Exercise-Analyze a sector\'s historical trends and find future mega-trends v1 PDF

Preview

Summary

Download Exercise-Analyze a sector's historical trends and find future mega-trends v1 PDF

Description

In-lecture Exercise: Analyze a sector’s historical trends and find future mega-trends In this exercise, you will use Bloomberg and the Internet to:  Explain what has happened in a sector/industry in the past  Explain current and future trends in an industry Background 1. Bloomberg Intelligence (“BI”): a. Is a stock research department similar to sell-side firms b. Is not comprised of journalists (which are found in Bloomberg's "News" division) c. Not all sectors are covered (you may see some industries lack data in the “Industry” section of BI) 2. Please note, the term "Sector" and "Industry" are used interchangeably for the purposes of equity research 3. There are often two places to enter information on a Bloomberg screen a. At the top there will be a black box with a blue prompt is to change pages/functions b. Below the top prompt there will often be an amber/orange box for entering information specific to that page Find and save the chart I sent to your Bloomberg account (if you did not sign up for Bloomberg well before this class, you probably will not have the charts) 4. Log into Bloomberg 5. Check your messages by typing "MSG" and press enter 6. Look for emails that I have sent which will have attached charts 7. Open the first chart 8. When it populates, using the pull-down menu under "Actions" in the red toolbar, select "Save a Copy" which will save it in your "Graphs and Maps" area 9. Keep going back to your messages with the MSG function until all of the charts have been saved to your graphs area 10. Check to see if the graphs are saved in your "Graphs and Maps" area by going to the top of the Bloomberg screen and type "G" and press enter (try to remember this because you will periodically need to go back to the Graphs and Maps page to get graphs you need to use) 11. IMPORTANT: If you're working in a team, every other team member not using Bloomberg during this exercise will need to follow the steps above in the future when logged into their account Find a sector/industry index ticker 12. Select a stock not in the restaurant sector that is widely-known (Please don't select an obscure stock because it will make later steps difficult and please don't select AMZN, TSLA, FB or TWTR because they're overused) 13. To find the ticker of this stock of interest, start typing the company's name in the top command bar in Bloomberg (it will likely have a blue blinking cursor). As you type the company's name, look down to the "Securities" area and when it appears, select that stock and record its ticker. The company name should appear in the pulldown menu at the very top of the page which is for "recent" securities. 14. Using your stock of interest, identify an industry index that includes that stock by using Bloomberg’s “WGT” function. Using this as an example, AMZN EQUITY WGT, substitute your stock's ticker for "AMZN" and press the "F8" button for "EQUITY" Pa g e1o f 5

7 f 6 e 6 1 b e b b 2 4 5 7 e d 2 4 1 a d c c c b 4 6 9 9 a 4 8 . d o c x

15. The screen that appears will be all of the indexes that include this stock ranked in order of popularity by Bloomberg users 16. To find indexes that are concentrated with stocks from the same industry as your stock of interest do the following on the screen: a. In the amber (orange) box under "Name", put “GICS” and press enter b. This will populate the list with only those in the Global Industry Classification Standard which are the most popular indexes available c. Search for an index that contains "GICS level 4" which will have stocks that are the most similar to the stock of your interest (if there are more than one, select the one with "15" in its ticker). If level 4 is not appearing, select an index with level 3 d. When you find the index, record its ticker: [e.g. S5RAIL] Identify the 10-year trends of the sector/industry 17. Go to your graph & maps area by typing "G" in the very top command line (not the orange box) and press enter 18. Look for the chart “Abs P/E Components” and record the "G" number to its left. For example if the chart has a "G 4" to its left, it will be your G4 chart. In the future, you can get this chart to appear by typing G4 in the top command line 19. In the top command line (it typically has a blue blinking cursor), enter the following, TICKER INDEX G#, where: a. The ticker is the sector/industry ticker found above (e.g. S5RAIL above) b. "INDEX" is generated by pressing the F10 key c. The G# should be replace with your graph number from above i. TICKER INDEX G# ii. Press enter to generate the chart 20. When the chart appears, ensure it is for 10 years. If not, use the blue pull-down menu to change to "Weekly 10Y" 21. You are now looking at the industry's 10-year performance. Review how these lines have changed over the 10 years. Move your mouse over the line to see the value at any point in time. a. Yellow line: The price for one unit of the index, similar to the price of a stock b. Red line: The expected EPS over the next 12 months at any point in time, as forecast by all the analysts ("consensus") covering the stocks in the industry. Remember this is the single biggest factor that influences the long-term direction of a stock price (it's the health of the industry). c. Green line: The sector's relative performance when compared to the 500 stocks in the S&P 500. To interpret this line: i. Take the number in the green tag (usually the left side) and subtract 100 and that is the amount of return you would have generated during the graph's time period compared to owning all of the stocks in the S&P 500. ii. For example 1. If the green tag reads 130, subtract 100 and it shows that your industry index had a +30% better return over that time period than the S&P500 2. If the green tag reads 75, subtract 100 and it shows that your industry index had a 25% worse return over that time period than the S&P500 (75 – 100 = -25%) 3. If the green tag reads 100, subtract 100 and it shows that the industry index had the same return over that time period as the S&P 500 Pa g e2o f 5

