Sector Analyzer Report

Transcription

Index
Analyzer
November 2016
Select Sector Indices
Evaluate Select Sector Indices based on investment merit
using fundamental data and analysis
Compare sectors with ease on a variety of
forward-looking valuation metrics
Succinct reports in three easy-to-read sections:
Investment Summary, Fundamentals, and Composition
© 2016 AltaVista Research, LLC. All rights reserved.
Important additional disclosure information can be found on page 2.
Disclosures
Limitations on Usage
This report is provided by AltaVista Research, LLC (“AltaVista”) for informational purposes only, and is for distribution only as permitted by applicable
law. Any opinions expressed herein are solely those of AltaVista and make no allowances for any specific investment objectives. As such, they do not
constitute a recommendation with respect to the investment merits of any security or index mentioned herein. Nothing in this report should be
construed as an offer or solicitation of an offer to purchase any securities. Prices and valuation data change with market conditions and investors
should be aware that this material could be substantially out of date when distributed. This report may not be reproduced or redistributed, in whole or
in part, without the express written consent of AltaVista.
Data Definitions & Reliability
AltaVista believes the information contained in this report to be reasonably accurate at the time of publication, but makes no warranties with respect to
its accuracy. Calculations of fundamental data are based on a weighted average of consensus estimates and reported results for current index
constituents. As a result, historical figures for fundamental data such as dividends per share may not reflect those actually paid by firms in the index.
To the extent that index reconstitution and rebalancing have altered index composition, these differences may be significant. Definitions for some
commonly used financial terms are as follows:
Earnings/Net Income: Unless denoted as a GAAP figure, earnings are calculated on a “pro forma” basis using consensus EPS
results/estimates for the individual constituents of each index, multiplied by the float-adjusted shares in the index.
Cash Flow: Adds depreciation and amortization to consensus earnings estimates
Standard deviation: Statistical measure of price volatility using 3 years of monthly return data. Figures are annualized.
Beta: Measures relative volatility of a given sector index versus the S&P500 by comparing 3 years of monthly return data.
Book Value: Common Equity as reported by index constituents according to GAAP. Forecasts reflect pro-forma calculations using most recently
reported figures, plus earnings less dividends.
Dividends per share: Dividends paid by companies in the index on a pro forma basis.
Payout ratio: Dividends as a percentage of Earnings/Net Income in a given year.
Return on Equity: Net income divided by average common equity over the period.
Debt-to-equity: Ratio of long- and short-term debt to owners equity.
Long-term growth: Uses consensus estimates of 3-5 year earnings growth for individual constituents of each index to calculate a floatadjusted earnings-weighted growth rate for the index as a whole.
Trend in Current FY Estimates: Illustrates changes in consensus estimates over time by examining the monthly change in current fiscal year
EPS estimates for individual constituents of each index. Base period is set equal to 100.
Price-to-Earnings, -Cash Flow, -Sales and -Book Value: Valuation multiples derived by dividing the index price by the per-share figures
for earnings, cash flow, sales and book value, respectively, as per the 'per share results & estimates' for each index.
How We Rate Indices
For every index under coverage, we calculate a rating based on a proprietary scoring system that analyzes metrics such as Return on Equity and Priceto-Book Value multiples. Then, we separate the indices into five tiers based on their individual scores. Although one index's score and recommendation
are independent of other indices' rankings, our coverage universe has a roughly normal distribution among the five tiers, with NEUTRAL accounting for
the largest number of indices. The five tiers are as follows:
SPECULATIVE: Deeply undervalued but risky. A rating of SPECULATIVE indicates exceptional appreciation potential in our opinion.
However, firms in this index may also have deep structural issues, which can carry extra risk. The rating is based on a proprietary scoring
system that analyzes metrics such as Return on Equity and Price-to-Book Value multiples.
OVERWEIGHT: Above average appreciation potential. A rating of OVERWEIGHT indicates that stocks in this index are trading at
attractive valuations and/or have above-average fundamentals. The rating is based on a proprietary scoring system that analyzes metrics such
as Return on Equity and Price-to-Book Value multiples.
NEUTRAL: Average appreciation potential. A rating of NEUTRAL indicates that valuations adequately reflect the fundamentals of stocks in
these indices. The majority of indices we cover fall into this category. The rating is based on a proprietary scoring system that analyzes metrics
such as Return on Equity and Price-to-Book Value multiples.
UNDERWEIGHT: Below average appreciation potential. A rating of UNDERWEIGHT indicates that stocks in this index are trading at
relatively expensive valuations and/or have below-average fundamentals. The rating is based on a proprietary scoring system that analyzes
metrics such as Return on Equity and Price-to-Book Value multiples.
AVOID: A rating of AVOID indicates poor appreciation potential, but some indices in this category consist of stocks for which our
fundamentally-driven analysis may be less relevant, and which may not reflect the value of dividend income. The rating is based on a
proprietary scoring system that analyzes metrics such as Return on Equity and Price-to-Book Value multiples.
Additional information is available upon request.
©2016 AltaVista Research, LLC. All rights reserved. This report is provided for informational purposes only, and AltaVista makes no warranties with respect to
its accuracy.
Table of Contents
Index Analyzer: Select Sector Indices
IXY
IXR
IXE
IXM
IXFNS
IXV
IXI
IXB
IXRE
IXT
IXU
Valuation Guide
Consumer Discretionary Select Sector Index
Consumer Staples Select Sector Index
Energy Select Sector Index
Financial Select Sector Index
Financial Services Select Sector Index
Health Care Select Sector Index
Industrial Select Sector Index
Materials Select Sector Index
Real Estate Select Sector Index
Technology Select Sector Index
Utilities Select Sector Index
4-5
6
7
8
9
10
11
12
13
14
15
16
ALPS Distributor Inc. is distributor for the Select Sector SPDR Trust. © 2016 AltaVista Research, LLC. All Rights Reserved.
This report is provided for informational purposes only, and AltaVista makes no warranties with respect to its accuracy.
See Disclosure page for additional disclosures.
October 31, 2016
Valuation Guide
This page provides a summary of valuation metrics for the Select Sector Indices and S&P500 which may be
considered when buying or selling a fund tracking these indices.
