1. Information Technology
Jason Kotzur, Matthew Leightman, Mitch Maher, Dimitris Siafarikas

2. Green bar on the right side, overweight
SIM Overview
Green bar on the right side, overweight
Green bar on the left side, underweight
Companies in this sector and their weight according to market capitalization.

3. Companies listed under the IT sector.
Information Technology Overview
IT Sector Market Data
Companies listed under the IT sector.

4. Information Technology Life-Cycle Analysis

5. Typically the most robust time for growth
Information Technology Life-Cycle Analysis
Typically the most robust time for growth
Since 1962, the broader stock market produced approximately 20% total return during this phase, with an average length of 1 year
Tech stocks are growing marginally, mainly due to renewed interest in both consumer and corporate spending

6. Information Technology Life-Cycle Analysis
Information technology is the best performer of all the sectors during this phase
Software and hardware companies typically pick up momentum as these companies gain more confidence and start spending money on capital expenditures

7. Information Technology Life-Cycle Analysis
Information technology typically suffers during this time due to inflationary pressures that put a strain on margins and profits
Consumers tend to move to more economically inelastic segments, such as Energy

8. Typically shortest in the life-cycle, normally last about a year
Information Technology Life-Cycle Analysis
Typically shortest in the life-cycle, normally last about a year
Interest rate and economically sensitive sectors typically do not outperform the broader market

9. One sign means a mixed or less consistent signal
Information Technology Life-Cycle Analysis
White portions suggest no clear pattern of performance vs broader market.
Double signs indicate sector is showing consistency between all three metrics
One sign means a mixed or less consistent signal

10. Intensity of Rivalry Buyer Power Supplier Power Threat of Substitutes
Information Technology Porter’s 5-Forces
Intensity of Rivalry
Buyer Power
Supplier Power
Threat of Substitutes
Barriers to Entry

11. High Medium Price Consumer often are price conscious (-) Cost
Information Technology Porter’s 5-Forces
Price
Consumer often are price conscious (-)
Cost
Low customer switching cost (-)
Quantity
Many products provide same basic functions (-)
Buyer Power
High
Supplier Power
Price
Previously established relationships (+)
Cost
Inputs relatively standard (-)
Quantity
Industry standard for non-exclusivity (-)
Medium

12. Low High Price Cost Quantity
Information Technology Porter’s 5-Forces
Price
Cost
Quantity
At a macro-industry level, there is not a lot of substitutes.
Threat of Substitutes
Low
Barriers to Entry
Price
High growth potential (-)
Cost
Higher than average margins (-), start-up cost (+/-)
Quantity
Finding the niche (-)
High

13. Overall Attractiveness
Information Technology Porter’s 5-Forces
Intensity of Rivalry
Price
Cost
Quantity
Economies of scale (+), established customer base (+), market share uneven (+/-)
Moderate
We acknowledge that there are high growth and profit potentials in the technology sector and that’s why there are always new entrants; however, due to cost advantages that already established companies have and the cost of capital to get product to market, we feel that the overall industry is unattractive
Overall Attractiveness
Unattractive

14. Catalyst Inhibitors Increased consumer confidence Global Recession
Information Technology Sector Analysis
Catalyst
Increased consumer confidence
Low interest rates
Innovation
Governmental spending
Irrational Exuberance
Inhibitors
Global Recession
Uncertainty in the Market (Brexit: Hard/Soft Exit)
Credit tightening
High inventories (Low Revenue)
Interest rate hikes

15. Geography 23 Developed Markets 25 Emerging markets
Information Technology Sector Analysis
Geography
23 Developed Markets
25 Emerging markets
Huge potential in EM

16. Users United States > 15.5% population over 65
Information Technology Sector Analysis
Users
United States > 15.5% population over 65
Canada > 16.5% population over over 65
Is there a way that technology companies can target the aging population?

17. Shift towards Cloud Computing (Growth)
Information Technology Sector Analysis
Shift towards Cloud Computing (Growth)

18. Shift from PCs (Mature) to Smartphones and Tablets (Growth)
Information Technology Sector Economic Analysis
Shift from PCs (Mature) to Smartphones and Tablets (Growth)

19. Information Technology Economic Analysis
Is a Bubble Developing?
October 2008 – President Bush signs $700B bailout
August Standard and Poor’s downgrade US credit rating
October 2008
August 2011
^VIX vs VITAX (Vanguard IT Mutual Fund)

20. Information Technology Economic Analysis
Biggest wedge between the returns of the Information Technology sector vs the S&P 500, since 2008.
Is the United States market in a life cycle that would typically be conducive to information technology growth?

