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Financial Sector Jeff Voorhees Tyler Ragor

Financial Sector Jeff Voorhees Tyler Ragor. Agenda Overview Analysis Valuation Recommendation. Sector overview Global Index Classification Sector: Financials Industries: . Sector overview Global Breakdown. Sector overview Breakdown in detail. Sector overview. Recent performance.

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Financial Sector Jeff Voorhees Tyler Ragor

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  1. Financial Sector Jeff Voorhees Tyler Ragor

  2. Agenda • Overview • Analysis • Valuation • Recommendation

  3. Sector overview Global Index Classification Sector: Financials Industries:

  4. Sector overview Global Breakdown

  5. Sector overview Breakdown in detail

  6. Sector overview

  7. Recent performance

  8. Market Weight vs. SIM Weight June 26, 2013

  9. Business cycle

  10. Porter’s Five Forces Analysis

  11. Porter’s Five Forces Analysis Bargaining power of suppliers Low – many large, established businesses, similar products and terms, capital suppliers have influence Bargaining power of buyers Low (for most) – majority of customers have little power to influence business terms, difficult/time consuming to change providers. Very large corporate/institutional investors may exert disproportionate influence. Threat of new entrants Low – Market demands are currently met, high cost of market entry (regulation, capital requirements), opportunity may exist in the smaller niche markets (e.g. credit unions). Threat of substitution Medium – Many similar products, switching is difficult and time consuming Intensity of rivalry High – Many providers of similar products, largely competing on margin

  12. Economic analysis Financial sector continues to experience recovery Unemployment numbers steadily improving Housing market is improving (new home construction, new home prices, Case Shiller) Consumer confidence improving Interest rates artificially low (though increased recently) Europe continues to drag

  13. Economic analysis – Financials and GDP

  14. Financial analysis – Revenue Growth

  15. Financial analysis – Financial Sector - EPS

  16. Financial analysis – Insurance EPS

  17. Financial analysis – Diversified Financials EPS

  18. Financial analysis – Real Estate - EPS

  19. Financial analysis – Regional Banks - EPS

  20. Financial analysis – Industry Comparison - EPS

  21. Valuation – Financial Sector

  22. Current Events Diversified Financials and New Capital Requirement Regulations Big banks to become more conservative? Smaller? Real Estate – rising interest and mortgage rates Insurance – ObamaCare Unknown effects, still in implementation phase

  23. Recommendations Long-term year-over-year growth should decrease Continued near-term “growth” (read: recovery) in financial industry Opportunity to increase underweight holdings in Financials

  24. Recommendations Long-term year-over-year growth should decrease Continued near-term “growth” (read: recovery) in financial industry Opportunity to increase underweight holdings in Financials Opportunity for investment in banks and diversified financials with real estate exposure Suggest specific incorporation of real estate industry as part of SIM course beginning Autumn 2013

  25. Questions?

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