Price-to-earnings ratio (on 2016E EPS)
50
151.6
40
30.5
30
18.8
20
21.2
17.1
18.5
17.7
17.6
Industrials
Materials
Technology
Utilities
15.1
13.1
13.1
Financials
Finc. Services
10
0
Discretionary
Staples
Energy
Real Estate
Efficiency Metrics*
Avg. ROE
Asset
(12-16E) Turnover
22.4%
0.99x
23.8%
1.45x
8.1%
0.79x
9.2%
0.07x
9.2%
0.07x
8.2%
0.19x
21.6%
0.95x
22.2%
0.73x
17.8%
0.72x
23.3%
0.56x
10.9%
0.28x
Discretionary
Staples
Energy
Financials
Finc. Services
Real Estate
Health Care
Industrials
Materials
Technology
Utilities
Health Care
Risk measures: Standard Deviation
Prices
Earnings Est.
(3yr Ann.)
2016-17E
13.2%
3.4%
10.2%
1.8%
18.8%
37.4%
13.2%
3.1%
n/a
n/a
2.1%
n/a
n/a
11.0%
12.9%
2.3%
11.9%
3.0%
17.1%
7.2%
13.5%
4.2%
13.3%
2.6%
Assets/
Equity
3.4x
2.9x
2.1x
8.8x
8.8x
2.6x
2.5x
3.6x
3.0x
2.4x
3.7x
Debt/
Equity
1.2x
0.9x
0.4x
1.8x
1.8x
1.3x
0.6x
1.2x
0.9x
0.5x
1.3x
P/E
18.8
21.2
151.6
13.1
13.1
30.5
15.1
17.1
18.5
17.7
17.6
PEG
1.6
2.4
3.3
1.8
1.8
4.2
1.6
1.9
2.4
1.8
3.7
P/CF
12.5
15.9
13.6
14.9
14.9
16.3
13.9
11.2
10.4
12.3
8.4
P/Sales
1.4
1.4
1.7
2.1
2.1
6.1
1.6
1.7
1.7
3.2
1.9
P/BV
4.3
4.4
1.6
1.2
1.2
3.3
2.8
3.8
2.9
3.7
1.8
18.2
1.9
12.7
1.9
2.6
*most recent FY available, except averages as noted
Valuation multiples (based on 2016 estimates)
Discretionary
Staples
Energy
Financials
Finc. Services
Real Estate
Health Care
Industrials
Materials
Technology
Utilities
S&P 500
Earnings per share growth
20%
378%
10%
0%
-10%
-79%
2016
2017
Industrials
Materials
-20%
Discretionary
Staples
Energy
Financials
Finc. Services
Real Estate
Health Care
Technology
Utilities
Note: All valuation metrics on this page calculated based on consensus estimates of current index constituents, as collected by Bloomberg and
FactSet. Definitions of technical terms can be found on page 2 of this document.
© 2016 AltaVista Research, LLC. All Rights Reserved. This report is provided for informational purposes only, and AltaVista makes no warranties with
respect to its accuracy. See Disclosure page for additional disclosures.
October 31, 2016
Valuation Guide
Consumer Discretionary Select Sector
This page contains historical price-to-earnings (P/E)
and price-to-book value (P/BV) multiples based on
rolling twelve-months' earnings and book value per
share figures, respectively, for each Select Sector Index
(maximum value of 100). It illustrates how these
indices have traded in the recent past in relation to
these two valuation metrics.
20
15
1.0
0.0
2011
2012
2013
2014
2015
2016
P/BV (x)
P/E (left)
P/BV (right)
0
2.0
2014
2015
2016
2017
50
0.5
0
2012
2013
2014
2015
2016
0.0
2017
1.0
20
P/BV (x)
1.5
P/BV (x)
P/E (x)
Health Care Select Sector
10
15
10
0.5
5
P/E (left)
P/BV (right)
0.0
0
2011
2012
2013
2.0
1.0
P/E (left)
P/BV (right)
2011
Financial Select Sector
2.5
1.5
P/E (x)
2013
100
1.0
0.0
2012
2017
P/BV (x)
150
P/E (x)
3.0
15
P/BV (right)
4.0
12
2011
P/E (left)
0
5.0
6
4.0
Energy Select Sector
P/E (x)
18
5.0
2.0
5
Consumer Staples Select Sector
6.0
3.0
10
Investors may consider this along with other data and
information when buying or selling any security
tracking these indices.
24
P/E (x)
25
P/BV (x)
Trends in P/E and P/BV multiples
2014
2015
2016
2017
4.0
3.0
2.0
5
P/E (left)
1.0
P/BV (right)
0
0.0
2011
2012
2013
2014
2015
2016
2017
*Note: maximum P/E = 100, may also indicate losses
P/E (left)
P/BV (right)
0
2011
2012
2013
2014
2015
2016
20
3.0
15
2.0
10
1.0
5
0.0
0
2017
15
P/BV (x)
20
10
P/E (left)
P/BV (right)
4.0
15
3.0
0.0
2012
2013
2011
20
1.0
0
2011
2.0
5.0
2.0
5
3.0
P/E (left)
1.0
P/BV (right)
0.0
2012
2013
2014
2015
2016
2017
Utilities Select Sector
P/E (x)
Technology Select Sector
P/BV (x)
4.0
4.0
2014
2015
2016
2017
2.0
1.5
10
1.0
5
P/E (left)
P/BV (x)
5
25
P/E (x)
10
5.0
P/E (x)
15
P/BV (x)
20
Materials Select Sector
P/E (x)
Industrial Select Sector
P/BV (right)
0
0.5
0.0
2011
2012
2013
2014
2015
2016
2017
© 2016 AltaVista Research, LLC. All Rights Reserved. This report is provided for informational purposes only, and AltaVista makes no warranties
with respect to its accuracy. See Disclosure page for additional disclosures.
Consumer Discretionary Select Sector Index
IXY
Index Price History
AltaVista Recommendation
900
800
700
600
500
400
300
200
100
0
2005
Description
The Consumer Discretionary Select Sector Index is a
modified cap-weighted index. The index is intended to track
the movements of companies in the S&P500 that are
involved in consumer cyclical or transportation industries.
The index was established with a value of 250 on June 30,
1998.
2007
2009
2011
2013
2015
2017
NOTES: An investor cannot invest directly in an index.
Index returns do not represent returns from any fund.
The Index does not charge management fees or
brokerage expenses, nor does the Index lend securities,
and no revenues from securities lending were added to
the performance shown.
