Investment Report Issues - Essay Example

Investment Report Part Investments: Investing in both individual stocks, mutual funds and/or ETFs This section of the report seeks to provide details meriting my investment strategies in purchasing stocks of Hyperdynamics Corp (HDY), CNET, SinoCoking & Coke Chemical Industries Inc. (SCOK), Charles Voegele Holding AG (DE:VCH), and CyberArk Software Limited. The merits of my strategies are outlined below as follows: 1. As a pure investor, my duty is to balance off the risks and benefits associated with any type of stock purchased. Based on the Portfolio Theory, it is clear that the combination of assets that are not closely tied in terms of appreciation and depreciation allows investors to limit the risks they expose their investments to provided that different industries are affected differently by economic factors. Thus, as part of the Portfolio Theory directives, I decided to purchase stocks/ETF/Mutual funds from Hyperdynamics Corp (HDY), CNET, SinoCoking & Coke Chemical Industries Inc. (SCOK), Charles Voegele Holding AG (DE:VCH), and CyberArk Software Limited. The merit for selecting these stocks is due to the nature of their trading trends. Currently, most of the stocks from the five companies have a positive appreciating trends which was originally not the case. At the time of investment, August 25, 2014. Most of the stocks did not have the potential they currently have. However, provided that different investment plans were applied such as the consideration of the potential companies worth growing one’s investment value to favorable levels. On the other hand, the stocks with minimum potential at the time of investment were considered on the basis of their potential to grow in the future. While the option of investing in stocks that have the same value as my industry, my strategy did not match this criterion as the result of investing in such stocks is like banking with a low-interest-rates’ financial institutions. According to course book, “Street Smart, Book Smart”, rule number two warns investors from investing on stocks that do not exceed or reach the 1 million volume threshold. These type of stocks are weak and indicate economic instability of the trading company at hand. As of the current purchase of Hyperdynamics Corp (HDY), CNET, SinoCoking & Coke Chemical Industries Inc. (SCOK), Charles Voegele Holding AG (DE:VCH), and CyberArk Software Limited the daily stock volumes of these companies are not above the 1 million mark and therefore this rule applies with every investment consideration made. 2. Rule one of the course textbook indicates that whenever investors are buying stocks, they should be wary not to touch on stocks that exceed their 52 week high (Chakravarty, 3-11). With reference to Hyperdynamics Corp (HDY), CNET, SinoCoking & Coke Chemical Industries Inc. (SCOK), Charles Voegele Holding AG (DE:VCH), and CyberArk Software Limited, none of the stocks exceeded their 52 week high at the time of purchase and two months from the date of investment. However, while the investment based on the type of stock or funds is expected to yield the best results as the stock market develops, other factors such as international exchange rates apply in my case of purchasing these stocks. In my strategy, I have subjected my investment to currency exposure as the stocks are from different countries exposed to different rates of exchange. In this case, while investors would take the lead in identifying economic issues facing their local companies, my strategy aims at spreading investment risks across a continuum of economic situations. Thus, irrespective of whether local business stocks are doing well or not, my strategy aims at re-reducing the risks of total investment failure. For instance, with the use of the gainers and contrarian areas of investment, investors seek to make use of current potential stocks while at the same time hoping their investments on poorly trading stocks may pay off in the future. However, when considering these two methods, it is evident that they substitute one another in the generation of returns. On the aspect of currency exposure, my strategy to subject my investments to different currencies is the fact that regardless of whether the contrarian hopes and gainer’s benefits are foreseeable, economic changes affect the productivity of different portfolios. These economic risks have spillover effect in that they may affect the entirety of the economic industries within a region or a nation – for stocks in unaffected regions and nations, the investments involving currency exposure complement those that face poor economic payoffs. Figure 1: CYBR Based on the criteria for selecting the best suited stock/ETF/mutual funds to buy, it was evident that the second rule of considering shares with over 1 million daily volume, this rule was followed in the identification of the stock/ETF/mutual funds that did not hit the 1 million volume. The selected industries are explicitly differential making my strategy more sustaining since industries are not equally subjected to financial