The purpose of this assignment is to vote on an industry mix for the new Praxis portfolio. The (to-be-)posted spreadsheet (Industry mix Spring 2022.xls) will list the fifteen assigned Praxis industries and their (recent) S&P 500 benchmark weights, as well as older benchmark weights (which can be used to derive one measure of how expensive an industry is: “how much have prices gone up lately?”).
Your group’s task is three-fold. First, vote a suggested industry mix (that is, investment weights across the Praxis industries). Second, vote on various conscience-based investing issues. Third, discuss your reasoning.
We reminder you that the Praxis portfolio has (at least) two themes: (a) low risk investing, (b) conscience-based investing. How these themes are actually implemented is up to you (all the students, in aggregate). We examined (industry reports) the difficulty of finding low beta, low volatility stocks in each industry.
We examined (conscience-based investing reports), the conscience-based issues in each industry.* These (PowerPoint) reports are now posted on Canvas. It is now up to your group to decide how (and why) to weight each Praxis industry in the (new) Praxis portfolio, as well as how to implement conscience-based issues.
* We have not yet (systematically) valued individual stocks. However, we can calculate one (admittedly imperfect) measure of how expensive each Praxis industry is: how much stock prices in that industry have increased lately.
This is calculated in Column M (based on how the Praxis industry benchmark weights changed over time, from Columns L to Column E).
You should only fill the light blue cells of column F (your group’s choices for Praxis industry weights) in the spreadsheet, as well as column A (voting the conscience-based investing issues). Your industry weights imply S&P sector weights (S&P sectors are usually broader than Praxis industries), calculated in Column H (in pink), in contrast to actual current S&P sector weights in column G (in light green). The Praxis industry weights you choose in column F (combined with the already chosen grey industry weights there) must add up to 100%; no S&P sector weight may deviate from the benchmark weight by more than 50%. (To verify this, check the light yellow cells of Column I.) Note that you can decide to overweight or underweight a particular Praxis industry by more than 50%, as long
as S&P sector weights do not deviate from their benchmarks by more than 50%.
Important: Gray cells in column F are for unassigned industries. These must be assigned their exact benchmark weights (leave the gray cells alone).
Your team should turn in:
1. An Excel file, modifying “Industry mix Spring 2022.xls” to indicate your group’s desired industry weights, as well as conscience-based voting.
2. A text document (in Word) containing one paragraph for each industry. (For convenience of the reader, please cover the industries in order 1-15.) In the paragraph, explain the rationale for your chosen weight for this industry. This may be based upon (a) availability of low risk stocks, (b) conscience-based issues, (c) other reasoning. In other words, in the spreadsheet, you told us “how” you chose the weights; now you are saying “why.” (Also, assume the reader does not have the
spreadsheet; the document should be self-contained.) Additionally, if there is a sub-industry (or individual stocks) you believe deserves avoidance or embracing (presumably for conscience-based reasons), please let us know at this point.
This paper should contain one paragraph for each industry. If you have additionally singled out any sub-industries or individual firms (for avoidance/embracing for conscience-based reasons), please repeat that information in a final paragraph.
Because this is a team based work, I only need you to write two Industry that we invest which are Energy industry and Material industry. We invest 3.56% in Energy Industry and 2.60% in Material Industry which you could see it in the F column in the Excel industry mix spring 2022. You need to write one paragraph for each industry. In the paragraph, explain the rationale for your chosen weight for this industry. This may be based upon (a) availability of low risk stocks, (b) conscience-based issues, (c) other reasoning.
GICS Sector
GICS code(s)
10
15
201010, 201060
201020201050,201070,20
2030-2510
25 Consumer discret. 2520-2530
30 Consumer staples 2550-3010
3020-3030
35 Health care
3510
3520
40 Financials
40
45 Information tech. 4510
4520-4530
50 Commun. services 5010
502010-50202010
50202020-502030
55 Utilities
55
60 Real estate
60
10 Energy
15 Materials
20 Industrials
Praxis industry description
Energy
Materials
Aerospace, Defense, Machinery
Conglomerates (Cuny)
Transportation [incl. Autos]
Consumers [but not: 25201030 Homebuilders, 253020 S
Retailing
Staple Products
Health Care [Equip., Providers, Services]
Pharmaceuticals [incl. Biotech/Life Sciences]
Financials (Cuny)
Software [and IT Services]
Tech Hardware
Telecom
Media and Entertainment
Interactive Media and Entertainment
Utilities
Real Estate (Cuny)
Vote for each resolution. Enter
Y or N (yes or no) in each blue
cell.
