Pepsi Co and Coca Cola Stock Analysis - Essay Example

?INTRODUCTION This report analyses the stock price of two companies; Pepsi and Coca Cola. The report uses the stock price movements of the two companies and then identifies which of these companies yields more returns and which of these companies is riskier. The report also analyses different news that are related to interest rates, politics, industry, companies and international news and how these news impact the firms. Investment concepts are used to analyze which of the company is a better investment option. The report at the end presents the summary of what has been learnt in the report. COMPARING THE STOCK PERFORMANCE OF TWO FIRMS Historical prices of Pepsi co Adjusted closing price has been taken for the calculation of returns and risk. The average stock returns are found to be negative (-0.08) (Yahoo! Finance, 2013a) Historical Prices of Coca Cola Company STDEV 0.0101 The Adjusting closing has been taken for calculating returns and risk. The average returns are negative (-0.15) (Yahoo! Finance, 2013b). Dow Jones Industrial Average NASDAQ Composite Index The latest price at which the Pepsi co Philippines traded is 6.19, it is 10.03% below its high 52 week of 6.88. The listing of Pepsi co products are primarily on Philippines Stock Exchange (Financial Times, 2013). (Financial Times, 2013) Market closed at 40.81, which is 6.03% below its high 52 week of 43.43. The listing of Coca Cola Company products are primarily on NYQ. Interest Rates: For the last four years wages are being flat and there is no hint of an increase in inflation rate. In 1980s, women began to enter labor force, but still the work force participation is at its low rate. After the financial crisis the financial system has improved a lot, capitalization of the banks are managed in a better way, balance sheets are being improved by both the corporations and households and all these factors can positively impact not only the two companies but Dow Jones index as well as NASDAQ. Industry News: Despite the continuation of Fed with the policy of buying bonds and accommodation, stocks were more than expected rallied on Monday. The Dow industrials were at a positive sign for the whole day despite the sharp rise in Intel and Merck. With a success of key drug trial, Merck was up 3.8% while with the introduction of new processors of fourth generation, Intel was up to 4 %. The Dow industrial average was increased by 138 points at the closing with 15,254 and NASDAQ was up to 9 points with 3465. 545 million shares were traded by NASDAQ; there was an increase in the volume on NYSE with 879 million shares being traded. Dow Jones industrials violated the moving average of 20 day. The support zone focused concentration on Monday with 15,115 from 15,000. The index of Dow Jones was on a lead till March. Therefore such factors can also impact companies like Coca Cola and Pepsi as they are also traded on similar stock exchange. Company News The Coca Cola Company has announced its investment in Myanmar on Tuesday 4th June. The production of the company will be in Myanmar with an investment of $200 million. This investment will lift its shares in the market and profits will be enormous. The coca cola company was given the investment permit for the foreign investment Law by Myanmar. It is the first production of Coca Cola in decades. The Dow Industrial Average secured an uneven recovery has led the 30 giants of America which includes Coca Cola Company, Microsoft etc to the most comprehensive event (Eavis, 2013) PepsiCo has started its joint venture with the Theo Muller Group, established a new art-state manufacturing of yogurt plant in Batavia, New York. There’s an employment capacity of around 180 people. PepsiCo is the leader in food and beverages it has no less than $65 billion of net revenues. With twenty two brands in the portfolio PepsiCo enjoys over $1 billion to in each brand in a result of its annual sales. With the joint venture with the Theo Muller group Pepsi co enjoys expansion in stocks. PepsiCo due to increasing its price on Feb. 2013, increased its investors interest, there was a 17% increase in the profits of the PepsiCo. Company recorded a net income of $1.66 billion, due to the lift in the prices (Storm, 2013) Political News: A rumor which was uploaded on twitter was basically by the hacker as per the Associated Press, AP. The Dow Jones Industrial Average was affected by this cause dramatically. Index with more than 30 big corporations of