1 / 36

CHAPTER 17

CHAPTER 17. Macroeconomic and Industry Analysis. Fundamental Analysis Approach to Fundamental Analysis: Domestic and global economic analysis Industry analysis Company analysis Why use the top-down approach?. Framework of Analysis. Performance in countries and regions is highly variable

snodgrassj
Download Presentation

CHAPTER 17

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. CHAPTER 17 Macroeconomic and Industry Analysis

  2. Fundamental Analysis Approach to Fundamental Analysis: Domestic and global economic analysis Industry analysis Company analysis Why use the top-down approach? Framework of Analysis

  3. Performance in countries and regions is highly variable Political risk Exchange rate risk Sales Profits Stock returns Global Economic Considerations

  4. Table 17.1 Economic Performance in Selected Emerging Markets

  5. Figure 17.1 Change in Real Exchange Rate: U.S. Dollar versus Major Currencies, 1999–2006

  6. Gross domestic product Unemployment rates Interest rates & inflation Budget deficit Consumer sentiment Key Economic Variables

  7. Figure 17.2 S&P 500 Index versus Earnings Per Share

  8. Demand shock - an event that affects demand for goods and services in the economy Demand Shocks

  9. Supply shock - an event that influences production capacity or production costs Supply Shocks

  10. Federal Government Policy Fiscal Policy: Demand-side management Tax rate cut Increases in government spending

  11. Federal Government Policy Continued Monetary Policy- Demand-side management Manipulation of the money supply to influence economic activity Initial & feedback effects Tools of monetary policy Open market operations Discount rate Reserve requirements

  12. Federal Government Policy Continued Fiscal Policy: Supply-side management Incentive or marginal taxes National policies on education, infrastructure, and research are important elements

  13. Business Cycles The transition points across cycles are called peaks and troughs A peak is the transition from the end of an expansion to the start of a contraction A trough occurs at the bottom of a recession just as the economy enters a recovery

  14. Figure 17.3 Cyclical Indicators

  15. Leading indicators tend to rise and fall in advance of the economy Examples: Avg. weekly hours of production workers Stock Prices Leading Indicators

  16. Table 17.2 Indexes of Economic Indicators

  17. Coincident Indicators - indicators that tend to change directly with the economy Examples: Industrial production Manufacturing and trade sales Coincident Indicators

  18. Lagging Indicators - indicators that tend to follow the lag economic performance Examples: Ratio of trade inventories to sales Ratio of consumer installment credit outstanding to personal income Lagging Indicators

  19. Figure 17.4 Indexes of Leading, Coincident, and Lagging Indicators

  20. Table 17.3 Economic Calendar

  21. Industry Analysis Sensitivity to business cycles Factors affecting sensitivity of earnings to business cycles: Sensitivity of sales of the firm’s product to the business cycles Operating leverage Financial leverage Industry life cycles

  22. Figure 17.5 Economic Calendar at Yahoo!

  23. Table 17.4 Useful Economic Indicators

  24. Figure 17.6 Return on Equity, 2007

  25. Defining an Industry North American Industry Classification System, or NAICS codes Codes assigned to group firms for statistical analysis

  26. Figure 17.7 Industry Stock Price Performance as Measured by Rate of Return on Dow Jones Sector iShares, January-October 2007

  27. Figure 17.8 ROE of Major Banks

  28. Table 17.5 Examples of NAICS Industry Codes

  29. Figure 17.9 Industry Cyclicality

  30. Table 17.6 Operating Leverage of Firms A and B Throughout the Business Cycle

  31. Figure 17.10 A Stylized Depiction of the Business Cycle

  32. Sector Rotation Portfolio is adjusted by selecting companies that should perform well for the stage of the business cycle Peaks – natural resource extraction firms Contraction – defensive industries such as pharmaceuticals and food Trough – capital goods industries Expansion – cyclical industries such as consumer durables

  33. Figure 17.11 Sector Rotation

  34. StageSales Growth Start-up Rapid & Increasing Consolidation Stable Maturity Slowing Relative Decline Minimal or Negative Industry Life Cycles

  35. Figure 17.12 The Industry Life Cycle

  36. Industry Structure and Performance Threat of entry Rivalry between existing competitors Pressure from substitute products Bargaining power of buyers Bargaining power of suppliers

More Related