When JP Morgan was asked what markets would do, he replied: "They will fluctuate." The astute financier knew better than anyone that predicting markets' short-term direction was an exercise in futility.

It's hard for investors to accept that the next tick? up or down? of the stock market is unpredictable. People yearn for a system to anticipate tomorrow's Dow move, but any honest money manager will admit that it's impossible. Only a charlatan would claim otherwise.

In Las Vegas, if someone bets on red and wins, we would never say he's a skilled professional; we would say he's lucky. The Wall Streeter who predicts a market correction is more likely to be called a genius, given the false credibility that numbers and lingo impart to the process.

Everyone can point to a trader here or there who seems to have an uncanny knack for predicting market movements. Leaving aside that some are trading illegally on inside information, they are more likely exploiting a pattern or correlation that will eventually be arbitraged away by the market and rendered useless.

The truly successful traders who have an edge in markets are able to adjust to new patterns, but they will be the first to tell you that such speculation is incredibly dangerous and often doomed to failure? such as the spectacular hedge fund implosion of Long-Term Capital Management in 1998.

James Berman

THE BERMAN VALUE FOLIOA TREFIS INTERACTIVE PORTFOLIO

TABLE OF CONTENTS

ACCESS INTERACTIVE TREFIS ANALYSIS TO GET THE MOST FROM THE FOLIO

James Berman, the president and founder of JBGlobal.com LLC, a registered

investment advisory firm (SEC registered), specializes in asset management for high-net-worth individuals and trusts. Mr. Berman is a faculty member in the Finance Department of the NYU School of Professional Studies. He has appeared on CNBC and the Fox Business Channel and has been quoted and published in a variety of publications, including Barron's, Bloomberg, The Huffington Post and CNN Money. Mr. Berman holds a B.A., Magna Cum Laude, Phi Beta Kappa, in English & American Literature from Harvard and a J.D. from Harvard Law School.

A CRASH GUIDE FOR VALUE INVESTORS

SEPT 2015

A CRASH GUIDE FOR VALUE INVESTORS

1

SO WHAT WORKS? 2

CRASH RULES 3

CRASH SHOPPING LIST 4

SCHLUMBERGER 5

EXXONMOBIL 6

PROCTER & GAMBLE 7

BLACKROCK 8

THE FULL PORTFOLIO 9

- TEST OUR ASSUMPTIONS

- RUN YOUR OWN SCENARIOS

- READ FORECAST RATIONALE

- ACCESS TREFIS RESEARCH

- ANALYZE VALUE DRIVERS

2

THE TREFIS DOW

Ticker Trefis Price Market

AAPL 142 104

AXP 93.82 73.52

BA 131 125

CAT 85.54 72.06

CSCO 26.61 24.62

CVX 96 70.02

DD 53 49.06

DIS 104 95.89

GE 26.93 23.27

GS 210 178

HD 120 111

IBM 199 141

INTC 34.63 25.87

JNJ 107 90.73

JPM 71 59.91

KO 41.79 37.99

MCD 98.85 91.21

MMM 152 138

MRK 64.47 51.17

MSFT 44.46 40.47

NKE 92.52 104

PFE 37.85 31.34

PG 77.87 68.42

TRV 109 97.75

UNH 118 110

UTX 123 88.80

V 69.65 66.97

VZ 55.72 43.40

WMT 79.91 63.10

XOM 81 68.71

DOW 18,326.35 15,647.45

Undervaluation + 17%

So if its best for most people to avoid trading? and it is? what should they do instead? Value investing is the answer because it treats stocks for what they actually are: the equity claims on the underlying cash flows of a business.

Because value investors look at stocks as businesses, they evaluate them based on those underlying cash flows? the only rational way to predict whether stocks will go up or down over time. This is the method any private equity or commercial real estate investor would use to value an underlying asset. What's more, since so few people practice a value investing methodology, it continues to work well. Most people avoid it because this method requires a true understanding that stocks are not blips on a screen. It also requires intensive financial statement analysis and (what's often the ultimate death knell) tremendous patience? sometimes a wait of over 3-5 years, to see an underpriced asset revert to fair value.

Given the attention span most people have for sifting through financial statements, you can see why value investing never gains too many adherents, and thus continues to work time and time again. Only techniques that are not widely followed will continue to work over time, while the temporary advantage of any popular method gets arbitraged away.

Warren Buffett discovered this early in his investing career and profited handsomely as a result. He never for a moment looked at stocks as anything other than businesses. And neither did any of his many value colleagues, from Charlie Munger to David Gottesman to Chris Davis to David Tepper.

So what do value investors do during market crashes like the one this past month?

On the next page I've compiled a set of rules with my favorite mantras, advice and tools for times of market turbulence, or what the pundits politely call extreme volatility? in other words, a market crash.

