5. Raytheon (NYSE:RTH) Founded in 1922 by two former college classmates Provides defense and intelligence services to United States and abroad United States Army, Navy, Marines 75,000 employees Sales of $21.3B in 2007 William H. Swanson, CEO Radio tubes were initial product
6. Product Line Six strategic Business Units Integrated Defense Systems Intelligence and Information Systems Missile Systems Network Concentric Systems Space and Airborne Systems Technical Services 2007 Revenue Source: Capital IQ
7. Financials (YE 2007) Net Sales: $21.30B Net Income: $2.58B Total Assets: $23.2B Total Liabilities: $10.3B Beta Coefficient: 0.80 Source: Raytheon 2007 10-K
8. Stock Price & Return k = D1 + (P1 – P0) / P0 Investment: $1,500 52-week high: $67.49 52-week low: $41.81 February 13th: $46.74 3 Year Projection: Stock Price $65 and Dividends $0.40 ROI: 18.9%, or $283.50 0.1890 = 0.40 + (65 – 55) / 55
9. Analysis William H. Swanson has 35+ years industry experience President Obama’s ARRA* allocates millions towards development of satellite systems None of Raytheon’s 15,000 contracts account for more than 5% of total sales “A cut in defense spending would be ‘inconceivable’” –Jim Cramer, “Mad Money with Jim Cramer”, 2/13/09 “we expect (Raytheon’s) annual sales growth to average 7% over the next five years as the company continues to win government contracts” -Michael Pierson, MorningStar Analyst *American Reinvestment and Recovery Act of 2009
10. SAP (NYSE:SAP) Founded in 1972 in Walldorf, Germany Software solutions for businesses Banking Finance Supply Chain Management $13.3B in sales for 2007 43,800 employees Fact: More than 12 million people use SAP everyday
11. Products & Services Product Segment Marketing & Development of company’s products “SAP Business Suite” Consulting Segment Implementation of company’s software products Integration with I/T systems Training Segment Educational services and training Traditional classroom settings & E-Learning
17. Stock Price & Return Investment: $1,000 52-week high: $59.42 52-week low: $29.31 February 13th: $37.12 3 Year Projection: Stock Price $55 and Dividends $1.05 ROI: 16.7%, or $167.70 0.1677 = 1.05 + (55 – 48) / 48
18. Analysis Consistently outperforms Oracle Achieved 8% sales increase Purchased Business Objects in 2008 “SAP will increase market share with its recent purchase of Business Objects”. –SunitGogia, MorningStar Analyst Launched new software for police aid in 2009 MorningStar predicts growth rate of 9% for next 2-4 years
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20. “more than 55 million discs and ships 1.9 million of them to customers each day, on average”
23. Netflix Revenue rose to $359.6 million from $302.4 million in the third quarter earned $22.7 million, or 38 cents a share (23 cents a share a year ago). Analysts were expecting a return of 36 cents a share. If you stacked every movie Netflix ships (on average, 2 million DVDs a day) in a single pile, the stack would be taller than Mt. Everest within a week.
24. Netflix Netflix is in excellent financial shape. Although some of its cash is earmarked for investment in its digital download initiative, the company has no debt and generates plenty of free cash flow. (morningstar.com) Do not pay annual dividends.
25. Stock Price & Return Investment: $1,000 52-week high: $40.90 52-week low: $17.90 February 13th: $38.54 3 Year Projection: Stock Price $60 and EPS $1.35 ROI: 20.2%, or $200 0.2019 = 1.35 + (60 – 51) / 51
26. American Italian Pasta Co North America's largest manufacturer and distributor of 10 retail noodle and dry pasta brands Supply Mueller's, Golden Grain, Heartland, Anthony's, R&F, Ronco, Luxury, Martha Gooch, Pennsylvania Dutch and Mrs. Grass Listed on the NASDAQ
27. American Italian Pasta Co. First quarter ’09 earnings increase of $59.5 million, or 53%, to $171.2 million. Earnings per share 4th quarter ‘08 were only 7¢ Earnings per share 1st quarter ‘09 were $1.23
28. American Italian Pasta Co. Investment: $1,500 52-week high: $31.25 52-week low: $4.26 February 13th: $31.03 3 Year Projection: Stock Price $50 and EPS $1.60 ROI: 20%, or $300 Analysts suggest buying until $32.00 0.20 = 1.60 + (50 – 43) / 43
29. Bonds Bonds are securities issues by corporations to borrow funds Corporate Bonds default rate at all time high Municipal Treasury Bonds have default rate of zero Relatively safe, however certain terms make them risky Call provisions Convertible Bonds: Exchangable for certain allocation of shares Secured Bonds: Issued with collateral (property)
30. TIPS Investment: $3,000 Municipal Bond Treasury Inflation Protected Securities Adjusted for Inflation Median Yield: 2.199% Cost: $2967.90 Yield is contingent on Consumer Price Index
31. Why TIPS? Inflation has averaged at least 2.5% since 2001 Us treasury securities market is one of largest and most liquid Economist predict rabid inflation with Obama’s $800 stimulus plan. Guaranteed Return 3-Year ROI: 2.199% or $197.91
32. Deflation Present state of economy is in deflation. Deflation has never been sustained over a ten year period. If that could happen, we would still receive face value with little interest. As long as there is cumulative inflation over the ten year period we profit.
