Individual Share Portfolio Review
One of the most common ways of working out the performance of a particular stock at the stock market is through monitoring and studying the price changes of the said stock for a certain period of time. These changes in pricing are then expressed as percentages. Another effective way is by monitoring the performance of the said stock against the set index which acts as a benchmark. This is also done over a certain period of time (Sadler & Craig, 2013). It is, however, important to note that benchmarking can be a sophisticated process whenever it involves the calculation of the total return which is a sum total of the stock price change and other returns from other investments which may include dividends (Lhabitant & Gregoriou, 2008). Whenever an investment is made in different currencies, then the rate of conversion of the respective currencies should be considered (Sadler & Craig, 2013). This is because the changes of the exchange rate will have an impact on the final returns of the stock investment. This paper compares the performance Burberry PLC share(s) with the performance of the overall group portfolio namely Barclays Plc Right Move Plc and Royes Royce Plc. Later an analysis is performed to confirm Burberry shares out-perform the group portfolio stocks? If yes, why? If not, why not?
Analysis of the Share Portfolio Review
An initial investment of £10,000 was made in Burberry Group PLC for the purchase of six shares. Specifically, during the opening trading day, October 31, 2013, the opening price was £1,535 per share. This reduced the share value by £12.00 which is an equivalent of 0.77%. The opening stock stated on 13th March 2014 during that last trading day was £1,462.00. The Burberry Group PLC stock price experienced a seesaw effect, but it generally maintained a stable trend devoid of extreme variations and the value of the final investment was below the initial investment of £10,000 during the six months period (Financial Times 2014)
Chart of Share Value for Burberry
Chart of Share Value for Burberry
The slight differences in the opening price is not a cause for alarm as the organization is sill recording good trading in terms of volume because of demand. At its last trading, the stock traded at 15.67% above the 52 week low set on April 16, 2013 (Financial Times 2014).
An analysis of a month-to-month comparison shows that there was an improvement in December, 2013 compared to November(Bloomberg 2014a).. There was, however, a general decline in January, 2014 followed by an increase in share value in February, 2014. The performance in March, 2014 is, however, the best within this five month comparison period (Bloomberg 2014c).
Currently, the market has outperformed the stock. This was attributed to slow sales and revenue growth globally. However, the company’s market capitalization stood at $9.7 billion according to the latest reading (Bloomberg 2014b) which puts its value among the top in the industry. An expert analysis of the markets has shown that Burberry is expected to outperform the markets according to the latest forecasts (Financial Times 2014). Investment analysts and advisors have continuously been optimistic since September, 2013 although the previous sentiments preceding the current period was of advising investors to hold onto their position in the company.
Barclays Plc Share Review
Barclays bank is a renowned financial banking institution. As of 20th March 2014, the Barclays plc closed at 238.65.This was 4.54% above its 52 week low of 228.29 set on March 14, 2014.Below is a graph showing the 6 month share performance of the Barclays plc;
(Financial Times, 2014)
As observed from the graph, as of March 20th 2014 it closed the market trading at 238.65 and shares traded were at 45.05m.It is however evident that it had lost value of 1.18% in the market. From 2011 to 2013 the Barclays PLC grew revenues up 5.91% from 34.15bn to 36.17bn while net income improved from a loss of 624.00m to a gain of 540.00m. As of Mar 14, 2014, investment analysts forecast the company outperforming the market. Analysts agree that the company has shown marked improvement in share trading since January 10,2013and investors are advised to continue having their stake in Barclays (Financial Times, 2014)
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The market outperformed Barclays PLC. The market grew by -1.25% whereas Barclays PLC grew by -14.25%. The poor performance was a result of various issues cost legacy of PPI, LIBOR, mis-selling and poor performance of the investment division weighed heavily of the stock performance
Right Move Plc Review
As of 20th March 2014, the Right Move PLC closed at 5.97%.This was way below its 52 week high of 2814 that was set on January 07th 2014.Below is a graph depicting its 6 month performance(Financial Times, 2014);
(Financial Times, 2014)
As noted from the graph, the Right Move plc closed at 2,646 as of 20th March 2014.the number of shares traded are 106.00K.The share trading value had decreased by 0.94% by the end of the trading period(Financial Times, 2014). Although the day’s trading had a slight dip in the Right Move shares they have been growing in revenues since 2009 to 2013.
In the last 6 months the Right move shares have dipped. The Rightmove outperformed the market. The market grew by -1.25% whereas Rightmove PLC grew by 13.25%. The was as a results revenues have gone up 17.23% from 119.37m to 139.94m.This is owed to an increase in the global consumer market which has been on the upward rise at +2.61% in the last 6 months. Net income has also improved by 18.84% from 62.55m to 74.34m.Its current Net profit margin is at 53.12%.However,in comparison to global media shares, its interests tend to dip slightly and are at -2.38% in the last 6 months. Investment analysts polled as of March 14th 2014 forecast that the company shall outperform the market in 2014(Financial Times, 2014).
