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Industrial Sector Presentation

Industrial Sector Presentation. PREPARED BY: ASHLEY CLARK RICHARD GROSS JON HARMACEK OLGA ISENBERG BRYON JORDAN. Agenda. Sector Analysis Business Analysis Economic Analysis Financial Analysis Valuation Analysis Recommendation Q&A. Sector Analysis.

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Industrial Sector Presentation

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  1. Industrial Sector Presentation PREPARED BY: ASHLEY CLARK RICHARD GROSS JON HARMACEK OLGA ISENBERG BRYON JORDAN

  2. Agenda • Sector Analysis • Business Analysis • Economic Analysis • Financial Analysis • Valuation Analysis • Recommendation • Q&A

  3. Sector Analysis The Industrials Sector makes up 11.57% of the SIM Portfolio, 178 basis points above the S&P 500.

  4. Sector Analysis – Top 10 companies

  5. Sector Analysis – Returns by sector Industrial QTD Return – 3.65% Industrial YTD Return - -4.32%

  6. Business Analysis – Economic cycle Source: http://personal.fidelity.com/products/funds/content/sector/cycle.shtml

  7. Business Analysis – Industrials vs. S&P 500 Source: http://www.yahoo.com

  8. Business Analysis – Stages of Maturity Source: http://openlearn.open.ac.uk/mod/resource/view.php?id=281253

  9. Economic Analysis • Industrials are highly correlated to GDP, real interest rates, real private investments, federal government spending and housing market • In June 2009, The Fed Beige Book report indicated that the expectations of several districts regarding the recession have improved, though they do not see the substantial increase in economic activity through the end of the year • In Q2 2009, manufacturing activity declined or remained at a low level across most states

  10. Economic Analysis – GDP vs. Industrial Equipment

  11. Economic Analysis – GDP vs. Change in Real Investment

  12. Economic Analysis – GDP vs. New Single Family Home Sales

  13. Economic Analysis – Industrial Production Index vs. Recessions

  14. Economic Analysis – Capacity Utilization vs. Recessions

  15. Economic Analysis – Real Private Investment vs. Recessions

  16. Financial Analysis - Net Profit Margin

  17. Financial Analysis - ROE

  18. Financial Analysis - ROE Key Operating Statistics *Red indicates consensus estimates

  19. Financial Analysis - EPS YOY Growth

  20. Financial Analysis - Earnings Per Share Expected Significant Decrease in 2009 Overall Expected Increase in 2010 Overall *Red indicates consensus estimates

  21. Validation Analysis - Industrials

  22. Validation Analysis - P/E vs. S&P 500

  23. Validation Analysis - P/S vs. S&P 500

  24. Validation Analysis - P/B vs. S&P 500

  25. Validation Analysis - P/CF vs. S&P 500

  26. Recommendation • Maintain the current overweight of 178 basis points (SIM 11.57% vs. S&P 500 9.79%) • Positives: • During the recession most of industrial stocks are undervalued • Most of the stocks should have an upside when economy turns around • Increased government spending (i.e. OSK, GE, Shaw) • Low interest rates • Risks: • Double-dip recession driving prices further down • Lag between GDP growth and Industrial growth • Companies have divested most of the assets due to the prolonged recession • Excess capacity in the housing market and commercial real estate

  27. Q&A

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