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Consumer Discretionary Sector

Consumer Discretionary Sector. February 2 nd , 2010 Sekhar Achanta,Tongyu Zhou. Recommendation. The Fund should underweight this sector when compared to S&P 500 index. The Fund should rebalance the sector by selling some retail sector stocks.

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Consumer Discretionary Sector

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  1. Consumer Discretionary Sector February 2nd, 2010 Sekhar Achanta,Tongyu Zhou

  2. Recommendation • The Fund should underweight this sector when compared to S&P 500 index. • The Fund should rebalance the sector by selling some retail sector stocks. • We see 20% - 50% returns in some select industries in this sector. • Automobile and components • Internet & Catalog Retail • Major positives for this sector is improvement is Consumer Confidence. • Biggest risk - Unemployment. • We recommend that the Fund should rebalance by selling 300 basis points of retail stocks in this sector and buy 300 basis points of automobile and components industry stocks and Internet and Catalog Retailing to keep the SIM weighting relative to the S&P500 at 6.99%.

  3. S & P 500 Sector Weights (as of 1/27/2010)

  4. Consumer Discretionary - Sector Details • The Consumer Discretionary Sector encompasses industries that tend to be the most sensitive to economic cycles. • Consumer Discretionary Sector manufacturing segment includes automotive, household durable goods, textiles & apparel and leisure equipment. • The services segment includes hotels, restaurants and other leisure facilities, media production and services, and consumer retailing and services. • Sector Size - The Market cap of the sector is $28.6 billion in the S & P 500 index. • The Total Market Cap of the sector is $2 Trillion.

  5. Consumer Discretionary - Industries • There are 33 sub-industry indices in this sector, with Movies & Entertainment being the largest, at 15.2% of the sector's market value. • Industries in this sector • Auto Components • Automobiles • Distributors • Diversified Consumer Services • Hotels, Restaurants and Leisure • Household Durables • Internet & Catalog Retail • Media • Multiline Retail • Specialty Retail • Textiles, Apparel & Luxury Goods • Source: http://eresearch.fidelity.com/eresearch/markets_sectors/sectors/sectors_in_market.jhtml?tab=industries&sector=25

  6. Consumer Discretionary Sector- Top 10 holdings Source: https://www.spdrs.com/product/fund.seam?ticker=XLY

  7. Sector Performance YTD and QTD

  8. Consumer Discretionary Sector And Economic Cycles Source: http://seekingalpha.com/article/178437-sector-performance-and-the-economic-cycle

  9. Fed Stimulus –Fed Funds Rate

  10. US Real GDP Growth

  11. US Unemployment Numbers

  12. Personal Savings Rate

  13. Disposable Income

  14. Consumer Confidence Index

  15. Change In Consumption

  16. Real Consumer Spending

  17. Consumer Spending: Ex-Housing, Bills and Auto

  18. Retail Sales

  19. Consumer Discretionary –Same Store Sales

  20. Correlation Coefficient R Consumer Spending Vs. Consumer Confidence

  21. Correlation Coefficient R Consumer Spending Vs. Employment Rate

  22. Correlation Coefficient R Consumer Spending Vs. Unemployment Rate

  23. Correlation Coefficient R Consumer Spending Vs. CD Sector Performance

  24. Consumer Discretionary Sector Revenues

  25. Consumer Discretionary Sector Earnings Growth Rates

  26. Consumer Discretionary Industries – Revenues and Earnings Growth Rates

  27. Consumer Discretionary Top 10 Companies – Revenues, Earnings, Margins and FCF

  28. Consumer Discretionary Earnings

  29. Consumer Discretionary Sector Margins- Relative to S&P 500

  30. Consumer Discretionary Sector- FCF Generation Compared to S&P

  31. Consumer Discretionary Sector – ROE

  32. Valuation Analysis - Sector Valuation

  33. P/B Relative to S&P 500

  34. P/S Relative to S&P 500

  35. P/CF Relative to S&P 500

  36. Forward P/E Relative to S&P 500

  37. Recommendation • The Fund should underweight this sector when compared to S&P 500 index. • The Fund should rebalance the sector by selling some retail sector stocks. • We see 20% - 50% returns in some select industries in this sector. • Automobile and components • Internet & Catalog Retail • Major positives for this sector is improvement is Consumer Confidence. • Biggest risk - Unemployment. • We recommend that the Fund should rebalance by selling 300 basis points of retail stocks in this sector and buy 300 basis points of automobile and components industry stocks and Internet and Catalog Retailing to keep the SIM weighting relative to the S&P500 at 6.99%.

  38. Questions

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