Vanguard 2019

Private Client Research
Monthly Market Commentary January 2019

U.S. Equity View
Outlook
The S&P 500 Bottoms-up Consensus Price Target = 3144, Which Implies The Market
Will Be 20% Higher One Year From Now. Estimated forward earnings per share (EPS) S&P 500 – Price
growth of 10% and a 10% increase in the forward price/earnings (P/E) multiple explain 3,600
the price target. Alternatively, a recent Barron’s survey of ten prominent strategists put 3,200 +20%
the mean top-down target at 2975, a 14% increase.
2,800
Key Points
2,400
EPS Growth Estimates (Consensus): 22% In ’18, 8% In ’19 And 10% In ‘20. Since last
month, ’18 (now $161), ’19 (now $175) and ’20 (now $193) have been tweaked lower 2,000
(less than 1%). 1,600
Valuation: 14.9 Times Forward EPS Estimates Versus 15.6 Times Last Month. Since
1,200
1990, the mean has been 15.9, with a normal range (1 standard deviation) from 12.8 to 2013 2014 2015 2016 2017 2018
19.0. Estimate based on consensus target
Our Take: Looking Back - The total return for the market (S&P 500) was a negative
3.6% this past month, with six of the eleven sectors outperforming, although only two S&P 500 – Earnings Growth
25%
were positive (Utilities and Real Estate) as market sentiment turned more defensive 22%
and negative. During the past 12 months, the total return for the market was flat at 0%, 20%
with five sectors outperforming, led by Health Care, Utilities, and Consumer
Discretionary. Looking Forward – Recent weak and volatile price action as well as 15%
11%
sector rotation suggests to us that more caution is in order regarding the market’s
10% 8%
near-term direction. While the outlook for continued positive growth remains 7%
favorable from a macroeconomic perspective, the S&P 500 has been in a trading range 5%
5%
for the past year (2529 – 2941) as investors wrestle with issues such as likely higher 1%
short-term interest rates (the Fed is expected to continue to increase the fed funds 0%
rate), the possibility of an inverted yield curve (a strong indicator of an impending -1%
recession), and anticipated slowing revenue and earnings growth for most companies. -5%
2013 2014 2015 2016 2017 2018E 2019E
Market “uncertainty” is currently high and we believe investors should act accordingly.
Sector Weightings: For those in the U.S. equity market, our sector recommendations S&P 500 – Forward P/E
are as follows: 30x
Overweight – Consumer Discretionary, Health Care 27x
24x
Underweight –Utilities
21x
Market Weight – Communications Services, Consumer Staples, Energy, Financials, +1SD
Industrials, Information Technology, Materials, Real Estate 18x
Avg
15x
Our Current Favorite Ideas: See page 2
–1SD
12x
Question Of The Month: “Is Now A Good Time To Invest In Energy Stocks?” See pages
4-5 9x
6x
Sector Performance And Commentary: See pages 6-29
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
Our Focus Lists: See pages 30-35

Source: FactSet, Bloomberg
Macroeconomic Performance And Commentary: See pages 36-43
This information should not be used as the primary basis for investment decisions nor should it be construed as advice since it may not consider the individual needs of
the investor, and as such should not be considered an investment recommendation by BB&T Scott & Stringfellow. While the information above is from sources that
BB&T Scott & Stringfellow believes to be reliable, we do not guarantee their accuracy or completeness. Additional information available upon request. Ratings, Price
Targets, and Estimates based on consensus data from FactSet. Past performance is no guarantee of future results. Any analysis or calculation is for informational
purposes only.
BB&T Scott & Stringfellow is a division of BB&T Securities, LLC, member FINRA/SIPC. BB&T Securities, LLC, is a wholly owned nonbank subsidiary of BB&T
Corporation. Securities and insurance products or annuities sold, offered or recommended by BB&T Scott & Stringfellow are not a deposit, not FDIC insured, not
guaranteed by a bank, not insured by any federal government agency and may lose value.
BB&T Scott & Stringfellow See pages 44-46 for analyst certification and important disclosures
Sector Weightings, Favorite Ideas, ETF Plays

Sector Weightings
Overweight Market Weight Underweight
Consumer Discretionary Communications Services Utilities
Health Care Consumer Staples
Energy
Financials
Industrials
Information Technology
Materials
Real Estate
Favorite Ideas
Focus Lists ETF
Equity Equity Sector
Sector Appreciation Income High Income Ladder Play
Overweight
Hertz Corp.
Consumer Discretionary RCL SIX XLY
5.875% due 10/15/20
Health Care MDRX WELL – XLV
Market Weight
CenturyLink
Communication Services FB VZ XLC
7.5% due 4/1/24
Consumer Staples MDLZ PM – XLP
Whiting Petroleum
Energy LNG WMB XLE
6.25% due 4/1/23
Saratoga Invt. Corp.
Financials SYF IVZ XLF
6.75% due 12/30/23
Gibraltar Industries, Inc.
Industrials KSU FTAI XLI
6.25% due 2/1/21
NCR Corp.
Information Technology CTSH AVGO XLK
5.0% due 7/15/22
AK Steel Corp.
Materials GRA – XLB
7.625% due 10/1/21
Real Estate CBRE IRM – XLRE
Underweight
Utilities – D – XLU
BB&T Scott & Stringfellow | Private Client Research 2 of 48

Monthly Market Commentary

Contents
Click any title to jump directly to that section. A “Back to Contents” link at the top of each section will return
you to this page.
Question of the Month 4
Sector Performance 6
Historical Returns 6
Expected Returns 7
Sector Commentary 8
Communication Services 8
Consumer Discretionary 10
Consumer Staples 12
Energy 14
Financials 16
Health Care 18
Industrials 20
Information Technology 22
Materials 24
Real Estate 26
Utilities 28
Focus Lists 30
Equity Appreciation 30
Equity Income 32
High Income Ladder 34
Economic Performance and Commentary 36

Outlook 36
Key U.S. Consensus Estimates 37
Leading, Coincident, and Lagging Indicators 39
Disclosures 44

Question of the Month Back to Contents
“Is Now A Good Time To Invest In Energy Stocks?”
For long-term investors, we believe the short answer is drilling have not just increased oil production, but natural
“yes” based on the themes that we outline below. We are gas production as well. In 2005 production started to soar
not, however, recommending buying energy stocks in the and has grown over 50% since then using the latest
hope of a quick “bounce” in the price of oil or in the annual production data from 2017. Supplies of oil, natural
stocks, especially given recent price action. gas liquids, and natural gas are abundant as evidenced by
the recent announcement of the U.S. Geological Survey.
Having followed this sector for 25 years, we have never According to the survey, the Delaware Basin in Texas and
seen changes like those driven by hydraulic fracturing and New Mexico contains 281 trillion cubic feet (Tcf) of
horizontal drilling. Both these technologies are not new, natural gas, 46.3 billion barrels of oil, and 20 billion
but George Mitchell of Mitchell Energy is credited with barrels of natural gas liquids. For perspective, the U.S.
combining fracking and horizontal drilling with other consumed 27.1 Tcf of natural gas in 2017. Assuming flat
technologies to make shale production commercial viable consumption, this field would supply the entire U.S. for
sometime around 2005. Since then, costs have come 10 years.
down and techniques have become more effective. As a
result, oil and gas production from the U.S. has soared. We do not recommend trading energy stocks based on
For the week ending November 30th, 2018 the U.S. the belief that it is possible to predict energy prices,
exported a net 211,000 barrels per day which is the first especially in the near term. There are too many factors
time that the U.S. has been a net exporter of oil since that are hard to predict like weather for natural gas and
1973, according to the EIA (U.S. Energy Information with oil it is geo-political events, U.S. dollar fluctuations,
Association). In other words, we are moving closer to demand and supply shocks, etc. However, we can make
energy independence which has a number of implications some reasonable long term predictions. For example, we
both economic and political. know that U.S. natural gas supplies are plentiful which
will likely keep pricing in the $2 to $5 per MMBTU where
On a global basis, the U.S. is now the largest producer of they have traded since 2005. With attractive pricing,
crude oil compared to other countries. U.S production demand is growing for electric power generation,
exceeded that of both Russia and Saudi Arabia at commercial, industrial, and residential use. With the
different points in 2018. The EIA is projecting that U.S. excess, the U.S. began exporting natural gas in liquefied
will remain at the top in 2019. Fracking and horizontal form in 2016, and growth is expected to be significant.
With projects coming on line, exports are expected to
triple to over 9 billion cubic feet per day by the end of
2019. New drilling technologies have put the U.S. in a
strong position to grow production and to exploit new
technologies like fracking which has yet to be promoted
internationally. With the abundance of natural gas and
natural gas liquids, there are 13 new refineries either
online or expected to be online by the early 2020s. These
refineries or crackers refine ethane (from natural gas
liquids) into ethylene, which is the building block for most
plastics.

Question of the Month Back to Contents
In an unpredictable oil price environment, investors can Theme #2: Shale drilling technologies. Halliburton (HAL)
mitigate the risk of low oil prices by buying companies is the leading oil service company participating in the
that have strong production growth. In other words, North American shale revolution and has the potential to
companies with good production growth can grow expand this technology internationally. Technologies
earnings in a low or flat oil price environment whereas include basin modeling, fluid migration modeling,
those without growth can only rely on rising commodity reservoir engineering, drilling, and completion.
prices to grow earnings.
Theme #3: Shale acreage owners. Buy the exploration
How do we recommend investing in the energy sector? and production companies with significant acreage in
We recommend investing in longer term themes which shale. The Permian Basin is the granddaddy of production
we have described above. and is a big reason for the spike in U.S. production. The
EIA expects almost 4 million barrels per day in 2019 from
Theme #1: The abundance of natural gas. There are the Permian, which is over 2X the production of the
several ways to take advantage of this. The first strategy second biggest shale play (Bakken). Chevron (CVX) is one
is to buy companies involved in liquefying and exporting of the biggest owners in the Permian with 2.2 million
natural gas. The largest in North America is Cheniere acres, and it pays little or no royalties on 80% of its
Energy (LNG). In Australia Chevron (CVX) is a leader in acreage since rights were acquired back in the 1920s.
liquefied gas with its $88 billion investment in two
projects – Wheatstone and Gorgon. The second strategy Theme #4: Natural gas liquids boom. Buy the companies
is to buy the pipeline companies that are moving the supplying natural gas liquids to the ethane crackers (four
natural gas to growing end markets. The purest natural online since 2017 and another nine between now and the
gas pipeline that we like is Williams Companies (WMB) early 2020s). Chevron (CVX) owns one of the operational
while our other favorites, Enterprise Products (EPD) and crackers through its 50/50 joint venture with Phillips 66.
Kinder Morgan (KMI), also participate in natural gas and Enterprise Product Partners (EPD) is involved in
other areas. transporting, processing, storing, and exporting natural
gas liquids. It is also connected to the major shales basins
and to the ethylene refineries on The Gulf coast.
Have a question that you would like us to address in this publication? Reach out to your advisor to request or discuss. We are also
interested in your feedback in terms of how we can be most helpful to you.

Sector Performance Back to Contents

Historical Returns
Sector Weightings Matter. Sector returns can vary significantly from year to year. For the past ten years, the
top sector returns have averaged 28%, while the bottom sector returns have averaged (9%). It’s notable that
no sector has been the top performer in consecutive years. In fact, more often than not the top sector
underperformed the S&P 500 the following year. Given this historical pattern, we believe it’s important for
investors to have some exposure to every segment of the market unless compelling fundamental reasons
suggest otherwise.
Cumulative and Annualized

Index Our Sector Cumulative Annualized
Sector Weight Outlook 1 Month YTD 1 Year 3 Year 5 Year 10 Year 15 Year Yea 3 Year 5 Year 10 Year 15 Year
Communication Services 10% Market Weight -2% -9% -7% 14% 22% 120% 176% 4% 4% 8% 7%
Consumer Discretionary 10% Overweight -4% 4% 5% 36% 71% 473% 321% 11% 11% 19% 10%
Consumer Staples 8% Underweight -3% -3% -2% 19% 47% 212% 279% 6% 8% 12% 9%
Energy 5% Market Weight -5% -12% -8% 11% -16% 51% 204% 4% -3% 4% 8%
Financials 13% Market Weight -8% -12% -11% 35% 55% 198% 51% 10% 9% 12% 3%
Health Care 15% Overweight -1% 9% 9% 33% 80% 327% 299% 10% 12% 16% 10%
Industrials 9% Market Weight -6% -10% -8% 31% 46% 259% 225% 9% 8% 14% 8%
Information Technology 20% Market Weight -3% 3% 3% 63% 119% 457% 328% 18% 17% 19% 10%
Materials 3% Market Weight -5% -14% -11% 26% 29% 188% 180% 8% 5% 11% 7%
Real Estate 3% Market Weight 0% 4% 4% 24% 66% 299% 265% 7% 11% 15% 9%
Utilities 3% Underweight 4% 11% 6% 51% 81% 194% 350% 15% 13% 11% 11%
S&P 500 100% -4% -1% 0% 37% 62% 266% 230% 11% 10% 14% 8%
Spread between best and worst performing sectors 12% 25% 20% 51% 134% 422% 298% 14% 20% 15% 8%
Sector outperformed the S&P 500
Source: FactSet
Performance Quilt
Source: FactSet

Sector Performance Back to Contents

Expected Returns
Valuation Return Components
Market Industry Current Target 10-Year Current Fwd EPS Multiple Forward Total
Group Cap ($Bs) Weight Fwd P/E Fwd P/E Median vs. Med Growth Change Yield Return
S&P 500 21,942 100% 14.9x 16.4x 14.8x 1% 10.3% 9.6% 2.2% 23.1%
Communication Services 2,218 10.1% 16.5x 18.5x 17.3x (4%) 10.8% 11.9% 1.6% 25.7%
Consumer Discretionary 2,173 9.9% 19.5x 21.2x 17.0x 15% 13.5% 8.9% 1.4% 25.1%
Consumer Staples 1,664 7.6% 17.9x 18.0x 16.7x 7% 6.8% 0.6% 3.1% 10.6%
Energy 1,204 5.5% 13.4x 15.7x 13.7x (2%) 14.1% 16.9% 3.6% 37.0%
Financials 2,862 13.0% 10.3x 12.1x 12.0x (14%) 9.7% 16.8% 2.7% 30.8%
Health Care 3,398 15.5% 15.3x 16.2x 15.1x 1% 9.1% 5.8% 1.8% 17.2%
Industrials 2,013 9.2% 14.1x 15.6x 15.2x (7%) 12.8% 10.4% 2.2% 26.8%
Information Technology 4,430 20.2% 15.5x 17.4x 14.3x 8% 10.5% 11.7% 1.8% 25.2%
Materials 571 2.6% 13.9x 15.4x 15.1x (8%) 10.7% 11.2% 2.4% 25.5%
Real Estate 665 3.0% 17.6x 17.7x 18.0x (2%) 6.4% 0.3% 3.6% 10.4%
Utilities 745 3.4% 17.3x 16.6x 15.0x 16% 5.2% (4.3%) 3.5% 4.2%
Expected total returns based on bottom-up consensus price targets and NTM dividend estimates from FactSet
Expected Growth in Forward EPS 10-Year Valuation Ranges

Energy 14% Consumer Discretionary 19.5x
Consumer Discretionary 14% Consumer Staples 17.9x
Industrials 13% Real Estate 17.6x
Communication Services 11% Utilities 17.3x
Materials 11% Communication Services 16.5x
Information Technology 11% Information Technology 15.5x
S&P 500 10% Health Care 15.3x
Financials 10% S&P 500 14.9x
Health Care 9% Industrials 14.1x
Consumer Staples 7% Materials 13.9x
Real Estate 6% Energy 11.8x
Utilities 5% Financials 10.3x
0% 5% 10% 15% 0x 5x 10x 15x 20x 25x 30x
Energy valuation range based on NTM EPS 12 months forward to normalize the multiple
S&P 500
2545.94 0.00 0.00% 12:00:00 AM VWAP:
- - -
Weekly
High: 2940.91 Low: 1810.10 Chg: 26.94%
3,200
Technical Comment
S&P 500 Price S&P 500 MA-50D S&P 500 MA-200D
Intermediate Price Trend (6 mths):

