This document provides an outlook and investment strategy for global equities in 2005. Some of the key points include:
1) Major macro themes that may impact stocks include an expected revaluation of Asian currencies which could benefit Asian and European stocks but hurt US stocks, high corporate free cash flow could boost late-cycle spending plays, and the US consumer is expected to remain the slowest part of the US economy.
2) At the micro level, the focus is on high-quality stocks with stable free cash flow, companies engaging in "financial self-help", and large-cap stocks over small-caps.
3) Overweight sectors include luxury goods, European food producers, investment banks, oil & gas
Over the last year or so, there has been much talk about another impending recession and how it could impact channel management. The recession theory is based upon historical trends, which suggest business cycles tend to last around five to seven years each. That means every five to seven years we experience some sort of a recession.
The document discusses forecasts for the insurance industry in 2010 from various industry leaders. They predict modest growth in life insurance sales of 3-5% but flat or negative growth for annuities and profits. Products with guarantees will be strongest. Consolidation may continue due to economic challenges including low interest rates and investment losses. The outlook is cautiously optimistic but the recovery will be gradual.
In this edition of Valuation Insights we discuss retention incentives that are expected to become more mainstream under the new Trump Administration. The article discusses recent high profile cases, such as United Technologies recently announced deal to retain Carrier Corporation's furnace manufacturing facility in Indiana. The most common retention incentives are discussed in the article as well as best practices to improve your prospects for securing them.
Other Topics Covered Include:
• Goodwill impairment trends as highlighted in the Duff & Phelps 2016 U.S. and European Goodwill Impairment Studies • Duff & Phelps' Fifth Annual Transaction Trail Report on M&A and Capital Markets Activity in Southeast Asia • Delaware Chancery Court Case which utilized the Duff & Phelps Valuation Handbook Series as support for its conclusion that the respondent's expert's analysis was more reliable.
The document provides an analysis of Ebix Inc. by three students. It recommends buying the stock with a price target of $68.85, compared to the current price of $62.75. It highlights several positives for Ebix including its leadership position in the insurance software industry, recurring revenue model, and potential for cloud M&A. However, it also notes risks such as the strong US dollar impacting international revenues and potential disruption from artificial intelligence. Overall the analysis provides a bullish outlook for Ebix based on its industry position, growth opportunities, and financial metrics.
FMC Corp Misplaced Pessimism Creates 50% Upside, For StartersLester Goh
The document discusses FMC Corporation, which has seen its share price halved since 2014. The author believes the pessimism is misplaced and sees 50% upside potential in the stock. FMC has transformed to focus on high-margin agrochemicals, health & nutrition, and lithium. While weak agricultural markets and currency issues hurt results, the company can offset losses through price increases. The author argues the sell-off overstates the issues, and that FMC is undervalued given its margins, cash flow generation, and potential for further cost cuts or acquisition.
International marketing strategies of foreign companies in the United States are discussed. Japanese companies like Toyota and Sony faced challenges from American competitors but responded strategically through legal challenges and emphasis on quality. Toyota surpassed General Motors in the US through lower costs, higher quality, and focus on customer satisfaction. South Korean companies Samsung and LG also focus on innovative products and flooding the market.
The document provides an overview of the current financial crisis and government responses. It discusses where markets currently stand with large writedowns, falling stock prices, and job losses. It then examines how the crisis developed from the 2000s due to leverage, securitization of loans, and underestimation of risk. Finally, it outlines the massive government bailouts and responses and considers implications such as the future of banks and effects on employment.
Experience Mazda Zoom Zoom Lifestyle and Culture by Visiting and joining the Official Mazda Community at http://www.MazdaCommunity.org for additional insight into the Zoom Zoom Lifestyle and special offers for Mazda Community Members. If you live in Arizona, check out CardinaleWay Mazda's eCommerce website at http://www.Cardinale-Way-Mazda.com
Over the last year or so, there has been much talk about another impending recession and how it could impact channel management. The recession theory is based upon historical trends, which suggest business cycles tend to last around five to seven years each. That means every five to seven years we experience some sort of a recession.
The document discusses forecasts for the insurance industry in 2010 from various industry leaders. They predict modest growth in life insurance sales of 3-5% but flat or negative growth for annuities and profits. Products with guarantees will be strongest. Consolidation may continue due to economic challenges including low interest rates and investment losses. The outlook is cautiously optimistic but the recovery will be gradual.
In this edition of Valuation Insights we discuss retention incentives that are expected to become more mainstream under the new Trump Administration. The article discusses recent high profile cases, such as United Technologies recently announced deal to retain Carrier Corporation's furnace manufacturing facility in Indiana. The most common retention incentives are discussed in the article as well as best practices to improve your prospects for securing them.
Other Topics Covered Include:
• Goodwill impairment trends as highlighted in the Duff & Phelps 2016 U.S. and European Goodwill Impairment Studies • Duff & Phelps' Fifth Annual Transaction Trail Report on M&A and Capital Markets Activity in Southeast Asia • Delaware Chancery Court Case which utilized the Duff & Phelps Valuation Handbook Series as support for its conclusion that the respondent's expert's analysis was more reliable.
The document provides an analysis of Ebix Inc. by three students. It recommends buying the stock with a price target of $68.85, compared to the current price of $62.75. It highlights several positives for Ebix including its leadership position in the insurance software industry, recurring revenue model, and potential for cloud M&A. However, it also notes risks such as the strong US dollar impacting international revenues and potential disruption from artificial intelligence. Overall the analysis provides a bullish outlook for Ebix based on its industry position, growth opportunities, and financial metrics.
FMC Corp Misplaced Pessimism Creates 50% Upside, For StartersLester Goh
The document discusses FMC Corporation, which has seen its share price halved since 2014. The author believes the pessimism is misplaced and sees 50% upside potential in the stock. FMC has transformed to focus on high-margin agrochemicals, health & nutrition, and lithium. While weak agricultural markets and currency issues hurt results, the company can offset losses through price increases. The author argues the sell-off overstates the issues, and that FMC is undervalued given its margins, cash flow generation, and potential for further cost cuts or acquisition.
International marketing strategies of foreign companies in the United States are discussed. Japanese companies like Toyota and Sony faced challenges from American competitors but responded strategically through legal challenges and emphasis on quality. Toyota surpassed General Motors in the US through lower costs, higher quality, and focus on customer satisfaction. South Korean companies Samsung and LG also focus on innovative products and flooding the market.
The document provides an overview of the current financial crisis and government responses. It discusses where markets currently stand with large writedowns, falling stock prices, and job losses. It then examines how the crisis developed from the 2000s due to leverage, securitization of loans, and underestimation of risk. Finally, it outlines the massive government bailouts and responses and considers implications such as the future of banks and effects on employment.
Experience Mazda Zoom Zoom Lifestyle and Culture by Visiting and joining the Official Mazda Community at http://www.MazdaCommunity.org for additional insight into the Zoom Zoom Lifestyle and special offers for Mazda Community Members. If you live in Arizona, check out CardinaleWay Mazda's eCommerce website at http://www.Cardinale-Way-Mazda.com
Stock Pitch For Logistics Services PowerPoint Presentation PPT Slide TemplateSlideTeam
DEF Logistics is a top ten global provider of supply chain solutions that has grown through acquisitions, with a target price of $52 per share representing 60% upside. The company has a robust business model strengthened by acquisitions, operates in the large and growing third-party logistics market, and appears undervalued relative to its peers based on various valuation methods. However, integration challenges from acquisitions and competitive risks from startups in the logistics technology space represent key risks to the investment thesis.
This report recommends buying shares of Herman Miller, an office furniture company, at a price of $20.67. It projects Herman Miller's revenues and earnings to grow steadily through 2015, driven by expansion in international markets growing 13.8% annually and a continued economic recovery in North America. The report sets a 12-month price target of $25.08, offering 21.3% upside, based on a discounted cash flow analysis accounting for various scenarios. The main risks to the price target are negative macroeconomic conditions and unsuccessful international expansion.
Trade deficit tax losses violates constitutional law. This presentation has sound and provide and indepth overview of the trade deficit. It provides an understanding of equal trade as a corrective action. It also invites the reader to sign a petition at the website www.CitizensForEqualTrade.org.
This document provides an analysis of the situation for State Farm's auto insurance business. It examines the economic environment, noting opportunities to compete on price and develop tools to help consumers compare rates. The competitive environment is also assessed, with State Farm's main competitors being Geico, Progressive, and Allstate. These companies spend heavily on advertising, especially television commercials, with Geico typically perceived as the biggest spender. The analysis provides context for developing an integrated marketing communications plan to help State Farm maintain its leadership position.
We think that we fully understand the costs/benefits of the financial engineering sold by brokers until we don’t. Potential for Vulnerabilities in MLPs by Bank MS => MLPs rely on capital markets to continuously grow (low r, high yield). (Potentially Overvalued) Overall MLPs carry a greater interest rate risk concentration than equities. (what doesn’t appear to be priced yet) and how man-made accumulations in the debt-commodity linked products can distort the Supply and Demand in the Commodities ?
The document summarizes revenue growth rates across the global outsourcing industry in 2010. It finds that overall growth fell to modest levels of 15.7%. Growth was particularly difficult for small companies under $10M and mid-sized companies between $100M-1B, which saw growth rates of 14% and 5% respectively due to pricing pressures and reduced demand. Larger companies over $1B grew by 18.4% but this was skewed by one large merger; otherwise growth was a modest 3.5%. The document lists the fastest growing companies by revenue size.
