Business Plan on "Stock Portfolio Report Presentation"

Business Plan 5 pages (1509 words) Sources: 1+

[EXCERPT] . . . .

Stock Portfolio Report Presentation

In a present turbulent business environment where stock values are directly linked to the state of an economic environment, simply evaluating a company's sales, financial ratio, cash flow, and other vital statistics may not be enough to understand firm's stock outlook and future. Various external influences have substantial effects on the stock returns. Economic forces and other indicators could be the significant indices to the performances of a stock. Thus, understanding various forces and indicators affecting the stock's performances is very critical to understand the performances of stocks' portfolio and investment returns. Gross Domestic Product (GDP) is a commonly used indicator to measure the economic health of a country. GDP could have a huge influence on stocks' investment and returns. GDP is the total amount of goods and services produced within a country, a significant change in a country GDP has a substantial effect on company stock returns.

Objective of this report is to present a stock presentation using the economic indicators such as the GDP, inflation, interest rates, unemployment rate, personal spending, consumer and business sentiment. In the first part, the report evaluates the U.S. economic performances using some economic indicators to examine whether it will be wise to invest in the U.S. stock markets. The second part of the report selects some stocks from the U.S. capital market and evaluates whether it will be appropriate to invest the money in the stocks.

Overview of the U.S. Economic indicator Affecting Stock Returns

Analysis of the U.S. economy reveals that the U.S. recorded a turbulent economic record between 2008 and 2010 leading to the collapse of stock prices of many companies. Between 2009 and 2010, the U.S. GDP recorded a decline from $14.2 Trillion to 13.9 Trillion. Despite the decline in the country GDP during the period, the economy recovered and the total value of the U.S. GDP in 2011 was $14.4 Trillion and increased to the $14.9 Trillion in 2012. However, within the second quarter of 2013, the values of the U.S. GDP jump to $15.68 Trillion. (The fig 1 presents the historical values of the U.S. GDP).

Fig 1: United States GDP between 2004 and 2012

Source: Trading Economics (2013).

Based on the analysis of the U.S. economic situation, the U.S. economy has improved in the last two years. The U.S. inflation rates has declined drastically in the last two years between 2011 and 2013. The inflation has declined from 3.8% in 2011 to 1.8% in July 2013. Inflation rate in a country measures both Produce Price Index (PPI) and Consumer Price Index (CPI). Both CPI and PPI are high in the period of high inflation rate, and during the period of high PPI and CPI, corporate profits are generally low leading to a decline in stock returns.

A country unemployment rate is another strong indicator of country economic performances, which ultimately leads to the performances of stock returns. In 2011, the U.S. unemployment rate was 9.1% however, the country unemployment rates declines to 7.6% in 2013. Essentially, low unemployment rates in the country indicate that more people are with jobs leading to higher economic output, savings and corporate profits. Thus, stock returns generally rise when a country is recording low unemployment rates and low during the period of high employment. The U.S. interest rates also decline within the last two years. In 2011, the country's interest rate was 1.1%, however, the interest rate declines to 0.25% in 2013. In the United States, corporate organizations are able to have access to low-interest bank loans during the low interest rates period than during high interest rates period. Thus, corporate organizations could use low-interest loans to generate higher corporate profits, which consequently lead to higher stock returns.

The increase in the U.S. economic performances has influenced the (Dow Jones) the United States Stock Market performances within the last two years. Between 2011 and 2013, the Dow Jones performances index increased from 12810.54 to 15668 index points. (See Fig 2). Typically, Dow Jones Industrial Average is the most closely U.S. benchmarked indices and its price-weighted index is used to track the performances of 30 large U.S. companies listed on the New York Stock Exchange.

Fig 2: Dow Jones (United States Stock Market)

Source: Trading Economics (2013).

Based on the performances of the U.S. economy in the last two years, it will be attractive to invest in the U.S. stock markets.

