January 2017 Inside The Buy-Side

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IF IT’S CORBIN, IT’S ACTIONABLE

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4Q16 Earnings Primer January 13, 2017

CORBINADVISORS.COM 1

Issue Date: January 13, 2017

Inside The Buy-side® 4Q Earnings Primer

 We survey institutional investors and sell-side analysts

Market Performance1

quarterly to gauge and track sentiment on topics pertaining to the earnings season, global economy and market drivers  We share our research broadly with corporate executives,

investor relations (IR) professionals and investors  Survey scope: 101 investors globally managing over $719

billion in assets  Survey timeframe: Dec. 9, 2016 to Jan. 6, 2017

4Q16

One-Year

DJIA

7.9%

15.2%

NASDAQ

1.3%

9.8%

S&P 500

3.3%

11.2%

Russell 2000

8.4%

22.4%

1

By Region

By Sector Generalist

48%

Multi Industrial IT

6%

Financial

5%

Other

N. America

14%

Europe

23%

Asia Pacific Latin America

By Style 56%

16% 11%

As of Dec. 31, 2016

17% 4%

Core Value Growth Hedge Fund GARP Income Value VC/PE Aggr. Growth Sector Specific Momentum Deep Value

24% 24% 12% 10% 10% 6% 6% 4% 2% 2%

CORBIN ADVISORS 2

Word Cloud: Frequency Of Occurrence

CORBIN ADVISORS 3

Key Findings

Optimism Abounds As 2017 Gets Underway #1

Sentiment Turns The Corner; Bullishness Makes A Comeback And Earnings Expectations Track Higher…Are We Ahead Of Ourselves?



85% expect 4Q earnings to be in line or better than consensus, up from 78% last quarter; those expecting worse than consensus results drops to lowest level in 12 months



All key metrics are expected to improve with views on organic growth performance garnering the highest level of confidence in more than a year



Management tone is described as more positive and greater than 60% expect 2017 annual guidance to be higher than last year



90% consider equity markets fairly to overvalued with more in the latter camp

#2

USA! USA! Sentiment Improves Following The Election Amid Promises Of Business Friendly Political Environment And Stimulus Spending



67% report they are feeling better about the economy post election while 70% expect the U.S. economy to improve over the next six months



Similarly, participants are most bullish on the U.S. but downbeat on Mexico and China citing protectionism and trade war concerns



U.S. recession fears off the table for 2017

#3

Sector Views Driven By Trump Rhetoric And December Rate Hike With More Expected In 2017



Financials experience biggest spike in bullish sentiment; Utilities and REITs witness biggest declines



Healthcare sees a major shift in bearish views, moving from #2 bull spot to #4 bear spot this quarter, while Industrials are back in favor and Materials receives the highest confidence level in three years CORBIN ADVISORS 4

Expectations

Earnings Expectations Continue To Rise; Highest Level In A Year Expectations Regarding 4Q Earnings Performance Relative To Consensus

Mar '16

43%

Jun '16 Sep '16

31%

27%

Dec '16

47%

50%

40%

39%

35% 30%

22%

21%

15%

Better Than

In Line

Worse Than

 85% predict 4Q earnings will be in line or better than consensus with 60% expecting a sequential improvement  Along those lines, 62% anticipate 2017 annual guides to be higher than last year  In December 2015, worse than expectations peaked at 57%; at that point, it was the highest level of bearish

sentiment in 13 quarters

CORBIN ADVISORS 5

Expectations

On Earnings Expectations Vs. Consensus Better Than

In Line

Worse Than

“Better growth, slow rate hikes and low inflation.” Buy Side, Generalist,

“Improving economy, increased optimism and spending.” Buy Side,

“Reality.” Sell Side, Generalist, N.A.

N.A.

Multi, N.A.

“Caution in stampeding market.”

Sell Side, Generalist, Europe

“Cycling off a fairly weak 4Q15.”

Sell Side, Financials, N.A.

“Business is good almost everywhere, companies are investing a lot in automation and digitalisation.” Buy Side, Multi,

“Industrials not showing any inflection. Weather comp difficult vs. 4Q15.” Sell Side, Industrials, N.A.

