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Investing, Stock Markets

Enterprise Valuation Techniques: Determining a Company’s Total Worth

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Enterprise Valuation Techniques: Determining a Company’s Total Worth

The companies that have the potential to be successful entice investors to venture their capital to them. Although, a slothful evaluation with these robust companies always comes with a price. Investors must scrutinize thoroughly if these companies are worth buying for.

Company Valuation is an overall system of thoroughly appraising the economic value of an entire business. Company Valuation is used in order to estimate the fair market value of a business for several purposes. Aside from buying and selling shares, the process in determining an enterprise’s value is also beneficial in settling disagreements concerning taxation, distribution of business acquisition value with business assets, shareholder or partnership interests, and divorce proceedings. There are several useful techniques that can be utilized for company valuation depending on what aspect of that company you want to focus on such as: discounted cash flow valuation, times revenue method, market capitalization, liquidity valuation, valuation by share price, valuation by comparing companies, valuation through financial ratios, asset-based valuation, and earnings-multipliers.

Company valuation is a complicated financial evaluation that must be done by qualified valuation accountants awarded with a professional designation. This process will give aid especially to owners who are reaching a deal in selling their company and investors who are willing to buy a business. In this article, we are going to discuss the different methods in calculating an enterprise’s worth to raise awareness on how and why these methods are used. 

Discounted Cash Flow Valuation

Discounted Cash Flow is a method of appraising the worth of a company through forecasting its forthcoming cash flows. Through this valuation technique, sequences of assumptions are used in concluding cash flows forecasts regarding the potential performance of a company. Subsequently, the projected company performance will be interpreted to forecast the possible cash flow provided as a result of the operations of the company. 

This technique estimates the enterprise’s value by means of the Net Present Value method. NPV method is a contemporary way of assessing investment offers. This technique is based on the time value of money which estimates the return on investment by considering the factor of the time element. Using the NPV method, cash flows of the investment projected must be logically assumed. Correct discounts are recognized in the NPV method in order to mark down cash flows. For you to calculate the present value of cash flows, the opportunity cost must be considered as the discount rate.

Discounted Cash Flow has been used in most situations because it calculates the company’s value with accuracy. Therefore it is the most reliable valuation technique that exists today. Despite all of that, the DCF method also comes with some risks.

Why Discounted Cash Flow Should Be Analyzed

Valuation through the use of the Discounted Cash Flow method is beneficial for the owners since the cash of a company is what they are mainly concerned about. The DCF method help makes assumptions regarding the future cash flow to be generated by a company. Despite the affirmative earnings, a company that has unstable liquidity will not be attractive for investors since it is unable to pay off its obligations. 

Valuation Methods: Revenue Multiples

The Times Revenue method is a business valuation technique useful for estimating a company’s worth. For this method, the basis of verifying the highest value of a company is the multiple of the current revenue in which affected by a variety of factors such as the status of the industry in which the company belongs and its macroeconomic setting. Under this method, a company is valued on the range between 2 revenue multiples.

For example, a company that gained revenue worth $2 million for the current year is valued between 2x to 4x revenue. Therefore, it will have a total value of between $4 million to $8 million. 

Why Revenue Multiples Should Be Analyzed

The Times Revenue method may appear for some as an unreliable valuation technique in determining the current value of a company. The reason behind the doubt in using this method is that the continuous revenue growth does not indicate profitability growth. Despite its undependability, this method is advantageous for financial analysis in which the revenue is used as an independent variable and its limitations are manageable for complex analysis purposes. Thus, the Times Revenue method is still favorable for buyers because it estimates the purchase price offered by them.

Market Capitalization

Market Capitalization is the most uncomplicated and the easiest method you can understand since this determines the worth of a company based on the total value of all the company’s stocks. This technique is used in estimating a company’s value by simply multiplying the company’s number of outstanding shares to the price per share. For instance, a company is selling 100,000 outstanding shares for $50 per share. Therefore, the company could be appraised at $5 million.

Why Market Capitalization Should Be Analyzed

If you want to compare companies, this valuation method will be reliable in evaluating their relative size because it measures its value on the open market. In addition, it allows predicting its potential growth in the future and helps to determine risks in obtaining which makes the method a dependable basis for investors who are interested in buying shares of stock. 

