1. CONSUMER DISCRETIONARY STOCK OUTLOOK
Nick Amanatides, Byron Bone, Randy Bond
Byron

2. Service Corporation International
AGENDA
Sector Recap
Amazon
Newell Brands
General Motors
Churchill Downs
Service Corporation International
Dollar Tree
Recommendation
Byron

3. Sector Overview (S5COND)
Consumer Discretionary makes up about 13% of S&P 500
Total size of approximately $3.44 Trillion
Extremely diverse sector; 12 different industries
Byron

4. LARGEST COMPANIES (ALL OVER $100B IN MARKET CAP)
Amazon
Home Depot
Netflix
The Walt Disney Company
Comcast Corporation
McDonalds
Nike
Booking Holdings (Online Travel)
Byron

5. S5COND Performance YTD = 11.65% SPX Performance YTD = 2.48%
Byron

6. Business Analysis The Consumer Discretionary Sector is highly cyclical
It tends to outperform when the overall economy does well and underperform when the overall economy does poorly
Relies heavily on the health of the consumer for revenue growth
The overall U.S. economy appears to be in the Mid to Late stage of the cycle
Byron
Source: Fidelity Investments

7. Sales and Earnings SALES SALES GROWTH EARNINGS EARNINGS GROWTH Byron
*Sales Growth has been between approximately 5% to 10% in the years since the Great Recession and this trend is expected to continue.
*Earnings Growth has also been between approximately 5% to 10% in the years since the Great Recession and this trend is expected to continue.

8. Valuation Analysis S5COND 10 Year High 10 Year Low 10 Year Median
Current
P/E
131.96
14.07
20.01
25.23
P/S
1.88
.43
1.33
P/B
5.73
1.78
3.99
P/CF
39.40
9.75
19.32
25.51
P/EBITDA
11.49
4.65
8.21
11.19
S&P
10 Year High
10 Year Low
10 Year Median
Current
P/E
24.11
12.07
17.55
21.04
P/S
2.32
0.74
1.50
2.21
P/B
3.45
1.64
2.41
3.34
P/CF
25.09
8.92
14.91
22.73
P/EBITDA
12.08
4.4
8.25
11.44
Byron
Fairly inline with S&P based on historical 10 year medians

9. Recommendation Neutral Positive Factors Negative Factors
Historically Low Unemployment
Increasing Wage Growth
Tax Cuts
Moderate GDP Growth
Negative Factors
High Historical Valuations
Increasing Interest Rates
Potential for Trade War
Late in the Economic Cycle
Neutral
Byron

10. Service Corporation International
AGENDA
Sector Recap
Amazon
Newell Brands
General Motors
Churchill Downs
Service Corporation International
Dollar Tree
Recommendation
Nick

11. Company Overview Ticker: AMZN Logo: Founded: 1994 by Jeff Bezos
Sector: Consumer Discretionary
Weight = Approx %
Industry: Internet & Direct Marketing Retail
Market Cap: $830B (7/6/18 close)
Stock Price: $1, (7/6/18 close)
Shares Outstanding: M
52 Week High: $1,763.10
52 Week Low: $931.75
One Year Return: 71.7% (7/6/18 close)
Beta: (Bloomberg)
Dividend Yield: N/A
Shares Sold Short: 1.24% (7/6/18 close)
Buy/Sell Rating Ratio: 6 to 0 (TD Ameritrade)

12. Business Lines How the company makes money:
Amazon is primarily an online retailer (facilitated by Prime membership)
Provides a platform for third-parties to sell goods
Offers cloud computing services (e.g., data storage) via Amazon Web Services (AWS)
Offers subscription services (e.g., Audible, Amazon Music, etc.)
Operates traditional brick and mortar grocery stores (e.g., Whole Foods, Amazon Go)
Sells Amazon devices (e.g, Alexa, etc.) to produce a network effect for the above services
Other: Book publishing, digital content production, online pharmacy (e.g., PillPack)

