Fundamental Analysis Finding and Evaluating Stocks by kellena99

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									Industry Analysis: Finding and
Evaluating the Story


                Drew Newell
              February 16, 2006
Overview
^   What defines an Industry
^   Why we look at them
^   Where we find Industry
    information
^   How to find the story




February 16, 2006   Industry Analysis   2
Industry
 ^   A specific branch of
     manufacture and/or
     trade
 ^   Consists mainly of
     company competitors
 ^   Producers of perfect
     substitutes




 February 16, 2006   Industry Analysis   3
Stock Analysis Relies on Industry Outlook
 ^   Industry Trends affect:
      ^   Future Revenues
      ^   Market Sizing
      ^   Threat of Competitors
      ^   Relative Cheapness of
          Company Stock
      ^   Short-term Stock Price
          Pressure




 February 16, 2006         Industry Analysis   4
Evaluating Industry: Competition Analysis
 ^   Industry Shaping Factors:
      ^   Product Differentiation
      ^   Existence of Monopolies
      ^   Patents Held by Other
          Companies
      ^   Technological/Procedural
          Advancements
      ^   Barriers to Entry
      ^   Foreign Trade Policy




 February 16, 2006        Industry Analysis   5
Comparative Valuation: Competitors
 ^   Identifying Competitors
      ^   Perfect Substitution –
          Obvious competitors
      ^   Imperfect Substitution –
          Goods serve same basic
          purpose
      ^   Size and Scope of Business


 Competitors put
 fundamental analysis
 in perspective


 February 16, 2006         Industry Analysis   6
Industry/Product/Market Analysis
  ^ Consider 4 P’s:
      ^   Product
           ^   Quality
           ^   Brand Name
      ^   Place
           ^   Market Location
           ^   Distribution Methods
      ^   Promotion
           ^   Advertising
           ^   Sales Force
      ^   Price
           ^   Product demand
           ^   Costs

 February 16, 2006              Industry Analysis   7
Macro vs. Micro Economic Analysis
 ^ World Economics
                               Global Economy
 ^ U.S. Economics
      ^   Look at Economic and
          Monetary Indicators
                                                     U.S. Economy
           ^   Unemployment Rate
           ^   Industrial Production
           ^   Durable Orders
                                                        Sector
           ^   Corporate Profits
           ^   Retail Sales
           ^   Housing Activity
                                                        Industry
      ^   No one Indicator is Most
          Important
      ^   Look at Composite of 11                      Company
          Leading Indicators
 February 16, 2006               Industry Analysis                  8
Story: Where the Company Fits
 ^ Company:
      ^   Takes advantage of
          industry trends
      ^   Positioned to
          capture/create market
          share
      ^   Demonstrated effective
          management decisions
      ^   New products in pipeline
          and news releases




 February 16, 2006        Industry Analysis   9
Resources
 ^   Economic Data:
      ^   Economic Statistic Briefing
          Room:
 www.whitehouse.gov/fsbr/esbr.html


 ^   Industry Data:
      ^   www.morningstar.com


 ^   Competitors:
      ^   www.investors.com – Stock Checkup
      ^   http://finance.yahoo.com
      ^   www.morningstar.com
      ^   www.wsj.com

 February 16, 2006          Industry Analysis   10
Sample Data from Briefing Room




 February 16, 2006   Industry Analysis   11
SFCC: Research Services
 ^ Questions to Ask:
      ^   Who are its competitors?
      ^   What makes a good drug
          tester? (Apply 4 P’s)
      ^   How is the Industry
          expected to perform?
      ^   What are positive/negative
          impacts on industry?

           Use the these impacts
           to hypothesize positive
           and negative scenarios



 February 16, 2006            Industry Analysis   12
SFCC
 ^ Look to Morningstar.com
   for Competitors
 ^ Factors for Success in
                                              +          -
   Research Services
                                             R&D      Negative
   Industry:
                                           Spending   Publicity
      ^   Cost
          Timeliness                       Medical
      ^                                                Deaths
                                           Testing
      ^   Methods ±
                                             Out-
 ^   Industry expected to
                                           sourcing
     perform well (see article)


 February 16, 2006     Industry Analysis                     13

								
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