Index Total Returns
One year
Five year
Ten year
Since inception
-1.8%
16.9%
9.5%
7.8%
*as of 10/31/16. See Notes.
INDEX PRICE
AS OF 10/31/16
UNDERWEIGHT
Below average appreciation potential. A rating of
UNDERWEIGHT indicates that stocks in this index
are trading at relatively expensive valuations
and/or have below-average fundamentals. The
rating is based on a proprietary scoring system
that analyzes metrics such as Return on Equity
and Price-to-Book Value multiples.
AVOID
NEUTRAL
UNDERWGT.
Risk Measures
Beta vs. S&P 500
Standard deviation
1.14
13.2%
786.63
SPECULATIVE
OVERWGT.
NOTE: See "How we rate Indices" on the Disclosure page for a
definition of each rating level.
Analyst's Opinion
Per Share Results
& Estimates
2011
Sales
427.50
Earnings
27.29
Book Value
146.46
Dividends
6.17
Sales growth
EPS growth
2012
438.04
29.44
153.18
7.62
2013
463.23
32.64
153.00
8.62
2014
481.05
33.16
151.18
10.29
2015
501.35
37.10
152.80
11.98
2016E
577.14
41.87
183.24
12.90
2017E
605.16
45.89
215.29
13.60
2.4%
7.8%
5.7%
10.8%
3.8%
1.6%
4.2%
11.8%
15.1%
12.8%
4.8%
9.5%
Return on Equity
Net Margins
30%
Trend in Current FY Est.
106
8%
7%
6%
5%
4%
3%
2%
1%
0%
25%
20%
15%
10%
5%
0%
2011
2013
2015
2017
Constituent Allocation
No. of constituents
Weighted avg mkt cap (mns)
Med mkt cap (mns)
Large cap ( >$10bn)
Mid cap ($2-10bn)
Small cap ( <$2bn)
2013
2015
2017
94
6 mo
4 mo
2 mo
Industry Breakdown
13.3%
6.7%
6.5%
6.1%
4.2%
3.4%
3.2%
3.1%
3.0%
2.6%
52.0%
86
$106,847
$12,373
91.0%
9.0%
0.0%
Leisure
2016E
18.8
12.5
1.4
4.3
Price-to-Earnings
Price-to-Cash Flow
Price-to-Sales
Price-to-Book Value
98
2011
Consumer firms have become more profitable
since the financial crisis--see Net Margins and
ROE--although we question the continued
improvement in margins implied by the
consensus estimates for 2017. But valuation
multiples appear to be trending lower after
trading in a narrow range for the last two years,
and as the 2nd best performing sector over the
past 10 years (after Staples) Discretionary firms
remain richly valued vs. the S&P 500.
Valuation Metrics
102
Top 10 Constituents
AMAZON.COM INC
HOME DEPOT INC
COMCAST CORP-CL A
WALT DISNEY CO/THE
MCDONALD'S CORP
STARBUCKS CORP
PRICELINE.COM INC
NIKE INC -CL B
TIME WARNER INC
LOWE'S COS INC
TOTAL
11-16E
CAGR
6.2%
8.9%
4.6%
15.9%
Autos &
parts
Durables
today
2017E
17.1
10.8
1.3
3.7
Historical P/E Ratio*
22
20
18
16
14
12
10
8
6
2011
2012
2013
2014
2015
2016
2017
*based on twelve months' forward EPS (max value of 100)
Media
Retail
Other Fundamental Data
LT growth est.
Payout ratio
Debt-to-equity
For more information visit
www.etfresearchcenter.com
©2016 AltaVista Research, LLC. All rights reserved. This report is provided for informational purposes only, and AltaVista makes no warranties with respect to its accuracy. See
Disclosure page for additional disclosures.
11.7%
30.8%
1.2x
Consumer Staples Select Sector Index
IXR
Index Price History
Description
The Consumer Staples Select Sector Index is a modified capweighted index. The index is intended to track the
movements of companies in the S&P500 that are involved in
the development or production of consumer goods. The
index was developed with a value of 250 on June 30, 1998.
UNDERWEIGHT
600
500
400
300
200
100
0
2005
2007
2009
2011
2013
2015
2017
Index Total Returns
One year
Five year
Ten year
Since inception
8.7%
14.4%
10.5%
6.3%
INDEX PRICE
AS OF 10/31/16
AVOID
0.68
10.2%
SPECULATIVE
NEUTRAL
UNDERWGT.
Risk Measures
Beta vs. S&P 500
Standard deviation
529.93
OVERWGT.
Analyst's Opinion
Per Share Results
& Estimates
2011
Sales
330.96
Earnings
22.08
Book Value
99.01
Dividends
10.42
Sales growth
EPS growth
2012
343.34
22.74
97.88
10.26
2013
350.25
24.10
98.23
12.62
2014
359.10
24.77
93.31
12.58
2015
364.74
24.12
109.91
13.70
2016E
373.60
25.06
121.58
13.78
2017E
392.12
27.27
134.26
14.68
3.7%
2.9%
2.0%
5.9%
2.5%
2.8%
1.5%
-2.6%
2.4%
3.8%
4.9%
8.8%
Return on Equity
Net Margins
30%
11-16E
CAGR
2.5%
2.6%
4.2%
5.7%
104
8%
Valuation Metrics
102
25%
6%
20%
4%
10%
96
94
2%
5%
0%
2013
2015
2017
2017E
19.4
14.8
1.4
4.0
92
0%
2011
2016E
21.2
15.9
1.4
4.4
Price-to-Earnings
Price-to-Cash Flow
Price-to-Sales
Price-to-Book Value
100
98
15%
Return on Equity appears headed in the wrong
direction and sales and EPS estimates for next
year look overly optimistic to us in light of recent
history. In any case Consumer Staples stocks
have seen their valuation multiples expand
considerably over the last five years -- see the
historical P/E ratio below -- and as a result these
stocks continue to appear expensive, leading to
an UNDERWEIGHT recommendation.
