Cole Blackmore

Xinxin Li

Agenda Overview

Business Analysis

Economic Analysis

Financial Analysis

Valuation Analysis

Recommendation

Sector Breakdown S&P 500 SIM

14.33%

Overweight: 1.87%

12.46%

Sector Industries Sector:

SIM:

Hotels, Restaurants, Leisure

Housewares Durables

Internet & Catalog Retail

Media

Textiles, Apparel, Luxary Goods

Apparel & Accessory

Automobile Manufactures

General Merchandise

Retail Apparel

Cable & Satellite

Largest Companies Comcast Corp

Amazon.com Inc

Home Depot Inc

Walt Disney Co

McDonald’s Corp

Twenty-First Century Fox, Inc

Ford Motor Co

Time Warner Inc

Starbucks Corp

NIKE Inc

Sector Performance YTD: Outperformed S&P by ~9%

Sector Performance QTD: Outperformed S&P by ~1%

Agenda Overview

Business Analysis

Economic Analysis

Financial Analysis

Valuation Analysis

Recommendation

Sector Performance Overperforms: Early Stage

Underperforms: Late & Recession

Business Analysis: Demand Non-essential Goods

Sector highly cyclical: very sensitive

Often leads economies out of Recessions

Porter’s 5 Forces Barriers to Entry: High

High Start-up Cost

Mature Firms; Incumbent Power

Buyer Power: High Easy switching costs (Retail

& General Merchandise)

High Competition=Price Wars

Supplier Power: Variable Depends on Industry

High Raw Materials Costs & Multiple Vendors=Low Bargaining Power

Substitutes: High

Product availability very diverse: ie, AE, ANF, Aero all offer similar clothing.

Lack of differentiation

Competition: High

Retail Apparel: has many established brands

Automobile Manufactures: emergence of foreign cars built & sold in US

Agenda Overview

Business Analysis

Economic Analysis

Financial Analysis

Valuation Analysis

Recommendation

Retail Sales

Employment

Disposable Income

Consumer Spending

Real GDP

Agenda Overview

Business Analysis

Economic Analysis

Financial Analysis

Valuation Analysis

Recommendation

Sector Sales

EPS

Net Profit Margin (Absolute)

Net Profit Margin (Relative S&P 500)

Housewares Durables

Housewares Durables

Apparel

Cable & Satellite

Auto

Auto Parts

Agenda Overview

Business Analysis

Economic Analysis

Financial Analysis

Valuation Analysis

Recommendation

Sector Performance

Absolute Basis High Low Median Current

P/Trailing E 53.7 13.9 20.0 20.9

P/Forward E 44.1 13.0 17.4 19.0

P/B 4.4 1.5 2.5 4.0

P/S 1.3 0.4 0.9 1.3

P/CF 12.2 5.7 9.1 12.2

Relative to SP500 High Low Median Current

P/Trailing E 3.9 1.1 1.2 1.3

P/Forward E 3.0 1.0 1.2 1.2

P/B 1.7 0.7 1.0 1.6

P/S 0.9 0.5 0.6 0.9

P/CF 1.2 0.7 0.9 1.1

Industry Performance Automobile Manufacturers

Cable & Satellite

Industry Performance Hotel, Restaurants, & Leisure

Houseware Durables

Industry Performance Internet & Retail Catalog

Multiline Retail

Industry Performance Retail Apparel

Relative to SP500 High Low Median Current

P/Trailing E 1.6 0.7 1 1.1

P/Forward E 1.3 0.73 1 1.2

P/B 3.1 1 1.5 2.5

P/S 1 0.4 0.7 0.9

P/CF 1.5 0.6 1 1.3

Agenda Overview

Business Analysis

Economic Analysis

Financial Analysis

Valuation Analysis

Recommendation

Recommendation Sim Portfolio should:

Stay Overweight: trailing P/E has consistently performed at or above relative to S&P

Underweight: Auto Manufacturers

Diversify by adding new Industry to portfolio

Pro’s & Cons: Business cycle still in expansion stage, continued

outperformance

Industries sensitive to global economic changes (ie European markets)