Investing in the U.S. Stock Market

The appendix 1 reveals all the listed stocks worth considered based on the U.S. economic performances within the last two years while the Table 1 reveals all the listed of stocks worth buying. The report evaluates the listed stocks based on their historical stock returns. Analysis of the stock returns of the selected stocks reveals that the Questcor Pharmaceuticals Inc. has performed excellently over the last 5 years. Questcor Pharmaceuticals Inc.'s annual sales are

$135.1 Million while the annual profits are $39.1 Million with the 29% Profit Margin (Profit/Sales) in 2012.

Table 1: List Stocks Worth Buying

Annual Sales ($)

Annual Profit

Profit Margin

(Profit/Sales)

52-week range

Price/Earnings Ratio

Analyst Consensus Opinion

Condition 1: Buy Price

Condition 2: Blue over Red?

Drug Sector

Questcor Pharmaceuticals Inc.

135,129,000

39,064,000

29%

17.25-58.91

13.94

1.7

o

27.665

Yes

Amgen, Inc.

4,238,000,000

1,434,000,000

34%

70.88-114.95

16.24

2.4

Celgene Corporation

1,464,600,000

384,900,000

26%

59.50-131.82

33.98

1.7

77.98

Yes

Social Media

Microsoft Corporation

20,489,000,000

6,055,000,000

30%

26.26-35.78

17.37

2.5

28.64

Yes

Consumer Goods

Toyota Motor Corp.

225,818,000,000

3,446,000,000

2%

72.04-130.99

18.86

1

86.78

Yes

The Procter & Gamble Company

20,598,000,000

2,566,000,000

12%

59.07-82.54

19.21

2.2

64.94

Yes

The Coca-Cola Company

11,035,000,000

1,751,000,000

16%

35.58 -43.43

20.65

2.1

37.54

Yes

From the Table 2, the Questcor Pharmaceuticals 5-year average stock returns increase by 63.32%, however the company stock returns increase to 81.77% for the 3-year average. However, within the last 3 months, the company stock returns increase by 47.25% and 44.44% in the last one week. Evaluation of the company stocks reveals that the stock is good for both short- and long-term investment. A buyer wishing to invest in the company stocks for a short-term and long-term will enjoy significant returns based on the company historical data.

Table 2: Total Return of Selected Stocks (%)

Total Return % (07/31/2013)

1-Day

1-Week

1-Month

3-Month

YTD

1-Year

3-Year

5-Year

Questcor Pharmaceuticals, Inc. QCOR

28.41

44.44

47.25

83.24

81.77

68.32

Amgen Inc. AMGN

(2.62)

1.59

9.76

4.37

26.72

33.11

26.82

12.17

Celgene Corporation

1.02

7.99

25.54

24.38

87.15

38.61

14.24

Microsoft Corporation

(0.03)

(0.38)

(7.83)

(3.11)

20.93

11.06

9.73

6.43

Toyota Motor Corp.

(0.56)

(5.08)

1.03

4.82

30.72

60.21

20.94

8.13

Procter & Gamble Co

(0.17)

0.04

5.08

5.38

20.88

28.02

12.39

6.65

The Coca-Cola Company

(0.60)

(1.91)

(0.07)

(4.65)

12.11

1.86

16.03

11.65

Celgene Corporation is another good company on the list. The company annual sales are $1.46 Billion with $384.9 Million annual profits. The company recorded 26% Profit Margin (Profit/Sales) in 2012. The company recorded 14.24% 5-year average stock returns increase, and the 3-year average stock returns increase are 38.61%. However, the company recorded 114.52% increase in the stock return within the last one year. The company records 25.44% stock returns increase within the last one month and 7.99% increase within the last one week. Based on the evaluation of the company's financial record, it will be wise to invest in the company stocks both for the short-term and long-term investments. The Amgen Inc. AMGN and Procter & Gamble Co have also recorded a moderate increase in the stock returns for both the short-term and long-term.

Apart from the Questcor Pharmaceuticals, Celgene Corporation Amgen Inc. And Procter & Gamble Co that could deliver higher stocks returns for both the short-term and long-term investments, other listed company in the Table 2 is not appropriate for the short-term investment. However, all… READ MORE

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