The investment objective of this portfolio is to selectively invest in well established companies that show signs of growth within the next few years. Not only that, this investment portfolio will also invest in companies that have experienced slumps as of late due to their current market environment but do show significant potential in growing out of their current unfortunate circumstances.
Rationale behind Investment
Investing $9,000 into the Convergys (CVG) stock is based on three factors:
- A relatively stable stock price that has not experienced significant dips within the past 3 years and has only dipped once to a quarter of its share price as a direct result of the 2008 financial crisis.
- The company’s revenue stream is significantly bolstered by its call center facilities located in India and the Philippines
- Lastly, various U.S. and European based corporation have increasingly sought to outsource various aspects of their operations to third-party operators (like Convergys) in order to reduce the cost of doing business.
It is a combination of these factors that has resulted in the company’s stock price hovering just between $10 to $15 dollars and remained at this constant interval for the past 3 years.
Other factors have also contributed to this investment, such as the company establishing 18 business processing and call centers within the Philippines, which is now considered the best location in the world for voice-based business processing services. With the current European debt crisis threatening to create further turmoil within global markets, it is expected that more companies will turn towards outsourcing as a solution to remaining operational.
Such a case was seen in the aftermath of the 2008 global economic crisis wherein U.S. based telecommunication firms such as AT&T, Sprint and Comcast outsourced their voice based services to Convergys. Thus, with a well established call center infrastructure in one of the best locations in the world to have a call center this places Convergys in a potentially lucrative position given the potential for additional client as the global economic market continues to be uncertain and tumultuous.
Rationale behind Investment
Hon Hai Precision Industry Co. (HNHPF) or more commonly known as Foxconn is the world’s largest manufacturer of electronic components. They are famously known for making the iPad and iPhone for Apple inc as well as the Playstation 3 for Sony and the Xbox 360 for Microsoft.
While it may be true that the manufacturing industry within China has experienced considerable setbacks within the past few months due to waning U.S. and European demand for consumer technology the fact remains that such a state of affairs would probably only last for at least a year or so till demand picks up once again and as a result this would increase the level of productivity of Foxconn thus growing its stock price.
At the moment the company’s stock price is at $5.037 per share, however, should manufacturing start to pick up share prices could possibly rise to $8 to $10 a share as seen last year due to the release of the iPhone 4s and the unprecedented level of demand this caused. It must also be noted that various industry sources have stated that the release of the Microsoft’s and Sony’s new gaming consoles are scheduled for release next year.
Should this occur it can be expected that production at Foxconn would definitely increase resulting in considerable profits for the company. As such, investing in Foxconn now while the share prices are low could pay off considerably should the various factors that have been elaborated on so far come to pass.
Rationale behind Investment
For the uninitiated Activision Blizzard (ATVI) is considered to be one of the best companies within the gaming industry to date with games such as World of Warcraft, Starcraft 2 and the recently release Diablo 3 being just a few of its recent releases that have netted the company millions of dollars in revenue.
With a current share price of $11.65 per share, this can be considered downright cheap when taking into consideration the sheer amount of profits the company has made within recent months with Diablo 3 rated as being the fastest-selling game in recent history. With other future releases lined up for next year such as Starcraft 2: Heart of the Swarm and Starcraft 2: Legacy of the Void as well as its much anticipated new MMORPG (Massively Multiplayer Online Role-Playing Game) it is undeniable that the company’s revenues will surge by next year.
Various analysts have even stated that the stock price could even go as high as $20 per share as soon as the new expansion packs of Starcraft 2 are released. As such, investing $15,000 into Blizzard is not at surprising given the performance of the company and the popularity of its products.
Rationale behind Investment
The gains achieved by IBM (IBM) within the past 15 years can all be attributed to its marketing strategy of removing itself from direct competition within the currently oversaturated P.C. market. Instead, the company has focused on direct business to business sales wherein its primary clients are multinational corporations, government and educational institutions, the airline industry, the food services industry as well as several other sectors within the global economy today that rely on the technology, software and consulting expertise of IBM in order to resolve their technology-related issues.
