Cole Blackmore Xinxin Li
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Cole Blackmore
Xinxin Li
Agenda Overview
Business Analysis
Economic Analysis
Financial Analysis
Valuation Analysis
Recommendation
Sector Breakdown S&P 500 SIM
14.33%
Overweight: 1.87%
12.46%
Sector Industries Sector:
SIM:
Hotels, Restaurants, Leisure
Housewares Durables
Internet & Catalog Retail
Media
Textiles, Apparel, Luxary Goods
Apparel & Accessory
Automobile Manufactures
General Merchandise
Retail Apparel
Cable & Satellite
Largest Companies Comcast Corp
Amazon.com Inc
Home Depot Inc
Walt Disney Co
McDonald’s Corp
Twenty-First Century Fox, Inc
Ford Motor Co
Time Warner Inc
Starbucks Corp
NIKE Inc
Sector Performance YTD: Outperformed S&P by ~9%
Sector Performance QTD: Outperformed S&P by ~1%
Agenda Overview
Business Analysis
Economic Analysis
Financial Analysis
Valuation Analysis
Recommendation
Sector Performance Overperforms: Early Stage
Underperforms: Late & Recession
Business Analysis: Demand Non-essential Goods
Sector highly cyclical: very sensitive
Often leads economies out of Recessions
Porter’s 5 Forces Barriers to Entry: High
High Start-up Cost
Mature Firms; Incumbent Power
Buyer Power: High Easy switching costs (Retail
& General Merchandise)
High Competition=Price Wars
Supplier Power: Variable Depends on Industry
High Raw Materials Costs & Multiple Vendors=Low Bargaining Power
Substitutes: High
Product availability very diverse: ie, AE, ANF, Aero all offer similar clothing.
Lack of differentiation
Competition: High
Retail Apparel: has many established brands
Automobile Manufactures: emergence of foreign cars built & sold in US
Agenda Overview
Business Analysis
Economic Analysis
Financial Analysis
Valuation Analysis
Recommendation
Retail Sales
Employment
Disposable Income
Consumer Spending
Real GDP
Agenda Overview
Business Analysis
Economic Analysis
Financial Analysis
Valuation Analysis
Recommendation
Sector Sales
EPS
Net Profit Margin (Absolute)
Net Profit Margin (Relative S&P 500)
Housewares Durables
Housewares Durables
Apparel
Cable & Satellite
Auto
Auto Parts
Agenda Overview
Business Analysis
Economic Analysis
Financial Analysis
Valuation Analysis
Recommendation
Sector Performance
Absolute Basis High Low Median Current
P/Trailing E 53.7 13.9 20.0 20.9
P/Forward E 44.1 13.0 17.4 19.0
P/B 4.4 1.5 2.5 4.0
P/S 1.3 0.4 0.9 1.3
P/CF 12.2 5.7 9.1 12.2
Relative to SP500 High Low Median Current
P/Trailing E 3.9 1.1 1.2 1.3
P/Forward E 3.0 1.0 1.2 1.2
P/B 1.7 0.7 1.0 1.6
P/S 0.9 0.5 0.6 0.9
P/CF 1.2 0.7 0.9 1.1
Industry Performance Automobile Manufacturers
Cable & Satellite
Industry Performance Hotel, Restaurants, & Leisure
Houseware Durables
Industry Performance Internet & Retail Catalog
Multiline Retail
Industry Performance Retail Apparel
Relative to SP500 High Low Median Current
P/Trailing E 1.6 0.7 1 1.1
P/Forward E 1.3 0.73 1 1.2
P/B 3.1 1 1.5 2.5
P/S 1 0.4 0.7 0.9
P/CF 1.5 0.6 1 1.3
Agenda Overview
Business Analysis
Economic Analysis
Financial Analysis
Valuation Analysis
Recommendation
Recommendation Sim Portfolio should:
Stay Overweight: trailing P/E has consistently performed at or above relative to S&P
Underweight: Auto Manufacturers
Diversify by adding new Industry to portfolio
Pro’s & Cons: Business cycle still in expansion stage, continued
outperformance
Industries sensitive to global economic changes (ie European markets)
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