Three sentences:
JetBlue is a low-cost airline headquartered in New York serving over 100 destinations. The document analyzes JetBlue's industry, business model, financial performance and risks to value the company. A financial model was created assuming revenue and cost growth rates to estimate JetBlue's stock value at $38.56, an upside of 75% from its current price.
This document outlines the key elements of developing an effective global marketing strategy. It discusses defining the global marketing mission and segmentation strategies. It also addresses competitive positioning and customizing the marketing mix for different markets. Major risks like political, financial and exchange rate risks are summarized. The document provides an overview of the strategic challenges of entering foreign markets and considerations for subsequent expansion into a truly integrated global marketing approach.
The allocator shows in detail our view on the financial markets and give insight on our asset, sector and geographical allocation. It can go from 0 - 100% in equity and is actively rebalanced on a monthly basis.
1) Deloitte analyzes the global economic outlook and consumer trends, with a focus on the US, China, Europe, and other regions.
2) Under the Trump administration, the US economy may see increased spending on infrastructure and the military, less regulation, and trade restrictions, which could both boost and slow growth.
3) China is transitioning its economy from manufacturing and exports to services and domestic consumption, while facing challenges from declining working populations and debt levels.
4) Europe has mixed growth across countries, with strength in some like Germany and weakness in others like Italy, while the UK faces uncertainty from Brexit.
This document discusses trade theory and international trade arrangements. It begins with questions about trade theory, including whether trade is zero-sum or positive-sum, the principles of absolute and comparative advantage, and conditions under which trade should occur. It then defines various types of international economic arrangements from free trade areas to political unions. It concludes with discussion questions about countries' comparative advantages and strategies for improving export competitiveness.
The document summarizes lessons learned from companies that emerged as leaders after the 2000-2001 recession by maintaining flexibility. These companies typically had lower leverage, controlled costs well, and diversified their product offerings and business geographies before the downturn. During the recession, they were able to invest in growth opportunities through capital expenditures and M&A while cutting costs without damaging long-term health. Companies that emerged as leaders also had more diversified product offerings and geographic presence going into and coming out of the recession. Maintaining flexibility positioned these companies to take advantage of opportunities in the economic downturn.
Boosting Competitiveness through Reviewing Productive-Sector Value Chains KM2215Kingstone Pumula Kanyile
This document outlines Dr. K. Mlambo's presentation on boosting competitiveness through reviewing productive sector value chains and cost structures in Zimbabwe. The presentation covers: why Zimbabwe is uncompetitive due to high costs, fees, and inefficiencies; constraints on value chain financing like high lending rates and non-performing loans; RBZ initiatives to address issues through policies like lowering rates and establishing credit registries; and suggestions to improve infrastructure, innovation, entrepreneurship, clustering, and policy consistency. The role of banks in value chain financing and initiatives by RBZ to enhance value chains through model projects are also discussed.
White Paper: Low cost country sourcing – navigating unchartered opportunitiesGEP
An increasing number of enterprises are developing newer and more innovative procurement strategies to position themselves for supply management success. One such strategy is for businesses to expand their strategic scope beyond familiar shores to capitalize on growing opportunities abroad through Low Cost Country Sourcing (LCCS).
The document defines several economic terms and concepts related to macroeconomics. It provides descriptions of key terms such as AAA credit rating, absolute advantage, absolute poverty, accelerator effect, accession countries, accommodatory policy, adjusted net savings, advanced economies, age dependency ratio, and ageing population. In less than 3 sentences, the document is a glossary that defines various macroeconomic terms and concepts.
The document discusses exchange rates and is divided into chapters. Chapter 10 covers the determination of exchange rates. It describes the International Monetary Fund (IMF) and its role in establishing exchange rates. Countries can choose between hard peg, soft peg, or floating exchange rate arrangements. It also discusses how the European Monetary System established exchange rate stability in Europe and how the euro became the currency of the Eurozone. The major determinants of exchange rates are also identified, such as demand for a country's goods and currency. Managers use fundamental and technical analysis to forecast exchange rate movements. Exchange rate changes influence business decisions in areas like marketing, production, and finance.
The document provides an overview and strategic assessment of the US displays industry in January 2011. It finds that the US industry includes over 130 businesses in the display value chain, with average revenues of $140 million. It identifies several themes for the industry, including that the largest players like 3M and Corning still dominate but face new challenges, and that the US has a strong position in areas like touch technology and microdisplays due to support from the government and military applications. However, the document also notes mixed results for intellectual property and licensing businesses, and questions if more can be done to support equipment manufacturers and novel materials companies in the US.
Does ownership matter? The growth of China´s chemical market is primarily cap...Kai Pflug
The growth of China´s chemical market is primarily captured by private domestic companies at the expense of state-owned entities and multinational chemical companies. Why?
This document provides an analysis of the Canadian asset management industry. It finds that the industry has matured but remains very profitable, with expected annual growth of around 8% driven by market performance of 6% and net sales of 2%. While industry consolidation has increased competition, the top 10 managers still control around 80% of retail assets under management. Banks have gained the most market share this decade. The document also examines trends like growth in balanced funds and segregated products, reflecting a reduced appetite for risk among retail investors. It provides ratings and price targets for several asset managers.
Seminar 8 creating an investment recommendationpvalantagul
The document provides guidance on creating an investment recommendation and pitching a stock. It outlines the key components of a stock pitch, including analyzing if a company is a good business and if it will be a good stock. An example stock pitch for Waste Management is then presented, analyzing the company, industry, financials, valuation, opportunities/risks, and recommending the stock as a buy. The document emphasizes synthesizing information from prior seminars to develop an investment thesis and recommendation.
Stock Pitch For Logistics Services PowerPoint Presentation PPT Slide TemplateSlideTeam
DEF Logistics is a top ten global provider of supply chain solutions that has grown through acquisitions, with a target price of $52 per share representing 60% upside. The company has a robust business model strengthened by acquisitions, operates in the large and growing third-party logistics market, and appears undervalued relative to its peers based on various valuation methods. However, integration challenges from acquisitions and competitive risks from startups in the logistics technology space represent key risks to the investment thesis.
This report recommends buying shares of Herman Miller, an office furniture company, at a price of $20.67. It projects Herman Miller's revenues and earnings to grow steadily through 2015, driven by expansion in international markets growing 13.8% annually and a continued economic recovery in North America. The report sets a 12-month price target of $25.08, offering 21.3% upside, based on a discounted cash flow analysis accounting for various scenarios. The main risks to the price target are negative macroeconomic conditions and unsuccessful international expansion.
Trade deficit tax losses violates constitutional law. This presentation has sound and provide and indepth overview of the trade deficit. It provides an understanding of equal trade as a corrective action. It also invites the reader to sign a petition at the website www.CitizensForEqualTrade.org.
This document provides an analysis of the situation for State Farm's auto insurance business. It examines the economic environment, noting opportunities to compete on price and develop tools to help consumers compare rates. The competitive environment is also assessed, with State Farm's main competitors being Geico, Progressive, and Allstate. These companies spend heavily on advertising, especially television commercials, with Geico typically perceived as the biggest spender. The analysis provides context for developing an integrated marketing communications plan to help State Farm maintain its leadership position.
We think that we fully understand the costs/benefits of the financial engineering sold by brokers until we don’t. Potential for Vulnerabilities in MLPs by Bank MS => MLPs rely on capital markets to continuously grow (low r, high yield). (Potentially Overvalued) Overall MLPs carry a greater interest rate risk concentration than equities. (what doesn’t appear to be priced yet) and how man-made accumulations in the debt-commodity linked products can distort the Supply and Demand in the Commodities ?
The document summarizes revenue growth rates across the global outsourcing industry in 2010. It finds that overall growth fell to modest levels of 15.7%. Growth was particularly difficult for small companies under $10M and mid-sized companies between $100M-1B, which saw growth rates of 14% and 5% respectively due to pricing pressures and reduced demand. Larger companies over $1B grew by 18.4% but this was skewed by one large merger; otherwise growth was a modest 3.5%. The document lists the fastest growing companies by revenue size.
Three sentences:
JetBlue is a low-cost airline headquartered in New York serving over 100 destinations. The document analyzes JetBlue's industry, business model, financial performance and risks to value the company. A financial model was created assuming revenue and cost growth rates to estimate JetBlue's stock value at $38.56, an upside of 75% from its current price.
This document outlines the key elements of developing an effective global marketing strategy. It discusses defining the global marketing mission and segmentation strategies. It also addresses competitive positioning and customizing the marketing mix for different markets. Major risks like political, financial and exchange rate risks are summarized. The document provides an overview of the strategic challenges of entering foreign markets and considerations for subsequent expansion into a truly integrated global marketing approach.
The allocator shows in detail our view on the financial markets and give insight on our asset, sector and geographical allocation. It can go from 0 - 100% in equity and is actively rebalanced on a monthly basis.
1) Deloitte analyzes the global economic outlook and consumer trends, with a focus on the US, China, Europe, and other regions.
2) Under the Trump administration, the US economy may see increased spending on infrastructure and the military, less regulation, and trade restrictions, which could both boost and slow growth.
3) China is transitioning its economy from manufacturing and exports to services and domestic consumption, while facing challenges from declining working populations and debt levels.
4) Europe has mixed growth across countries, with strength in some like Germany and weakness in others like Italy, while the UK faces uncertainty from Brexit.
