Camelot Portfolios Talking Points

Sector Revenue and Margins Breakdown

 As the domestic market continues to stretch valuations to all-time highs, revenues and margins remain within a reasonable band for most sectors. The current trailing twelve month revenues for the S&P 500, “the market”, constituted $11.12 Trillion and operating margins averaged 15.37% across all sectors (Morningstar). Revenue growth for the market has flattened out at 4.86 percent compared to the rolling 10 year average of 10.66 percent (Morningstar). The largest aggregate sector based on revenue is healthcare which totals $1.89 trillion TTM (Morningstar).

Although revenue only conveys the story on the surface, operating margins continue to be robust. Financials and Real Estate presently have the widest operating margins with 25 percent and 26 percent on average, respectively (Morningstar). The energy sector as a whole continues to lag losing 22 percent over a TTM period (Morningstar). In 2010 through 2011, the energy sector had the highest margins (Morningstar). This should not come as a surprise with declines in the pricing of crude.

Regarding sector valuations using sector Shiller P/E as an indicator, relative sectors are starting to widen beyond their 10 year average.  Currently, Technology and Real Estate have the highest P/E and Consumer Cyclicals P/E has steadily decreased over time. This is largely due to the future speculation on retail (Guru Focus). Financial Services has increased from 12.71 in 2011 to 25.1 in August 2017 (Guru Focus). Energy sector relative value is increasing as well with heightened valuations trading at 17.4 Price/Earnings (Guru Focus).

Today, the market Shiller P/E stands at 30.3. This higher than average market P/E is starting to creep up towards the all-time high of 41.9 in December of 1999 (Guru Focus).

Source: Morningstar Direct

Source: Morningstar Direct

Source: Morningstar Direct

Source: Morningstar Direct

Source: Morningstar Direct

Source: Morningstar Direct

Source: GuroFocus.com

Source: GuroFocus.com

Compiled by the Camelot Portfolios Investment Committee

Darren Munn, CFA, Chief Investment Officer

Eric Kartman, Research

Drew Steinman, CPA, Trader/Research

Zach Hartenburg, Analyst

Frank Echelmeyer, MBA, CKA®, Advisor Consultant

-for Broker/Dealer and RIA use only-

 References

Guru Focus. Sector Shiller P/E. 2017. web.

Morningstar. Revenue and Margin Breakdown. August 2017.

 The material presented is for use by professional advisors only.  It is intended as informational and educational, and is not intended to be interpreted as investment advice.  The references to specific investment ideas, be they concepts, trends, sectors or even specific securities, are not recommendations for any advisor to adopt for any of their clients.  No investor or client reading these materials should view them as investment advice.  These materials are to be utilized as a catalyst for thought and discussion regarding the economy, investments, and responsible investing in general.  Past performance is not necessarily indicative of future returns, and there is no guarantee that any information presented herein will contribute to a profitable portfolio.  All facts referenced herein are derived from sources believed to be reliable.  

Any charts, graphs, or visual aids presented herein are intended to demonstrate concepts more fully discussed in the text of this brochure, and which cannot be fully explained without the assistance of a professional from Camelot Portfolios LLC.  Readers should not in any way interpret these visual aids as a device with which to ascertain investment decisions or an investment approach.  Only your professional adviser should interpret this information.  A489