Macroeconomic and industry analysis
Objectives:
1. Conduct macroeconomics analysis covering global, domestic and local economy.
2. Conduct sector and industry analysis covering industry prospects, competitiveness, etc... for the industry of the company selected.
3. Search and collect macroeconomic and industry-wide data and use those data to make investment decisions.
You start your first summer job at Goldman Sachs Inc. as an assistant to an equity investment team. On your first day of the job, Melinda, your advisor, asks you to write a 5-page long report on the impact of macroeconomic and industry-wide factors on ______ performance. (Put the company of your selection in the blank). You are asked to present the results back to the whole team by next Monday.
Now you go back to your desk and are very excited about this opportunity. You remember what you‘ve learned in investment class back in college. There are several approaches in pricing financial assets. One of the approaches you've learned is top-down analysis. This approach starts with a broad market analysis and then stock selections. To begin macroeconomic analysis, one must understand the current macroeconomic conditions and market trends. You recall there are several important economic indicators that can be good guidance in determining the economic outlook. You decide to go back to look up what those indicators are and rely on the information to make good judgements on economic outlook in a foreseeable period of time and its possible impacts on the targeted equity.
You then need to study industry conditions on the industry at which the targeted company is categorized. You decide what industry factors are important to your equity analysis. The next step is to collect information relevant to those factors and analyze the impacts of them on the targeted company.
You know some of the economic indicators and statistics can be found on several government agencies (BLS, Census, FRED, etc...), government sponsored organizations and private companies like Wall Street Journal and Yahoo! Finance, etc....You also know that some international organizations such as International Monetary Funds (IMF) publishes forecasting data on global and reginal economies.
It looks like that you already have things plan out and know where to start. You feel much prepared and now it is time to get a cup of coffee and get ready to work on this project the whole weekend!
Few questions to ponder:
1. The past, current and future status of major economic indicators and their relations to the economy in a foreseeable period of time. What would be the likely state of the economy for the next few years?
2. Past performances of the targeted company and its industry. What is current phase of industry life for the targeted industry? Provide evidences.
3. Relation between the targeted industryand the general economy. Is the targeted industry a cyclical or defensive industry?
4. Any things you believe should be important to be included in this report.