/Harris victory, end of stimulus.” Buy Side, Multi

CORBIN ADVISORS

10

Debt Paydown and Reinvestment Still Preferred Uses of Cash, While Dividend Appetite Nearly Doubles Cash conservation (“dry powder”) continues to see a precipitous decline amid more positive economic trends, while 40% now favor dividend growth, more than doubling since March; strong balance sheets still top of mind, though preferred debt levels ease slightly

PREFERRED USES OF CASH In Descending Order of Top Two Preferences

56%

61%

59% 51%

44% 46% 48%

40%

37%

Debt Paydown

Reinvestment

23% 12% 15% 12%

13%

Dividend Growth Mar '20

30%

24%

18% 22%

Dry Powder Jun '20

M&A

Buybacks

Sep '20

IDEAL NET DEBT-TO-EBITDA LEVEL 64% (Q3’20)

34% 32% 17%

1.0x or Less

20%

21% 15%

1.5x

26% 26% 16%

12% 11% 14%

2.0x Mar '20

CORBIN ADVISORS

2.5x Jun '20

17%

15% 8%

3.0x

3%

8%

5%

>3.0x

Sep '20

11

Most Believe We are in an Economic Recovery but the Shape Taking Hold is Anyone’s Guess With Manufacturing ISM® stabilizing, U.S. unemployment improving and the highest month-over-month increase for U.S. consumer confidence in 17 years, investors anticipate a W- or hockey stick-shaped recovery TYPE OF RECOVERY 30%

71%

23% 14%

Believe we are in an economic recovery W-shaped

Hockey Stick

11%

U-shaped

11%

K-shaped

V-shaped

5%

6%

L-shaped

Other

®

Manufacturing ISM Report on Business1 Proprietary Research Investors most focused on the following Economic indicators

60 55 50 45 40

51.7

51.2

49.1

47.8

48.3

48.1

50.9 47.2

50.1

52.6

Manufacturing ISM®

51%

2

Consumer Confidence

43%

3

Unemployment

40%

Consumer Confidence2

4

Yield Curve

26%

140

5

Interest Rates

18%

120

6

GDP

14%

100

7

Capex Level

8%

80

8

Inflation

7%

9

Stock Market

4%

10

Housing Starts

6%

56.0

55.4

49.1 41.5

1

54.2

43.1

Jun '19 Jul '19 Aug '19 Sep '19 Oct '19 Nov '19 Dec '19 Jan '20 Feb '20 Mar '20 Apr '20 May 20 Jun '20 Jul '20 Aug '20 Sep '20

124.3

135.8 134.2

132.6 126.3 126.1 126.8 126.5 130.4

118.8 98.1 85.7

85.9

91.7

101.8 86.3

Jun '19 Jul '19 Aug '19 Sep '19 Oct '19 Nov '19 Dec '19 Jan '20 Feb '20 Mar '20 Apr '20 May 20 Jun '20 Jul '20 Aug '20 Sep '20

U.S. Unemployment Rate3

22.0% 1 Source:

Institute for Supply Management 2 Source: The Conference Board 3 Source: U.S. Bureau of Labor Statistics CORBIN ADVISORS

12.0%

3.7%

3.7%

3.7%

3.5%

3.6%

3.5%

3.5%

3.6%

3.5%

4.4%

14.7% 13.3% 11.1% 10.2% 8.4%

7.9%

2.0% Jun '19 Jul '19 Aug '19 Sep '19 Oct '19 Nov '19 Dec '19 Jan '20 Feb '20 Mar '20 Apr '20 May 20 Jun '20 Jul '20 Aug '20 Sep '20 12

The Trend is Your Friend: Most Economies See More Investors Expecting Improvement China and the U.S. remain top picks for the second consecutive quarter, while Latin America sees the most downbeat outlook

