305 Investment Essay

Submitted By liulong123
Words: 2411
Pages: 10

Portfolio Analysis



Portfolio Analysis


For an investor to make a rational investment decision, it is necessary to conduct a thorough scanning of the organization or group of companies which are identified as potential target or portfolio. This would support the famous saying that investors are generally risk averse while they expect the highest return from the investment they make. In finance, there is risk trade off system where risk is generally compensated with return that is, the higher the risk, the higher the returns and vice versa. On the contrary, investors are not willing to take great risk since they would prefer putting their finances in investments that are not exposed to high risk and expect returns equivalent to or higher than they could have gotten if they opted for higher risk. This has forced investors to perform the extensive research of the company they intend to invest on their past, present, and future growth, and performance. This is achieved through investment appraisal techniques and other indicators that reveal the viability of an investment they are intending to take both in terms of profitability and the time it will take to repay their costs.

For the purpose of making investment decision in this assignment, two portfolios of six companies are picked from the New Zealand Stock Exchange, Australian Securities Exchange and from the international market. Decision will be made after critical analysis of the company’s activities both within and outside the company that have an impact on its profitability and continued growth. Performance would be accessed through application of performance appraisal tools such as ratio analysis that would assist in revealing the company performance in different areas. For instance, profitability, liquidity, and financing among others. Other tools would include the position of the company both in the industry and regional economy, its relation with stakeholders, its SWOT analysis, and Porter’s generic model of the company’s products among others. If investors perform a proper evaluation and analysis of the company, chances are they would be able to minimize some or all the risks involved in the investment they are willing to make and, therefore, make a better decision.

Portfolio 1 consists of three companies based in New Zealand listed in the New Zealand Stock Exchange and the other three consist of companies listed in the Australian Securities Exchange. The New Zealand Stock Exchange listed companies include Auckland International Airport, Air New Zealand Limited, and Fletcher Building Limited while Acacia Coal Limited, AACL Holdings Limited, and A-Cap Resources Limited were picked from the Australian Securities Exchange. The second portfolio consisted of companies picked from the first portfolio and from the international markets. All the companies had one common character, they were publicly traded companies although in different markets all over the world. Their information was publically available since it is a universal requirement that all publically traded companies should make all their documents available to potential and current investors plus any other party who would be interested for the purpose of decision making.

Historical Background Brief Outline and Analysis of the Companies

Air New Zealand Limited (AIZ)

It is an international and regional airline group that transport passengers and cargos within New Zealand and other regions such as Australia, South West Pacific, Asia, North America and the United Kingdom. It also has business units that provide engineering, ground handling services, and subsidiaries specialized in booking, wholesale, and retail traveling services. To remain in the market, AIR performs a close market analysis and exploits opportunities where it has the potential of stimulating its growth…