3,000
Negative (-8% annualized)
2,800
Key Levels:
50-Day Moving Avg. = 2722 (+7%)
2,600 200-Day Moving Avg. = 2759 (+8%)
Drawn Support Trend Line = 2550 (0%)
2,400
Drawn Resistance Trend Line = 3275 (+29%)
Weekly Relative Strength (RSI): 40
Comment: The S&P 500’s total return during the past month was -3.6%, with six sectors
2,200
outperforming and five sectors underperforming. For the past twelve months, the total
2,000 return for the S&P 500 was 0.0%, with five sectors outperforming (Health Care, Utilities,
Consumer Discretionary, Real Estate and Information Technology) and the remaining six
sectors underperforming. It was a rough month for the market following a flat previous
1,800 month and the sharp sell-off in October. The S&P 500 continues to trade below its 50-day
and 200-day moving averages and the 50-day just crossed below the 200-day (death
cross). The market is currently near key support in the 2500 range and a break below this
1,600 level implies the likelihood of further downside. The weekly RSI reading has been
trending lower since September and is approaching oversold territory.
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18
Source: All charts and tables based on data from FactSet

Sector Commentary Back to Contents

Communication Services
Market Weight 252
S&P 500 Communication Services – Price
232
Recommendation
212
Forward earnings growth is expected to slightly exceed the broader market.
192
Valuation multiples are also modestly discounted versus historical medians while
the S&P 500 trades roughly in line. Given the generally attractive fundamentals and 172
reasonable valuation levels, we believe a Market Weight provides appropriate 152
sector exposure. 132
112
Key Points 2013 2014 2015 2016 2017 2018
Featured Story. Verizon (VZ) announced that it expects to take an impairment Sector S&P 500
charge in Q4 related to its investment in Oath, writing down goodwill almost
completely. The company cited lower-than-expected benefits from the integration Annual EPS Growth
25%
of Yahoo and AOL and, more broadly, competition in the digital advertising market 20%
20% 17%
that contributed to lower projections for its Oath business unit. Both VZ and AT&T
15%
(T) are attempting to build advertising platforms in order to capture growth from 9%
10% 6%
digital ad spending. However, we aren’t surprised that—so far—they haven’t seen
5%
meaningful success in this market, which is dominated by Alphabet (GOOG) and
0%
Facebook (FB) with more than 50% market share, by some estimates.
-5% -2%
Growth Expected To Continue. Forward earnings are currently projected to -10%
increase about 11% for the Communication Services sector, a point ahead of the -15%
-15%
S&P 500. Consensus estimates suggest that EPS growth for Entertainment (13%), -20%
-20%
Interactive Media & Services (16%), and Media (17%) could all outpace the S&P -25%
500, while Telecom could lag behind at just 2%. 2013 2014 2015 2016 2017 2018E 2019E
Negative Momentum. Communication Services was the worst-performing sector Forward P/E – Absolute
in 2017 and continued to perform relatively poorly this year (–9% vs. –1% for the 25x
S&P 500). Media, Telecom, and Interactive Media & Services are both down YTD 23x
while Entertainment has fared better, aided significantly by Netflix and Fox. 21x
19x +1SD
Valuation. The current forward P/E of 16.5x compares to the S&P 500 at 14.9x and
a 10-year median of 17.3x. Communication Services trades at a slight discount to 17x Avg
its historical median due mainly to the Telecom and Interactive Media & Services 15x
–1SD
groups, offset somewhat by Entertainment, which trades at a 19% premium. By 13x
group, Interactive Media & Services trades at the highest multiple of 21.5x while 11x
Telecom trades at the lowest, 10.1x. 9x
Expected Returns. The bottom-up consensus target for the S&P 500 7x
Communication Services index implies total return potential of about 26% vs. 23% 2003 2005 2007 2009 2011 2013 2015 2017
for the overall market. For the sector, returns should be driven by higher earnings
Forward P/E – Relative to S&P 500
and multiples and a nominal dividend yield. 1.4x
Top Picks 1.3x

Equity Appreciation Focus List: Facebook (FB) +1SD
1.2x
Equity Income Focus List: Verizon (VZ) Avg
1.1x
High Income Ladder: CenturyLink 7.5% Sr. Unsec. Notes Due 4/1/24 –1SD
1.0x
Peter W. Councill, CFA / 804-782-8850 / PCouncill@BBTScottStringfellow.com
0.9x
0.8x
2003 2005 2007 2009 2011 2013 2015 2017
Source: FactSet


Expected Returns by Group
Market Current Target 10-Year Current Fwd EPS Multiple Forward Total
S&P 500 21,942 100% 14.9x 16.4x 14.8x 1% 10% 10% 2.2% 23%
Communication Services 2,218 10% 16.5x 18.5x 17.3x (4%) 11% 12% 1.6% 26%
Diversified Telecom Services 471 2% 10.1x 10.8x 12.9x (22%) 2% 7% 5.8% 15%
Entertainment 441 2% 20.8x 23.4x 17.4x 19% 13% 13% 0.9% 28%
Interactive Media & Services 1,015 5% 21.5x 24.2x 23.6x (9%) 16% 12% 0.0% 30%
Media 290 1% 14.8x 15.3x 16.8x (12%) 17% 3% 1.7% 23%

Media Interactive Media & Services 21.5x
17%
Interactive Media Entertainment 20.8x

16%
& Services
Entertainment 13% Communication Services 16.5x
Communication S&P 500 14.9x

11%
Services
S&P 500 10% Media 14.8x
Diversified Diversified Telecom Services 10.1x

2%
Telecom Services
0% 5% 10% 15% 20% 5x 10x 15x 20x 25x 30x 35x
-
S&P 500 / Communications Services SEC Weekly
141.68 0.00 0.00% 12:00:00 AM VWAP: High: 183.85 Low: 140.95 Chg: -3.55%
- - - - 190
S&P 500 / Communications Services SEC Price S&P 500 / Communications Services SEC MA-50D
- -
S&P 500 / Communications Services SEC MA-200D
Technical Comment
180

170 Key Levels:
50-Day Moving Avg. = 149 (+5%)
200-Day Moving Avg. = 151 (+6%)
160 Drawn Support Trend Line = 130 (-8%)
150 Comment: The total return for Communications Services during the past
month was -2.1% vs. -3.6% for the S&P 500, and ranked 4th out of the 11
sectors. For the past twelve months, the sector’s total return was -7.1% vs.
0.0% for the S&P 500, and ranked 7th out of the 11 sectors. Negatives include
140
trading below both its 50-day and 200-day moving averages and being in a
downtrend since H2’16. Key support is in the 140 range. The weekly RSI
reading has been trending lower for the past few months.
130
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18

Consumer Discretionary
Overweight S&P 500 Consumer Discretionary – Price
995
Recommendation 895
We continue to recommend an Overweight rating on Consumer Discretionary for 795

long-term investors. Recent performance has tracked the broader market, with 695
selling pressure largely a function of defensive sector rotation and ongoing trade
595
uncertainty. Despite the market selloff, we believe fundamentals (to include
consumer confidence and strength in online retail) remain favorable for long- 495
term sector outperformance. Royal Caribbean Cruises Ltd. (RCL) remains our top
395
pick given strong early 2019 pricing/booking trends, while XLY is our preferred 2013 2014 2015 2016 2017 2018
ETF. We advise investors to be selective.
Sector S&P 500
Key Points
Annual EPS Growth
Auto/Auto Components. We remain generally cautious on autos, but concede 25%
that the recent NAFTA/USMCA rework is generally positive for domestic 19%
20%
manufacturers. We also believe that any thawing in U.S.-China trade relations 17%
could provide some momentum into 2019. On the aggregate, we expect added 15% 13%
cost inflation, higher interest rates, and fading demand for passenger cars to 10%
negatively impact U.S. auto sales over the next year. 10%
5%
Homebuilders/Household Durables. Higher mortgage rates, coupled with rising 5% 3%
material costs and tighter inventories continue to pressure new home sales
0%
(authorized permits -4% YTD). Despite the attractive valuations, we urge investors
-1%
to avoid homebuilding stocks. -5%
2013 2014 2015 2016 2017 2018E 2019E
Hotel & Leisure. Hotel & leisure stocks have seen added selling pressure in recent
weeks although domestic fundamentals (high consumer confidence, low Forward P/E – Absolute
unemployment) remain generally positive. Royal Caribbean Cruises Ltd. (RCL) is 24x
our Top Pick given double-digit projected EPS growth in 2018 and 2019. On the 22x
company’s Q3’18 call, RCL management called out momentum in forward
20x
bookings, which could facilitate added growth acceleration into 2019. +1SD
18x
Restaurants. Highly franchised fast food stocks (MCD, SBUX) have generally Avg
16x
outperformed casual dining providers (BLMN, EAT) in recent months given a
widening price gap which we expect to continue. Consumer spending metrics 14x –1SD
remain largely positive while the shift toward added digital and delivery 12x
integration has proven significant for many. Competition is significant and rising 10x
costs (namely, wages) could impact results more meaningfully in 2019.
8x
Retailing. Retailing remains a story of “haves” and “have nots,” in our view, with 2003 2005 2007 2009 2011 2013 2015 2017
select providers benefitting from efficient inventory management and the ongoing
shift to e-commerce. Consumer spending has proven generally positive given 1.6x
near-full employment, nascent wage gains, and relatively low debt/income levels.
1.5x
This said, we continue to expect reduced foot traffic for poorly-positioned
brick/mortar department stores and select mall-based apparel retailers. 1.4x
Top Picks 1.3x

+1SD
1.2x
Equity Appreciation Focus List: Royal Caribbean Cruises Ltd. (RCL) Avg
1.1x –1SD
Equity Income Focus List: Six Flags Entertainment Corp. (SIX)
1.0x
High Income Ladder: Hertz Corp. 5.875% Senior Unsecured Notes due 10/15/20
0.9x
Charles E. Redding / 804-782-8853 / CRedding@BBTScottStringfellow.com 2003 2005 2007 2009 2011 2013 2015 2017
Source: FactSet

S&P 500 21,942 100% 14.9x 16.4x 14.8x 1% 10% 10% 2.2% 23%
Consumer Discretionary 2,173 10% 19.5x 21.2x 17.0x 15% 14% 9% 1.4% 25%
Auto Components 30 1% 9.5x 12.1x 11.7x (19%) 12% 27% 1.8% 44%
Automobiles 85 4% 6.2x 7.3x 7.5x (17%) 4% 18% 5.4% 28%
Distributors 22 1% 13.4x 15.7x 16.8x (20%) 7% 17% 3.1% 28%
Diversified Consumer Svcs 6 0% 13.0x 12.3x 12.3x 6% 6% (5%) 3.7% 4%
Hotels Restaurants & Leisure 404 19% 19.2x 19.3x 18.8x 2% 12% 0% 2.2% 15%
Household Durables 68 3% 8.9x 9.8x 14.3x (38%) 6% 10% 2.3% 18%
Internet & Direct Mktg Retail 779 36% 43.6x 43.1x 20.5x 113% 34% (1%) 0.0% 32%
Leisure Products 14 1% 23.3x 20.5x 14.9x 56% 42% (12%) 2.4% 28%
Multiline Retail 109 5% 12.7x 13.8x 13.9x (9%) 5% 9% 2.6% 17%
Specialty Retail 499 23% 16.1x 17.3x 17.0x (5%) 10% 8% 2.1% 20%
Textiles & App & Lux Goods 158 7% 18.4x 21.0x 18.6x (1%) 14% 14% 1.7% 31%

Leisure Products 42% Internet & Direct Mktg Retail 43.6x
Internet & Direct Mktg Retail 34% Leisure Products 23.3x
Textiles & App & Lux Goods 14%
Consumer Discretionary 19.5x
Consumer Discretionary 14%
Hotels Restaurants & Leisure 12% Hotels Restaurants & Leisure 19.2x
Auto Components 12% Textiles & App & Lux Goods 18.4x
S&P 500 10% Specialty Retail 16.1x
Specialty Retail 10%
S&P 500 14.9x
Distributors 7%
Diversified Consumer Svcs 6% Distributors 13.4x
Household Durables 6% Diversified Consumer Svcs 13.0x
Multiline Retail 5% Multiline Retail 12.7x
Automobiles 4%
0% 20% 40% 60% 0x 20x 40x 60x 80x 100x
-
S&P 500 / Consumer Discretionary SEC Weekly
Technical Comment
784.91 0.00 0.00% 12:00:00 AM VWAP: High: 939.41 Low: 543.54 Chg: 27.61%
- - - - 1,000
S&P 500 / Consumer Discretionary SEC Price S&P 500 / Consumer Discretionary SEC MA-50D
- -
S&P 500 / Consumer Discretionary SEC MA-200D

950
900
850 Key Levels:
800
200-Day Moving Avg. = 862 (+10%)

750
Drawn Support Trend Line = 810 (+3%)
700

650 Comment: The total return for Consumer Discretionary during the past
600
sectors. For the past twelve months, the sector’s total return was 5.4% vs.
0.0% for the S&P 500, and ranked 3rd out of the 11 sectors. Negatives
include trading below its 50-day and 200-day moving averages, breaking
below our previously drawn support trend line, and a negative 6-month
550
price trend line. Key support is around 800. The weekly RSI reading has
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18
500 been trending lower for the past few months.


Consumer Staples
Market Weight 735
S&P 500 Consumer Staples – Price
685
Recommendation 635
The past month marks the third in a row that Consumer Staples have 585
outperformed the S&P 500 (the market). The sector was down 3.0% while the 535
market was down 3.6%. Last month we increased our weighting to Market Weight 485
from Underweight. Consumer Staples stocks tend to hold up better when the 435
market sells off given the defensive nature of the businesses that these companies 385
are in. There is merit to the theory that “everybody has to eat.” Looking at sector 335
performance over the past ten years, Staples was the best performing sector in 2013 2014 2015 2016 2017 2018
only one year (2008), and it has never been the worst. In 2008, the market was Sector S&P 500
down 37% and Staples was down just 15% (so best house on a bad block). In the
past ten years, Staples has outperformed in just four of these periods. In general, Annual EPS Growth
12% 11%
this group tends to outperform in a low expected return environment. With the
volatility and selloffs over the past several months, we believe it prudent to take a 10%
8%
more defensive approach. Valuation, on an absolute basis, remains elevated at 8%
17.5X the 2019 estimate. The 10-year average is 16.3X, but on a relative basis, it is 6% 5%
5% 5%
close to the average. During 2008, the sector traded at a 30% premium to the 3%
4%
market, and now it is at a 17% premium.
2%
0%
Key Points
-2%
Beverages. This group of companies focuses on brand name beer, spirits, and soft -2%
-4%
drinks. This sector is under pressure from micro-breweries and distilleries as well as 2013 2014 2015 2016 2017 2018E 2019E
niche brands and healthier alternatives.
Food & Staples Retailing. This subsector is made up of grocery, wholesale, and drug Forward P/E – Absolute
23x
stores. There has been a considerable amount of consolidation in this sector which
is highly competitive. This group is vulnerable to the “Amazon factor” with its 21x
purchase of Whole Foods. 19x +1SD
Food Products. This group consists of brand name, premium foods companies that 17x Avg
have been around for years. Smaller niche and private label brands have put
pressure on these iconic companies. 15x
–1SD
13x
Household Products. These are the brand name, established companies that have
long operating histories. The focus for growth has been consolidation, international 11x
sales, and product innovation.
9x
Tobacco. A relatively small group with just two companies in the S&P 500. While 2003 2005 2007 2009 2011 2013 2015 2017
tobacco use has been declining for years, these companies have been able to raise
prices to grow earnings. Altria announced a 45% stake in the Canadian cannabis 1.5x
company named Cronos Group Inc. for a total investment of $1.8 billion. Altria
1.4x
stated that the cannabis industry “is poised for rapid growth over the next decade.”
Constellation Brands made a similar investment in a Canadian cannabis company 1.3x
earlier. +1SD
1.2x
Top Picks 1.1x
Avg
–1SD
Equity Appreciation Focus List: Mondelez International (MDLZ) 1.0x
Equity Income Focus List: Philip Morris International (PM) 0.9x
W. Moultrie Dotterer, CFA / 804-780-3279 / MDotterer@BBTScottStringfellow.com 0.8x