GLOBAL ECONOMY EXPECTATIONS OVER THE NEXT SIX MONTHS

EUROZONE U.S. Improve

Worsen

62%

27%

+2 pts

+6 pts

MEXICO Worsen

Improve

Worsen

36%

28%

21%

31%

-11 pts

Worsen

45%

14%

-9 pts

-6 pts

+5 pts

JAPAN

CHINA

LATIN AMERICA

Improve

+9 pts

Improve

Improve

Worsen

Improve

Worsen

70%

5%

21%

20%

+13 pts

-12 pts

-20 pts

+9 pts

INDIA Improve

Worsen

47%

20%

Improve

Worsen

+16 pts

-10 pts

48%

4%

UNCH

-7 pts

SOUTHEAST ASIA

-13 pts

BRAZIL AUSTRALIA

Improve

Worsen

33%

31%

Improve

Worsen

+18 pts

-24 pts

42%

19%

-14 pts

+13 pts

TOP 3 – IMPROVING China

70%

U.S.

India

CORBIN ADVISORS

TOP 3 – WORSENING

62% 47%

Brazil

31%

Latin America

31%

U.S.

27%

13

Views on Key Economic Indicators Over the Next Six Months Consumer Confidence expected to Improve, while the remainder of indicators are expected to Stay the Same or Improve, except for Non-Resi Construction GLOBAL CAPEX 15%

GLOBAL PMI 34%

33%

27% 42% 58%

Jun '20

CONSUMER CONFIDENCE 39%

43%

48%

34%

24%

13%

Sep '20

Jun '20

Sep '20

Improving

Staying the Same

“Improving: As per capex.” Buy Side, Generalist,

Generalist, N. America

Australia

“Staying the same: Restrained primarily due to uncertainty relating to COVID-19, impact on a traditional economic infrastructure.” Buy Side, Generalist, N. America

“Staying the same: Recovered well but need full reopening to get better.” Buy Side, Generalist,

“Staying the same: Election uncertainty hard to predict.”

“Staying the same: Will normalize at current levels.”

Sell Side, Multi, N. America

Buy Side, Generalist, Africa

45% 34%

N. America

NON-RESI CONSTRUCTION 33%

23%

Jun '20

Sep'20

35%

26%

30%

30%

Jun '20

Sep '20

“Improving: Assuming no second wave of lockdowns and prospect for a vaccine in H1 2021.” Sell Side, Multi, Europe “Worsening: Election uncertainty hard to predict disposable income and credit card debt makes economy susceptible.” Sell Side, Generalist, N. America

RESI CONSTRUCTION

20%

16%

29%

32%

51%

52%

31% 42%

44%

21%

44%

Worsening

“Improving: Move toward more automation.” Buy Side,

OIL & GAS MARKETS

35%

Jun '20 Improving

Sep '20 Staying the Same

27%

Jun '20

40% 47% 13%

Sep '20

Worsening

“Improving: As the economy slowly recovers, oil & gas markets will also recover somewhat.” Sell Side, Multi,

“Staying the same: At best, in a holding pattern pending the election and fiscal policy outcomes.”

Europe

Buy Side, Generalist, N. America

“Worsening: Incremental increase in demand and/or pricing will be met with capacity increases. The latter will constrain pricing. Also, continued balance sheet deterioration will impact this sector/market.” Buy Side,

“Worsening: The U.S. has been over-stored for decades and commercial real estate is not in demand .”

“Improving: Given low interest rates coupled with the motivation to exit population centers, this should be an area that may continue to exhibit positive growth.” Buy Side, Generalist, N. America

Generalist, N. America

Buy Side, Generalist, N. America

“Worsening: Office demand to plummet.” Buy Side,

“Staying the same: Construction may recover as GDP recovers, but there is a risk of delayed impact as unemployment increases.” Sell Side, Generalist, Europe

Generalist, Australia CORBIN ADVISORS

14

Record Number of Net Buyers Identified for Equities Despite the 12th consecutive quarter of U.S. stocks being viewed as overvalued, nearly half of investors report Net Buying and 41% believe valuations will Expand for the remainder of 2020 2020 EQUITY VALUATION EXPECTATIONS

GLOBAL EQUITY VALUATION CLASSIFICATION +2 pts U.S.