2011
2013
2015
2017
90
6 mo
4 mo
2 mo
today
22
20
Top 10 Constituents
PROCTER & GAMBLE CO/THE
COCA-COLA CO/THE
PHILIP MORRIS INTERNATIONAL
ALTRIA GROUP INC
WAL-MART STORES INC
CVS CAREMARK CORP
PEPSICO INC
WALGREENS BOOTS ALLIANCE INC
COSTCO WHOLESALE CORP
MONDELEZ INTERNATIONAL INC-A
TOTAL
No. of constituents
Med mkt cap (mns)
Large cap ( >$10bn)
Mid cap ($2-10bn)
Small cap ( <$2bn)
Industry Breakdown
12.5%
8.8%
8.0%
6.3%
5.7%
4.9%
4.8%
4.0%
3.7%
3.6%
62.2%
37
$114,974
$20,209
98.2%
1.8%
0.0%
18
HH &
Personal
Products
Food &
Staples
Retail
16
14
12
10
2011
2012
2013
2014
2015
2016
2017
Food, Bvg &
Tobacco
LT growth est.
Payout ratio
Debt-to-equity
8.7%
55.0%
0.9x
©2016 AltaVista Research, LLC. All rights reserved. This report is provided for informational purposes only, and AltaVista makes no warranties with respect to its accuracy. See Disclosure
page for additional disclosures.
Energy Select Sector Index
IXE
Index Price History
Description
1,200
The Energy Select Sector Index is a modified capitalizationweighted index. The index is intended to track the
the development or production of energy products. The
index was established with a value of 250 on June 30, 1998.
UNDERWEIGHT
1,000
800
600
400
200
0
2005
2007
2009
2011
2013
2015
2017
Index Total Returns
One year
Five year
Ten year
Since inception
3.9%
2.1%
4.3%
8.4%
INDEX PRICE
AS OF 10/31/16
AVOID
1.04
18.8%
SPECULATIVE
NEUTRAL
UNDERWGT.
Risk Measures
Beta vs. S&P 500
Standard deviation
688.33
OVERWGT.
Analyst's Opinion
Per Share Results
& Estimates
2011
Sales
784.57
Earnings
39.74
Book Value
355.06
Dividends
12.82
Sales growth
EPS growth
2012
786.79
43.36
389.78
14.61
2013
766.12
43.73
407.44
17.05
2014
749.66
50.85
448.19
19.86
2015
505.39
22.08
448.39
20.97
2016E
412.06
4.54
434.74
17.86
2017E
514.83
21.68
438.76
17.78
0.2%
9.1%
-2.6%
0.8%
-2.1%
16.2%
-32.5%
-56.5%
-18.4%
-79.4%
24.9%
377.5%
Return on Equity
Net Margins
14%
8%
7%
6%
5%
4%
3%
2%
1%
0%
12%
10%
8%
6%
4%
2%
0%
2011
2013
2015
2017
No. of constituents
Med mkt cap (mns)
Large cap ( >$10bn)
Mid cap ($2-10bn)
Small cap ( <$2bn)
This year is likely to be another "write-off" in
terms of earnings--and estimates are falling again
after stabilizing for a few months--but profits are
forecast to rebound in 2017. On such depressed
earnings the P/E ratio naturally appears elevated,
but Energy stocks might be attractive on P/BV if
the lousy ROE figures for 2015-17E is temporary,
rather than a "new normal." Nonetheless based
on where estimates stand now the sector rates as
UNDERWEIGHT.
100
Valuation Metrics
80
Price-to-Earnings
Price-to-Cash Flow
Price-to-Sales
Price-to-Book Value
60
40
2016E
151.6
13.6
1.7
1.6
2017E
31.8
8.9
1.3
1.6
20
2011
Top 10 Constituents
EXXON MOBIL CORP
CHEVRON CORP
SCHLUMBERGER LTD
PIONEER NATURAL RESOURCES CO
EOG RESOURCES INC
OCCIDENTAL PETROLEUM CORP
HALLIBURTON CO
CONOCOPHILLIPS
SPECTRA ENERGY CORP
KINDER MORGAN INC
TOTAL
11-16E
CAGR
-12.1%
n/m
4.1%
6.9%
2013
2015
2017
0
6 mo
2 mo
today
140
120
100
80
60
40
20
0
Industry Breakdown
17.2%
14.5%
8.3%
5.1%
4.4%
3.6%
3.5%
3.0%
2.9%
2.8%
65.2%
36
$114,886
$15,313
93.2%
6.9%
0.0%
4 mo
2011
2012
2013
2014
2015
2016
2017
Energy
LT growth est.
Payout ratio
Debt-to-equity
45.9%
393.5%
0.4x
Financial Select Sector Index
IXM
Index Price History
Description
The Financial Select Sector Index is a modified cap-weighted
index. The index isintended to track the movements of
companies in the S&P500 that are involved in the
development or production of financial products. This index
was established with a value of 250 on June 30, 1998.
OVERWEIGHT
400
350
300
250
200
150
100
50
0
2005
2007
2009
2011
2013
2015
2017
Index Total Returns
One year
Five year
Ten year
Since inception
3.5%
14.8%
-1.6%
2.4%
INDEX PRICE
AS OF 10/31/16
Above average appreciation potential. A rating of
OVERWEIGHT indicates that stocks in this index
are trading at attractive valuations and/or have
above-average fundamentals. The rating is based
on a proprietary scoring system that analyzes
metrics such as Return on Equity and Price-toBook Value multiples.
AVOID
1.05
13.2%
SPECULATIVE
NEUTRAL
UNDERWGT.
Risk Measures
Beta vs. S&P 500
Standard deviation
242.94
OVERWGT.
Analyst's Opinion
Per Share Results
& Estimates
2011
Sales
102.79
Earnings
12.18
Book Value
160.51
Dividends
2.33
2012
113.21
14.32
170.29
3.03
2013
109.75
17.03
179.78
3.65
2014
112.47
16.08
188.37
4.29
2015
114.43
18.15
191.13
4.90
2016E
117.19
18.52
207.15
5.36
2017E
116.14
21.01
218.99
6.02
Sales growth
EPS growth
10.1%
17.4%
-3.0%
18.9%
2.4%
-5.5%
1.7%
12.8%
2.4%
2.0%
-0.8%
13.4%
Return on Equity
Net Margins
12%
11-16E
CAGR
2.7%
8.7%
5.2%
18.1%
104
20%
Valuation Metrics
102
10%
15%
8%
6%
98
96
4%
5%
2%
0%
2013
2015
2017
2017E
11.6
13.4
2.1
1.1
94
0%
2011
2016E
13.1
14.9
2.1
1.2
Price-to-Earnings
Price-to-Cash Flow
Price-to-Sales
Price-to-Book Value
100
10%
With Real Estate no longer part of the sector, the
focus is on Financial Services where the outlook
remains clouded by interest rates, the ageing bull
market, and of course the election. But 3Q16
results have been strong so far, and postFinancial Crisis return on equity for these firms
has settled into a range around 8-10%, while the
stocks trade at quite reasonable valuation
multiples. Financials enjoy an OVERWEIGHT
recommendation as a result.