SO WHAT WORKS?

(1) Don't just do something, stand there. The value investor must never react out of panic. That's for others. To sell stocks as they decline in price just because they're tanking is like selling your house just because someone offered you 25% less than you think it's worth. You must value the asset first. If it's trading at a price less than its value, you don't sell it merely out of fear of further declines. You assess the situation first.

(2) Buy, Don't Sell. If you thought a stock was worth owning at $100 because you think its intrinsic value is $125 and it declines to $80, you don't sell. You buy more at this new bargain price.

(3) Never Place a Stop Loss Order, Ever. Stop-loss orders are anathema to the value investor. These orders, which sell you out of a stock if it drops to a particular price, are so dangerous because they sell you out of a stock on an impairment in price, not on an impairment in underlying value. Witness the horror of those who sold in the August flash crash when the Dow was down over 1,000 points only to see it close down only 600 points. Instead, place limit orders which buy stocks that drop below a designated price.

(4) Ignore the Macro News. The macro news is of no use to the value investor. Macro predictions have too many moving parts. If you trade on macro news, you are trying to predict markets which cannot be predicted. Instead, ask yourself if the stocks you own are cheap enough to have already priced in the macro disasters du jour. If yes, buy more. If not, only then consider selling.

3

CRASH RULES FOR THE VALUE INVESTOR

Every value investor should have a shopping list at the ready. Crashes put quality companies on sale. On a 1,000 points down Dow day, you get the opportunity to buy stocks at dream prices. While panicked traders are tossing the baby out with the bathwater, you should be catching the baby.

Here are my favorite current buys for the market meltdown, in order of conviction:

(1) United Technologies (UTX) is my top pick for the market sell-off. You don't find better quality than UTX, the maker of Otis elevators and Carrier HVAC systems. UTX recently sold Sikorsky to Lockheed to focus on core businesses. The stock is down 7% over the past month on China fears. I had downgraded UTX to a Hold last month, but am now upgrading it to a Buy on the new $92 price. I would buy this stock anywhere under $95.

(2) Arcelor-Mittal (MT) has been beaten into oblivion by the crash in steel prices. I've written about it many times over the past few months, so I won't spend too much time on it here. Suffice it to say, I think MT is worth $15 per share and now trades under $8. I estimate MT's normalized free cash flows to be over $2 billion, which would give it an FCF yield of 16%.

(3) Petrobras (PBR) is not of the same quality as SLB and is mired in scandal after scandal, but large-cap stocks just don't get cheaper than this. At 1.4 times cash flows, PBR is trading at a massive discount to its historical average. The $5 shares are worth at least twice that.

(4) Schlumberger (SLB) has fallen to the obscene price of $70, helped along not only by the drop in crude prices, but also by the recently announced acquisition of Cameron International. The purchase of Cameron is a shrewd strategic move, even if it dents the stock price in the short term. See p. 5 for more details.

CRASH SHOPPING LIST

4

As I wrote on the prior page, Schlumberger (SLB) is one of my top picks for the market meltdown. The stock has been crushed by lower oil prices, which in turn lead to declining capex and service budgets. SLB is also paying

a premium price for Cameron International. The $12.7 billion deal is expensive, at a 56% premium to the closing price. Though too rich, the deal works by expanding SLB's reach in surface drilling equipment. I don't usually like to see deals done at huge premiums, but this deal looks smart to me and positions SLB well for a prolonged period of lower oil prices. SLB reached $118 just over a year ago. Today at $70, it represents a huge bargain to its intrinsic value, estimated by Trefis to be $94.65. I bought it first in the Folio at $98, which looks dumb as a doorknob, but I believe it's worth over $100.

Market Capitalization Annual Revenues Dividend/Yield 52 Week Range

$97 B $44.5 B $2.00 / 2.4% $68.01 - 109.93

COMPANY HIGHLIGHTS

TREFIS KEY DRIVERS

Schlumberger's acquisition of Cameron International will allow the company to diversify further into the deepwater market and leverage Cameron?s heavy-duty offshore drilling hardware. The deal is likely to be accretive to Schlumberger very quickly, and is expected to result in synergies of $300 million in the first year and $600 million in the second year. This will be largely driven by cost cuts, process streamlining as well as revenue consolidation in the second year.

5

ExxonMobil (XOM) didn't make my top list of buys for the market crash, but it shouldn't be far behind. This best-of-breed integrated oil company is a perfect gem to buy during the commodity bear market. XOM has some

of the highest returns on invested capital in the industry? a testament to its superior capital allocation skills. Even with prices per barrel under $50, XOM has been able to generate positive free cash flow. XOM tends to use every difficult period to get stronger and I expect this time to be no different. Trefis believes XOM is worth $81, eight percent above the market price. I think it's worth above $90, a factor of reducing my cost of equity estimate to 8.5% due to XOM's stellar management of the current crushing cycle. I would buy more XOM at current prices.

