Introduction
The economic recession of 2007 affected the operations of many companies and the interests of the public regarding investing in the stock market. The Federal Reserve of the United States adopted immediate measures to intervene and stop insolvency. However, the bond-buying program did swell not only the central bank’s balance sheet but also created an uncertain future regarding the stock market. Some business sectors continue to feel the impacts of the economic crisis, even though they have put mechanisms to cushion their investments in case of inflation occurs. Today, most companies have adopted the “risk-on risk-off” trade approach to secure their stocks (Hirsto, 2011). Facebook, Twitter, Nike, Adidas, Google, AstraZeneca, Apple, Dell, Disney, and Verizon have adopted different strategies for marketing their stocks. The fundamental and technical analysis and issues that affect the pricing and demand for their shares and recommendations for improved performance are extensively documented in this essay.
Fundamental and Technical Analysis
These companies specialize in offering online and some electronic services to customers located in different parts of the globe. They focus on innovations and the latest trends to attract and retain customers. A close analysis of their performance records shows the improved and outstanding trade and profit activities. Facebook and Twitter offer social networking services to clients located in different countries. The increase in the demand for their services by businesses has led to an influx of marketers to secure platforms to advertise their businesses. Today, most companies have pages on these social network sites and use them to communicate with the public. A survey of the Week 3 and Week 5 trade shows a considerable improvement by both companies. Facebook recorded a 3.13% increase in the prices of stocks from $81.21 to $83.83 while Twitter’s was 2.63% from the previous price of $47.35 to $48.63. These companies recorded an increase of 2.62 and 1.28 respectively. Their Week 5 report indicates an opposite trend of -$1.61 and -$1.45 which means that there was a decline in the stock prices of these companies by 1.96% and 2.90% respectively. These results show that the prices of the stocks of these companies are unpredictable because they are controlled by forces beyond their control. The current stock price of Facebook is $84.63 while that of Twitter is $51.73. These changes show that the companies have improved by 1.21% (+1.01) and 0.80% (+0.41) respectively. However, the volume of stocks traded remained at $ 100,000. The fluctuations of these prices are caused by the unpredictable number of active members and visitors of these sites.
Nike and Adidas are multinational companies that specialize in the manufacturing of sports shoes, accessories, and clothing. The Week 3 old price of Nike stocks was $98.46 while that of Adidas was $46.00. Nike registered a slight improvement by 3.78 to $ 102.24 while Adidas’ prices shot by 23.48 to $69.48. The Week 5 results show the stock of these companies closing at $100.33 and $ 73.69 respectively. This means that Nike’s price reduced by -1.91 while that of Adidas increased by 4.21. The percentage changes were -1.90 and 5.71 respectively. In addition, the volume of Nike’s stock was 98, 131.85 while that of Adidas was 106, 059.30. This means that Adidas enjoyed higher sales than Nike. The current stock values of Nike and Adidas are $100.15 and $74.42. This means that the companies registered a decrease of 0.14 (0.14%) and 1.21 (1.60%) respectively.
Apple, Dell, and Verizon recorded similar performances during the Week 3 and Week 5 trading periods. They opened at $ 126.41, $177.0 and $48.92 respectively. These companies closed on a positive note at $127.12, $177.0, and $49.73. This means that they had improved except Dell whose prices were unchanged. Dell maintained a similar trend during Week 5 while Apple and Verizon’s prices decreased by 2.74 (-2.20%) and -1.10 (2.26). The market values of these companies were less than 100%, while that of Dell did not change. The current stock prices for Apple, Dell, and Verizon are $128.62, $ 177.0, and $49.57 respectively. This shows a change by +1.71 (1.35%), 0.00 and +0.4 (0.81%) respectively. Dell’s stock prices remained unchanged, and this trend is expected to last this way for a longer period.
