Portfolio Management
Introduction
The objective of this report is to understand the performance of various stocks ranging from different industry over a period of three weeks. The companies selected by us include:
- Apple Inc.
- Ebay Inc.
- Delta Airlines
- Coca-Cola Company
- Bank of America
- Wells Fargo
- Banco Santander
- JP Morgan
- Progressive Corp
- Pepsi
- Mcdonald
- AT&T
The companies were selected as each one represented their industry significantly while the banking stocks were selected primarily because of recent growth in the banking sector amid the economic recovery in the United States. As for our portfolio, during three week, the stocks selected performed well and we ended with an appreciable gain as most of the stocks selected by us saw price rise except for Coca-Cola.
In the matter related to economic factors affecting the performance of the stock, although, the firm specific and macro-economic factors have their own impact on the company; however, it is the macro-economic factors that impact the stock largely. This is because, if, for instance, the company is lacking innovation and thus losing its demand, only the stock of the particular company will be affected. However, if for instance, the economy of a nation enters the recessionary period, this will have a direct impact on the stock market performance. This is because with the advent of recession, the demand slumps and production cycle either gets slow or experience a standstill. In this case, the stock prices will keep on falling affecting the macro-investors and does not remain restricted to one stock.
Companies
Apple Inc:
Headquartered in California, Apple Inc. is a renowned seller of consumer electronics and other multimedia online services. While the product offered under consumer electronics include Iphone, Ipad, Macbook and Ipod, the multimedia service platform of the company is called Itunes. At present, the company is the largest company on the American Stock Exchange with market capitalization of $446 Billion. Recently, the company awed the consumers with the latest version of Iphone series and Iwatch.
Ebay Inc:
Founded in the year 1995, Ebay Inc. is an American Multinational e-commerce company that targets business to business and consumer to consumer sales. Ebay Inc. is an online giant company with revenue of $16047 Million and market capitalization of $68.18 Billion. Unmoved by its original concept, the company still sell the product through the bid system where the interested buyers bid their price for the product.
Delta Airlines:
The company is a renowned airline in the world and operates more than 5400 flights on daily with network reaching wide to international and domestic borders. By the end of 2013, the company was the world’s largest airline in terms of passengers carried. Headquartered in Atlanta, the company has three international hubs, Tokyo, Paris and Amsterdam.
Coca-Cola Company:
Coca-Cola Company manufactures soft drinks under various brand names with Coca-Cola being the most famous one. Headquartered in Atlanta, the company has history of more than 130 years. The company has huge global presence with the product being sold in 200 countries serving 1.8 Billion beverages every day. According to a study conducted in the year 2011, the company had the most valuable brand around the world.
Bank of America:
Bank of America is a multinational financial institution, headquartered in North Carolina. Founded in the year 1998, the company by the end of 2010 became the third biggest company in the world. One of the major and popular acquisitions made by the company was during 2008, when it purchased Merrill Lynch that made the bank world’s largest asset manager and a leader in the investment banking industry. By the end of 2013, the company had total revenue of $88.94 Billion.
Wells Fargo
Wells Fargo is an American multinational bank headquartered in San Francisco. The financial institution has history that dates back to 1852 and at present, it is the fourth largest bank in the United States by assets and largest in terms of market capitalization.
Banco Santander
It is a Spanish bank founded in the year 1857. The financial institution is the principal subsidiary of Santander Group. The bank made a major acquisition of Banesto and Banco BANIF in 2012 that resulted in 100% owner of the bank in Banco.
JP Morgan Chase
Founded in the year 200, JP Morgan Chase is American Multinational Bank and at present, is the largest bank in the United States with total assets of $2.51 Trillion. The company offers range of financial services including wealth management and investment banking. However, the bank is majorly known for its hedge fund unit that is the second largest hedge fund unit in the United States.
Progressive Corporation
Founded in the year 1937, the company is the largest insurance service provide in the United States. Apart from United States, the company also operates in Australia and offers insurance services for vehicles and home.
Pepsico
A well-known beverage manufacturing company founded in the year 1893 with multiple renaming in 1898 and finally in 1961. The company offers beverages under many brands with Pepsi being the most famous of all. It is a major competitor of Coca-Cola Company.
Mcdonald’s
Founded in the year 1940, the company is world’s largest chain of fast food restaurants. At present, it has presence in 119 countries and estimated to serve 69 Million customers daily. The company operates through multiple structures, Franchisee, Affiliate or by the corporation itself while the income is sourced from rent, royalty and fees paid by franchisee.
AT&T Inc.
Founded in the year 1983, the company provides telecommunication services in the United States and at present, it is the second largest provider of mobile phones and largest provider of fixed landline services in the United States.
Below are the ratios for each of the company that we traded in during the three weeks
Performance Analysis
We started our investment by investing in stocks from varied industry and were happy to see the positive gains in all of them except for Coca-Cola. The decision to invest in Coca-Cola backfired as the stock saw its biggest decline in six years as even the cost-cutting plans were not able to satisfy the investors as globally, the company is losing on its sales volume because of growing health concerns.
However, other stocks, Delta, Apple and Ebay performed well and helped us in achieving a positive return of 6.97% maximum profit earned from Apple Inc that was expected by us amid the increased pre-bookings of Iphone 6 and Iphone 6 Plus.
After selling our holdings from all the stocks of Week 1, we purchased stocks of Banking Industry and yet again were able to earn an appreciable return of 8.85%. During this week, the stock in our portfolio were, Bank of America, Wells Fargo, JP Morgan Chase and Banco Santander. While all the stocks ended up in profit, the least was earned from the Spanish bank, Banco Santander while the maximum profit was earned from JP Morgan amounting to $1319.50 amid strong economy data releases positively affecting banking sector. In comparison to Week 1, our profits were higher during this week.
During the last week our investment, we invested in stocks of Progressive Corporation, Pepsico, Mcdonalds and AT&T. Once again, each of the stock showed a positive trend and our portfolio earned a profit for third consecutive week.
Overall Performance
The overall performance of our portfolio had been good and as expected, we also learnt how macro-economic factors can affect stock prices. For Instance, as we witnessed, Coca-Cola stocks slumped during Week 1 of our investment and the stock price reached 6 year low as the company is facing sluggish international growth and overall decline in its demand because of growing health concerns. On the other hand, JP Morgam Chase, provided us with maximum return during week 2 as the stock price increased because of encouraging economic data of the US economy. Below is the summary of our three-week portfolio:
Conclusion
At the end of this project, we have learnt how the stock prices are also affected by macro-economic factors and not just firm specific factors relating to announcement of financial results. Overall, by the end of this report, we learnt how the stock price movement is dependent on both firm specific as well as macro-economic factors.
Works Cited
Standford, Duane. Coca-Cola Shares Fall as Cost Cuts Fail to Placate Investors. n.d. 28 November 2014 <http://www.bloomberg.com/news/2014-10-21/coca-cola-revenue-misses-estimates-as-north-american-sales-drop.html>.
The Weekly Stock Market Report (25 – 31 October 2014). n.d. 28 November 2014 <http://insights.jpmorgan.co.uk/adviser/commentary-and-analysis/the-weekly-stock-market-report-25-31-october-2014/>.