Resolution (and short summary of reasoning)
Part 1. Current Praxis policies
Y
Praxis currently does not invest in tobacco firms. This should continue. (To
Y
Praxis currently prefers natural gas to coal/crude oil [energy industry] inves
Y
Praxis currently does not invest in mining firms. This should continue. (Pol
N
Praxis currently does not invest in military firms. This should continue. (Mi
Y
Praxis currently prefers its utilities to have more renewable energy (or be w
Y
Praxis currently will not invest in Facebook (Meta). This should continue. (
Y
Praxis currently does not invest in casinos. This should continue. (Gambling
Part 2. Proposed new Praxis policies
Y
Praxis will not invest in video game firms. (Video game addiction, lootboxe
N
Praxis will not invest in social media firms. (Distributing misinformation/di
Team(s)
assigned
1
2
3AB
4AB
5AB
6ABCDEFG
7ABC
8ABC
9ABCD
10ABCDEF
11ABCDEFG
12
13AB
14ABCD
15AB
Praxis industry
% of S&P 500
(Feb 18, 2022)
Praxis industry weights
3.56%
2.60%
3.13%
2.99%
4.23%
3.05%
8.07%
4.91%
5.80%
7.34%
11.73%
13.05%
14.89%
1.29%
2.31%
5.92%
2.52%
2.61%
3.56%
2.60%
4.13%
5.60%
4.23%
2.55%
8.07%
6.00%
7.55%
9.00%
11.73%
10.50%
10.51%
2.00%
2.31%
5.92%
3.75%
0.00%
100.00%
100.00%
S&P Sector
% of S&P 500
(Feb 18, 2022)
3.56%
2.60%
4.95%
12.09%
6.35%
13.14%
11.73%
27.94%
9.52%
2.52%
2.61%
This box should equal 100%
when you are done. Only enter
values in Column F, blue cells.
is should continue. (Tobacco is addictive and causes cancer.)
[energy industry] investing. This should continue. (Climate change)
100.00%
(Your) implied
S&P Sector
sector weight
Deviation
vs. benchmark
3.56%
2.60%
5.98%
0.0%
0.0%
20.8%
11.71%
7.29%
-3.2%
14.7%
16.55%
26.0%
11.73%
21.01%
0.0%
-24.8%
10.23%
7.4%
3.75%
Not applicable
48.8%
Not applicable
Praxis industry Implied relative
% of S&P 500 price increase **
(Mar 5, 2021) (last ~12 months)
3.10%
2.67%
3.42%
3.25%
3.88%
2.86%
8.48%
4.74%
6.37%
6.68%
11.62%
13.67%
13.07%
1.63%
3.28%
6.35%
2.55%
2.38%
14.8%
-2.6%
-8.5%
n/a
9.3%
6.6%
-4.9%
3.6%
-8.9%
9.8%
0.9%
-4.6%
14.0%
-20.8%
-29.4%
-6.9%
-1.2%
9.7%
100.00%
All yellow deviations should
be between –50% and +50%
** This is a measure of how much more expensive the
It is a relative measure (Praxis industry price change vs
It is an imperfect measure (it does not properly account
s not properly account for S&P additions/deletions, M&A, dividends, and changes in underlying fundamental
rlying fundamental value).
Industry report summary
(What are the prospects for finding low risk stocks in this Praxis industry?)
(Excellent? Good? Fair? Poor?)
