SIM Sector Presentation: Information Technology. Presenters: Krisztina Nadasdy, Yvonne Qi, Randy Oenardi Raharjo, David Robinson, Tony Cui

Transcription

1 SIM Sector Presentation: Information Presenters: Krisztina Nadasdy, Yvonne Qi, Randy Oenardi Raharjo, David Robinson, Tony Cui

2 AGENDA Sector Overview Business Analysis Economic Analysis Financial Analysis Valuation Analysis Recommendation 2

3 Sector Overview 3

4 I don t know how to put this, but I m kind of a big deal. People know me. I m very important Ron Burgundy 4

5 Telecom 2% Materials 3% Utilities 3% Consumer Staples 10% S&P 500 SECTOR WEIGHTS Energy 7% Industrials 10% [CATE GORY NAME] [PERC ENTAG E] Financials 16% Info Tech is the largest sector in the S&P 500 by weight Current Market Cap: $4.398T Consumer Discretionary 13% Health Care 15% 5

6 The Information Sector has consistently outperformed the S&P 500 since 2008/2009 [normalized] 6

7 Utilities 2% Telecom 2% Materials 3% Cash 3% SIM PORTFOLIO WEIGHTS [CATE GORY NAME] [PERC ENTAG E] Consumer Discretionary 13% Consumer Staples 10% Dividend Receivables 0% Energy 7% Info Tech is the largest sector in the SIM Portfolio by weight Total unrealized gains/ (loss) for the sector is $398,748 Portfolio as a whole is only $348,581 Industrials 10% Financials 16% Health Care 13% 7

8 Info Tech Sector Breakdown Semiconductors and Semiconductor Equipment Software and Services Hardware and Equipment IT Services Internet and Software Services Software Communications Equipment Electronic Equipment, Instruments and Components Hardware Storage and Peripherals 8

9 Largest Companies in Information : Top 5 Largest InfoTech Stocks in SP500 by Market Cap Company Market Cap Price/Share Apple, Inc. $635.51B $ Google, Inc. $465.91B $ Microsoft, Inc. $378.02B $47.70 Facebook, Inc. $275.56B $97.83 Visa, Inc. $187.41B $77.09 Total Market Cap $4.40T 9

10 Activision Blizzard, Inc. Apple, Inc. Information Stocks in SIM Portfolio: EMC Corp. Google, Inc. Micron, Inc. Vantiv, Inc. 10

11 Information Stocks in the SIM Portfolio: Company Market Value in SIM Portfolio Price/Share Activision, Inc. $259, $33.45 Apple, Inc. $264, $ EMC Corp. $343, $27.71 Google, Inc. $312, $ Micron, Inc. $229, $19.03 Vantiv, Inc. $521,072 $46.66 Total Market Value of Infotech in SIM Portfolio $1,930, (21% of total SIM Portfolio) Total SIM Portfolio Market Value (excluding dividends and cash) $9,041,

12 10 Year Trends for Info-Tech: 12

13 Best and Worst Performing Info-Tech Stocks YTD Best and Worst Performing Info-Tech Stocks QTD 13

14 Business Analysis 14

15 Factors affecting Supply and Demand for Information : Geographic expansion (e.g. Emerging Markets) Constant innovation and new products (e.g. New ) Internet of Things Cloud computing Industry always in flux SUPPLY AND DEMAND 15

16 Influence of US and Foreign Economy on Information Demand: For Companies: Financing Activities R&D expense, CapEx Supplier Consolidation and Failures Public Policy & Tax Reduction For Customers: Unemployment Rate Personal and Household Income Household Structure SUPPLY AND DEMAND 16

17 TECHNOLOGY PRODUCTS LIFE CYCLE ANALYSIS 17

18 Barriers to Entry: -capital investment -brand loyalty -Specialized Knowledge -short product life cycle Substitutes: -Disruptive technologies (ex. cloud storage) -Going off the grid PROFITABILITY OF INDUSTRY: PORTER S FIVE FORCES Buyer Power: -Low switching costs -Large number of buyers -High demand for innovation -Customers willingness to try new products Rivalry: -many companies out there -M&A activity in the industry -constant innovation -companies willing to cannibalize own products Supplier Power: -Threat of vertical integration -Supplier monopoly in some cases (ex. intel inside ) -Fewer suppliers than buyers 18

19 Economic Analysis 19

20 GDP AND INFO-TECH NORMALIZED 20

21 CPI AND INFO-TECH LAST PRICE 21

22 CONSUMPTION AND INFO-TECH 22

23 RECESSION INDICATOR AND INFO-TECH 23

24 TOTAL LABOR SPENDING AND INFO-TECH 24

25 Financial Analysis 25

26 REVENUES BY INFO-TECH INDUSTRY 26

27 LAST PRICE BY INFO-TECH SECTOR 27

28 GROSS MARGIN BY INFO-TECH SECTOR 28

29 OPERATING MARGIN BY INFO-TECH SECTOR 29

30 NET INCOME MARGIN BY INFO-TECH SECTOR 30

31 RETURN ON COMMON EQUITY BY INFO- TECH SECTOR 31

32 Valuation Analysis 32

33 INFO-TECH P/E MULTIPLES '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15E '16E '17E S&P INFT S&P 500 Internet Software & Services Semiconductors Tech Hardware 33

34 INFO-TECH P/B MULTIPLES '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15E '16E '17E S&P INFT S&P 500 Internet Software & Services Semiconductors Tech Hardware 34

35 INFO-TECH P/S MULTIPLES '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15E S&P INFT S&P 500 Internet Software & Services Semiconductors Tech Hardware 35

36 INFO-TECH DIVIDEND YIELDS '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15E S&P INFT S&P 500 Internet Software & Services Semiconductors Tech Hardware 36

37 INFO-TECH P/E SPREADS V. S&P

38 INFO-TECH TECHNICAL ANALYSIS 38

39 TECHNICAL ANALYSIS CONTINUED 39

40 INFO-TECH MULTIPLES SUMMARY 10 Yr. Absolute Basis High Low Average Current P/E P/B P/S P/EBITDA Relative to S&P 500 High Low Average Current P/E P/B P/S P/EBITDA

41 Recommendation 41

42 GENERAL RECOMMENDATIONS FOR SIM PORTFOLIO Sector as whole: overweight relative to the S&P 500 Preferred Industry within Info- Tech Sector: Software and Services 42

43 RISKS OF OVERWEIGHTING INFO-TECH SECTOR Possible second Internet Bubble Cyclical Industry Short Life Cycle A lot of companies are fair value or overvalued Some industries in the sector are engaged in a race to the bottom Importance of keeping the SIM portfolio well-diversified 43

44 QUESTIONS? 44