Information Technology Sector Outlook: Information Technology Summer 2018 Max Pristic, Brett Mosher, Korey Murnane, Balakrishna Nallanagulagari, Christopher Poelking, & Nate Quellhorst

Sector Size & Weight Market Cap: $6.16T # of Constituents: 69 Weight of Largest Constituent: 14.5% Weight top 9 Constituents: 67.9% Source: Fidelity

Sector Industries Source: Fidelity

Sector Companies – Highest Market Capitalization Chris add some solid info and smart art stuff - the total should be trillion Source: tradingview.com

Sector Companies – Lowest Market Capitalization Source: tradingview.com

Sector Companies - Top Performers Based on Total Return from Last 3 Months Chris Source: tradingview.com

Sector Companies - Bottom Performers Based on Total Return from Last 3 Months Source: tradingview.com

Sector Performance: Overview Q/Q: 16 years Source: Bloomberg

Sector Performance: Overview Info Tech: YTD: +13.60% ($150.47) QTD(3/1-6/1): +39.1% ($350.45) S&P YTD: +3.33% ($88.98) QTD(3/1-6/1): +14.3% ($338.66) YTD Source: Bloomberg

Sector Business Cycle The Information Technology sector is still experiencing healthy global expansion, and will continue to grow in the future. That being said, it is moving from the mid to later stages of the business growth cycle. As the sector moves further into the growth cycle, growth will slow. Korey Elaborate Source: Fidelity

Sector Growth Max Source: Bloomberg

Sector Profitability – Porter’s 5 Forces Threats of New Entrants: Low IT Industry is unattractive to newcomers because: - Cost advantage large-scale incumbents possess - The significant amount of capital needed by a new firm - Established brands exists Threat of Substitutes: Low - There is not much of a threat from substitutes to the IT industry, mostly because there aren’t true substitutes. Rivalry: Medium to High - Intense rivalry among existing companies - Large companies benefit from economies of scale - Well branded and tend to have a strong customer base - Market share uneven Buyer Power: Medium - Customers control IT sector - Many choices for a buyer - Minimal switching costs - Customers are sensitive to price - Companies offer incentives to use their products Supplier Power: Medium to High -Most supplier relationship are long-term & well-established -Most companies utilize standard inputs -Difficult for new suppliers to enter industry Source: https://sites.google.com/site/computerindustryadmn703/home/porter-s-five-forces-model

Correlation to S&P Max/Nate Q/Q: 10 years Source: Bloomberg

Correlation to GDP Correlation: 0.97 Max Source: multipl.com, Bloomberg

Correlation to 10-Year Treasury Note Max Correlation: -0.35 Source: investing.com, Bloomberg

Sector Financial Analysis Sales Growth Rate: 2017: 13.48% 2018E: 8.7% Major Companies: Apple: 2017: 6.28% 2018E: 14.61% Google: 2017: 22.80% 2018E: -2.17% Microsoft 2017: 5.94% 2018E:13.16% Sector: Earnings Growth Rate: 2017: 23.45% 2018E: 32.43% Major Companies: Apple: 2017: 5.47% 2018E: 21.25% Google 2017: 24.47% 2018E: 10.34% Microsoft 2017: 20.05% 2018E:12.84% Nate Source: Bloomberg

Sector Financial Analysis Revenue & Earnings Nate Source: Bloomberg

Sector Valuation Analysis   Korey Source: Bloomberg

Sector Valuation Analysis - By Industry Most multiples for top Industries within Info Tech are greater than S&P 500 -Attributed to potential growth

Sector Valuation Analysis Margins Free Cash Flow Need help moving excel table to this powerpoint slide Source: Bloomberg

Recommendation As of May 31, 2018: S&P 500 weight - 26.19% OSU endowment fund weight - 24.06% What adjustments do we recommend for this upcoming quarter? BUY back to maximum allotment (+1% of S&P 500 weight)