33. Certificate of Deposits We plan to invest $2000 in CDs We are investing in standard CDs Instead of investing in a single CD, we are investing in multiple CDs with different maturity dates We are investing in a 1 year, 2 year and 3 year CDs. We will be purchasing our CDs from H&R Block Bank We will be investing $250, $500 and $1250 respectively in 1 year, 2 year and 3 year CDs. By investing in this manner, we will be earning a 10% rate of return when all our CDs have matured.
36. What is a Money Market? What is a money market? A financial market for short-term borrowing and lending. It provides short-term liquidity funding for the global financial system. Money markets have high risk rates, in terms of low to non interest rates Dealing with short- term debts The short-term trade in money and in the sale and purchase of bonds certificates
37. Why Not Invest in Money Markets? According to Comerica Bank, the High Yield Money Market Investment Account (HY MIA) only provides a 0.20 percent of interest rate. With an opening balance of $1- $14,999 Comerica Bank also requires either $1,000.00 minimum ledger balance or a $2,500.00 average daily ledger balance. Money markets do not earn interest for consumers There is no return Losing your money; you’re not likely to get out what you put in!!!
38. Group Decision (Money Markets) We decided not to invest in money markets: Opportunity cost of giving up money that could be invested elsewhere A normal savings account, would earn you more interest than a money market account Economy plays a major role in why we decided not to invest in money markets Businesses closing: Market failures Inflation rate is higher the return of the money market- your money would be worth even less than before
39. Do Banks Approve Money Markets? “An investment in money market funds is not insured or guaranteed by Bank of America, N.A., the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in money market funds.”
40. Money Market Concerns According to Bankrate.com, money market and savings account rates for the Bay-Saginaw and Midland area are very high priced. Comparing opening accounts, many banks such as, Bank of America, Chase Bank, Citizens Bank and National City bank all have a price of $10,000 in the opening process of a money market. Not only are consumers expected to pay for these high rated accounts, but they are also required to pay an “avoiding fee” charge, at which the amounts are as high as $5,000.
41. Money Market Concerns Continued According to Bankrate.com, These banks also offer monthly service fees of a rate of $3 – $20. The starting intro rates for these banks range from 0.15% to 2.61%. Economy is worsening and headed for a “Great Depression”
42. What Would Have Happened? If we were to invest $1,000.000 in money markets within the 3 years, we would have an ending balance of $1,074.64. We used 36 months, at a annual percentage yield rate of .2 and an opening balance of $1,000.00.
Products and services include: Missiles, Air Traffic Mgmt Solutions, Infrared Surveillance, Naval Weapon Systems, etc.William H. Swanson – Been with the company since 1972 / 35+ years. He brings a lot to the table, which we will point out in a couple minutes.
As you can see in the graph, the company has a well diversified product line – this is important because no specific business unit accounts for a large part of sales. Important for government contracts.
The beta coefficient measures the stock’s market risk. Generally speaking, stocks below 1 are “safer”.
k = returnD1= dividend paid during yearP0= price we pay todayP1= price at the end of one year0.40 is the dividend that that expect in Year 3 – 65 is our Recommendation – 55 is at the end of Year 2Most recent dividend: $0.28/share – January 31st
Point One: Swanson has been with the company for more than 35 years – he has been through economic downturns and change in political leadership. The WSJ reports that Raytheon will NOT cut any of its 75,000 positions despite the current economic situation.Point Two: American Reinvestment and Recovery Act of 2009; plans to create satellite systems that monitor climate change – intelligence software that Raytheon has been working on.
SAP Business Suite can be licensed individually or as a whole – Product Lifecycle, Relationship Mkt, and more.
Less than 1 is preferred – “less risky”.
Dividends have been paid yearly. Most recent dividend was 0.73.
BO; Business Intelligence Software – Diversify companyToday there is an increased need for investigators to make more arrests and deliver improved efficiency to local communities.
Dividends have been paid yearly.
If it’s good enough for Cramer, it should be good enough for you!!
