Important Disclosures

Copyright © 2016 GARP Research. All rights reserved.

Affiliations

GARP Research is the d/b/a under which Gaineswood Investment Management, Inc. provides equity research for institutional clients. Gaineswood Investment Management Inc., a registered investment advisory firm, also manages money in separate accounts. GARP Research & Securities Co. was formerly an affiliate of Gaineswood Investment Management, Inc., and its research activities are now conducted through the GARP Research d/b/a.

Privacy Policy

GARP Research is committed to protecting your personal information. Privacy and security are fundamental elements of our commitment to our clients. We do not disclose any nonpublic personal information about current or former clients to anyone, except as permitted by law.

Material Conflicts of Interest

GARP Research and its affiliates (“GARP”) do not hold positions that exceed 1% or make a market in any class of securities of the subject companies rated by GARP (“Subject Companies”). GARP does not provide investment banking services to Subject Companies.

Analyst ownership in companies that are the subject of research reports is disclosed on a per-report basis at the time of publishing. Outside of this disclosed ownership, the analysts are not aware of any other material conflicts of interest.

Meanings of Ratings

GARP Research rates companies as BUY, NEUTRAL, and AVOID (SELL). The rating methodology permits richer valuations when faster rates of earnings growth are expected (see “Ratings Matrix” table below). BUY rated stocks generally have a combined “Growth Score” and “Value Score” of less than six, NEUTRAL between six and nine, and AVOID rated stocks nine or more. Another important consideration in determining the rating is whether the underlying company possesses characteristics consistent with the investment philosophy of GARP Research. This includes an assessment of quality (through competitive analysis and current or projected return on invested capital) and control of risk (determined by technical and quantitative factors). Ratings may also take into account growth beyond terminus years.

Ratings Matrix

Earnings Growth* Growth Score Out-Year P/E** Value Score
>17% 1 <10x 1
14-17% 2 10-12x 2
12-14% 3 12-14x 3
9-12% 4 14-16x 4
<9% 5 >16x 5
*Annualized earnings growth over a two to four year time horizon.
**Out-year P/E is determined by the current price divided by our diluted EPS estimate two- to four-years forward.

Distribution of Ratings

The percentage of BUY, NEUTRAL, and SELL ratings on August 24, 2016 was 82%, 18%, and 0% respectively. The percentage of BUY, NEUTRAL, and SELL for subject companies for whom GARP Research has provided investment banking services in the past 12 months is 0%.

General Risks

Some of the general risk factors that pertain to forecasts included in our research are as follows: changes in industry fundamentals with respect to customer demand or product/service pricing could adversely impact expected revenues and earnings, issues relating to major competitors, customers, suppliers and new product expectations could change investor attitudes toward the sector or this stock, unforeseen developments with respect to the management, financial condition or accounting policies or practices could alter the prospective valuation, or external factors that affect global and/or regional economies, interest rates, exchange rates or major segments of the economy could alter investor confidence and investment prospects. There may be instances when fundamental, technical, and quantitative opinions may not be in concert with our research publications.

Other Disclosures

This research is for clients only. The information contained herein has been obtained from sources believed reliable but is not necessarily complete and accuracy is not guaranteed. Opinions expressed are subject to change without notice and do not constitute solicitation of orders. We, our affiliates, and any officer, director or stockholder or any member of their families do not accept responsibility or liability for any direct, indirect, special, consequential or other losses or damages of whatsoever kind arising out of our research publications. The information in our reports is for information purposes only and is not intended to provide tax, legal or investment advice. You should not rely on any material contained in our reports and should seek independent advice wherever necessary. Any decisions you make based upon any information contained in our reports or otherwise are your sole responsibility. Past performance is not indicative of future results. Additional information on recommended securities is available upon request at (410) 764-1300.

Form ADV Part 2

A copy of our Form ADV Part 2 (“Firm Brochure”) is available upon request, at no charge. Our Firm Brochure addresses matters such as the services we offer, the fees we charge, any potential conflicts of interest, and any additional information that is essential for clients to know in regard to our delivery of the services we offer. The following is a summary of new or revised disclosures to the Firm Brochure since the last annual updating amendment on February 28, 2014.

  • Item 4 (Advisory Business) was updated to describe the equity research services that Gaineswood provides under the d/b/a GARP Research.
  • Item 5 (Fees and Compensation) was updated to disclose the Firm’s fee schedule for research services.
  • Item 8 (Methods of Analysis, Investment Strategies and Risk of Loss) was updated to include cyclical analysis as a method of analysis.
  • Item 10 (Other Financial Activities and Affiliations) was amended to remove GARP Research & Securities Co., a recently dissolved affiliate of Gaineswood.
  • Item 12 (Brokerage Practices) was updated to disclose that Gaineswood no longer receives soft dollars benefits from broker-dealers.
  • Item 13 (Regular Reports) was updated to disclose the platforms that Gaineswood uses to make its research available.
  • Item 17 (Voting Client Securities) was amended to disclose that Gaineswood does not vote securities on behalf of its institutional research clients.
  • Item 19 (Requirements for State-Registered Advisers) was updated to reflect that Robert J. Furlong, Director of Research, is no longer with the Firm.

Short Term Trading Ideas

GARP, upon request, will provide a client with short term trading ideas. GARP generally communicates the ideas to clients by telephone or electronically through email, GARP’s website, or the client’s alpha capture system (a proprietary system that gives the client a systematic way to quantify and monitor the performance of various ideas). Short term trading ideas are different from and do not affect the long term recommendation rating. Trading ideas submitted to clients will typically include a rationale, timeframe, price target, and conviction level, which may be more or less positive than the long term recommendation rating.

Dissemination of Research

Our research publications are sent by email to clients. Institutional clients may also receive our research via Thomson First Call, Reuters Multex, Bloomberg, Capital IQ, and Factset. It is the Firm’s policy to make its best effort to distribute research simultaneously to all of its clients for whom the research is deemed relevant.

The information provided herein may be displayed and printed for your personal, noncommercial use only. You may not reproduce, retransmit, distribute, disseminate, sell, publish, broadcast or circulate the information to anyone, without the express written consent of GARP Research.

Analyst Certification

All of the views expressed in the report accurately reflect the personal views of GARP’s research analysts about any and all of the subject companies. No part of the compensation of the research analysts named in the reports of GARP Research was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the research analyst in this report. Neither the research analyst nor a member of the analyst’s household serves as an officer, director or advisory board member of any companies mentioned in the reports published by GARP Research.