美银-RIC报告：自由现金流为王-The RIC Report：Free cash flow is king-20260909

Accessibleversion

BofAGLOBALRESEARCH

BofASECURIES

TheRICReport

Freecashflowisking

Afteran“asgoodasitgets”summer...

USharddataarethebestinfiveyears,globalearningsrevisionsarenearrecordhighs,andweexpectFedhikes.Nowonderinvestorssaid“asgoodasitgets”thissummer,

rotatingfromAlpicks&shovelstostagflation,defensives,andquality(Exhibit4).The

assetallocationmathfavorsstocksvs.bondsuntilapeakinAlcapexorinnon-Alprofits.

...A“showmethecashflow”fall

QualitystockswithhighFCFhavebeenthebestperformingfactorofthelast30years(Exhibit1).Buywhatisscarce:withS&P500FCFyieldatrecordlows,high-FCFstocksare+43%YTD,onpaceforrecord;mid-capsnowbuybackmoresharesthanlarge

(Exhibit11);shareholderyieldinJapanisnow>theUS(Exhibit12).ETFideasinside.

Whenhighbondyieldshurtstocks

Historyshowsthatexpensivestockspeakwhenbondyieldsapproach7%(Nikkei1990,Nasdaq2000).Wheninflationishighandbondsdon'tdiversifybutmoveintandemwithstocks(liketoday-Exhibit19),investorsarelesslikelytocareuntilyieldsgettrulyrich.

ARICRoundtableon.qualitycashflows

Wecaughtupwithcolleaguesonsometopideasinqualitystocks.ForLawsonWinder,Newmont(NEM)bringsbalancesheetdisciplinetothegoldminingboom.RafeJadrosichexpectsTollBrothers(TOL)toreturnmorecapitaltoshareholders,andJasonGerberryseesJazz(JAZZ)usingcashfromcurrentmedicinestofundcutting-edgecancertrials.

Tax-lossharvestingideasinETFs

WehighlightinvestmentthemeswhereETFinvestorsmayhavelossesin2026thatcanoffsetgainselsewhere,includingChina,India,andUSequitysectors.(Exhibit24).showsopportunitiesinourcoveragealongwithrelevantreplacementideas.

Exhibit1:Truequality(FCF)outperformsotherfactors

Cumulativeandannualizedreturnsofequityfactors,%

10000%8000%

6000%4000%2000%0%

19992004200920142019

FCFQuality:18.2%

Russell1000:8.5%Value:83%

2024

Source:BofAGlobalResearch,Blbomberg,GlobalFinancialData,Quality=VFLOTIndex,Value=RU10VATRIndex,Gowth=RU10GRTR

Index,Russell1000=RUITRIndex,Dividend=M1WDHDVDIndex,Momentum=M1USMMTIndex.

BofAGLOBALRESEARCH

Tradingideasandinvestmentstrategiesdiscussedhereinmaygiverisetosignificantriskandarenotsuitableforallinvestors.Investorsshouldhaveexperienceinrelevantmarketsandthefinancial

resourcestoabsorbanylossesarisingfromapplyingtheseideasorstrategies.

BofASecuritiesdoesandseekstodobusinesswithissuerscoveredinitsresearch

reports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictof

interestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.

