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INDUSTRIALS. Will Amerine Piyush Dubey Inanc Gencer Matthew Hankey. INDUSTRIALS. CURRENT SIM HOLDINGS. S&P 500 Sector Allocation. INDUSTRIALS. Industries included in Industrials Sector Price Change % of industrials3MOYTD2006 5-Year - PowerPoint PPT Presentation
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INDUSTRIALS
S&P 500 Sector Allocation
Financials 21.60%
Health Care 11.90%
Industrials 10.90%
Info Tech 14.90%
Telecom Services 3.70%
Materials 3.10%
Utilities 3.70%
Consumer Discretionary
10.50%
Consumer Staples 10.50%
Energy 10.10%
S&P 500 Sector AllocationCURRENT SIM HOLDINGS
SIM Allocation
Financials 21.54%
Health Care 18.26%
Industrials 10.57%
Info Tech 15.61%
Telecom Services 7.06%
Materials 2.97%Utilities 1.28%
Consumer Discretionary
7.98%
Consumer Staples 7.94%
Energy 6.80%
INDUSTRIALS Industries included in Industrials Sector
Price Change% of industrials 3MO YTD 2006 5-Year
Aerospace and Defense 22.63% 3.6 7.7 23.1 10.5Air Freight and Logistics 8.04% (2.6) (4.7) 1.6 3.3Airlines .78% (5.0) (6.3) (6.8) (11.4)Building Products 1.40% (4.2) 2.8 4.7 5.4Commercial Printing .60% 8.4 13.1 3.9 4.7Construction and Engineering .58% 15.8 17.1 5.7 14.1Construction and Farm Mach. 7.59% 17.7 22.3 20.6 22.5Diversified Commercial Serv .69% (6.6) (3.9) 2.4 2.1Electrical Components and Eqp. 3.89% 3.6 5.1 17.3 14.1Environmental and Facility Serv 1.61% (0.7) 2.7 23.2 6.2Human Resource and Empl Serv .76% (16.6) (10.1) 5.1 9.2Industrial Conglomerates 35.61% 3.4 1.0 5.7 4.7Industrial Machinery 7.04% 4.1 10.1 12.7 11.1Office Services and Supplies 1.12% (3.2) (0.8) 14.3 1.4Railroads 7.05% 11.3 18.4 13.5 19.8Trading Companies .41% 6.4 18.1 (1.6) 7.9Trucking .22% (3.5) 3.1 N/A N/AINDUSTRIALS 4.0 5.3 11.0 7.5
INDUSTRIALS
LARGEST COMPANIES
1. General Electric 19.08%
2. United Parcel Service 5.40%
3. Boeing 5.20%
4. United Technologies 4.77%
5. Tyco International 4.57%
6. 3M 4.08%
7. Caterpillar 3.27%
8. Honeywell International 2.76%
9. Lockheed Martin 2.59%
10. Emerson Electric 2.58%
INDUSTRIALS
S&P 500 Sector PerformanceSector MTD QTD YTD
S&P 500 1.57% 5.97% 6.16%
Energy 1.99% 7.30% 9.14%
Materials 1.78% 3.75% 12.44%
Industrials 1.68% 6.48% 7.09%
Consumer Discretionary 1.20% 3.73% 2.70%
Consumer Staples 0.02% 3.19% 4.83%
Health Care 1.57% 8.77% 9.45%
Financials 1.60% 5.64% 2.01%
Information Technology 1.94% 7.45% 6.26%
Telecommunications 3.41% 3.49% 10.07%
Service Utilities 1.43% 5.62% 14.53%
INDUSTRIALS
Product Life Cycle
MATURE AND STEADY INDUSTRY
PROFIT MARGINS LOWERED
SALES FOLLOW ECONOMIC GROWTH
FIGHT TO KEEP MARKET SHARE
INDUSTRIALS
RIVALRY
HIGHLY COMPETITIVE INDUSTRY
COMPETITION DRIVES PRICES DOWN
SUBSTITUTES
LOW
NO ISSUE
SUPPLIER POWERS
LOW DUE TO HIGH COMPETITION
CUSTOMER POWERS
LOW/MODERATE
ENTRANTS
