SECTOR PRESENTATION:
CONSUMER DISCRETIONARY
Shengyu Cao
Nolan Cox
Trey Morrish
Ziyang Zhong
AGENDA
• Sector Overview
• Business Models
• Economic Factors
• Financial Analysis
• Valuation Overview
• Recommendation
SECTOR OVERVIEW
OVERVIEW
KEY TAKE-AWAYS
• S&P 500 11.74%
• SIM 12.28%
• SIM Overweight by .54%
•
SIM inclusion of cash and dividends
OVERVIEW
KEY PERFORMERS
OVERVIEW
SECTOR COMPANIES
BUSINESS MODELS
BUSINESS CYCLE
PORTERS FIVE FORCES
Buyer Power
High
Sector name by definition is used with discretionary income
Supplier Power
Varies
High in specialty products
Low in common goods
Substitutes
High
Diverse products within an industry
Funds are fungible to other industries
Competition
High
Industry structure varies from Oligopolies (Auto) to near
Perfect Competition (Restaurants)
All try to take marketshare
Barriers to Entry
Varies
Barrier depends on what industry:
Auto - high
Retail - low
ECONOMIC FACTORS
ECONOMIC OUTLOOK
US Outlook
European Outlook
•
Decreasing Unemployment
•
Sluggish Economy
•
Decreasing Labor Force
Participation
•
Northern/Southern Gap
•
Euro Future
•
Monetary and Fiscal Policy
CPI
DISPOSABLE INCOME
CHANGES IN EMPLOYMENT
REAL GDP
CONSUMER SPENDING
LABOR FORCE PARTICIPATION
FINANCIAL ANALYSIS
SECTOR PERFORMANCE
REVENUE
EPS
NET PROFIT MARGINS
ROE
VALUATION OVERVIEW AND INDUSTRY
HIGHLIGHTS
• Current Forward P/E s are
around middle of historical data
• Except for that of Automobile,
forward P/E s of other
industries are around that of
S&P 500
• All Forward P/E s are below
that of Sector
LUXURY APPAREL
Relative to SP500 High Low Median Current
P/Trailing E
1.7 0.56
1
1.2
P/Forward E
1.5
0.6
1.1
1.1
P/B
2.7
0.6
1.2
1.9
P/S
1.9
0.6
1
1.3
P/CF
2
0.8
1.3
1.5
MEDIA
Relative to SP500 High Low Median Current
P/Trailing E
10.1
0.8
1.5
1.2
P/Forward E
1.6 0.81
1.1
1.1
P/B
1.6
0.7
1.1
1.6
P/S
1.8
1
1.3
1.1
P/CF
0.8
0.4
0.5
0.4
GENERAL
MERCHANDISE
Relative to SP500 High Low Median Current
P/Trailing E
1.6 0.85
1.1
0.95
P/Forward E
1.4 0.84
1.1
0.98
P/B
1.3
0.7
1
0.9
P/S
0.7
0.4
0.5
0.5
P/CF
1.4
0.9
1.1
1.2
AUTO INDUSTRY
Relative to SP500 High Low Median Current
P/Trailing E
5.8 0.27
0.44
0.68
P/Forward E
17.9
0.4
0.59
0.67
P/B
4.2
0.2
0.5
1.2
P/S
0.3
0
0.1
0.3
P/CF
0.5
0.1
0.1
0.5
EDUCATIONAL
SERVICES
Relative to SP500 High Low Median Current
Trailing P/E
2.2 0.32
0.78
0.32
Forward P/E
2.1 0.44
0.86
0.44
P/B
9.8
0.5
1.8
0.8
P/S
4.3
0.3
1.2
0.3
P/CF
3.2
0.3
1
0.3
RECOMMENDATION: UNDERWEIGHT
Positives
Negatives
•
Revenue continually increasing
•
Quantitative Easing
•
Stable EPS Growth
•
Volatile Sector
•
De-levering of consumer debt
•
All-Time Highs in Indices
RECOMMENDATION: UNDERWEIGHT
• 50 basis points under the market
• Sectors we like
• Media (strong)
• General Merchandise (strong)
• Education Service (high risk)
QUESTIONS
SOURCES
1.
Fidelity
2.
Thompson Reuters Baseline
3.
S&P Indices