JUST “SITTIN” IN THE EASY CHAIR – “READIN” THE PAPER

1. JUST “SITTIN” IN THE EASY CHAIR – “READIN” THE PAPER

2. BIGFOOT INVESTMENTS OPEN FORUM Apr 25th, 2013 WELCOME!

3. AGENDA • WELCOME! • ADMIN NOTES • QUOTE OF THE DAY • OPTIMISM GAUGE • CHARTS OF INTEREST • SO WHAT’S UP WITH: THE “MARKET” • A CLOSER LOOK AT: PRGO • DAVID’S CORNER • SWAPS AND SPREADS • LEE’S COMMENTS • QUESTIONS/COMMENTS

4. “NOTES” • IF YOU USE ANY OF OUR SLIDES, PLEASE REMEMBER TO • HAVE THEM APPROVED BY YOUR COMPLIANCE DEPARTMENT. • WE’LL UN-MUTE YOU ON OUR END SO YOU CAN ASK QUESTIONS. • PLEASE MUTE AUDIO FROM THE MENU ON YOUR SCREEN SO • WE DO NOT GET FEEDBACK. • THANK YOU!

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8. Screening/Scoring for May

9. QUOTE OF THE DAY: The only time my prayers are never answered….. ….is on the golf course! Billy Graham

10. Optimism Gauge As of: 4/25/2013

11. Measuring Our Economy Last Update: 4/25/2013

12. Measuring Our Economy READING AS OF: 4/25/2013 Economic Optimism Index NOTES/COMMENTS CURRENT READING: 63.4% PRIOR READING: 59.1% BIAS: SLIGHTLY BULLISH 9 OF 13 INDICATORS POSITIVE TREND - INCREASING 45 65 35 75 25 85 63.4% 15 95 Current Reading Prior Reading POSITIVE AS OF: 8/17/2012

13. Charts of Interest!

14. S & P DATA! http://www.standardandpoors.com/home/en/us

15. S & P DATA!

16. “HEADLINE” DATA IS GOOD! Mar 2013: SAAR of 417,000 – Up 1.5% from revised Feb @ 411,000 and 18.5% above the March 2012 estimate of 352,000. Source: Calculated Risk

17. BUT THE “RATIO GAP” IS IMPORTANT Way out of balance Consistent for many years WE NEED A BETTER RATIO TO “BALANCE” THE MARKET Source: Calculated Risk

18. THE “BIG 5” – COST OF “LIVING” IS UP (NOTHING NEW HERE) Source: BEA – Mar 28, 2013

19. Swap and credit spreads have typically been good coincident and forward-looking indicators of systemic risk and the health of the economy. Currently they are showing no signs of any deterioration Source: Bloomberg/Scott Grannis

20. FINE MESS YOU’VE GOT ME IN NOW??? Keep your finger crossed Source: Markit – 4/23/2013

21. THE CARS OF THE FUTURE

22. NEW ORDERS ADVANCE RPT A GLITCH – FOR NOW Ex-Transportation: -1.4% Shipments up: 0.4% NEW ORDERS Source: Census Bureau

23. SO WHAT’S UP WITH: THE MARKET Looking P/E Multiples and History

24. WHERE TO FROM HERE? • Having reached all-time highs – can we go higher? • Are multiples out of line? • Will earnings falter? • What if the Fed “pulls the plug?” • WHAT IF?!!!!!

25. FIRST – LET’S LOOK AT HISTORIC MULTIPLES: • The Average P/E since 1870’s - about 15 • Since 1970 – 18.8 • If you “toss” the 3 highest and 3 lowest numbers – 17.6* *Note: This will take out the recession “swings.”

26. WHAT ABOUT EARINGS: • The Average earnings since 1970 - $35.25 • If you toss the 3 highest and 3 lowest numbers – $32.74 • Take that number and “deflate” it = about $99.28 (using aver rate of 4.4%)

27. SO: • The current multiple (17.5) is about average (from last 43 years at 17.6) • Current projected earnings at $109.52 (according to S&P) are not that disjointed from the average real earnings of $99.28

28. NOW LET’S TOSS IN THE INFLATION FACTOR According to Wells Fargo research, if inflation is below 4%... …historic P/E multiples are above the norm almost 70% of the time. Since 1945, the odds are better (70% beat) They use 15 as the long term P/E multiple

29. KNOWNS AND UNKNOWNS • KNOWNS: • Multiples do not appear to be out of balance • The Fed (plus all Central Banks) have the power • Crisis “residual” and constant negatives depress confidence • There has not been a fund “rotation” of any significance (Bonds –M/M) • Even slow, continued growth improves confidence • There are no competing markets at this juncture • Earnings forecasts seem negative – more wait and see attitude • Business in uncertain • Excessive regulation is tough • Markets are LEADING INDICATORS

30. KNOWNS AND UNKNOWNS • UNKNOWNS • Europe • Government • The Fed’s “unwind” • Global Central Banks • Emerging Markets • China • Global Business Climate • Consumer • Employment • Alternative Markets • Inflation