LOW RISK OF NEW ENTRANTS, ESTABLISHED BRAND NAMES
PROFITABILITY AND
PRICING
Financial Analysis - Income Statement Ratios
Current Net Profit Margin and ROE trend is positive
INDUSTRIALS
INDUSTRIALS
Valuation over 10 YearsStockVal®S&P INDUSTRIALS SECTOR COMP ADJ (SP-20) Price 52.13
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20081997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
PRICE / YR-FORWARD EPS ESTS12
15
18
21
24
HI 23.5 LO 14.3 ME 18.4 CU 16.0
05-02-199705-04-2007
PRICE / EBITDA6
8
10
12
14
HI 12.4 LO 7.5 ME 10.0 CU 8.7
05-02-199705-04-2007
PRICE / BOOK VALUE2
3
4
5
6
HI 5.3 LO 2.7 ME 3.6 CU 3.5
05-02-199705-04-2007
PRICE / SALES0.9
1.2
1.5
1.8
2.1
HI 2.02 LO 1.20 ME 1.60 CU 1.55
05-02-199705-04-2007
INDUSTRIALS
Valuation vs. S&P 500 10 YearStockVal®S&P INDUSTRIALS SECTOR COMP ADJ (SP-20) Price 50.60
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20081997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
PRICE / YR-FORWARD EPS ESTS RELATIVE TO S&P 500 INDEX WITH REPORTED EPS (SP5)0.6
0.8
1.0
1.2
HI 1.02 LO 0.63 ME 0.87 CU 0.89
04-18-199704-23-2007
PRICE / EBITDA RELATIVE TO S&P 500 INDEX WITH REPORTED EPS (SP5)0.8
1.0
1.2
1.4
HI 1.37 LO 0.99 ME 1.15 CU 1.00
04-18-199704-23-2007
PRICE / BOOK VALUE RELATIVE TO S&P 500 INDEX WITH REPORTED EPS (SP5)0.8
1.0
1.2
1.4
HI 1.31 LO 0.91 ME 1.12 CU 1.06
04-18-199704-23-2007
PRICE / SALES RELATIVE TO S&P 500 INDEX WITH REPORTED EPS (SP5)0.8
0.9
1.0
1.1
1.2
HI 1.16 LO 0.80 ME 1.02 CU 0.91
04-18-199704-23-2007
INDUSTRIALS Valuation Analysis 10 YearsRelative to SP500 High Low Mean Current P/Forward E 1.02 .63 .87 .89 P/S 1.16 .80 1.02 .91 P/B 1.31 .91 1.12 1.06 P/EBITDA 1.37 .99 1.15 .99 P/CF 1.15 .74 1.01 1.04
•Trend shows cheap sector
•Distinguishing trends in Price to Share/Book/EBITDA
•Cyclical Sector and Measurements of Valuation
INDUSTRIALS
Valuation vs. S&P 500 5 YearsStockVal®S&P INDUSTRIALS SECTOR COMP ADJ (SP-20) Price 52.13
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20081997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
PRICE / YR-FORWARD EPS ESTS RELATIVE TO S&P 500 INDEX WITH REPORTED EPS (SP5)0.6
0.8
1.0
1.2
HI 1.02 LO 0.63 ME 0.87 CU 0.89
05-02-199705-04-2007
PRICE / EBITDA RELATIVE TO S&P 500 INDEX WITH REPORTED EPS (SP5)0.8
1.0
1.2
1.4
HI 1.37 LO 0.99 ME 1.15 CU 1.02
05-02-199705-04-2007
PRICE / BOOK VALUE RELATIVE TO S&P 500 INDEX WITH REPORTED EPS (SP5)0.8
1.0
1.2
1.4
HI 1.31 LO 0.91 ME 1.12 CU 1.07
05-02-199705-04-2007
PRICE / SALES RELATIVE TO S&P 500 INDEX WITH REPORTED EPS (SP5)0.8
0.9
1.0
1.1
1.2
HI 1.16 LO 0.80 ME 1.02 CU 0.90
05-02-199705-04-2007
INDUSTRIALS
Positive Trends
-- Valuations are on a downward slope = more undervalue
-- Low points of P/EBITDA, P/Sales and P/Book
-- Valuation Expansion and need for more weight in portfolio
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