Risks Using Market Capitalization

Although the Market capitalization is the simplest method, this is not the most effective way to appraise a company’s value because the share price is only based on the declared value in which the real value of the company may not be considered. Your evaluation of business might be put in jeopardy if you rely exclusively on this valuation technique. These are the reasons why depending on the Market Capitalization alone will bring uncertain company valuation results:

  1. The share price is constructed through the foreseeable positive outcome of an upcoming set of products of a company. These newly-launched products might end up as a failure and will result in a decrease in the share price.
  2. The share price might be based on an inaccurate forecast about the development of the company. The mistakes on the company’s projection might be the result of taking it as an insignificant part of the valuation. 
  3. The share price is based on the historical growth in which the company expects to continue. Using solely the past development of a company is a slothful way of estimating a company’s value.
  4. The share price is being relied on news reports or rumors that are unnecessary in completing the company valuation. 
  5. The share price is irrelevant to the company’s value if it is being traded inactively. 

Liquidation Value

Liquidation Value is a way of measuring the value of a company once it is bankrupt or shutting down its business. An enterprise’s worth is determined using this valuation technique by getting the amount of its cash after selling off all its assets and settling all its obligations. However, Liquidation Value is against the going concern principle which is about the presumption that a business has to continue its operation for the foreseeable future or at least 12 months.

Why Liquidation Value Should Be Analyzed

If a company is projected or planning to wind up in a span of 12 months, the Liquid Valuation is a reliable and acceptable method from the fact that it does not violate the going concern principle. 

Company Stock Comparisons

Comparing companies within the same industry is one of the useful techniques in measuring a company’s value. Considering the share price of the companies sold before is an effective way to estimate your price per share. On the other hand, applying this company valuation method also has drawbacks:

  1. You may find comparing indistinguishable companies complicated from the fact that modification on the calculations has to be done in order to identify their distinctions.
  2. The sales of a company are not equivalent to another company.
  3. The sales report of the companies has to be up to date in order for the current fair market value to be concluded.

Share Prices and Financial Ratios 

The shares undervalued by the market are attractive for value investors. They are executing this kind of game plan because they think that the underpriced valuation of the market is its exaggerated response from either good or bad news. Therefore, companies trade their shares less than intrinsic or book value. The underestimated shares by the market give value investors an opportunity to buy the shares of a company because of the shares’ future earnings power. Here are the practical financial ratios that will provide aid for company valuation:

  1. Price-Earnings Ratio – This ratio reveals the link between the fair market value per share and the earnings per share. It is also known as the Earnings- Multiplier method. Since a company’s profit is a more precise basis of financial performance than sales revenue, this method is frequently used to get the exact company value than the Times Revenue method. It is calculated as market value divided by the earnings per share.
  2. Price-Book Value Ratio – This ratio reflects the relationship between the market value and the book value per share. It is computed as market value divided by the book value per share.
  3. Price-Sales Ratio – The price to sales ratio determines the percentage appraised by the company per dollar of the sales. It is computed as market capitalization (or the number of outstanding shares multiplied by the price per share) divided by the total sales over the past 12 months. 
  4. Price-Cash flow Ratio – This ratio measures the correlation between the market value per share and the generated cash flow. To calculate the ratio, get the company’s market capitalization and divide it by the operating cash flow for the past 12 months. 
  5. Price/Earnings-Growth (PEG) Ratio – The PEG ratio finds out the proportion between the Price/Earnings Ratio and the projected earnings growth of a company for the given years. To get the ratio, take the Price-per-Earnings ratio and divide it by the expected earnings-per-share growth. 

Asset-Based Valuation Using the Going Concern Approach

Just like the Liquidation Value, this method uses a simple formula in order to get the value of a company. The only difference is that the going concern approach supposed that the company will continue its operation without being at risk of liquidation. This method calculates the fair market value of the total assets including intangible assets such as trademarks and patents. 

However, the way how intangible assets are being measured is different from the valuation of the other assets. The value of marketable securities already has a determined fixed value. The intangible assets are appraised under the discretion of the company which might result in overvaluation.  The techniques mentioned are the commonly-used company valuation method in the present day. These methods are known from their dependability towards precise valuation. The methods that are also useful include breakup value, replacement value, and a lot more.

