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Consumer Discretionary Sector

Consumer Discretionary Sector. July 21, 2009 Joshua Anderson, Kunal Arora, Branyan Booth, Joseph Chandraraj. Sector Overview - S&P 500 Composition. Sectors as % of S&P 500. Sector Overview – Top 10 Industries. Industries as % of Consumer Discretionary Sector. $688 billion. % of sector.

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Consumer Discretionary Sector

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  1. Consumer Discretionary Sector July 21, 2009 Joshua Anderson, Kunal Arora, Branyan Booth, Joseph Chandraraj

  2. Sector Overview - S&P 500 Composition Sectors as % of S&P 500

  3. Sector Overview – Top 10 Industries Industries as % of Consumer Discretionary Sector $688 billion % of sector

  4. Sector Overview – Top 10 Companies $688 billion

  5. Sector Overview – 5 Year Returns

  6. Sector Overview - YTD & QTD Returns

  7. Business Analysis – Porter’s 5 Forces

  8. Economic Analysis - Disposable Income • High correlation with • disposable income • Sharp increase in 2003, peak of 12% in early 2007 • Continuous drop since second half of 2007

  9. Economic Analysis - Consumer Spending • High correlation with • consumer spending • Sharp increase in 2003, peak of 12% in early 2007 • Continuous drop since second half of 2007

  10. Economic Analysis – Personal Saving Rate • Saving Rate = Disposable Income – Consumer Spending • Disposable Income • Consumer Spending • Saving Rate • Saving Rate currently at 6.9% (15 year high) and projected to hit 10% • Is there a change in consumer behavior with home value going down, consumer is more cognizant of saving?

  11. Economic Analysis - Unemployment Rate • High negative correlation with unemployment rate • With unemployment projected to hit double digits by end of the year, consumer discretionary sector will be negatively affected

  12. Economic Analysis - Home Sales • R = 0.50 strong positive correlation • Leading indicator for the overall economy

  13. Financial Analysis – Net Profit Margin

  14. Financial Analysis – Net Profit Margin

  15. Financial Analysis – Top Industries Net Profit Margin

  16. Financial Analysis – Sector ROE

  17. Financial Analysis - Major Companies Revenue Growth

  18. Valuation Analysis - Sector P/CF

  19. Valuation Analysis - Sector P/S

  20. Valuation Analysis - Sector forward P/E

  21. Valuation Analysis - Industry 17.5

  22. Recommendation Hold current underweight position of 146bps, why? Hold current underweight position of 146bps “S&P recommends underweighting the S&P 500 Consumer Discretionary sector…” Standards & Poor’s 7/12/2009

  23. Questions???

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