(Note that foreign stocks often provide international diversification, and thus may offe
(Summaries by Cuny; your opinion may differ)
1. Energy
2. Materials
3. Machinery
4. Transports
5. Consumers
6. Retail
7. Staples
8. Health
9. Pharma
10. Software
11. Hardware
12. Telecom
13. Media
14. Interactive Media
15. Utilities
Poor. Oil pipelines are a mild exception
Poor. Some slightly-below-average-risk stocks can be found. (But
Poor. Military/defense can be an exception
Fair to poor. Foreign firms about as good as it gets
Fair to poor. You have to choose carefully (MCD)
Good. But you have to choose (TGT, COST, WMT)
Excellent. Easy to find low risk stocks (most of those reported)
Good. But you have to choose (BDX, CVS)
Excellent to good. Many choices (JNJ, MRK, PFE, LLY)
Fair to poor. (Maybe IBM, ORCL)
Fair to poor. Maybe MSI and some foreign
Excellent. Many (large) telecom choices
Fair. Some cable, books slightly below average beta
Fair. Video games are best bet
Excellent. Easy to find low risk stocks
Details can be found in the posted powerpoints/reports.
Important: Many powerpoint summary tables have corrections by Cuny (usually in red
on, and thus may offer lower beta.)
ks can be found. (But not in the report)
Energy Industry
Overview
Sub-Industries
Oil & Gas Drilling
Unique Valuation Methods/Metrics: NAV, EV / Proven Reserves, EV / Capacity, EBIDAX, EV / BOE
Oil & Gas
Equipment &
Services
Integrated Oil &
Gas
Energy Equipment & Services
Sources: GICS Industry Codes, Praxis Universe, mergersandinquisistions.com, Investopedia
Oil & Gas
Exploration &
Production
Oil & Gas Refining
& Marketing
Oil, Gas & Consumable Fuels
Oil & Gas Storage
& Transportation
Coal &
Consumable Fuels
Energy Industry
Overview
S&P Energy Industry Group Performance against S&P 500 (2012-2022)1
➢
➢
Macroeconomic Drivers2
➢
➢
➢
➢
➢
➢
➢
GDP
Disposable Income
Value of industrial shipments
New housing starts
Sales of new light-duty vehicles
Interest rates
Employment
65.2% LTM return
24.3% YTD return
Industry Outlook3
➢
➢
➢
➢
Projected 5% Increase in brent crude oil
➢
price in 2022
Projected 4% increase in global liquid fuel
consumption in 2022
Projected 6% increase in U.S. coal
➢
production in 2022
Energy industry is sensitive to heightened
macroeconomic uncertainty
Sources: (1) S&P Energy sector factsheet, (2) Economic Industry Administration Assumptions to Annual Energy Outlook 2017 , (3) Energy Information Administration
Long term increase in renewables,
especially for electricity but coal and natural
gas remain important to support growing
grid
Long term global oil and gas growth
supported by increasing population and
developing economies
TC Energy
Based in Calgary Alberta, TC Energy is a
major energy infrastructure company
serving North America. The company,
originally named TransCanada
corporation was founded in 1951 and
has grown to 7000 employees.
TC Energy
Products
Energy
Natural Gas, Nuclear and
Wind Power
Natural Gas Storage
Natural Gas Pipeline
Operator
Liquid Energy Pipeline
Operator
Competitors
Enterprise
Products
Partners
Shawcor
Shawcor is a leading energy and
infrastructure technology company
specializing in product, services and
solutions utilized in oil and gas,
water and wastewater, fuel,
transportation and industrial
applications.
Plains GP Holdings
An owner and operator of
midstream energy infrastructure
providing logistics for crude oil,
natural gas liquid and natural
gas.
One of the largest midstream
oil and gas companies in
North America.
Stork
Stork is a value-driven
provider of fully integrated
operations, maintenance,
modifications and asset
integrity solutions.
Sources: Company Websites
Quantitative Data
Market Cap
Debt
Ratio
Beta
(10y,weekly)
$49.638 B
0.0635
.8750
TC
ENERGY
Sources: Yahoo Finance, Internal Calculations
Volatility
Volatility
(10y,weekly) (10y,Daily)
.063
.0705
Vol
Avg
Daily
.068
BP
Based in London, BP is one of the
world’s five supermajors. BP’s
operations are fully integrated,
consisting of transportation, trading,
refining, petrochemicals, marketing and
renewable energy.