This document discusses trade theory and international trade arrangements. It begins with questions about trade theory, including whether trade is zero-sum or positive-sum, the principles of absolute and comparative advantage, and conditions under which trade should occur. It then defines various types of international economic arrangements from free trade areas to political unions. It concludes with discussion questions about countries' comparative advantages and strategies for improving export competitiveness.
The document summarizes lessons learned from companies that emerged as leaders after the 2000-2001 recession by maintaining flexibility. These companies typically had lower leverage, controlled costs well, and diversified their product offerings and business geographies before the downturn. During the recession, they were able to invest in growth opportunities through capital expenditures and M&A while cutting costs without damaging long-term health. Companies that emerged as leaders also had more diversified product offerings and geographic presence going into and coming out of the recession. Maintaining flexibility positioned these companies to take advantage of opportunities in the economic downturn.
Boosting Competitiveness through Reviewing Productive-Sector Value Chains KM2215Kingstone Pumula Kanyile
This document outlines Dr. K. Mlambo's presentation on boosting competitiveness through reviewing productive sector value chains and cost structures in Zimbabwe. The presentation covers: why Zimbabwe is uncompetitive due to high costs, fees, and inefficiencies; constraints on value chain financing like high lending rates and non-performing loans; RBZ initiatives to address issues through policies like lowering rates and establishing credit registries; and suggestions to improve infrastructure, innovation, entrepreneurship, clustering, and policy consistency. The role of banks in value chain financing and initiatives by RBZ to enhance value chains through model projects are also discussed.
White Paper: Low cost country sourcing – navigating unchartered opportunitiesGEP
An increasing number of enterprises are developing newer and more innovative procurement strategies to position themselves for supply management success. One such strategy is for businesses to expand their strategic scope beyond familiar shores to capitalize on growing opportunities abroad through Low Cost Country Sourcing (LCCS).
The document defines several economic terms and concepts related to macroeconomics. It provides descriptions of key terms such as AAA credit rating, absolute advantage, absolute poverty, accelerator effect, accession countries, accommodatory policy, adjusted net savings, advanced economies, age dependency ratio, and ageing population. In less than 3 sentences, the document is a glossary that defines various macroeconomic terms and concepts.
The document discusses exchange rates and is divided into chapters. Chapter 10 covers the determination of exchange rates. It describes the International Monetary Fund (IMF) and its role in establishing exchange rates. Countries can choose between hard peg, soft peg, or floating exchange rate arrangements. It also discusses how the European Monetary System established exchange rate stability in Europe and how the euro became the currency of the Eurozone. The major determinants of exchange rates are also identified, such as demand for a country's goods and currency. Managers use fundamental and technical analysis to forecast exchange rate movements. Exchange rate changes influence business decisions in areas like marketing, production, and finance.
The document provides an overview and strategic assessment of the US displays industry in January 2011. It finds that the US industry includes over 130 businesses in the display value chain, with average revenues of $140 million. It identifies several themes for the industry, including that the largest players like 3M and Corning still dominate but face new challenges, and that the US has a strong position in areas like touch technology and microdisplays due to support from the government and military applications. However, the document also notes mixed results for intellectual property and licensing businesses, and questions if more can be done to support equipment manufacturers and novel materials companies in the US.
Does ownership matter? The growth of China´s chemical market is primarily cap...Kai Pflug
The growth of China´s chemical market is primarily captured by private domestic companies at the expense of state-owned entities and multinational chemical companies. Why?
This document provides an analysis of the Canadian asset management industry. It finds that the industry has matured but remains very profitable, with expected annual growth of around 8% driven by market performance of 6% and net sales of 2%. While industry consolidation has increased competition, the top 10 managers still control around 80% of retail assets under management. Banks have gained the most market share this decade. The document also examines trends like growth in balanced funds and segregated products, reflecting a reduced appetite for risk among retail investors. It provides ratings and price targets for several asset managers.
Seminar 8 creating an investment recommendationpvalantagul
The document provides guidance on creating an investment recommendation and pitching a stock. It outlines the key components of a stock pitch, including analyzing if a company is a good business and if it will be a good stock. An example stock pitch for Waste Management is then presented, analyzing the company, industry, financials, valuation, opportunities/risks, and recommending the stock as a buy. The document emphasizes synthesizing information from prior seminars to develop an investment thesis and recommendation.
The document provides an initiation of coverage on the Latam autoparts industry. It discusses key trends driving growth in the industry, such as automakers outsourcing production to emerging markets and suppliers to lower costs. It introduces five leading autoparts companies in the region and develops a proprietary investment methodology to evaluate and initiate coverage on the companies. Autometal receives a Buy rating, while Randon and Marcopolo receive Sell ratings based on valuation analysis incorporating discounted cash flow models and trading multiples. Iochpe-Maxion and Mahle Metal Leve receive Hold ratings. Important risks to the industry include a worsening competitive environment and an economic downturn in key markets like Europe.
- The document analyzes American Airlines, the largest airline in the US. It discusses the company's history, management, financials, and industry ratios. A technical analysis shows the stock remains in a long-term downtrend but may be breaking out of short and medium-term patterns. Most analysts have price targets above the current stock price on expectations that passenger revenue will turn positive next year, driving the stock higher. The recommendation is to take a long position once the stock closes above $38 for a $60 target price in 18 months.
This document identifies 10 trends shaping the investment management industry in a world of low interest rates, high volatility, and high correlations between asset classes. The key trends are the search for yield driving demand for credit and dividend-paying stocks; the debate around whether equities can still outperform with their high volatility; the growth of risk-minimizing multi-asset strategies; the shift to passive index funds and ETFs; and declining performance of hedge funds. Understanding how investor behavior is changing in response to these trends will be important for investment managers and can provide insights into future asset prices.
1) The 4th quarter of 2016 saw a significant market rotation out of secular growth stocks typically held in the Focused Growth portfolio following Donald Trump's election victory. This hurt the portfolio's absolute and relative performance in Q4.
2) For the full year 2016, the portfolio benefited from strong stock selection and an overweight in technology, including three technology company buyouts. However, a large position in The Advisory Board hurt performance.
3) Going forward, the portfolio is positioned with overweight positions in companies expected to benefit from secular growth trends, while also having reduced exposure to areas that face greater uncertainty like healthcare and mortgage lending.
The fund manager provides a summary of the DSP Equity Opportunities Fund's investment strategy and current portfolio positioning. The fund focuses on companies with capable management, good growth trends, and balance sheets when available at a margin of safety. The current portfolio has overweight positions in financials, pharma, and cement companies. Specific overweight stocks include ICICI Bank, HDFC Bank, Axis Bank, SBI, Bank of Baroda, Dr. Reddy's, Alkem, Sun Pharma, Ultratech Cement, Dalmia Bharat, and ACC. The fund manager avoids expensive consumer stocks and index heavyweights where the risk-reward is not favorable.
This article recaps the formidable changes that have shaped the FIA market since its humble beginnings in the mid-1990s and offers a perspective on ten emerging developments to watch in 2014 and beyond.
Third point-q4-2014-investor-letter-tpoiFrank Ragol
This letter summarizes Third Point LLC's investment results and outlook for 2015. In 2014, Third Point achieved mid-single digit returns due to poor performance during market volatility and prematurely exiting some positions. Already in 2015, markets have been highly volatile. Third Point is focusing on companies with strong cash flows and consistent growth, and looking to take advantage of market dislocations. The letter discusses two of Third Point's largest equity positions - Amgen and Fanuc.
The document provides an overview of Merrill Lynch including its business description, financial profile, competitive environment, and valuation. It discusses Merrill Lynch's core businesses, leadership changes, risk management improvements, growth opportunities in emerging markets and through third party funds, and plans for balance sheet optimization and more efficient use of capital.
1) The fund update provides performance information for IDFC Sterling Value Fund for the quarter ending December 2020. The fund focuses on a value investment strategy in mid and small cap companies.
2) For the quarter, the fund outperformed its benchmark index with a return of 22.9% versus the benchmark return of 21.2%.
3) Top positive contributors were commodities, cement/building materials, and consumer discretionary, while top negative contributors were utilities, information technology, and financials.
1) The fund provides a quarterly update on the IDFC Sterling Value Fund, an open-ended equity scheme that follows a value investment strategy focused on mid and small cap companies.
2) During the quarter, the fund outperformed its benchmark index and had its strongest positive contributors in the Commodities, Cement/Building Materials, and Consumer Discretionary sectors. Its underweight in Financials and overweight in Information Technology negatively impacted performance.
3) The fund manager maintains a positive outlook on commodities and financials due to an expected economic recovery and earnings growth. Cement and building materials are also expected to benefit from increased government spending and rural demand.
1. The document provides a quarterly update on the IDFC Sterling Value Fund for January 2021.
2. During the quarter, the fund outperformed its benchmark index and maintained its focus on companies that benefit from positive liquidity, low interest rates, and attractive valuations.
3. Top positive contributors were commodities, cement/building materials, and consumer discretionary, while top negative contributors were utilities, information technology, and financials.
The memo warns that a U.S. recession is likely as concerns about the stock market and economy have risen dramatically. It recommends shifting to a market neutral strategy as equity values will remain depressed for an extended period. Several indicators point to worsening economic conditions, such as banks entering risk aversion mode, high yield bonds becoming illiquid, weaker auto and revenue growth sales, impacts from low oil prices yet to be fully realized, and declining freight volumes. Caution is advised given these rising concerns about a potential recession.
