SIM Sector Presentation:
Information Technology
Presenters: Krisztina Nadasdy, Yvonne Qi, Randy
Oenardi Raharjo, David Robinson, Tony Cui
Sector Presentation: Information
Technology
AGENDA
Sector Overview
Business Analysis
Economic Analysis
Financial Analysis
Valuation Analysis
Recommendation
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Sector Presentation: Information
Technology
Sector
Overview
3
Sector Presentation: Information
Technology
“I don’t know how to put this, but I’m kind of a big deal.
People know me. I’m very important” – Ron Burgundy
4
Sector Presentation: Information
Technology
S&P 500 SECTOR WEIGHTS
Telecom
2%
Materials
3%
Utilities
3%
Energy
7%
Consumer
Staples
10%
[CATE
GORY
NAME]
[PERC
ENTAG
E] Financials
Current Market Cap:
$4.398T
16%
Industrials
10%
Consumer
Discretionary
13%
Info Tech is the largest
sector in the S&P 500
by weight
Health Care
15%
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Sector Presentation: Information
Technology
The Information Technology Sector has consistently outperformed the S&P 500
since 2008/2009 [normalized]
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Sector Presentation: Information
Technology
Cash
3%
Utilities
2%
Telecom
2%
Materials
3%
SIM PORTFOLIO WEIGHTS
Dividend
Receivables
0%
Consumer
Discretionary
13%
[CATE
GORY
NAME]
[PERC
ENTAG
E]
Consumer
Staples
10%
Energy
7%
Industrials
10%
Info Tech is the largest
sector in the SIM
Portfolio by weight
Total unrealized gains/
(loss) for the sector is
$398,748 – Portfolio as a
whole is only $348,581
Financials
16%
Health Care
13%
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Info Tech Sector
Breakdown
Sector Presentation: Information
Technology
Semiconductors and
Semiconductor
Equipment
IT Services
Software and Services
Internet and Software
Services
Software
Communications
Equipment
Technology Hardware
and Equipment
Electronic Equipment,
Instruments and
Components
Technology Hardware
Storage and Peripherals
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Sector Presentation: Information
Technology
Largest Companies in
Information Technology:
Company
Top 5 Largest
InfoTech
Stocks in
SP500 by
Market Cap
Market Cap
Price/Share
Apple, Inc.
$635.51B
$111.13
Google, Inc.
$465.91B
$664.02
Microsoft, Inc.
$378.02B
$47.70
Facebook, Inc.
$275.56B
$97.83
Visa, Inc.
$187.41B
$77.09
Total Market Cap
$4.40T
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Sector Presentation: Information
Technology
Activision Blizzard, Inc.
Apple, Inc.
Information
Technology
Stocks in SIM
Portfolio:
EMC Corp.
Google, Inc.
Micron Technology, Inc.
Vantiv, Inc.
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Sector Presentation: Information
Technology
Information Technology Stocks in the SIM Portfolio:
Company
Market Value in SIM
Portfolio
Price/Share
Activision, Inc.
$259,476.00
$33.45
Apple, Inc.
$264,720.00
$111.13
EMC Corp.
$343,072.00
$27.71
Google, Inc.
$312,801.30
$664.02
Micron Technology, Inc.
$229,194.00
$19.03
$521,072
$46.66
Vantiv, Inc.
Total Market Value of
Infotech in SIM Portfolio
Total SIM Portfolio
Market Value (excluding
dividends and cash)
$1,930,335.30 (21% of
total SIM Portfolio)
$9,041,646.17
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Sector Presentation: Information
Technology
10 Year Trends for Info-Tech:
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Sector Presentation: Information
Technology
Best and Worst Performing
Info-Tech Stocks YTD
Best and Worst Performing
Info-Tech Stocks QTD
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Sector Presentation: Information
Technology
Business
Analysis
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Sector Presentation: Information
Technology
SUPPLY AND DEMAND
Factors affecting Supply and Demand for
Information Technology:
•  Geographic expansion (e.g. Emerging
Markets)
•  Constant innovation and new products (e.g.