 

Dividend Stocks, S&P 500

Time to add Johnson & Johnson to your Portfolio as Sales Projected to Grow despite Headwinds

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Johnson & Johnson (NYSE: JNJ), the global healthcare behemoth, posted Q4 2017 revenue of $20.2bn (an increase of 11.5%) and 2017 full-year earnings of $76.5bn (an increase of 6.3%) on January 23, 2018. Diluted loss per share was $3.99 (adjusted diluted EPS was $1.74 which was an increase of 10.1% compared to Q4 2016); while diluted EPS for 2017 full-year was $0.47 (adjusted diluted EPS was $7.36 which was an increase of 8.5%). The decrease was primarily due to the provisional charge of $13.6bn which was incurred due to the Republican tax reform. Free cash flow in 2017 was $17.8bn.

Source: Yahoo Finance

Exceeding the expectations set at the beginning of 2017, Johnson & Johnson also gave a total shareholder return of 24% with its Pharmaceutical business and Medical Device business showing great strengths. During 2017, it completed around 60 acquisitions and invested $10.5bn in R&D and $35bn in Mergers & Acquisitions. It also executed four divestitures as a part of its business fortification strategy.

Investment Outlook

Source: Google Finance

As the above chart shows, the J&J stock rallied to all-time highs of $147 in January 2018 before falling down 13% to around $127 in March 2018. It went to its highs during 2017 due to its product launches, positive clinical data, and strong Q3 2017 results. However, it declined by 13% in February 2018 due to the following reasons:

  • Q4 2017 results showed negative earnings due to the tax reform act
  • Sales decline in some of its drugs, baby care division, and specialty surgery
  • Talcum powder lawsuits since last year

As per the latest survey by Reuters, J&J stock has received a ‘buy’ or ‘strong buy’ rating from 52% of its analysts and a ‘hold’ rating from 35% of them.

However, looking toward 2018, Johnson & Johnson stock can be seen as a good investment for prospective shareholders due to the following reasons:

  1. With $10.5bn investment in Research & Development, J&J would also be tapping on the developing markets across the world.
  2. J&J’s forward price to earnings ratio is 18.5, lesser than the S&P 500 stock ratio, which makes it a good quality buy.
  3. With a presence in over 60 countries and a massive healthcare division, J&J is uniquely positioned to gain from economies of scale.

Dividend Outlook

As a Dividend Aristocrat, J&J has raised its dividend for consecutive 55 years and now has a yield of 2.5%. The dividend payout ratio stands at around 60%. In 2017, it spent $8.9bn in dividends – i.e. 50% of its free cash flow of $17.8bn. It paid its latest dividend of $0.84 on March 13, 2018. The 5% annual dividend increase for 2017 is low compared to the last eight years (last two annual increases were 6.7% in 2016 and 7.1% in 2015).

Even though J&J is using its cash flow to improve shareholder value, it is also being prudent with the way it manages its finances. Looking at the string of mergers and acquisitions conducted over the past few years, it seems that it would be offsetting these costs by balancing its dividend payout. This could be a reason for a decrease in annual dividend growth. However, all in all, its robust dividend payout despite the future challenges makes it a reliable stock in a prudent investor’s portfolio.

How Does JNJ Stock Compare with the Top Healthcare stocks in the Dow Jones U.S. Health Care Index (DJUSHC)?

Dividend Stocks, Long Ideas

Dividend Stocks: Prospect Capital Trading Near Lows

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Dividend Stocks: Prospect Capital Trading Near Lows

The Federal Reserve has set low interest rates for the US economy.  This makes dividend stocks especially attractive, and one of the most popular companies in this category is Prospect Capital Corp. (NASDAQ:PSEC).  Those with long positions in PSEC capture dividend yields of 10.5%, which is massive compared to most of the traded stocks in the market.