Google, AstraZeneca, and Disney recorded mixed results during the Week 3 and Week 5 trading periods. Google’s stock prices slumped from $575.33 to $ 558.28 while those of AstraZeneca and Disney improved from $68.18 to $72.21 and $105.03 to $108.76 respectively. This means that these companies recorded -17.05 (3.05%), +4.03 (5.58%), and +3.73 (3.43%) respectively. The Week 5 results of all these companies were negative with Google, AstraZeneca, and Disney making losses of -10.28 (-1.88%), -3.78 (-5.52%), and -4.72 (-2.26%) respectively. None of these companies achieved the 100% market value of their stocks. The current stock prices of these companies are $539.36, $73.35, and $107.94 respectively. They recorded a -0.26 (-0.24%), +0.65 (+0.89%) and +5.40 (+1.01%) respectively.
Events That May Have Affected the Investments
Economic Inflation. Sometimes, the prices of goods increase despite the interventions put to regulate them. This condition is called inflation and forces people to stop investing in shares and thus prefer saving for the unexpected increase in the prices of basic commodities like food, bus fare, and high (Reilly, & Brown, 2011). The 2007 economic crisis exposed various investors to risks while others lost a lot of money. They feared a return of this ghost and some of them stopped investing in stocks. Those who are still interested do not want to invest a lot of money for fear of losing it. Others diversify their investments to spread risks. Inflation is a serious threat that may have contributed to the low investment levels of customers in the stocks of these companies.
Deflation. Consumers are the greatest beneficiaries of deflation because of the availability of cheap goods in the market. However, investors in the stock market do not enjoy it because they perceive the economy to be weak if deflation occurs (Edmans, 2011). The 2007 economic crisis was an eye-opener to investors, and they have become wiser and studied markets and companies carefully before buying their stocks.
High-Interest Rates. Banks and other money lending institutions control the money in circulation by altering their interest rates. High-interest rates make money scarce because not every borrower can finance expensive loans. Companies may reduce their employees by laying them off and cutting spending to reduce the costs of business operations. Banks earn a huge percentage of their income from the interests charged on loans (Lehman, & Osteen, 2012). However, they cannot make profits if only a few clients borrow loans. High-interest rates on loans reduce the amount of money in circulation and make it difficult for people to invest in the stock market.
Foreign Markets. Developed nations like the United States and China rely on other nations to buy their goods and services. Foreign markets cannot promote the businesses of these developed nations if their economies are weak. There will be no market for the goods produced. A drop in revenues occurs when American companies are unable to sell their goods or services to other countries. The stock exchange activities of foreign markets have adverse effects on the attitude and perception of American investors towards the stock market.
Market Sentiment. It is not easy to predict what may happen to the stock market. The above analysis of various stock values shows that companies may enjoy high prices and suffer serious losses the following day (Braeley, Myers, & Allen, 2010). The sovereign debt crisis in Europe or other developed nations affects the international stock market. Unfortunately, most investors focus on the short-term gains of their investments. Most companies do not have effective marketing strategies of investment consultants to educate the public on the need to focus on the long-term gains of investing in their stocks.
Company News and Reputation. The public has a keen eye and ear on the events that take place in companies. They prefer supporting companies that have robust corporate social responsibility programs and respect their employees. Good or bad news that shape the reputation of a company may encourage or discourage potential and existing investors from investing in its stock (Hirt, & Block, 2012). Companies that acquire others successfully improve consumer trust in their future while those who frequently make losses or lay off their employees discourage consumers from investing in their stocks.
Government
Politics. The United States pays attention to the democratic practices of its trade partners. In addition, it supports leaders who are ready to create a healthy business environment with America. Unfortunately, most countries do not undergo peaceful leadership transitions. The political temperatures rise in developing countries during elections. Market panic occurs in countries that change leadership through violence or corruption. Political instability affects exchange rates, trade agreements, and international relations (Foster, Reidy, Misra, & Goff, 2011). If America stops its association with a country, it means that some of its companies will have to look for markets elsewhere. Trade sanctions lower the popularity of countries, and this affects their stock markets.
Taxation. The government has numerous powers of controlling the prices of goods and services produced within a country or imported (Kaustia, & Torstila, 2011). Heavy taxation of multinationals discourages foreign investments and promotes local business activities. America’s economy is supported by numerous large and middle-size companies that generate a lot of revenue for government expenses. Subsidies and tax exemption programs are important in promoting investments in stocks.