2011
Top 10 Constituents
2013
2015
2017
92
6 mo
4 mo
2 mo
11.1%
10.2%
8.6%
6.9%
5.9%
2.9%
2.7%
2.5%
2.4%
2.1%
55.4%
No. of constituents
Med mkt cap (mns)
Large cap ( >$10bn)
Mid cap ($2-10bn)
Small cap ( <$2bn)
64
$92,393
$16,947
84.8%
4.0%
0.0%
15
Industry Breakdown
BERKSHIRE HATHAWAY INC-CL B
JPMORGAN CHASE & CO
WELLS FARGO & CO
BANK OF AMERICA CORP
CITIGROUP INC
US BANCORP
GOLDMAN SACHS GROUP INC
AMERICAN INTERNATIONAL GROUP
CHUBB LIMITED
METLIFE INC
TOTAL
today
10
5
Insurance
0
2011
Banks
Diversified
2012
2013
2014
2015
2016
2017
LT growth est.
Payout ratio
Debt-to-equity
7.5%
28.9%
1.8x
Financial Services Select Sector Index
IXFNS
Index Price History
Description
85
The Financial Services Select Sector Index is a modified capweighted index. The index isintended to track the
the development or production of financial products,
excluding REITs. This index was established with a value of
80.03 on August 17, 2015.
OVERWEIGHT
80
75
70
65
8/17/15
9/14/15
10/12/15
11/9/15
12/7/15
1/4/16
2/1/16
2/29/16
3/28/16
4/25/16
5/23/16
6/20/16
7/18/16
8/15/16
9/12/16
10/10/16
60
Index Total Returns
One year
Five year
Ten year
Since inception
2.2%
n/a
n/a
n/a
AVOID
n/a
n/a
SPECULATIVE
NEUTRAL
UNDERWGT.
Risk Measures
Beta vs. S&P 500
Standard deviation
75.67
INDEX PRICE
AS OF 10/31/16
OVERWGT.
Analyst's Opinion
Per Share Results
& Estimates
2011
Sales
31.81
Earnings
3.80
Book Value
49.92
Dividends
0.73
Sales growth
EPS growth
2012
34.96
4.46
53.28
0.94
2013
34.02
5.31
55.74
1.14
2014
35.10
5.01
58.24
1.34
2015
35.87
5.65
60.02
1.53
2016E
36.62
5.77
64.30
1.67
2017E
36.12
6.54
68.38
1.88
9.9%
17.4%
-2.6%
18.9%
3.1%
-5.5%
2.1%
12.8%
2.0%
2.0%
-1.3%
13.3%
Return on Equity
Net Margins
12%
11-16E
CAGR
2.9%
8.7%
5.2%
18.1%
104
20%
Valuation Metrics
102
10%
15%
8%
6%
98
96
4%
5%
2%
0%
2013
2015
2017
2017E
11.6
13.4
2.1
1.1
94
0%
2011
2016E
13.1
14.9
2.1
1.2
Price-to-Earnings
Price-to-Cash Flow
Price-to-Sales
Price-to-Book Value
100
10%
Essentially identical to the broader Financial
sector, these Financial Services firms have made
steady improvements in profitability since the
Financial Crisis. EPS growth next year is forecast
to exceed all other sectors except for rebounding
commodities, although uncertainty abounds given
interest rates and bank instability abroad, not to
mention the election. However, lower valuation
multiples already discount this, resulting in an
OVERWEIGHT recommendation.
2011
Top 10 Constituents
2013
2015
2017
92
6 mo
4 mo
2 mo
11.2%
10.2%
8.6%
7.0%
5.9%
2.9%
2.7%
2.5%
2.4%
2.1%
55.5%
No. of constituents
Med mkt cap (mns)
Large cap ( >$10bn)
Mid cap ($2-10bn)
Small cap ( <$2bn)
64
$92,551
n/a
84.8%
4.0%
0.0%
15
Industry Breakdown
BERKSHIRE HATHAWAY INC-CL B
JPMORGAN CHASE & CO
WELLS FARGO & CO
BANK OF AMERICA CORP
CITIGROUP INC
US BANCORP
GOLDMAN SACHS GROUP INC
AMERICAN INTERNATIONAL GROUP
CHUBB LIMITED
METLIFE INC
TOTAL
today
10
5
Insurance
0
2011
Banks
2012
2013
2014
2015
2016
2017
Diversified
LT growth est.
Payout ratio
Debt-to-equity
7.5%
28.9%
1.8x
Health Care Select Sector Index
IXV
Index Price History
Description
The Health Care Select Sector Index is a modified capweighted index. The index is intended to track the
health care services. The index was established with a value
of 250 on June 30, 1998.
OVERWEIGHT
900
800
700
600
500
400
300
200
100
0
2005
2007
2009
2011
2013
2015
2017
Index Total Returns
One year
Five year
Ten year
Since inception
-4.0%
17.1%
9.4%
7.2%
INDEX PRICE
AS OF 10/31/16
AVOID
0.95
12.9%
SPECULATIVE
NEUTRAL
UNDERWGT.
Risk Measures
Beta vs. S&P 500
Standard deviation
676.01
OVERWGT.
