Australian Stock Market

Introduction

There are mainly two reasons why persons invest their self-managed superannuation fund in the stock market. The first reason would be to gain money from the stock market price fluctuations. An investor would invest in one stock like Caltex Australia today with the hope that he or she will sell the same stocks at a higher price in the future. This would generate a profit based on the difference between the buy price and the selling price.

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This is where price fluctuation terminologies like a break, bottom, top, bull, and bear are often heard. This type of stock market activity keeps the investor on the edge of his or her seat as she or he is waiting for that opportune time to sell his stock at a profit. However, unexpected events would cause the stock market prices of some companies to dive below the cost of the investment. This is where the investor uses technical analysis terminologies like bull or bear.

Further, the second reason for investing in the stock market is to generate dividends from each share of stock invested. Dividends are the products of accumulated net income from the business operations of Caltex Australia, Metcash, and the like. The technical analysis below will help determine which stocks of the alternatives will give the most benefit. Following this second reason, five stocks from the Australian stock exchange under the consumer staples section are shown below. In addition, five stocks under the Australian stock market energy sector are also technically analyzed below.

Body

The Consumer Staples sector and the Energy sector are the two best investment alternatives. These sectors fit with Mr. Crawford’s character as an ‘aggressive’ investor. Appendix A shows the Energy sector has the second-highest movement at 278.4 The Consumer Staples sector was also chosen because it has the second to the last position in terms of movement. Both a very aggressive Energy sector and a not so aggressive sector were chosen in order to synergize the investment(Oxley 2000, 124).

To explain further, the figures of the five companies listed under the CONSUMER STAPLES section of the Australian Stock Exchange show that Woolworths Ltd (WOW) generated the highest two-year earnings growth rate of twenty-eight percent. Lion Nathan Ltd (LNN) generated the second-highest two-year earnings growth rate of twenty-four percent. Coca-Cola Amatil (CCL) generated the third-highest two-year earning growth rate of eighteen percent. The fourth placer under this category is Metcash Ltd (MTS) with a negative or declining growth rate of eight percent. The lowest ranking of the five company analyses is Wesfarmers Ltd (WES) with a negative or declining growth rate of twenty-five percent(Barnard 1963, 370).

In terms of the two-year revenue growth rate, Coca-Cola Amatil (CCL) garnered the highest with a twenty percent increase. This is followed by Woolworths Ltd (WOW) with an increase of thirteen percent. Wesfarmers Ltd (WES) got the third-highest revenue growth rate at ten percent. The fourth placer of the group is Lion Nathan Ltd (LNN) with a growth rate of only six percent. The bottom company of the Metcash (MTS) with a growth rate of only two percent. These figures were based on the five companies’ 2007 financial statements and 2006 balance sheet and income statements(Mckenzie 2001).

In terms of earnings per share, Coca-Cola Amatil (CCL) was able to generate the highest with $2.67 earning per share of the company’s stocks. Wesfarmers was able to generate the second highest with the lower $1.32 earning per share of the company’s stocks. Woolwoods Ltd (WOW) was able to generate the third highest with $ 0.91 earning per share of the company’s stocks. The fourth placer in the group is Lion Nathan Ltd (LNN) with earnings per share of $0.47. The last place goes to Metcash (MTS) with an earnings per share figure of only $ 0.26. These figures for based on the five company’s 2007 financial statements (Dawkins and Kelly 2003, 173).

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In terms of assets of the CONSUMER STAPLES section, MTS had the highest number of assets amounting to $5,476,596. This is followed by Coca-Cola Amatil (CCL) with assets amounting to $43,269. Wesfarmers (WES) follows in third place with assets amounting to $12,076.20. LNN follows close behind with assets of $2,620.30. Woolwoods Ltd (WOW) is in the last place with assets of only $1,320.60.

In terms of equity in the CONSUMER STAPLES section, Metcash (MTS) had the highest number of equity amounting to $2,659,514. This is followed by Coca-Cola Amatil (CCL) with equity amounting to $21,744. Wesfarmers (WES) follows in third place with equity amounting to $3,502.90. Woolwoods Ltd (WOW) is in fourth place with an equity of only $1,199.80. Lion Nathan (LNN) follows close behind with equity of $ 828.10.