7 f 6 e 6 1 b e b b 2 4 5 7 e d 2 4 1 a d c c c b 4 6 9 9 a 4 8 . d o c x

YOUR RESPONSES: Based on your work above, explain what has happened in the past to: Qu e s t i o n

Y o u rRe s p o n s e Th ey e l l o wl i n ei nmyp o i n t o f v i e wt e l l su sa b o u t t h ec o mp a n yl a s t y e a r T h es e c t o ri n d e x e s ’ p r i c ef o rt h e1 0y e a r sp r i o r t o d u r i n gc o v i dwh i c hh a sb e e nma d el o s s e sb u t s t i l l s t a b l ewh i c hi sap l u s COVI D1 9( y e l l o wl i ne ) p o i n t f o r i t . T h es e c t o r ’ sEPSg r o wt hr a t ea n ds t a b i l i t y( r e d Th er e dl i n e ss p e a ka b o u t t h ema r k e t o f h o med e p or t , e a r n i n g sa swe l l l i n e ) a st h es t a b i l i t yo f t h ec omp a n y . Us i n gt h eg r e e nl i n e , wh e nd i dt h es e c t o ro u t Th eg r e e nl i n eb a s i c a l l yt e l l su sa b o u t t h e1 0y e a r sp e r i o do f h o me p e r f o r m( gou p ) an du n d e r p er f o r m( god o wn ) t h e d e p o r t wh i c hi s1 5 9 . 0 0t i me sb e t t e r . mo s t r e l a t i v et ot h eb r o a d e rma r k e t ( S&P5 0 0 ) . I p er s o n a l l yt h i n kt h a t a st h ec o mp a n yh a v ei n c r e a s ei np a s t y e a r st h e y Wh a t d oy o ut h i n kma yh a v ec a u s e dt h e s e h a v ema d ec o r p o r a t ee a r n i n ga swe l l a st h e yh a v eb u i l t ma n y mo v e s ? i n f r a s t r u c t u r ewh i c hh a sh e l p e dt h e mt oi mp r o v et h ec o mp a n y .

Pa g e3o f 5

7 f 6 e 6 1 b e b b 2 4 5 7 e d 2 4 1 a d c c c b 4 6 9 9 a 4 8 . d o c x

Find sector mega-trends by searching Bloomberg Intelligence For this stage, you will conduct research to identify current and future trends for the industry you selected 22. To use the research found in Bloomberg Intelligence (BI), it's best to start on their page dedicated to the industry. a. In the Bloomberg command line (it typically has a blue blinking cursor), enter: BI and press enter, which will bring you to the Bloomberg Intelligence home page b. In the top orange box, type the ticker of the company from this sector you used in an earlier step and select that company from the options that appear under "Companies" c. Select “Company Data” which should bring up the sector/industry dashboard (if it doesn’t, re-do this step using another stock in the sector) d. Notice you will be in the sector/industry dashboard which has its own unique name just under the orange box near the top of the screen (e.g. “BI RAILN”) 23. Record your sector dashboard ticker in case you need to go back to it, which can be done by entering it into the command line (e.g. BI RAILN) e. While still in the BI sector/industry dashboard, in the left panel select “Industry” under the “Research” section (not under the "Data Library" section). f. In the right panel, review all the gray tabs along the top of the section EXCEPT “Valuation” and “Earnings” (these may not appear for your sector). Helpful tabs include (they may not all be there): i. “Themes” tab ii. “Indictors” tab iii. “Basics” tab e. Bloomberg will typically display only summaries of their research reports and so you will need to select the headline to read more f. If you're in a report and want to get back to the sector/industry dashboard, select the " to Return" at the top of the screen Find sector mega-trends by searching the Internet 24. Separately, using your preferred web browser, search the Internet for “[INDUSTRY NAME] megatrends” Based on everything you've researched in this short period of time, briefly provide 3 to 5 observations about past and future trends in the industry (10-20 words per bullet).  [Observation #1]  [Observation #2]  [Observation #3]  [Observation #4]  [Observation #5]

Pa g e4o f 5

7 f 6 e 6 1 b e b b 2 4 5 7 e d 2 4 1 a d c c c b 4 6 9 9 a 4 8 . d o c x

Alternative method to find the Bloomberg Intelligence industry dashboard 1. Another method to find BI's “Industry” page is to start with a stock of interest in that industry. In the top command line, enter the following, where: a. The ticker is the stock of interest b. "EQUITY" is generated by pressing the F8 key c. "BICO" is the Bloomberg page that will provide a Bloomberg Intelligence Company Overview (only for larger companies) d. It should look like this but replace AMZN with your ticker i. AMZN EQUITY BICO 2. Assuming the Bloomberg Intelligence Company Overview page appears (it may not for smaller and non-U.S. stocks) a. Look for “Industry Dashboard” in the lower right of the screen b. Record the Bloomberg Intelligence industry code for future use. For example, if it shows "Industry Dashboard: BI ITSVG" that means the Bloomberg Intelligence industry code is ITSVG (this is not a stock ticker)

Pa g e5o f 5

7 f 6 e 6 1 b e b b 2 4 5 7 e d 2 4 1 a d c c c b 4 6 9 9 a 4 8 . d o c x...