Thursday, September 7, 2006

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Thursday, September 7, 2006
Presented by Joe Muelleman
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Past Weeks Major News

• September 6 According to a Labor Department
  report, wages rose at an annual rate of 4.9
  percent in the second quarter, above the 4.2
  percent the agency estimated.
• Sept. 6 A report from the Institute for Supply
  Management showed that the services sector grew
  at a faster pace in August than economists
  forecast.
• An economy still showing this type of growth
  could make it easier for the Fed to justify a
  rate hike to fight inflation. The central bank
  left rates unchanged at its last meeting after a
  string of 17 straight increases its next meeting
  is Sept. 20.
• Sept. 5 Intel Corp. announces 10,500 jobs will
  be cut by mid-2007, which will result in an
  estimated savings of 3 billion annually by 2008.
• Sept. 5 Bill Ford is replaced by Boeings Alan
  Mulally as the CEO of Ford Motor Company.

3
Federal Reserve Bank

• Federal Reserve Maintained Rate on August 8, 2006
• Economic growth slowing
• Cooling housing market
• Lagging effects of High Interest Rates and Fuel
  Costs
• Inflation pressure likely to moderate over time
  rate should remain steady

4
Federal Funds Rate
5
Risk Free Treasury Bill Rates
Source Yahoo Finance
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Risk Free Treasury Bill Rates

• Recommendation
• 3 Month Maturity rate of 4.83 as Risk Free Rate
  of Return

7
International Markets

• Weak U.S. dollar from May to September
• (Demand
• The interest rates in Europe and China are
  expected to increase again
• In June, 8.4 billion was withdrawn from mutual
  funds
• Better stock performance has been observed in
  Asia and Europe

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Exchange Rates
9
Stock Index - Asia
N225 vs. SP 500
HSI vs. SP 500
BSESN vs. SP 500
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Stock Index - Europe
FTSE V.S. SP 500
FCHI V.S. SP 500
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Consumer Staples Industry

• Market Cap 2575.3B
• P/E 25.14
• ROE 16.73
• Dividend Yield 2.19
• Long Term Debt to Equity1.17
• Price to Book Value -.01
• Net Profit Margin 6.83
• Price to Free Cash Flow 72.72

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Consumer Staples Industry

• Major Components
• Auto Manufacturers
• Cigarettes
• Food
• Electronic Equipment

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Services Industry

• Market Cap 2925.6B
• P/E 25.98
• ROE 14.81
• Dividend Yield 1.33
• Long Term Debt to Equity 1.28
• Price to Book value 6.48
• Net Profit Margin 5.7
• Price to Free Cash Flow 79.36

14
Services Industry

• Major Components
• Discount Variety Stores
• Entertainment
• Business Services
• Air Delivery Freight Services
• Home Improvement Stores
• Restaurants

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Financial Industry

• Market Cap 5461B
• P/E 13.9
• ROE16.27
• Dividend Yield 2.62
• Long Term Debt to Equity 3.47
• Price to book value 2.82
• Net profit margin 12.76
• Price to free cash flow -41.61

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Financial Industry

• Major Components
• Money Center Banks
• Foreign Money Center Banks
• Property Casualty Insurance
• Credit Services
• Savings Loans

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Utilities Industry

• Market Cap 948.9B
• P/E 33.97
• ROE 16.01
• Dividend Yield 4.51
• Long Term Debt to Equity 2.31
• Price to Book Value 2.72
• Net Profit Margin 9.54
• Price to Free Cash Flow -64.36

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Utilities Industry

• Major Components
• Electric Utilities
• Foreign Utilities
• Gas Utilities
• Water Utilities

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Healthcare Industry

• Market Cap 2566.1B
• P/E 46.37
• ROE 14.63
• Dividend Yield 1.62
• Long Term Debt to Equity 0.45
• Price to Book Value 45.03
• Net Profit Margin 11.36
• Price to Free Cash Flow 72.3

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Healthcare Industry

• Major Components
• Drug Manufacturers
• Biotechnology
• Medical Instruments Supplies
• Health Care Plans

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• Health care spending is currently 16 of GDP
• This number is expected to rise as the population
  ages and more expensive drugs and devices are
  developed

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DJ US Health Care Index (June-Aug)

• Dow Jones Health Care index is up 3.3 for the
  past year.
• Best performing industry subsections are
  pharmaceuticals and medical supplies up 7.3 and
  8.46 for the past year, respectively.
• Biotech stocks have been more volatile, and are
  down 1.96 in the past year.

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Technology Industry

• Market Cap 5327.8B
• P/E 28.48
• ROE15.90
• Dividend Yield 1.97
• Long Term Debt to Equity 0.63
• Price to book value 5.24
• Net profit margin 10.76
• Price to free cash flow 115.19

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Technology Industry

• Major Components
• Communication Equipment
• Foreign Telecom Services
• Wireless Communications
• Application Software
• Semiconductors
• Computer Systems