Assignment

Analysis of the Market

The thirty components making up the Dow Jones Industrial Average pay dividends on a regular basis and it is for this reason that the index is well known for its dividend strength. As much as most of the strongest component stocks register excellent records of increasing their payments of dividends at least once annually for the last ten years, some stocks have maintained their dividend yields really low despite their respective earnings. Examples of these stocks are Goldman Sachs, American Express, Visa and UnitedHealth. It is worth noting that these four stocks are linked to the financial industry. Consequently, they are subject to a couple of capital restrictions (Caplinger, 2014).

The Dow closed the day on Wednesday at 16,573. This represents a 308.77 points increase since last week. The index performed well four straight sessions on Wednesday after about two hundred thousand private sector jobs were added in March. It is projected that about 190,000 jobs were added in March which points out the first time pre-cash levels being reached by the private payrolls. Among the stocks that helped the Dow rise higher is Home Depot which accounts for 0.7% of the rise (Divine, 2014).

Early Tuesday, the Institute of Supply Management released their most recent manufacturing purchasing managers reading. Economists were expecting last month’s reading to be 54 but the actual figure is 53.7. This implies that the economy is slightly weaker, contrary to the belief of most. Janet Yellen, the Chairwoman of the Federal Reserve announced that the central bank would still continue to boost the economy as a result of the mediocre state of the economy. Even after the announcement of the fragile economic data, the major indexes continued to soar up. The Dow for example was up sixty points in just five hours of trading (Thalman, 2014).

This week, the portfolio has gained 1.83%. More than half of the stocks constituting the portfolio have improved significantly. These include Supervalu Inc, Delta Air Lines Inc., Microsoft, Best Buy, RR Donnelley and Donaldson Company Incorporation. However, the biggest loser, Caesar Entertainment, accounts for 9.38% of the total value shed in the portfolio. Other losers are Realogy Holdings Inc., Coca Cola Company and Icahn Enterprises LP.

Supervalu Inc. edged up by 5.74%. The stocks of the company beat their 200 day moving average of $6.95 on Wednesday as it changed hands as high as $6.99. The shares increased by two percent on trading on Wednesday.

A new Dunn Brothers Coffee shop is expected to open towards the end of April. This coffee shop will be situated in the Cub Foods store in 8150 Wedgewood Lane in Maple Grove. It will be the first coffee store in a Cub Foods store at the moment. The new coffee house will be situated at the front of the Cub Foods store. The location seeks to offer the coffee house experience to the customers of Club Foods. Cub Foods was first established in 1968 and it is based in Stillwater Minnesota. It was purchased by Supervalu in 1980.

Delta Airlines Inc. traded up 5.58% compared to last week. The airline company acquired a 49% stake in Virgin Atlantic from Singapore Airlines. Delta is benefiting from the tie up with Virgin Atlantic seeing it is profiting a lot in the travel route from New York to London. This is one of the world’s popular travel routes. The itinerary is also at the moment the most lucrative business opportunity for especially since executive fliers are willing and able to pay a little extra amount of fare for last minute travels. Delta is expected to have almost ten nonstop flights between New York and London from April this year. Other airlines like American Airlines Inc. offer 17 daily flights on the same route. Delta has however expanded its presence in JFK and LaGuardia so as to increase its foothold in the transatlantic route.

Delta released a report on its financial and operating performance for the month of March on Wednesday. The consolidated passenger unit revenue (PRASM) increased by 1% year over year. The Domestic entity showed continued growth. The March airline completion factor stood at 99.8% whereas the on time arrival rate stood at 84.3%.

The stocks in Best Buy edged up 4.87%. The company has put in place measures to boost their performance. In spite of these measures, the results of the company have not been so great to the investors. The results too have not been a cause of panic to the investors as well. In order to please their customers, the company intends to improve its shipping speeds. The company is currently delivering two days faster than in the past by using more than one thousand four hundred locations that offer ship-from-store service. $0.4 billion is the amount Best Buy had been losing as a result of returns and open-box items. To counter this problem, the company decided to sell those returns and open-box items online. This move will reduce the amount lost even if these items will be priced for less (Moskowitz, 2014).

