Portfolio Theory Analysis
Brayer announced the development of a process to produce plastic out of arbor dioxide, which would not only make the company more sustainable and environmentally friendly, but would also offer cost savings in the long term (Titian, 2013). Finally, Brayer entered negotiations to take over Allege, a Norwegian pharmaceutical company. If the operation finally takes place, Brayer would improve its oncology products as well as nearly double the profit made from their US division sack, Bibb). 5.
Oil and Gas: BP In the beginning of the analyses period, BP shares price was relatively low as it was expected that the company would have to pay high compensations for the Departed Horizon disaster (Crooks, AAA). However, after BP won one of the legal battles involved in that procedure, share prices showed some recovery (Hunter, Bibb). Then, after a couple of relatively stable weeks, when the US ceiling was raised and financial markets regained confidence, BP share prices rose rapidly because of: BP plans to sell $10 ban of its assets to buy back a part of its shares and to rise (Savannah, Bibb).
New opportunities arising from the discovery of new oilfields in the North Sea (Savannah, AAA), the shift in the American gas market trend (Meyer, 2013) and the announcements to increase investments in the Gulf of Mexico. However, this increase was not as high as it could have been since oil prices fell in the last weeks of this analysis. 6. Retailers: Tests To begin with, it should be noted that Tech’s share prices have experienced a falling trend over the last months. Expectations and announcements regarding the company’s performance are responsible for it.
The debacle of Tech’s American venture, the fact that Tech’s sales are growing slower than its rivals, the increase of Tech’s biggest competitors (SAD and Kingsbury) market shares, the collapse in European financial markets due to the US he poor earnings of its European businesses and the prospect of a price war over the next months among supermarkets have pushed Tech’s share prices down (Elder, Bibb), leading shareholders to question whether Tech’s management is appropriate for the company (Felted and Oakley, Bibb).
However, Tech’s share prices increased at some points over this period due to positive announcements such as the deal to exit the US retail market (Davies, 2013), the deal with Chinese Resources Enterprise to form a Joint venture to reduce the risk that the entrance in the Chinese market involves, the launch of a low cost tablet and he strategy to fight the current food wastage figures. 7. Telecommunications: BAT BAT stock prices have been following an increasing trend due to its consistent business strategy (Financial Times, 13th).
Despite Ian Livingston departure (Thomas, Bibb), BAT has maintained the growth path he initiated, improving three of its divisions. Firstly, BAT has increased its investment in fiber broadband, G and wireless technology (Thomas, 13th). Furthermore, BAT was awarded a contract to supply subsidized broadband to rural areas, which creates a great opportunity for the company (Thomas, ICC). Secondly, BAT reached a deal with E to use its network to refocus on the consumer mobile operations (Thomas, 201 Be). And finally, the factor that has had the biggest impact has been the investment in its televised sports division.
Not only BAT Sport has increased its customers up to 2 million but they have been successful in the bid for the TV rights for Champions League games, challenging the competition (Menace, 2013). 8. The I-J Government long bond When analyzing bond markets, inflation, interest rates and default risk are some of the major concerns (Reilly and Brown, 2012). However, in the analyses period they ad little to do with the I-J long bond price performance because: in the analyses period, inflation decreased to 2. 2% moving closer to the 2% target of the Boo (Warden and Allen, 2013); the interest rate in the I-J stayed fixed at 0. % as the Governor of the Boo does not intend to change it until unemployment shows some recovery (BBC, 2013); and the UK government bonds are still seen as very safe investments according to the credit rating agencies, although Fitch and Moody’s have downgraded the I-J bonds rating. The issues that drove the demand for the UK long bond during this period were: The US debt ceiling crisis. The risk that the US might default if debt ceiling was not raised before the 17th October caused investors to look for safer investments, such as I-J bonds and therefore the price experience some increase.
However, during the following weeks, fears that the US might collapse pushed prices down. Finally, after the Senate’s decision to raise the debt ceiling, the prices went up again as market regained confidence. The decision of the European Central Bank to cut the interest rate to 0. 25% to fight the risk of deflation in the Rezone (Asking, 2013) and the rowing confidence in the British economy (Highlighters, ICC) are responsible for the fall in the I-J long bond price during the last weeks. 9.
Conclusions: Portfolio total performance The value of this portfolio has followed similar patterns as the FETES 100 and the DOD Jones Industrial. Thus, it fell as the US debt ceiling crisis threatened financial markets and then increased significantly. This increasing trend towards the end was accompanied by a decrease in oil prices (Financial Times, off) and gold prices, which can be seen as an increase in the confidence in the marketplace as the American political situation became elatedly stable again and markets felt a little more optimistic about the Rezone economy.
It was also accompanied by an appreciation of the pound against the Euro, after the CB cut interest rates. Another spotted trend indicates that the I-J long bond increased as the stock prices fell during the US budget crisis, which could be seen as an investors’ move from equity to bonds searching for lower risk. And finally, it can also be said that the portfolio increased its value since the beginning (3. 44%), as BP, BAT and Brayer stock prices went up, compensating for the falling trends of BABE and Tests.