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Smart Phones are Eating the World

Smart Phones are Eating the World. Team : Investomics. Nima Behkami , PhD Deep Agnani , PhD Amjad Husain, PhD. Bridge between: Wireless Networks and Personal Computing. 3.2 billion (mobile operators) vs 1.7 billion people (PC). Growth opportunity.

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Smart Phones are Eating the World

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  1. Smart Phones are Eating the World Team: Investomics NimaBehkami, PhD Deep Agnani, PhD Amjad Husain, PhD

  2. Bridge between: Wireless Networks and Personal Computing

  3. 3.2 billion (mobile operators) vs 1.7 billion people (PC)

  4. Growth opportunity • Two-thirds of the mobile phone market has yet to convert to smartphones. • Close to a billion smartphones will be sold in 2013, while PC sales will gradually decline. • Existing Markets and Emerging Economies

  5. Mobile Value Chain

  6. Investomics Focus • Mobile phone handset business • Wireless network operators • Mobile content providers

  7. Communication Funds (US News) • General attributes of communication funds: • Concentrate on telecommunication and media companies of various kinds • Combination of cable television, wireless communication, communication equipment firms and traditional phone companies • Some favor entertainment firms (broadcasters, film studios, publishers, on-line service providers)

  8. Top Two Communication Funds (US News) • ProFunds Telecommunications UltraSector Fund (TCPIX) • Non-diversified • Seeks daily investment results, before fess and expenses, that correspond to 1.5X the daily performance of the Dow Jones U.S. TelecommunicationsSM Index • Invest in securities and derivatives that should have similar daily characteristics as 1.5X the daily return index • Above Average risk (compared to similar funds as per Morningstar) • Trailing returns: • Year to date: UP 24.7% • One Year: UP 40.6% • Expenses: 1.78% • Total Assets: $5.44M • T. Rowe Price Media And Telecommunications Fund (PRMTX) • Common stocks of media, technology and telecommunications • 80% of net assets in companies engaged in internet, publishing, movies, cable/satellite, TV, telephones, cellular services, technology and equipment • Invest in companies in large-to-mid-capitalization range • Average risk (compared to similar funds as per Morningstar) • Trailing returns: • Year to date: UP 11.9% • One Year: UP 17.8% • Expenses: 0.81% • Total Assets: $2.74B

  9. T. Rowe Price Media and Telecommunications Fund 6 Month Dow Jones 1 year S&P 500 5 year Nasdaq Composite

  10. ProFunds Telecommunications UltraSector Fund 6 Month Dow Jones 1 year S&P 500 5 year Nasdaq Composite

  11. Approach • Similar to T. Rowe Price but no movies (i.e. if movies is the major asset / earner for the company than may not invest in stock) • Major invest in companies in large-to-mid-capitalization range • Will invest in smaller companies if technology / service may be regarded as “break-through”

  12. Research Methodology • Focus on growth stocks in telecom sector. • P/B: <5; • EPS growth past five years: Positive; • Net profit margin: Positive; • Performance (Rate of return): Quarter up; P/E: 5-25; • Sales growth past five years: Positive; • Return on equity: Positive (but cautiously: if company has large debt then should be raising funds by issuing stock rather than borrowing); • We consider the probability that the two-thirds of the mobile phone market has yet to convert to smartphones. Developed and emerging economies are going to do well in the telecom sector in coming decade. • Holding period on our stock: 6 months to 2 years.

  13. Selected stocks Wireless Providers: • AT&T Inc • Vonage Holdings Inc (VG) • Premier Global Services (PGI) • Globecomm System Inc (GCOM) • Lumos network Corp (LMOS) • Extreme Networks Ltd (EXTR) • NeuStarInc (NSR) Emerging Economies (India): • BhartiAirtel (BHARTIARTL) • Idea Cellular (IDEA) Data Storage Companies: • Brocade communication systems Inc (BRCD) • Western Digital Corp (WDC)

  14. Macro Indicators • GDP • Employment Numbers • Walmart Sales • Manufacturers' new orders for non-defense capital goods • Index of consumer expectations

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