“Fewer selling days.” Sell Side, Healthcare, N.A.

Europe

“Commodity prices have bottomed and the production is growing.” Sell Side, Energy, Asia

“All the bad news seems to be out there.” Sell Side, Industrials, N.A.

“Commodity price rally.” Sell Side,

“Improvements in commodity prices and potential for rising bank margins.” Buy Side, Generalist,

Materials, Asia

Asia

“PMI figures for October and November.” Buy Side, PE, LatAm

CORBIN ADVISORS 6

Expectations

Improvement Expected Across The Board For Key Metrics Organic Growth

57% 45%

51% 45% 31%

EPS Growth

46% 42% 35%

45%

36% 30%32%

27%

34%35%

33%33% 28%

22%

23%

22%20%

15%

13%

Improving

Staying the Same

Worsening

Improving

Cash Flow

Staying the Same

Operating Margins

55% 43% 35%35%

46% 45% 38%

41%

37% 31% 30%

35% 24%

Improving

Staying the Same

Worsening

28%

17%

Improving

Jun '16

Sep '16

43% 40%

23%

20%

20% 14%

Worsening

Mar '16

31%

37% 32%

Staying the Same

Worsening

Dec '16

CORBIN ADVISORS 7

Sentiment

Investor Sentiment And Executive Tone More Optimistic Investor Sentiment

Management Tone 4%

4%

14% 22% 31%

35%

34%

Bullish

48%

Neutral to Bullish 28% Neutral

37%

Neutral to Bearish 27%

Bearish

30%

33% 22% 16%

7% Sep' 16

1%

2%

5%

Dec' 16

Sep' 16

Dec' 16

CORBIN ADVISORS 8

Sentiment

On Investor Sentiment Drivers Bullish

Neutral to Bullish

“Trump policies such as tax reform, less regulation, etc.”

Buy Side, Multi, N.A.

“Political changes, interest rates.” Buy Side, Multi, N.A. “Higher oil prices.” Buy Side, Generalist, N.A.

“Upward grind and positive impact of election sweep.”

Buy Side, Generalist, N.A.

“Improving economic data and general positive sentiment.” Sell Side, Financials, N.A.

“OPEC cuts and U.S. banks are likely to be allowed to grow lending without more capital.” Sell Side, Multi, Europe

“Corporate tax cuts.” Sell Side, Generalist, Europe “New U.S. President.” Buy Side, Generalist, Asia

“Chinese industrial production.” Sell Side, Materials, Asia “Reflation is coming and nobody believes it.” Buy Side, Generalist, N.A.

Neutral to Bearish “Fundamentals have not improved enough to justify valuation increases.” Buy Side, Multi, N.A.

Neutral “Many risks still remain and the market has moved aggressively.” Buy Side, Generalist, N.A. “Lots of uncertainty.” Sell Side, Multi, LatAm

“Market valuation is not being driven by fundamentals but by fund flows out of bonds and inflows from other countries.” Sell Side, Industrials, N.A. “Brexit uncertainty, economic growth in the U.S. but in inflationary environment; therefore, circumspect consumer.” Sell Side, Consumer Staples, Europe

CORBIN ADVISORS 9

Sentiment

Things That Make You Go Hmmmm‌ More See Market Overvalued But Buying Anyway

How Would You Classify Equity Valuations?

What Has Been Your Investment Trend QoQ?

Top Concerns (Unaided) 1. Europe, specifically EU

54%

2. Geopolitical Issues 46%

3. China

44%

45%

4. Trade

42% 36%

5. Aggressive Rate Hikes

23% 20%

24% 21%

14% 11%

10% 10%

Under

Fairly

Over

Net Buyer

Sep '16

Dec '16

Net Seller

Holding

Rotating

CORBIN ADVISORS 10

Going Forward

Views On Global Economies Over The Next Six Months: Trump Bump Catapults U.S. To #1 And Weighs On Mexico

U.S.