Analyst's Opinion
Per Share Results
& Estimates
2011
Sales
294.38
Earnings
29.43
Book Value
137.17
Dividends
7.21
Sales growth
EPS growth
2012
306.83
30.97
145.43
8.24
2013
323.87
32.04
157.11
9.04
2014
362.65
37.16
166.27
9.93
2015
392.67
41.14
210.16
11.02
2016E
427.34
44.83
242.50
11.92
2017E
448.64
49.00
279.67
12.74
4.2%
5.2%
5.5%
3.4%
11.9%
15.9%
8.2%
10.7%
8.8%
8.9%
4.9%
9.3%
Return on Equity
Net Margins
12%
103
20%
10%
102
8%
101
6%
100
4%
99
2%
98
10%
5%
0%
0%
2011
2013
2015
2017
2011
Top 10 Constituents
2013
2015
2017
97
6 mo
Valuation Metrics
12.1%
7.5%
6.3%
5.2%
4.4%
4.2%
3.8%
3.6%
3.4%
3.3%
53.7%
No. of constituents
Med mkt cap (mns)
Large cap ( >$10bn)
Mid cap ($2-10bn)
Small cap ( <$2bn)
59
$112,541
$19,731
97.7%
2.3%
0.0%
2016E
15.1
13.9
1.6
2.8
Price-to-Earnings
Price-to-Cash Flow
Price-to-Sales
Price-to-Book Value
4 mo
2 mo
Industry Breakdown
JOHNSON & JOHNSON
PFIZER INC
MERCK & CO. INC.
UNITEDHEALTH GROUP INC
MEDTRONIC PLC
AMGEN INC
GILEAD SCIENCES INC
ABBVIE INC
ALLERGAN PLC
BRISTOL-MYERS SQUIBB CO
TOTAL
Until the recent decline in biotech shares dragged
the sector's overall P/E down, investors had been
revaluing Health Care stocks with steadily higher
multiples since late 2011. Perhaps the recent
pullback in valuations (P/E, P/BV) reflects the
declining trend in Return on Equity. But are
investors overreacting? Multiples are at their
lowest level in years resulting in the highest rating
for any sector, firmly in OVERWEIGHT territory.
25%
15%
11-16E
CAGR
7.7%
8.8%
12.1%
10.6%
Equip &
Svcs.
today
2017E
13.8
11.6
1.5
2.4
20
18
16
14
12
10
8
6
2011
2012
2013
2014
2015
2016
2017
Pharma &
Biotech
LT growth est.
Payout ratio
Debt-to-equity
9.2%
26.6%
0.6x
Industrial Select Sector Index
IXI
Index Price History
Description
The Industrial Select Sector index is a modified capitalizationweighted index. The index is intended to track the
industrial products and services. The index was established
with a value of 250 on June 30, 1998.
NEUTRAL
700
600
500
400
300
200
100
0
2005
2007
2009
2011
2013
2015
2017
Index Total Returns
One year
Five year
Ten year
Since inception
7.9%
13.9%
7.7%
7.0%
INDEX PRICE
AS OF 10/31/16
Average appreciation potential. A rating of
NEUTRAL indicates that valuations adequately
reflect the fundamentals of stocks in these
indices. The majority of indices we cover fall into
this category. The rating is based on a proprietary
scoring system that analyzes metrics such as
Return on Equity and Price-to-Book Value
multiples.
AVOID
1.04
11.9%
SPECULATIVE
NEUTRAL
UNDERWGT.
Risk Measures
Beta vs. S&P 500
Standard deviation
572.33
OVERWGT.
Analyst's Opinion
Per Share Results
& Estimates
2011
Sales
331.94
Earnings
24.20
Book Value
120.13
Dividends
7.63
Sales growth
EPS growth
2012
345.28
25.87
131.70
8.71
2013
355.08
28.30
145.22
9.78
2014
364.59
32.18
144.64
11.03
2015
347.20
33.58
130.82
12.46
2016E
344.81
33.40
150.57
13.17
2017E
349.21
35.15
169.70
13.99
4.0%
6.9%
2.8%
9.3%
2.6%
13.7%
-4.7%
4.3%
-0.6%
-0.5%
1.2%
5.2%
Return on Equity
Net Margins
104
30%
12%
25%
10%
20%
8%
15%
6%
96
10%
4%
94
5%
2%
92
0%
2013
2015
2017
98
Top 10 Constituents
2013
2015
2017
90
6 mo
4 mo
10.5%
5.6%
4.8%
4.7%
4.5%
4.3%
4.1%
3.6%
2.8%
2.6%
47.5%
No. of constituents
Med mkt cap (mns)
Large cap ( >$10bn)
Mid cap ($2-10bn)
Small cap ( <$2bn)
67
$76,043
$13,105
92.5%
7.5%
0.0%
2 mo
today
2017E
16.3
10.9
1.6
3.4
20
15
Industry Breakdown
GENERAL ELECTRIC CO
3M CO
HONEYWELL INTERNATIONAL INC
BOEING CO
UNITED TECHNOLOGIES CORP
UNION PACIFIC CORP
UNITED PARCEL SERVICE-CL B
LOCKHEED MARTIN CORP
CATERPILLAR INC
GENERAL DYNAMICS CORP
TOTAL
2016E
17.1
11.2
1.7
3.8
Price-to-Earnings
Price-to-Cash Flow
Price-to-Sales
Price-to-Book Value
100
2011
The shale oil & gas revolution is contributing to a
manufacturing renaissance that has resulted in
rising margins and faster long-term EPS growth,
although sales declined last year and are forecast
to be about flat this year, reflecting weak
economies abroad and strong USD. In any case,
the sector's P/E multiple has held fairly steady
while the market's P/E rose in recent years,
leaving Industrials' attractiveness on par with the
S&P 500 in our opinion.
Valuation Metrics
102
0%
2011
11-16E
CAGR
0.8%
6.7%
4.6%
11.5%
10
5
Transport
0
2011
2012
2013
2014
2015
2016
2017
Com. Svcs
Capital
Goods
LT growth est.
Payout ratio
Debt-to-equity
9.0%
39.4%
1.2x
Materials Select Sector Index
IXB
Index Price History
Description
The Materials Select Sector Index is a modified capitalizationweighted index. The index is intended to track the
basic industries. The index was established with a value of
250 on June 30, 1998.
NEUTRAL
600
500
400
300
200
100
0
2005
2007
2009
2011
2013
2015
2017
Index Total Returns
One year
Five year
Ten year
Since inception
5.5%
8.8%
6.0%
6.7%
INDEX PRICE
AS OF 10/31/16
multiples.
AVOID
1.32
17.1%
SPECULATIVE
NEUTRAL
UNDERWGT.
Risk Measures
Beta vs. S&P 500
Standard deviation
494.96
OVERWGT.
