consumer discretionary xly

J U S T I N J A E N A E R I C R U S S E L L

T H O M A S L A S K O W S K I A U S T I N F R A Z I E R

T I M F I L E M A L L A RY D A N A

Consumer Discretionary XLY

88.96%

11.04% 0 0 S&P500

Leisure

Media

Retail

Company Market Value (in Millions) Wal-Mart $249,386

Amazon $112,867

McDonalds $93,986

Comcast Corp $93,975

Walt Disney $93,195

Home Depot $89,195

Top Ten Industries in Our Sector

Heterogeneous Sector 1. Media 31.01% 2. Specialty Retail 17.92% 3. Hotels Restaurants & Leisure 17.46% 4. Internet & Catalog Retail 9.48% 5. Multiline Retail 7.42% 6. Textiles, Apparel & Luxury Goods 5.17% 7. Automobiles 3.51% 8. Auto Components 3.39% 9. Household Durables 2.19% 10. Leisure Equipment & Products 1.11% 11. Distributors 0.70%

Annual Return

Indicators

Interest rates, inflation, unemployment, income, disposable income, sales projections

48-mo. new car

7.77 7.02 6.72 6.21 5.73 5.79 5.89 5.40 5.07 4.87 4.87

24-mo. personal

12.38

11.37

11.10

10.87

10.88

11.37

10.80

10.36

10.88

10.94

10.94

07 08 09 10 11 11 11 12 12 12

Q1 Q2 Q3 Q1 Q2 Q3

Income and Spending

From January to August, spending on consumer durables accounted for 9% of income in the United States.

Retail Sales Estimates

Not Adjusted Adjusted2

8 Month Total 2012 2011 2012 2011

% Chg. Aug.3 Jul. Jun. Aug. Jul. Aug.3 Jul. Jun. Aug. Jul.

2012 2011 (a) (p) (r) (a) (p) (r) (r) (r)

Retail & food services,

total ………………………………. 3,207,701 5.8 421,436 400,945 406,128 398,950 388,749 406,748 403,176 400,635 388,595 388,064

Global Economy

United States exports in consumer durables and automotive parts accounted for 20.8% of all goods exported from 2011.

Opportunity in developing nations

1 billion people will join the middle class by 2020

Increase in consumer spending

Focus on high end products

Global Events affecting CND E U R O P E AN D E B T C R I S I S

Global Events Affecting CND

Wars/Instability in the Middle East

Volatility

Risk (Modern Portfolio Theory) Statistics

3 Years

Statistic XLY Category

Alpha (against Standard Index) 13.28 10.09

Beta (against Standard Index) 0.92 0.99

Mean Annual Return 1.80 1.59

R-squared (against Standard Index) 79.28 74.83

Standard Deviation 17.74 19.81

Sharpe Ratio 1.21 0.97

5 Years

Statistic XLY Category

Alpha (against Standard Index) 7.86 N/A

Beta (against Standard Index) 0.96 N/A

Mean Annual Return 0.69 N/A

R-squared (against Standard Index) 76.08 N/A

Standard Deviation 23.09 N/A

Sharpe Ratio 0.33 N/A

Volatility Continued

10 Years

Statistic XLY Category

Alpha (against Standard Index) 1.52 1.53

Beta (against Standard Index) 0.96 0.90

Mean Annual Return 0.75 N/A

R-squared (against Standard Index) 72.72 73.30

Standard Deviation N/A 17.82

Sharpe Ratio N/A N/A

Treynor Ratio 5.94 6.17

Year to Date Return (Mkt): 17.50%

1-Year Total Return (Mkt): 23.16%

3-Year Total Return (Mkt): 22.14%

Comparison

Top Companies in CSD sector by market cap

DIS – Walt Disney Co. - $93.57 Billion

Top Companies in CSD sector by market cap

CMCSA – Comcast Corp. $95.17 Billion

Top Companies in CSD sector by market cap

AMZN – Amazon.com Inc. $117.71 Billion

Top Companies in CSD sector by market cap

MCD – McDonalds Corp. $93.19 Billion

Sector Industry Location Cycle Cyclical or Defensive

Cyclical, does well when consumer confidence is high.