Further, the figures of the five companies listed under the ENERGY sector of the Australian stock exchange show that Caltex Australia (CTX) generated the highest two-year earnings growth rate of thirty-nine percent. Origin Energy Ltd (ORG) generated the second-highest two-year earnings growth rate of thirty-eight percent. Santos Ltd (STO) generated the third-highest two-year earning growth rate of negative fourteen percent. The fourth placer under this category is Woodside Petroleum Ltd. (WPL) with a negative or declining growth rate of twenty-eight percent. The lowest ranking of the five company analyses is Queensland Gas Co. (QGC) with a negative or declining growth rate of ninety-four percent.

In terms of two-year revenue growth rate, Woodside Petroleum (WPL) garnered the highest with an eleven percent increase. This is followed by QGC with an increase of 10.73 percent. Origin Gas (ORG) got the third-highest revenue growth rate at nine percent. The fourth placer of the group is Caltex Australia Ltd (CTX) with a growth rate of only three percent. The bottom company of Santos Ltd (STO) with a growth rate of only zero percent. These figures are based on the five companies’ 2007 financial statements and 2006 balance sheet and income statement(Clarke 2002, 175).

In terms of earnings per share, Santos Ltd (STO) was able to generate the highest with $13.80 earning per share of the company’s stocks. WPL was able to generate the second highest with the lower $1.90 earning per share of the company’s stocks. Origin Energy Ltd (ORG) got third place with earnings per share of the company’s stocks of $0.46. The fourth placer in the group is Caltex Australia Ltd (CTX) with earnings per share of $0.23. The last place goes to Queensland Gas Co. (QGC) with earnings per share figure of only $ -0.01. These figures are based on the five company’s 2007 financial statements (Schwartz 2007).

In terms of assets of the ENERGY sector, Caltex Australia had the highest number of assets amounting to $5,329,936. This is followed by Santos Ltd (STO) with assets amounting to $483,218. Origin Energy Ltd (ORG) follows in third place with assets amounting to $14,765.30 WPL follows close behind with assets of $9,730. Queensland Gas Co. (QGC). Woolworths Ltd. (WOW) is in the last place with assets of only $543.70.

In terms of equity of the ENERGY sector, Caltex Australia had the highest number of equity amounting to $2,828,622. This is followed by Santos Ltd (STO) with equity amounting to $177,275. Origin Energy Ltd (ORG) follows in third place with equity amounting to $ 5,881 WPL follows close behind with equity of $ 5,093.90. QGC Ltd (WOW) is in the last place with an equity of only $523.60.

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Lastly, stock market price fluctuations of each stock offered in the Australian Stock Market is are based on the financial statements. The balance sheet shows how many assets, liabilities, and capital the company has as of a given date. The income statement shows the revenues, cost of sales, selling expenses, and net income of the business. Logically, a higher net income would create a craving to invest stocks in the company. Basic economics tells us that the stock market prices will increase if there is a strong demand. On the other hand, a decrease in demand for the produces would surely force a deduction in the stock market prices. For, a company that has a net loss will create panic and force the stock market price to plunge to unprofitable levels. This is the reason why the second reason is better than the first in terms of investing in the Australian stock market(Pusey 2003, 8).

Conclusion

Mr. Crawford should invest in the five stocks amounting to $30,000 each. The five stocks are STO, WPL, WES, CCL, and WOW. The first four stocks generated the two highest earnings per share in their group. Choosing these four companies would surely bring higher earnings per share for its investors. The fifth company, WOW, generated the highest two-year earnings growth rate when all the ten companies were analyzed with a growth rate of twenty-eight percent. The reason for this is synergy. Investments should be put in different baskets in order to offset any major loss brought about if all the investments are placed in only one stock. Conclusively, Mr. Crawford would earn more if the $150,000 is invested in the five stocks chosen here(Pusey 2003, 157).

Works Cited

Barnard, Marjorie. 1963. A History of Australia. New York: Frederick A. Praeger.

Clarke, Frank G. 2002. The History of Australia. Westport, CT: Greenwood Press.

Dawkins, Peter and Paul Kelly, eds. 2003. Hard Heads, Soft Hearts: A New Reform Agenda for Australia. Crows Nest, N.S.W.: Allen & Unwin.

7Mckenzie, Michael D. 2001. Non-Periodic Australian Stock Market Cycles: Evidence from Rescaled Range Analysis. Economic Record 77, no. 239: 393+.