The latest collection of things we (Atomico) found interesting and important in tech and VC land, but that didn’t necessarily get the attention they deserve. We think of them as our hidden little gems. We’ll add to the collection over time, so bookmark the page and keep coming back for updates or to dig into the archive.
COVID-19 has disrupted the global financial market and our team sought to exploit these arbitrage opportunities presented to create a U$500MM active portfolio across Equities, Fixed Income, FX, Cash, and Commodities. Our portfolio uses Markowitz Mean-Variance Optimization in allocating weights and its performance is constantly monitored against the benchmark FundX, which compromises of MSCI World Index (Equities), iShares Core U.S. Aggregate Bond ETF (Bond) and S&P GSCI Index (Commodities). We considered the risk and return tradeoffs, macroeconomic and microeconomic catalysts, quantitative data as well as qualitative information in our asset selections.
Team members: Emily Pope, Sharon Lee and Jayson Chaplin
Can Small Cap Stocks Weather the Storm?Susan Langdon
This document summarizes research analyzing whether small cap stocks are well positioned to weather an economic downturn caused by the COVID-19 pandemic.
The research finds that small cap companies' financial characteristics, such as leverage, leading into the crisis were consistent with long-term trends. Historical data also shows no relationship between the rate of small cap company delistings and relative small cap stock performance. While small caps may be more vulnerable operationally, market prices already reflect expectations about future cash flows, including recession impacts. Overall, the research finds that small cap stocks can still deliver higher expected returns even during an economic downturn. Investors are thus advised to maintain a diversified portfolio including small cap stocks.
1. Owens Corning (OC) operates three businesses: roofing, insulation, and industrial composites. The roofing and insulation businesses, which primarily serve the US residential and commercial construction markets, account for 70-85% of OC's earnings.
2. The document outlines several positive factors that could improve OC's earnings over the next 1-3 years, including improving US construction and GDP growth, tight global industrial composites capacity, and decreased oil costs. It develops bull, base, and bear cases for OC's stock price and recommends the stock as a buy.
3. Key risks include a global economic slowdown, increases in raw material costs, and highly competitive pricing pressures. However, the document
The Wells Fargo Advantage Absolute Return Fund seeks to generate positive returns regardless of market conditions by allocating across stocks, bonds, and alternative strategies. In Q4 2013, the fund had positive returns driven by U.S. and international equities, while fixed income detracted. The portfolio managers maintain a cautious approach and wait for extreme valuations before making large allocation changes between asset classes.
The portfolio manager commentary provides an overview of the 3rd quarter 2016 performance of the Small Cap Focused Growth strategy. Key points include:
- The strategy had strong absolute and relative performance in Q3, outperforming the Russell 2000 Growth index, driven by strong stock selection.
- Top performing sectors were Technology, Consumer Discretionary, and Producer Durables. Laggards were Healthcare and Energy due to lack of exposure.
- Looking ahead, the manager remains optimistic about the portfolio companies' ability to sustain high growth, despite ongoing economic and political uncertainties.
Similar to 2005 Outlook Sectors and themes - Executive Summary (20)
2005 Outlook Sectors and themes - Executive Summary
1. Equity Research
16 December 2004
Global
Investment Strategy
Global equity strategy
2005 Outlook: Sectors and themes
The changing of the year need not herald a change to our views. Our main thoughts are:
(1) Major macro themes: (a) Asian currencies should revalue sometime next year (revaluation would
be positive for domestic non-Japan Asian stocks; companies such as Millennium & Copthorne,
Danone, Standard Chartered, Caterpillar, GE, SKF and Atlas Copco who have Asian based revenue
or competitors, but is negative for companies that source from Asia such as non-food retailers, Nokia
and PC’s). In particular, this leads us to still be positive on the non-Japan Asian consumer; (b)
Corporate FCF remains extremely high. Plays on this are late-cycle corporate spending (see below),
and the investment banks as M&A recovers and (c) the US consumer should remain the slowest
component of US growth (which is negative for US consumer cyclicals).
(2) Major micro themes: (a) focus on ‘quality’ (which currently trades abnormally cheaply and tends
to only underperform as credit spreads narrow sharply). Companies that have top quintile CFROI®
(against their global peer group), above average asset turns and revenue growth (five-years historical
and two-years forward) and also trade on a valuation discount to their peer group include: Autoliv,
Sanofi, WPP,Centex, Paccar, Best Buy, Colgate, Mediatek, Sage, Hon Hai and Atlas Copco. (b)
Focus on companies with high FCF and low cash earnings volatility. The very low level of corporate
bond yields effectively re-rates these plays. Such stocks include: Lennar, Reebok, BAT, Inbev,
Anthem, Smithfield Food, Hunter Douglas, Itacementi, Travis Perkins. (c) Financial self-help (see page
3).
(3) Conventional investment styles: We prefer large over small-caps in the US. We prefer Growth
over Value: Growth becomes scare, equity risk premiums should fall and P/E relatives are extreme.
(4) Our main sector changes: We increase our exposure to the GEM consumer by raising
weightings in luxury goods (to overweight) and adding money to European food producers (where our
preferred stocks are Nestle and Danone). We modestly add to our overweight of investment banks (in
the anticipation of more M&A) but reduce our US consumer banking exposure further. We also add to
our overweight in US medtech, continuing to prefer this space to big cap pharma.
(5) Our main sector overweights: (a) Late-cycle corporate spend (long-cycle capital goods,
European advertising plus US content plays, applications software and again cement); (b) Deep-value
cyclicals (European newsprint, US containerboard and cement); (c) Oil Field Services & E&P (we are
neutral of the integrateds but closer to raising weightings than cutting), (d) Financials in under-
leveraged regions (France, Spain, Italy, GEM, especially non-Japan Asia). Non-mortgage banks in the
UK and investment banks and (e) select defensives that either offer deep-value (wireless telecoms or
their PTT proxies, high FCF yielding pharmaceutical stocks, tobacco) or those that offer ‘growth at a
reasonable price’ (spirits and medtech). We are 4% underweight cyclicals.
(6) Our main sector underweights: (a) US and UK consumer banks; (b) US and UK consumer
cyclicals; (c) metals and mining (though tactically we would less negative on steel);(d) US utilities and
(e) semis & PCs. We add NGT, BP, Inbev, Keppel, LVMH and Schlumberger to our focus list.
ANALYST CERTIFICATIONS ARE IN THE DISCLOSURE APPENDIX. FOR OTHER IMPORTANT DISCLOSURES, visit www.csfb.com/
researchdisclosures or call +1 (877) 291-2683. U.S. Disclosure: CSFB does and seeks to do business with companies covered in its research
reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors
should consider this report as only a single factor in making their investment decision.
research team
Andrew Garthwaite
44 20 7883 6477
andrew.garthwaite@csfb.com
Jonathan Morton
44 20 7883 8273
jonathan.morton@csfb.com
Richard Woolhouse
44 20 7883 6481
richard.woolhouse@csfb.com
Jonathan White
44 20 7883 6484
jonathan.white@csfb.com
Marina Pronina
44 20 7883 6476
marina.pronina@csfb.com
2. Global equity strategy 16 December 2004
2
Executive Summary
There is a temptation to believe that just because the calendar changes, so too should
portfolio recommendations. We don’t buy into this thinking. In our view, the only
advantage of the bringing of a new year is that it allows investors perspective and a
longer-term time horizon (after all there are 12 months to go until the end of 2005).
Below, we highlight five-key issues for 2005: (1) the likely major macro themes; (2) our
micro themes; (3) investment styles, (4) our key sector overweights and (5) our key
sector underweights. Finally we note what we think are the major risks for 2005.
Macro themes
(1) Non-Japan Asian currency revaluation, especially against the Euro
The non-Japan Asian currencies are the most undervalued globally (the aggregate
current account surplus is 5% of GDP and aggregate net FDI is 2.3% of GDP, interest
rates in some parts can hardly fall lower – they are already negative in real terms in six
out of nine countries and China is under more political pressure to revalue with its
purchases of US Treasuries falling by three-quarters the year-to-date). The potential
winners from this are: domestic Asia (property, banks, utilities and telecoms); those
European/US names that compete against the Asians (SKF, ABB, Electrolux,
Caterpillar, GE, EPCOS, STM, DRAMs and autos) or who have high revenue exposure
to Asia (Alfa Laval, LVMH, Danone, Millennium & Copthorne). The potential losers are
those companies that source from Asia (for example, Teradyne, Amkor Technology,
Kulicke & Soffa, Nokia, US PCs, the US non-food retailers, H&M, Puma and Adidas,
(the latter for example, sources 67% of its sales from emerging Asia).
(2) Corporate FCF is at record levels. Hence we continue to overweight late-cycle corporate
spend
The return on capital is close to an all time high relative to the cost of capital and net-
investment shares of GDP are still close to all time lows. We overweight the following
late cycle corporate spend areas to exploit this: long-cycle capital goods (Atlas Copco,
GE, ABB, Schneider, Tomkins), advertising/media content (WPP, Disney), applications
software (SAP) and cement (Lafarge).
(3) The US consumer is likely to remain the slowest component of US growth
The weak dollar is telling investors that it is no longer acceptable to allow the US
savings rate (which now stands at just 0.2%) to continue to fall. All told, there are plenty
of other reasons why we underweight US retailing and US autos (see page 10).