Consumer Discretionary (XLY)

Sensitivity to Business Cycle

Companies doing well

Dividend Growth Rate G= ROE x (1-p) : P= dividend payout percent

Estimated Earnings growth PEG = (P/E)/projected growth in earnings

Our goal: maximize shareholder wealth Continual return on dividends gives confidence

Companies doing well

Name (Dividend Growth)

Symbol

Beta Estimated EG

3-Yr DGR

Acme United (8) ACU 0.39 17.9% 13.7% Nike (10) NKE 0.5 17.8% 17.8% McDonalds (35) MCD 0.18 10.3% 10.3% Genuine Parts (56) GPC 0.7 50% 5.5%

The lower the beta, the less risky the investment is. The estimated earning growth – more confidence, more investors, higher growth The Dividend growth rate – strong dividend growth future dividend growth likely long term profitability

Ratios to determine investment Quality

Price to Earnings Ratio (P/E) Market Value Per Share Earnings Per Share

Home Depot (HD) PE: 21.56 (september 28, 2012)

JCPenny (JCP) PE: 24.29 (september 28, 2012)

Ratios to Determine Investment Quality

Price to Sales Ratio (P/S) Share Price Revenue Per Share

Home Depot (HD) PS: 1.288 (September 28, 2012)

JCPenny (JCP)

PS: .3407 (September 28, 2012)

Sources

"Yahoo! Finance - Business Finance, Stock Market, Quotes, News." Yahoo! Finance. Yahoo, n.d. Web. 27 Sept. 2012. <http://finance.yahoo.com/>.

United States. Federal Reserve. Board of Governors of the Federal Reserve System.Consumer Credit. N.p.: n.p., 2012.

United States. U.S. Bureau of Economic Analysis. Department of Commerce. U.S. INTERNATIONAL TRADE IN GOODS AND SERVICES. N.p.: n.p., 2012.

United States. U.S. Census Bureau. Department of Commerce. ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES. By Ian Thomas. N.p.: n.p., 2012.

"Distributions - Select Sector SPDRs." Distributions - Select Sector SPDRs. McGraw-Hill, n.d. Web. 30 Sept. 2012. <http://www.sectorspdr.com/spdr/distributions/?symbol=XLY>.

"Businessweek." Bloomberg. Bloomberg, n.d. Web. 30 Sept. 2012. <http://investing.businessweek.com/research/sectorandindustry/sectors/sectordetail.asp?code=25>.

"Consumer Cyclical." Wall Street Journal. Wall Street Journal, n.d. Web. 28 Sept. 2012. <http://online.wsj.com/mdc/public/page/2_3024-sm_consumer_cyclical_map.html?mod=topnav_2_3050>.

"Consumer Discretionary." Consumer Discretionary Sector: Themes for 2012. N.p., 12 Dec. 2011. Web. 29 Sept. 2012. <https://www.fidelity.com/viewpoints/consumer-discretionary-sector-2012>.

"Stock Snapshot." Search. N.p., n.d. Web. 01 Oct. 2012. <http://www.sectorspdr.com/eqsnaps/?do=snapshot>.On Oct 1, 2012, at 4:24 PM, Justin Jaena wrote:

Sources

"Home Depot PE Ratio:." Home Depot PE Ratio (HD). YCharts, 28 Sept. 2012. Web. 28 Sept. 2012. <http://ycharts.com/companies/HD/pe_ratio>.

"Home Depot Price / Sales Ratio:." Home Depot Price / Sales Ratio (HD). YCharts, 28 Sept. 2012. Web. 28 Sept. 2012. <http://ycharts.com/companies/HD/ps_ratio>.

"J.C. Penney Company PE Ratio." (JCP). YCharts, 28 Sept. 2012. Web. 28 Sept. 2012. <http://ycharts.com/companies/JCP/pe_ratio>.

"J.C. Penney Company Price / Sales Ratio:." J.C. Penney Company Price / Sales Ratio (JCP). YCharts, 28 Sept. 2012. Web. 28 Sept. 2012. <http://ycharts.com/companies/JCP/ps_ratio>.

Turner, Chris. "S&P 500 Price Projections Based on Earnings." Dshort.com. Advisor Perspective Inc., 10 July 2012. Web. 20 Sept. 2012. <http://advisorperspectives.com/dshort/guest/Chris-Turner-120710-SPX-price-projections.php>.

"S&P 500 Stock Market Index Forecast." Forecastchart.com. Signaltrend Inc, 1 Aug. 2012.

Web. 20 Sept. 2012. <http://www.forecast-chart.com/index-sp-500.html>. "Market Cap Rankings." Market Cap Stock Rankings. Shawn Carpenter, 05 Jan. 2009. Web. 29

Sept. 2012. <http://ycharts.com/rankings/market_cap?p=3>. "Map of Market." Sector SPDR. McGraw-Hill Companies, 01 Jan. 2000. Web. 29 Sept. 2012.

<http://sectorspdr.com/marketmap/>. "Sectors and Cycles." Fidelity Investments. Asset Allocation Research Team, 04 Jan. 2012.

Web. 01 Oct. 2012. <https://www.fidelity.com/viewpoints/sectors-and-cycles>.