2003 2005 2007 2009 2011 2013 2015 2017
Source: FactSet


S&P 500 21,942 100% 14.9x 16.4x 14.8x 1% 10% 10% 2.2% 23%
Consumer Staples 1,664 8% 17.9x 18.0x 16.7x 7% 7% 1% 3.1% 11%
Beverages 421 25% 20.7x 20.5x 18.4x 13% 8% (1%) 3.0% 10%
Food & Staples Retailing 344 21% 18.0x 18.9x 15.1x 19% 6% 5% 2.1% 13%
Food Products 262 16% 14.8x 15.8x 15.8x (6%) 6% 7% 3.3% 16%
Household Products 376 23% 21.2x 18.2x 18.3x 16% 6% (14%) 2.9% (6%)
Tobacco 228 14% 13.9x 15.3x 15.2x (9%) 8% 10% 5.9% 25%

S&P 500 10% Household Products 21.2x
Tobacco 8% Beverages 20.7x
Beverages 8% Food & Staples Retailing 18.0x
Consumer Staples 7% Consumer Staples 17.9x
Food & Staples Retailing 6% S&P 500 14.9x
Food Products 6% Food Products 14.8x
Household Products 6% Tobacco 13.9x
0% 5% 10% 15% 5x 10x 15x 20x 25x
-
S&P 500 / Consumer Staples SEC Weekly
Technical Comment
- - - - - - 620
S&P 500 / Consumer Staples SEC Price S&P 500 / Consumer Staples SEC MA-50D S&P 500 / Consumer Staples SEC MA-200D

600
Positive (+14% annualized)

Key Levels:
580
200-Day Moving Avg. = 544 (0%)

560 Drawn Support Trend Line = 510 (-6%)
540
Comment: The total return for Consumer Staples during the past month
was -3.0% vs. -3.6% for the S&P 500, and ranked 5th out of the 11 sectors.
520 For the past twelve months, the sector’s total return was -1.6% vs. 0.0% for
the S&P 500, and ranked 6th out of the 11 sectors. Recent performance of
Consumer Staples has been relatively strong as investors increased
500 exposure to the sector given its perceived level of greater safety in a down
market. The sector also continues to trade above its 200-day moving
average. Key support is around 500. A weekly RSI reading of 50 suggests to
480 us that the sector is neither overbought nor oversold.
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18


Energy
Market Weight 1,127
S&P 500 Energy – Price
1,027
Recommendation 927
Since the beginning of December, the price of oil has been fairly flat around the $50 827
level. However, energy stocks continued to trade down and were off 5.1% for the 727
month, making it the third-worst performing sector. Several factors are at work 627
including a strong dollar (hurts foreign buying since oil is priced in dollars), rising 527
global oil inventories with the recent IEA monthly inventories above the five-year 427
average, the unwillingness of major oil producing companies to cut production, and 327
th
slowing global growth. However, OPEC members recently (Dec 7 ) agreed to cut 2013 2014 2015 2016 2017 2018
production by 1.2 billion barrels a day with Russia leading the way, although Sector S&P 500
announced cuts and actuals cuts by OPEC don’t always match. Oil spiked 2% on the
announcement but the rally has faded. Meanwhile, the U.S. has become a net Annual EPS Growth
300%
exporter of oil for the first time since 1973. See our Question of the Month on 247%
pages 4 and 5 for more details. The consensus estimate for oil is $66.92 for year- 250%
end 2018 (down slightly from the past month), and the 2019 estimate is $66.79 200%
(down over $2.00 from last month). Natural gas had spiked to the $4.70 level, but, 150%
with adequate supplies, has pulled back to the $3.50 level. Price estimates for this 105%
100%
year and next are still around the $3.00 level. As a way to gauge investor interest,
the energy sector as a percentage of the S&P 500 now stands at 5.5% whereas in 50% 17%
times past it has been as high as 15% (1990s and 2008/2009). We continue to 0%
recommend a Market Weight -7% -6%
-50%
Key Points -100%
-62%
-74%
2013 2014 2015 2016 2017 2018E 2019E
Oil, Gas & Consumable Fuels. Many of these companies have direct exposure to
commodity prices, and thus trade in anticipation of price moves. The large-cap
Forward P/E – Absolute
majors tend to be more insulated as marketing and refinery businesses can offset 85x
weakness in exploration and production (E&P). The pipeline business is capital 75x
intensive and many of the companies operate in a regulated, fee-based
65x
environment which mitigates exposure to commodity price swings. The business is
based on moving, storing, and processing hydrocarbons and is generally a function 55x
of volume. We like the pipeline group for yield-oriented investors, and there are 45x
some interesting growth opportunities. We recently added Williams Cos (WMB) to
35x
the Equity Income Focus List. We believe that Williams is a solid investment for +1SD
investors seeking an attractive yield and the potential for low double-digit dividend 25x
Avg
growth. Williams owns the crown jewel of pipeline assets – the Transco pipeline 15x
which extends from the Gulf Coast to the Northeast. 5x
Oil Service/Equipment. Typically a volatile business that has been consolidated over 2003 2005 2007 2009 2011 2013 2015 2017
the years. Customers often contract or “rent” equipment to be used in the drilling Forward P/E – Relative to S&P 500
and production process. These companies provide innovation to the industry 5.0x
through technology. The latest technology advances include horizontal drilling and 4.5x
fracking. This group usually moves in anticipation of an upswing in commodity prices 4.0x
since the utilization of drilling equipment is often the first thing that the E&P 3.5x
companies do when they are bullish on commodity prices.
3.0x
Top Picks 2.5x
Equity Appreciation Focus List: Cheniere Energy (LNG) 2.0x

+1SD
1.5x
Equity Income Focus List: Williams Companies (WMB) Avg
1.0x
High Income Ladder: Whiting Petroleum 6.25% Sr. Unsec. Notes due 4/1/23 0.5x
W. Moultrie Dotterer, CFA / 804-780-3279 / MDotterer@BBTScottStringfellow.com 2003 2005 2007 2009 2011 2013 2015 2017
Source: FactSet


S&P 500 21,942 100% 14.9x 16.4x 14.8x 1% 10% 10% 2.2% 23%
Energy 1,204 5% 13.4x 15.7x 13.7x (2%) 14% 17% 3.6% 37%
Energy Equipment and Services 116 10% 18.6x 19.5x 17.4x 7% 52% 5% 3.8% 63%
Oil Gas & Consumable Fuels 1,088 90% 13.1x 15.3x 13.5x (3%) 11% 17% 3.6% 34%

Energy Equipment and Services 52% S&P 500 13.5x
Energy 14% Energy Equipment and Services 12.3x
Oil Gas & Consumable Fuels 11% Energy 11.8x
S&P 500 10% Oil Gas & Consumable Fuels 11.7x
0% 20% 40% 60% 0x 10x 20x 30x 40x 50x
Valuation range based on NTM EPS 12 months forward to normalize the multiple
-
S&P 500 / Energy SEC Weekly
- - - - - - 600
S&P 500 / Energy SEC Price S&P 500 / Energy SEC MA-50D S&P 500 / Energy SEC MA-200D
Technical Comment
550 Intermediate Price Trend (6 mths):
Key Levels:
500
50-Day Moving Avg. = 501 (+12%)
200-Day Moving Avg. = 533 (+19%)
450
Comment: The total return for Energy during the past month was -5.1% vs.
-3.6% for the S&P 500, and ranked 9th out of the 11 sectors. For the past
twelve months, the sector’s total return was -7.8% vs. 0.0% for the S&P
400
500, and ranked 8th out of the 11 sectors. Negatives include trading below
its 50-day and 200-day moving averages, our previously drawn support
trend line, and the weakest 6-month price trend line of all the sectors. Key
support is around 450. A weekly RSI reading of 33 suggests to us that the
sector is close to approaching oversold territory.
350
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18

Financials
Market Weight 520
S&P 500 Financials – Price
470
Recommendation
420
Strong expected EPS growth coupled with attractive absolute and relative valuation is
the basis for our Market Weight recommendation. For the past twelve months, 370
however, the total return for Financials has been -10.8%, compared to 0.0% for the 320
overall market. While most subsectors are expected to benefit from continued
economic growth, a relatively flat yield curve has been a headwind, along with the 270
concerns that Financials are not a good place to invest at this point in the cycle. 220
2013 2014 2015 2016 2017 2018
Key Points Sector S&P 500
Asset Managers. The market is most bullish on the passive managers, which is
reflected not only in the earnings outlook but also in valuation. We have taken a Annual EPS Growth
35%
contrarian stance, with two high-quality, primarily active managers Invesco (IVZ) 30%
and Affiliated Managers Group (AMG)) on one of our Focus Lists. We also like these 30%
names given IVZ’s growth in passives and AMG’s growth in alternatives. 25%
Banks/Thrifts. Our positive outlook is due to the strong macro backdrop, which 20%
should equate to solid loan growth, higher net interest margins, and manageable
15% 13%
credit costs. Some level of regulatory relief and lower taxes should also be a benefit. 11%
10% 10%
We believe Citigroup (C) currently offers the best risk/reward of the major banks 10%
and Bank OZK (OZK) and First Horizon (FHN) are the best ways to play smaller banks.
5%
All three are on our Equity Appreciation Focus List (EAFL). 2%
1%
0%
BDCs. Poor past performance by most of the BDCs keeps us highly-selective. However, 2013 2014 2015 2016 2017 2018E 2019E
three best-in-class players, Ares Capital Corp. (ARCC), Fidus Investment Corp.
(FDUS), and TPG Specialty Lending (TSLX) are on our Equity Income Focus List (EIFL), Forward P/E – Absolute
while we’ve included sr. unsecured notes of Saratoga Investment Corp. on our High 20x
Income Ladder. 18x
Financial Data And Exchanges. We view most companies in this subsector as fully- 16x
valued and reflective of the premium the market is willing to pay for growth.
14x +1SD
Insurance. A diverse group (brokers, underwriters, reinsurers), with many that are
12x Avg
expected to benefit at some point in the future from higher long-term interest rates.
–1SD
Our current favorite is Prudential Financial (PRU), which is on the EIFL. 10x
Investment Banking/Brokerage. Continued capital markets strength will to some 8x

degree offset margin pressure from the ongoing shift from active to passive asset
6x
management, regulation (MiFID II), technology and competition. 2003 2005 2007 2009 2011 2013 2015 2017
Mortgage REITs. We favor the commercial real estate-focused mortgage REITs in the
current environment. Granite Point (GPMT) is on our EIFL and we expect this 1.4x
company to continue to grow earnings and dividends as it expands its balance sheet.
1.3x
Specialty Finance. The uniqueness of many of the individual companies and current 1.2x
valuation levels make this the most interesting group to us. Air Lease (AL), Ally
1.1x
Financial (ALLY), and Synchrony (SYF) are currently on our EAFL.
1.0x
Top Picks 0.9x +1SD
Equity Appreciation Focus List: Synchrony Financial (SYF) 0.8x Avg
Equity Income Focus List: Invesco (IVZ) 0.7x –1SD
High Income Ladder: Saratoga Inv. Corp. 6.75% Sr. Unsecured Notes due 12/30/23 0.6x
2003 2005 2007 2009 2011 2013 2015 2017
Vernon C. Plack, CFA / 804-780-3257 / VPlack@BBTScottStringfellow.com
Source: FactSet


S&P 500 21,942 100% 14.9x 16.4x 14.8x 1% 10% 10% 2.2% 23%
Financials 2,862 13% 10.3x 12.1x 12.0x (14%) 10% 17% 2.7% 31%
Diversified Banks 979 34% 9.1x 10.8x 11.0x (17%) 12% 19% 3.4% 36%
Regional Banks 244 9% 9.4x 11.6x 12.7x (26%) 8% 24% 3.7% 37%
Asset Mgmt & Custody Banks 195 7% 10.6x 11.9x 13.8x (23%) 9% 12% 3.2% 25%
Consumer Finance 150 5% 9.0x 10.3x 11.3x (20%) 9% 14% 2.0% 27%
Investment Banking & Brokerage 184 6% 8.6x 11.2x 12.0x (28%) 9% 30% 2.2% 43%
Financial Exchanges & Data 211 7% 20.6x 21.3x 18.6x 11% 10% 3% 1.9% 16%
Multi-Sector Holdings 395 14% 19.0x 22.8x 18.2x 4% 3% 20% 0.1% 23%
Life & Health Insurance 149 5% 7.2x 8.7x 8.7x (17%) 8% 21% 3.6% 34%
Insurance Brokers 113 4% 16.8x 16.7x 15.3x 10% 11% (1%) 1.7% 11%
Multi-line Insurance 65 2% 8.9x 11.0x 11.1x (20%) 12% 24% 2.8% 42%
Property & Casualty Insurance 167 6% 11.5x 13.1x 11.6x (0%) 5% 14% 2.6% 22%

Multi-line Insurance 12% Financial Exchanges & Data 20.6x
Diversified Banks 12% Multi-Sector Holdings 19.0x
Insurance Brokers 11%
S&P 500 Insurance Brokers 16.8x
10%
Financial Exchanges & Data 10% S&P 500 14.9x
Financials 10% Property & Casualty Insurance 11.5x
Consumer Finance 9%
Asset Mgmt & Custody Banks 10.6x
Asset Mgmt & Custody Banks 9%
Investment Banking &… 9% Financials 10.3x
Regional Banks 8% Diversified Banks 9.1x
Life & Health Insurance 8%
Investment Banking & Brokerage 8.6x
Property & Casualty Insurance 5%
Multi-Sector Holdings 3% Life & Health Insurance 7.2x
0% 5% 10% 15% 0x 5x 10x 15x 20x 25x 30x
-
S&P 500 / Financials SEC Weekly
550
Technical Comment
- - - - - -
S&P 500 / Financials SEC Price S&P 500 / Financials SEC MA-50D S&P 500 / Financials SEC MA-200D
500
450
Key Levels:
50-Day Moving Avg. = 436 (+10%)
400 200-Day Moving Avg. = 456 (+15%)
350

Comment: The total return for Financials during the past month was -8.1% vs.-
3.6% for the S&P 500, and ranked 11th out of the 11 sectors. For the past twelve
months, the sector’s total return was -10.8% vs. 0.0% for the S&P 500, and
300
ranked 10th out of the 11 sectors. Negatives include trading below its 50-day and
200-day moving averages and our previously drawn support trend line. A weekly
RSI reading of 36 suggests to us that the sector is approaching oversold territory.
250
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18


Health Care
Overweight 1,197
S&P 500 Health Care – Price
1,097
Recommendation
997
The Health Care sector is the second best performing sector on a year-to-date 897
basis with a 9.1% return. As investors might expect, Health Care should outperform
797
in volatile markets given the defensive nature of the industry. For reference,
Health Care stocks have outperformed the market in 8 out of the last 10 years 697
(including YTD 2018). Consumers typically don’t forego expenditures for good 597
health. With the aging of the baby boomers, the population over 65 continues to 497
grow. In 2008 the population over 65 was 12.5% of the total, and today it is closer 2013 2014 2015 2016 2017 2018
to 16%. As a result, Health Care expenditures have risen – in 2008 expenditures Sector S&P 500
were 16% of GDP and according to the latest data from 2017, expenditures are
now 18% of GDP (according to CMS.gov). Total expenditures have risen at an Annual EPS Growth
18%
average of 9% per year since 1960. Health Care stocks are now trading at a 16%
16% 15%
premium to the S&P 500 while earnings growth is one percentage growth below
the market (9% versus 10%). With the outperformance, Health Care stocks are 14%
trading at a 3% premium to the market. 12%
10%
10%
Key Points 8%
9% 8%
7%
Biotech. This group of companies is out of favor with investors. There have been 6%
no major drug pipeline catalysts, and many drugs are seeing competitive pricing. 4% 4%
Health Care Equipment And Supplies. This group of companies makes medical 2%
equipment and devices which are typically more stable and slower growth 0%
businesses. 2013 2014 2015 2016 2017 2018E 2019E
Health Care Providers And Services. This sector covers hospital companies, Forward P/E – Absolute
managed care providers, and lab companies. For the most part, these companies 21x
have benefitted from health care expansion which helped bring more members
19x
into managed care and higher reimbursements for hospitals. Part of the
outperformance over the past 10 years (Health Care up 327% and the S&P 500 up 17x +1SD
266%) has been the expansion of services and insurance coverage under The 15x
Avg
Affordable Care Act. However, we are seeing some changes that may have a
negative impact on the group. First, the penalty for not having coverage was 13x
–1SD
rescinded and, second, a federal judge recently ruled that the mandate to buy 11x
insurance is unconstitutional. Health Care stocks (particularly the managed care
companies) trading off on the day of the announcement. However, it is too soon to 9x
draw conclusions as the ruling will be appealed and will likely make it back to The 7x
Supreme Court. 2003 2005 2007 2009 2011 2013 2015 2017
Life Sciences. A relatively small group of companies focused on the tools and Forward P/E – Relative to S&P 500
services used in drug discovery, testing, and product development. The emphasis is 1.3x
more on the technology side of health care.
1.2x
Pharmaceuticals. This group is comprised of the large-cap, blue-chip +1SD
pharmaceutical companies that pay attractive dividends. Over the past several 1.1x
years, Pharma has suffered from patent expirations and lack of new major drugs. Avg
1.0x
Top Picks –1SD
0.9x
Equity Appreciation Focus List: Allscripts Healthcare (MDRX)
0.8x
Equity Income Focus List: Welltower (WELL)
0.7x
W. Moultrie Dotterer, CFA / 804-780-3279 / MDotterer@BBTScottStringfellow.com 2003 2005 2007 2009 2011 2013 2015 2017
Source: FactSet