Stock Price Chart Prospect Capital (PSEC)
Stock Price Chart Prospect Capital (PSEC)

In this chart, Prospect Capital has posted negative earnings performances over the last three years:

Stock Market Earnings
Stock Market Earnings

Stock Analyst Recommendations:

Stock Analyst Recommendations
Stock Analyst Recommendations

The stock is trading at a 25% discount to net asset value (NAV):

Closed End Funds NAV Discount
Closed-End Funds NAV Discount

Stock Price Chart: PSEC Technical Analysis

Stock Price Chart: PSEC Technical Analysis
Stock Price Chart: PSEC Technical Analysis
Options

Australian Stocks: Options Trading in the ASX 100

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Options markets have quickly risen in prominence over the last several years, and there are many reasons to explain why these trends have been seen.  Global markets are quickly adding many different trading instrument types in order to meet the needs of everyday investors.  

For those most focused on Australian companies, this will often mean establishing positions in the ASX options contract. These option types allow investors to gain market exposure to the stocks listed on the Australian Stock Exchange, which is one of the most interesting and dynamic stock collections in the world.

Just like bonds and mutual funds, trading options is a kind of investment portfolio strategy for sophisticated investors. Options are a derivative security type, with a price derived from (or dependent upon) one or more underlying assets. Working as a contractual agreement, options grant the rights of buying and selling those assets on or before a certain date and at a set price – known as the strike price.

CALL Options and PUT Options

There are two basic types of options: CALLS and PUTS.  With CALL options, the investor gets the right to buy a particular stock at a fixed price on a fixed timeline, but it is not an obligation to make the purchase. CALL options work like a future deposit. Within the expiry time, the stock can be bought at a fixed price (the strike price), and it does not matter if the market value of that stock has doubled during the timeline. This can help investors make big gains. CALL options are exercised when the market value of stocks seems to be going up in a bullish fashion.

With PUT options, investors have the right to sell a particular stock at a fixed price within an expiration timeline. Again, making the sale is not an obligation. This can be profitable in cases where the market value of the stock goes down while the investor can still sell it at the higher strike price. But for both CALL and PUT options, there is a set expiration date. After that, the right expires and all purchases and sales must be made at the actual market rate.

Options Premiums

A premium is the price/value of an option in options trading. It is the amount paid by the investor at the time the options trade is selected. Technically, the only potential risk for the buyer is to lose the initial premium amount paid for the option (in cases where the trader does not utilize his/her buying or selling right before expiration timeline). These premiums can range from narrow to wide bid/ask spreads, and are often quoted by market makers who build market activity in that specific option.

Expiration Date

Every option contract comes with an expiration date, which is the total life span of that contract. The right to buy/sell a stock is valid until that period of time. Expiration deadlines vary for different stocks and products. The premium is lost if the purchase/sale is not made within the specific time period.

 

Market News

Stock Trading: Oracle Shares Surges to New Highs

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Stock Trading: Oracle Shares Surges to New Highs

Stock markets continue to post major bull rallies but one sector that has been largely missed by investors is the technology space.  This can be seen in professional indices trading trends, which have recently shown that assets tied to the NASDAQ have underperformed those tied to the value of the S&P 500.

But we are starting to see some of these trends change, as tech stocks have been able to post better rallies in recent weeks.  One of the best examples here can be seen in Oracle Corp. (NYSE: ORCL) which is now trading at long-term highs.

Stock Price Chart: Oracle Corp. (NYSE: ORCL)

Stock prices in ORCL have surged above prior resistance levels en route to new highs above $45 per share.  “Information driven,” Oracle is one of the most prominent names in tech development and marketing of business software products, database technology software and cloud engineered systems.  Based in the USA and established in 1977, the company is a public multinational entity having more than 136,000 employees currently with head office in California’s Silicon Valley.  

Key products among others related to Oracle are storage, servers, oracle applications and oracle enterprise manager. Enterprise resource planning, supply chain management, and customer relationship management soft wares are also specialized names which are associated with Oracle. It reported annual revenue of $37.04 US billion Dollars (2016) and net income worth 8.90 US billion Dollars (2016).

Tech Manufacturing Companies

In addition to manufacturing and marketing of business software products Oracle also offers other services which comprise consultancy, training and financing which is also a unique element in relation to Oracle. Since its inception Oracle has gone through a comprehensive process of acquisition of entities both corporate and individuals.  In 1995, IRI software was acquired by it under consideration of $100 million US Dollars.  