21. Information Technology Economic Analysis
Information Technology is the 3rd most positively correlated sector in the S&P 500, this could be due to the market weight of the sector
Information Technology, Intra-sector correlation is not as strong among other sectors

22. Information Technology Economic Analysis
Sector Returns:

23. Industry Price / Earnings Multiple
Information Technology Valuation
Industry Price / Earnings Multiple
How much are we paying for one dollar of profit?
Industries Price / Sales Multiple
The value placed on each dollar of a company's revenues

24. How much total profit can be divided to an individual share
Information Technology Valuation
Industry EPS
How much total profit can be divided to an individual share
Industry P/CF
How much are we paying for one dollar of operating cash flow from the company?

25. Information Technology Valuation
P/E Relative
2014: 1.25%
2015: 1.86%
2016: 3.59%
2017: 8.21%
P/S Relative
2014: 83.43%
2015: 82.07%
2016: 84.26%
2017: 92.38%
P/B Relative
2014: 44.33%
2015: 48.74%
2016: 48.81%
2017: 60.19%
P/CF Relative
2014: 11.43%
2015: 17.61%
2016: 6.17%
2017: 10.2%

26. Support and Resistance Bands
Information Technology Technical Analysis
Support and Resistance Bands
Support
Resistance
New S&R
Resistance: when stock hits a peak and starts to descend
Support: when a stock hits a bottom point and starts to ascend

27. Head and Shoulders Reversal
Information Technology Technical Analysis
Head and Shoulders Reversal
Left Shoulder
Head
Right Shoulder
Neck Line
This could be interpreted as a signal to buy

28. This could be a signal to buy
Information Technology Technical Analysis
Double and Triple Bottoms
This could be a signal to buy

29. Information Technology Financial Analysis
Revenue Analysis

30. Information Technology Financial Analysis
Gross Margin Analysis

31. Information Technology Financial Analysis
Operating Margin Analysis

32. Information Technology Financial Analysis
Profit Margin Analysis

33. Information Technology Financial Analysis
Return on Common Equity Analysis

34. Short-term Recommendations* Short-term Risk*
Information Technology Short-Term Recommendations and Risk
Short-term Recommendations*
SIM profile should be at market-weight with the S&P 500
Decrease (Sell) SIM weight to equal 22.48%
United States market life-cycle is not conducive to sector growth
Short-term Risk*
One of the current holdings in the SIM portfolio outperforms analyst expectations
We are wrong about the United States current market life-cycle (Mid-Late)
Sector has a whole increases dividends and attracts investors
* 2 Year Time Horizon

35. Long-term Recommendations*
Information Technology Long-Term Recommendations and Risk
Long-term Recommendations*
The past 15 years, the IT sector overperformed the SP500.
Investors start focusing in technology and they ways they will influence the world.
Examples: Artificial Intelligence, Virtual Reality, Augmented Reality.
* 7 year time-horizon
* 10 Year Time Horizon

36. Information Technology
Questions?

37. References Information Technology
Annual S&P Sector Performance. (n.d.). Retrieved July 5, 2017, from
Big Charts. (n.d.). Retrieved July 5, 2017, from
Bloomberg Portal. (n.d.). Retrieved July 5, 2017.
Information Technology. (n.d.). Retrieved July 5, 2017, from
Interactive Charts. (n.d.). Retrieved from
Morningstar. (n.d.). Retrieved July 5, 2017, from
Murphy, J. (n.d.). John Murphy's "Charting Made Easy". Retrieved from
Sallomi, P. (n.d.) Technology Industry Outlook. Retrieved July 5, 2017.
TECHNOLOGY OVERVIEW. (n.d.). Retrieved July 5, 2017, from
The Business Cycle Approach to Equity Sector Investing. (2014, September). Retrieved from
Yahoo Finance. (n.d.). Retrieved July 5, 2017, from