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MORGAN STANLEY RESEARCH
Morgan Stanley & Co.
AUGUST 25, 2010
Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan StanleyResearch. Investors should consider Morgan Stanley Research as only a single factor in making their investmentdecision.
For analyst certification and other important disclosures, refer to the Disclosures Section.
+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject toNASD/NYSE restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
NorthAmerica
 
NorthAmerica
HIGHLIGHTS9US Interest Rate Strategy
 A NewLeaf – Becoming More Tactical
Jim Caron
41Republic Services
  Adding to Best Ideas: HowYou’d Run a Waste Business
Vance H. Edelson, Peter J. Park
45Tyco International
 Adding to Best Ideas List: Near-term Catalysts + Longer HomeStay = 20%-Plus Growth
Scott R. Davis, Matthew E. Gugino
INVESTMENTPERSPECTIVES
Strategy and Economics
3 Morgan Stanley Best Ideas List5 US Economics
Deleveraging the AmericanConsumer: Faster than Expected
Richard Berner 
7 US Credit Strategy
Getting Some Credit
Rizwan Hussain, Adam Richmond
9 US Interest Rate Strategy
A New Leaf –Becoming More Tactical
Jim Caron
11 Global Equity Strategy
 The Rock, Part II – Don’t Ignore Yield
Jason Todd, Gerard Minack
13 Europe Equity Strategy
 Looking for Best Yield Opportunities
Graham Secker 
15 Equity Derivatives Strategy
 Volatility Curves Help the Hunt for Yield
Sivan Mahadevan, Christopher Metli et al.
17STEP Commentary
 Behind the Spreadsheet: Adam Frisch
Douglas M. Cohen
Opinion Changes
p
 
Downgrades
19Electric Utilities/Diversified
Falling GasTrumps Rising Demand; Moving to Cautious
Greg Gordon, J. Cohen, R. Tolentino, W. Appicelli
21Research In Motion
 Downgrading to Underweight as Too Many Head-winds Overwhelm International Growth Story
Ehud Gelblum, Kimberly Watkins
New Coverage
23NetLogic Microsystems
 Secular Opportunities Offset by Transition Risks
Sanjay Devgan
25SMART Technologies
Public Sector BudgetRisk Overestimated — Overweight
Katy L. Huberty, Mathew Schneider 
 
 
2
 
MORGAN STANLEY RESEARCHAugust 25, 2010Investment Perspectives — US and the Americas
Table of Contents (Continued)
Industry Analysis
27 Coal
Positive Thesis on Low-Cost Coal Holds inCheap Gas Environment
Mark Liinamaa, Wes Sconce
29 Exploration & Production
Still Waiting for CapitalDiscipline; DVN Upgraded to Overweight
Stephen Richardson, Stuart Young, Brian Lasky
31 Freight Transportation
Market-ImpliedProbabilities Highlight Opportunity in Rails
William J. Greene, John D. Godyn, Adam Longson
33 Oil Services, Drilling & Equipment
 Pressure Pumping Update
Ole Slorer, Paulo Loureiro
Company Analysis
35 Caterpillar 
2010 Investor Day Thoughts
Robert Wertheimer, Joseph O'Dea, Alexander Vecchio
37 Potash Corp. of Saskatchewan
Alternatives Likelyto Drive Higher Valuation From Here
Vincent Andrews, Megan Davis
39 PPG Industries
  A Clear Beneficiary of Cheap Natural Gas
Paul Mann, Charles A. Dan
41Republic Services
Adding to Best Ideas:How You’d Run a Waste Business
Vance H. Edelson, Peter J. Park
43SanDisk
Mid Quarter Health Check: Bifurcation inRetail and OEM Demand Trends; Remain Overweight
 Atif Malik, Michael Chu
45Tyco International
 Added to Best Ideas List: Near-term Catalysts +Longer Home Stay = 20%-Plus Growth
Scott R. Davis, Matthew E. Gugino
47VMware
Further Upside Potential Likely;Raising Price Target
 Adam Holt, Munish Jain, Keith Weiss, Kelvin Wu
International
49Michelin
EPS at €10: Michelin Can Surprise Again —Raise to Overweight
Edoardo Spina, Stuart Pearson
51Repsol-YPF
Monetizing Brazil
James R. Hubbard, Theepan Jothilingam, Matthew P. Lofting
Events
 All events require advance registration. Clients should contact their Financial Advisors.
Industrials CEO Unplugged Conference
  August 31–September 1, New York
Thai Corporate Day
 September 2–3, Hong Kong/Singapore
Global Healthcare Conference
 September 13–14, New York
13th Annual Latin America Conference
 September 13–15, London
Power & Utility Summit
 September 16, London
Business & Education Services Conference
 September 22–23, New York
Japan Equity Conference
 September 27–28, New York
Abu Dhabi and Saudi Conference
 November 2–5, London
Asia Pacific Summit
 November 9–11, Singapore
Global Chemicals Conference
 November 11–12, New York
Global Consumer & Retail Conference
 November 16–17, New York
TMT Conference
 November 17–19, Barcelona
US Economic Outlook
Value 200820092010e2011e
GDP Growth (%) 0.4(2.6)3.13.1CPI Inflation (%) 3.8(0.3)1.72.2
e = Morgan Stanley Research estimates
 
