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Analysis of Share Prices of Five Different Companies Essay

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Updated: May 4th, 2022

This paper focuses its analysis on the finance sector, specifical banks in England. The shares of these companies are traded at the London Stock Exchange. All the five London-based companies that are considered here include; Commerz Bank Ag, Diamond Trust Bank, BCB Holdings Limited, Commercial Intl Bank (Egypt) S.A.E, and Federal Bank. The financial sector has been chosen as the records indicate that operations in these companies have shown a very good performance. The paper has made a myriad of considerations to reach a decision to invest in these shares. Most of the stocks have a lot of value since the sector attracts a large number of investors and clients globally.

The volume of the stocks is also high therefore so many shares can be traded. There is common knowledge that low volume stocks indicate low liquidity and therefore these shares were picked. The price-earnings ratio is also taken into consideration as it gives information on whether the stock is over or under-valued. Earnings per share/ cash flow per share are applied in breaking down the capital of the company whilea market cap will be considered to make it easy in the classification of the company as nano, micro, or mega caps. Stock volatility is always a vital concept to a serious investor and therefore could not be ignored. The dividends paid by these companies made it easier to know the liquidity of the companies. The financial goal of the investment was to get the companies with very good liquidity and high turnover. This paper has chosen a moderate kind of investment since it does not consider too risky stocks or stocks that are easily predicted. So, the investor is weighed between the two. (White 34)

The Number of shares bought and their prices.

Institution Price of the share- Euros Total No. of Shares Total cost
Euros
COMMERZ Bank AG 1.19 4,002 4762.38
Diamond Trust Bank 2.65 1,000 2650
BCB Holdings Limited 18.50 150 2775
Commercial Intl Bank (Egypt) S.A.E 4.62 1000 4620
Federal Bank 7.81 191 1491.71

20,000.00 USD = 16,299.77 EUR. (Stock Exchange 2012)

Justification

The major reason for investing is to focus on those investments with a very high liquidity. I also stated that the financial sector has had a fair trend which makes it a better choice for an investor with limited resources. Commerz Bank which tops the list trades at 1.19 meaning that the investor can buy a number of these shares. The shares of this kind can give quick returns in the short run given scarce resources. Diamond trust bank is similar to Commerz that has a very high turnover. The investor should spend an amount which can buy an almost a similar number of shares. The investor will spend an amount of 2650 Euros and 4620 Euros respectively. These shares will also make it easy for the company to have quick returns though not sustainable. The stocks of Federal bank and BCB Holdings limited are having low turnover and therefore should be given least priority. This is a strategy to help the investor spread risks. Instead of investing a whole fortune which can fail, it is advisable that the investor spread risks, by purchasing other stocks which can take long. The money which is obtained from those stocks with high turnover can be ploughed back to help cushion the investor of any occurrence. (Dorsey 76)

Portfolio of business for five days. The calculations indicate the share prices for the companies within a five day period.

Institution Day 1 Day 2 Day 3 Day 4 Day 5 Total No. of Shares
Day 1
Total No. of Shares
Day 2
Total No. of Shares
Day 3
Total No. of Shares
Day 4
Total No. of Shares Day 5 Total cost
Day 1
Commerz Bank AG 1.19 1.195 1.199 2.015 2.121 4,002 3986 3972 2363 2245 4762.38
Diamond Bank 2.65 2.61 2.65 2.68 2.71 1,000 1015 1000 989 978 2650
BCB Holdings Limited 18.50 19.0 19.2 19.4 19.6 150 146 145 143 142 2775
Commercial Intl Bank (Egypt) S.A.E 4.62 4.72 4.74 4.76 4.78 1000 979 974 971 967 4620
Federal Bank 7.81 7.75 7.84 7.98 8.06 191 192 190 187 185 1491.71
Total 6343 6318 6279 4652 4518

20,000.00 USD = 16,299.77 EURU London (Stock Exchange 2012)

Did you increase or decrease your stock portfolio. Explain why either case occurred based on the stock itself, the company, the sector and /or the economy.

The portfolio decreased as shown in the table above. There are a number of intertwined reasons which influence the decision. These factors can be categorized as; factors related to the company, the global economic conditions and finally investor emotions. These stocks were bought since their prices will shoot up very fast. The number of shares reduced with an increase in their prices. When the ratio of price share to earnings is calculated, the figures indicate the optimistic figures which can easily attract any normal investor to buy the shares. Most of the banks have in the past regained momentum after the economic recession of 2007/2008 which rocked most of the financial institutions. Given that these companies operate in some of the countries which were majorly affected, there is a lot of hope that their performances will be better. The increase in internet transactions that these banks offer is also another incentive which must have led to an added appetite to these shares. (Andersen 7).`

Institution Stock prices in Day5 Total No. of Shares
Day 1
Total
COMMERZ BANK AG 2.121 4,002 8488.24
Diamond Trust Bank 2.71 1,000 2710
BCB Holdings Limited 19.6 150 2940
COMMERCIAL INTL BANK(EGYPT)S.A.E 4.78 1000 4780
FEDERAL BANK 8.06 191 1539.46

According to the results stipulated in the table, the paper admits that even though the targeted result was not achieved, the return was not bad. This is because the paper opted for a moderate kind of a scheme which does not involve a lot of risk taking. From the trend, it is confirmed that shares in the financial sector are not advisable for people who are risk averse. Since the set goals were not met, next time the focus will be shifted to those shares which are risky especially shares for companies within the technology industry. Given the above set goals, it is believed that the choice of the company and their respective share prices have been in a position to meet some of the set objectives. In the coming investments, the focus will be on highly volatile shares. A change of the sector will also be recommended. Volatile sectors such as technology, construction will be priority when doing my selection of the industry.

Works Cited

Andersen, Michael. Share prices and investment, Economic Research Dept., Reserve Bank of Australia; Sydney 1996.

Dorsey, Pat. The five rules for successful stock investing: Morningstar’s guide to building wealth and winning in the market John Wiley: Hoboken, N.J. 2004.

London Stock Exchange, 2012. Web.

White, John. Investing in stocks & shares: a step-by-step guide to making money on the stock market, How To Books: Oxford. 2003.

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