Sources: Company Websites
BP Products
Fuels
Invigorate®, BP Diesel®,
AMOCO Ultimate®
Gas & Low
Carbon Energy
Wind, solar and hydrogen
Lubricants
Retail Stations & Stores
Castrol
BP, ARCO, AMOCO, Arial
ampm convenience stores
Competitors
Exxon Mobil
ExxonMobil’s primary retail gasoline
brand in US, with concentration of
retail outlets located in New Jersey,
Pennsylvania, Texas, and in the MidAtlantic and Southeastern states.
Royal Dutch Shell
Chveron
A British publicly traded oil and
gas company headquartered in
London, UK. It is one of the oil
and gas ”supermajors”, ranking
within the top 10 of the Fortune
global 500 since 2000.
One of the largest companies
in the world and the second
largest oil company in the US,
only behind ExxonMobil.
TotalEnergies SE
A French oil and gas
company founded in 1924
and one of the
seven ”supermajor” oil
companies.
Sources: Company Websites
Quantitative Data
BP
Market Cap
Debt Ratio
Beta
(10y,weekly)
Volatility
(10y,weekly)
$107.85B
0.28
1.11
0.296
Market Cap = Price per share*Shares outstanding = 32.88*$3.28B = $107.85B
Debt Ratio = (Debt-Cash)/(Debt-Cash+Market Cap) = (71.84-30.88)/(71.84-30.88+107.85) = 0.28
Because BP stock is ADR, the calculation of beta and vol only includes weekly data
Sources: Yahoo Finance, Internal Calculations
EQT
EQT was Founded in 1878
And is based in Pittsburgh, Pennsylvania.
The company places emphasis on the
Appalachian area natural gas production,
gathering, and transmission. EQT is a a
leader in the use of advanced horizontal
drilling technology.
EQT
Products
Natural Gas
Crude Oil
Natural Gas Liquids
The Natural Gas
Transmission and
Storage Activities
Competitors
An oil and natural gas company that
focuses on developing high-return,
growth-oriented projects in the MidContinental region of the United
States.
Focuses on exploration, development &
production of crude oil, natural gas & natural
gas liquids.
Sources: Company Websites
Explores and develops
shale oil and gas resources.
Focuses on the exploration and
development of shale oil and gas
assets from Pennsylvania Also
develops assets in Canada.
Quantitative Data
Market Cap Debt Ratio
EQT
$8.15B
0.64
Beta
Beta
Volatility
Volatility
(10y,daily)
(10y,weekly)
(10y,daily)
(10y,weekly)
0.9
0.8
0.45
0.98
Market Cap = Price per share*Shares outstanding = 21.56 ∗ 377,948,658 = 8.15B
*The stock price is based on the close price of the latest trading day（Feb.4）.
*The shares outstanding is based on the quarterly report whose quarterly period ended Sep 30, 2021.
Debt Ratio=
????−???ℎ
????−???ℎ+????? ?????? ??????????????
Sources: Yahoo Finance, Internal Calculations
=
14,751,995,000−22,792,000
14,751,995,000−22,792,000+8,148,573,066
= 0.64
Equitrans Midstream
Corporation
ETRN
Sources: Bloomberg, Reuters
Headquartered in Pittsburgh, PA, Equitrans
Midstream Corporation (ETRN) serves the
states of Pennsylvania, Ohio, and West
Virginia. Equitrans Midstream focuses on the
transportation, storage, and gathering systems
of natural gas in the region.
Their competitors include other midstream
energy companies in the Appalachian Basin
region, though they would compete with other
natural gas midstream companies more than
midstream companies for other types of
energy (e.g., coal, oil). One such competitor is
UGI Corporation.