S&P 500 21,942 100% 14.9x 16.4x 14.8x 1% 10% 10% 2.2% 23%
Health Care 3,398 15% 15.3x 16.2x 15.1x 1% 9% 6% 1.8% 17%
Biotechnology 559 16% 11.5x 12.6x 15.0x (23%) 10% 10% 2.3% 23%
Equipment & Supplies 725 21% 21.8x 22.7x 14.7x 49% 11% 4% 1.1% 17%
Health Care Technology 18 1% 20.9x 22.5x 27.1x (23%) 11% 8% 0.0% 20%
Life Sciences 222 7% 23.2x 23.0x 18.9x 23% 13% (1%) 0.2% 12%
Pharmaceuticals 1,127 33% 14.9x 15.4x 14.6x 2% 8% 3% 2.7% 14%
Providers & Services 746 22% 13.7x 15.0x 13.4x 2% 9% 9% 1.1% 20%

Life Sciences 13% Life Sciences 23.2x
Health Care Technology 11% Equipment & Supplies 21.8x
Equipment & Supplies 11% Health Care Technology 20.9x
S&P 500 10% Health Care 15.3x
Biotechnology 10% S&P 500 14.9x
Health Care 9% Pharmaceuticals 14.9x
Providers & Services 9% Providers & Services 13.7x
Pharmaceuticals 8% Biotechnology 11.5x
0% 5% 10% 15% 0x 10x 20x 30x 40x
-
S&P 500 / Health Care SEC Weekly
- - - - - - 1,150
Technical Comment
S&P 500 / Health Care SEC Price S&P 500 / Health Care SEC MA-50D S&P 500 / Health Care SEC MA-200D
1,100

1,050
Key Levels:
1,000
50-Day Moving Avg. = 1054 (+5%)

950 200-Day Moving Avg. = 1013 (+1%)
900

850
Comment: The total return for Health Care during the past month was -
1.4% vs. -3.6% for the S&P 500, and ranked 3rd out of the 11 sectors. For the
800
past twelve months, the sector’s total return was 8.9% vs. 0.0% for the S&P
500, and ranked 1st out of the 11 sectors. The 6-month price trend is the
750 most positive of any of the sectors at 14.4%. Key support is between 900
and 925. The weekly RSI reading of 48 suggests to us that the sector is
neither overbought nor oversold.
700
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18


Industrials
Market Weight 740
S&P 500 Industrials – Price
690
Recommendation 640
We continue to recommend a Market Weight for Industrials as uncertainty over 590
global tariffs, coupled with waning overall market sentiment, keeps us cautious on 540
the sector. To the positive, valuations are now attractive in many cases following 490
recent market selling. Our top pick, Kansas City Southern (KSU) remains well- 440
positioned, in our opinion, to benefit from strong core demand for rail-based 390
freight over time. 340
2013 2014 2015 2016 2017 2018
Key Points Sector S&P 500
Aerospace & Defense. We expect global aerospace/defense spending to remain
Annual EPS Growth
positive near-term, while select valuation multiples are increasingly favorable, in 20% 19%
our view. Companies with stronger EPS growth and lower relative leverage remain 18%
comparatively well-positioned. 16%
14%
Building Products. Rising interest rates and higher input costs have weighed on 12%
12% 11%
building product stocks YTD, although valuations are now more attractive for many.
10%
Easing trade tensions with China could provide material relief for these stocks, in
8% 7%
our view, while trends in residential repair/remodel remain generally positive.
6% 5%
Engineering & Construction. Select E&C stocks have proven weaker in recent 4%
2%
weeks given reduced energy pricing and lighter guidance although valuations are 2% 0%
favorable in select cases. 0%
2013 2014 2015 2016 2017 2018E 2019E
EE/Multi-Industry. Many within EE/MI have pared back materially given trade
concerns and slowing global growth. Valuations have become more favorable. Forward P/E – Absolute
22x
Machinery. Global machinery stocks remain pressured by the ongoing threat of
20x
trade retaliation and higher raw material pricing, although this has improved
valuations materially for select companies. Domestic metrics, to include elevated 18x
+1SD
capex spending and still strong Class 8 truck orders remain largely positive. 16x
Avg
Road & Rail/Logistics. We remain positive on rail given generally strong freight 14x
–1SD
demand and solid overall pricing. Operating leverage for select providers is 12x
material, while demand for last-mile logistics should also remain robust, in our
10x
view. Top Pick Kansas City Southern (KSU) benefits from ongoing U.S.
petrochem/Mexican energy investment and de-escalating North American trade 8x
tensions. We believe the recent pullback in shares provides an attractive entry 6x
point for investors. 2003 2005 2007 2009 2011 2013 2015 2017
Airlines. We remain cautious on airlines given overall trade uncertainty, and the Forward P/E – Relative to S&P 500
1.3x
ongoing potential for added overcapacity. We recommend exposure to aircraft
leasing - Fortress Transportation & Infrastructure (FTAI) - as an alternative way to 1.2x
play elevated flight demand.
1.1x +1SD
Top Picks Avg
1.0x
Equity Appreciation Focus List: Kansas City Southern (KSU) –1SD
0.9x
Equity Income Focus List: Fortress Transportation & Infrastructure (FTAI)
High Income Ladder: Gibraltar Ind., Inc. 6.25% Senior Unsec. Notes due 2/1/21 0.8x
Charles E. Redding / 804-782-8853 / CRedding@BBTScottStringfellow.com 0.7x

2003 2005 2007 2009 2011 2013 2015 2017
Source: FactSet


S&P 500 21,942 100% 14.9x 16.4x 14.8x 1% 10% 10% 2.2% 23%
Industrials 2,013 9% 14.1x 15.6x 15.2x (7%) 13% 10% 2.2% 27%
Aerospace & Defense 558 28% 15.7x 17.4x 14.7x 7% 16% 11% 2.3% 31%
Air Freight & Logistics 137 7% 12.1x 14.4x 16.9x (28%) 10% 19% 2.7% 34%
Airlines 101 5% 8.4x 9.2x 8.2x 2% 15% 10% 1.5% 28%
Building Products 59 3% 13.7x 14.2x 15.9x (14%) 18% 4% 2.5% 25%
Commercial Svcs & Supplies 82 4% 23.0x 23.0x 18.7x 23% 9% 0% 1.8% 11%
Construction & Engineering 16 1% 10.6x 13.8x 15.2x (30%) 17% 30% 1.2% 53%
Electrical Equipment 104 5% 15.2x 17.3x 16.0x (5%) 10% 14% 3.0% 28%
Industrial Conglomerates 306 15% 14.8x 16.2x 15.7x (6%) 13% 10% 2.1% 26%
Machinery 330 16% 12.4x 13.7x 14.9x (17%) 7% 11% 2.4% 22%
Professional Services 64 3% 19.6x 21.0x 19.2x 2% 10% 7% 1.3% 19%
Road & Rail 219 11% 15.5x 17.3x 15.4x 1% 12% 12% 2.0% 28%
Trading Comp & Distributors 37 2% 11.9x 12.9x 18.5x (36%) 10% 9% 2.0% 21%

Building Products 18% Commercial Svcs & Supplies 23.0x
Construction & Engineering 17% Professional Services 19.6x
Aerospace & Defense 16% Aerospace & Defense 15.7x
Airlines 15% Road & Rail 15.5x
Industrials 13% Electrical Equipment 15.2x
Industrial Conglomerates 13% S&P 500 14.9x
Road & Rail 12% Industrial Conglomerates 14.8x
Professional Services 10%
Industrials 14.1x
S&P 500 10%
Building Products 13.7x
Air Freight & Logistics 10%
Trading Comp & Distributors Machinery 12.4x
10%
Electrical Equipment 10% Air Freight & Logistics 12.1x
Commercial Svcs & Supplies 9% Trading Comp & Distributors 11.9x
Machinery 7% Construction & Engineering 10.6x
0% 5% 10% 15% 20% 0x 5x 10x 15x 20x 25x 30x
Technical Comment
-
S&P 500 / Industrials SEC Weekly
- - - - - - 700
S&P 500 / Industrials SEC Price S&P 500 / Industrials SEC MA-50D S&P 500 / Industrials SEC MA-200D

650
Key Levels:
600
200-Day Moving Avg. = 624 (+13%)

550
500
Comment: The total return for Industrials during the past month was -5.6% vs.
-3.6% for the S&P 500, and ranked 10th out of the 11 sectors. For the past
450 twelve months, the sector’s total return was -8.5% vs. 0.0% for the S&P 500,
and ranked 9th out of the 11 sectors. Negatives include trading below its 50-day
and 200-day moving averages, our previously drawn support trend line, and
previous key support around 600. A weekly RSI reading of 36 suggests to us
that the sector is approaching oversold territory.
400
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18


Market Weight 1,445
S&P 500 Information Technology – Price
Recommendation 1,245
Valuation multiples for IT are elevated versus historical medians, consistent with 1,045
several other sectors. On a relative basis the group trades roughly in line with the
market. With IT constituting a significant portion of the S&P 500 (roughly a fifth of 845
total market cap), we believe a Market Weight sector recommendation provides
645
adequate exposure.
Key Points 445
2013 2014 2015 2016 2017 2018
Q3 Earnings Season Comes to a Close. The remaining stragglers in the IT sector Sector S&P 500
have now reported results but the fundamental picture is unchanged. Sales growth
in the quarter averaged about 9% yr/yr, which was roughly in line with consensus. Annual EPS Growth
25%
EPS came in 11% above the Street on average, resulting in higher-than-expected
21%
earnings growth of 20% yr/yr. Sales and EPS estimates are mostly unchanged for
20% 19%
2019 with a few notable exceptions, both positive and negative. By industry
vertical, negative revisions were primarily driven by the semiconductor,
15%
semiconductor equipment, and flash memory/hard drive complex of stocks. 13%
Growth Expected To Continue. Forward earnings are currently projected to 10%

8%
increase about 10% for the IT sector, in line with the S&P 500. Consensus estimates 7%
suggest that Software may outperform most other groups at 14% and 5% 3%
Semiconductors and Communications Equipment could trail other industries at 8% 1%
each. 0%
2013 2014 2015 2016 2017 2018E 2019E
Positive Momentum. IT has outperformed the market year to date (3% vs. –1% for
the S&P 500). Communication Equipment (+22%), IT Services (+9%), and Software Forward P/E – Absolute
(+22%) have all outperformed while Semiconductors, Electronic Equipment, and 28x
Technology Hardware have lagged behind the S&P 500. 26x
24x
Valuation. The current forward P/E of 15.5x compares to the S&P 500 at 14.9x and
22x
a 10-year median of 14.3x. IT trades at a premium of 8% to its 10-year median P/E
20x
vs. an average premium of 8% for other sectors. By group, Software trades at the +1SD
18x
highest multiple of 22.5x or 49% above the historical median, mostly a function of
16x Avg
Microsoft (MSFT) which accounts for more than two-thirds of the industry’s
14x
market cap. Conversely, Semiconductors trade at 11.3x (a 21% discount). –1SD
12x
Expected Returns. The bottoms-up consensus price target for the S&P 500 IT index 10x
implies total return potential of about 25%, higher than the overall market at 23%. 8x
For the sector, returns should be driven by higher earnings and multiples and a 2003 2005 2007 2009 2011 2013 2015 2017
nominal dividend yield.
1.6x
Top Picks
1.5x
Equity Appreciation Focus List: Cognizant Technology Solutions (CTSH)
1.4x
Equity Income Focus List: Broadcom (AVGO) 1.3x
High Income Ladder: NCR Corp. 5.0% Sr. Unsec. Notes due 7/15/22 1.2x +1SD
Peter W. Councill, CFA / 804-782-8850 / PCouncill@BBTScottStringfellow.com 1.1x Avg

1.0x
–1SD
0.9x
0.8x
2003 2005 2007 2009 2011 2013 2015 2017
Source: FactSet


S&P 500 21,942 100% 14.9x 16.4x 14.8x 1% 10% 10% 2.2% 23%
Information Technology 4,430 20% 15.5x 17.4x 14.3x 8% 11% 12% 1.8% 25%
Communications Equipment 261 6% 15.3x 16.1x 12.8x 19% 8% 5% 2.7% 16%
Electronic Equipment 98 2% 15.7x 17.7x 14.7x 7% 11% 13% 1.6% 27%
IT Services 1,053 24% 18.6x 20.0x 15.2x 22% 12% 8% 1.4% 22%
Semiconductors 812 18% 11.3x 13.3x 14.3x (21%) 8% 18% 2.6% 30%
Software 1,349 30% 22.5x 23.5x 15.1x 49% 14% 5% 1.3% 20%
Technology Hardware 857 19% 11.6x 14.1x 12.0x (4%) 10% 21% 2.1% 35%

Software 14% Software 22.5x
IT Services 12% IT Services 18.6x
Electronic Equipment 11% Electronic Equipment 15.7x
Information Technology 11% Information Technology 15.5x
S&P 500 10% Communications Equipment 15.3x
Technology Hardware 10% S&P 500 14.9x
Semiconductors 8% Technology Hardware 11.6x
Communications Equipment 8% Semiconductors 10.5x
0% 5% 10% 15% 5x 10x 15x 20x 25x 30x
Semiconductors valuation range based on NTM EPS 12 months forward to normalize the multiple
-
S&P 500 / Information Technology SEC Weekly
Technical Comment
- - - - 1,400
S&P 500 / Information Technology SEC Price S&P 500 / Information Technology SEC MA-50D
- -
S&P 500 / Information Technology SEC MA-200D
1,300
1,200
Key Levels:
1,100
50-Day Moving Avg. = 1195 (+8%)
200-Day Moving Avg. = 1227 (+11%)
1,000

900

Comment: The total return for Information Technology during the past
800
sectors. For the past twelve months, the sector’s total return was 3.4% vs.
0.0% for the S&P 500, and ranked 5th out of the 11 sectors. Negatives
700
include trading below both its 50-day and 200-day moving averages and
breaking below our previously drawn support trend line. Key support is
around 1100. A weekly RSI reading of 39 suggests to us that the sector is
600
approaching oversold territory.
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18

