1 / 16

Understanding Macroeconomic and Industry Analysis: A Comprehensive Framework

This chapter provides an in-depth analysis of macroeconomic and industry frameworks, emphasizing the importance of fundamental analysis in today’s interconnected economy. It explores domestic and global economic factors, industry dynamics, and company performance. Key topics include government fiscal and monetary policies, demand and supply shocks, and the implications of business cycles on industry sectors. By examining leading, coincident, and lagging indicators, the chapter sheds light on critical economic variables and their impact on sales, profits, and stock returns, making it essential for analysts and investors.

tehya
Télécharger la présentation

Understanding Macroeconomic and Industry Analysis: A Comprehensive Framework

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter11 Macroeconomic and Industry Analysis

  2. Framework of Analysis • Fundamental Analysis • Approach to Fundamental Analysis • Domestic and global economic analysis • Industry analysis • Company analysis • Why use the top-down approach

  3. Global Economic Considerations • Performance in countries and regions is highly variable • Political risk • Exchange rate risk • Sales • Profits • Stock returns

  4. Key Economic Variables • Gross domestic product • Unemployment rates • Interest rates & inflation • Budget Deficits • Consumer sentiment

  5. Federal Government Policy • Fiscal Policy - government spending and taxing actions • Direct policy • Slowly implemented

  6. Federal Government Policy (cont.) • Monetary Policy - manipulation of the money supply to influence economic activity • Initial & feedback effects • Tools of monetary policy • Open market operations • Discount rate • Reserve requirements

  7. Demand Shocks • Demand shock - an event that affects demand for goods and services in the economy • Tax rate cut • Increases in government spending

  8. Supply Shocks • Supply shock - an event that influences production capacity or production costs • Commodity price changes • Educational level of economic participants

  9. Business Cycles • Business Cycle • Peak • Trough • Industry relationship to business cycles • Cyclical • Defensive

  10. NBER Cyclical Indicators: Leading Leading Indicators - tend to rise and fall in advance of the economy Examples • Avg. weekly hours of production workers • Stock Prices

  11. NBER Cyclical Indicators: Coincident Coincident Indicators - indicators that tend to change directly with the economy Examples • Industrial production • Manufacturing and trade sales

  12. NBER Cyclical Indicators: Lagging Lagging Indicators - indicators that tend to follow the lag economic performance Examples • Ratio of trade inventories to sales • Ratio of consumer installment credit outstanding to personal income

  13. Industry Analysis • Sensitivity to business cycles • Sector Rotation • Industry life cycles

  14. Sensitivity to Business Cycle • Factors affecting sensitivity of earnings to business cycles • Sensitivity of sales of the firm’s product to the business cycles • Operating leverage • Financial leverage

  15. Sector Rotation • Selecting Industries in line with the stage of the business cycle • Peak – natural resource firms • Contraction – defensive firms • Trough – equipment, transportation and construction firms • Expanding – cyclical industries

  16. Industry Life Cycles StageSales Growth Start-up Rapid & Increasing Consolidation Stable Maturity Slowing Relative Decline Minimal or Negative

More Related