Quantitative Data
ETRN
???? ????? =
Market
Cap
Debt
Ratio*
Beta (2yr,
daily)
Beta (2yr,
weekly)
Beta (2yr,
weighted
avg)
Volatility
(2yr, daily)
Volatility
(2yr,
weekly)
Volatility
(2yr,
weighted
avg)
$4.39bn
0.6106
-0.1548
-0.1533
-0.1541
.30
.29
.29
???? − ???ℎ
$7.08?? − $194.24?
=
= 0.6106
???? − ???ℎ + ?????? ??? $7.08?? − $194.24? + $4.39??
Note: EQT split into EQT and Equitrans Midstream Corp in late 2018.
As such, data is compiled from 1/1/2019 through 1/1/22.
*Debt Ratio as of September 2021
Sources: Yahoo Finance, Internal Calculations
NextEra
Energy
NextEra Energy is one of the largest
power and energy infrastructure
companies in North America and a
leader in the new energy market.
Main
product
Power
generation
fiber optic
transmission
Wind, solar,
hydro, nuclear
and natural gas
sales
Telephone
companies,
telecommunicatio
ns companies,
internet
companies
FPL
Gulf Power
Florida Power
& Light
（Merged into FPL in
January 2021）
NEER
NextEra Energy
Resources
Competitors
Southern
Company
Southern Company is an
electric utility company,
serving 9 million users. It
provides natural gas and
electricity in Alabama,
Georgia, Illinois, Mississippi,
Tennessee and Virginia
through subsidiaries.
Dominion
Energy,Inc
Dominion Energy is an
electric and natural gas utility
company. It generates
electricity from nuclear,
natural gas, coal-fired and
plants.
Duke Energy
Exelon
Exelon is an electric utility
company, is engaged in the
production and distribution
of electricity.
Duke Energy is an electric
and natural gas utility
company with a history
dating back to 1900, now
manages numerous nuclear,
coal-fired, hydroelectric, oil
and gas, solar and wind
plants.
SNP- China Petroleum
& Chemical
China Petroleum & Chemical
Corporation, an energy and
chemical company, engages in oil
and gas, and chemical operations
in the People’s Republic of China.
SNP
Products
Exploration
Explore oil fields
Refining
Sells refined petroleum
products
Chemicals
Retail Gas Stations
Chemical products
including synthetic fibers
Over 30000 Stations
Competition
Analysis
Market Cap
PetroChina(PTR)
Yes
138.3B
Major Business
Oil product
sale
SNP
76.1B
Oil Refining
National
Offshore Oil
54.4B
Sources: Company Websites, Yahoo Finance
Exploring
Quantitative Data
SNP
Market Cap
Debt Ratio
Beta
(10y,weekly)
Volatility
(10y,weekly)
$76.1426B
0.345
0.812
0.272
Market Cap=Price per share*Shares outstanding = 0.2551344* 53.46+95.55777B*4.19/6.36 = 76.1426B
Debt Ratio = (Debt-Cash)/(Debt – Cash + Market Cap) = (254.87/(254.87+76.14*6.36) = 0.345
Because SNP stock is ADR, the calculation of beta and vol only includes weekly data
Sources: Yahoo Finance, Internal Calculations
SHELL
Dutch Royal Shell, formed in 1907 through the
merger of the Royal Dutch Petroleum Company,
based in London, United Kingdom.
Mission
Statement
Products
Petroleum
10%
25%
15%
50%
Petrochemical
Natural Gas
Lubricant
Quantitative
Data
Market Cap
Shell
Sources: Yahoo Finance, Internal Calculations
195.426B
Debt Ratio
.2359
Beta
1.03679188
Volatility
0.344
Comparison: Nextera not Energy.
Vol(TC) = .24, Vol(RDS) = .30, Vol(ETRN) ~.55
Beta(RDS) = 1.11, Beta(EQT) = .86, Beta(ETRN) ~.9
D/V(TRP) = .57, D/V (EQT) =.44, D/V(SNP)= .22
ETRN has only 3 yrs data, from 2019
Appendix
What Is Material Industry
➢ Defination
• Material Industry encompasses wide range of commodity-related
manufacturing industries. It includes companies that produce or
manufacture chemicals, construction materials, glass, packaging
products, metals, minerals and mining companies
➢ Market Cap
• 2.54 Trillion Dollars in Feb 2022
➢ XLB
• ETF that includes some major companies in material industry.