5%

-2 pts 27%

50%

18%

29%

34%

28% 25%

-31 pts

21%

-23 pts

+7 pts Asia

41%

68%

+6 pts Europe

54%

27%

49% Under

Fairly

24%

Expand from Here

Remain Flat Jun '20

Over

Contract from Here

Sep'20

QoQ INVESTMENT TRENDS

QoQ PORTFOLIO CASH HOLDING 55% 34% 16%20%

Remain Steady

28%29% 8% 3% 6%

Decrease Mar '20

Increase Jun '20

Do Not Hold Cash

Net Buyer

Sep '20

UNDERVALUED VS. OVERVALUED (U.S. EQUITIES) 80% 60% 40% 20% 0%

20%16% 11%

33% 22%18%

Net Seller

3% 2% 2% Holding

Mar '20

31% 23%

16%

Jun'20

Rotating

Liquidating

Sep'20

NET BUYERS VS. NET SELLERS 80% 60% 40% 20% 0%

Undervalued CORBIN ADVISORS

46%

40% 27%

34%31% 26%

Overvalued

Net Buyers

Net Sellers 15

As Time Ticks on, Sector Winners and Losers Become Clearer Tech, Biotech and Healthcare remain top bets, albeit at more moderate levels as other sectors kick into gear, while Energy, Financials and REITs are the laggards

Notable Sector Sentiment Building Products

BULLS VS BEARS Bulls

100% 80% 60% 40% 20% 0%

Bears

+/- Represents Study-over-Study Delta

Technology Biotechnology Healthcare

-1 pt

72% -25 pts

17%

50%

11% +7 pts 47%

-20 pts

Clean Energy 1 Financials Comm. Services Industrials Cons. Discretionary Building Products Materials

Energy

+11 pts

44% +16 pts

Industrials

11% +3 pts

6%

39%

54%

33%

-15 pts +14 pts

14%

31%

+13 pts

11%

28%

22%

+5 pts +2 pts

+6 pts

+14 pts -22 pts

23%

25%

+10 pts

100% 80% 60% 40% 20% 0%

Cons. Disc.

100% 80% 60% 40% 20% 0%

-21 pts

17%

-21 pts

17%

-23 pts

17%

+31 pts

66%

REIT Cons. Staples

-20 pts

11%

Utilities

-6 pts

11%

REITs

1

-6 pts 6%

26%

+11 pts

43%

+12 pts

51%

-16 pts

100% 80% 60% 40% 20% 0%

New Measure CORBIN ADVISORS

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Survey Says: Joe Biden for President! (Though Investors Got It Wrong in 2016) Energy, Financials, Communication Services and Healthcare believed to have the most at stake in the U.S. Presidential election

Predicted Winner of 2020 U.S. Presidential Election

64%

36%

Joe Biden

Donald Trump

TOP 5 MOST POSITIVELY AND NEGATIVELY IMPACTED SECTORS IF ELECTED

Positive Technology

Negative 43%

Positive

Energy

70%

Negative

Energy

48%

35%

Healthcare

35%

Comm. Services

39%

Financials

Biotechnology

39%

Healthcare

25%

Technology

30%

Comm. Services

30%

Utilities

45%

Cons. Disc.

Technology

Healthcare

30%

Industrials

25%

Financials

Building Products

30%

REIT

25%

Biotechnology

CORBIN ADVISORS

35%

22%

Financials

30% 20% 15%

17

Results Are In and the Evidence is Clear: The “S” (Social) is Meaningfully Impacting Investment Decisions The percentage of investors noting SOCIAL is important to their investment thesis has increased to 45% from 28% just two years ago, proliferated by COVID-19; more than half say companies that took a stand on racial injustice positively impacted decisions

45% 2020: Note the “S” is Very Important to Critical to their Investment Thesis

“SOCIAL” IMPORTANCE TO INVESTMENT THESES

28%

33% 45%

62% Q2’20: Are Placing More or Continued High Emphasis on Social as a Result of COVID-19

31%

27%

45% 41%

40%

54% Q3’20: Note Companies that Took a Stand on Racial Injustice on Earnings Calls Last Quarter Had a Positive Impact on Their Investment Decisions in the Context of ESG

10% 2018

2019

Not at All

Little / Some

2020

Very / Critical

0% Believe This Had a Negative Impact on Their Investment Decisions CORBIN ADVISORS

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CORBIN ADVISORS

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