Refertoimportantdisclosuresonpage28to32.AnalystCertificationonpage25.Price

ObjectiveBasis/Riskonpage24.13016555

09September2026

InvestmentStrategyGlobal

TableofContents

TheRICOutlook

2

Buywhatisscarce:quality

3

Thegoodnewsaboutbadbonds

5

ARIRoundtableon.qualitycashflows

7

TaxlossharvestingforETFs

9

DynamicPrudentYield

10

ETFValuation

11

Strategy&ThematicHighlights

13

EquityResearchHighlights

14

Globalcross-assetreturns

20

Appendix

21

ResearchAnalysts

33

ResearchInvestmentCommittee

BofAS

JaredWoodard

Investment&ETFStrategistBofAS

+16468552600

jared.woodard@

JamesCole

Investment&ETFStrategistBofAS

james.cole2@

+16468555704

KyleNisbet

Investment&ETFStrategistBofAS

DerekHarris

PortfolioStrategistBofAS

derek.harris@

ChrisFlanagan

FI/MBS/CLOStrategistBofAS

christopher.flanagan@

SeeTeamPageforListofAnalysts

RecentResearch

ETFs:Japanupdate+initiations

2heRICReport|09September2026

TheRICOutlook

“Asgoodasitgets”datasparksarotationtoquality

Exhibit2:Afive-yearhighforharddata

Simpleaverageofstandardizedharddataandsoftdatainputs

AfterSeptemberpayrollgrowthof162kjobs,ourmeasureof

USeconomic“harddata”hasclimbedtothehighestsince

2021,0.5sdaboveaverageandnearpriorpeaksinQ32018andQ12007(Exhibit2).Exceptforthe2000dotcomeraandthe

1.0

0.0

-1.0

2001Covidrebound,thisgaugeoftheUSeconomyhasrarelybeensostrong.

SinceJune,investorshavetakenstrongeconomicdataandtheprospectofFedhikesasanopportunitytotakeprofitsinAI

“picksandshovels”stocks(Exhibit3).

AstheAItradehaslostsomefavor,investorsrotatedinto

19901995200020052010201520202025

Source:BofAGlobalResearch,Bloomberg;seeAppendixfordetailsonhard/soft-data

StandardizedsoftdataStandardizedharddata

defensivesectorslikehealthcare,stagflationtrades(energy&MLPs),andquality(FCFyield&Japanesevalue);allup8-18%inthelastthreemonths(Exhibit4).

-2.0

Inourview,theassetallocationmathfavorsstocksoverbondsuntilthereisapeakinAIcapexgrowthorinnon-AIprofits.

BofAGLOBALRESEARCH

Exhibit4:“Unloved”non-AIsectorshaveralliedCumulativetotalreturn,%

Exhibit3:Peaksandshovels

CumulativetotalreturnofAI-buildoutrelatedstocks,%,indexedto100

3500

600

Healthcare:18%

CaterpillarInc

FCFquality:16%

Energy:14%

20%

15%

10%

5%

0%

-5%

-10%

-15%

3000

2500

500

Midcaps:13%

MLPs:9%

400

Japanvalue:8%

2000

1500

300

200

1000

Semis:-9%

100

500

0

0

BWTechnologiesIncAlphabetInc(rhs)

VertivHoldingsCo(rhs)SKhynixInc(rhs)

SMIDIndustrials:-17%

2026

2022

2023

2024

2025

2021

-20%

06/2607/2608/2609/26

Source:BofAResearchInvestmentCommittee,Bloomberg

BofAGLOBALRESEARCH

Source:BofAResearchInvestmentCommittee,BloombergNote:Healthcare=LV,FCFquality=VFLO,energy=LE,Midcaps=GRPM,MLP=AMLP,Japanvalue=EWJV,Semis=SMH,SMID

industrials=AIRR

BofAGLOBALRESEARCH

Theearningsoutlookisalsorarelythisgood

OurStrategyteam’s1-monthGlobalEarningsRevisionsRatiorecentlyhit1.35,ahighnotseensince2018(Exhibit5).Earningsrevisionsthishighhaveonlybeenseenfive

times,mostrecentlyaftertheCovidtroughin2020.Peakpositiveearningsrevisionsdonotnecessarilysuggestabearishoutlook,withaverage1-yearforwardreturnsof9.5%,abovetheMSCIACWIaverageof7.4%(Exhibit6).

heRICReport|09September20263

Exhibit5:GlobalEarningsRevisionRatio

TheGlobalEarningsRevisionRatiojumpedfrom0.99to1.35

Exhibit6:RecordhighERRspellsshort-termgains,long-termpeakBofAGlobalEarningsRevisionRatio(ERR)&MSCIACWIforwardreturns

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

DateERRFwdreturn(CAGR)

#StocksUpgraded/#Downgraded

1-monthEarningsRevisionRatio

1yr3yr5yr

3-monthEarningsRevisionRatio AverageEarningsRevisionRatio

9/30/19881.3423.2%5.2%6.2%

2/29/20041.3710.8%12.4%-6.3%

9/30/20091.376.2%4.9%7.7%1/31/20181.41-9.3%5.9%3.7%

12/31/20201.3516.8%4.0%9.4%Average9.5%6.5%4.1%

MSCIACWIaverage7.4%6.0%6.4%Source:BofAGlobalResearch,Bloomberg

BofAGLOBALRESEARCH

0.0

20212223242526

Source:BofAGlobalQuantitativeStrategy,MSCI,IBES

BofAGLOBALRESEARCH

Buywhatisscarce:quality

Wesuggestfourideastotakeadvantageofthesuddenscarcityofunencumbered,cashflowsamongpubliccompanies:1.FCFyield,2.midcaps,3,Japan,4.energy.