Materials
Market Weight 493
S&P 500 Materials – Price
443
Recommendation
393
In recent weeks, Material stocks have seen added selling pressure along with the
overall broader market. We continue to recommend a Market Weight for the 343
sector given broad-based tariff uncertainty and added international growth 293
moderation in many regions. To the positive, valuations are now notably attractive
for select names, and we prefer those with limited exposure to China. Our Top Pick, 243
W.R. Grace & Co. (GRA) is a long-term play on elevated global refinery demand and 193
ongoing industry consolidation. 2013 2014 2015 2016 2017 2018
Sector S&P 500
Key Points
Chemicals. Weaker global growth, to include renewed softness in auto, continues Annual EPS Growth
25% 22%
to negatively impact select chemical stocks. Elevated commodity prices have also
been an ongoing headwind although materially reduced crude oil could provide 20%
some reprieve heading into 2019. Expect M&A to remain an ongoing theme. W.R. 15%
Grace & Co. (GRA) is our Top Pick given aggressive recent price increases, which we
10% 8% 8%
expect will benefit margins in 2019. Given robust global refinery demand, the 6%
company believes it can achieve double-digit earnings/dividend growth through 5% 3%
2021. Management expects limited negative impact from tariffs near-term. 0%
Construction Materials. We remain largely cautious on domestic aggregates due to -5% -3%
-5%
ongoing public construction delays (understaffed DOTs, select labor shortages) and
overall uncertainty related to comprehensive spending. We project elevated local -10%
2013 2014 2015 2016 2017 2018E 2019E
infrastructure spending over the coming years, but do not expect a more
substantial Federal spending package near-term. Forward P/E – Absolute
23x
Containers & Packaging. Packaging names have seen substantial selling pressure in
21x
recent months given renewed concerns over added domestic capacity and
(potentially) slowing consumer demand. We are also watching cost inflation 19x
carefully for signs of more meaningful appreciation. Despite the notable discount 17x +1SD
to valuation, we remain cautious on the group. 15x
Avg
13x
Metals & Mining. Ongoing trade uncertainty continues to impact this group, and –1SD
we have added concerns for slowing global growth. Material capacity additions 11x
bode poorly for domestic steel pricing into 2019 while weaker auto volumes could 9x
also impact production expectations for select providers. 7x
5x
Long-term Positive on Coatings. In 2018, coatings manufacturers were negatively 2003 2005 2007 2009 2011 2013 2015 2017
impacted by higher raw materials pricing, slowing global growth, and weaker OEM
auto. Heading into 2019, we view the current risk/reward setup for Axalta Coating Forward P/E – Relative to S&P 500
1.4x
Systems, Ltd. (AXTA) favorably given an attractive current valuation, modest recent
commodity price easing, and long-term consolidation potential. Consensus 1.3x
currently projects double-digit annual earnings growth in 2019/2020. 1.2x
Top Picks 1.1x

+1SD
1.0x
Equity Appreciation Focus List: W.R. Grace & Co. (GRA) Avg
0.9x –1SD
High Income Ladder: AK Steel Corp. 7.625% Senior Unsecured Notes due 10/1/21 0.8x
Charles E. Redding / 804-782-8853 / CRedding@BBTScottStringfellow.com 0.7x
0.6x
2003 2005 2007 2009 2011 2013 2015 2017
Source: FactSet


S&P 500 21,942 100% 14.9x 16.4x 14.8x 1% 10% 10% 2.2% 23%
Materials 571 3% 13.9x 15.4x 15.1x (8%) 11% 11% 2.4% 25%
Chemicals 428 75% 14.3x 15.7x 15.2x (6%) 12% 10% 2.4% 25%
Construction Materials 24 4% 19.3x 20.4x 31.7x (39%) 19% 6% 1.1% 27%
Containers & Packaging 68 12% 10.9x 12.4x 13.3x (18%) 5% 14% 3.0% 22%
Metals & Mining 51 9% 13.1x 15.9x 13.6x (3%) 5% 21% 2.1% 30%

Construction Materials 19% S&P 500 14.9x
Chemicals 12%
Chemicals 14.3x
Materials 11%
Materials 13.9x
S&P 500 10%
Metals & Mining 13.1x

Metals & Mining 5%
Containers & Packaging 5% Containers & Packaging 10.9x
0% 5% 10% 15% 20% 25% 0x 10x 20x 30x 40x 50x
-
S&P 500 / Materials SEC Weekly
Technical Comment
- - - - - - 420
S&P 500 / Materials SEC Price S&P 500 / Materials SEC MA-50D S&P 500 / Materials SEC MA-200D
400

380
360 Key Levels:

340
200-Day Moving Avg. = 360 (+15%)

320 Drawn Support Trend Line = 315 (0%)
300

280
Comment: The total return for Materials during the past month was -4.8%
vs. -3.6% for the S&P 500, and ranked 8th out of the 11 sectors. For the past
twelve months, the sector’s total return was -11.5% vs. 0.0% for the S&P
500, and ranked last out of the 11 sectors. Following a bounce the previous
260
month, Materials underperformed during the past 30 days. Negatives

240
include trading below both its 50-day and 200-day moving averages and
breaking below our previously drawn support trend line. A weekly RSI
220
reading of 36 suggest to us that the sector is close to being oversold.
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18


Real Estate
Market Weight 257
S&P 500 Real Estate – Price
237
Recommendation
217
We believe a favorable macro-economic backdrop should support growth in 197
underlying property values and net operating income (NOI) for most operators.
177
With modest growth prospects, reasonable valuations, and hedging benefits if
future interest rates are lower than anticipated, we assign a Market Weight 157
recommendation. The Real Estate Sector is comprised primarily of equity real 137
estate investment trusts (REITs), and within REITs there are many subsectors that 117
cover essentially all of the different property types, to include health care, 2013 2014 2015 2016 2017 2018
hotel/resort, industrial, office, residential, retail and a diverse group of Sector S&P 500
niche/specialized players.
Annual EPS Growth
Key Points 14%
12%
Stock Performance. For the past twelve months, the total return for Real Estate has 12%
been 3.7% compared to 0.0% for the overall market. Real Estate has benefited from 10% 9%
a rotation to defensive sectors given investors’ concerns regarding the economy
8% 7%
and the potential impact on the equity markets. Of the sub-sectors, Health Care has 7%
6%
performed best while Office and Hotels have been under the most pressure. 6%
4%
Expected Earnings Growth. Consensus estimates for 12-month forward Funds 4%
From Operations (FFO) growth is 6%, with Specialized REITs at the upper end (9%) 2% 1%
and Hotel and Resort REITs at the lower end (2%).
0%
Valuation Dependent On Subsector. Within the subsectors, the market is definitely 2013 2014 2015 2016 2017 2018E 2019E
assigning higher multiples for growth and certainty. However, we are also seeing
meaningful divergence within some subsectors such as Health Care. Interesting to Forward P/E – Absolute
25x
note is that many publicly-traded REITs are effectively trading at a discount to
23x
private market valuations.
21x
Equity Appreciation Focus List Real Estate Ideas: CBRE Group, Inc. (CBRE - c-corp. 19x
+1SD
and global leader in commercial real estate services); and Equinix, Inc. (EQIX - Avg
17x
data center REIT). –1SD
15x
Equity Income Focus List Real Estate Ideas: All are REITs, and Include Easterly 13x
Government Properties, Inc. (DEA – government offices); Iron Mountain, Inc. 11x
(IRM – storage, both physical and digital); Kite Realty Group Trust (KRG – open air 9x
shopping centers); and Simon Properties (SPG – regional malls).
7x
Should Rising Interest Rate Concerns Cause Investors To Flee Real Estate? We 2003 2005 2007 2009 2011 2013 2015 2017
don’t think so. Sentiment may continue to have a negative bias as rates go up but
rising interest rates should also be reflective of a strong economy, thus driving 2.0x
property values and NOI growth higher. It should also not be considered a certainty
that rates will rise meaningfully anytime soon to the point that alternative 1.8x
investments will be viewed as much more attractive or that rising capital costs will
1.6x
more than offset revenue growth, thus potentially causing property values to
+1SD
potentially decline. 1.4x
Avg
Top Picks 1.2x
Equity Appreciation Focus List: CBRE Group Inc., Class A (CBRE) 1.0x
–1SD
Equity Income Focus List: Iron Mountain, Inc. (IRM)

0.8x
Vernon C. Plack, CFA / 804-780-3257 / VPlack@BBTScottStringfellow.com 2003 2005 2007 2009 2011 2013 2015 2017
Source: FactSet


S&P 500 21,942 100% 14.9x 16.4x 14.8x 1% 10.3% 9.6% 2.2% 23.1%
Real Estate 665 3% 17.6x 17.7x 18.0x (2%) 6.4% 0.3% 3.6% 10.4%
Specialized REITs 266 40% 19.2x 18.9x 20.5x (7%) 9.3% (1.2%) 3.3% 11.2%
Health Care REITs 63 9% 16.6x 15.6x 13.8x 20% 3.2% (5.8%) 5.0% 2.2%
Hotel & Resort REITs 13 2% 10.2x 12.1x 12.8x (21%) 1.9% 18.7% 4.8% 25.7%
Industrial REITs 51 8% 20.5x 20.9x 18.7x 10% 5.9% 1.8% 3.2% 10.9%
Office REITs 52 8% 16.8x 17.8x 17.4x (3%) 5.7% 5.8% 3.3% 15.2%
Residential REITs 99 15% 19.6x 19.0x 19.4x 1% 4.7% (3.0%) 3.3% 4.8%
Retail REITs 108 16% 15.4x 15.8x 16.3x (6%) 4.2% 2.4% 4.5% 11.2%
Real Estate Services 13 2% 12.5x 14.4x 15.2x (18%) 11.4% 15.9% 0.0% 29.1%

Real Estate Services 11% Industrial REITs 20.5x
S&P 500 10% Residential REITs 19.6x
Specialized REITs 9% Specialized REITs 19.2x
Real Estate 6% Real Estate 17.6x
Industrial REITs 6% Office REITs 16.8x
Office REITs 6% Health Care REITs 16.6x
Residential REITs 5% Retail REITs 15.4x
Retail REITs 4% S&P 500 14.9x
Health Care REITs 3% Real Estate Services 12.5x
Hotel & Resort REITs 2% Hotel & Resort REITs 10.2x
0% 5% 10% 15% 0x 10x 20x 30x 40x 50x 60x
-
S&P 500 / Real Estate SEC Weekly
Technical Comment
- - - - - - 220
S&P 500 / Real Estate SEC Price S&P 500 / Real Estate SEC MA-50D S&P 500 / Real Estate SEC MA-200D

210
Key Levels:
200 50-Day Moving Avg. = 202 (+2%)
200-Day Moving Avg. = 199 (+0%)
Drawn Support Trend Line = 190 (-4%)
190

180
Comment: The total return for Real Estate during the past month was 0.5%
vs.-3.6% for the S&P 500, and ranked 2nd out of the 11 sectors. For the past
twelve months, the sector’s total return was 3.7% vs. 0.0% for the S&P 500,
and ranked 4th out of the 11 sectors. Real Estate had another solid month
(one of only two sectors with a positive return) as investors got more
170
defensive. The 6-month price trend line remains positive. (+2% annualized).
Additional key support is in the 180 range. A weekly RSI reading of 54
160 suggests to us that the sector is neither overbought nor oversold.
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18


Utilities
Underweight 331
S&P 500 Utilities – Price
311
Recommendation 291
271
For long-term investors, we continue to favor a modest sector Underweight for
251
Utilities given lower relative growth and rising interest rates. However, we also
231
recognize the appreciable rotation into the sector in recent weeks, as Utilities have 211
outperformed the broader market. Long-term, we encourage investors to remain 191
selective. Our preferred sector ETF- Select Sector SPDR (XLU) provides diversified 171
exposure while our top pick, Dominion Energy, Inc. (D), maintains comparatively 151
higher earnings/dividend growth and an attractive current valuation. 2013 2014 2015 2016 2017 2018
Sector S&P 500
Key Points
Electric Utilities. The S&P 500 Electric Utility Index currently trades just ahead of Annual EPS Growth
10%
the sector’s five-year average multiple (16x forward EPS). Limited growth is our 8%
biggest issue, as consensus projections call for just 4% FY’19 EPS growth, on 8%
7%
average, for companies within the subsector. We believe the low single-digit
6% 5%
growth potential warrants a discount to historical valuation.
Multi-Utilities. We generally prefer the modestly higher growth profiles (and 4% 3%
added diversification) of multi-utilities relative to traditional electrics. 2%

0%
Gas Utilities. We expect regulated gas consolidation to continue as select utilities 0%
0%
seek higher growth and added diversification. Extensive natural gas reserves have
facilitated ongoing infrastructure build, while overall demand appears generally -1%
-2%
healthy, in our view. Despite the positives, elevated valuations (in part due to 2013 2014 2015 2016 2017 2018E 2019E
lingering M&A speculation), along with rising interest rates, keep us cautious.
Forward P/E – Absolute
Renewables & IPPs. We remain cautious on renewables & IPPs, as natural gas 19x
overcapacity and overall domestic energy pricing (seasonal fluctuation
17x
notwithstanding) could likely remain headwinds for U.S.-centric independent +1SD
power producers, in our view. We expect added renewable capacity to further 15x
pressure pricing in the years ahead. Avg
13x
Dominion Update. On 12/14, the S.C. Public Service Commission (PSC) voted in –1SD
favor of Dominion’s proposed merger with SCANA, effectively marking the final 11x
regulatory hurdle required for deal passage. The merger, which requires approval
of select conditions (written order to be issued 12/21) includes a potential 9x
$22/month rate cut for S.C. ratepayers and is expected to be immediately accretive
7x
to Dominion earnings (long-term EPS growth outlook 8%+ including SCANA). 2003 2005 2007 2009 2011 2013 2015 2017
Dominion continues to trade at a discount to its five-year forward average of 19x
EPS. Given the company’s long-term growth potential and proven record for Forward P/E – Relative to S&P 500
1.3x
consistent operating performance, we believe the current discount is unwarranted.
1.2x
Top Pick
1.1x
+1SD
Equity Income Focus List: Dominion Energy Inc. (D)
1.0x
Avg
Charles E. Redding / 804-782-8853 / CRedding@BBTScottStringfellow.com
0.9x
–1SD
0.8x
0.7x
0.6x
2003 2005 2007 2009 2011 2013 2015 2017
Source: FactSet


S&P 500 21,942 100% 14.9x 16.4x 14.8x 1% 10% 10% 2.2% 23%
Utilities 745 3% 17.3x 16.6x 15.0x 16% 5% (4%) 3.5% 4%
Electric Utilities 459 62% 16.7x 16.2x 14.7x 13% 4% (3%) 3.6% 5%
IPPs and Renewables 23 3% 11.3x 11.6x 12.3x (8%) (1%) 2% 1.8% 3%
Multi-Utilities 246 33% 19.2x 17.6x 15.6x 23% 8% (8%) 3.5% 2%
Water Utilities 18 2% 27.2x 26.0x 18.3x 49% 9% (4%) 2.0% 6%

S&P 500 10% Water Utilities 27.2x
Water Utilities 9% Multi-Utilities 19.2x
Multi-Utilities 8% Utilities 17.3x
Utilities 5% Electric Utilities 16.7x
Electric Utilities 4% S&P 500 14.9x
IPPs and Renewables (1%) IPPs and Renewables 11.3x
(5%) 0% 5% 10% 15% 5x 10x 15x 20x 25x 30x 35x
-
S&P 500 / Utilities SEC Weekly
- - - - - - 300
Technical Comment
S&P 500 / Utilities SEC Price S&P 500 / Utilities SEC MA-50D S&P 500 / Utilities SEC MA-200D
290

280
270
Key Support Levels:
260
200-Day Moving Avg. = 265 (-4%)
250
Drawn Support Trend Line = 247 (-11%)
240 Weekly Relative Strength (RSI): 63
Comment: The total return for Utilities during the past month was 4.3% vs.
230
-3.6% for the S&P 500, and ranked 1st out of the 11 sectors. For the past
twelve months, the sector’s total return was 6.5% vs. 0.0% for the S&P 500,
220 and ranked 2nd out of the 11 sectors. Positives include trading above both
its 50-day and 200-day moving averages, and a positive 6-month price
210
trend line (+14% annualized). Additional key support is in the 235 to 245
range. A weekly RSI reading of 63 suggests to us that the sector is neither
overbought nor oversold.
200
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18

