consumer discretionary xly
TRANSCRIPT
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J U S T I N J A E N A E R I C R U S S E L L
T H O M A S L A S K O W S K I A U S T I N F R A Z I E R
T I M F I L E M A L L A RY D A N A
Consumer Discretionary XLY
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88.96%
11.04% 0 0 S&P500
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Leisure
Media
Retail
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Company Market Value (in Millions) Wal-Mart $249,386
Amazon $112,867
McDonalds $93,986
Comcast Corp $93,975
Walt Disney $93,195
Home Depot $89,195
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Top Ten Industries in Our Sector
Heterogeneous Sector 1. Media 31.01% 2. Specialty Retail 17.92% 3. Hotels Restaurants & Leisure 17.46% 4. Internet & Catalog Retail 9.48% 5. Multiline Retail 7.42% 6. Textiles, Apparel & Luxury Goods 5.17% 7. Automobiles 3.51% 8. Auto Components 3.39% 9. Household Durables 2.19% 10. Leisure Equipment & Products 1.11% 11. Distributors 0.70%
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Annual Return
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Indicators
Interest rates, inflation, unemployment, income, disposable income, sales projections
48-mo. new car
7.77 7.02 6.72 6.21 5.73 5.79 5.89 5.40 5.07 4.87 4.87
24-mo. personal
12.38
11.37
11.10
10.87
10.88
11.37
10.80
10.36
10.88
10.94
10.94
07 08 09 10 11 11 11 12 12 12
Q1 Q2 Q3 Q1 Q2 Q3
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Income and Spending
From January to August, spending on consumer durables accounted for 9% of income in the United States.
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Retail Sales Estimates
Not Adjusted Adjusted2
8 Month Total 2012 2011 2012 2011
% Chg. Aug.3 Jul. Jun. Aug. Jul. Aug.3 Jul. Jun. Aug. Jul.
2012 2011 (a) (p) (r) (a) (p) (r) (r) (r)
Retail & food services,
total ………………………………. 3,207,701 5.8 421,436 400,945 406,128 398,950 388,749 406,748 403,176 400,635 388,595 388,064
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Global Economy
United States exports in consumer durables and automotive parts accounted for 20.8% of all goods exported from 2011.
Opportunity in developing nations
1 billion people will join the middle class by 2020
Increase in consumer spending
Focus on high end products
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Global Events affecting CND E U R O P E AN D E B T C R I S I S
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Global Events Affecting CND
Wars/Instability in the Middle East
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Volatility
Risk (Modern Portfolio Theory) Statistics
3 Years
Statistic XLY Category
Alpha (against Standard Index) 13.28 10.09
Beta (against Standard Index) 0.92 0.99
Mean Annual Return 1.80 1.59
R-squared (against Standard Index) 79.28 74.83
Standard Deviation 17.74 19.81
Sharpe Ratio 1.21 0.97
5 Years
Statistic XLY Category
Alpha (against Standard Index) 7.86 N/A
Beta (against Standard Index) 0.96 N/A
Mean Annual Return 0.69 N/A
R-squared (against Standard Index) 76.08 N/A
Standard Deviation 23.09 N/A
Sharpe Ratio 0.33 N/A
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Volatility Continued
10 Years
Statistic XLY Category
Alpha (against Standard Index) 1.52 1.53
Beta (against Standard Index) 0.96 0.90
Mean Annual Return 0.75 N/A
R-squared (against Standard Index) 72.72 73.30
Standard Deviation N/A 17.82
Sharpe Ratio N/A N/A
Treynor Ratio 5.94 6.17
Year to Date Return (Mkt): 17.50%
1-Year Total Return (Mkt): 23.16%
3-Year Total Return (Mkt): 22.14%
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Comparison
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Top Companies in CSD sector by market cap
DIS – Walt Disney Co. - $93.57 Billion
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Top Companies in CSD sector by market cap
CMCSA – Comcast Corp. $95.17 Billion
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Top Companies in CSD sector by market cap
AMZN – Amazon.com Inc. $117.71 Billion
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Top Companies in CSD sector by market cap
MCD – McDonalds Corp. $93.19 Billion
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Sector Industry Location Cycle Cyclical or Defensive
Cyclical, does well when consumer confidence is high.
