Zach Rochon Logan Cotter Adam Claugus Joseph Hsieh May 5 th, 2009.
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Transcript of Zach Rochon Logan Cotter Adam Claugus Joseph Hsieh May 5 th, 2009.
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Zach RochonLogan Cotter
Adam ClaugusJoseph Hsieh
May 5th, 2009
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1) Size and Composition2) Economic Analysis3) Business Analysis4) Valuation Analysis5) Financial Analysis6) Recommendation
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Coal and Consumer Fuels Oil and Gas
◦Drilling◦Equipment and Services◦Exploration and Production◦Integrated◦Refining/Marketing◦Storage
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Consumer Discretionary9.52%
Consumer Staples12.04%
Energy12.51%
Financials12.19%
Health Care13.83%
Industrials10.44%
Information Technology18.40%
Materials3.37%
Telecom Svc3.71%
Utilities3.98%
Cash0.00%
S&P 500 Sector Weights
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Consumer Discretionary7.93%
Consumer Staples13.06%
Energy11.31%
Financials8.14%
Health Care17.74%
Industrials9.44%
Information Technology19.92%
Materials3.88%
Telecom Svc2.40% Utilities
2.50%Cash
3.69%
Sim Portfolio Weights
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1. SizeA. Adjusted market cap of $1,006,613 millionB. Composes 12.51% of the S&P500C. SIM currently underweights by 120 basis points
2. Largest Companies1. Exxon Mobile($332.30B),
PetroChina($180.73B), Royal Dutch Shell($149.17B), BHP Billiton ($141.55B), BP ($139.57B), Chevron($131.86B)
3. Performance1. YTD: (2.25%)2. QTD: 11.18%
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2) Economic Analysis
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EUR/USD
Energy (Sp-10) prices
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Correlation=-.888R² = 0.7902
0
20
40
60
80
100
120
140
160
0.6 0.65 0.7 0.75 0.8 0.85
Crud
e O
il
USD/Euro
USD/Euro vs. Crude Oil
2008-Present
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The Life Cycle
The Business Cycle
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Near-term future of energy markets is tied to the economy’s uncertainty.
Restoring credit flow is key to stabilizing demand.
Capital intensive nature of energy projects makes access to financing critical.
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Energy is at the center of a political debate◦ Waxman-Markey Bill◦ Cap-and-trade of greenhouse gases◦ Carbon pricing◦ Clean Energy and Energy Efficiency◦ Back by Obama with majority support in the
House, Senate is the only hurdle
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Increase 120 basis points to par with S&P500 at 12.51%◦ The sector is currently undervalued with strong
growth potential within our one year horizon Energy’s performance against the S&P500
◦ QTD:11.18% vs. 6.48%◦ YTD: (2.25%) vs. (2.49%)
We expect this trend to continue and improve long-term
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Biggest positives◦ Short-Term: OPEC cutting production◦ Long-term: U.S. economic recover
Biggest risks◦ Appreciation of USD/Euro◦ Uncertainty in global economy◦ Political risk
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Overweight◦ Drilling & Services
Underweight◦ Exploration and Production
Individual stock recommendation◦ Transocean (RIG)