31. MULTIPLES ABOVE 20 ARE NOT THAT UNCOMMON

32. CONCLUSIONS: • 60/40 is not protection • In the “hands” of the Fed (they made it – they can break it) • Fed raising rates is actually a necessity…. • ……But –the exit strategy is critical • Slow growth is OK • World economies are important • To capture the market’s potential we will need a pullback • Inflation is a critical factor • The balance between multiples and earnings is not clear – don’t make too many assumptions • Biggest risk is uncertainty

33. A “TALE OF TWO CITIES” • CITY #1 • Good Fed exit • Inflation remains at target 2.5 to 3.0% • 3.5% GDP growth next 3 years • Market multiple of 17.5 • Earnings increase at 3.5% (now about $98) • Target S&P = 1900 • CITY #2 • Bad Fed exit • Inflation soars above 4% • Less than 3% GDP growth next 3 years • Market multiple of 14 • Earnings increase at 2.5% (now about $98) • Target S&P = 1477 (Ouch!)

34. A CLOSER LOOK AT: PRGO

35. Enters Portfolio

36. Perrigo Co. (PRGO) Perrigo Company, through its subsidiaries, develops, manufactures, and distributes over-the-counter (OTC) and generic prescription (Rx) pharmaceuticals, infant formulas, nutritional products, and active pharmaceutical ingredients (API) worldwide. The company operates in four segments: Consumer Healthcare, Nutritionals, Rx Pharmaceuticals, and API. The Consumer Healthcare segment offers a line of OTC pharmaceutical products in the areas of analgesics, cough/cold/allergy/sinus, gastrointestinal, and smoking cessation, as well as in the areas of feminine hygiene, diabetes care, and dermatological care. The Nutritionals segment develops, manufactures, markets, and distributes infant and toddler formula products, infant and toddler foods, and oral electrolyte solution products, as well as vitamin, mineral, and dietary supplement products. The Rx Pharmaceuticals segment develops, manufactures and markets a portfolio of generic prescription drug products in topical dosage forms, such as creams, ointments, lotions, gels, shampoos, foams, suppositories, sprays, liquids, suspensions, solutions, and powders, as well as controlled substances, injectables, hormones, and oral liquids and oral solid dosage forms. The API segment develops, manufactures, and markets API used by the generic drug industry and branded pharmaceutical companies. Perrigo Company also manufactures and markets branded prescription drugs; and imports pharmaceutical, diagnostics, and other medical products. The company sells its products through chain drug stores, wholesalers, distributors, hospital systems, and group purchasing organizations, as well as retail drug, supermarket, and mass merchandise chains. It has joint development agreements with Medicis Pharmaceutical Corporation, and M. Arkin, Ltd. Perrigo Company was founded in 1887 and is headquartered in Allegan, Michigan. Source: FinViz.com, April 2013

37. PERRIGO ACQUISITION OF VELCERA, INC. -- KNOWN FOR ITS PETARMOR® FRANCHISE OF FLEA AND TICK TREATMENTS -- CLOSES APRIL 1, 2013 Velcera, together with major retail partners, has been instrumental in developing an OTC market for pet health products traditionally dispensed only by veterinarians. Retail sales of the PetArmor® franchise exceeded $100 million during calendar year 2012, the value-brand's first full year on the market, having launched in April 2011. Velcera sales for calendar year 2012 were approximately $60 million. The PetArmor® franchise brand will be supported by a number of pipeline product candidates in both flea and tick and health and wellness categories that will continue to bring additional vet technologies to the hands of consumers in the mass market. • Slightly accretive to adjusted EPS/dilutive to GAAP EPS 2013 • Expected $0.11 accretive adjusted EPS/neutral to marginally dilutive GAAP EPS 2014 • Fully accretive 2015

38. Perrigo Co. (PRGO) POSITIVES:Perrigo is the market leader in generic releases of prescription drugs that receive OTC approval, participating in roughly 80% of such domestic launches. Possible concerns:Johnson & Johnson's eventual return to the OTC market and a gradually improving economy should slow Perrigo's market share gains in its store-brand consumer health segment. Sources: Morningstar, March 2013

41. Against this backdrop of escalating costs, the Generic Drug Savings analysis shows conclusively that the use of lower cost generic prescription drugs is a vital component to holding down the growth rate of health care spending. As the study shows, generic drug use has saved the U.S. health care system approximately $1.07 trillion over the past decade (2002 through 2011) with $192.8 billion in savings achieved in 2011 alone. Considering that the government’s share of health care spending will soon exceed 30 percent as the oldest baby boomers become eligible for Medicare, the money saved by using generic medicines is critical to bending the cost curve and providing sustainability to our health care system. Indeed, the NHEA report concluded that, while overall health care costs continue to grow at a rate higher than national economic growth, the growth in drug spending is slowing (only 1.2 percent in 2010), driven by “continued increase in the use of generic medications.” THINK ACA!! Source: “Generic Drug Savings In the U.S.” – Generic Pharmaceutical Assoc

42. BUY 3/4/2013 @$114.53 Current $119.23

43. Trade Data Expectancy Price Target Mean

44. April 2013 Stock Picks Industry: Major Drugs As of March 28, 2013 - Subject to change.

45. NYSE Healthcare Index

46. PHLX Drug Index

47. FINVIZ SUMMARY

48. Value Line $118.87

49. Value Line