In the case of IBM, what was done was to focus on a customer-oriented strategy by providing solutions instead of merely software and hardware. Not only that, the company also avoided the potential pitfall of being blind to changes within the market by in effect taking itself out of the competitive direct to consumer P.C. market and instead focused on a niche market strategy involving multinational corporations, institutions and other such organizations.
While expensive, the use of $15,000 in IBM is justified as a stable long term investment given the way in which the company has been able to integrate itself as an essential service into numerous industries with a greater likelihood that the company will continue to operate profitably well into the future.
Rationale behind Investment
Going back a few years ago, it can be seen that RIM (RIMM) actually used to have a far larger share of the smartphone market (roughly 40%) starting from the latter half of the 1990s till 2005. It was only when other manufacturers (i.e., Nokia, Samsung, Siemens, and Motorola) gained sufficient traction that smartphone sales for the company began to dip.
The proverbial nail in the coffin came when Apple released the iPhone, from 2009 till the present the iPhone dominated the smartphone market pushing other competitors, especially RIM, onto the sidelines. While RIM has attempted to compensate for this by venturing into other markets and attempting to diversify its service offerings, the fact remains that the company should have delved deeper into appropriate product development early on instead of relying on its old business model.
As a result, RIM’s shares have been falling in price as of late with many speculating that this once great company may actually go under. Currently valued at $9.06 investing in RIM may seem like a terrible choice given the current state of the company’s business model, however, research into the current operational strategy of the company reveals that it has begun shifting its sales operations to developing countries like the Philippines wherein the iPhone has not gained sufficient consumer traction given the cost of the product. As such, it can be speculated that RIM’s share prices may actually increase within the coming years as the company continues to gain traction within the Asian region.
Rationale behind Investment
At the present, the internet has become one of the dominant means of communicating ideas wherein access to the latest styles, trends and events are quite literally at a person’s fingertips. There are millions of websites and blogs, billions of articles and trillions of data snippets all devoted to providing information to an average internet user.
With more and more content being freely available online most individuals choose the convenience of the internet over the costs and inconvenience involved in having to buy a physical copy of the information they can easily get through online digitized content. The reduction in the number of subscribers to physical copies of the New York Times (NYT) is a manifestation of this trend at work and is indicative of the fact that hardcopy versions of written content are increasingly being overlooked in favor of their much cheaper and far more accessible digital versions.
While such an environment would make investing in the company seem like a terrible idea what you need to take into consideration is the distinctive shift in the business model of the company wherein the New York Times has a digitized version of its newspaper which can be subscribed to by literally anybody can be accessed from anywhere around the world that has a working internet connection. This has broadened its consumer base and as a result shows potential for possible gains in the future as the company increases its amount of digital newspaper subscribers.
Rationale behind Investment
AGL Resources Inc. (GAS) is a company whose principal business lies in the sale and distribution of natural gas to local distributors located within Virginia, Georgia, New Jersey, Illinois, Maryland, Florida and Tennessee. Through its acquisition of a rival company (Nicor), AGL Resources was able to expand its consumer base of 2.2 million consumers to 4.5 million consumers thus allowing it to become one of the largest distributors of natural gas within the Eastern and Mid-West part of the U.S. It must be noted though that the company’s annual revenue has dropped to almost 50% of its 2009 revenue of 222 million as a result of a variety of problems that have plagued the natural gas industry as of late.
Unfortunately, market demand for natural gas within the U.S. already reached its peak by 2009 (or even a year or so prior to this) resulting in AGL Resources investing resources into a strategy that did not pay off within the past few years. While ordinarily, this would be indicative of a company that should not be invested in given its falling revenue, the fact remains that this is not due to problems with the company itself but is slightly due to problems endemic within the industry as a whole due to excessive natural gas exploration and extraction.
