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Industry Analysis

Industry Analysis. By: Ian, Steve, Conor, Jason and Nicholas. Top 15. Healthcare Distributors and Services. Neutral to negative investment outlook by Business Week 18% price increase (ttm, Yahoo! Finance) Healthcare demand is always high

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Industry Analysis

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  1. Industry Analysis By: Ian, Steve, Conor, Jason and Nicholas

  2. Top 15

  3. Healthcare Distributors and Services • Neutral to negative investment outlook by Business Week • 18% price increase (ttm, Yahoo! Finance) • Healthcare demand is always high • Stable revenue streams and consistent gross margins • Small growth at mature stage of business • Chance of government intervention • NovaMed Inc. (NOVA) and Quest Diagnostics (DGX)

  4. Biotechnology • Positive investment outlook by Business Week • 7.8% price increase (ttm, Yahoo! Finance) • Potential for large return • Numerous micro and small-cap companies • Potential for large loss • Many have no revenue and burn cash quickly • OSI Pharmaceuticals (OSIP) and Cell Therapeutics (CTIC)

  5. Pharmaceuticals • Investment outlook is neutral • Index dropped 5.6% YTD • Flood of patent expirations offers opportunities for generic manufacturers • Improved earnings prospects in 2005, and historically low P/E multiples • Weakness in drug stocks reflect political uncertainty • Possible increased reimportation of drugs from Canada • Merck (MRK) and Boston Scientific Corp (BSX)

  6. Consumer Finance • Investment outlook is positive • Consumer Finance Index gained 4.1% YTD • Margins of credit card issuers to expand • Higher long-term interest rates YoY should help drive greater loan growth • Pricing pressures will remain intense though • Balances and transaction volumes weaker than expected • Bank of New York (BK) and Fifth Third Bancorp (FITB)

  7. Systems Software • Investment outlook: Neutral • As of August 20th, Systems Software Index down 6.2% • Long-term growth potential in the web technologies and web services areas • Predicted lower double digit PC software sales growth over the next year • Growth in software spending has slower than previous quarters • Example Stocks: Microsoft (MSFT), Adobe Systems Inc. (ADBE)

  8. Health Care Facilities • Investment outlook: Neutral • As of July 30th, the Health Care Facilities Index declined 13.2% • Managed care providers will see continued earnings growth • Estimated 10% revenue growth resulting in 10 to 15% gains in EPS for the rest of the year • Continued problems with bad debit expense throughout the industry • Example Stocks: Tenet Healthcare Group (THC), Healthsouth Corp. (HLSH)

  9. IT Consulting Services • Negative Outlook by Business Week • -19.4% YTD Decline • Possible growth through acquisitions and partnerships • Modest improvement in 2005 • Softness in IT spending • Weak demand for consulting services • Unisys (only S&P 500 in industry); Hewitt Associates

  10. Electric Utilities • Neutral Outlook by Business Week • 4.6% YTD Growth • Economic recovery will boost energy demand • Look for companies with strong balance sheets and growing dividend • High level of pension costs • Many companies have high debt and liquidity problems • Exelon Corp., National Grid Transco PLC

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