When one company sneezes, who catches the cold?
Mapping the Networked Economy
Elhams Berrhili, Vice President, FactSet
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
Mission: Build an Economic Graph that Uncovers Linkages of Companies
Firms do not exist in isolation
and are linked to each other
What do companies do?
Who do they work with?
Where do they sell?
3
Datasets
Patented Industry Classification
Map Relationships Ecosystem
Map Geo-Exposure
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
2
Core information about companies
+ Question 1: What do companies do?
+ Question 2: Who do they work with?
+ Question 3: Where do they generate revenues from?
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
3
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
4
Classification Application: Better Peer Group, Higher Signal-to-Noise
Consumer
Information Technology
Consumer
Electronics
Data
Storage
Technology
Normally
everybody
stops here
Hardware
Communications
Equipment
Local Area
Network
Electronic
Components
Commercial Electronics
Computer
Hardware by
Conventional
System?
Software
Computer
Hardware
Wireless
Equipment
Mobile
Cellular
Phone
May 6, 2015
Smartphones
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
5
FactSet Revere Classification: A Patented System in 7000+ Levels
53%
18%
70+
Nodes Mapped
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
6
Bottom-Up Classification Delivers Never Before Accuracy
Company
GICS Level 2 - 4
RBICS Level 1 - 4
Google Inc.
Information Technology > Software and
Services (3)
Consumer Production>Consumer Media >
Consumer Web Navigation (3)
Information Technology > Software &
Services > IT Services (4)
Business and Transportation>Professional
Services > Electronic Transaction Processing
and Clearinghouse Activities > Electronic
Payment Processing (4)
Information Technology > Technology
Hardware > Computer & Peripherals>(4)
Technology Hardware > Communications
Equipment>End User Communication
Products > Cellular Phones, Pagers and
Accessories(4)
Visa Inc.
Apple Inc.
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
7
FactSet Classification vs. GICS comparaison
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
8
RBICS Deepens Performance and Risk Exposure Understanding
Barclay Sector vs.
RBICS
YTD
Return
OAS
YTM
Durati
on
S&P
Rating
Oil Field Services
6.7%
122
3.32
7.77
BBB
7.41%
103
2.69
4.59
BBB
5.16%
149
3.35
6.45
BBB-
(Barclays Classification)
Onshore Drilling
(RBICS)
Offshore Drilling
(RBICS)
May 6, 2015
•
Onshore Drilling has lower risk profiles and higher return,
hence its risk-adjusted return is much more favorable than
either Oil Field Services or Offshore Drilling.
•
Market is pricing Onshore and Offshore drilling differently,
and investors should differentiate these sector bets.
•
This differentiation wouldn’t have been visible without RBICS.
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
9
Core information about companies
+ Question 1: What do companies do?
+ Question 2: Who do they work with?
+ Question 3: Where do they generate revenues from?
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
10
FactSet Revere Supply Chain: Information Advantage via Inter-linkages Visibility
Supplier 2nd Order
May 6, 2015
Supplier 1st Order
Customer 1st Order
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
Customer 2nd Order
11
Capture Significance of Revenue Dependencies Not Disclosed by Target Companies
Only 2 out of 291 Suppliers of Samsung are Disclosed by Samsung
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
12
Capture Important Partnerships Ignored by Other Providers
Biogen (BIIB) and Swedish Orphan Biovitrum (SOBI) do not have a Supplier-Customer Relationship,
but are very dependent upon each other via Research Collaboration.
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
13
Suppliers of ‘Bankruptcy Likely’ Ford Motor may Actually be at High Risk
Altman Z Score
Supplier Revenue Dependency
3.73
63%
4.88
45%
Supply-chain data to pinpoint
potential financial risk of
presumably healthy suppliers
could lead to more forward
looking insight.
36%
1.49
4.38
Altman Z Score
28%
2.77
8.94
May 6, 2015
25%
Visteon and M/A-COM have both
B+ Rating and Stable Liquidity.
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
14
Core information about companies
+ Question 1: What do companies do?
+ Question 2: Who do they work with?
+ Question 3: Where do they generate revenues from?
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
15
A More Precise Geographic Exposure: Samsung
20.80%
17.05%
6.54%
3.97%
2.99%
280+ countries &
regions
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
16
Nikkei 225 Geographic Exposure by Country of Domicile vs. Revenues
14.2% USA
Revenue Exposure (outer)
100%
57.69%
14.21%
10.5% BRIC
Revenue Exposure (outer)
ROW
Japan
USA
10.50%
BRIC
MSCI EM ex BRIC
4.90%
MSCI DM ex Japan & USA
MSCI FM
1.69%
9.64%
1.37%
The Nikkei 225 is more than 40% and 10% exposed to the international market and BRIC by revenues, respectively.
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
17
Geographic Revenue in PA – By Major Continents
Show more relevant geographical
exposure by revenues vs.
country of domicile.
Note our overweight in Europe
(67%) is cut in half to (33%)
viewed under GeoRev
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
18
Geopolitics Impacting Markets*
Russia
Ukraine
Civil War
Russia RTS
3 Month Return
Turkey
Iraq
ISIS
Ebola
-10.7%
-6.1%
MSCI Turkey
3 Month Return
Liberia
Nigeria
-10.4%
NSE All Shares
3 Month Return
*3 month return from 7/30/2014 to 10/30/2014.
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
Country of Revenue: Calculating Intel’s EM Exposure
25
countries
Emerging
Market
Other EM
countries
═ 31.6
═ 14.5
═ 11.4
Total
57.5
1.
Algorithm uses GDP weight to estimate EM exposure when needed
2.
3.
Taiwan is given, no estimate is needed
For China (includes Hong Kong), algorithm kicks in and allocates 14.5% to EM
4.
14.5% =15.0% X 0.966 (EM Multiplier), using GDP weight of “China ex HK” divided by “China + HK”
5.
EM Multiplier derivation is conceptually simple, but computationally complex depending on how
each company chooses to disclose its geographic revenues distribution.
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
20
Summary
+ Company fundamental information is of key importance:
+ What do they do?
+ Who do they work with?
+ Where do they generate their revenues?
+ Clients can benefit from our contents:
+ To measure the risk on their portfolios
+ To use the factors to generate alpha on your models
+ Department using our data:
+
+
+
+
Compliance
Risk management
Portfolio management
Quantitative analysis
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
21
The FactSet Data Model
FactSet Content
Client Proprietary Data
- FactSet Fundamentals
3rd Party Content
- Security Prices
- FactSet Revere
- End of day
- FactSet Estimates
- Real-Time
- FactSet Economics
- Corporate Events
- Ownership
- M&A
- Broker Research
- Regulatory Filings
FactSet Database Integration
Entity Data
Management (EDM)
-Benchmarks
-MSCI
-FTSE
-Merrill
-Barclays
-Etc
- Entity Model
- Fixed Income T&C
- Debt Structures
- Private Companies
- People/Contacts
- Venture Capital
- Private Equity
May 6, 2015
FactSet
Applications
Content
Feeds
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
22
Questions?
Contact
Elhams Berrhili
Vice President - Europe CTS, FactSet
[email protected]
May 6, 2015
Copyright © 2015 FactSet Research Systems Inc. All rights reserved.
23