3. Global equity strategy 16 December 2004
3
Micro themes
(1) Focus on high and stable FCF yielding companies
The fall in BBB rated corporate bond yields over the last year re-rates those companies
that have stable FCF yields (CSFB’s 7-10 year BBB-rated US$ corporate bond index is
now yielding 5.1% whilst the similarly rated € index is yielding 4.1%). We believe that
the global macro and microeconomic environments (slowing growth and increasing
competition/de-regulation respectively) will also favour these sorts of companies. We
thus screen for companies that have a high FCF yield, low cash margin volatility and
which also have an implied growth rate less than delivered: Lennar, Anthem, Sherwin-
Williams, Reebok, Ingersoll-Rand, BAT, Inbev, Mohawk, CAT, Hunter Douglas, Travis
Perkins, Glaxo, Erg and MAN (and apart from Glaxo and BAT, all have positive earnings
momentum on consensus estimates).
A more extreme version of this screen is to look for companies that have a dividend
yield above their corporate credit yield. Theoretically, such companies can issue debt to
take themselves private. Thus we screen for companies where the 2005E dividend yield
is above their corporate bond yield, dividend cover is above one times and their FCF
yield is also above their 2005E dividend yield. We also avoid highly leveraged
companies (as they cannot significantly re-leverage much further). This screen
highlights: Valeo, PT, UPM, BAT, ENI, Scottish Power, Altria, Rank, Stora Enso, Bristol-
Myers.
(2) ‘Quality’
The fall in corporate credit spreads has left ‘quality’ stocks trading at abnormally cheap
levels (we find that 78% of the time credit spreads narrow sharply, ‘quality’ stocks
underperform as, perhaps not surprisingly, poor quality companies tend to have higher
financial leverage). We define ‘quality’ stocks as those with superior CFROI®, asset
turns and revenue growth against their sector peer group. Quality outperformed
between March and September when credit spreads stabilised but has underperformed
as credit spreads fell again. Our index of quality stocks is trading at a 7% 12-month
forward P/E valuation discount to inferior quality stocks (against a long-run average of a
11% premium). We screen for quality companies (with top quintile CFROI against their
peer group) that trade at a discount to their global peer group. This would highlight:
Lennar, Autoliv, Ingersoll-Rand, Best Buy, Total, Colgate, Parker-Hannifin, PPG
Industrial , SEC, Hon Hai, WPP, Sanofi and Atlas Copco.
(3) Focus on financial self-helpers
We focus on those companies that have high FCF yields, have historically paid little to
shareholders (i.e., have a sub-30% payout ratio) but have instead engaged in value-
destroying acquisitions (resulting in their transactional CFROI® being at least 10% less
than their actual CFROI®) and as a result, they trade attractively against their peer
group. Among the stock highlighted on this screen are: Gannett, WPP, Travis Perkins,
and Northrop Grumman.
4. Global equity strategy 16 December 2004
4
Conventional investment styles
(1) Large over small-cap, especially in the US
We prefer large-cap stocks to small-cap stocks. Large-caps have the advantage of (i)
better valuations (the S&P 500 is trading on a 21% trailing P/E discount to the S&P 600
versus a normal discount since 1999 of 11% and the yield relative is close to a 6 year
extreme), the stage of the economic cycle (slowing lead indicators), the high chance in
our opinion of wider credit spreads (widening spreads tend to negatively hit small caps
relatively more since they tend to have lower credit ratings) and a weak dollar (which
favours international companies who tend to be larger cap). In Europe we also focus on
big cap for similar reasons (we believe the euro trade-weighted exchange rate index
may actually depreciate over 2005). Only in Japan and non-Japan Asia would we be
more neutral (owing to potential currency strength. Also, small cap doesn’t have the
legacy issues, can exploit new growth opportunities and tends to be more domestic and
thus should outperform if the Yen strengths).
(2) Growth over value
Almost all of the indicators we look at favour growth: the yield curve (flattening), lead
indicators (rolling over) and credit spreads (which should now stop falling – sharply
narrowing spreads in the past have positively re-rated value which tends to be more
leveraged). The only potential hiccup is the likely rise in bond yields (as growth is longer
duration than value) but on our models much of the negative impact of the rise in bond
yields can be offset by the fall in the equity risk premium. Growth, having
underperformed value by 26% over the last four-years is at a nine-year price relative low
and trades on P/B terms at a 19% discount to its historical average level relative to
value (12% ex-tech bubble) on our analysis. On P/E and yield relatives valuations of
growth versus value are at extremes.
Conceptually, we find the following areas as growth: luxury goods, niche long-cycle
capital goods, medtech, TFT-LCD, platinum, Asian hotels, cruising, spirits, advertising in
Europe & Japan, OFS, applications software, air freight, biotech, education services and
content production for media.
(3) Be careful of high dividend yield
Tactically, we find that when bond yields have risen since 1998, high yield (as defined
by top quintile) underperforms (with a correlation coefficient of 0.61 with the 10 year
bond yield).
5. Global equity strategy 16 December 2004
5
Cyclicals versus Defensives
From a top-down perspective, one of the greatest surprises to us has been that since
mid-May this year, cyclicals have outperformed defensives by 8% in the US and 4%
globally despite the roll-over in lead indicators, the fall in bond yields and the flattening
yield curve (which normally would be consistent with 4% underperformance globally).
Indeed, the decoupling from fair-value on our cyclical model is one of the largest on
record.
We believe that only part of this breakdown can be explained by one-off hits to
defensives (principally to pharmaceuticals and food producers) as well as the under-
recording of Chinese growth – both of which benefit cyclicals.
From here, most of the macro factors are less favourable for cyclicals (a flatter US yield
curve, decelerating lead indicators as well as higher oil prices). The relative earnings
momentum of cyclicals is now rolling over and has quite a way to fall on our models.
Valuations, in aggregate, are particularly unappealing with the EV/Sales of global
cyclicals now within 6% of its all time high (the implied growth rate of cyclicals is 1.1%
above defensives – which again, is close to an all time high).
However, we would stress, as in 2004, that it is the detail that really matters.
Understanding the secular issues in the defensive areas of the market (which keeps us
only 4% underweight of cyclicals overall) and differentiating between early-cycle (US
consumer related) and late-cycle (long-cycle corporate spend cyclicals) areas of the
market is critical.
The major changes are to increase sector weightings in the areas exposed to the GEM
consumer and thus take food producers (principally in Europe) and luxury goods to
overweight.
We marginally add to the over-weightings in paper, healthcare equipment and
investment banks at the expense of US regional banks
Luxury goods
This sector is a three-way play on Asian currency revaluation – translational,
transactional (since some of the manufacturing base is in Europe) and it boosts Asian
consumer spending power for foreign goods both at home and when abroad. The Asian
consumer is also very under-leveraged (look at the region’s current account surpluses)
and is likely to see explosive growth in its middle classes which should see a boom for
budget branded luxury products. LVMH derives 29% of its sales from Asia (13% directly
from non-Japan Asia). Luxury goods to us are one of the ‘clear as blue-sky’ plays on
China. The brand life of luxury products is over double to triple that of food producers
yet their A&P costs (as a proportion of sales) are estimated to be a half to a third lower.
This suggests that the brand value is more permanent. The 2005E FCF yields of LVMH
and Swatch are above those of the US market (at 5% and 4.9% respectively versus
4.5% for the US market), and P/E relatives are mid-range.
6. Global equity strategy 16 December 2004
6
Emerging market consumer staples
We favour those developed market consumer staples companies that have high GEM
exposure and offer a high FCF yield. This leads us towards Inbev (which has a 8.4%
2005 FCF yield according to our analyst, +5% organic volume growth and 45% of
revenue from GEM), BAT (9.0% 2005E FCF yield and 43% sales revenue from GEM)
and the European food producers (Nestle and Danone derive 27% and 30% of their
respective revenues from GEM and have FCF yields of 5.6% (7.4% ex Alcon and
L’Oreal) and 6.3% respectively. We find that for the first time since April 2003, food
producers now have output price inflation above input price inflation and have seen the
best improvement in margin pressure of any sector over the last three-months on our
margin monitor which looks at input/output prices for all sectors.
Our main sector overweights
(a) Deep value cyclicals
We highlight paper. This sector ranks second on our capital discipline monitor, is
attractively valued (on HOLT the sector is 24% cheap relative to the market even if
CFROI® reverts back to their long-run average after five-years), has very conservative
margin expectations, is late-cycle (with 60% of European advertising being paper
based) and is showing some signs of pricing improvement. We favour newsprint in
Europe and containerboard in the US. Our preferred stocks on our screens are: M-real,
Stora-Enso, Carter Holt, Sappi and SSCC.
Elsewhere, we continue to focus on select areas of building materials (cement and
some of the international plays on housing, Wolseley).
We are getting close to the stage when autos become a deep-value area.
(b) Late-cycle corporate spend
We highlighted the macro case earlier, namely FCF yields are at record levels and they
have to go somewhere (see Macro theme 2 above). Specifically, we play this through
the following areas:
(i) Long-cycle capital goods – Logically, we believe that corporations should be investing
given the near record return on capital relative to the cost of capital and the still high
cost of labour relative to the cost of capital; capital spending upswings in the past have
lasted between five and seven-years (Navistar recently commented that the cycle was
as long as 10-years); year on year long-cycle capital spending growth only turned
meaningfully positive this summer; the pricing power of capital goods is the best of any
cyclical sector (output prices are rising 1.1% above input prices on our monitor); forward
earnings momentum is excellent and consensus revenue estimates for 2005 at 4.0% in
2005 look conservative to us.