Ongoing Process of Asset Price and Balance Sheet Adjustment. 1993. World Economic Outlook.

Oxley, Alan. 2000. Seize the Future: How Australia Can Prosper in the New Century /. St. Leonards, N.S.W.: Allen & Unwin.

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Pusey, Michael. 2003. The Experience of Middle Australia: The Dark Side of Economic Reform. Cambridge, England: Cambridge University Press.

Schwartz, Michael. 2007. Corporate Responsibility and Australian Business: Identifying the Issue. Australian Journal of Social Issues 42, no. 3: 419+.

Appendix

Appendix A

Australia
Standard and Poor Indices Stock Exchange
Code Last Mvmt Close
S&P/ASX All Australian 200 XAT 4,933.40 63.8 4,869.60
S&P/ASX 200 Energy (Sector) XEJ 16,957.10 278.4 16,678.70
S&P/ASX 200 Financials (Sector) XFJ 4,554.10 14.2 4,539.90
S&P/ASX 200 Materials (Sector) XMJ 13,177.00 471.4 12,705.60
S&P/ASX 200 Consumer Staples (Sector) XSJ 7,424.20 31.9 7,392.30
S&P/ASX 200 Utilities (Sector) XUJ 5,073.60 41.3 5,032.30

Appendix B

MTS 2007 MTS 2006 WES 2007 WES 2006
in Au$000 in Au$000 in Au$000 in Au$000
Two year earnings growth (0.08) (0.25)
Two year revenue growth 0.02 0.10
Two year Net Income 160,522.00 174,132.00 786.30 1,048.10
Two year Revenue 383,177.00 375,294.00 9,666.30 8,818.30
Two year Earnings per share 0.26 0.22 1.32 1.09
Two year Asset 5,476,596.00 5,234,787.00 12,076.20 7,430.20
Two year Equity 2,659,514.00 2,635,560.00 3,502.90 3,165.90

Appendix C

WOW 2007 WOW 2006 CCL 2007 CCL 2006
in Au$000 in Au$000 in Au$000 in Au$000
Two year earnings growth 0.28 0.18
Two year revenue growth 0.13 0.20
Two year Net Income 1,294.00 1,014.60 5,981.00 5,080.00
Two year Revenue 42,586.80 37,833.30 28,857.00 24,088.00
Two year Earnings per share 0.91 0.91 2.67 2.22
Two year Asset 1,320.60 1,166.60 43,269.00 29,963.00
Two year Equity 1,199.80 1,171.89 21,744.00 13,043.00

Appendix D

LNN 2007 LNN 2006 CTX 2007 CTX 2006
in Au$000 in Au$000 in Au$000 in Au$000
Two year earnings growth 0.24 0.39
Two year revenue growth 0.06 0.03
Two year Net Income 282.10 226.80 648,816.00 467,197.00
Two year Revenue 2,000.60 1,883.10 19,078,481.00 18,441,437.00
Two year Earnings per share 0.47 0.42 0.23 0.19
Two year Asset 2,620.30 2,590.10 5,329,936.00 4,417,426.00
Two year Equity 828.10 748.10 2,828,622.00 2,442,510.00

Appendix E

ORG 2007 ORG 2006 STO 2007 ST0 2006
in Au$000 in Au$000 in Au$000 in Au$000
Two year earnings growth 0.38 (0.14)
Two year revenue growth 0.09 0.00
Two year Net Income 456.90 331.90 44,641.00 51,847.00
Two year Revenue 6,471.10 5,919.50 522,797.00 521,482.00
Two year Earnings per share 0.46 0.40 13.80 15.82
Two year Asset 14,765.30 8,664.90 483,218.00 458,823.00
Two year Equity 5,881.00 2,690.70 177,275.00 167,833.00

Appendix F

WPL 2007 WPL 2006 QGC 2007 QGC 2006
in Au$000 in Au$000 in Au$000 in Au$000
Two year earnings growth (0.28) (0.94)
Two year revenue growth 0.11 10.13
Two year Net Income 1,030.20 1,427.00 (12.20) (6.30)
Two year Revenue 3,841.40 3,475.50 34.50 3.10
Two year Earnings per share 1.90 2.02 (0.01) 0.02
Two year Asset 9,730.00 8,968.70 543.70 129.80
Two year Equity 5,093.90 4,201.80 523.60 70.70
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