Other notable acquisitions include:

  • PeopleSoft in 2005 $10.3 billion US Dollars
  • Seibel Systems in 2006 for $5.85 billion US Dollars
  • Hyperion Corporation in 2007 for $3.3 billion US Dollars
  • Sun Microsystems in 2010 for $7.4 billion US dollars
  • Micros Systems in 2014 for $5.3 billion US Dollars
  • NetSuite in 2016 for $9.3 billion US Dollars
  • Apiary in 2017  for which the valuation of purchase consideration is yet to be agreed

According to reports in 2015 Oracle after Microsoft was second-largest software maker revenue wise which is indeed an impressive and substantial outlook internationally. Since the beginning company has introduced multiple technological dimensions like UNIX-based Oracle applications in 1987, PL/SQL in 1988, 64 bit RDBMS in 1995.  

This was followed by its free database to qualify industry standard security evaluations in 2002, smart scans that enhance software query response in HP Oracle Database machine in 2008 and in particular initiative in the shape of Oracle 12c which can facilitate cloud services along with Oracle Database in 2015.  Conclusively, despite facing multiple challenges since the beginning, Oracle has proved itself among preferred and highly recommended global tech entities.

Long Ideas

Gilead Sciences: Sluggish After Healthcare Reform Debate

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Gilead Sciences: Sluggish After Healthcare Reform Debate

Gilead Sciences is an American biopharmaceutical company that discovers, develops and commercially sells a range of therapeutics including antiviral drugs for the treatment of Hepatitis, HIV, and influenza.

The company was founded in 1987 by Michael Riordan, a medical doctor. He served as CEO till 1996. A venture capital firm Menlo Ventures made the first investment of $2 million dollars in Gilead. In 1996, it entered a collaborative research agreement with Glaxo for the development of genetic code blockers or antisense. This was terminated in 1998 and its antisense intellectual property portfolio was sold to Isis Pharmaceuticals.

Gilead IPO

Its Initial Public Offering raised $86.25 million. It launched Vistide for the treatment of CMV in patients with AIDS. It collaborated with Pharmacia & Upjohn to reach more markets outside the United States. In 2010, it acquired CGI Pharmaceuticals for $120 million which expanded its research into kinase biology and chemistry. It also acquired Arresto Biosciences for $225 million and their research for treating fibrotic diseases and cancer. It acquired Pharmasset Inc. for $10.4 billion dollars.

Drug Pipelines

This gave it control over the HCV treatment market by holding Sofosbuvir (medicine for Hepatitis C). It was the first firm to manufacture a pill which is known to reduce the risk of HIV infection. It had a market capitalization of US $113 billion and its stock doubled its value after the acquisition. It was ranked the 4th best drug company by Forbes. It attributed its success to FDA approval and potentially revolutionary drug Sovaldi.

The drug has faced its fair share of criticism for its high price. The committee of finance of the United States Senate investigated wherein it sent letters to the CEO of the company as to how it derived its price. It has recently also acquired Phenex Pharmaceuticals, EpiTherapeutics and Nimbus Apollo. This has given access to treat liver diseases such as non-alcoholic steatohepatitis, inhibitors of histone demethylases which regulates gene transcription in cancer and potentially treating hepatocellular carcinoma and an anti-inflammatory drug filgotinib which may be used to treat arthritis and Crohn’s disease. It’s current president and chief executive officer is John F. Milligan.

Long Ideas, S&P 500

GE: Trump’s Infrastructure Policies Favor Blue-Chips

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General Electric is an American multinational conglomerate incorporated in New York. It offers a range of services from power and oil, gas and aviation to financial services and even software development. It is one of the original 12 companies listed on the Dow jones index and while it may have not been listed on the index continuously it currently features in the index. It was one of the earliest companies incidentally funded Thomas Edison’s electricity projects.

General Electric was one of the earliest companies incidentally funded Thomas Edison’s electricity projects. The Radio Corporation of America was founded through GE in 1919. It was also used as the retail arm for radio sales until their separation in 1930. GE has been involved in power generation and its history working with turbines, it introduced the first superchargers. These were incorporated into flights during World War I. It reacquired RCA in 1986 and by that NBC.

Changing Company Focus

In the 1960s, GE was considered one of the major computer companies. It had a line of both general and special purpose computers such as GE200, GE400 etc. IN 1970, GE sold most of its computer division to Honeywell, though it did retain its timesharing options for a while after. GE’s current business divisions include GE Power, GE Oil & Gas, GE Renewable Energy, GE Energy Connections, GE Aviation, GE Healthcare, GE Transportation, GE Capital and GE digital.