Focus Lists Back to Contents

Equity Appreciation Focus List December 17, 2018
Company &
Price Sector
Company Ticker 12/17/18 Weight Key Points
Communication Services (10.1% of the S&P 500) 10.0%
Facebook, Inc. Class A FB $142.41 1.5% Ad model enabled by unique dataset, strong network effects, and unparalleled user base
Alphabet Inc. Class C GOOG $1,030.12 2.5% Leader in search, mobile, and digital ads; Using machine learning on massive collection of user data
Communication Services Select Sector SPDR XLC $43.17 6.0% Industry exposure used to reflect our current Market Weight recommendation for the sector
Consumer Discretionary (9.9%) 11.0%
Consumer Discretionary Select Sector SPDR XLY $100.44 5.0% Industry exposure used to reflect our current Overweight recommendation for the sector
Hilton Grand Vacations, Inc. HGV $27.69 3.0% Premier timeshare operator with elevated contract sales growth and differentiated platform
Royal Caribbean Cruises Ltd. RCL $105.93 3.0% Play on elevated consumer spend and impressive execution; Material EPS/dividend upside
Consumer Staples (7.6%) 7.5%
Mondelez International, Inc. Class A MDLZ $43.36 3.0% Valuation; International exposure; New management; Earnings growth
Vanguard Consumer Staples ETF VDC $138.40 4.5% Broadens exposure to Staples; Tracks S&P 1500; 104 stocks
Energy (5.5%) 5.5%
Cheniere Energy, Inc. LNG $59.60 2.5% Liquid natural gas growth story; First to market; Stable cash flow with LT contracts
Halliburton Company HAL $29.01 3.0% Largest service company in US shale; Leveraged to drilling technology
Financials (13.0%) 14.0%
Affiliated Managers Group, Inc. AMG $95.98 2.0% Compelling valuation given challenging environment; Well-positioned for long-term success
Air Lease Corporation Class A AL $33.09 2.0% Positive global demand; Attractive portfolio, profitability, and valuation
Ally Financial Inc ALLY $22.76 2.0% Expected higher profitability/product mix shift should lead to higher valuation
Bank OZK OZK $22.18 2.0% High-quality commercial real estate lender; Outstanding profitability; Attractive valuation
Citigroup Inc. C $54.82 2.0% Best risk/reward of the major banks w/ above avg. EPS growth and below avg. valuation
First Horizon National Corporation FHN $13.55 2.0% Recent acquisition expected to lead to strong EPS growth and higher profitability
Synchrony Financial SYF $23.95 2.0% Leading provider of private label credit cards; PayPal receivables purchase = Buying opportunity
Health Care (15.5%) 16.5%
Allscripts Healthcare Solutions, Inc. MDRX $10.18 5.0% Compelling valuation; Stable revenue base; M&A potential
Celgene Corporation CELG $68.02 5.0% Compelling valuation; Attractive drug pipeline; Significant growth potential
Vanguard Health Care ETF VHT $162.33 6.5% Broadens exposure to Health Care; Tracks MSCI Index; 345 stocks
Industrials (9.2%) 9.5%
Fortune Brands Home & Security, Inc. FBHS $40.52 2.0% Quality brands with an attractive valuation; Material LT earnings upside potential
Johnson Controls International plc JCI $31.92 2.0% Shift to higher margin portfolio continues; LT synergies potentially significant
Kansas City Southern KSU $95.44 2.0% Well-positioned rail with leverage to key industrial markets and an attractive valuation
Industrial Select Sector SPDR Fund XLI $66.30 3.5% Industry exposure used to reflect our current Market Weight recommendation for the sector
Information Technology (20.2%) 19.5%
Applied Materials AMAT $32.96 2.0% Best-in-class semiconductor capital equip. provider w/ high free cash flow, attractive valuation
Cognizant Technology Solutions Corp. CTSH $66.05 3.0% Focus on higher-growth IT services and improving profitability to generate significant EPS growth
salesforce.com, inc. CRM $132.57 3.0% Growth story based on secular shift to SaaS and outsourced IT infrastructure
Vanguard Information Technology ETF VGT $170.61 11.5% Industry exposure to match IT market weighting
Materials (2.6%) 3.0%
Axalta Coating Systems Ltd. AXTA $22.13 1.5% Market share gains benefiting margin expansion; Industry consolidation ongoing
W R Grace & Co GRA $60.48 1.5% Strong core demand trends ongoing; Positive pricing offsets raw material inflation
Real Estate (3.0%) 2.5%
CBRE Group, Inc. Class A CBRE $40.51 1.0% Global leader in commercial real estate services; Favorable growth prospects and valuation
Equinix, Inc. EQIX $382.25 1.0% Largest provider of collocated data centers globally; Growth due to secular rise in data/public cloud
Real Estate Select Sector SPDR Fund XLRE $33.35 0.5% Industry exposure used to reflect our current Market Weight recommendation for the sector
Utilities (3.4%) 1.0%
Utilities Select Sector SPDR Fund XLU $56.62 1.0% Industry exposure used to reflect our current Underweight recommendation for the sector
Cash - - 0.0%
Bold indicates top pick
See pages 44–46 for important disclosures.


Equity Appreciation Focus List
Consensus
Market Ann'd Div Yld NTM NTM Price Average Date
Company Ticker Cap ($B) Dividend (Ann'd) P/E EPS Grth Target Rating Added
Telecom
Facebook, Inc. Class A FB 411.6 - - 19.8x -3% $190 Buy 1/20/17
Alphabet Inc. Class C GOOG 716.4 - - 23.0x -6% $1,355 Buy 10/26/18
Communication Services Select Sector SPDR XLC 3.2 $0.53 1.2% - - NA NA 10/26/18
Consumer Discretionary Select Sector SPDR XLY 12.8 $1.40 1.4% - - NA NA 11/30/17
Hilton Grand Vacations, Inc. HGV 2.7 - - NM NM $40 Buy 6/27/18
Royal Caribbean Cruises Ltd. RCL 22.4 $2.80 2.6% 11.1x 10% $139 Buy 4/26/18
Consumer Staples
Mondelez International, Inc. Class A MDLZ 63.3 $1.04 2.4% 17.8x 3% $49 Buy 6/27/18
Vanguard Consumer Staples ETF VDC 4.4 $4.17 3.0% - - NA NA 1/20/17
Energy
Cheniere Energy, Inc. LNG 15.6 - - NM NM $79 Buy 1/20/17
Halliburton Company HAL 25.4 $0.72 2.5% 16.9x -15% $45 Buy 1/20/17
Financials
Affiliated Managers Group, Inc. AMG 5.0 $1.20 1.3% 6.5x -6% $149 Buy 1/20/17
Air Lease Corporation Class A AL 3.7 $0.52 1.6% 6.0x 24% $58 Buy 1/20/17
Ally Financial Inc ALLY 9.5 $0.60 2.6% 6.6x 10% $33 Buy 1/20/17
Bank OZK OZK 2.8 $0.84 3.8% 6.8x 6% $30 Hold 5/18/18
Citigroup Inc. C 134.4 $1.80 3.3% 7.5x 16% $83 Buy 4/26/18
First Horizon National Corporation FHN 4.4 $0.48 3.5% 9.1x 2% $19 Buy 5/18/18
Synchrony Financial SYF 17.3 $0.84 3.5% 5.7x 25% $37 Buy 3/27/18
Health Care
Allscripts Healthcare Solutions, Inc. MDRX 1.8 - - 13.0x 12% $14 Hold 9/25/18
Celgene Corporation CELG 47.7 - - 6.9x 16% $108 Buy 1/20/17
Vanguard Health Care ETF VHT 8.7 $2.50 1.5% - - NA NA 1/20/17
Industrials
Fortune Brands Home & Security, Inc. FBHS 5.7 $0.80 2.0% 10.8x 14% $53 Buy 1/20/17
Johnson Controls International plc JCI 29.5 $1.04 3.3% 14.0x -19% $39 Hold 1/20/17
Kansas City Southern KSU 9.8 $1.44 1.5% 14.4x 15% $125 Buy 10/26/18
Industrial Select Sector SPDR Fund XLI 10.6 $1.54 2.3% - - NA NA 10/26/18
Applied Materials AMAT 31.3 $0.80 2.4% 9.5x -22% $47 Buy 6/27/18
Cognizant Technology Solutions Corp. CTSH 39.2 $0.80 1.2% 14.2x 4% $82 Buy 1/26/18
salesforce.com, inc. CRM 104.8 - - 51.7x 6% $172 Buy 1/20/17
Vanguard Information Technology ETF VGT 18.6 $2.56 1.5% - - NA NA 1/20/17
Materials
Axalta Coating Systems Ltd. AXTA 5.3 - - 16.0x 5% $30 Buy 1/20/17
W R Grace & Co GRA 4.1 $0.96 1.6% 13.9x 9% $83 Buy 8/28/18
Real Estate
CBRE Group, Inc. Class A CBRE 14.0 $0.00 0.0% - - $53 NA 9/25/18
Equinix, Inc. EQIX 31.1 $9.12 2.4% - - $491 NA 9/25/18
Real Estate Select Sector SPDR Fund XLRE 2.8 $1.17 3.5% - - NA NA 11/30/17
Utilities
Utilities Select Sector SPDR Fund XLU 8.8 $1.90 3.4% - - NA NA 10/26/18
Cash - - - - - -
- - - -
Average 54 13.7x 5%


Equity Income Focus List December 17, 2018
Company &
Price Current Sector
Company Ticker 12/17/18 Yield Weight Key Points
Communication Services (10.1% of the S&P 500) 5.26%
Verizon Communications VZ $56.69 4.3% 5.26% Best-in-class carrier with attractive dividend yield and valuation
Consumer Discretionary (9.9%) 5.26%
Six Flags Entertainment Corp. SIX $58.35 5.6% 5.26% Stable, recurring cash flow supports material return of capital
Consumer Staples (7.6%) 6.00%
PepsiCo, Inc. PEP $114.25 3.2% 3.00% Valuation, dividend growth track record, cash flow generation
Philip Morris International Inc. PM $82.55 5.5% 3.00% International diversification and growth in e-cigarettes
Energy (5.5%) 12.00%
Chevron Corporation CVX $113.69 3.9% 3.00% Major oil with strong balance sheet, production and dividend growth
Enterprise Products Partners L.P. EPD $25.82 6.7% 3.00% One of the largest, most diversified energy midstream cos, solid balance sheet
Kinder Morgan Inc KMI $16.23 4.9% 3.00% Strong balance sheet, good management, and growing dividend
Williams Companies WMB $23.49 5.8% 3.00% Leverage to natural gas, restructuring, low risk growth projects
Financials (13.0%) 19.00%
Ares Capital Corporation ARCC $15.77 9.9% 3.00% "Best in Class" BDC with an outstanding manager, in our view
Fidus Investment Corporation FDUS $13.22 13.0% 3.00% An attractive way to invest in the lower middle market
Granite Point Mortgage Trust, Inc. GPMT $18.95 8.9% 3.00% Commercial real estate lender; Expected strong EPS and div. growth
Invesco Ltd. IVZ $17.24 7.0% 4.00% Well-positioned (active/passive) global asset manager; Compelling valuation
Prudential Financial , Inc. PRU $81.85 4.4% 3.00% Global divers. Ins./Inv. mgmt. co.; Attractive val.; Expected strong div. growth
TPG Specialty Lending, Inc. TSLX $18.85 8.3% 3.00% BDC with strong performance track record and NAV/sh growth
Health Care (15.5%) 8.26%
Pfizer Inc. PFE $43.80 3.1% 3.00% Diversification over a wide platform of drug therapies
Welltower, Inc. WELL $72.43 4.8% 5.26% Strong demographic tailwinds and high quality assets
Industrials (9.2%) 11.00%
Fortress Transportation & Infrastructure FTAI $14.95 8.8% 4.00% High-growth air leasing portfolio with solid free cash and material yield
Hannon Armstrong HASI $21.83 6.0% 4.00% Conservative portfolio, leverage structure; Dividend compelling
Macquarie Infrastructure Corp. MIC $40.16 10.0% 3.00% Higher risk capital appreciation recovery play; Current yield significant
Information Technology (20.2%) 14.26%
Broadcom Inc. AVGO $257.82 4.1% 3.00% Portfolio of profitable, high FCF businesses with a discounted valuation
Cisco Systems, Inc. CSCO $45.29 2.9% 4.00% Quality company with good div coverage and growth potential
Crown Castle International Corp. CCI $114.10 3.9% 5.26% Wireless network investment should drive strong cash flow and div growth
Intel Corporation INTC $48.06 2.5% 2.00% Best-in-class company w/ good div coverage + some growth potential
Materials (2.6%) 0.0%
- - - 0.00%
Real Estate (3.0%) 12.00%
Easterly Government Properties, Inc. DEA $17.44 6.0% 3.00% Unique focus on mission-critical U.S. government agencies
Iron Mountain, Inc. IRM $34.69 7.0% 3.00% Global storage leader with growth opportunities in data and emerging markets
Kite Realty Group Trust KRG $16.52 7.7% 3.00% High-quality portfolio of open-air shopping centers
Simon Property Group, Inc. SPG $181.86 4.4% 3.00% Leader in global retail real estate with an attractive portfolio
Utilities (3.4%) 5.26%
Dominion Energy, Inc. D $76.11 4.8% 5.26% Capex expansion continues, dividend well positioned for strong growth
Cash 1.25% 1.68%
Wtd. Average 5.8%

Bold indicates top pick


Equity Income Focus List
Current Consensus
Market Dividend 12-Month Price Average Date
Company Ticker Cap ($B) (Ann.) Div Growth Target Rating Added
Communication Services
Verizon Communications VZ 235.9 $2.41 1% $59 Hold 11/9/17
Six Flags Entertainment Corp. SIX 5.0 $3.28 1% $66 Buy 11/4/16
Consumer Staples
PepsiCo, Inc. PEP 160.8 $3.71 7% $117 Hold 5/29/18
Philip Morris International Inc. PM 128.2 $4.56 4% $95 Buy 11/4/16
Energy
Chevron Corporation CVX 217.5 $4.48 4% $140 Buy 3/27/18
Enterprise Products Partners L.P. EPD 56.4 $1.73 2% $34 Buy 6/20/17
Kinder Morgan Inc KMI 35.7 $0.80 25% $22 Buy 10/26/18
Williams Companies WMB 28.4 $1.36 12% $32 Buy 11/27/18
Financials
Ares Capital Corporation ARCC 6.8 $1.56 2% $18 Buy 11/4/16
Fidus Investment Corporation FDUS 0.3 $1.56 0% $17 Buy 11/4/16
Granite Point Mortgage Trust, Inc. GPMT 0.8 $1.68 4% $20 Hold 7/23/18
Invesco Ltd. IVZ 7.0 $1.20 5% $24 Hold 11/4/16
Prudential Financial , Inc. PRU 34.0 $3.60 6% $117 Buy 8/28/18
TPG Specialty Lending, Inc. TSLX 1.3 $1.56 7% $22 Buy 7/23/18
Health Care
Pfizer Inc. PFE 253.2 $1.36 5% $46 Hold 11/4/16
Welltower, Inc. WELL 27.2 $3.48 2% $72 Hold 11/4/16
Industrials
Fortress Transportation & Infrastructure FTAI 1.3 $1.32 3% $22 Buy 6/20/17
Hannon Armstrong HASI 1.4 $1.32 3% $25 Buy 11/4/16
Macquarie Infrastructure Corp. MIC 3.5 $4.00 0% $51 Hold 11/4/16
Broadcom Inc. AVGO 105.4 $10.60 9% $294 Buy 7/23/18
Cisco Systems, Inc. CSCO 206.0 $1.32 15% $52 Buy 11/4/16
Crown Castle International Corp. CCI 47.5 $4.50 7% $115 Buy 11/4/16
Intel Corporation INTC 218.4 $1.20 8% $55 Hold 11/4/16
Materials
- - - -
Real Estate
Easterly Government Properties, Inc. DEA 1.1 $1.04 1% $21 Buy 6/27/18
Iron Mountain, Inc. IRM 10.0 $2.44 0% $37 Hold 6/27/18
Kite Realty Group Trust KRG 1.4 $1.27 3% $18 Hold 6/27/18
Simon Property Group, Inc. SPG 56.5 $8.00 4% $197 Buy 11/4/16
Utilities
Dominion Energy, Inc. D 50.5 $3.67 5% $77 Hold 11/4/16
Cash
Wtd. Average 5%