Manyofthelargestcompaniesintheworldarespendingrapidlyandaddingdebtto

maintainAImarketshare,sendingtheFCFyield(FCF/EV)oftheS&P500torecordlows(Exhibit8).InJune,theconsensusfreecashflowofthefive“hyperscalers”wasexpectedtobe-$29bnoverthenexttwelvemonths,thefirstnegativefiguresinceatleast2007.

oday,theexpectedtotalis-$141bn(Exhibit7).

Wherearethecustomers’bots?

Incomingquarters,weexpectcapitalproviderstodemandmoreevidencethatAImodelsareraisingprofitsforend-users.Sofar,investorshavebeenwillingtograntthatLLMswillcauseaboominproductivity,despitespottyevidence(seeExhibit3–opFAQsandcross-assetviews).

Evenifwegrantthisassumption,itmaybethatconsumersandbusinessescaptureanyeconomicsurplus(formore,seeSurvAIvalofthefattestbelow).AIcouldbethelatestinalonglineoftechnologiesthatdidraiseproductivitybutdidnotrecoupinvestment

quickly,andnotbytheirfirstbenefactors.RailroadsintheUSandUKinthemid-1800s,fiberopticcableinthe1990s,shalefracturinginthe2010s:alltheserequiredbigcapitalexpenditurewithbenefitsrealizedonlyafteraninitialstockbubblehadburst.

Ifthistimeisnodifferent,investorsleveragedtoAIstocksmightconsiderdiversifying.

Exhibit8:S&P500freecashflowyieldatrecordlowsS&P500forward12mfreecashflowyield

Exhibit7:Thesuddendisappearanceofbigtechfreecashflow12mforwardFCFof“hyperscaler”companies,$bn

300

6%

200

5%

4%

Median

0

-100

-200

3%

Aggregate

2%

100

June:-$29bn

Today:-$141bn

2011

2016

2021

2026

2006

20072012201720222027

Source:BofAGlobalResearch,FactSet.Note:usesfreecashflowdividedbyenterprisevalue

Source:BofAResearchInvestmentCommittee.Hyperscalers=AMZN,GOOGL,META,MSFT,ORCL.

BofAGLOBALRESEARCH

BofAGLOBALRESEARCH

4heRICReport|09September2026

1.Freecashflowyield

Asfreecashflowbecomesscarcer,investorsaremorewillingtopayforit,andone

representativeEFofhigh-qualitycompanies(VFLO)hasrallied43%YD,onpaceforitsbestyearever(Exhibit9).

Inpriorwork,wefoundthatfreecashflow(FCF)yieldwasthebestmeasureofqualitybecauseitwasdifficulttomanipulateandwascomparableacrossfirms(seeQuality

time).Stocksthatrankwellonthisbasishavebeenthebestperformingfactorofthelast30years(Exhibit10).Firmsthatcangeneratesteadycashhavebeenrewardedbyinvestorsbecausetheyhavetheflexibilitytoinvestforthefuture,paydowndebts,andreturncapitaltoshareholdersasneeded.

S&P500FCFyieldisatrecordlows,despitethemedianS&P500companyFCFyieldremainingsteady(Exhibit8).hissupportsourUSEquityStrategyteam’sviewfavoringtheequally-weightedovermarket-capweightedS&P500,astheyfindP/Evaluations

implylong-termreturnsof-3%CAGRforthelatterand+3%fortheformer(seeMarketsignalsshiftfromredtoyellow.Whattobuynow).

ETFIdea:VictorySharesFreeCashFlowEF(VFLO;1-FV),+43%YD,13.7xforwardP/Evs.21.3xfortheS&P500,&40%exposuretoenergyandhealthcaresectors.