13. 5 Year Stock Performance
AMZN vs. S&P 500
AMZN vs. Consumer Discretionary

14. 5 Year Stock Performance (Cont.)
AMZN vs. Competitors
The stock has outperformed due to the following reasons:
Extraordinary sales growth that has translated into increased market share
The slow reaction of competitors towards the convenience trend
Consistent innovation and expansion into new industries
High quality management
A halo effect
Amazon Alibaba Walmart Google Kroger

15. Business Drivers
Demand for Amazon’s products and services is primarily driven by consumer preferences in conjunction with economic conditions that impact consumer spending.
The preference of consumers to seek convenience in their shopping for retail goods has increased substantially over the last decade.
U.S. Gross Domestic Product growth is an important element for Amazon since this is the company’s largest market.
Strong Consumer Confidence is also an important factor since this can impact consumer spending.
Amazon has been a beneficiary of climbing U.S. Personal Consumption Expenditures.
Amazon has also been a beneficiary of the low Unemployment Rate.

16. Business Drivers (Cont.)
AMZN vs. Consumer Confidence
AMZN vs. Personal Consumption Exp.

17. Percentage of Net Sales by
Financial Analysis
Percentage of Net Sales by
Line of Business
2017 Financial Highlights
Income Statement
Net Sales: $177,866B
Operating Income: $4,106B
Net Income: $3,033B
Diluted EPS: $6.15
Balance Sheet
Total Assets: $131,310B
Total Liabilities: $103,601B
Stockholders’ Equity: $27,709B
Working Capital: $2,314B
Cash Flow Statement
Free Cash Flow: $6,479B
Returns
Return On Equity: %
Return On Assets: 2.83%
Return On Invested Capital: 5.85%
This financial strength is likely to continue improving in the coming years.
Source: Amazon 10k, 2017

18. Financial Analysis (Cont.)
Percentage of Net Sales by
Line of Business
This financial strength is likely to continue improving in the coming years.
Source: Bloomberg

19. Financial Analysis (Cont.)

20. Valuation Analysis Amazon currently sells for more than all
5 Year High
5 Year
Low 5
Year Average
Current
P/E
1.07k
152.70
473.44
371.69
P/S
4.72
1.49
2.84
4.57
P/B
30.57
12.42
21.44
29.59
P/FCF
463.77
33.84
105.84
125.50
P/EBITDA
65.11
26.44
41.59
52.18
Comps
S&P 500
Current
S5COND Current
Competitor Current
P/E
20.68
25.14
27.06
P/S
2.17
1.82
4.72
P/B
3.27
5.76
4.98
P/FCF
22.31
25.38
26.01
P/EBITDA
11.48
11.73
16.62
*5 year P/S average x estimated 2018 sales per share = about $1,366.00
*5 year P/E average x estimated 2018 EPS = about $5,757.00
*Current book value per share is about $65.00
Amazon currently sells for more than all
5-year average valuation metrics with the exception of P/E
Amazon currently sells for more than all
current valuation metrics of the S&P, S5COND Sector, & Competitors with the exception of P/S for Competitors
Source: Bloomberg

21. DCF Model

22. Recommendation SELL Positive Factors Negative Factors
Strong Net Sales Growth
Diversified Sales
High Quality Management
International Opportunities
One Of The First To Market
Negative Factors
Very High Valuation
Aggressive Expansion
High Expectations
Potential for Trade War
Later in the Economic Cycle
*Amazon’s “international activities are significant to revenues and profits” - Amazon k
Target Price: $1,144 (33% Downside)
Current SIM Weight: 557 BPS
Current S&P 500 Weight: 295 BPS
Proposed Weight: 295 BPS

23. Service Corporation International
AGENDA
Sector Recap
Amazon
Newell Brands
General Motors
Churchill Downs
Service Corporation International
Dollar Tree
Recommendation
Nick

