券和组合课后习题答案

CHAPTER14

INDUSTRYANALYSIS

AnswerstoOuestions

1.Theresultsofempiricalstudiesconcludedthattherearesubstantialdifferencesin

absoluteorrelativeperformanceamongindustriesduringanygiventimeperiod.In

addition,industryperformancedifferencesarefoundinalternativetimeperiodswherethe

timeperiodsmayvaryinlength.Therefore,theinvestormustexaminealternative

industriesafterhehasforecastedmarketmovementsbecauseofthewidedispersionof

industryperformancearoundtheexpectedmarketperformance.

2.Studiesshowthatrelativeindustryperformanceisinconsistentovertime.When

industriesarerankedoversuccessivetimeperiods,thereislittlecorrelationinthe

rankings.Thisresultholdsfordifferenttypesofmarketsandforalternativelengthtime

periods.Thesefindingsimplythatsimpleextrapolationofpastperformanceisnotuseful

byitself.Therefore,theanalystmustputadditionaleffortintohisindustryanalysisby

projectingindustryperformancebaseduponfutureexpectationsofindustryconditions.

Thisobviouslymakesindustryanalysismoredemanding.

3.Agreateremphasismustbeplaceduponindustryanalysiswhentheperformancesofthe

individualfirmsclusterabouttheindustryperformance.Incontrast,oncetheindustry

performanceisestimated,theneedforindividualfirmanalysisisreducedsincethese

resultsimplythatallthefirmswillbehavesimilartotheindustry.

4.Disagree.Althoughstudieshaveshownasignificantdispersionofindividualfirm

performancewithinagivenindustry,theyalsofoundthattheindustrycomponentcould

partiallyexplainindividualfirmperformance.Althoughthestrengthoftheindustry

componentvariesamongindustries,industryanalysisisanimportantstepbefore

proceedingtothecompanyanalysis.Theimportantimplicationisthatindividual

companyanalysiswouldberelativelymoreimportantforindustrieswhereindividual

companyreturnsarewidelydispersed.Thepointis,thedispersionamongcompanies

withinindustriesindicatesaneedforcompanyanalysisafterindustryanalysis.

5.Forgiventimeperiods,thereweresignificantdifferencesinriskamongalternative

industries.AnanalysisofBetacoefficientsforthe30Barron飞industrygroupsindicated

awiderangeofsystematicrisk.Thesubstantialdispersioninriskforalternative

industriesimpliesthattheanalystmustexaminetherisklevelsforalternativeindustries.

6.Whilethereissubstantialdispersioninindustryriskduringagiventimeperiod,studies

indicatereasonablystablebetacoefficientsovertime.Thisimpliesthatpastindustryrisk

analysismaybeusefulinestimatingfuturerisk.

7.Thefourthstageoftheindustriallifecycleisstabilizationandmarketmaturity.During

thisstage,salesgrowinlinewiththeeconomy.Ifsalespershareforanindustryinthis

stageofthelifecyclewerepredictedtoincreaseby20percent,thiswouldimplya

growthrateoftheaggregateeconomyof20percent.Asalesgrowthrateof20percentis

highforanindustryinthefourthstageoftheindustriallifecycle.

8.Asaninvestor,youwouldliketodiscoverafirmjustenteringtherapidaccelerating

growthstage.Duringthisstage,afirmwillexperiencehighsalesgrowth,highprofit

margins,andlittlecompetition.

9.Anindustrythatexperiencedthekindofexplosivegrowthcharacteristicsofstagetwo

(rapidacceleratinggrowth)wastheinternet-relatedindustryinthelate1990s.

10.Input-outputanalysisisoneofthreepopularmethodsforforecastingindustrysales.For

autos,industriessupplyingsteel,glass,tiresandupholsteryfabricsshouldbescrutinized

aswellasthespendingcapabilities/habitsofconsumers.Forcomputers,thesuppliersof

criticalcomponentswouldhavetobestudiedalongwiththespendingcapabilities/habits

ofpotentialusers.