• It allows us to measure the movement of stock prices for the whole
industry.
Sub-Industries and Downstream
Sub-Industries
Petrochemical
Steel
Rare Earths
DownStream
Plastic
Real Estate
War Industry
ECOLAB INC.(ECL)
• Main product:
• water, hygiene and inflection prevention solutions
• Healthcare facilities and life sciences products
• Major competitors:
• Albemarle
• Clorox
• Praxair
• ABM Industries
ECOLAB INC.(ECL)
• Stock Market Cap: 53.726B
• Debt Ratio:
Cash: 897.9M = 0.8979B
Total debt: 6.33B
Ratio: 0.092
• Standard risk measurements:
Beta(Daily):1.00
Annual Volatility: 0.23
Beta(Weekly):1.09
Nutrien Ltd. (NTR)
• Main product:
• Fertilizer
• Potash product
• Agrium product
• Major competitors:
• The Mosaic Company
• CVR Energy
• Nortox
• Pupuk Indonesia
Nutrien Ltd. (NTR)
• Stock Market Cap: 41.3526B
• Debt Ratio:
Cash: 443M = 0.443B
Total debt: 12.57B
Ratio: 0.23
• Standard risk measurements:
Beta(Daily): 0.96
Annual Volatility: 0.33
Beta(Weekly):0.98
Vale S.A.
⚫ A Brazilian multinational corporation eneaged in metals and mining.
⚫ PRODUCES:
Lagerset producer of Iron ore and Nickel in the world.
Manganese / Ferroalloys / Copper / Bauxite / Potash / Kaolin
⚫ Main Competitors:
Glencore : A resources company that specializes in marketing of
minerals.
metals and
Anglo American : A mining company providing metals and minerals.
Fortescue : A metals mining company.
Vale S.A.
daily data beta: regression of v & s / monthly data beta: regression of vv & ss
LINDE
➢Linde is an industrial gases and engineering company.
➢End markets: Healthcare, Chemicals, Energy, Manufacturing etc.
➢Major products: atmospheric gases
➢ E.g., Oxygen for medical use, gases for electronic manufacturing etc.
➢Competitors: Air Liquide, Air Products and Chemicals, Matheson TriGas…
LINDE
Market Cap
153 (in billion)
Debt ratio
7.3%
Average Beta
0.97
Average Annulized Volatility
21%
ALBEMARLE
bromine
specialties
lithium
catalysts
ALBEMARLE: Financial Stats
DuPont De Nemours INC
Dupont is a Chemistry company and have 3 main business:
1.Electronics&Industrial(new technologies performance material)
2.Mobility&Materials(automotive, electronic, medical)
3. Water& Protection(function, safety solution)
Main Products:
Construction materials—performance building solutions,corian sufacing materials, great stuff inslulating Foam
sealant, Green Vista Solutions
Medical Devices & Materials—;Packaging Materials & Solutions–;Consumer Products—-Personal Protective Equipment
Main Compeitiors:
Monsanto (MON):Digiital farming materials including Seed product, protective material on planting
3M: Top chemical product company with with expertise in product development, manufacturing, and marketing.
Arkema:Arkema is a producer of specialty chemicals, advanced materials, and coating solutions.
DuPont De Nemours INC Basic Stats Data
Comparble Company data:
U.S.Steel Company Overview
United States Steel Corporation, more commonly known as U.S. Steel,
is an American integrated steel producer headquartered in Pittsburgh,
Pennsylvania, with production operations in the United States and
Central Europe.
Principal Product:
Include hot-rolled, cold-rolled and coated sheets, tin mill products and
spiral welded pipe.
Main Competitors:
• Gerdau
• Magnitogorsk Iron and Steel Works (MMK)
• Vallourec
U.S.Steel Company Stats Data
Financial comparison
ALB, beta 1.34
VALE, beta = 1.29, D/V = 6%
Thank you
Q&A
Purchase answer to see full
attachment