New Technology)
•  “Internet of Things”
•  Cloud computing
•  Industry always in flux
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Sector Presentation: Information
Technology
SUPPLY AND DEMAND
Influence of US and Foreign Economy on Information
Technology Demand:
For Companies:
•  Financing Activities
•  R&D expense, CapEx
•  Supplier Consolidation and Failures
•  Public Policy & Tax Reduction
For Customers:
•  Unemployment Rate
•  Personal and Household Income
•  Household Structure
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Sector Presentation: Information
Technology
TECHNOLOGY PRODUCTS LIFE CYCLE
ANALYSIS
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Sector Presentation: Information
Technology
PROFITABILITY OF INDUSTRY: PORTER’S FIVE FORCES
Buyer Power:
-Low switching costs
-Large number of buyers
-High demand for innovation
-Customers willingness to try new
products
Barriers to Entry:
-capital investment
-brand loyalty
-Specialized Knowledge
-short product life cycle
Rivalry:
-many companies out there
-M&A activity in the industry
-constant innovation
-companies willing to cannibalize
own products
Substitutes:
-Disruptive technologies (ex. cloud
storage)
-Going “off the grid”
Supplier Power:
-Threat of vertical integration
-Supplier monopoly in some cases (ex. “intel
inside”)
-Fewer suppliers than buyers
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Sector Presentation: Information
Technology
Economic
Analysis
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Sector Presentation: Information
Technology
GDP AND INFO-TECH NORMALIZED
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Sector Presentation: Information
Technology
CPI AND INFO-TECH LAST PRICE
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Sector Presentation: Information
Technology
CONSUMPTION AND INFO-TECH
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Sector Presentation: Information
Technology
RECESSION INDICATOR AND INFO-TECH
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Sector Presentation: Information
Technology
TOTAL LABOR SPENDING AND INFO-TECH
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Sector Presentation: Information
Technology
Financial
Analysis
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Sector Presentation: Information
Technology
REVENUES BY INFO-TECH INDUSTRY
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Sector Presentation: Information
Technology
LAST PRICE BY INFO-TECH SECTOR
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Sector Presentation: Information
Technology
GROSS MARGIN BY INFO-TECH SECTOR
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Sector Presentation: Information
Technology
OPERATING MARGIN BY INFO-TECH
SECTOR
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Sector Presentation: Information
Technology
NET INCOME MARGIN BY INFO-TECH
SECTOR
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Sector Presentation: Information
Technology
RETURN ON COMMON EQUITY BY INFOTECH SECTOR
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Sector Presentation: Information
Technology
Valuation
Analysis
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Sector Presentation: Information
Technology
INFO-TECH P/E MULTIPLES
75
65
55
45
35
25
15
5
'05
'06
'07 '08
S&PINFT
'09
'10
InternetSoftware&Services
'11
'12 '13
S&P500
'14
'15E
'16E
'17E
Semiconductors
TechHardware
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Sector Presentation: Information
Technology
INFO-TECH P/B MULTIPLES
8
7
6
5
4
3
2
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
S&PINFT
S&P500
InternetSoftware&Services
Semiconductors
'15E '16E '17E
TechHardware
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Sector Presentation: Information
Technology
INFO-TECH P/S MULTIPLES
12
10
8
6
4
2
0
'05
'06
'07
'08
'09
'10
'11
'12
S&PINFT
S&P500
InternetSoftware&Services
Semiconductors
'13
'14
'15E
TechHardware
35
Sector Presentation: Information
Technology
INFO-TECH DIVIDEND YIELDS
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
'05
'06
'07
'08
'09
'10
'11
'12
S&PINFT
S&P500
InternetSoftware&Services
Semiconductors
'13
'14
'15E
TechHardware
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Sector Presentation: Information
Technology
INFO-TECH P/E SPREADS V. S&P 500
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Sector Presentation: Information
Technology
INFO-TECH TECHNICAL ANALYSIS
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Sector Presentation: Information
Technology
TECHNICAL ANALYSIS CONTINUED
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Sector Presentation: Information
Technology
INFO-TECH MULTIPLES SUMMARY
10 Yr. Absolute
Basis
High
Low
Average
Current
P/E
26.78
10.79
18.2
18.78
P/B
5.01
2.29
3.69
4.09
P/S
3.36
1.05
2.43
3.23
15.88
6.45
11.06
11.95
1.54
1.79
2.14
0.89
1.31
1.55
Average
1.12
1.53
1.79
Current
1.04
1.49
1.82
2.30
1.05
1.51
1.19
P/EBITDA
Relative to
S&P 500
P/E
P/B
P/S
P/EBITDA
High
Low
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Sector Presentation: Information
Technology
Recommendation
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Sector Presentation: Information
Technology
GENERAL RECOMMENDATIONS FOR SIM PORTFOLIO
Sector as whole: overweight
relative to the S&P 500
Preferred Industry within InfoTech Sector: Software and
Services
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Sector Presentation: Information
Technology
RISKS OF OVERWEIGHTING INFO-TECH
SECTOR
Possible second “Internet Bubble”
Cyclical Industry – Short Life Cycle
A lot of companies are fair value or
overvalued
Some industries in the sector are engaged
in a “race to the bottom”
Importance of keeping the SIM portfolio
well-diversified
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Sector Presentation: Information
Technology
QUESTIONS?
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