5%

25%

70%

+36 pts

-19 pts

India

17%

39%

44%

+2 pts

+10 pts

Southeast Asia

16%

44%

40%

-12pts

+8 pts

Eurozone

24%

36%

40%

+6 pts

+3 pts

Brazil

22%

41%

37%

-4 pts

+1 pt

Japan

12%

57%

31%

+17 pts China

-28 pts 37%

33%

30%

-4 pts LatAm (ex-Brazil)

+2 pts 22%

51%

27%

-7 pts Mexico

13%

+2 pts 42%

45%

-15 pts

+16 pts Improving

Staying The Same

Worsening

CORBIN ADVISORS 11

Going Forward

The Aftermath Of The Election: A Collective Sigh Of Relief Are You Feeling Better About The Economy Post Election?

Yes: 67%

No: 33%

“Trump seems to have backed off the outlandish rhetoric and is generally making prudent appointments.” Buy Side, Generalist, N.A. “Change and a shakeup in the status quo are good.” Buy Side, REIT, N.A. “Less regulation, stimulated by more fiscal spending, and lower taxes all sounds good.” Buy Side, Multi, N.A. “Tax reform, health care reform, less regulation and a unified Congress. People are focused on productive uses of time and efforts, unlike under Obama.” Buy Side, Multi, N.A.

“We have the ECB turning off QE, probably too early and we have a strong dollar.” Sell Side, Industrials, N.A. “The economy does not rely on elections.” Buy Side, Multi, Europe “More or less the same. Additional stimulus only provides marginal benefits because of full employment.” Sell Side, Generalist, Europe “Inflation and increased nationalism lead to the potential for protectionism.” Sell Side, Consumer Staples, Europe “Rates going up, growth not proven.” Buy Side, Generalist, Asia

CORBIN ADVISORS 12

Going Forward

Recession Concerns Pushed Out; Rate Hikes Now A Question Of “When” And “How Many”, Not “If”

98% Surveyed Investors Who Believe The Fed Will Continue To Raise Interest Rates In 2017

When Do You Think The U.S. Will Have Its Next Recession?

40% 34%

32%

32% 29%

24%

23%

22% 17%

24%

16%

Most Participants Expect Two Hikes

“I believe the Fed will raise rates but it will coincide with next slump in economy. They have waited too long.” Sell Side, Industrials, N.A. “Improving economy will lead to two 25bps raises.” Sell Side, Multi, LatAm

4%

2017 Mar '16

2018 Jun '16

3+ Years Sep '16

Dec '16

34% do not think the U.S. is heading into a recession in the next three years

CORBIN ADVISORS 13

Going Forward

Protectionism In Effect; U.S. GDP Expected To Improve Despite Pessimism/Fears Surrounding Global Trade Improving Looking Out Over The Next 6 Months, Do You See The Following Improving, Staying the Same or Worsening?

“Both are likely to grow, even if there is a fear of major backlash.” Sell Side, Multi, Europe “Housing is robust.” Sell Side, Multi, Asia

70%

Staying The Same 42%

Global Trade U.S. GDP

“New administration will not be able to enact new policy as quickly as people believe.” Buy Side, REIT, N.A.

34% 24%

26%

“Age of globalization is over.” Sell Side, Generalist, Asia 4%

Improving

Staying the Same

Worsening

Worsening “Uncertainty at its epic high.” Sell Side, Healthcare, Asia

CORBIN ADVISORS 14

Outlook

Rate Hike Improves Outlook For Financials At The Expense Of High-yield Sectors; Mixed Views On Energy And Cons. Disc.

38%

Financials

36%

Energy

51% 46% 29%

Industrials

43%

Materials

25% 26%

Healthcare

23% 26% 29% 25% 23% 22%

*Cons. Staples

34% 14%

32%

Energy

30%

Sep' 16

46%

*Telecom

21%

Building Products

33%

Cons. Disc.

31% 38%

Cons. Disc.

51%

*REITs

47%

Technology

34%

*Utilities

67%

Dec' 16

18%

Sep '16

Big Shifts In Bullishness Driven By Rate Hike, Anticipated Infrastructure Spending; Technology Slips

Dec '16

Long Anticipated December Rate Hike Beats Down High-yield Sectors; Healthcare Sees Biggest Reversal

CORBIN ADVISORS 15

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CORBIN ADVISORS 16