High Income Ladder December 17, 2018
Price
Issuer CUSIP Maturity Coupon 12/17/18 Key Points
2019
SEASPAN CORP 81254U205 04/30/2019 6.375% $25.27 Improving financials; Global trade; Long term charters; Modern fleet
DPL INC 233293AN9 10/01/2019 6.750% $102.00 Subsidiary of AES Corp., an independent power generator and utility
2020
EXANTAS CAPITAL CORP. 76120WAB0 01/15/2020 8.000% $103.13 Comm. RE-focused mortgage REIT; New manager; Redo/restructure
HERTZ CORP 428040CP2 10/15/2020 5.875% $98.50 Iconic rental car brand; Undergoing plan to incr. rev/improve profitability
2021
GIBRALTAR INDS INC 374689AF4 02/01/2021 6.250% $100.00 Diversified metal component manufacturer; Solid growth, limited debt
AK STL CORP 001546AS9 10/01/2021 7.625% $94.75 Ohio-based steel producer with good liquidity; Improving end markets
2022
QUAD / GRAPHICS INC 747301AC3 05/01/2022 7.000% $96.50 Integrated print/logistics provider; Material free cash/liquidity
NCR CORP NEW 62886EAJ7 07/15/2022 5.000% $95.12 Vendor of ATMs and point-of-sale/self check-out systems; Improving profitability
2023
WHITING PETE CORP NEW 966387AP7 04/01/2023 6.250% $98.00 Oil based shale producer; Higher production; Improving cash flow
SARATOGA INVT CORP 80349A406 12/30/2023 0.000% $25.10 Bus. Develop. Co.; Lower middle market focus; Strong performance
2024
CENTURYLINK INC 156700BA3 04/01/2024 7.500% $101.25 3rd largest landline telco in the US; Stable top line/good cash flow
DYNEGY INC. (VISTRA ENERGY CORP.) 26817RAP3 11/01/2024 7.625% $106.50 TX-based integrated power company; Stable cash flow, Improving leverage


High Income Ladder
S&P S&P
Current Call Out Issuer Security Date
Issuer CUSIP Security Yield YTM YTW Date Call Price ($M) Rating Rating Added
2019
SEASPAN CORP 81254U205 Sr. Unsec. Note 6.31% 5.60% 5.60% NA NA #N/A NR NR 3/20/17
DPL INC 233293AN9 Sr. Unsec. Note 6.62% 4.16% 3.88% 09/01/2019 Par 99 BB BBB- 1/26/18
2020
EXANTAS CAPITAL CORP. 76120WAB0 Sr. Unsec. Convertible Note 7.76% 5.00% 5.00% NA NA 96 NR NR 6/27/18
HERTZ CORP 428040CP2 Sr. Unsec. Note 5.96% 6.75% 6.75% 10/15/2016 $102.938 700 B+ B- 3/20/17
10/15/2017 $101.469
10/15/2018 Par
2021
GIBRALTAR INDS INC 374689AF4 Sr. Unsec. Note 6.25% 6.24% 6.18% 08/30/2013 Par + MW Prem.* 210 B BB 3/27/18
03/01/2017 $103.125
03/01/2018 $101.563
03/01/2019 Par
AK STL CORP 001546AS9 Sr. Unsec. Note 8.05% 9.81% 9.81% 09/16/2014 Par + MW Prem.* 406 B B- 3/20/17
10/01/2017 $103.813
10/01/2018 $101.906
10/01/2019 Par
2022
QUAD / GRAPHICS INC 747301AC3 Sr. Unsec. Note 7.25% 8.20% 8.20% 04/15/2015 Par + MW Prem.* 243 BB- B 3/20/17
NCR CORP NEW 62886EAJ7 Sr. Unsec. Note 5.26% 6.55% 6.55% 03/26/2013 Par + MW Prem.* 600 B BB 10/26/18
07/15/2017 $102.500
07/15/2018 $101.667
07/15/2019 $100.833
07/15/2020 Par
2023
WHITING PETE CORP NEW 966387AP7 Sr. Unsec. Note 6.38% 6.78% 6.78% 07/02/2015 Par + MW Prem.* 407 BB- BB 3/20/17
01/01/2023 Par
SARATOGA INVT CORP 80349A406 Sr. Unsec. Note 0.00% 6.64% 6.06% 12/23/2019 $25.000 #N/A NR NR 3/20/17
2024
CENTURYLINK INC 156700BA3 Sr. Unsec. Note 7.41% 7.21% 7.20% 04/01/2019 Par + MW Prem.* 1,000 BB B+ 2/27/18
01/01/2024 Par
DYNEGY INC. (VISTRA ENERGY CORP.) 26817RAP3 Sr. Unsec. Note 7.16% 6.28% 4.31% 08/15/2015 Par + MW Prem.* 1,223 BB BB 10/26/18
11/01/2019 $103.813
05/01/2020 $102.542
05/01/2021 $101.271
05/01/2024 Par
*Issue features Make Whole Premium

Economic Data Back to Contents

Outlook
Outlook = Remains Positive Overall. The Conference Board Leading Economic Index (LEI) for the U.S. has been in a positive trend since
early 2009. This positive outlook is also reflected in consensus real GDP growth estimates of 2.9% for ’18 and 2.5% for ’19.
Recent Monthly Data = Modest Growth Ongoing. The November LEI reading will be released on 12/20. For October, the LEI posted
th
another sequential increase (+0.1%), marking the 13 consecutive expansionary month. According to the Conference Board, positive
contributors included elevated consumer confidence and ISM new orders. We note that The Conference Board attempts to
“normalize” select metrics; thus, sequential reductions may still be considered positive for purposes of Index aggregation. ISM values
over 50 and non-inverted interest rate spreads are also considered positives. Despite the sequentially higher October reading, growth
does appear to be moderating for select leading metrics on an absolute basis. We will continue to watch each of these indicators for
signs of deterioration. In recent months, the majority of Index components have been positive and we expect generally favorable
readings in the coming months.
LEI Components include average weekly production hours, ISM/PMI new orders, consumer confidence, and the interest rate spread
between U.S. 10Y Treasuries and the Federal Funds rate. Both PMI and consumer confidence posted material retrenchment ahead of
the last two recessions, while the interest rate spread turned negative. Capital goods and consumer goods moderated ahead of the ’01
recession, and a sharp retrenchment in domestic housing construction (authorized permits) signaled warning signs in the early stages
of the ’08-’09 recessionary period.
US Index of Leading Indicators US Index of Leading Indicators (Yr/Yr)

115 15%
10%
105
5%
95 0%
-5%
85 -10%
-15%
75
-20%
65 -25%
1992 1996 2000 2004 2008 2012 2016 1992 1996 2000 2004 2008 2012 2016
Source: The Conference Board via FactSet
Last 6 Mo
Leading Economic Index Component Data Apr May Jun Jul Aug Sep Oct Read Trend
Average weekly hours, manufacturing 42.3 42.0 42.1 42.2 42.2 42.1 42.1
ISM New Order Index 61.2 63.7 63.5 60.2 65.1 61.8 57.4
Avg. consumer expectations for business/economic conditions* 0.55 0.88 0.55 0.54 0.66 0.93 1.02
Interest rate spread, 10-year Treasury bonds less federal funds 1.18 1.28 1.09 0.98 0.98 1.05 0.96
Leading Credit Index* -0.05 -1.05 -0.82 -1.19 -1.27 -1.17 -1.11
Manufacturers' new orders, consumer goods and materials ($B) 135.13 134.58 135.44 135.43 136.12 139.06 139.06
Manufacturers' new orders, non-defense cap goods ex. aircraft ($B) 39.33 39.51 39.70 40.17 40.04 39.90 40.12
Stock prices, 500 common stocks 2,654 2,701 2,754 2,794 2,858 2,902 2,785
Building permits, new private housing units (000) 1,364 1,301 1,292 1,303 1,249 1,270 1,263
Average weekly initial claims for unemployment insurance (000) 221.6 225.5 224.8 214.7 210.1 207.1 214.1
Leading Economic Index, Total** 109.3 109.4 110.0 110.8 111.3 112.0 112.1
Source: The Conference Board via FactSet; *Standard Deviation; **LEI benchmark revisions effective December 2017 (2016=100)


Key U.S. Consensus Estimates
US Real GDP (Yr/Yr) US Real GDP Growth: Estimate Revisions
3.0%
4.0% CY'18
3.5%
3.5% 2.7%
2.9% 2.9%
3.0% 2.6% 2.5% CY'19
2.5% 2.3% 2.4%
2.0% 1.7% 1.8%
1.5% 2.1%
1.5%
1.0% CY'20
1.8% CY'21
0.5%
0.0% 1.5%
US Inflation (Core CPI Yr/Yr) US Core CPI Inflation: Estimate Revisions

2.5%
2.8%
2.4% 2.2% 2.2% 2.1% 2.2% 2.3% 2.4%
2.0% 1.8% 1.7% 1.8% 1.8% 2.3% CY'20

1.6% CY'21
2.2% CY'19
1.2%
2.1% CY'18
0.8%
0.4% 2.0%
0.0% 1.9%
US Unemployment Rate US Unemployment: Estimate Revisions

4.8%
9.0%
7.4% 4.6%
7.5%
6.2% 4.4%
6.0% 5.3%
4.9% 4.2%
4.3%
4.5% 3.7% 3.9% 3.5% 3.6% 4.0%
CY'18
3.0% 3.8%
CY'21
1.5% 3.6% CY'20
CY'19
0.0% 3.4%
Source: FactSet

Key U.S. Consensus Estimates (Continued)
US Fed Funds Target Rate: Estimate Revisions
US Fed Funds Target Rate 3.2%
3.5%
3.0% 2.88% 3.00% 3.0% Q3'19
2.50% 2.63% Q2'19
2.5% 2.25% 2.25% 2.8%
2.00% Q1'19
2.0% 1.75% 2.6%
1.50% Q4'18
1.5% 2.4%
1.0% 2.2%
0.5% 2.0%
0.0% 1.8%
US 10Yr Treasury Yield US 10Yr Treasury Yield: Estimate Revisions

3.5%
4.0%
3.38%
3.5% 3.05% 3.15% 3.30% 3.30% 3.4%
Q3'19
2.74% 2.85% 2.87% Q2'19
3.0% Q1'19
2.43%
2.5% 3.2%
Q4'18
2.0%
1.5% 3.1%
1.0%
2.9%
0.5%
0.0% 2.8%
US Treasury Yield Curve US 10Y Treasury Yield

3.4% 8.0%
7.0%
3.0%
6.0%
2.6%
5.0%
2.2% 4.0%
1.8% 3.0%
1.4% 2.0%
1.0%
1.0%
Yr 5Yr 10Yr 15Yr 20Yr 25Yr 30Yr 0.0%
1 Year Ago 1 Month Ago Current 1997 2000 2003 2006 2009 2012 2015 2018
Source: FactSet

Leading Economic Indicator Components
US Average Weekly Production Hours
42.5
• Material declines in Consumer Confidence and ISM
42.0 New Order data preceded each of the last two
recessionary periods. We believe both metrics
41.5 continue to reflect relative strength within the
41.0 economy and among domestic consumers.
• A negative Interest Rate spread (US 10Y Treasury
40.5 less Fed Funds) also preceded each of the last two
40.0 recessions.
• The Leading Credit Index (which spiked into the ’08-
39.5 ’09 recession) currently implies relative stability, in
39.0 our view.
2000 2003 2006 2009 2012 2015 2018
ISM New Order Index (US) US Consumer Confidence Index

80 160
140
70
120
60 100
50 80
60
40
40
30 20
20 0
1987 1991 1995 1999 2003 2007 2011 2015 1997 2000 2003 2006 2009 2012 2015 2018
US Interest Rate Spread (10Y Less Fed Funds) Leading Credit Index
4.0% 14
12
3.0% 10
2.0% 8
6
1.0%
4
0.0% 2
0
-1.0%
-2
-2.0% -4
1997 2000 2003 2006 2009 2012 2015 2018 1997 2000 2003 2006 2009 2012 2015 2018

Leading Economic Indicator Components (Continued)
US Manufacturers New Orders: Consumer
Goods & Materials ($B)
$170
• Capital Goods Orders (non-defense ex. aircraft)
$160 remain 3% higher YTD, indicating fundamental
strength in core business spending, in our view.
$150
• A sharp decline in Housing Permits preceded the ’08-
$140 ’09 recession. Authorized permits are off 6% yr/yr due
to labor/land constraints, higher raw material costs,
$130
and rising interest rates.
$120 • We believe current macro conditions remain
supportive of continued sub-4% unemployment over
$110
the coming quarters.
$100
1997 2000 2003 2006 2009 2012 2015 2018
US Manufacturers New Orders: Nondefense

S&P 500 Price Index
Capital Goods ex. Aircraft ($B) 3,500
$50
3,000
$45
2,500
$40 2,000
1,500
$35
1,000
$30
500
$25 0
1997 2000 2003 2006 2009 2012 2015 2018 1997 2000 2003 2006 2009 2012 2015 2018
Total US Housing Permits Authorized US Unemployment (Avg Wkly Claims)

2,500 700
600
2,000
500
1,500 400
1,000 300
200
500
100
0 0
1997 2000 2003 2006 2009 2012 2015 2018 1997 2000 2003 2006 2009 2012 2015 2018

Coincident Economic Indicator Components
US Index of Coincident Indicators US Index of Coincident Indicators (Yr/Yr)
110 6%
105 4%
100 2%
95
0%
90
-2%
85
-4%
80
75 -6%
70 -8%
65 -10%
1992 1996 2000 2004 2008 2012 2016 1992 1996 2000 2004 2008 2012 2016
US Manufacturing & Trade Sales ($B) US Employees on Nonag Payroll (M)

$1,500 155
$1,350 150
$1,200 145
140
$1,050
135
$900
130
$750 125
$600 120
1997 2000 2003 2006 2009 2012 2015 2018 1997 2000 2003 2006 2009 2012 2015 2018
US Personal Income Less Transfers ($000) US Industrial Production (Yr/Yr)

$14 10%
$13 5%
$12
0%
$11
-5%
$10
-10%
$9
-15%
$8
$7 -20%
1997 2000 2003 2006 2009 2012 2015 2018 1997 2000 2003 2006 2009 2012 2015 2018

Lagging Economic Indicator Components
US Index of Lagging Indicators US Index of Lagging Indicators (Yr/Yr)
110 8%
6%
100
4%
90
2%
80 0%
-2%
70
-4%
60
-6%
50 -8%
1992 1996 2000 2004 2008 2012 2016 1992 1996 2000 2004 2008 2012 2016
Average US Prime Rate US Consumer Credit/ Personal Income Ratio

10.5% 24%
9.0% 23%
7.5% 22%
6.0% 21%
4.5% 20%
3.0% 19%
1.5% 18%
0.0% 17%
1997 2000 2003 2006 2009 2012 2015 2018 1997 2000 2003 2006 2009 2012 2015 2018
US Manufacturing & Trade Inventory/ Sales US Commercial & Industrial Loans ($B)
1.55x $1,400
1.50x $1,250
$1,100
1.45x
$950
1.40x
$800
1.35x
$650
1.30x $500
1997 2000 2003 2006 2009 2012 2015 2018 1997 2000 2003 2006 2009 2012 2015 2018

Lagging Economic Indicator Components (Continued)
US Labor Cost/ Output Index US Unemployment Duration (Weeks)
120 45
40
115
35
110
30
105 25
20
100
15
95
10
90 5
1997 2000 2003 2006 2009 2012 2015 2018 1997 2000 2003 2006 2009 2012 2015 2018
LEI/CEI Ratio
Ratio of Leading (LEI) vs. Coincident
(CEI) Economic Indictors
1.15x • Generally speaking, a more substantial reduction in
1.10x leading growth indicators relative to coincident
indicators can indicate cyclical slowing. We highlight
1.05x
the material LEI/CEI declines preceding each of the last
1.00x two recessionary periods.
0.95x • We believe the current LEI/CEI reading (1.07x) implies
the potential for added expansion of leading
0.90x indicators, while current ratio momentum remains
0.85x directionally positive.
0.80x
1992 1996 2000 2004 2008 2012 2016

Research Department Sector Focus
Vernon C. Plack, CFA / 804-780-3257 / VPlack@BBTScottStringfellow.com Financials and Real Estate
W. Moultrie Dotterer, CFA / 804-780-3279 / MDotterer@BBTScottStringfellow.com Consumer Staples, Energy, and Health Care
Charles E. Redding / 804-782-8853 / CRedding@BBTScottStringfellow.com Consumer Discretionary, Industrials, Materials, and Utilities
Peter W. Councill, CFA / 804-782-8850 / PCouncill@BBTScottStringfellow.com Communication Services and Information Technology
IMPORTANT DISCLOSURES
BB&T Securities, LLC, Research Disclosures as of December 19, 2018
Companies Mentioned and Associated Disclosures