11.Asubstituteproductforsteelwouldlimitthepricesfirmsinthatindustrycouldcharge.

Thedegreeoflimitationwoulddependonhowcloselythesubstituteproductwasinprice

andfunctiontosteel.

12.Boththepresentvalueofcashflowapproachesandtherelativevaluationratiosapproach

requiretwofactorsbeestimated:(1)requiredrateofreturnonthestock,becausethisrate

becomesthediscountrateorisamajorcomponentofthediscountrate,and(2)growth

rateofthevariableusedinthevaluationtechniques,suchas,dividends,earnings,cash

flowsorsales.

13.Earningsmultiplier(P/E)isdeterminedby:

(1)theexpecteddividendpayoutratio,

(2)theestimatedrequiredrateofreturnonthestock(k),and

(3)theexpectedgrowthrateofdividendsforthestock(g).

Withintheretailfoodindustry,onewouldlookatacompany'sfundamentalrisk

(business,financial,liquidity,exchangeandcountryrisks).Differencesinfundamental

risklevelswilldetermineacompany'sperformancewithintheindustry.Onecouldalso

lookatthecompetitiveenvironmentofanindustry-rivalryamongtheexisting

competitors,threatofnewentrants,threatofsubstituteproducts,bargainingpowerof

buyers,andbargainingpowerofsuppliers.

14.Thetwo-stageFCFEmodelwouldapplytothevaluationofstockforgrowthcompanies

becausethehighgrowthofearningsforthegrowthcompanyisinconsistentwiththe

assumptionsoftheinfiniteperiodconstantgrowthDDMmodel.Acompanycannot

permanentlymaintainagrowthratehigherthanitsrequiredrateofreturn,because

competitionwilleventuallyenterthisapparentlylucrativebusiness,whichwillreducethe

firm9sprofitmarginsandthereforeitsROEandgrowthrate.Therefore,afterafewyears

ofexceptionalgrowth(aperiodoftemporarysupernormalgrowth)afirm'sgrowthrateis

expectedtodecline.Eventuallyitsgrowthrateisexpectedtostabilizeataconstantlevel

consistentwiththeassumptionsoftheinfiniteperiodDDM.

15.ThereasonforthedifferenceintheP/CFratioscanbeexplainedbydifferencesinthe

growthrateofCFpersharebetweenthemarketandindustry,andtherisk(volatility)of

theCFseriesovertime.Therefore,anincreaseinthegrowthrateoftheindustryCF

comparedtothegrowthofthemarketCF,aswellastheindustryCFseriesbecoming

moreconsistentinitsgrowth,wouldcauseanincreaseintheindustry-marketratio.

16.CFAExamination11(1999)

IdentifyCurrentStageinProductLifeCycle(circleone)

SUVModelandJustifyYourChoice

Declining

RavenThenumberofRavenSUVunitssoldhasdeclinedsinceitspeakin1997andthe

declineisexpectedtoacceleratein1999and2000.

Mature

HawkTherateofincreaseinthenumberofHawkSUVunitssoldhasslowedandthe

numbersoldisexpectedtoincreaseonlymodestlyin1999and2000.

Expanding

Eagle

ThenumberofEagleSLTVunitssoldhasincreasedrapidlysinceitsintroduction

in1997andisexpectedtocontinuegrowingrapidlyin1999and2000.

16(b).ThestatementthatNelsonMotorsisenjoyingincreasingSUVprofitabilityistrue.SUV

Divisionprofitshaveincreasedfrom$45millionin1990to$1,311millionin1998,

withadditionalsubstantialincreasesforecastfor1999and2000.TheSLTVdivisionhas

grownfromapproximately4%ofNelsonMotors9profitsin1990toanestimated52%

ofprofitsin2000.TheEagleisprimarilyresponsibleforthisprofitgrowthbecauseof

itshighunitsalesgrowthandgreaterprofitpervehiclecomparedtotheRavenandthe

Hawk.

