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

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

5. Sector Industries
Source: Fidelity

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

7. Sector Companies – Lowest Market Capitalization
Source: tradingview.com

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

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

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

11. Sector Performance: Overview
Info Tech:
YTD: % ($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

13. 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

14. Sector Growth
Max
Source: Bloomberg

15. 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:

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

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

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

21. 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

22. Sector Financial Analysis
Revenue & Earnings
Nate
Source: Bloomberg

24. Sector Valuation Analysis
Korey
Source: Bloomberg

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

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

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