Economics 494 INVESTMENT ECONOMICS
	Spring 2015

Industry and Stock Analysis

This is a team assignment involving the analysis of stocks in a particular industry.  Select an industry that is of interest to your team and identify it using one of the methods mentioned in class (4-digit NAICS code, S&P, Value Line).   Each industry may only be selected by one team, and industries will be allocated on a first-come, first-served basis.

Analysis

Please address the following in any order:

1.  Briefly describe the industry that you have selected.  This should include a discussion of the product or service dealt with in the industry and any trends (technological, social, etc.) that may be affecting the industry.

2.  How do macroeconomic forces affect this industry?  Discuss where you think the national and international macroeconomies are heading and how this will affect your industry.

3.  Analyze your industry completely based on the concepts discussed in Chapter 12, particularly Porter's Five Forces analysis.

4.  Each member of the team should choose a key publicly traded company in the industry and do an analysis of that company.  This should be an individual effort but should be included as part of the team report.  The analysis should include the following elements:

a.  Provide some background for your company.  Discuss its prospects in terms of the macroeconomic and industry analysis performed in the team assignment.

b. Calculate the intrinsic value of the stock using the two-stage dividend discount model (see the Honda Motor example on pp. 417 - 419) or the free cash flow model (pp. 430 - 431).  Also calculate the intrinsic value using P/E analysis (p. 428).

c.  Calculate the key financial ratios given on p. 463.  Compare them to the industry averages that can be found at the sources below:

• Dun & Bradstreet:  "Industry Norms & Key Business Ratios"

• Leo Troy:  "Almanac of Business & Industrial Financial Ratios"

• Risk Management Association :  "RMA Annual Statement Studies"

d.  Using daily data from the beginning of 2013, calculate both 50-day and 200-day moving averages for your company's stock price.  Plot these along with the stock price on a single graph.  Identify the following key turning points:

• The stock price crossing either of the moving averages

• The shorter term moving average (50-day) crossing the longer one (200-day)

e.  Rate each company's stock as a buy, sell, or hold. 

Output

Your output should be in the form of a report dealing with the items above.  Please submit this report by May 12. If the output is a hard copy, it should be typed, double spaced, on 8 ½ x 11 or A4 paper.  Be sure to cite any references used.