Thesecondpartofthestatement,thatNelsonMotorsenjoysdecliningearningsrisk

goingforward,isnottrue.NelsonMotorsisrelyingheavilyontheEagletotaketheplace

oftheRaven,whichisinthedecliningphaseofitslifecycle,andtheHawk,whichisin

thematurityphaseofitslifecycle.NotethatNelsonMotorshasnoSUVmodelsother

thantheEagleintheearlyphaseoftheirlifecycle.TheincreasingdependenceofNelson

ontheprofitabilityoftheSUVdivisionincreasestheexposureofthecompanyto

developmentsthatwouldaffectthatproductline.

Insummary,whileNelsonMotorsmayenjoyincreasedprofitabilityduetothesuccessof

theEagle,therisktoearningshasactuallyincreasedbecausethecompanyismore

dependentononemodelinthefuture.IntheexistingSUVproductportfolio,theRaven

andHawkareaging,andtheircontributiontoNelson'sprofitsisdroppingdramatically.

17.CFAExamination11(1999)

Valid/IndustryCharacteristics

StatementNotValid(citetwobynumberforeach

(circleone)statement)

IrecommendthatweinvestintoyValid:1,2,4,5,6,15

companieswithasubstantialpercentageofValid

revenuesderivedfromnon-U.S.sales.NotValid:none

CompaniesselectedfortheportfolioValid:13

shouldderivealargeportionofrevenuesNotValid

fromthelargestdiscounttoyretailer.NotValid:13,14,15

Iamparticularlyinterestedinastart-upValid:12

companythathasanexcitingnewtoyNotValid

comingoutbasedonaverypopularNotValid:7,8,10,11,16

televisionshow.

AlthoughMasterToyhasthedominantValid:none

marketshare,smallercompanieswillhaveNotValid

betteropportunitiesforgrowth.NotValid:7,8,9,10,11,16

CHAPTER14

AnswerstoProblems

1.StudentExercise

2.StudentExercise

3.StudentExercise

4.StudentExercise

5.StudentExercise

6.StudentExercise

7.StudentExercise

8.CFAExamination11(1995)

8(a).RelevantdataitemsfromTable1thatsupporttheconclusionthattheretailautoparts

industryasawholeisinthestabilizationphaseoftheindustrylifecycleare:

1.Thepopulationof18-29yearolds,amajorcustomerbasefortheindustry,is

graduallydeclining.

2.Thenumberofhouseholdswithincomelessthan$35,000,anotherimportant

customerbase,isnotexpanding.

3.Thenumberofcars5-15yearsold,animportantendmarket,hasrecordedlow

annualgrowth(oractualdeclinesinsomeyears),sothenumberofunitsthat

potentiallyneedpartsisnotgrowing.

4.Automotiveaftermarketindustryretailsaleshavebeengrowingslowlyforseveral

years.

5.Consumerexpendituresonautomotivepartsandaccessorieshavegrownslowlyfor

severalyears.

6.Averageoperatingmarginsofallretailautopartscompanieshavesteadilydeclined.

8(b).RelevantitemsofdatafromTable1thatsupporttheconclusionthatWigwamAutoparts

Heaven,Inc.(WAHI)anditsmajorcompetitorsareinthegrowthstageoftheirlifecycle

are:

1.Salesgrowthofretailautopartscompanieswith100ormorestoreshavebeen

growingrapidlyandatanincreasingrate.

2.Marketshareofretailautopartsstoreswith100ormorestoreshasbeenincreasing

butisstillonly19percent,leavingroomformuchmoregrowth.

3.Averageoperatingmarginsforretailautopartscompanieswith100ormorestores

arehighandrising.

Becauseofindustryfragmentation(i.e.,mostofthemarketshareisdistributedamong

manycompanieswithonlyafewstores),thereta