5. Largest Companies
Berkshire Hathaway
471.65B
JP Morgan Chase & Co
366.134B
Bank of America Corporation
296.679B
Wells Fargo and Company
268.398B
Citigroup
170.284B
Goldman Sachs Group
83.163B
American Express
83.421B
US Bancorp
81.844B
9. Business Cycle
● Financials show top performance during growth and maturity phases
● High interest rates improve outlook
● As cycle progresses, financials lose due to lower spending
10. Porter’s 5 Forces
Barrier to Entry Moderate Difficult to raise necessary capital to gain entry
Highly supervised
Small banks able to offer more
Supplier Power Moderate Policy has large impact
Customer can change very easily
Buyer Power Moderate Buy and supplies capital
As rates increase, may increase power due to more
competition for money
Substitution Moderate Many small companies taking aim at segments
Increased competition and low rate products
Rivalry High Highly competitive
Small banks have different regulations
Fees a big topic
Similar products
11. Supply/Demand
● Consumers are people, companies, governments
● Drivers:
○ Interest rates
○ Inflation
○ Economic conditions
○ Government regulations
● Overall financial sector is second largest
13. Factors of High Influence
● Economic Conditions in US (S&P 500)
● Interest Rates
● Consumer Confidence
● US Gross Domestic Product
● Unemployment
● Regulations, Policy and Taxes
33. Recommendation
● Recommendation is to remain “neutral”
● Current position is overweight
● Previously underperformed the S&P… BUT
○ Current relative multiples are lower than their median
○ Current S&P multiples are higher than their median
● Expect the financial sector to outperform S&P
moving forward