Caesars Entertainment was the biggest loser this week shedding almost 10%. The company would probably be bankrupt if it had not sold some of its most dear assets to a subsidiary which is partly owned by Caesars Acquisition Company. The company also sold stock, thereby tapping the public markets in an effort to remain afloat. With a debt tranche of about $24 billion where the revenue of the company is dwindling and some of the resorts coming under siege, it becomes too much to bear for the company (Hoium, 2014).

Caesars reported a 7% drop after announcing that it was intending to sell 7 million shares of common stock with the hopes to come up with $135 on average so as to finance it operations. The company said it would shut down Harrah’s Tunica casino in Mississippi as a result of poor sales. Caesars does not have the exposure in Macau where many of its competitors are in the rapidly growing gaming market. It is for this reason the company not only faces billions of dollars in debts, but also credit default swaps that are priced to reflect their probable future default on bonds (Caplinger, 2014).

The Coca Cola Company lost 1.32% of their shares market value to close at $38.33 on Wednesday against a 52 week range of $36.86-$43.43. The company’s stocks are constituents of the Dow Jones Industrial Average. The shares have been pressured relative to the market. There is a health risk about diet drinks that the company produces. The management has maintained a financial policy and credit ratio that is moderate according to their financial risk assessment. Some financial experts are debating if the stocks of Coca Cola and Pepsi should be regarded as defensive stocks seeing the issues that have had adverse effects on domestic case volumes (Ogg, 2014).

Coca Cola stocks held back the Dow’s performance on Tuesday with a 0.5 decline bringing the share price to $38.46. Towards the end of trading on Monday, the shares were down 6.4% year to date. 10.5 million Shares represent the volume the company currently sits at which traded against an average daily volume of nearly seventeen million shares. The company has a market capitalization of approximately $172 billion (Hossain, 2014).

The data chart below shows the previous week’s performance as at the close of trading on Thursday.Source : https://finance.yahoo.com/portfolio/pf_3/view/v2

References

Caplinger, D. (2014, April 2). These 4 Dow Stocks Could Double Their Dividends in a Snap Retrieved from http://www.fool.com/investing/general/2014/04/02/these-4-dow-stocks-could-double-their-dividends-in.aspx?source=isesitlnk0000001&mrr=0.17

Delta Gains from Virgin Atlantic Tie Up. Retrieved from https://finance.yahoo.com/news/delta-gains-virgin-atlantic-tie-202015756.html

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Delta Reports Financial and Operating Performance for March 2014. Retrieved from https://finance.yahoo.com/news/delta-reports-financial-operating-performance-130300551.html

Divine, J (2014, April 2). 4 Straight for Dow; Myriad Genetics Soars. Retrieved from http://www.fool.com/investing/general/2014/04/02/4-straight-for-dow-myriad-genetics-soars.aspx?source=isesitlnk0000001&mrr=0.20

Hossain, N. (2014, April 1). Dow Today: Coca-Cola (KO) Lower. Retrieved from http://www.thestreet.com/story/12592812/1/dow-today-coca-cola-ko-lower.html

Hoium, T. (2014, March 31). Caesars Entertainment Being Squeezed From All Sides. Retrieved from http://www.fool.com/investing/general/2014/03/31/caesars-entertainment-being-squeezed-from-all-side.aspx

Moskowitz, D. (2014, April 1). Is Best Buy Capable of a Turnaround?. Retrieved from http://www.fool.com/investing/general/2014/04/01/is-best-buy-capable-of-a-turnaround.aspx

New Dunn Brothers to Open in Maple Grove Cub Foods Store. Retrieved from https://finance.yahoo.com/news/dunn-brothers-open-maple-grove-143500079.html

Ogg, J. C. (2014, April 2). What Health Risk in Soda? Coca-Cola Credit Ratings Looking Positive. Retrieved from http://247wallst.com/consumer-products/2014/04/02/what-health-risk-in-soda-coca-cola-credit-ratings-looking-positive/

SVU Makes Bullish Cross Above Critical Moving Average. Retrieved from http://www.nasdaq.com/article/svu-makes-bullish-cross-above-critical-moving-average-cm340975#ixzz2xoruJ2Xp

What Health Risk in Soda? Coca-Cola Credit Ratings Looking Positive - Coca-Cola (NYSE:KO) - 24/7 Wall St. Retrieved from http://247wallst.com/consumer-products/2014/04/02/what-health-risk-in-soda-coca-cola-credit-ratings-looking-positive/#ixzz2xpkFkXr5

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