24. Company Overview Ticker: NWL Retails Consumer Products
Valuation
Current
P/S: 0.91
P/E:
P/B: 0.94
P/FCF:
P/EBITDA: 7.17
Div Yield: 3.36%
5-Year Average
P/S: 1.68
P/E:
P/B: 4.31
P/FCF:
P/EBITDA:
Div Yield: 1.98%
Cheap compared to the S&P, S5COND Sector, Competitors, and itself
Est. 1903
Ticker: NWL
Retails Consumer Products
Sector: Consumer Discretionary
Weight = 0.44%
Industry: Household Durables
Market Cap: $13.32B (7/6/18 close)
Stock Price: $27.42 (7/6/18 close)
52 Week High: $54.18
52 Week Low: $22.60
Dividend Yield: 3.36%
2017 Financials
Revenue: $14,742B
EPS: $5.63
Book Value: $29.15
Free Cash Flow: $525M
ROE: %
*2018 estimated Sales per share = $29.02 x 1.68 = $ *Div Yield at $48 would be 1.92%
*2018 estimated EPS = $2.62 x = $ *Stock currently sells for under book value
Source: Newell 10k, 2017 & Bloomberg

25. DCF Model & Recommendation
Target Price: $46.69 (70% Upside)
Current SIM Weight: N/A
Current S&P 500 Weight: 6 BPS
Proposed Weight: 262 BPS
BUY

26. Service Corporation International
AGENDA
Sector Recap
Amazon
Newell Brands
General Motors
Churchill Downs
Service Corporation International
Dollar Tree
Recommendation
Byron

27. General Motors
Ticker: GM
Formed in 1908 in Flint, Michigan

28. General Motors GM Automotive Business Segments GM North America
GM Europe
GM International Operations
GM South America
Purchased Cruise Automation Inc. in 2016

29. General Motors GM Financial
50 Facilities in US. Accounts for 65% of total sales
Acquired Ally Financial’s 40% stake in SAIC-GMAC in China for $1 billion

30. General Motors

31. General Motors Financials

32. General Motors Financial Drivers
Truck Sales

33. General Motors DCF/Factors
Performance and Valuation
Discount rate: 11%
FCF Growth: 3%
Tariffs and Trade War
Truck vs Car Trend
Electric and Automation

34. General Motors Recommendations
but wait...

35. General Motors Recommendations
Stock Price of 13,050 common stock
Now, stock price of 39.16…
$511,038

36. Service Corporation International
AGENDA
Sector Recap
Amazon
Newell Brands
General Motors
Churchill Downs
Service Corporation International
Dollar Tree
Recommendation
Byron

37. Company Overview Churchill Downs Incorporated Ticker: CHDN
Information: Racing, gaming, and online entertainment company
Most recognized for Kentucky Derby
Reuters

38. Churchill Downs

39. Churchill Downs

40. Churchill Downs DCF
Discount rate: 9-10% FCF Growth: 2%

41. Service Corporation International
AGENDA
Sector Recap
Amazon
Newell Brands
General Motors
Churchill Downs
Service Corporation International
Dollar Tree
Recommendation
Byron

42. Company Overview
Service Corporation International provides death care services. The Company operates funeral service locations, cemeteries, and crematoria. SCI also sells prearranged funeral services in most of its service markets.
They are 16%.... Closet competitor is 2% of the market
Dominated by Mom & Pop places
1,488 Funeral Locations & 473 Cemetery Locations
North America’s largest provider of funeral and cemetery services
Founded in 1962, original strategy was to obtain efficiency of business and to reduce overhead by sharing resources
Partnering with other firms led to numerous merger and acquisitions
SCI grew at an incredible rate

43. Company Overview - Continued
Business is good.
“In this world nothing can be said to be certain, except death and taxes.”
- Benjamin Franklin

