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Consumer Discretionary Sector. July 21, 2009 Joshua Anderson, Kunal Arora, Branyan Booth, Joseph Chandraraj. Sector Overview - S&P 500 Composition. Sectors as % of S&P 500. Sector Overview – Top 10 Industries. Industries as % of Consumer Discretionary Sector. $688 billion. % of sector.

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Consumer discretionary sector

Consumer Discretionary Sector

July 21, 2009

Joshua Anderson, Kunal Arora,

Branyan Booth, Joseph Chandraraj


Sector overview s p 500 composition
Sector Overview - S&P 500 Composition

Sectors as % of S&P 500


Sector overview top 10 industries
Sector Overview – Top 10 Industries

Industries as % of Consumer Discretionary Sector

$688 billion

% of sector


Sector overview top 10 companies
Sector Overview – Top 10 Companies

$688 billion


Sector overview 5 year returns
Sector Overview – 5 Year Returns


Sector overview ytd qtd returns
Sector Overview - YTD & QTD Returns


Business analysis porter s 5 forces
Business Analysis – Porter’s 5 Forces


Economic analysis disposable income
Economic Analysis - Disposable Income

  • High correlation with

  • disposable income

  • Sharp increase in 2003, peak of 12% in early 2007

  • Continuous drop since second half of 2007


Economic analysis consumer spending
Economic Analysis - Consumer Spending

  • High correlation with

  • consumer spending

  • Sharp increase in 2003, peak of 12% in early 2007

  • Continuous drop since second half of 2007


Economic analysis personal saving rate
Economic Analysis – Personal Saving Rate

  • Saving Rate = Disposable Income – Consumer Spending

  • Disposable Income

  • Consumer Spending

  • Saving Rate

  • Saving Rate currently at 6.9% (15 year high) and projected to hit 10%

  • Is there a change in consumer behavior with home value going down, consumer is more cognizant of saving?


Economic analysis unemployment rate
Economic Analysis - Unemployment Rate

  • High negative correlation with unemployment rate

  • With unemployment projected to hit double digits by end of the year, consumer discretionary sector will be negatively affected


Economic analysis home sales
Economic Analysis - Home Sales

  • R = 0.50 strong positive correlation

  • Leading indicator for the overall economy


Financial analysis net profit margin
Financial Analysis – Net Profit Margin


Financial analysis net profit margin1
Financial Analysis – Net Profit Margin




Financial analysis major companies revenue growth
Financial Analysis - Major Companies Revenue Growth




Valuation analysis sector forward p e
Valuation Analysis - Sector forward P/E


Valuation analysis industry
Valuation Analysis - Industry

17.5


Recommendation
Recommendation

Hold current underweight position of 146bps, why?

Hold current underweight position of 146bps

“S&P recommends underweighting the S&P 500 Consumer Discretionary sector…” Standards & Poor’s 7/12/2009