Exhibit9:Bestyearforqualitysince2013,onpaceforbestyeareverCalendaryeartotalreturns,2026annualized(lightblue)

71%

75%58%

46%

50%25% 0%-25%

-50%

200020052010201520202025Source:BofAGlobalResearch,Bloomberg;VFLOTIndex

BofAGLOBALRESEARCH

2.Midcaps:wehavethebuybacks

Whilelargecompaniesarereducingbuybackstofundbigcapitalprojectswithuncertainreturns,mid-sizedcompaniesare

returningcapitaltoshareholdersatoneofthehighestratesonrecord(Exhibit11).

hisisthefirsttimethatrateofmidcapbuybacksexceedsthatoflargecapssinceatleasttheGFC.

Inrecentquarters,smallercompanieshavetakenonmore

leverageandthusbecomemoresensitivetohigherinterest

rates.hat’sonereasonJillHallprefersmidcapstockstosmall.

ETFIdeas:InvescoS&PMidCap400GARPEF(GRPM;1-FV)&iSharesMorningstarMid-CapEF(IMCB;1-FV),whichhave

returned20-21%YD(vs.13.7%fortheS&P500),withforwardP/Eratios2-5turnslowerthantheS&P500.

Exhibit10:Truequality(FCF)outperformsotherfactorsCumulativeandannualizedreturnsofequityfactors,%

8000%

6000%

4000%

2000%

0%

Momentum:9.2%

Russell1000:8.5%

Value:8.3%

Growth:8.1%

Dividend:6.6%

FCFQuality:18.2%

199920042009201420192024

Source:BofAGlobalResearch,Bloomberg,GlobalFinancialData,Quality=VFLOTIndex,Value=

RU10VATRIndex,Growth=RU10GRTRIndex,Russell1000=RUITRIndex,Dividend=M1WDHDVDIndex,Momentum=M1USMMTIndex.

BofAGLOBALRESEARCH

Exhibit11:Rolereversal:mid-capspayshareholdersaslargespendsTrailing12mbuybacksasa%ofindexmarketcap

4%

3%

2%

S&P400

S&P500

1%

0%

200920132017202120252029

BofAGLOBALRESEARCH

Source:BofAUSEquity&USQuantStrategy,HaverAnalytics

heRICReport|09September20265

3.Japan:whereValueneverstoppedworking

Exhibit12:Forshareholderyield,Japan>S&P500

Shareholderyield(buybacks÷nds)forMSCIJapanvs.theS&P500

Japanequitiesshowthatcorporatecapitalefficiencyis

S&P500

MSCIJapan

8%

6%

4%

2%

improving,deliveringmorereturnstoshareholders.ShareholderyieldforJapaneseequitiesnowsurpassesthatoftheS&P500at4%(Exhibit12).Japan’scorporatereformsaredelivering

growthforequitiesamidastrengtheningYen.WehaverecentlyrefreshedratingsonJapanEFs(seeOverthehedges:Initiatingon4JapanEFs&ratingchangesforastrongerYen).

ETFIdeas:CapturecorporatereformopportunitieswiththeWisdomreeJapanOpportunitiesFund(OPPJ;1-FV),andvalueexposureiniSharesMSCIJapanValueEF(EWJV;1-FV),whereJapanhasthehighestvaluereturnsofanyregionsince2020.

0%

2008201120142017202020232026

Source:BofAGlobalResearch,FactSet

BofAGLOBALRESEARCH

4.Energy

Exhibit13:StraitofHormuztankertrafficremainsdepressed

StraitofHormuzcrudetankercrossingseast-to-westandwest-to-east

40

35

30

25

20

15

10

5

0

MLPshavebenefittedfrombothhigherenergypricesand

CrudeTankersE>WCrudeTankersW>E

greaterpipelinegrowth.MLPsreturned31%thisyearwithlowvaluations(13.6xP/E).JeanAnnSalisburyandtheIntegrateds,Refining,&Midstreamteamrecentlynearlydoubledtheir

pipelinegrowthestimatefrom5%to9%ongreatergasand

pipelinebuildouts(seeHowmuchcouldNGLsgrowfromthe

unlockedPermiangas?Whobenefits?)Domesticpipeline

demandcontinuestoincreaseasStraitofHormuztankertrafficisonlyaboutathirdofpre-warlevels(Exhibit13),whichalso

contributestoelevatedenergyprices.