War and Terrorism. Peaceful environments attract investors and create opportunities for utilization of natural resources (Kotler, & Keller, 2011). The government has a responsibility of ensuring its citizens live in a safe and secure environment. However, terrorism has become a stubborn problem in international trade. Fear is a serious threat to investments because nobody wants to invest in a business that may be bombed the following day. The September 11th, 2001 terrorist attack on America’s business hub center changed the investment habits of many companies and individuals. It takes years before the markets recover from criminal attacks targeting key government installations. Countries spend a lot of money fighting terrorism instead of investing in activities that will create healthy business environments (Ferreira, & Santa-Clara, 2011). Governments that do not provide security for their citizens and foreigners cannot attract investors. For instance, the recent killing of 147 university students in Garissa, Kenya has discouraged many foreign investors from seeking partnerships with the Kenyan government and individuals. The United States and the United Kingdom have issued several travel advisories warning their citizens to be careful when visiting Kenya.
Recommendations
Profitability. The client should analyze the performance records of these ten companies before deciding to continue with the appropriate ones. These companies have shown different performances as indicated in Week 3, Week 5, and current stock prices. Google is the poorest performer because the price of its stock has remained unchanged for a long time. It seems that there is no activity in this company, and this signals a dark future regarding its performance and profits. The company has made three huge consecutive losses with a backward slump in the prices of its shares. This company has become unpopular because of the stiff competition from Yahoo and other search and social network sites. Dell is a dormant company, and there seems to be no activity in its stock values. The investor should consider moving the shares from this to other active companies. Adidas seems to make good profits because the value of its shares continues to appreciate. The client should invest more shares in this company because it has a bright future.
Possibilities of Growth. This is another factor that investors should consider. Today, companies like Apple, Samsung, LG, and Sony offer good returns on investors’ shares because of the huge demand for modern technological devices and services. There is a possibility of increased demand in the future because more people are getting used to modern technology and rushing to buy devices to make their lives easier and better. Mobile phones and other technology-based companies produce goods and services that are in high demand because of the exemplary market research conducted by their developers (Hirsto, 2011). Therefore, they have steady and reliable markets and a huge following that promotes their reputations and attracts high dividends on shares.
Reputation. The reputation of a company determines its popularity among investors. Companies that have scandals (social, economic, and political) have a bleak future because they may collapse anytime. Those that have successful acquisition records should be given priority. A company’s reputation is the first selling point of its products or services because the public does not want to be associated with scandals.
References
Braeley, R. A., Myers, S. C., & Allen, F. (2010). Principles of Corporate Finance. New York: McGraw-Hill/ Irwin.
Edmans, A. (2011). Does the stock market fully value intangibles? Employee satisfaction and equity prices. Journal of Financial Economics, 101(3), 621-640
Ferreira, M. A., & Santa-Clara, P. (2011). Forecasting stock market returns: The sum of the parts is more than the whole. Journal of Financial Economics,100(3), 514-537.
Foster, J. D., Reidy, D. E., Misra, T. A., & Goff, J. S. (2011). Narcissism and stock market investing: Correlates and consequences of cocksure investing. Personality and Individual Differences, 50(6), 816-821.
Hirsto, H. (2011). Everyday discourses of stock market investing: Searching for investor power and responsibility. Consumption, Markets, and Culture, 14(1), 57-77.
Hirt, G. & Block, S. (2012). Fundamentals of Investment Management. New York: McGraw-Hill/Irwin.
Kaustia, M., & Torstila, S. (2011). Stock market aversion? Political preferences and stock market participation. Journal of Financial Economics, 100(1), 98-112.
Kotler, P. & Keller, K. L. (2011). Marketing Management. New Jersey: Prentice Hall.
Lehman, N. J., & Osteen, S. R. (2012). A Financial Professional’s Guide to Generational Risk Analysis in Stock Market Investing. Journal of Consumer, 29, 60-69.
Reilly, F. K., & Brown, K.C. (2011). Investment Analysis and Portfolio Management. Massachusetts: Cengage Learning.