Common Stocks – Long Positions Essay
The Parker Hannifin Corporation (PH) stock has recorded one of the longest running dividend increases among the S&P 500 for years. On May 8, it reported an amazing first quarter result that provided the much need thrust. The stock price was 38.82 on the trading day of Nov 20 from which it saw a significant rise in the prices and reached a high of 41.08 on November 28. Due to low trading volume from November 26 onwards until 1st December, the stock prices fell to 37.34 as has been customary for this stock during low trading volumes. The prices remained stable once the activity picked up and ended around 37.50 after gaining 0.27 points on after market trading on Nov 4.
Advanced Micro Devices (AMD) is a manufacturer of semiconductors and provides one of the safest trading environments in S&P 500. The share prices were quoted as $1.91 on Nov 20 which remained steady until Nov 25 but dropped afterwards amid speculations of sales decline. Nevertheless, the stock prices have rebounded since then to close at $2.08 per share.
Common Stocks – Short Positions
Stanley Works (SWK) provides Do-it-yourself tools and is considered an overvalued stock with underperforming growth projection, thus making it a potential short sell candidate (Kevin). It should be noted that the stock is still declining since this September. Contrary to the speculations, the stock prices continued to rise after Nov 20 from a low of 25.38 to almost 30.59, an approximate gain of 25 percent. There hasn’t been any significant financial news to highlight its gradual rise.
Penn Virginia Corporation (PVA) engages in gas and Oil exploration business. It is yet another over-priced stock that has been in continued decline since July. The stock prices began to rise abruptly on Nov 20 from 21.85 to 31.08 on Nov 26 but continued its historical path of declining since then. The closing price on Nov 4th was 23.81, a decrease of more than 11 percent since the previous day’s close.
Mutual Fund – Stock Fund
The BlackRock Health Sciences Ops mutual stock fund is a Morningstar 5 star rated. It has been among the leading mutual fund stocks since last five years. The fund has shown general market characteristics and gained approximately 10 percent since 20th November from a low of 21.85 to 23.80.
Mutual Fund – Bond Fund
The Ridgeworth US Government Security Ultra Short Bond I (SIGVX) has been one of the most stable mutual funds when it comes to bonds composition. The prices have remained stable at 9.92 since November 20 with a gradual increase to 9.93 to ward of a sudden decline in mid-week trading.
ETF – Country
The UltraShort FTSE/Xinhua China 25 index emulates the performance of the FTSE/Xinhua Chine 25 index but takes an inverse position to the stock. Its goal is to double the performance of the inverse position of the original index. The overall price pattern is of decline with regular intervals of high and lows. The ETF shed more than 40 points since it was bought on November 20. Although, the short cycle of increase did reach its peak on Nov 20 but it continued the downward trend.
The United States Oil (USO) ETF seeks to exploit the performance of the West Texas intermediate light and sweet crude oil. It also invests in cash settled options and oil futures contract. The ETF was in constant decline since last September but one of the reasons to buy it were the continually decreasing prices of the oil that could have actually regained its previous prices. One of the theories behind such a decision was the constant demands of Saudi Arabia which seek the Oil prices to be stabilized at around $75 per barrel. Unfortunately, the oil prices continued to decline sharply as United States fell into an official recession. The prices of the ETF did gain momentum after starting at an initial price of 39.55 on November 20 to reach its peak at 44.54 on November 26. Amid the increasing volume of sell off in the last three and four days, the ETF prices took a drastic hit on 4th November falling almost 8% due to the speculations of Oil prices plummeting further down. The final quote was 35.25 per share on the closing bell on November 24.
The Japanese Yen has been rising steadily against the US Dollar. In spite of the financial crises around the world, the logic behind buying a December contract (JYC8) is to cash on its significant rise during the last few months. On Nov 20, the opening price of the contract was 10,467 which saw a gradual rise in the coming days without any trace back. The unusual high volume on Nov 20 and the next day saw a price rise. The same buying trend followed the next week after the prices had fallen to the previous opening prices of Nov 20. Since then, the contract has gained a hefty 328 points closing at 10,795.
The investment in the future contract (SFC8) of Swiss France was initiated due to its safe reputation and least fluctuation. Amongst the upheaval, the strategy was to short the Swiss Franc, a currency reminiscent of the overall world market. As predicted, the stock followed the world markets when it gained momentum on Nov 20 and saw a rise on its otherwise weekly shortcomings. From an opening price of 0.8181 to US Dollar, it climbed to 0.845 on December 25th. On concerns that Swiss France would continue its long streak of weakening against the US Dollar, the currency has pulled back to a certain extent to 0.823 but still the trade is at lost.
Options – Call
The January Option of the Kraft Foods was bought due to a steady performance of the Food sector and a high open interest. The Strike price of 27.50 (KFTAY.X) has not performed according to the plan. It has receded somewhat from its initial price of 4.0 to dip at 3.80 near the closing of New York Markets on December 4.
Options – Put
Likewise, a Put for Apple computers was sought in order to gain on the declining prices of its share and to hedge on the risk of the Call option at Kraft Foods. Regrettably, the Jan 2008 strike option of 40.00 (AAQXH.X) declined to 0.02 due to a better performance of Apple’s stock. The overall price has decreased tremendously from Nov 20 price of 0.10.