How Promising Are Singapore Airlines and Hitachi Metal as Investment Targets - Essay Example

The stock market is a sea of opportunities for investors of all ages. The investing strategy a person chooses depends on how much risk a person is willing to undertake. The higher the risk in an investment provides the opportunity for the investor to obtain larger financial returns. Two stocks selected by this writer as investment opportunities were Singapore Airlines and Hitachi Metal.

The stocks were purchased in an investment game. 20,000 shares of Hitachi Metal were purchased and 10,000 shares of Singapore Airlines were acquired. The two investments were selected for a variety of reasons. The future revenue stream of the company should increase due to the strategic move. In 2006 the company’s revenues increased by 8.7% while its profits attributable to equity holders increased a staggering 71.6% (Annual Report: Singapore Airlines). Appendix A shows a ratio analysis comparison of the company and the airline industry.

The return of assets of Singapore Airlines is nearly double the industry standard. The company is making great assets investment and is generating an above-normal return on its assets. The debt to equity ratio of Singapore Airlines is only 0.12, which represents a metric that is 78% lower than the industry standard of 0.54. The low debt levels of Singapore Airlines represent an opportunity for the company for future growth since the credit capacity of the firm is high. The company enjoyed a 10.

4% revenue increase in the first half of 2007 in comparison with last year and in the 2nd quarter of 2007 which ended in September 2007 the company declared an interim dividend of 20 cents per share at the end of October (Hitachi). The 10,000 share investment in this firm represents cash earning from dividend revenue of $2,000. Hitachi Metal is a multinational firm dedicated to producing steel-derived products. The company is diversifying its product line into new business segments such as information technology.

In 2006 the company established a new strategic focus to promote collaborative creation and profits by applying new ideas such as future inspiration value, a high-profit business portfolio, innovation, and cooperation among partners (Hitachi).