zach rochon logan cotter adam claugus joseph hsieh may 5 th, 2009
TRANSCRIPT
Zach RochonLogan Cotter
Adam ClaugusJoseph Hsieh
May 5th, 2009
1) Size and Composition2) Economic Analysis3) Business Analysis4) Valuation Analysis5) Financial Analysis6) Recommendation
Coal and Consumer Fuels Oil and Gas
◦Drilling◦Equipment and Services◦Exploration and Production◦Integrated◦Refining/Marketing◦Storage
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
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
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%
2) Economic Analysis
EUR/USD
Energy (Sp-10) prices
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
The Life Cycle
The Business Cycle
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.
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
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
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
Overweight◦ Drilling & Services
Underweight◦ Exploration and Production
Individual stock recommendation◦ Transocean (RIG)