Stock Analysis - Essay Example

Stock analysis for McDonalds and Apple stocks Happenings in the year 2008 for The changes in stock prices are influenced by several factors that are beyond the control of shareholders. In this paper, McDonalds Corporation stocks and Apple Inclusive stocks will be used to analyze the movement of stocks. McDonalds operates in the fast food industry with numerous outlets across the globe. Apple Inclusive, on the other hand, operates in the technological field renowned for its apple phones and Ipads.

It will be wise to analyze those stocks from different industry because in so doing the importance of portfolio diversification might be revealed (Didier, Love, & Pería, n.d). In the year 2008 there were massive failures of the banks in the United States due to credit default swaps. As a result the stock market was in crisis, stock prices for numerous companies declined, and the shareholders suffered losses in their investment. The same year is when Steve Job was diagnosed with pancreatic cancer, which most analysts argue it was a blow to Apple Inclusive.

Linking the happenings to the stock movement Apple Inclusive experienced a series of decline as a result of the stock market crisis. The decline started from 2nd August 2008, when the price per stock was $ 165.15 to 6th October 2008 with price per stock being $ 96.8. The major decline recorded was -16.28%. The government intervened, and the stock market stabilized. However, towards the end of year 2008 and January 2009, stock prices for Apple was dropping at an alarming rate that shocked potential investors and the current shareholders by then.

Stock prices dropped from $ 161.36 to $ 130.01, a percentage drop of -19.36% that was 4/1/2008 to 22/1/2008. This period Steve Job was away on medical attention, because he was diagnosed with pancreatic cancer. It is still the same period when Apple launch Macworld 2008. According to (Fuller, 2006) this is ironical in the sense that when a new product is launched by a giant company, it is expected investors to purchase more shares and stock prices to rise, but this was not the case. It is been argued that many investors were not willing to invest in the company because of the health status of its CEO.

They had doubt on who will position the company in the competitive phone market. McDonalds Corporation experienced a significant fluctuation in its stock prices in the year 2008 in October. The stock prices dropped to $ 53.35 from $ 60.23 a percentage drop of -11.42%. According to (Fuller, 2006), the reason for the decline in the stock prices was because of the massive failures of the banks in the United States due to credit default swaps. Similarities in stock prices movement From August to October the stock prices for the two companies declined.

This period is when the stock market was in crisis due to the massive failures of banks not only in America but also in Europe. It can be therefore, be linked to the sharp decrease in the stock prices for the two companies. There was no similar movement in stock prices at the end of year 2008 and beginning of 2009. The reason being Apple stock price was affected by the health status of its then CEO Steve, which is an internal factor. Internal and external factors Factors influencing stock movement are both external and internal.

Control of these factors is challenging since the investors and shareholders make their decision based on their preference and situation. Internal factors can be controlled to a limit but not totally. The case of Job being away for medical attention did not go well with investors. Apple Inclusive was affected by both internal and external factors, but the internal factor was severe as compared to an external factor. This is evidenced by the percentage drop in stock prices influenced by the two factors.

During the fluctuation in stock prices caused by massive failures in banks due to credit swap the percentage drop was -16.28%. Comparing the decrease caused by the health status of Steve job, which was -19.36%, it is clear internal factor had an immense effect. McDonalds on the other hand was doing well during that year and the failure in the banks led to the drop in its stock prices. The decrease of -11.42% in stock prices was the highest to be recorded by McDonalds in the last ten years. One can, therefore, conclude that change in the external environment has a great impact on the operations of McDonalds Corporation.

According to (Darling, & Frankewich, 1929), external factors are totally out of control for any party involved and can be solved by the relevant authority. This is the case in the year 2008, the prices of the stocks and other commodities declined due to financial crisis. The extent to which these factors can last solely depends on the rate responsiveness of the relevant authority. Predicting stock prices Predicting stock price on a day-to-day is a difficult task that might lead someone nowhere.

The stock market is very volatile, and there are no control measures to curtail this phenomenon. Though some stock prices follow a certain trend annual one can be aware when the price will rise or fall but perfectionism in actual prices cannot happen (Darling, & Frankewich, 1929). It can be a waste of time for one to sit down and try to predict the price of stocks. In addition to that, uncertainties in the stock market cannot be ruled out, chances of a company stock to fail to follow a known trend is not a surprise.

Especially introduction of a potential competitor in the stock market poses a challenge to the investor, who might think to invest in a promising company. Functions of Security Exchange Commission Security Exchange Commission (SEC) was created by U.S. in 1934 after the Congress passed the Security Exchange Act of 1933 (Tyler, 1965). The role for this body was primarily to stop any future stock market crisis as that experienced in 1929. It can be argued that the body failed to avert the 2008 stock market crisis though it was not severe as that of 1929; it was unexpected for it to occur.

Protecting investors from fraudulent traders is yet a responsibility of the body. Bernie Madoff was able to run Ponzi scheme without been noticed by SEC for a long period. The body failed on that, but since its formation it has tried to smooth the stock market thus investors having confidence in U.S stock market. Another role is to facilitate capital formation for a business that wants to expand or to be formed. References AAPL Historical Prices | Apple Inc. Stock - Yahoo! Finance. (n.d.). Retrieved April 8, 2015, from http://finance.yahoo.com/q/hp?

s=AAPL Historical Prices Darling, F., & Frankewich, E. (1929). Factors affecting security prices. Didier, T., Love, I., & Pería, M. (n.d.). What explains comovement in stock market returns during the 2007-2008 crisis? International Journal of Finance & Economics, N/a-N/a. Fuller, D. (2006). The stock market. Minneapolis, MN: Lerner Publications. MCD Historical Prices | McDonalds Corporation Common S Stock - Yahoo! Finance. (n.d.). Retrieved April 8, 2015. Tyler, P. (1965). Securities, exchanges, and the SEC.

New York: H.W. Wilson.