The thorny issue is valuations. The EV/Sales relative of the US sector is nearly two
standard deviations above its pre-bubble average but that in Europe is 0.9 standard
deviations below its average. Revaluation of the Asian currencies potentially helps many
European and US names. Our preferred plays focus on end-markets such as: non-
residential construction, power generation, transmission, metals and mining and hence:
Atlas Copco, Schneider, ABB, Tomkins, American Standard and GE. On our HOLT and
7. Global equity strategy 16 December 2004
7
implied growth rate screens, Ingersoll-Rand, SKF, Deere, Caterpillar and Parker
Hannifin still look cheap and have positive earnings momentum.
Overall, we are only 5% overweight of capital goods because of US valuations (3M in
particular) and we avoid many of the short-cycle areas.
(ii) Advertising in Europe – The advertising shares of GDP in the US and Europe are
6.2% and 3.6% below their respective trend (assuming conservative trend growth ex
direct mail of 5.7% and 4.7% respectively). Advertising historically has been late-cycle
(going above trend only at the end of the 1980’s and 1990’s). The advertising share of
GDP and costs per unit in Europe are 41% and 65% below those of the US respectively.
The food companies have reminded us that advertising is non-discretionary.
The valuation of media overall is now interesting (on EV/Sales relative to the market, it
is now the cheapest of all sectors on our monitor and the overall implied growth rate is
close to a 10-year low).
Our preferred plays are the Spanish broadcasters (Telecinco and Antenna) and the
agencies (which are the least fragmented business model – we would highlight WPP).
Globally, we focus on the cheap content plays (as opposed to the distribution plays) –
this highlights Disney.
(iii) Applications software – Valuations are reasonable (on HOLT and EV/sales),
software capex versus hardware capex has never been this far below trend at 21% (and
with replacement cycles slowing down in PC’s and mobiles, a greater proportion of IT
spending is likely to go into software). In the technology space, it is the intellectual
property rights than one wants to buy. We recommend SAP and Sage.
Other late-cycle plays (that fit in with other themes) are Asian hotels, paper and cement
(where 30% of US demand is from non-residential construction).
(c) Select financials (mainly concentrating on those in under-leveraged countries)
Much more of the world is over-leveraged than under-leveraged (in market cap terms).
However, there are still two areas that interest us: non-Japan Asian and parts of
Continental Europe.
(i) Non-Japan Asia – Highly undervalued currencies have resulted in real rates across
most of non-Japan Asia now being negative (this is the case in six out of nine
countries). This pushes investors into physical assets. Both private sector credit-to-GDP
(outside of Korea) and loan-to-deposit ratios are at decadal lows. Affordability is
attractive (excluding Korea, rental yields are above mortgage rates in all the countries
with major property markets). This creates a still very positive backdrop for property
stocks. More interestingly, banks still do not look expensive to us (their price-to-book
ratio relatives to US banks is still 35% below its 15-year average) and loan growth
estimates and provisioning assumptions both look too pessimistic. We would highlight
Malayan Banking, Bank Mandiri, Krung Thai Bank, Cathay Financial Holdings, Shinhan
Financial Group, Standard Chartered, Keppel Land, Kerry Properties, Henderson Land
and New World Development
(ii) Under-leveraged parts of Continental Europe (France, Italy, Spain and Belgium) – In
general, the P/E relative to the market of European banks is mid-range (compared to
the US where the Banks P/E relative is close to all time highs); bank lending growth is
8. Global equity strategy 16 December 2004
8
currently running at 6.8% and accelerating (and above the consensus revenue growth
estimate of 3.6%); relative earnings momentum is turning upwards; the macro
environment is favourable (a strong Euro, an upward sloping yield curve and
accelerating credit growth relative to nominal GDP growth) and finally there is still a
strong self-help story (front and back-office and revenue synergies).
We favour France (favourable top-line growth; consolidation prospects) and note all the
French banks have deep-value (on a price-to-book and implied growth rate basis) with a
high cost/income ratio (implying self-help potential). French banks also have one of the
lowest deposit-to-loan ratios in Europe. We favour Credit Agricole.
The structural story, for Italian banks is still positive (falling credit spreads imply a sharp
fall in corporate default rates, Italy also has the lowest leverage ratio by far of any G15
country, Italian banks trade on a 19% price-to book discount to European banks against
a long run average discount of 13%). The problem is that Italian banks typically do
worse when short rate expectations fall and the Euro strengthens (as 70% of Italian
corporate lending is to SMEs whose credit quality then deteriorates). We would
recommend Verona.
We would still overweight the Spanish banks (real rates are –1.5%) and Latin America
appears under-leveraged. Our preferred play here would be BBVA.
(iii) Non-mortgage banks in the UK – RBOS and Barclays would benefit from our theme
of both falling UK rates in 2005 and a soft landing in the economy. Both look very cheap
to us on sum of the parts basis (RBOS trading under seven times 2005E once its US
operations are on a peer group multiple and a similar result for Barclays).
(iv) Select capital markets plays – We would overweight the Swiss private banks (on 13
times 2005E compared to asset managers on 16 to18 times) and investment banks
ahead of a potential pick-up in M&A (which in our view is likely to follow the collapse we
have seen in BBB rated corporate bond yields). M&A activity is running even now at just
57% and 60% of normal levels in the US and Europe. Vontobel, Goldman Sachs and
UBS would be our preferred plays on this. We prefer these plays to life companies.
(d) Select Defensives
The big problem to us, and we stated as much at the beginning of 2004, is that in many
ways, the secular problems being faced by many defensives have been greater than the
cyclical problem in cyclicals. We continue to believe that a decent defensive story will be
secularly re-rated. Our preferred plays are spirits, the GEM exposed consumer staples,
wireless telecoms, MedTech and those pharmaceuticals stocks that have high FCF
yields.
(i) Spirits – The spirits industry is experiencing its best top-line growth since the 1960’s.
It is a play on the aspiring middle class of the emerging markets and the 21 to 29 year
age cohort in developed markets, as well as low-carbohydrate diets. On our margin
proxy/pricing power monitor spirits ranks as one of the best sectors. Product lives are
also very long (72 years for an average brand). Our preferred plays are: Diageo (the
stock trades on a 2005e 7.0% FCF yield ex General Mills and has a 25% market share
of premium spirits) and Pernod Ricard (5.9% 2005e FCF yield and play on Asia – its
Asian based sales experienced 17% organic sales growth in the first three-quarters of
this year).
9. Global equity strategy 16 December 2004
9
(ii) The developed market consumer staples plays – Nestle, Danone and P&G. See
page 6.
(iii) Telecoms – We find that since late summer, earnings momentum turned positive for
the first time in nearly 18 months in the UK and the US. On top of this, we find that:
valuations for the European sector against utilities are close to all time lows, the
exceptionally high FCF yields are now finding their way through to the shareholder
(dividends plus share buybacks in Europe equivalent to 5.5% of market cap for wireline
and 3.6% for wireless) and finally, self-help is returning in the form of cost-cutting and
consolidation (for example, in US wireless).
We do admit that there are still some huge secular question marks over this sector
(VoIP for wireless and wireline, what is mid-cycle capex?, a still high CFROI® for
wireless attracting the attention of both regulators and competitors and, finally, 3G
adding more to capacity than demand), but in the near term, we believe there is a
window of opportunity.
Specifically, 3G is being priced in Europe as a premium product; capex growth is
slowing (helped by a weaker dollar. Interesting both Vodafone & O2 have targets of
capex-to-sales of just 10% - some four percentage points below current levels); and
much of the regulatory risk appears already been priced in.
We would focus on European wireless (and their incumbent proxies): Vodafone, O2, FT,
Japanese wireless (high capex/sales of 18% could fall significantly) and emerging
market wireless (CMHK, FarEastTone, PT Telkom and SK Telecom). We would also
overweight US telecoms with wireless exposure (its a four player market and
consolidation continues and still has quite low penetration rates (61%). We would steer
clear of pure US wireline.
(iv) MedTech – ICD product penetration rates are low; there is little threat from generic
products (given length of patents); R&D efficiency (or in other words) continues to
improve and there is very high end-market concentration (especially in stents and ICD).
The issue had been valuation but on HOLT and implied growth (6.6%), the sector still
looks reasonable to cheap (P/E relatives on Medtronics are at 10-year lows). We would
favour Boston Scientific and also (in a different vein) Fresenius.
(v) High FCF yielding pharmaceutical stocks – We are bears of the drugs industry on a
secular basis but those companies which have an above market FCF yield also
potentially have a strong self-help story (cost-cutting and under-leveraged). This would
highlight: Glaxo, Takeda and Eisai. On pipeline, we would only favour the attractively
valued generics.
10. Global equity strategy 16 December 2004
10
Our main sector underweights
(a) US and UK consumer cyclicals
(i) US consumer cyclicals (See also comments under Macro Theme 3 above.) – This
year, and we suspect also in 2005, the US consumer should be the slowest component
of US growth (a complete contrast to the period between 2000 and 2003). Consumption
growth needs to decelerate modestly to be in line with real wage and employment
growth. The US retail sector has performed much better than we would have expected
given the slowdown over the summer in retail sales relative to industrial production.