ETFIdeas:ortoiseNorthAmericanPipelineEF(PYP;1-FV)&AlerianMLPEF(AMLP;1-FV),whichhaveannualized20%returnsover5years.

Jan-26Feb-26Mar-26May-26Jun-26

Source:Bloomberg

BofAGLOBALRESEARCH

Thegoodnewsaboutbadbonds

Someinvestorshaveaskedwhetherrisingbondyieldswillbegintohurtequitymarketsgivenreasurybondyieldsattheirhighestin20years.MichaelHartnettbelieves5%isa“warningshot”tolookoutfor(seeLetthemeatdata),whileBofAEquity&Quant

Strategysee7%yieldasthepointwherebondsbecomeaproblem(SeeMid-year2026:

takeprofitsinS&P/seculargrowth,buyLargeValue/cyclicals).

Thebondmarketmessage:secularstagnationisover

reasurybondshavebeenalosingpropositionformostofthisdecade.10-year

reasuriesaredown40%sincetheCovidpeak.Unlessyieldsfall50bpsbytheendoftheyear,thiswouldbecomethelongestbearmarketinover200years.

Sometimesbondyieldsriseforbullishreasons.AttheG20meetinginAsheville,NClastmonth,FedchairWarshnotedthechangefroma“savingsglut”toan“investment

surge”,anunderstandingthattheeraofsecularstagnationdescribes“apastlongago.”Hence,theriseinbondyieldsmaysignalbothhigherpossiblegrowth&highertrend

inflation.20thcenturyG7inflationaveraged5%;butinthedecadesofsecularstagnationitaveragedjust2%;sinceCovidithasaveraged4%(Exhibit15).

6heRICReport|09September2026

Exhibit14:The2ndlongestbonddrawdowninUShistoryUSGovernment10-yearTreasurybonddrawdowns

0%

-10%

-20%-15.8%

VolckerShock

-30%US-2i.i%lWar-26.2%

-31.1%Post-COVID

EarlyFounding

-40%

178918341879192419692014

Source:BofAGlobalResearch,GlobalFinancialData

BofAGLOBALRESEARCH

NotjustaUSstory

ForalltheconcernsaboutUSfiscaldeficits,dollardebasement,orsupplyovercrowding,theriseingovernmentbondyieldsisvisiblearoundtheworld.10-yearyieldsintheUK,France,Italy,Australia,Canada,andotherdevelopedcountrieshaveallrisensharplysince2022inlinewiththeUS(Exhibit16).

Whyallocatorsmayhitsnoozeonbondsuntil7%

Wenotetworeasonstowonderwhetherassetallocatorsmaynotrotatetobondsuntilyieldsaresomewhathigher.

1.History:First,whilehigherbondyieldstendtocoincidewithlowerequityreturns,evenata7%yield,averageannualizedstockreturnsarestillhigher(Exhibit18).Historyshowsthatexpensivestockspeakwhenbondyieldsapproach7%

(Nikkei1990,Nasdaq2000-Exhibit17).

Exhibit17:Cheapbondshurtexpensivestocksat7%yieldsUSGovernment10-yearTreasurybonddrawdowns

Japan

Nasdaq

NikkeipeakUS

8%

peak

7%

7%

6%

6%

5%

5%

4%

4%

3%

1999

2002

2023

2026

1993

1988

Source:BofAResearchInvestmentCommittee,GlobalFinancialData

BofAGLOBALRESEARCH

Exhibit15:G7inflationaveraged5%sinceCovid,matchingthe20thcAverageG7inflation,GDP-weighted%

Globalization,tech

10%

disruption,lowdebt,optimaldemographics

5%

4%

0%

2%

G7inflation

-10%

1900194019802020Source:BofAResearchInvestmentCommittee,GlobalFinancialData

BofAGLOBALRESEARCH

Exhibit16:Risingyieldsacrosstheboard(ex-China)arenotaUSspecifictrend

10ygovernmentbondyields

UK

Australia

US

France

5%

4%

3%

China

2%

1%

0%

-1%

2026

2030

2018

2022

2014

Source:BofAGlobalResearch,Bloomberg.

