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Abdullah Alsalloom
Multinational Business Finance. 755
Professor Hamid Moini
Global Investment Portfolio Project -01
Fall 2012
I have picked the following US Based stocks:
Firm's Name / Ticker Symbol / Amount Invested / Price/share (14 Sep)Concho Resources / CXO / $100,000 / 101.15
Apple / AAPL / $100,000 / 691.28
Coca Cola / KO / $100,000 / 38.12
CVS Caremark / CVS / $100,000 / 46.97
Concho Resources
This pure play Permian Basin company seems to be a good buy given the increased interest in the region by international players. Recently, Chevron and Shell engaged in deals in the Permian Basin because of its high oil content and sound economics even if oil prices fall. The increasing horizontal drilling opportunities for oil in the Basin are driving the Permian stocks to appreciate. The fact that Concho Resources is totally based in Permian Basin also makes it a likely acquisition target giving further boost to the stock price. looking at the valuation, it trades at a P/E ratio of ( 16.82 ).
APPLE
One of the most innovative companies, Apple Inc, recently launched the Iphone 5. The post launch sentiment was largely below expectation. I expect the stock to take a push upwards as the phone’s version 5 gradually begins to gain momentum. I believe that the phone is an upgrade due to its much sleeker design, double the processing speed and much stronger sound and camera quality so it will pick up. Another catalyst for the stock could be its pending deal with China Mobile which if it happens, could be a game changer for Apple stock. Also, looking at the valuation, it trades at a P/E ratio (12 months expected earnings) of ~15 times. Even assuming big decrease from 70%+ annualised growth over last five years, it seems like a good bargain given it has some product launches (I-pods) also coming up.
COCA COLA
This company has been the leader in the soft drinks space. The second closest competitor, Pepsi is still a mile behind. With two risky stocks in the portfolio, AAPL, and CXO, this stock will help to add stability and reduce risk. The company recently reinforced their focus on South West Asia which is a huge market. The packaged juices market is the key growth area for the company and it has been growing steadily in Asian markets. With only a fraction of its product portfolio launched in these emerging markets, Coca-cola has the leverage to pick the flavours that suit the regional needs. With its strong supply chain and reach for its flagship drink, making available juice in different areas where it is hard for competitors to reach could give the company an edge. looking at the valuation, it trades at a P/E ratio of ( 20.18 ).
CVS Caremark
Given the uncertain economic scenario, adding a stock from the pharmacy space helps to add resistance to the portfolio. Pharmacy benefits management is a key role in the US economy and hence is a defensive space. With an aging population, CVS stands to benefit in unfavourable economic scenario as generic drugs usage is likely to increase and people will try to use low cost options like mail orders. This could lead to margin and multiple expansion for the company. Also, three of company’s recent deals with health insurers could give the company access to a large customer base and help to drive growth. looking at the valuation, it trades at a P/E ratio of ( 16.79 ).
I have picked the following foreign company stocks (ADRs):
Firm's Name / Ticker Symbol / Base Country / Amount Invested / Price/share (14 Sep)Unilever / UL / UK / $100,000 / 36.55
Sony / SNE / Japan / $100,000 / 13.05
Tata Motors / TTM / India / $100,000 / 25.41
Gold Fields / GFI / South Africa / $100,000 / 12.90
Unilever - UK
I pick Unilever in my portfolio due to: (1) the defensive nature of the sector in which company operates which helps to cover for my more risky picks and balance the portfolio; (2) the strong loyalty for Unilever brands; and (3) the company’s presence across the globe. Despite the slowdown, the company’s products continue to see robust demand and its ability to customize to the situation, for example, by providing small, cheaper packaging helps the company to perform even in tough times. looking at the valuation, it trades at a P/E ratio of ( 19.55 ).
Sony – Japan
The stock has taken a hit recently due to its reducing market share. However, I believe that the stock is now bottoming out and could be slated for a upward trend with the launch of its new products, Xperia tablet range and Bravia television products line. The company’s management is strong and I expect to see a bounce back in Sony’s market share and stock price.
TATA MOTORS – India
The India based auto major has two key areas of growth ahead: (1) the luxury cars market in India has seen a steady growth. With Jaguar and Land Rover acquisition, Tata Motors made an entry into this space and is increasingly beginning to realize the growth potential in this segment. (2) the company recently launched a new pickup truck and expects to increase its market share in this segment. The market for light trucks has not been hit as hard as heavy trucks and increased market share could be a stock booster. These catalysts accompanied with upcoming festive season in India, make me choose this stock in my portfolio. looking also at the valuation, which trades at a P/E ratio of ( 6.84 ).
Gold Fields – South Africa
With rising gold prices which are expected to remain high in the near future due global uncertainty, a gold producing company could be a strong buy. However, the Gold Fields stock has taken a hit due ongoing strikes at the plant since last one month. This could potentially be a good , though risky, buying opportunity because if the management is able to control the strike and bring the workers back to production, the stock could see a rally in the next few months. looking at the valuation, it trades at a P/E ratio of ( 9.30 ).