Market Capitalization Annual Revenues Dividend/Yield 52 Week Range

$312 B $300 B $2.92 - 3.8% $66.55 - 99.59

COMPANY HIGHLIGHTS

TREFIS KEY DRIVERS

Oil prices have a significant impact on Exxon?s upstream earnings. According to the company, a $1 per barrel decline in full-year weighted-average realized prices results in a $350 million negative impact on upstream earnings. This means that - depending on the lag between price fluctuations and their impact on earnings - if Brent prices average around $59 per barrel for the year, Exxon?s upstream earnings could decline by as much as $14 billion, or 50%, year-on-year. 

6

Procter & Gamble (PG) is well into its slimming process, having divested multiple product lines, including 43 beauty brands to Coty for $12.5 billion. Among those sold are Max Factor, Vidal Sassoon, CoverGirl, and Wella. While compiling this newsletter, my assistant hadn't heard of most of these brands showing how these erstwhile winners of my era have become duds. No wonder PG is eager to rid

itself. The company will keep Pantene, Head & Shoulders, Olay, and SK-II to anchor its beauty business. This all follows the 2014 sale of Duracell to Warren Buffett for $4.7 billion. I was initially skeptical of PG's crash diet, concerned that shedding a chunk of brands is more geared towards public relations than financial results. The uneven strength of PG's products however, provides a good rationale for selling off the old and tired to concentrate on the strong growers. I believe this restructuring could bear fruit in 2016 as higher growth rates power sales, but I wouldn't buy any more shares until we know more.

Market Capitalization Annual Revenues Dividend/Yield 52 Week Range

$191 B $76 B $2.65 / 3.7% $65.02 - 93.89

COMPANY HIGHLIGHTS

TREFIS KEY DRIVERS

Procter & Gamble appears to have put top-line growth on hold as it focuses on its ongoing organizational restructuring and productivity improvements. Volumes plunged across the board in fiscal 2015 as the company raised prices to battle currency headwinds. P&G?s near-term outlook remains soft since it continues to prioritize productivity improvements ahead of revenue expansion. FX headwinds are likely to wipe out many productivity savings, dragging down the company's performance in the near term.

7

8

BlackRock (BLK) has been hit hard in the past month as asset managers bore the brunt of the market crash. BLK now trades well below its intrinsic value, even subtracting its dynamic ETF business. Its iShares

business is the market leader along with State Street (STT). Recently, Barron's pointed out that BLK's operating margin of 41% eclipses STT's 29% and Charles Schwab's (SCH) 36%. The operating leverage of money managers, which favors enormous scale, is the cause. Mammoth size is a particular advantage in the ETF business where critical mass of assets spawns liquidity, which in turn attracts more dollars and becomes a virtuous cycle. I would buy BLK on any major market sell-off that takes the S&P down 10% or more? so long as BLK trades at less than $380.

Market Capitalization Annual Revenues Dividend/Yield 52 Week Range

$51 B $11.3 B $8.72 / 2.6% $275 - 382.84

COMPANY HIGHLIGHTS

TREFIS KEY DRIVERS

BlackRock has been aggressively pursuing growth in the real estate and infrastructure investment space in order to boost its alternative investment platform, which accounts for around 9% of its value according to Trefis estimates. The alternative investment space is attractive to BlackRock because of the higher fee potential; the company earns fees of around 0.65% of total assets for its alternative investments, in comparison to under 0.2% for active fixed income funds and 0.05% for passive fixed income funds.

Total return is calculated since inception date of 12/21/2011 and includes reinvested dividends. When a stock is bought in the portfolio, it is added on an equal cash-weighted basis at the time of purchase.