Analyst's Opinion
Per Share Results
& Estimates
2011
Sales
324.71
Earnings
29.41
Book Value
137.74
Dividends
9.85
2012
326.20
26.30
146.44
9.53
2013
332.78
27.12
155.54
11.32
2014
336.60
29.06
155.35
11.25
2015
296.48
27.17
157.47
10.59
2016E
292.24
26.83
173.39
11.06
2017E
302.85
30.82
192.07
11.64
Sales growth
EPS growth
0.4%
-10.5%
2.0%
3.1%
1.1%
7.1%
-11.9%
-6.5%
-1.4%
-1.2%
3.6%
14.8%
Return on Equity
Net Margins
25%
12%
20%
10%
8%
15%
6%
10%
4%
5%
2%
0%
0%
2011
2013
2015
2017
2011
Top 10 Constituents
2013
2015
2017
110
105
100
95
90
85
80
75
70
6 mo
11.5%
11.5%
8.3%
6.3%
5.7%
5.5%
4.7%
4.2%
3.7%
3.6%
65.0%
No. of constituents
Med mkt cap (mns)
Large cap ( >$10bn)
Mid cap ($2-10bn)
Small cap ( <$2bn)
27
$33,672
$11,653
88.4%
11.6%
0.0%
Chemical firms dominate the Materials sector
(about 70%) and benefit from the shale oil and
gas revolution, which is translating into higher
margins. Last year however both revenue and
profits declined as commodity prices fell, and
profits are forecast to decline slightly again this
year before a rebound in 2017. However declines
in valuation multiples over this period appear to
adequately reflect this, putting the sector in
NEUTRAL territory.
Valuation Metrics
2016E
18.5
10.4
1.7
2.9
Price-to-Earnings
Price-to-Cash Flow
Price-to-Sales
Price-to-Book Value
4 mo
2 mo
today
2017E
16.1
9.7
1.6
2.6
25
20
Industry Breakdown
DOW CHEMICAL
DU PONT (E.I.) DE NEMOURS
MONSANTO CO
PRAXAIR INC
ECOLAB INC
AIR PRODUCTS & CHEMICALS INC
LYONDELLBASELL INDU-CL A
PPG INDUSTRIES INC
SHERWIN-WILLIAMS CO/THE
NEWMONT MINING CORP
TOTAL
11-16E
CAGR
-2.1%
n/m
4.7%
2.3%
15
10
5
0
2011
2012
2013
2014
2015
2016
2017
Materials
LT growth est.
Payout ratio
Debt-to-equity
7.7%
41.2%
0.9x
Real Estate Select Sector Index
IXRE
Index Price History
170
Description
The Real Estate Select Sector Index is a modified capweighted index. The index isintended to track the
movements of Real Estate Investment Trusts in the S&P500,
excluding Mortgage REITs. This index was established with a
value of 147.88 on August 17, 2015.
AVOID
160
150
140
8/17/15
9/14/15
10/12/15
11/9/15
12/7/15
1/4/16
2/1/16
2/29/16
3/28/16
4/25/16
5/23/16
6/20/16
7/18/16
8/15/16
9/12/16
10/10/16
130
Index Total Returns
One year
Five year
Ten year
Since inception
36.4%
n/a
n/a
n/a
INDEX PRICE
AS OF 10/31/16
A rating of AVOID indicates poor appreciation
potential, but some indices in this category consist
of stocks for which our fundamentally-driven
analysis may be less relevant, and which may not
reflect the value of dividend income. The rating is
based on a proprietary scoring system that
analyzes metrics such as Return on Equity and
Price-to-Book Value multiples.
AVOID
n/a
n/a
SPECULATIVE
NEUTRAL
UNDERWGT.
Risk Measures
Beta vs. S&P 500
Standard deviation
148.22
OVERWGT.
Analyst's Opinion
Per Share Results
& Estimates
2011
Sales
16.89
Earnings
2.09
Book Value
32.56
Dividends
3.03
2012
17.53
2.22
39.26
3.20
2013
20.15
2.61
42.14
3.58
2014
20.97
3.75
44.92
4.56
2015
22.79
4.30
46.45
4.91
2016E
24.13
4.86
45.11
6.25
2017E
25.76
4.11
43.57
5.41
Sales growth
EPS growth
3.7%
6.2%
14.9%
17.8%
4.0%
43.5%
8.6%
14.7%
5.8%
12.9%
6.7%
-15.4%
Return on Equity
Net Margins
25%
115
10%
20%
110
15%
105
10%
100
5%
95
6%
4%
2%
0%
0%
2011
2013
2015
2017
2011
2013
Most REIT investors don't focus on the EPS
figures shown here and which drive our ratings,
but even the more relevant cash flow multiples
appear a bit rich to us. REITs must pay out the
majority of their earnings, in turn providing
investors with what we estimate will be the richest
yields of any Select Sector index in 2016, but
beware that current consensus forecasts suggest
dividends will decline next year.
12%
8%
11-16E
CAGR
7.4%
18.4%
6.7%
15.6%
2015
2017
90
6 mo
Valuation Metrics
2016E
30.5
16.3
6.1
3.3
Price-to-Earnings
Price-to-Cash Flow
Price-to-Sales
Price-to-Book Value
4 mo
2 mo
today
2017E
36.1
16.7
5.8
3.4
60
50
Top 10 Constituents
Industry Breakdown
SIMON PROPERTY GROUP INC
AMERICAN TOWER CORP-CL A
PUBLIC STORAGE
CROWN CASTLE INTL CORP
PROLOGIS INC
EQUINIX INC
WELLTOWER, INC.
VENTAS INC
AVALONBAY COMMUNITIES INC
WEYERHAEUSER CO
TOTAL
10.8%
9.3%
5.8%
5.8%
5.0%
4.7%
4.6%
4.4%
4.3%
4.2%
58.8%
No. of constituents
Med mkt cap (mns)
Large cap ( >$10bn)
Mid cap ($2-10bn)
Small cap ( <$2bn)
28
$25,872
n/a
88.7%
11.3%
0.0%
40
30
20
10
0
2011
2012
2013
2014
2015
2016
2017
Real Estate
LT growth est.
Payout ratio
Debt-to-equity
7.2%
128.6%
1.3x
Technology Select Sector Index
IXT
Index Price History
Description
The Technology Select Sector Index is a modified capweighted index. The index is intended to track the
the development or production of technology products. The
index was established with a value of 250 on June 30, 1998.