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Consumer Discretionary (XLY)
Sensitivity to Business Cycle
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Companies doing well
Dividend Growth Rate G= ROE x (1-p) : P= dividend payout percent
Estimated Earnings growth PEG = (P/E)/projected growth in earnings
Our goal: maximize shareholder wealth Continual return on dividends gives confidence
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Companies doing well
Name (Dividend Growth)
Symbol
Beta Estimated EG
3-Yr DGR
Acme United (8) ACU 0.39 17.9% 13.7% Nike (10) NKE 0.5 17.8% 17.8% McDonalds (35) MCD 0.18 10.3% 10.3% Genuine Parts (56) GPC 0.7 50% 5.5%
The lower the beta, the less risky the investment is. The estimated earning growth – more confidence, more investors, higher growth The Dividend growth rate – strong dividend growth future dividend growth likely long term profitability
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Ratios to determine investment Quality
Price to Earnings Ratio (P/E) Market Value Per Share Earnings Per Share
Home Depot (HD) PE: 21.56 (september 28, 2012)
JCPenny (JCP) PE: 24.29 (september 28, 2012)
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Ratios to Determine Investment Quality
Price to Sales Ratio (P/S) Share Price Revenue Per Share
Home Depot (HD) PS: 1.288 (September 28, 2012)
JCPenny (JCP)
PS: .3407 (September 28, 2012)
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Sources
"Yahoo! Finance - Business Finance, Stock Market, Quotes, News." Yahoo! Finance. Yahoo, n.d. Web. 27 Sept. 2012. <http://finance.yahoo.com/>.
United States. Federal Reserve. Board of Governors of the Federal Reserve System.Consumer Credit. N.p.: n.p., 2012.
United States. U.S. Bureau of Economic Analysis. Department of Commerce. U.S. INTERNATIONAL TRADE IN GOODS AND SERVICES. N.p.: n.p., 2012.
United States. U.S. Census Bureau. Department of Commerce. ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES. By Ian Thomas. N.p.: n.p., 2012.
"Distributions - Select Sector SPDRs." Distributions - Select Sector SPDRs. McGraw-Hill, n.d. Web. 30 Sept. 2012. <http://www.sectorspdr.com/spdr/distributions/?symbol=XLY>.
"Businessweek." Bloomberg. Bloomberg, n.d. Web. 30 Sept. 2012. <http://investing.businessweek.com/research/sectorandindustry/sectors/sectordetail.asp?code=25>.
"Consumer Cyclical." Wall Street Journal. Wall Street Journal, n.d. Web. 28 Sept. 2012. <http://online.wsj.com/mdc/public/page/2_3024-sm_consumer_cyclical_map.html?mod=topnav_2_3050>.
"Consumer Discretionary." Consumer Discretionary Sector: Themes for 2012. N.p., 12 Dec. 2011. Web. 29 Sept. 2012. <https://www.fidelity.com/viewpoints/consumer-discretionary-sector-2012>.
"Stock Snapshot." Search. N.p., n.d. Web. 01 Oct. 2012. <http://www.sectorspdr.com/eqsnaps/?do=snapshot>.On Oct 1, 2012, at 4:24 PM, Justin Jaena wrote:
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Sources
"Home Depot PE Ratio:." Home Depot PE Ratio (HD). YCharts, 28 Sept. 2012. Web. 28 Sept. 2012. <http://ycharts.com/companies/HD/pe_ratio>.
"Home Depot Price / Sales Ratio:." Home Depot Price / Sales Ratio (HD). YCharts, 28 Sept. 2012. Web. 28 Sept. 2012. <http://ycharts.com/companies/HD/ps_ratio>.
"J.C. Penney Company PE Ratio." (JCP). YCharts, 28 Sept. 2012. Web. 28 Sept. 2012. <http://ycharts.com/companies/JCP/pe_ratio>.
"J.C. Penney Company Price / Sales Ratio:." J.C. Penney Company Price / Sales Ratio (JCP). YCharts, 28 Sept. 2012. Web. 28 Sept. 2012. <http://ycharts.com/companies/JCP/ps_ratio>.
Turner, Chris. "S&P 500 Price Projections Based on Earnings." Dshort.com. Advisor Perspective Inc., 10 July 2012. Web. 20 Sept. 2012. <http://advisorperspectives.com/dshort/guest/Chris-Turner-120710-SPX-price-projections.php>.
"S&P 500 Stock Market Index Forecast." Forecastchart.com. Signaltrend Inc, 1 Aug. 2012.
Web. 20 Sept. 2012. <http://www.forecast-chart.com/index-sp-500.html>. "Market Cap Rankings." Market Cap Stock Rankings. Shawn Carpenter, 05 Jan. 2009. Web. 29
Sept. 2012. <http://ycharts.com/rankings/market_cap?p=3>. "Map of Market." Sector SPDR. McGraw-Hill Companies, 01 Jan. 2000. Web. 29 Sept. 2012.
<http://sectorspdr.com/marketmap/>. "Sectors and Cycles." Fidelity Investments. Asset Allocation Research Team, 04 Jan. 2012.
Web. 01 Oct. 2012. <https://www.fidelity.com/viewpoints/sectors-and-cycles>.