 
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MORGAN STANLEY RESEARCHAugust 25, 2010Investment Perspectives — US and the Americas
NORTH AMERICA
Best Ideas
Best Ideas are our leading stock investment insights — thebest combination of highly differentiated research, favorablerisk-reward profiles, and clear catalysts.
Differentiated research.
We seek out-of-consensus thinkingthat incorporates fresh data and analysis. Analysts are ex-pected to identify "what's in the price" and present a compellingchallenge to market assumptions on key investment debates.
Favorable risk-reward profiles.
Scenario analysis lies at theheart of our disciplined approach to research, so we look be-yond single-point estimates and price targets. We examine thefull risk-reward profile of the investment, assessing the range of plausible outcomes and the scenario skew as indicators of analyst conviction.
Clear catalysts.
We require a clear roadmap for upcomingdata and events in the following few months that can helpcorroborate our analysts' investment theses and drive a dis-cernable change in market perceptions. Additions and removals of stocks are published as part of regular, stock-specific reports. The complete list appearsweekly in
Investment Perspectives
.
Important Note: Best Ideas is not and should not be con-sidered a portfolio.
Each investment idea is chosen based onits own merit and without any consideration of the other in-vestment ideas chosen. Specifically, there has been no effortto mitigate the risks of investing in any collective group of BestIdeas. Concepts important to a balanced portfolio, such asnegative correlation and diversification, have not been con-sidered. Treating Best Ideas as a portfolio will subject you tothe risk of losing all or a substantial portion of your investments.
Morgan Stanley ResearchStock Selection Committee
Aug 24 Price Valuations ($):EPS*ConsensusEPS*AnnualGrowthin EPS*P/E* P/B
 
Company Ticker Price($) Target Bull Base Bear2010 2011 2010 2011 2010-2012 2010 2011 2010 2011
Apple
 AAPL.O239.93 346 440 346 210 14.59e18.10e14.49e17.70e19.2% 16.5 13.3 4.8 3.5
Air Products
 APD.N73.84 92 115 92 62 5.04e5.75e4.99e5.61e13.2% 14.7 12.8 2.9 2.6
Bank of America
BAC.N12.64 25 30 25 10 1.27e1.83e0.97e1.64e44.4% 10.0 6.9 0.5 0.4
Dollar General
DG.N28.02 35 45 35 22 1.77e2.17e1.73e2.04e20.4% 15.8 12.9 2.5 2.1
DirecTV Group
DTV.O37.42 44 51 44 31 2.32e3.24e2.38e3.22e31.2% 16.1 11.5 NM NM
Republic Services
RSG.N
 
29.95 38 49 38 24 1.72e2.08e1.72e2.03e18.4% 17.4 14.4 1.5 1.4
Textron
TXT.N17.42 30 40 30 16 0.75e1.60e0.58e1.41e66.9% 23.2 10.9 1.7 1.6
Tyco International
TYC.N38.50 49 61 49 31 2.63e3.25e2.61e3.10e19.4% 14.6 11.9 1.3 1.2
Union Pacific
UNP.N71.94 91 100 91 70 5.39e6.50e5.22e6.04e17.5% 13.3 11.1 1.9 1.7
Dividend Yield FCF Yield Ratio RNOA Net Debt/EBITDA Interest Cover Company Ticker 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011
Apple
 AAPL.O7.0% 8.0% NMNMNM NM NM NM
Air Products
 APD.N2.6% 3.0% NM 2.4% 11.9%e12.3%e1.9e 1.7e 12.1e 13.1e
Bank of America
BAC.N0.3% 2.4% 4.5%e6.7%e0.9e 0.7e 14.1e 18.7e
Dollar General
DG.N6.3% 7.5% 9.8%e11.2%e2.3e 1.8e 3.0e 3.8e
DirecTV Group
DTV.O0.0% 0.0% 7.0% 9.6% 28.2%e33.8%e1.3e 1.8e 8.0e 7.5e
Republic Services
RSG.N
 
2.6% 2.7% 5.2% 7.7% 6.7%e7.5%e2.6e 2.4e 3.2e 3.7e
Textron
TXT.N0.5% 0.5% 0.7% 12.2% 3.1%e6.5%e6.7e 3.5e 3.3e 8.2e
Tyco International
TYC.N2.2% 2.5% 7.2% 8.5% 10.1%e10.4%e1.0e 0.7e 5.6e 6.7e
Union Pacific
UNP.N1.8% 2.2% 4.7% 6.5% 11.8%e12.6%e1.8e 1.6e 6.1e 7.0e
* Uses consensus methodology; all other metrics use ModelWare methodology. For valuation methodology and risks associated with any pricetargets above, please email morganstanley.research@morganstanley.comwith a request for valuation methodology and risks on a particular sto0ck.
 
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