Through these GE participates in various markets ranging from generation and distribution of electricity, medical imaging equipment, automation, motors and aviation. It also offers financial services through GE Commercial Finance, GE Consumer Finance etc. GE has a history of large scale water and air pollution. IT heavily contaminated the Hudson river with PCBs between 1947 and 1977. It also polluted the Housatonic River with PCB discharges from 1932 till 1977. Recently GE has shifted its efforts towards using clean renewabl

Recently GE has shifted its efforts towards using clean renewable energy. It unveiled its EV solar Carport which has solar panels on its roof with electric vehicle charging stations under its cover. It has a renewable energy programme ‘Ecomagination’ which has resulted in over 70 green products such as halogen lamps, biogas engines being introduced into the market. It invested nearly $25 billion dollars into the project due to popular market response.

Long Ideas, S&P 500

Goldman Sachs: Financials Ride Trump Train Higher

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Goldman Sachs: Financials Ride Trump Train Higher

The Goldman Sachs Group is an American multinational financial company that provides financial services such as investment management, securities and is involved in investment banking. Investment banking accounts for about 21% of the group’s revenue. It gained a reputation as a white knight against hostile takeovers. It is one of the leading M&A forms and frequently tops the Thomson Financial league tables in size of transactions.

Goldman’s Business

It performs various activities such as financial advisory, underwriting etcetera. Investing and lending activities included 16% of its revenue while Institutional client services such as currency and commodities, equities trading accounts for 45% of its total revenue. It is a primary dealer in U.S Treasury securities market. It was founded in 1869 and is headquartered at New York City.

In August 2012, Goldman Sachs created the first social impact bond to support therapy for 16-18 year olds incarcerated on Rikers Island. It has implemented internal policies to address global warming and climate change. It has given around $119 million in grants since 1999 to promote youth education. It was ranked as one of the best places to work for by Fortune magazine and it supports employee philanthropic efforts. As a result the employees are highly loyal to the organisation.

Mortgage Market Criticism

As a result, the employees are highly loyal to the organization. Goldman Sachs has also been criticised as being responsible for the collapse of the mortgage market. It faced investigations from the Congress, the Justice Department and the SEC which it had to settle. It was alleged to have misled investors. Goldman Sachs has denied the allegations and stated that its customers were aware of the bets. It has been accused of various other ethical violations including insider trader based on information obtained from the U.S government and working to

Goldman Sachs has denied the allegations and stated that its customers were aware of the bets. It has been accused of various other ethical violations including insider trader based on information obtained from the U.S government and working together with dictatorial regimes and increasing prices of commodities through futures speculation. It was accused of helping Greece hide its debt by creating a special credit default swap to cover the high risk of Greece’s national debt. 

Goldman Sachs has donated money to both major American political parties during election cycles as well as the candidates and the super PACs of both parties. In 2016, Goldman employees donated $371,245 to the Republican National Committee and $301,119 to the Hilary Clinton presidential campaign but top employees were forbidden from donating to Donald Trump.

Dividend Stocks, FANG, Tech Stocks

Stocks Traders: What’s Next for Apple Stock?

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Stocks Traders: What’s Next for Apple Stock?

Apple, Inc. is an American technology company that is based in California, USA. It is renowned for designing, developing and distributing consumer electronics, computer software, and online services. It was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne to make and sell personal computers (PC’s).

It is known for its flagship products, which include the revolutionary iPhone, iPod, iPad and the Mac personal computer. The Mac also links the computer’s operating system to Apple’s online products and its own web browser, Safari. To this,the company hasadded features such as iTunes, iLife and iWork creativity and productivity suites. Its online services include the App store, Apple music, iCloud and the iTunes store.

Increasing Stores

Apple nearly 500 stores across 17 nations, further it has online stores in 40 countries. These are customized to cater to their location. Their store in Reagent street in London is the most profitable shop in London. Apple has nearly 50,000 employees in the U.S alone with 30,000 working at Apple stores.