NEUTRAL
550
500
450
400
350
300
250
200
150
100
50
0
2005
2007
2009
2011
2013
2015
2017
Index Total Returns
One year
Five year
Ten year
Since inception
11.0%
15.1%
9.5%
3.5%
INDEX PRICE
AS OF 10/31/16
475.87
multiples.
AVOID
SPECULATIVE
NEUTRAL
UNDERWGT.
OVERWGT.
ALTAR Scores™
Risk Measures
Beta vs. S&P 500
Standard deviation
1.14
13.5%
Analyst's Opinion
Per Share Results
& Estimates
2011
Sales
114.11
Earnings
18.02
Book Value
86.38
Dividends
4.84
2012
115.36
20.75
91.49
5.38
2013
120.31
21.62
99.31
6.86
2014
127.04
23.21
99.89
7.18
2015
144.36
26.31
110.62
8.34
2016E
149.58
26.84
128.68
8.81
2017E
156.82
29.56
148.78
9.26
Sales growth
EPS growth
1.0%
15.1%
4.2%
4.1%
5.5%
7.3%
13.6%
13.3%
3.6%
2.0%
4.8%
10.1%
Return on Equity
Net Margins
30%
106
20%
25%
15%
20%
15%
11-16E
CAGR
5.6%
8.3%
8.3%
12.7%
Valuation Metrics
2016E
17.7
12.3
3.2
3.7
Price-to-Earnings
Price-to-Cash Flow
Price-to-Sales
Price-to-Book Value
102
10%
98
10%
Although profitability in terms of margins and ROE
remains exceptionally high, earnings growth has
declined in recent years, and long-term EPS
growth expectations are now on par with the S&P
500 overall. However, while valuation multiples
have crept slowly upward over the past few years,
they've lagged gains for the S&P, putting the
sector at a P/E discount. As a result, we think
Tech has modestly above-average appreciation
potential.
2017E
16.1
11.2
3.0
3.2
5%
5%
0%
0%
2011
2013
2015
2017
2011
Top 10 Constituents
APPLE INC
MICROSOFT CORP
FACEBOOK
ALPHABET INC. CLASS A
ALPHABET INC. CLASS C
AT&T INC
INTEL CORP
VERIZON COMMUNICATIONS INC
VISA INC-CLASS A SHARES
CISCO SYSTEMS INC
TOTAL
No. of constituents
Med mkt cap (mns)
Large cap ( >$10bn)
Mid cap ($2-10bn)
Small cap ( <$2bn)
2013
2015
2017
94
6 mo
4 mo
Telecom
15
Semis
10
5
2011
Hardware
2012
2013
2014
2015
2016
2017
Software
72
$287,254
$13,718
98.4%
1.6%
0.0%
today
20
Industry Breakdown
13.8%
10.5%
6.9%
5.4%
5.3%
5.0%
3.7%
3.7%
3.5%
3.5%
61.2%
2 mo
LT growth est.
Payout ratio
Debt-to-equity
9.6%
32.8%
0.5x
Utilities Select Sector Index
IXU
Index Price History
Description
The Utilities Select Sector Index is a modified capitalizationweighted index. The index is intended to track the
movements of companies in the S&P500 that are utilities.
The index was established with a value of 250 on June 30,
1998.
NEUTRAL
600
500
400
300
200
100
0
2005
2007
2009
2011
2013
2015
2017
Index Total Returns
One year
Five year
Ten year
Since inception
17.1%
11.5%
7.4%
6.3%
INDEX PRICE
AS OF 10/31/16
multiples.
AVOID
0.20
13.3%
SPECULATIVE
NEUTRAL
UNDERWGT.
Risk Measures
Beta vs. S&P 500
Standard deviation
499.81
OVERWGT.
Analyst's Opinion
Per Share Results
& Estimates
2011
Sales
244.01
Earnings
26.95
Book Value
209.99
Dividends
14.97
Sales growth
EPS growth
2012
247.42
26.48
237.33
15.55
2013
253.53
26.21
249.48
15.86
2014
274.79
27.34
259.20
16.10
2015
260.41
27.28
263.25
16.71
2016E
265.88
28.35
274.19
17.49
2017E
274.19
28.73
284.31
18.45
1.3%
-1.7%
2.4%
-1.0%
8.3%
4.3%
-5.2%
-0.2%
2.0%
3.9%
3.1%
1.3%
Return on Equity
Net Margins
14%
12%
12%
10%
10%
106
Valuation Metrics
98
4%
4%
2016E
17.6
8.4
1.9
1.8
Price-to-Earnings
Price-to-Cash Flow
Price-to-Sales
Price-to-Book Value
102
6%
6%
Utilities' share prices went on a tear in H1 2016,
gaining about 23% and pushing the sector's P/E
ratio to its highest level in years (see chart below)
although they've retreated a bit in the past few
months. Meanwhile environmental regulations and
distributed generation represent dual threats to
profitability-- witness the declining trend in ROE in
the last few years, resulting in only 1% annual
earnings growth between 2011-16E.
8%
8%
11-16E
CAGR
1.7%
1.0%
5.5%
3.2%
2017E
17.4
8.0
1.8
1.8
2%
2%
0%
0%
2011
2013
2015
2017
2011
Top 10 Constituents
2013
2015
2017
94
6 mo
4 mo
2 mo
9.7%
8.2%
8.2%
7.6%
5.2%
5.1%
5.0%
4.4%
3.9%
3.8%
60.9%
No. of constituents
Med mkt cap (mns)
Large cap ( >$10bn)
Mid cap ($2-10bn)
Small cap ( <$2bn)
28
$30,052
$11,737
92.6%
7.4%
0.0%
20
Industry Breakdown
NEXTERA ENERGY GROUP
DUKE ENERGY CORP
SOUTHERN CO
DOMINION RESOURCES INC/VA
AMERICAN ELECTRIC POWER
EXELON CORP
P G & E CORP
SEMPRA ENERGY
EDISON INTERNATIONAL
PPL CORPORATION
TOTAL
today
15
10
5
2011
2012
2013
2014
2015
2016
2017
Utilities
SEL002430 Exp 12/31/16
LT growth est.
Payout ratio
Debt-to-equity
4.8%
61.7%
1.3x

Sector Analyzer Report

Transcription

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