U.S. and effective corporations were drop down to one percent from 14,699 to 14,555. The president of Kaltbaum Capital Management stated that due to this cause market gone down to some great extent and the one who wanted to have the maximum benefit because of this cause ,had it, at least till the time when the tweet was assumed to be a rumor (USA Today, 2013). However after that Dow recovered well and trading was again back to its level where it started off (Obel, 2013) International News: The Coca Cola Company on May 24, 2013 announced its participation in the Charlotte Motor Speedway where they allowed their fans to meet their favorite drivers and provided leverage to have some time with them away from the track. They organized a program called Coca Cola Track Walks where it expressed the Company and people were encouraged to have an active, healthy and refreshing life. On May 30, 2013 held a press which pointed the Healthy Weight Commitment Foundation (HWCF), PepsiCo is one of the partners of HWCF, to reduce the calories by 1.5 trillion for healthy America committed to the First Lady’s Partnership. PepsiCo have the belief that their actions and their commitment are making possible for a healthier America. Investment Concepts Since Standard Deviation is less for Pepsi so it is wise to invest in Pepsi co. Coefficient of variance is another important investment concept that is used to identify the risk per unit of return. After COV standard deviation was applied in order to know where it is suitable to invest. However, both the companies are offering negative returns so from investment perspective the investors should not invest in any of these companies. Lessons: As an investor if I want to know the market price of PepsiCo or Coca Cola Company first I should know the trend of both the market. Also keeping in mind the risk factor that stocks can go overvalue or undervalue. The stock prices can fluctuate on the events such as discussed above about the Obama case where it was just a rumor but still the Dow Jones indices were affected by that event. As an investor one should first learn that whether he is investing for the long term or the short term. If one is investing for the long term then he should not worry that much about the risk factor. For example at the above the share prices of Pepsi Co and Coca Cola were sometimes negative, that does not mean that one should not invest but it is the risk factor it depends on you whether you are risk averse or not. I learned from my analysis that one has to take the recent data of share prices of each corporation and can compare the stock prices by taking average returns and converting them to standard deviation. Standard deviation gives the idea of where it is suitable for an investor to invest. The news does have an effect on the share prices of any organization it depends. Before investing one should know how much of the risk he can take and whether he can handle the risk or not. One should know that inflation how inflation has an impact on investment. References Financial Times. (2013). Pepsi Cola Products Philippines Inc. Retrieved June 10, 2013 from http://markets.ft.com/research/Markets/Tearsheets/Summary?s=PIP:PHS Eavis, P. (2013). As Fears Recede, Dow Industrials Hit a Milestone. The New York Times, Retrieved June 10, 2013 from http://www.nytimes.com/2013/03/06/business/daily-stock-market-activity.html?_r=0&adxnnl=1&pagewanted=all&adxnnlx=1370865790-3d6mqTkN/i3Z+VMOGFyD+Q Obel, M. (2013). Dow Jones Industrial Average Plunges 145 Points After Fake Tweet That White House Had Been Attacked, President Obama Injured. International Business times, Retrieved June 10, 2013 from http://www.ibtimes.com/dow-jones-industrial-average-plunges-145-points-after-fake-tweet-white-house-had-been-attacked USA Today. (2013). SEC, FBI probe fake tweet that rocked stocks. Retrieved June 10, 2013 from http://www.usatoday.com/story/news/nation/2013/04/23/hack-attack-on-associated-press-shows-vulnerable-media/2106985/ Storm, S. (2013). Higher Prices Help PepsiCo to a 17% Gain in Profit. The New York Times, Retrieved June 10, 2013 from http://www.nytimes.com/2013/02/15/business/higher-prices-help-pepsico-to-17-gain-in-profit.html?ref=pepsicoinc Yahoo! Finance. (2013a). The Coca-Cola Company. Retrieved June 10, 2013 from http://finance.yahoo.com/q/hp?s=KO&a=03&b=22&c=2013&d=05&e=4&f=2013&g=d Yahoo! Finance. (2013b). Pepsico. Retrieved June 10, 2013 from http://finance.yahoo.com/q/hp?s=PEP&a=03&b=22&c=2013&d=05&e=4&f=2013&g=d Read More