Affiliated Managers Group, Inc. (AMG), none
Air Lease Corporation Class A (AL), none
Allscripts Healthcare Solutions, Inc. (MDRX), none
Ally Financial Inc (ALLY), none
Alphabet Inc. Class C (GOOG), none
Applied Materials (AMAT), 6
Axalta Coating Systems Ltd. (AXTA), none
Bank OZK (OZK), 6, 7, 9a
CBRE Group, Inc. Class A (CBRE), 1a, 4, 7
Celgene Corporation (CELG), none
Cheniere Energy, Inc. (LNG), none
Citigroup Inc. (C), 2, 3, 4
Cognizant Technology Solutions Corp. (CTSH), 4, 7
Communication Services Select Sector SPDR (XLC), none
Consumer Discretionary Select Sector SPDR (XLY), none
Equinix, Inc. (EQIX), none
Facebook, Inc. Class A (FB), none
First Horizon National Corporation (FHN), 9a
Fortune Brands Home & Security, Inc. (FBHS), none
Halliburton Company (HAL), none
Hilton Grand Vacations, Inc. (HGV), 3, 4
Industrial Select Sector SPDR Fund (XLI), none
Johnson Controls International plc (JCI), none
Kansas City Southern (KSU), 1a, 4, 7
Mondelez International, Inc. Class A (MDLZ), 4, 7
Real Estate Select Sector SPDR Fund (XLRE), none
Royal Caribbean Cruises Ltd. (RCL), 4, 7
salesforce.com, inc. (CRM), 4
Synchrony Financial (SYF), 9a
Utilities Select Sector SPDR Fund (XLU), none
Vanguard Consumer Staples ETF (VDC), none
Vanguard Health Care ETF (VHT), none
Vanguard Information Technology ETF (VGT), none
W R Grace & Co (GRA), none
Ares Capital Corporation (ARCC), 3, 4
Broadcom Inc. (AVGO), none
Chevron Corporation (CVX), none
Cisco Systems, Inc. (CSCO), 4, 7
Crown Castle International Corp. (CCI), none
Dominion Energy, Inc. (D), 2, 3, 4, 7
Easterly Government Properties, Inc. (DEA), none
Enterprise Products Partners L.P. (EPD), none
Fidus Investment Corporation (FDUS), 1a, 2, 3, 4, 9a

Fortress Transportation & Infrastructure (FTAI), 1a
Granite Point Mortgage Trust, Inc. (GPMT), none
Hannon Armstrong (HASI), none
Intel Corporation (INTC), 7
Invesco Ltd. (IVZ), 2, 3, 4, 9a
Iron Mountain, Inc. (IRM), none
Kinder Morgan Inc. (KMI), none
Kite Realty Group Trust (KRG), none
Macquarie Infrastructure Corp. (MIC), 4
PepsiCo, Inc. (PEP), 7
Pfizer Inc. (PFE), 7
Philip Morris International Inc. (PM), none
Prudential Financial, Inc. (PRU), 4, 6, 7
Simon Property Group, Inc. (SPG), 4, 7, 9a
Six Flags Entertainment Corp. (SIX), 4, 7
TPG Specialty Lending, Inc. (TSLX), none
Verizon Communications (VZ), 7
Welltower, Inc. (WELL), 2, 3, 4, 7
Williams Companies (WMB), 7
AK STL CORP, 1b
CENTURYLINK INC, 1b, 4, 7
DPL INC, 1b
DYNEGY INC. (VISTRA ENERGY CORP.), 1b, 7
EXANTAS CAPITAL CORP., 1b
GIBRALTAR INDS INC, 1b, 4, 7
HERTZ CORP, 1b
NCR CORP NEW, 1b, 4, 7
QUAD / GRAPHICS INC, 1b, 4, 7
SARATOGA INVT CORP, 1b, 2, 3, 4
SEASPAN CORP, 1b, 4
WHITING PETE CORP NEW, 1b, 2, 3, 4, 7
Disclosure Codes:
1.
a. BB&T Securities, LLC, makes a market in the securities of the subject company.
b. BB&T Securities, LLC, trades or may trade as principal, or make a market, in the debt securities (or in related derivatives) of the
subject company.
2. BB&T Securities, LLC, has managed or co-managed a public offering of securities of the subject company in the last 12 months.
3. BB&T Securities, LLC, has received compensation for investment banking services from the subject company in the last 12 months.
4. BB&T Securities, LLC, expects to receive or intends to seek compensation for investment banking services from the subject company
in the next three months.
5. BB&T Securities, LLC, or its affiliates beneficially own 1% or more of the common stock of the subject company.
6. The subject company is, or during the past 12 months was, a client of BB&T Securities, LLC, which provided noninvestment banking
securities-related services to, and received compensation from the subject company. The analyst or employees of BB&T Securities,
LLC, with the ability to influence the substance of this report knows the foregoing facts.
7. An affiliate of BB&T Securities, LLC, received compensation from the subject company for products or services other than investment
banking services during the past 12 months. The analyst or employees of BB&T Securities, LLC, with the ability to influence the
substance of this report know or have reason to know the foregoing facts.
8. The analyst serves as an officer, director, or advisory board member of the subject company.
9.
a. The research analyst or a member of the research analyst’s household has a financial interest in the common stock of the
subject company.
b. The research analyst or a member of the research analyst’s household has a financial interest in the preferred stock of the
subject company.

c. The research analyst or a member of the research analyst’s household has a financial interest in options on the common stock
of the subject company.
d. The research analyst or a member of the research analyst’s household has a financial interest in rights for the securities of the
subject company.
e. The research analyst or a member of the research analyst’s household has a financial interest in warrants for the securities of
the subject company.
f. The research analyst or a member of the research analyst’s household has futures contracts on the securities of the subject
company.
g. The research analyst or a member of the research analyst’s household has a short position in the common stock of the subject
company.
h. The research analyst or a member of the research analyst’s household has a financial interest in a debt security of the subject
company.
10. The analyst received compensation from the subject company in the previous 12 months.
The analyst or an associated person of BB&T Securities, LLC, with the ability to influence the content of a research report knows or has
reason to know that a material conflict of interest with the analyst or BB&T Securities, LLC, exists at the time of this report.
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST
The analyst(s) principally responsible for the preparation of this report received compensation that is based upon many factors, possibly
including sales and trading or principle trading revenues, but not including the firm’s investment banking revenue.
Analyst Certification
The analyst(s) principally responsible for the preparation of this research report certify that the views expressed in this research report
accurately reflect his/her (their) personal views about the subject security(ies) or issuer(s) and that his/her (their) compensation was not,
is not, or will not be directly or indirectly related to the specific recommendations or views contained in this research report.
OTHER DISCLOSURES
The information and statistics in this report have been obtained from sources we believe are reliable but we do not warrant their
accuracy or completeness. We do not undertake to advise the reader as to changes in figures or our views. This is not a solicitation of an
order to buy or sell any securities.
The opinions expressed are those of the analyst(s) and not those of BB&T Corporation or its executives.

LOCATIONS
Home Office — Richmond, VA
901 East Byrd Street, Ste. 500
800-552-7757  804-643-1811
Alexandria, VA Columbia, SC Lexington, KY

201 N. Union Street, Ste. 240 2422 Devine Street, Ste. A 200 West Vine Street, Ste. 120
888-250-7212  703-836-9755 888-825-1234  803-748-1177 844-334-4433  859-629-3200
Asheville, NC Culpeper, VA Lexington, VA

nd
301 College Street, 2 Fl. 1300 Sunset Lane, Ste. 3210 539 E. Nelson Street
866-231-7650  828-258-7031 800-476-2566  540-825-0783 800-436-7218  540-463-4302
Atlanta, GA Dallas, TX Lynchburg, VA

3630 Peachtree Road NE, Ste. 250 8115 Preston Road, Ste. 200 810 Main Street
866-329-5338  404-264-6800 866-741-3145  972-232-4877 800-868-0413  434-846-2711
Aventura, FL Danville, VA Manassas, VA

19235 Biscayne Blvd. 120 Crown Drive, Ste. A 9200 Church Street, Ste. 100
877-211-5405  305-521-0220 800-476-0587  434-799-1000 800-476-5288  703-368-4970
Bedford, VA Fort Lauderdale, FL Miami, FL

1 Cedar Hill Court, Ste. A 110 E. Broward Blvd., Ste. 105 1200 Brickell Ave., Ste. 1020
888-473-8164  540-586-4422 888-327-3550  954-233-9777 855-399-9579  305-423-0330
Birmingham, AL Fort Worth, TX Morehead City, NC

th
2501 20 Place South, Ste. 110 5049 Edwards Ranch Rd., 4th Fl. 833- 2806 Arendell Street, Ste. 210
844-300-7692  205-445-2202 515-3205  817-344-7190 800-810-2763  252-222-0022
Blacksburg, VA Greensboro, NC Myrtle Beach, SC

902 Prices Fork, Ste. 2025 3318 W. Friendly Ave., Ste. 330 2619 N. Oak Street, 3rd Fl.
800-553-1574  540-953-0003 800-476-1824  336-378-1824 888-728-2265  843-918-7600
Bluefield, VA Greenville, NC Naples, FL

1934 Leatherwood Lane 1440 E. Arlington Blvd., Ste. B 5551 Ridgewood Drive, Ste. 101
800-733-0850  276-322-2900 800-207-3201  252-321-7808 855-537-0360  239-249-5080
Charleston, SC Greenville, SC Nashville, TN

945 Houston Northcutt Blvd. 40 W. Broad Street, Ste. 420 700 12th Avenue South, Ste. 304
800-400-7078  843-722-7800 800-476-3662  864-233-3655 833-242-1708  615-873-2133
Charleston, WV Harrisonburg, VA Newport News, VA

300 Summers Street, Ste. 500 250 Neff Ave., Ste. 200 827 Diligence Drive, Ste. 202
800-448-5480  304-357-6500 800-768-2882  540-434-2882 855-461-0305  757-327-7454
Charlotte, NC Houston, TX Norfolk, VA

6805 Morrison Blvd., Ste 120 333 Clay Street, Ste. 3830 500 East Main Street, Ste. 300
800-476-3768  704-367-3800 832-308-6080 800-515-0294  757-446-6800
Charlotte, NC – Uptown Hunt Valley, MD Ocala, FL

200 S. College St., Suite 750 303 International Circle, Ste. 400 4414 SW College Road, Ste. 1450
877-890-9099  704-496-4062 855-711-4950  410-891-0200 855-506-0252  352-390-2825
Charlottesville, VA King of Prussia, PA Palm Beach, FL

310 4th Street NE, Ste. 100 150 South Warner Road 125 Worth Avenue, Ste. 210
800-868-7726  434-971-8557 866-229-4226  610-263-0530 844-393-3832  561- 653-5570

Pinehurst, NC Savannah, GA Warrenton, VA
100 Pavilion Way, Ste. F 314 Stephenson Avenue, Suite A 560 Broadview Ave., Ste. 100
910-992-3275 877-512-9758  912-999-3360 800-476-3547  540-347-0200
Ponte Vedra Beach, FL Savannah, GA – Downtown Williamsburg, VA

814 North A1A, Ste. 200 7 East Congress Street, Suite 706 5238 Monticello Ave.
855-783-6333  904-543-6261 844-235-4279  912-344-9800 800-851-4313  757-220-3800
Raleigh, NC Staunton, VA Williamston, NC

3605 Glenwood Ave., Ste. 400 205 North Central Ave. 603 East Boulevard, Ste. A1
800-763-1893  919-571-1893 800-541-3851  540-886-2396 833-544-3107  252-508-7180
Reston, VA Sumter, SC Wilmington, NC

12010 Sunset Hills Road, Ste. 740 690 Bultman Drive 2512 Independence Blvd., Ste. 100
866-208-2918  703-471-3892 888-901-6688  803-774-2700 800-476-0405  910-392-7200
Richmond, VA Tampa, FL Winchester, VA

901 East Byrd Street, Ste. 500 400 N Tampa Street, Ste. 2300 115 N. Cameron Street, Ste. 210
800-552-7757  804-643-1811 833-614-8126  813-314-5700 800-476-9847  540-667-3311
Roanoke, VA Tysons Corner, VA Winston-Salem, NC

111 Franklin Road, Ste. 200 8200 Greensboro Drive, Ste. 100-A 110 S. Stratford Road, Ste. 400
800-476-0014  540-344-5414 877-807-3974  703-342-1740 800-476-7268  336-722-4702
Saint Augustine, FL Virginia Beach, VA

1100 Plantation Island Drive, Ste. 240 2101 Parks Ave., Ste. 402
844-276-3489  904-671-8150 800-745-2355  757-417-4900

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Private Client Research

Monthly Market Commentary January 2019

Overweight – Consumer Discretionary, Health Care 27x

Our Focus Lists: See pages 30-35

Sector Weightings, Favorite Ideas, ETF Plays

BB&T Scott & Stringfellow | Private Client Research 2 of 48

Monthly Market Commentary

Question of the Month 4

Economic Performance and Commentary 36

BB&T Scott & Stringfellow | Private Client Research 3 of 48

BB&T Scott & Stringfellow | Private Client Research 4 of 48

BB&T Scott & Stringfellow | Private Client Research 5 of 48

Sector Performance Back to Contents

Cumulative and Annualized

BB&T Scott & Stringfellow | Private Client Research 6 of 48

Sector Performance Back to Contents

Expected Growth in Forward EPS 10-Year Valuation Ranges

0% 5% 10% 15% 0x 5x 10x 15x 20x 25x 30x

Intermediate Price Trend (6 mths):

Source: All charts and tables based on data from FactSet

BB&T Scott & Stringfellow | Private Client Research 7 of 48

Sector Commentary Back to Contents

Top Picks 1.3x

BB&T Scott & Stringfellow | Private Client Research 8 of 48

Sector Commentary Back to Contents

Expected Growth in Forward EPS 10-Year Valuation Ranges

Interactive Media Entertainment 20.8x

Entertainment 13% Communication Services 16.5x

Communication S&P 500 14.9x

S&P 500 10% Media 14.8x

Diversified Diversified Telecom Services 10.1x

0% 5% 10% 15% 20% 5x 10x 15x 20x 25x 30x 35x

Intermediate Price Trend (6 mths):

Source: All charts and tables based on data from FactSet

BB&T Scott & Stringfellow | Private Client Research 9 of 48

We continue to recommend an Overweight rating on Consumer Discretionary for 795

Top Picks 1.3x

BB&T Scott & Stringfellow | Private Client Research 10 of 48

Expected Growth in Forward EPS 10-Year Valuation Ranges

Intermediate Price Trend (6 mths):

200-Day Moving Avg. = 862 (+10%)

Weekly Relative Strength (RSI): 41

Source: All charts and tables based on data from FactSet

BB&T Scott & Stringfellow | Private Client Research 11 of 48

Sector Commentary Back to Contents

W. Moultrie Dotterer, CFA / 804-780-3279 / MDotterer@BBTScottStringfellow.com 0.8x

BB&T Scott & Stringfellow | Private Client Research 12 of 48

Sector Commentary Back to Contents

Expected Growth in Forward EPS 10-Year Valuation Ranges

Tobacco 8% Beverages 20.7x

Beverages 8% Food & Staples Retailing 18.0x

Consumer Staples 7% Consumer Staples 17.9x

Food & Staples Retailing 6% S&P 500 14.9x

Food Products 6% Food Products 14.8x

Household Products 6% Tobacco 13.9x

0% 5% 10% 15% 5x 10x 15x 20x 25x

Intermediate Price Trend (6 mths):

Positive (+14% annualized)

200-Day Moving Avg. = 544 (0%)

Source: All charts and tables based on data from FactSet

BB&T Scott & Stringfellow | Private Client Research 13 of 48

Sector Commentary Back to Contents

Equity Appreciation Focus List: Cheniere Energy (LNG) 2.0x

BB&T Scott & Stringfellow | Private Client Research 14 of 48