BofAGLOBALRESEARCH

Exhibit18:Higherratesmeanweakerreturnsforequities

MedianmonthlyS&P500returnbasedonrangesofthe10yrTreasuryyield,1986-present

1.5%

1.8%

1.2%

0.6%

0.0%

1.2%

0.9%

0.6%

0to3%3%to5%5%to7%Above7%

Source:Bloomberg,FactSet,BofAUSEquity&USQuantStrategy

BofAGLOBALRESEARCH

heRICReport|09September20267

2.Whenbondsaregooddiversifiersforstocks,evena2-3%uncorrelatedyieldcanbehelpfulinaportfolio.hatwascertainlythecaseduringthesecularstagnationeraof

2000-2020.However,whenstock&bondcorrelationishigh,investorsmayrequiremuchhigheryieldstobe

interested(Exhibit19).

Exhibit19:BondsarenotaneffectivehedgeagainstUSstocks

24-monthrollingcorrelationbetween30yrUSTreasuriesandtheS&P500

0.8

Dot-com

bubble

Bonds&stocksmovetogether

0.4

WW2

COVID

0.0

Black

-0.4

MondayVolcker

TheGreatDepression

tightening

-0.8

TaperTantrum

Bondshedgeequities

1939

1919

2019

195919791999

Source:BofAGlobalResearch,Bloomberg,GlobalFinancialData

BofAGLOBALRESEARCH

ARICRoundtableon…qualitycashflows

Wenotedabovethatthissummer,manyinvestorsrotatedintostocksthatarenotdependentontheAIbuildout.Weidentifysomehigh-quality,non-AIstocksinExhibit20.heseare

selectedfromthegroupofhigh-FCFcompaniesownedintheQualityEFswecover.

NEM,JAZZ,andOLareamongthebest-rankingstocks(Exhibit20).WeaskedseniorBofAanalystscoveringmetals&mining,homebuilders,andpharmaceuticalstoexplainwhythesestocksarecompellingopportunities,andhowtheirabilitytogeneratehighfreecashflowcancreatelong-termvalueforshareholders.

TickerCompany

Exhibit20:FilteringforhighqualityBuy-ratedstocks

BofABuy-ratedstocksheldinQualityETFs,rankedbyFCFyield(FCF/EV)

BofARating

TotalreturnYTDSinceJune1st

FreeCashFlowYield

63%

27%

2%

18%

6%

2%

43%

18%

16%

16%

15%

12%

8%

26%

11%

19%

31%

14%

CNC

ALL

ACGL

RNR

EPE

PGR

BuyBuy

BuyBuy

BuyBuy

CenteneAllstate

ArchCapital

RenaissanceReExpedia

Progressive

NEM

Newmont

Buy

10%

29%

19%

THCCI

CAH

TenetHealthcare

Buy

10%

33%

56%

Cigna

Buy

9%

4%

4%

CardinalHealth

Buy

9%

21%

27%

JAZZ

JazzPharma

Buy

9%

45%

6%

HAS

Hasbro

Buy

7%

15%

10%

TOL

TollBrothers

Buy

7%

5%

3%

ETSY

Etsy

Buy

7%

38%

11%

TEAM

Atlassian

Buy

7%

17%

64%

Source:BofAGlobalResearch,Bloomberg.Note:Theuniverseisfromourtop3-ratedQualityETFs,stocksthatare>0%totalreturnforYTDandsinceJune1st,withBuyrating,POupside>10%,andthensortedbyFCF/EVyield.Thisisascreenandnotarecommendedlisteitherindividuallyorasagroupofstocks.Investorsshouldconsiderthefundamentalsofthecompaniesandtheirown

individualcircumstances/objectivesbeforemakinganyinvestmentdecisions.

BofAGLOBALRESEARCH

awsonWinder:SeniorAnalyst,NorthAmericanMetals&Mining,onNewmont(NEM)

1.Youforecastroughly$8.5bnofNEMfreecashflowin2026.Howmuchisdrivenbygoldprices,andhowsustainableisit

8heRICReport|09September2026

Newmontisoneoftheworld’slargestgoldproducers.WerateNEMaBuywitha$145priceobjective(23%upsidepotential).Highergoldpricesarethelargestdriverofour$8.5bnfreecashflowforecastfor2026,(Exhibit21)butNEMmustalsodeliveronitsproductionplanandcontrolcosts.BofACommodityteamforecastsanaveragerealgoldpriceof$4,360/ozin2026,

versusthe$3,500/ozlong-termpriceusedinourvaluation.