Rolls Royce PLC Review
As of March 20th 2014, the Rolls Royce Plc closed at 1,077 which were 13.13% above the 52 week low of 952.00 since February 26th 2014.Below is a graph depicting the same;
(Financial Times 2014)
As of 2009, the Rolls Royce PLC has been falling by 41.10% from 2.32bn to 1bn despite growing revenues. Revenues grew by 27.56% from 12.16bn to 15.51bn.Thas has been attributed to an increase in the cost of goods sold.
In the last 6month the market outperformed Rolls Royce PLC. The market grew by -1.25% whereas Barclays PLC grew by -2.41%. This was as results in increased sales percentage from 77.56% to 78.62% was a major contributing factor to the drop in net income. Its net profit margin is currently at 8.89% (Financial Times, 2014).Forecasts from March 19, 2014 that include 41 investment analysts show that the company stocks will outperform the market. Shareholders are thus encouraged to hold their stock.
Stock Swap the Stock
A stock swap is the term used to explain an occurrence when an original shareholder exchanges their existing number of shares to gain a new greater amount in stock (Cuthbertson & Nitzsche, 2005). In the case of Burberry PLC, it has experienced a reduction in share value from the original £10,000. Therefore, stock swap can be performed to achieve a greater value. However, an investor must understand that Burberry is expected to outperform the market in 2014. Thus, shareholders are thus encouraged to hold their stock due to increased optimism and positive sentiments. Burberry Group PLC stock is, therefore, a great investment to have since the future of its share value looks bright and stable. Similarly, the group stocks under-performed against the market expect Right Move Plc but all stocks are expected to outperform the market in 2014. Therefore, a stock swap is not advisable since both the group stock and Burberry PLC stock offer similar returns and sentiments.
PESTEL Analysis
Pestel analysis examines the political, economic, social, technology, legal and environmental factors affecting the organization.
Political factors: These include political stability in the country of operation, its taxation policy, foreign trade regulation and diplomacy as well as social welfare policies. Burberry Group is a multinational company doing business in many countries around the world, including emerging markets (Hill & Jones, 2012). As such, the Group is subject to different political climate which present different laws and regulations, taxation laws and rates, and foreign jurisdiction that it has adhere to.
Economic factors – These include such factors as inflation, unemployment levels, money supply and interest rates. The recent global financial crisis severely the degree of consumer spending especially on luxury items that Burberry Group deals in. Similarly, customers particularly from Middle East, Russia, Japan, China and other Asian countries who often purchase luxury goods while traveling domestically and overseas are relatively fewer compared to pre-2009 global economic downturn (Hill & Jones, 2012).
Socio cultural factors: These include such factors as population demographics, lifestyle, consumerism, social mobility, and income distribution. Different countries or regions have different cultural, lifestyle, or dress code cultures. The Burberry brand is known by its Britishness, authentic outwear heritage, democratic luxury positioning, historic icons, making it so popular among many consumers. Given that Burberry’s latest strategy is to invest under- penetrated markets it is obliged to explore the different socio-cultural factors of these emerging markets.
Technological factors: These include such factors as new inventions and innovations, rates of obsolescence, and speed of technology transfer. Burberry has become the pioneering luxury brand to live stream its fashion show in 3D format, in which consumers could purchase products directly and instantly from the catwalk (Hill & Jones, 2012). The company has also strove to take advantage of technological advancement by tapping into social networking sites and websites such as artofthetrench.com, allowing customers to customize their products online and give the company a competitive advantage.
Environmental factors: These include such factors as environmental protection /conservation laws, energy consumption, and waste disposal. Burberry Group has embarked on diverting waste from landfill. Also, Burberry‟s recycling partner has managed to convert in excess of 130 tonnes of raw material waste and samples into car door insulation (Hill & Jones, 2012).
Legal factors: These include employment law, competition law, and product safety which must be taken into consideration by an organization in order to develop strategy and compliance. Burberry has faced an issue of copycats, in which other players infringe on its trademark. Burberry has reported spending £2 million a year in the effort to fight these counterfeits (Hill & Jones, 2012).
Bibliography
Burberry Group 2014a, Forbes, viewed March 2014, <http://www.forbes.com/companies/burberry-group/>
Burberry Group, 2014bviewed March 2014, <http:// co.uk/finance?q=LON:BRBY>
Burberry Group, 2014c, Burberry Group PLC, viewed March 2014, <http://www.bloomberg.com/quote/BRBY:LN>
Cuthbertson, K., & Nitzsche, D. 2005, Quantitative Financial Economics Stocks, Bonds and Foreign Exchange. Chichester, John Wiley & Sons
Financial Times 2014, Markets FT, viewed March 2014, <http://markets.ft.com/research/Markets/Tearsheets/Summary?s=BRBY:LSE>
Hill, C. W. L., & Jones, G. R. 2012. Strategic Management. Cengage Learning.
Lhabitant, F.-S., & Gregoriou, G. N. 2008, Stock market liquidity: implications for market microstructure and asset pricing. Hoboken, N.J., J. Wiley & Sons.
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