Portfolio Theory Analysis
Portfolio
Theory
TABLE OF CONTENTS
1. Introduction 3
2. Aerospace and Defence: BAE systems 3
3. Banks: HSBC 3
4. Chemicals: Bayer 4
5. Oil and Gas: BP 4
6. Retailers: Tesco 5
7. Telecommunications: BT 5
8. The UK Government long bond 6
9. Conclusions: Portfolio performance 7
Bibliography and References 8
1. Introduction The purpose of the following pages is to analyse the changes in the prices of the UK Government long bond and six equities from different sectors from the 13th September to the 29th November. The performance of the whole portfolio will also be analysed.
2. Aerospace and Defence: BAE systems By the beginning of the analysed period, BAE systems share prices started to increase as contracts with Tigerair and the UAE were won and new orders for the future were announced (Elder, 2013a). However, as BAE systems is one of the biggest defence contractors in the US, the US shutdown affected the company negatively as they had to send home some of their workers during that period. After the US shutdown finished, the price of BAE systems stock seemed to recover but then it started to fall rapidly because of: warnings over deals in Saudi Arabia, although support from the British government has been shown (Hoyos et al., 2013); the shutdown of Portsmouth shipyard due to the lack of orders (Guthrie, 2013b); and mostly because the short term forecast for the defence industry is not positive at all since the regulatory framework is too strict in relation to exports and the military spending in the US has fallen significantly (Hoyos, 2013f).
3. Banks: HSBC
Having a beta value of 1.28 (Financial Times, 2013i), HSBC is probably one of the riskiest assets in the portfolio. This could help understand the price variations it has experienced over the analysed period. By the end of September, HSBC share prices kept on falling because the market expected the firm to
Theory
TABLE OF CONTENTS
1. Introduction 3
2. Aerospace and Defence: BAE systems 3
3. Banks: HSBC 3
4. Chemicals: Bayer 4
5. Oil and Gas: BP 4
6. Retailers: Tesco 5
7. Telecommunications: BT 5
8. The UK Government long bond 6
9. Conclusions: Portfolio performance 7
Bibliography and References 8
1. Introduction The purpose of the following pages is to analyse the changes in the prices of the UK Government long bond and six equities from different sectors from the 13th September to the 29th November. The performance of the whole portfolio will also be analysed.
2. Aerospace and Defence: BAE systems By the beginning of the analysed period, BAE systems share prices started to increase as contracts with Tigerair and the UAE were won and new orders for the future were announced (Elder, 2013a). However, as BAE systems is one of the biggest defence contractors in the US, the US shutdown affected the company negatively as they had to send home some of their workers during that period. After the US shutdown finished, the price of BAE systems stock seemed to recover but then it started to fall rapidly because of: warnings over deals in Saudi Arabia, although support from the British government has been shown (Hoyos et al., 2013); the shutdown of Portsmouth shipyard due to the lack of orders (Guthrie, 2013b); and mostly because the short term forecast for the defence industry is not positive at all since the regulatory framework is too strict in relation to exports and the military spending in the US has fallen significantly (Hoyos, 2013f).
3. Banks: HSBC
Having a beta value of 1.28 (Financial Times, 2013i), HSBC is probably one of the riskiest assets in the portfolio. This could help understand the price variations it has experienced over the analysed period. By the end of September, HSBC share prices kept on falling because the market expected the firm to
References: 2. Aerospace and Defence: BAE systems By the beginning of the analysed period, BAE systems share prices started to increase as contracts with Tigerair and the UAE were won and new orders for the future were announced (Elder, 2013a) 3. Banks: HSBC Having a beta value of 1.28 (Financial Times, 2013i), HSBC is probably one of the riskiest assets in the portfolio Finally, prices fell again because of the investigation over the Libor scandal (Schafer and Binham, 2013), the expected changes in prudential regulations and the compensations HSBC is likely to pay to its customers (Moore, 2013). New opportunities arising from the discovery of new oilfields in the North Sea (Kavanagh, 2013a), the shift in the American gas market trend (Meyer, 2013) and the announcements to increase investments in the Gulf of Mexico.