44. Business Analysis Overview: Ticker: SCI Industry: Funeral Services
SCI and Consumer Discretionary over the past 5 years
Business Analysis
Overview:
Ticker: SCI
Industry: Funeral Services
Current Price: $36.49
Target Price: $30.39
Market Cap: 6,690 M
Shares Outstanding: M
Dividend & Yield: / 1.84%
Beta: 1.02
Revenue: 3.1B
EPS (TTM): $1.65
P/E:
Share Price Performance – 1 Year
52-WEEK HIGH $ WEEK LOW $33.12
1-YEAR RETURN %

45. Growth Drivers & Risks Growth Drivers:
Only large provider of death care services
National Scale & Cluster Approach
Huge Market Share over competitors
Size allows lower costs through economies of scale
Large aging Baby Boomer Population
Currently age 54-72
Addressable market expected to grow 19% in the next 4 years
Full-Service Package reduces time and stress
Acquisition of Funeral Homes and Cemeteries
Internal Controls & New Training Program for all employees
Risks:
Increasing cremation rate
Lower revenue per service
Costs are rising while demand is slowing
Unfavorable demographics - Decline in births from
Increasing death benefits through life insurance may not cover future increases in the cost of the service
Competition… but they can buy them out
Full-Service Package: Merchandise, Funeral Services, Burial/Cremation

46. Five Year Growth Performance Compared to Competitors
Full-Service Package: Merchandise, Funeral Services, Burial/Cremation
Service Corporation International (SCI) - White
Carriage Services (CSV) – Orange
Stonemor Partners (STON) – Blue

47. Financial Analysis – DCF Valuation
DCF Target Price: $28.25

48. Financial Analysis - Valuation
Absolute Valuation
Current Multiple
Target Multiple
Target/ Current
Target Price
P/E
22.35
23.54
1.05
$38.31
P/B
4.50
3.44
0.76
$27.73
P/S
2.22
1.61
0.73
$26.64
EV/EBITDA
11.83
10.08
0.85
$31.02
Summary:
DCF Target Price: $28.25
Multiple Target Price: $ $38.31
Equally Weighted Target Price: $30.39
Valuation Method
Weight
Target Price
Weighted Target Price
DCF
0.2
$28.25
$5.65
P/E
$38.31
$7.66
P/B
$27.73
$5.55
P/S
$26.64
$5.33
EV/EBITDA
$31.02
$6.20
Total = Target Price
1.0
$30.39

49. SELL SCI SIM Recommendation Current Weight : 200 BPS
Proposed Weight: 167 BPS
(Target Price / Current Price) -1
($ $36.49) -1 =
200 current basis points x = 33 bps
200 – 33 = 167 bps

50. Service Corporation International
AGENDA
Sector Recap
Amazon
Newell Brands
General Motors
Churchill Downs
Service Corporation International
Dollar Tree
Recommendation
Byron

51. Company Overview – Dollar Tree
Ticker: DLTR
Industry: Discount Retail
Sector: Consumer Discretionary
Current Price: $85.83
Market Cap: 20,408M
52 Week High: $116.65
52 Week Low: $66.39
2017 Financials:
Revenue: 22.5B
EPS: $7.03
Free Cash Flow: $436M
Profit Margin: 7.44%
ROE: %
Current Price:
$85.83
Valuation:
P/E: 17.2
P/S: 0.9
P/B: 2.77
EV/EBITA: 9.4

52. $85.83 DCF for Dollar Tree Current Price:
Dollar Tree Intrinsic Value as of June 24th 2018

53. Service Corporation International
AGENDA
Sector Recap
Amazon
Newell Brands
General Motors
Churchill Downs
Service Corporation International
Dollar Tree
Recommendation
Byron

54. Recommendation Recap 557 BPS 295 BPS $1,710.63 $1,144.00 SELL 500 BPS
Current Weight
Proposed Weight
Current Price
Target Price
Buy, Sell, Hold
Amazon
557 BPS
295 BPS
$1,710.63
$1,144.00
SELL
General Motors
500 BPS
$39.16
$65.03
BUY, well...
Service Corp International
200 BPS
167 BPS
$36.49
$30.39

55. Questions?
All