Thus, we would expect some element of ‘catch-up’. Retailing normally underperforms if
the oil price rises, the dollar weakens or bond yields rise (all of which are likely next year
in our view). The sector is relatively capital ill-disciplined and consensus margin
expectations remain high. Conventional valuations (P/E and EV/Sales relatives) are
middling (though on HOLT, the sector is priced more demandingly). We would be
nervous of expensive discounters and the home furnishing plays.
(ii) UK consumer cyclicals – The UK retail sector has relatively little capital discipline
and this combined with sharply slowing retail sales growth, suggests to us that pricing
power (which is already negative) deteriorates further. Valuations are middling and a
weaker sterling/Asian currency revaluation is potentially problematic. As in the US, this
sector performed much better than our models suggested. Of the retailers we would
only consider the very high FCF yielding plays (WHSmiths), the non-UK plays (Kesa)
and growth (Tesco).
(b) US and UK consumer related banks
(i) US banks – The US sector suffers from: (a) a flattening yield curve and rising bond
yields (they normally underperform 90% and 70% of the time when these events
happen); (b) they are now more sensitive to the yield curve (with 31% of earnings based
assets parked in mortgage backed securities compared to 10% in 1988) at a time when
net interest margins are continuing to fall to new lows; (c) consumer lending intentions
are close to three-year lows (consumer and real estate loans account for 65% of overall
lending) while large-cap corporate lending has been dis-intermediated and (d)
valuations are unattractive in our view (the forward P/E relative of the US banks sector
is still close to its all time highs). If anything, our bias is more corporate (BoA) or
investment banks. We take a little more money out of US banks.
(ii) UK mortgage banks – Australian banks decoupled from forward interest rate
expectations once Australian rates peak. The same is likely to be true in the UK in our
opinion. As in Australia, the flat yield curve and fully consolidated state of the banking
system suggests a high risk of excess capital generation being re-invested into the
banking system leading to a loan price war. Gross mortgage lending could easily fall
20% in 2005 in our view and this drives non-interest income which accounts for 45% of
total profits. Valuations are mid-range on both a forward P/E and price-to-book relative
basis against European banks. We would only favour the non-mortgage banks: Barclays
and RBOS – both of which look attractive on our sum-of-the-parts valuations.
11. Global equity strategy 16 December 2004
11
(c) Metals and mining
Sales or asset valuations appear stretched now (for example, the EV/Sales ratio is close
to its all time high relative to the market) 12-month forward earnings estimates look
about 18% too high given where industrial metal prices are. This sector has ignored the
slowdown in global growth owing to China but in 2005 we think Chinese investment
growth will slow more meaningfully (from 26% year on year at present to sub-20%) and
construction activity should slow (already land area purchased for development is down
around 6% year on year) and the construction sector accounts for up to a third of
China’s copper demand. There is an aggressive supply side response especially in iron
ore which should get to the market given the increase in dry freight capacity (which we
expect to grow 5% per annum in both 2005 and 2006). Fundamentally, we find
ourselves most nervous of steel (the industry is caught between cartelised suppliers –
iron ore and coking coal – and relatively concentrated buyers, namely the automakers,
Chinese imports are already down 35% year on year and China is set to become a net-
exporter) but some steel stocks are on very low multiples so the sell-off may be more
Q2 than Q1. Our favoured commodities are copper and oil as well as the precious
metals (platinum and gold), though in Q1 a dollar bear market rally would lead to some
pullback in these areas.
(d) Semis / PC’s
(i) Semis – Up to October, semis had been our biggest underweight sector but we lifted
our weightings when the price-to-book relative got close to its previous pre-bubble lows.
We are negative but less so than we were. Our concerns are : (i) the sector looks
expensive on P/E and EV/Sales relatives (semis 12-month forward P/E trades on 45%
premium to the market whereas pre-bubble the sector traded on small discount), the
sector does trade on a price-to-book discount to its historical average but this is
primarily due to a 50% fall in asset turns since 1995; (ii) we expect earnings to fall
further (consensus 2005 net-income margins estimates at over 15% look far too high –
historically, margins have been over 15% for two consecutive years; and (iii) semi IC
units are still 5% above trend (the major end-markets of PCs, US Autos and handsets
are now practically flat). The move to 300mm increases semi capacity by some 20%
and thus lowers unit demand, and finally, we believe that a secular de-rating (after all
this sector has had just 4% revenue growth since 1995 with falling asset turns largely on
account of rising Asian competition).
However, there are a number of positives that we have to acknowledge, namely that:
relative earnings momentum is already close to its previous trough levels; this sector
normally begins to outperform two-months ahead of a trough in lead indicators and this
cycle has been much better managed (the industry’s capex-to-sales ratio peaked below
its average of the previous cycle, inventory management has been better and there has
been more outsourcing with the move to fabless companies). We would focus on the
non-Japan Asian names (which have way under-performed their global peer group) and
the TFT-LCD plays in particular which are now operating below their cash cost of
production in some areas (this normally precludes enforced capital discipline and
pricing). Recall that Hon Hai & Meditek rank on our best business models screen.
(ii) PCs – Our simple top-down replacement-demand driven PC unit growth model
suggests near zero unit growth in 2005 versus a consensus estimate of 8% (if there is a
12. Global equity strategy 16 December 2004
12
five-year replacement cycle, then on our model, the consensus estimate is broadly
right). The industry is subject to intensifying competition. In the true PC space, we would
focus only on Acer. Dell is a play on tech as it expands into an addressable market of
US$800bn (its current share of this market is 7%). Asian currency revaluation could be
problematic for this area.
(e) US utilities
We find that the CFROI® of the US sector is close to an all time high (and is 20% above
its average), 84% of the time bond yields rise, the sector underperforms and dividend
yield relatives are close to historic lows.
What about pharmaceuticals?
We are benchmark pharmaceuticals. The positives initially seem quite compelling: In the
US, the 2005E P/E relative is now back to its 1993 all time low (at a 11% discount to the
US market) and there is a very strong self-help story (the sector is under-consolidated,
grossly under-leveraged – a transition to optimal levels of leverage could boost earnings
by 15% – and marketing arms are much larger than R&D divisions suggesting there is
significant fat to cut). Added to all this, the sector looks oversold (its price relative is 2.3
standard deviations below its six-month moving average, which is more than any other
sector) and relative earnings momentum is starting to stabilise (on our scorecard).
However, our worry still remains that in aggregate, this industry is not cheap (the 2005E
FCF yield in the US is 5.6%) in an environment where the industry has undergone
secular change. Why should the price of US drugs be 35% higher than global drug
prices (72% for the top 15), at a time when the US government, via Medicare, becomes
a bigger buyer of drugs. PBM rebates are accelerating. With drugs now 11% of
healthcare costs in the US and a record fiscal deficit pricing pressure is all one-way –
down. We see this on our pricing monitor. The US accounts for 80% of global profits. Up
to 2007, according to our new US pharmaceuticals analyst, Catherine Arnold, patent
losses will erode 3-6% of industry revenues – in line with the pipeline. Very high margins
and ROE make this sector an easy political victim especially as marketing has
overtaken R&D.
In our opinion, the time to buy this sector is when we get M&A. Thus we stick to names
with high FCF (and thus have a potential self-help, not a ‘hope’ strategy). This would
highlight: Glaxo, Takeda and Eisai. We would note that P/E and price relative of Europe
against the US are both close to all time highs (although 60% of profits come from the
US).
What could go wrong with our strategy?
The biggest risk to us remains in the capacity constrained resource industries,
especially oil!
13. Global equity strategy 16 December 2004
13
Global sector recommendations
Figure 1: Global sectors: Recommended over/underweight versus benchmark (%)
Benchmark
weight
Recommended
weight
% Over/underweight
'vs' benchmark
Change Most preferred area Least preferred area
Pulp & paper 0.7 1.1 60 +20 Newsprint in Europe, coated paper US newsprint
Beverages 1.7 2.1 25 -10 Spirits, GEM exposed brewers Soft drinks & emerged market
brewers
Construction Materials 0.5 0.6 20 Cement, building distributors Glass
Health Care Equip 2.7 3.3 20 +5 ICDs
Software 3.8 4.5 20 Applications, security
Telecoms 5.4 6.2 15 Wireless in Europe (or their PTT
proxies) and Emerging Markets.