crises (Market Watch2, para 1). Hence, IBM’s daily volume is 38,831 shares which indicates a diversion from the dictating rule. Figure 2: SCOK The current stock price, as of December 7, 2014, for SCOK is $3.15, which is a decrease of -0.37% from the opening price of $3.16. However, the daily volume is an entirely different story when it comes to the use of 1-million-volume investment rule. For SCOK, the contrarian strategy does not seem to be working given that at the time of investment, August 25 2014, the stock price was about $9. The 3-month window period shows an unfavorable first quarter of trading. Figure 3: CNET For ChinaNet Online Holdings Inc., my strategy in this case applies the contrarian principles since the company’s daily volume is below the 1 million threshold. In this case, I chose the company’s stocks as part of the contrarian area of investment. With low stock volume traded on daily basis and a decreasing effect on the price index, the stock trades at the lowest price as compared to the rest of the chosen stocks. While contrarian strategy is considered, figure 3 shows that price index surges have occurred in October and registering the highest trading price since a year ago (MarketWatch2. para.1). However, the stocks have been able to hit the $2.0 dollar mark. Currently, as of December 7, 2014, the stocks trade at a price of 1.45 having closed on the last trading day (Friday December 5, 2014) at $1.44 indicate a $.01 increment which does not reflect the price index of Alibaba Holdings which is one among the bench mark stocks. Applying the Rules of Investment (1) Invest in stock with more than 1 million threshold daily volume & (2) Daily stocks that exceed the 52 week high are expensive and thus not safe for investing. a. SCOK: The share price of this stock fund meets the specific conditions for a contrarian investment strategy. However, the current trend of the stocks shows a decreasing trend since the value of the stock at the time of investment. The 52-week high and daily high rule applied in this case to limit the risks associated with expensive stock and stability. At the current moment and back to the time of investment, the stocks reflect industrial instability which may attract stabilization strategies from other companies, thus the stock price and the overall investment will eventually pay off under the assumption that industry will react to the current poor performances (MarketWatch3, para. 1). Figure 4: SCOK b. CNET: One of the stocks with positive daily change. In choosing CNET, I adapted the fund strategy as the stocks of a tech company depend on the growth of the industry as well as the innovative capabilities of the company behind the stock. With a funding strategy applied in this case, the poor value of the stock, $1.45, shows that the company can use funding to amplify its performance margin (Market Watch2, para 1). c. CyberArk Software Ltd: CYBR’s stock prices are high given that the company operates on higher daily low as compared to the 52 week low. In the aspect of share volume, the company has the highest average volume as compared to the other stocks that I have chosen. The daily volume is 3,950 which is higher than SCOK’s, and CNET’s. Additionally, the stock has had a flat rate of above $20 for the last 9 months since September 2014. Following the gainer’s strategy and trading stocks with 52-week high higher than the daily high, the CYBR investment is one of the investments absorbing the other stock’s negative growth and slow recover (MarketWatch1, para. 1). Figure 5: CYBR Part 2: Profit and Loss Momentum (Gainers) Contrarian (Losers) Market Own Strategy Ticker CYBR CNET SCOK ALIBABA # Shares Purchased 97 2759 1270 3515 37 Price Purchased $ $22.00 $1.0 $2.60 $95 Current Price $ $41.25 1.45 $3.15 $107.99 Commission Fees $ 9.95 9.95 9.95 9.95 Profit Per Share $ $19.25 $0.45 $0.55 $12.99 Gain on Investment $1,857.3 $1231.6 $688.55 $470.68 Return on Investment 86.9% 44.6% 28.85% 13.3% Table 1: Profit/Loss Based on my calculations above, all of the above stocks are considered momentum strategies except of CNET and SCOK. However, other areas such as contrarian, market, and own strategy categories all indicated positive gain on investment. Of all investments, the momentum strategy ROI. Market option is one among the poorest as the stock prices are very low and non-sustaining of the number of stocks bought. Based on the above calculations, the own strategy returns a ROI of 13.3%. This shows that my investment on momentum and own strategy are viable options. Works Cited Chakravarty. Street Smarts, Book Smarts. Acton, Massachusetts: XanEdu Publishing. . (2011). MarketWatch1. CyberArk Software Ltd. Accessed online on December 7, 2014 from http://www.marketwatch.com/investing/stock/cybr MarketWatch2. ChinaNet Online Holdings. Accessed online on December 5, 2014 from http://www.marketwatch.com/investing/Stock/CNET/charts?CountryCode=US MarketWatch3. SinoCoking & Coke Chemical Industries Inc. Accessed online on December 7, 2014 from http://www.marketwatch.com/investing/Stock/SCOK?countrycode=US Read More