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Consumer Discretionary- XLY. October 11th 2013- January 18th 2013 Kristen Hecht, Khalid Surur, Matt Vague, Alyssa Wood. CND-Last Semester. XLY vs S&P 500. Current State of Sector. Outperformed the S&P for all four quarters last year
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Consumer Discretionary- XLY October 11th 2013- January 18th 2013 Kristen Hecht, Khalid Surur, Matt Vague, Alyssa Wood
Current State of Sector • Outperformed the S&P for all four quarters last year • Driven by strong earnings, and increased customer confidence • Index / Index Sector 1Q 2012 2Q 2012 3Q 2012 4Q 2012 2012 '13 YTD a/o 1/15 • Russell 1000 12.3% -3.6% 5.7% -0.5% 13.9% 4.0% • Russell 1000 CND .4% -2.7% 7.8% 2.0% 23.4% 4.9% • http://finance.yahoo.com/news/consumer-recovery-russell-1000-r-160203263.html
Impacts of recent news • Was resilient as a sector through the fiscal cliff • Retail sails in December grew by only .7%, but improved inventory and promotional practices have increased margins • University of Michigan Consumer Sentiment Index dropped to 71.3 in January from 72.9 in December
Key Drivers/Valuation Multiples • Retail- Same store sales growth and revenue per sq. foot • Consumer Confidence Index and Consumer Sentiment Index • For high growth companies, PEG very relevant • Low growth companies, P/B and P/CF are more relevant
Biggest Movers(Oct. 11 – Jan. 18) • Positive: • Abercrombie & Fitch • + 48.37 % • Ford Motor Co. • + 39.15 % • Negative • JCPenney • - 27.92% • Kohl’s • - 14.33%
Largest Holdings • Comcast Corp 6.95% • Amazon.com Inc 6.4% • Home Depot Inc. 6.36% • Walt Disney Co 6.02% • McDonald’s Corporation 6.02 %
Short Term Outlook • Very Cyclical sector • Holiday season is over • Lots of earnings reports released this week (Starbucks, Coach, McDonalds, etc) • Fiscal Cliff
Past Recommendations • Harley-Davidson Inc (HOG) : BUY • BUY(10/11/12) • +24.37% • women, African-American and Latino customers, as well as to younger buyers, now account for 30 percent of bikes sold and are growing twice as fast as its core market. • Milwaukee-based Harley is introducing an enterprise resource planning production system at its York, Pennsylvania, facility to boost efficiency and allow Harley to better respond to fluctuating market demand.
Past Recommendations • Bed Bath & Beyond Inc (BBBY.O): • BUY (10/16/12) • -10.11% • expects net sales to increase by 24% to 26% in the fourth quarter and by 15% for the full year • VF Corp (VFC): • BUY(10/18/12) • -14.14% • Wrangler jeans are customizing for the motorcycle riding population of India and expect $1.1 billion in revenue to its Asia-Pacific business over the next five years. • Missed 3rd quarter revenue expectations and growth in its flagship company North Face.
Past Recommendations • Starbucks Corp (SBUX.O): • BUY(10/25/12) • +17.42% • Starbucks Corp said it will set up its first outlet in Vietnam early next month as the U.S. chain continues to expand in fast-growing Asian markets. • Yum! Brands Inc (YUM): • NO BUY (11/01/12) • -7.6% • KFC parent Yum Brands Inc said it had stopped using chicken from suppliers in China that are now under a government investigation before the review was even announced and analysts said they expect the company to recover from the business hit in its biggest market.
Past Recommendations • McGraw Hill • November 6 recommendation: No Buy • 2.82% growth since • New 52-week high December 11 • New “SmartBook” technology • Coach, Inc. • November 8 recommendation: Buy • 14.64% growth since • Earnings release January 23 -estimates are that COH will beat last year’s earnings -beat estimates last quarter
Past Recommendations • GameStop Corp. • November 13 recommendation: No Buy • 0.09% growth since • New 52-week high on December 13 • Analysts questioning if gaming consoles will become obsolete • Tiffany & Co. • November 29 recommendation: Buy • 6.69% growth since • Extended stock repurchase program to January 1, 2014 -CEO/Chairman sold off 100,000 of his own shares • Extended agreement with Elsa Peretti for at least 20 years -accounts for ~10% of sales
Past Recommendations • Time Warner Cable Inc. • December 4 recommendation: No Buy • 5.87% growth since • Earnings release January 31—analysts optimistic, recommending a Buy • Continuing customer care and billing systems with CSG Systems through March 2017 • New 52-week high on January 17
Works Cited • Finance.yahoo.com • Reuters.com • SeekingAlpha.com • Bloomberg.com • Marketwire.com