THE BERMAN VALUE FOLIO

Symbol Company Name Buy/Hold, Sell

Purchase Date

Basic Materials  

MT Arcelor-Mittal Buy 9/21/2012

RIO Rio Tinto Buy 1/31/2014

Purchase Price

Market Price

Total Return Since Purchase

Trefis Estimate

$16.06 $7.88 (48.4%) $9.40

$53.15 $36.72 (26.4%) $39.20

Consumer

PG Procter & Gamble Hold 12/21/2011 $65.84 $70.67 20.2% $77.87

HOG Harley Davidson Buy 4/30/2015 $56.22 $56.05 0.3% $63.93

Energy        

SLB Schlumberger Buy 9/30/2014 $98.66 $77.37 (20.3%) $94.65

BP BP Buy 12/21/2011 $41.33 $33.54 (5.4%) $45.00

PBR Petrobras Buy 12/31/2014 $7.30 $5.86 (19.6%) $10.80

XOM Exxon Mobil Buy 1/30/2015 $87.42 $75.28 (12.4%) $81.00

Financial Services      

BK BNY Mellon Buy 12/21/2011 $19.43 $39.81 119.8% $46.00

BLK BlackRock Buy 8/29/2014 $330.53 $302.47 (6.4%) $385

C Citigroup Hold 12/21/2011 $25.74 $53.47 108.8% $63.00

JPM JPMorgan Chase Buy 12/21/2011 $32.12 $64.12 120.3% $71.00

PYPL PayPal Buy 7/17/2015 $36.00 $35.00 (2.8%) N/A

Tech, Media, Telecom

EBAY eBay Hold 12/21/2011 $12.77 $27.11 112.3% N/A

IBM IBM Buy 2/28/2014 $185.17 $147.87 (17.1%) $199

PAYX Paychex Hold 12/21/2011 $29.14 $44.66 74.4% $47.75

Industrials & Transportation

UPS UPS Buy 12/21/2011 $72.40 $97.65 48.3% $111

UTX United Tech. Buy 4/21/2012 $80.40 $91.61 20.9% $123

DE Deere Hold 3/31/2015 $87.69 $81.79 (5.2%) $91.88

Total Return 71.0%

I am upgrading UTX from a Hold to a Buy. See p. 4.

The Berman Value Folio

info@jbglobal.com

DISCLAIMER

The Berman Value Folio (TBVF) is published monthly and provides information and investment ideas on stocks. All material in TBVF is copyright, 2011 through the present, by Trefis and JBGlobal.com LLC and may not be reproduced in whole or in part in any form without written consent. TBVF is written by James Berman with assistance from Trefis staff. TBVF is distributed by both Trefis and Forbes. Forbes acts only as distributor and is not responsible for, nor does it endorse, any TBVF content or investment ideas. All stock buys and sells are the sole decision of James Berman. In the TBVF portfolio, James Berman is restricted to buying only stocks that are covered by Trefis. TBVF is intended for experienced investors, who understand the risks, costs, mechanics and consequences of investing. None of the content in this newsletter is intended to be, nor should be interpreted as, a solicitation to buy or sell securities. The selection of portfolio stocks is based on fundamental analysis. There is, however, no assurance that these securities will produce profits. They may instead produce serious losses. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of any prior securities mentioned in the TBVF. All investing involves risk of serious loss. No graph, chart, formula or other device offered or portrayed in TBVF can in and of itself be used to make trading or investment decisions. Any graph, chart, formula or other device is inherently unreliable in making a trading or investment decision due to the intrinsically misleading nature of such items.

Performance results are based on model portfolios and do not reflect actual trading. Actual performance will vary based on a variety of factors, including market conditions and trading costs. TBVF results may not reflect the impact that material economic and market factors might have had on the adviser's decision-making if the adviser were actually managing clients' money in this portfolio. TBVF contains stocks that are managed with a view towards capital appreciation. James Berman and JBGlobal.com may manage other portfolios with different strategies and returns that may materially differ from TBVF results with substantially higher or lower performance. TBVF model results do not reflect the deduction of any management fees, advisory fees, brokerage or other commissions, bid-ask spreads, tax consequences, and any other expenses that a client would have to actually pay or would have actually paid in a real portfolio. All return figures assume the reinvestment of all dividends. When a stock is bought in the portfolio, it is added on an equal cash-weighted basis at the time of purchase. Past performance does not guarantee future results. Any forward-looking statement is inherently uncertain and cannot be relied upon as a statement of actual performance. If you would like a spreadsheet furnishing a list of all recommendations made by TBVF since inception on 12/21/2011, please send an email request to: info@jbglobal.com.

Although all content is derived from data believed to be reliable, accuracy cannot be guaranteed. James Berman, JBGlobal.com LLC, Insight Guru Inc., Trefis, TBVF?s publisher and distributor(s) and their employees assume no liability whatsoever for any investment losses as a result of securities purchased on TBVF recommendations. TBVF is not intended to provide personalized investment advice. Readers and subscribers should consult their financial adviser before investment. James Berman is an investor in Insight Guru Inc., the parent company of Trefis, both personally and through the venture fund he subadvises. James Berman, therefore, has a financial interest in Trefis aside from his interest in TBVF.

James Berman, JBGlobal.com LLC and employees of TBVF, Insight Guru Inc., JBGlobal.com L.L.C. and Trefis may hold positions in some or all of the stocks mentioned here, both personally and in the accounts and funds they manage for others. No compensation for recommending particular securities, services, or financial advisors is solicited or accepted. If you are unwilling or unable to abide by any conditions of this disclaimer, then you may obtain a refund for the unused portion of your subscription at any time.

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