On the other hand natural gas will undoubtedly continue to become a source of fuel for many homes within the U.S. and as such once gas prices increase as supplies start to meet demand the company’s profitability should increase thus resulting in higher share prices within the near future.
Rationale behind Investment
Research data from Boeing (B.A.) has shown that there has been a significant rise in orders for twin-engine 747s in several markets including the U.S. The reason behind this sudden upsurge has been indicated by the article “Best and Worst” (2011) as being the direct result of the development of not only an increasing amount of regional hubs within Asia but in the U.S. as well. One of the unique aspects of the 747 is that not only is it well suited for local domestic flights between short-distance flight routes but it actually also capable of long-distance flights.
As such, the reason behind this sudden upsurge in sales is connected to the subsequent expansion of low-cost carriers that see the fuel efficiency of the 747 twins bodied aircraft as one of the best means of entering into the primary stream long-distance flight market in order to rival legacy carriers. The reason why investing in Boeing would be useful is due to the fact that many of the legacy carriers at the present have been reducing the number of flights to particular routes in order to save on fuel and operational costs.
This in turn has resulted in more budget carriers increasing the amount of route they take which conversely increase the amount of 747s that have been ordered from Boeing in order to meet their subsequent expansion. The company even has a considerable backlog of orders from numerous airlines and as such of it being a good long term investment given the state of the airline at the present and the fact that various studies have indicated that the number of passengers within this industry is expected to increase by 50 billion within the next 20 years.
Rationale behind Investment
When examining the viability of G.E. as a potential investment, a particular emphasis should be placed on G.E.’s strong management discipline regarding not only its stringent implementation of cost-saving measures but in its ability to streamline operations in order to squeeze every single bit of productivity out of its employees. This, I believe, is the core of G.E.’s success as a corporation since it enables the company to operate at peak capacity while ensuring that costs are scaled back in favor of efficiency over wastefulness.
Such a strategy is evident throughout numerous instances of Immelt’s tenure as CEO of G.E. as seen in his initiatives which involved centralizing the diverse operational departments into distinct groups so as to reduce administrative costs as well as his emphasis on the use of lean Six Sigma practices in order to reduce operational wastefulness.
Another move which I consider a strength of the Immelt initiative was his focus on acquiring companies which for him could be integrated into G.E.’s current repertoire of services which would thus become, in his words, “growth engines” for the company. The growth engines came in form of acquiring Universal – Vivendi in order to enhance the offering of NBC, buying companies related to renewable energy initiatives, water, security, oil and natural gas exploration and finally Amersham, a British life sciences and medical diagnostics company which for Immemelt could be integrated with G.E.’s imaging technology division resulting in the development of new technologies and processes which would create considerable profits in the future.
It is based on this that the investment strategy of investing 20,000 into the company is definitely a viable one given the potential growth of GE within the next few years or decades which should result in substantial returns on investments.
Rationale behind Investment
Netflix (NFLX) is an online DVD and Blu-ray movie rental company that has a business model which revolved almost entirely around online retailing. The process behind Netflix is that a customer pays a flat monthly fee for a set of DVDs or Blu-ray discs that they receive individually in the mail. Once the customer is done with one CD, they just mail it in a prepaid mailing pouch that the company has provided and as soon as the company receives the CD they send in the new one via mail and the customer receives it within 1 to 2 days.
As of 2011, Netflix has actually surpassed 13 million subscribers to its services with more being added per day. It must be noted though that the company suffered a huge loss within the past few months as a direct result of trying to diversify its operations between its video stream services and its DVD mail order service. The result was an unfortunate loss of several million subscribers plunging the stock price to its current level of $65 per share.
While still considerably high the loss of so many subscribers does not bode well for the company and in fact, it can be expected that the price of its shares will go down even more within the next few months. It must be noted though the sheer popularity of online video streaming will undoubtedly bring back more subscribers to the company, especially if it continues to build up its lineup of shows and movies. Thus, it can be expected that share prices will increase within the next few years as the company continues to expand its current content.