Legacy Wireline
Media 3.4 3.9 14 -6 Agencies, European advertising US distribution and cable
Diversified Financials 6.0 6.6 10 +5 Investment banks-M&A focused US bond sensitive plays
Consumer Durables 2.1 2.3 10 +20 Luxury goods
Tobacco 1.0 1.1 10 High GEM exposure (BAT)
Insurance 4.4 4.9 10
Energy 8.2 8.6 6 +1 OFS and E&P Low volume integrated oil
Capital Goods 7.4 7.8 5 Long cycle, trucks Short cycle, US consumer good
related
Food Products 2.0 2.1 5 +5 Those with high GEM exposure
(Nestle and Danone)
Pharmaceuticals 7.2 7.2 0 -3 Drugs companies with high FCF,
generics
Companies heavily dependent on
pipeline
Autos & Auto Comps 2.1 2.1 0 Non-US plays, niche plays (safety) US autos
Transportation 1.9 1.9 0 Air freight Budget airlines
Commercial Services 1.0 1.0 0 European employment agencies
Household Products 1.5 1.5 0
Chemicals 2.2 2.2 0 Chorine and industrial gas Speciality and ethylene
Hotels Rests & Leisure 1.3 1.3 0 Asia and US
Utilities 3.9 3.8 -3 European generators
Real Estate 1.6 1.4 -10 10 Asia
Food & Staples Retail 2.3 2.1 -10 15 Tesco
Banks 12.2 10.3 -15 -7 Non-Japan Asia, Europe US, UK consumer banks
Technology Hardware 5.8 4.6 -20 Telecom equipment PC, handsets
Metals & Mining 2.3 1.9 -20 Iron ore Steel, aluminum
Semi & Semi-Cap Equip 2.4 1.8 -25 Cheap Asian plays
Retailing 3.0 1.8 -40 US and UK retailing Japanese and European
100 100
Source: MSCI, CSFB estimates
Figure 2: Sector summary: Recommended over/underweight versus benchmark (%)
Benchmark
weight (%)
Recommended
weight (%)
Over / underweight
'versus' benchmark
Cyclicals (inc Technology) 39.9 38.4 -3.6
Cyclicals (ex Technology) 28.0 27.6 -1.5
Energy 8.2 8.6 6.0
Defensives 22.4 23.3 4.1
growth defensives 11.7 12.6 8.4
ex-growth defensives 10.7 10.7 -0.5
Financials 24.1 23.2 -3.9
Technology 11.9 10.9 -8.4
Telecoms 5.4 6.2 15.0
Source: MSCI, CSFB estimates
14. Global equity strategy 16 December 2004
14
Global Top-30 stock list
Inclusions— NGT, BP, Keppel Land, Inbev, LVMH and Schlumberger.
Deletions—Centrica, Total, Chinatrust, Generali, Pernod-Ricard and Haliburton.
Figure 3: Global Top-30
Stock Ticker CSFB rating Price
(l.c.)
Market cap
(US$ bn)
Alfa Laval ALFA.ST Outperform 109.0 1.8
Bca.Ppo.Di Verona Novara BPVN.MI Outperform 14.1 7.0
Bhp Billiton BLT.L Outperform 576.0 27.3
BP BP.L Outperform 508.5 210.6
Carnival CCL Outperform 55.4 34.9
Caterpillar CAT Outperform 93.7 32.0
Chevrontexaco CVX Outperform 53.1 113.1
Credit Agricole CAGR.PA Outperform 22.8 44.7
Dbs Group DBSM.SI Outperform 15.8 14.3
Diageo DGE.L Outperform 746.0 43.3
France Telecom FTE.PA Outperform 24.7 80.9
Glaxosmithkline GSK.L Outperform 1171.0 132.2
Ictl.Htls.Gp. IHG.L Outperform 661.5 7.9
Inbev INTB.BR Outperform 27.6 21.1
Keppel Land KLAN.SI Outperform 2.0 0.9
LVMH LVMH.PA Outperform 54.6 35.5
National Grid Transco NGT.L Outperform 475.8 28.3
Nestle NESN.VX Neutral 299.3 104.5
Northrop Grumman NOC Outperform 57.0 20.2
Ryl.Bk.Of Sctl. RBS.L Outperform 1696.0 102.5
Samsung Electronics 05930.KS Outperform 412500.0 57.4
Sap SAPG.F Outperform 135.2 56.6
Schlumberger SLB Outperform 65.1 38.3
Scot. & Southern Energy SSE.L Outperform 830.5 13.7
Societe Generale SOGN.PA Neutral 75.2 44.4
Stora Enso R STERV.HE Outperform 11.5 10.1
Toppan Printing 7911 Restricted 1073.0 7.1
Volkswagen VOWG.F Outperform 33.7 14.3
West Japan Railway 9021 Outperform 414000.0 7.8
Wpp Group WPP.L Neutral 563.5 12.7
Source: Datastream, CSFB estimates
Companies Mentioned (Price as of 14 Dec 04)
ABB (ABBN.VX, SFr6.45, OUTPERFORM [V], TP SFr7.70, MARKET WEIGHT) Analyst -Julian
Mitchell
Acer Inc. (2353.TW, NT$52.50, OUTPERFORM, TP NT$55.00) Analyst -Kevin Y Chang
Adidas-Salomon (ADSG.F, Eu120.80, OUTPERFORM, TP Eu144.05, OVERWEIGHT)
Alcon Inc (ACL, $78.49, OUTPERFORM, TP $84.00, OVERWEIGHT) Analyst -Kenneth Kulju
Alfa Laval (ALFA.ST, SKr109.00, OUTPERFORM, TP SKr120.00, MARKET WEIGHT) Analyst -
Patrick Marshall
Altria Group, Inc. (MO, $60.77, OUTPERFORM, TP $67.00, MARKET WEIGHT) Analyst -Andrew
Conway
19. Global equity strategy 16 December 2004
19
Disclosure Appendix
Important Global Disclosures
The analysts identified in this report each certify, with respect to the companies or securities that the
individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views
about all of the subject companies and securities and (2) no part of his or her compensation was, is or will
be directly or indirectly related to the specific recommendations or views expressed in this report.
The analyst(s) responsible for preparing this research report received compensation that is based upon
various factors including CSFB's total revenues, a portion of which are generated by CSFB's investment
banking activities.
Analysts’ stock ratings are defined as follows***:
Outperform: The stock’s total return is expected to exceed the industry average* by at least 10-15% (or
more, depending on perceived risk) over the next 12 months.
Neutral: The stock’s total return is expected to be in line with the industry average* (range of ±10%) over
the next 12 months.
Underperform**: The stock’s total return is expected to underperform the industry average* by 10-15% or
more over the next 12 months.
*The industry average refers to the average total return of the analyst's industry coverage universe
(except with respect to Asia/Pacific, Latin America and Emerging Markets, where stock ratings are
relative to the relevant country index, and CSFB HOLT Small and Mid-Cap Advisor stocks, where stock
ratings are relative to the regional CSFB HOLT Small and Mid-Cap Advisor investment universe.
**In an effort to achieve a more balanced distribution of stock ratings, the Firm has requested that
analysts maintain at least 15% of their rated coverage universe as Underperform. This guideline is
subject to change depending on several factors, including general market conditions.
***For Australian and New Zealand stocks a 7.5% threshold replaces the 10% level in all three rating
definitions.
Restricted: In certain circumstances, CSFB policy and/or applicable law and regulations preclude certain
types of communications, including an investment recommendation, during the course of CSFB's
engagement in an investment banking transaction and in certain other circumstances.
Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or
more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going
forward. All CSFB HOLT Small and Mid-Cap Advisor stocks are automatically rated volatile. All IPO stocks
are automatically rated volatile within the first 12 months of trading.
Analysts’ coverage universe weightings* are distinct from analysts’ stock ratings
and are based on the expected performance of an analyst’s coverage universe**
versus the relevant broad market benchmark***:
Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12
months.
Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the
next 12 months.
Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12
months.
*CSFB HOLT Small and Mid-Cap Advisor stocks do not have coverage universe weightings.
**An analyst’s coverage universe consists of all companies covered by the analyst within the relevant
sector.
***The broad market benchmark is based on the expected return of the local market index (e.g., the S&P
500 in the U.S.) over the next 12 months.
CSFB’s distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Outperform/Buy* 37% (57% banking clients)
Neutral/Hold* 43% (58% banking clients)
Underperform/Sell* 18% (45% banking clients)
Restricted 2%
20. Global equity strategy 16 December 2004
20
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and
Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock
ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be
based on investment objectives, current holdings, and other individual factors.
Important Australian and Canadian Disclosures
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting
shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.
Individuals receiving this report from a Canadian investment dealer that is not affiliated with CSFB should
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Important Asian Disclosures
Principal is not guaranteed in the case of equities because equity prices are variable.
Important CSFB HOLT Disclosures
With respect to the analysis in this report based on the CSFB HOLT methodology, CSFB certifies that (1)
the views expressed in this report accurately reflect the CSFB HOLT methodology and (2) no part of the
Firm’s compensation was, is, or will be directly related to the specific views disclosed in this report.
The CSFB HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use
of a set of proprietary quantitative algorithms and warranted value calculations, collectively called the CSFB
HOLT valuation model, that are consistently applied to all the companies included in its database. Third-
party data (including consensus earnings estimates) are systematically translated into a number of default
variables and incorporated into the algorithms available in the CSFB HOLT valuation model. The source
financial statement, pricing, and earnings data provided by outside data vendors are subject to quality
control and may also be adjusted to more closely measure the underlying economics of firm performance.
These adjustments provide consistency when analyzing a single company across time, or analyzing
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Important MSCI Disclosures
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(MSCI). Without prior written permission of MSCI, this information and any other MSCI intellectual property
may not be reproduced, re-disseminated or used to create any financial products, including any indices.
This information is provided on an “as is” basis. The user assumes the entire risk of any use made of this
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information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability
or fitness for a particular purpose with respect to any of this information. Without limiting any of the
foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing
or compiling the information have any liability for any damages of any kind. MSCI, Morgan Stanley Capital
International and the MSCI indexes are services marks of MSCI and its affiliates.
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of
Morgan Stanley Capital International Inc. and Standard & Poor’s. GICS is a service mark of MSCI and S&P
and has been licensed for use by CSFB.
For disclosure information on other companies mentioned in this report, please visit the website at
www.csfb.com/researchdisclosures or call +1 (877) 291-2683.
Disclaimers continue on next page.
21. 2005 Outlook Sectors and themes - Executive Summary
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