It is the largest IT company in the world by revenue and it is the world’s second largest mobile phone manufacturer. It is also the largest publicly traded corporation in the world by market capitalization. It was also the first U.S corporation to be valued at over $750 billion.

Apple’s Corporate Culture

Apple is best known for its corporate culture and image in the public eye. The company’s stock trades as part of the tech-heavy NASDAQ Composite, which can be accessed when trading indices in the financial markets.

It was one of the earliest firms to embrace the individuality of its employees and propagated an informal culture. It is said the Steve Jobs used to walk barefoot in the office even after Apple became a Fortune 500 company.

This broke the perception of a traditional corporate culture. Apple also has fellowship programs to reward employees who make extraordinary technical or leadership contributions to the company. Apple has an efficient division of labor where all employees are technical experts in their field and they are not involved in functions outside their area of specialty. Apple has also turned towards green practices.

In 2008, apple became the first electronics corporation to fully eliminate PVC (polyvinyl chloride) and BFRs (brominated flame retardants) in its products. In 2007, they manufactured mercury-free LED-backlit and LCD displays and arsenic free glass. It issued a $1.5 billion-dollar climate bond to the government in 2016. It has also removed its heavy reliance on coal to alternative and renewable sources of energy. Apple stated that as of 2016, 100% of its U.S operations run on renewable energy.

Long Ideas, Options, S&P 500

KO: A Look at Coca-Cola Stock Ahead of Super Bowl

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KO: A Look at Coca-Cola Stock Ahead of Super Bowl

  • Stock choices become increasingly difficult when S&P 500 is at record highs.
  • Seasons like Christmas to not spell the end of buying activity for consumer products.
  • Consumer surveys showing more bullish signs that you might think exist, when viewing valuations at Coca-Cola.

Stock markets have taken some turbulent turns over the last few months, as the post-summer doldrums have been anything but dull.  The SPDR S&P 500 ETF (NYSEARCA: SPY) and the SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA) continue to press toward all-time records and generalized optimism has been the rising tide that has lifted all ships.  Investors looking to establish positions in these assets can use the MetaTrader platform through an MT4 broker, as this is one of the most efficient means of accessing the market that is currently available.

Chart View: SPDR S&P 500 ETF (NYSEARCA: SPY)

When we make our investment analysis in these central benchmarks, investors are most interested in finding opportunities that have been missed and one of the best examples of this can be found in The Coca-Cola Co. (NYSE: KO), as broader consumer spending levels should become evident within the company over the next few months.  

While many investors are being distracted by the holiday cheer that typically accompanies the Christmas season, investors should be looking ahead to the next big consumer event.  This, of course, can be found in the media juggernaut that is the NFL Super Bowl, which will take place on Sunday, February 5th.

Chart View: University of Michigan Consumer Survey

When we are assessing the market reaction to these types of events, it is important to understand the macro foundations that go into determining whether or not consumer spending is likely to change in material terms.  One of the best ways of doing this is to assess activity in the University of Michigan Consumer Survey, which has now risen to 98.2 and the highest level in almost 15 years.  

Now, the importance of these types of trends can be argued from multiple directions.  But the reality is that we are seeing a material shift in the ways American consumers are likely to approach their everyday purchases.  In pure searches on the internet, terms like NFL Playoffs and Super Bowl consistently come in near the top of the list and it is important to understand that this is more of a seasonal event that it is a one-time viewing opportunity for advertisers.  

Chart View: Coca-Cola Co. (NYSE: KO)

The company is commonly thought of as a perennial favorite of leading Berkshire Hathaway (NYSE: BKR.A) mind Warren Buffet, which in part is due to the KO’s handsome dividend yield (which currently stands at 3.36%).  This is a massive yield given the fact that we are still in a low-interest rate environment and in a weak state as far as GDP production is concerned.  

Stock Market Outlook

This means that investors are paid to wait for stock markets to realign themselves in ways that should favor consumer stocks like KO.  On the broadest level, it should be remembered that stock choices become increasingly difficult when the S&P 500 is at record highs.  In cases like this, it is essential to take a long-term view and identify the potential for growth before it happens.  

Seasons like Christmas do not spell the end of buying activity for consumer products, as some of the biggest consumer audience events happen in the months that follow.  All of this points to bullish signs that you might see when viewing valuations at KO, the stock could rally over the next few months.