Minesdeplete,soNEMmustreplaceproductioneconomicallyforthatcashflowtobesustainable.Itslargeassetportfolio,production-replacementpipeline,and$3.9bnnetcashpositionprovideresourcestoextendminesanddevelopnewones.hekeyismaintainingproductionwithoutprojectcostsordelaysabsorbingthebenefitofhighergoldprices.

Exhibit21:FreecashflowmoveswithgoldpricePriceofgold($/oz)andfreecashflowforNewmont

$6,000

12

FreeCashFlow($bn)

$5,000$4,000

Goldpriceperoz(rhs)

8

4

0

$3,000$2,000

-4

$1,000$0

2017

2020

2023

2026

2014

Source:BofAGlobalResearch,Bloomberg

BofAGLOBALRESEARCH

2.Goldminershistoricallyreinvestedwindfallsratherthanreturnthemto

shareholders.After$1.6bnofrecentbuybacks,isNEM’sremaining$4.3bnauthorization(3%ofmarketcap)evidencethatthistimeisdifferent

heearlyevidenceisencouraging.Withfreecashflowrisingalongsidegoldprices,NEMcompletedapproximately$1.6bnofsecond-quarterbuybacks,supportsanannual

dividendprogramofapproximately$1.1bn,andretains$4.3bnauthorizedforbuybacks.

hesereturnsarefundedbyfreecashflowandanetcashbalancesheet.hequestioniswhetherthatdisciplinelasts.Ifmanagementprioritizeshigh-returnprojectsandreturnsexcesscashratherthanpursuingexpensiveacquisitionsorgrowthforitsownsake,

Newmontcouldbreakwiththeindustry’spoorcapital-allocationrecord.hatwouldgiveinvestorsbothgoldexposureanddurableshareholderreturns.

Seerecentreports:Howmuchmoregoldcouldcentralbanksbuy?Whohavebeenthemajorbuyers?&Q2’26resultsseasonwrap:reactions,productionoutlookforH2’26

RafeJadrosich:SeniorAnalyst,USHomebuilders&BuildingProducts,onTollBrothers

1.WhatisitaboutTOL’sbuyerprofile,communities,andbusinessmodelthatmakesitmoreresilientthanentry-levelbuilders

ollBrothersistheonlynationalpublichomebuilderfocused

primarilyonluxurybuyers.Wehavea$180priceobjective(22%upsidepotential),andOLremainsourtophomebuilderpick

despiteourcautioushousingview.Itsapproximately$1m

homesattractwealthierbuyerswhodependlessonfinancing:

about30%payentirelyincash,whileborrowersgenerallymakelargerdownpayments.hisreducestheirsensitivityto

mortgagerates,helpingOLoutperformotherhomebuildersasrateshaverisen(Exhibit22).

OL’sbusinessmodelreinforcesthatadvantage.Its

communitiesareconcentratedinstrongerluxurymarkets,oftencompetingwithsmallerprivatebuilderswithlessscaleand

higherfinancingcosts.Luxurymove-upbuyersrepresented61%ofrecentsales.OLremainssensitivetostock-marketvolatility,butweexpectittooutperformbuildersfacinggreater

affordabilityconstraints.

Exhibit22:Asratesrise,TollBrothersoutperforms

TollBrothervs.StateStreetHomebuildersETF&30ymortgagerate

30ymortgagerate

8%

TollBrothersvs.Homebuilderstotalreturn(rhs)

1.30

5%

0.90

2%

0.50

2015

2018

2021

2024

2027

2012

Source:BofAGlobalResearch,Bloomberg

BofAGLOBALRESEARCH

2.Youareforecasting$902mofTOLfreecashflowin2026and$1.4bnin2027.

Howmuchofthisdoyouexpecttobereinvestedinlandpurchases/communityopeningsvs.returnedtoshareholdersviasharerepurchases

OLhasenoughcashtoinvestingrowthandreturncapitaltoshareholders.Itslandpositionsupports8%to10%annualc