BUILDING A STOCK PORTFOLIO, Ejercicios de Fundamentos de Administración y Gestión

¡Descarga BUILDING A STOCK PORTFOLIO y más Ejercicios en PDF de Fundamentos de Administración y Gestión solo en Docsity! THE STOCK MARKET HOMEWORK #1: BUILDING A STOCK PORTFOLIO Question: For 4th year A: Compare, analyze and choose between • Facebook & Pinterest • Crowdstrike Holding & Zscaler • Coupang & Atlassian Each of you must compare each one and choose the one they would buy stock in. To do so you must consider: • What is their Revenue Margin? • What are their Beta and P/E ratio? • What is their growth strategy? • What has their historical growth been? There are no right or wrong answers, the question is which stock do you think can grow more in the following year and why. You have to do a two-three paragraph analysis for each pair. As a suggestion don’t think intuition is the answer a smaller company can grow more than a bigger company since it’s has a bigger market share to take over. Answer: The first step is to search for the financial information and performance of these corporations. Since they are all registered in the USA stock exchange market, the financial information of their businesses is not confidential. This information is submitted to the U.S. Securities and Exchange Commission (SEC), and it is published. Therefore, investors can get the proper information to make their decisions, as well as specialized financial offices, that usually write and publish stock market ratios and reports. There are a lot of statistics, ratios and calculations about the financial performance of the companies in order to make a purchase decision, but for the porpoise of this homework, I am considering only some of them, which I think help But if the intention is to invest, I would buy Facebook & Pinterest and keep those stocks in the medium/long run. Consequently, in order to make a final decision, other ratios and index must be checked. Company Name Beta (*) Profitability: Net Margin % (2020 YR) Profitability: Return on invested capital % (2020 YR) Facebook, Inc. (FB) 1.30 – 5year 33.90 22.79 Pinterest, Inc. --- -7.5 -5.98 Crowdstrike Holding --- -29.45 -34.64 Zscaler, Inc. 0.79- 3Year -26.69 -8.92 Coupang Inc. -- -4.96 -- Atlassian Corporation Plc 0.82 -5Year -21.72 -19.81 These indexes show that even though Crowdstrike Holding & Zscaler got a high level of revenues, the performance of these corporations, were negative in year 2020, we can see Crowdstrike Holding & Zscaler show a loss instead of a profit, and there is no return for the money invested. On the other hand, only Facebook is the corporation that showed a profit and this one was able to provide a return on the money people decide to invest in that company, which is very good return: 22.79%. Considering risk analysis, a Beta index higher than 1= means a stock that swings more than the market. High-beta stocks are supposed to be riskier but provide higher return potential. Facebook is only 0.30 above market and provides good returns. So in my opinion, this does not represent a significant risk. There are also other ratios we can find in the Wall Street Journal. These ratios are published as “key stock data”. They are: • Earnings Per Share (TTM): A company's net income for the trailing twelve month period expressed as a dollar amount per fully diluted shares outstanding. • Market Capitalization: Reflects the total market value of a company. Market Cap is calculated by multiplying the number of shares outstanding by the stock's price. For companies with multiple common share classes, market capitalization includes both classes. • Shares Outstanding: Number of shares that are currently held by investors, including restricted shares owned by the company's officers and insiders as well as those held by the public. • Public Float: The number of shares in the hands of public investors and available to trade. To calculate, start with total shares outstanding and subtract the number of restricted shares. Restricted stock typically is that issued to company insiders with limits on when it may be traded. • Dividend Yield: A company's dividend expressed as a percentage of its current stock price. Based on May 05/2021, the ratios for the four corporations were: Facebook P/E Ratio (TTM):26.52 - EPS: $11.69 - Market Cap: $894.48 B - Shares Outstanding: 2.40 B - Public Float : 2.38 B – Yield: is not currently paying a regular dividend - Latest Dividend:N/A - Ex-Dividend Date: N/A. Pinterest P/E Ratio (TTM): N/A – EPS: $-0.06 - Market Cap: $37.00 B - Shares Outstanding:547.27 M - Public Float: 537.36 M – Yield: is not currently paying a regular dividend - Latest Dividend: N/A - Ex-Dividend Date: N/A. CrowdStrike Holdings Inc. P/E Ratio (TTM): N/A - EPS (TTM): $-0.42 - Market Cap: $42.21 B - Shares Outstanding: 188.28 M - Public Float: 189.36 M – Yield: is not currently paying a regular dividend - Latest Dividend: N/A - Ex-Dividend Date: N/A. Zscaler Inc. P/E Ratio (TTM): N/A - EPS (TTM): $-1.44 - Market Cap: $22.20 B - Shares Outstanding: 134.19 M - Public Float: 76.80 M – Yield: is not currently paying a regular dividend - Latest Dividend: N/A - Ex-Dividend Date: N/A The only corporation that shows a positive price/earnings ratio or EPS (TTM) is Facebook. On the hand, this corporation has the highest level of shares publicly traded among the other corporation in the market, and the value of the company's shares of stock is in US$ 894.48 billion. Facebook is the corporation that worth the most compare to the other three. Consequently, the value of Facebook & Pinterest, is a lot higher than Crowdstrike Holding & Zscaler. If it were possible to select only one corporation, I would buy only Facebook, but since I have to select a pair, Facebook can cover the small loss of Pinterest, and continuing showing a profit. So, once I have analyzed key ratios and financial performance, my decision is to buy the pair Facebook & Pinterest. There are two more things requested in the question of the homework, and it has to do with the business growth strategy and historical growth. Based on the announcements Facebook’s CEO, Mark Zuckerberg, published in digitalinformationworld.com, he said that Facebook, will focus on the long term growth, and outlined five key, these are: 1) Focusing on generational change; 2) Allowing more privacy; 3) Facilitating opportunities on platform; 4) Emphasizing on AR & VR (augmented and virtual reality); 5) Enhanced governance. On the other hand, Pinterest published a press release announcing a recovery plan, which is based on delivering more inspiring and shoppable content. Finally, the COVID pandemic has been an unexpected issue that hurt almost all business in the word. Facebook showed that it was able to cope with this situation. To check the performance of Facebook and Pinterest, the webpage of Wall Street Journal, give users the option to automatically make graphs or charts with historical ratios. Next, there are two graphs: The first chart confirms the stability and growth of Facebook since year 2016; the next chart shows Pinterest that started in the stock market in year 2019, this one is a more volatile stock that fall in 2019 and recovered in 2020, with a small decrease again in 2021.