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Running Head: Investment Project

 

 

 

 

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Table of Contents

 

Introduction…………………………………………………………………………….2

BAC vs. MCD………………………………………………………………………….3

Table 1 BAC stock prices………………………………………………………………3

Table 2 MCD stock prices………………………………………………………………3

Figure 1 Graphical representation of BAC and MCD stock prices…………………….4

Table 1 Stock earnings………………………………………………………………….5

Conclusion………………………………………………………………………………5

Works cited………………………………………………………………………………7

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Project

Introduction

The term “investment” is used in both finance and business. In finance, it refers to buying a financial asset such as bonds, stocks or shares and speculating to sell the assets at a higher price in future, hence making financial gain. In business on the other hand, investment is buying long-term equipment like tractors and other machinery to increase future productivity. Investing in financial assets is a game of speculation, a risk in which one may win or lose. Among the key factors to consider before investing in the stocks of a specific company are trends (fluctuations) in those stock prices, profit margin of the companies. To illustrate this, two companies shall be used as case studies, McDonald’s Corporation and the Bank of America Corporation.

Bank of America Corporation, BAC, is ranked among the largest banks in the United States of America in terms of asset ownership and the number of branches it operates. The bank offers a range of services including provision of credit cards and managing of assets. The bank networks are spread over 40 states, with customers in over 150 countries. It also has packages for consumers and small businesses. McDonald’s Corporation, MCD, is a fast-food franchise selling burgers, French fries, soft drinks and other fast foods. It is the largest fast-food franchise in the world and is based in the United States. The franchise is however not limited to the United States only; there are McDonald restaurants in 119 countries, giving a total of over 31,000 restaurants all over the world with more than 1.5million employees.

BAC vs. MCD

The tables below summarize the trend fluctuation in stock prices of BAC stocks and McDonald’s Corporation.

Week	Previous closing price ($)	Current closing price ($)	Change (%)
1	13.28	13.50	+1.66
2	13.50	13.55	+0.37
3	13.17	13.60	+3.26
4	13.10	13.30	+1.51
5	12.60	11.98	-0.62
6	11.28	11.12	-1.42
7	12.01	12.60	+4.91
8	12.90	13.02	+0.93

Table 2 BAC stock prices.

Average change= +1.33%

 

Week	Previous closing price ($)	Current closing price ($)	Change (%)
1	75.02	75.09	+0.09
2	74.37	75.01	+0.86
3	74.64	75.10	+0.62
4	78.44	78.51	+0.07
5	74.51	74.92	+0.55
6	77.04	77.48	+0.57
7	79.48	78.54	-1.18
8	78.50	79.64	+1.45

Table 3 MCD stock prices

Average change= +0.38%

The key to success in investment is buying when the stocks are weak and selling when they are strong. The policy used is known as the buy-and-hold strategy (Faerber, 209). As mentioned earlier, investment is a risk and there is no guarantee of gaining. The most common outcomes of investment are minimal gain or loss, or massive gains or losses. One may decide to buy or sell a stock at a price perceived to be the lowest or highest only to realize that had they waited a little longer, they would have profited even more. It is this uncertainty coupled with fear that may inhibit investment (O’Neal, 76).

Below is a graphical representation of the above information.

 

 

Figure 2 Graphical representations of BAC and MCD stock prices.

For this exercise, $20,000 was invested in BAC stocks while the other $10,000 went into MCD stocks. Stock purchases were made on September 3, 2010. BAC stocks were bought at $13.50, a total of 1481 stocks, while for MCD the number of stocks bought was 133 at a price of $75.09. The performances (profit or loss) for the stocks from September to November are tabulated below.

Week	Earnings ($)
	BAC	MCD
1	_	_
2	74	86
3	652	62
4	302	7
5	-124	55
6	-284	57
7	983	-118
8	186	145

Table 4 Stock earnings

Discussion

The earnings have bee calculated by multiplying the percentage change in the stock value by the amount invested in the stocks, for example, 0.37%*20,000 computes the BAC earnings for week 2.There were no earnings in the first week as this is when the stocks were bought; earnings or losses commenced in week 2. Given an option, it would be best to sell BAC stocks in week 3, which records the highest price of 13.60, therefore maximizing returns to investment. It would For MCD shares, it is best to wait until the 8^th week and sell stocks at the high price of 79.64. The trend in the price of MCD stocks is upward movements from week 5 to week 8. Another option is to wait for a week or two in the hope that stock prices will rise even higher and then buy at the price seen to be the highest possible.

The Dow Jones Industrial Average, DJIA or the Industrial Average is a stock market index showing the trading activities of the top 30 companies in the United States over a stated period. On September 3, 2010, the DJIA closed at 10448 and on November 19 the same year, it closed at 11203.55. This signifies a rise in trading activity between September and November, meaning that people became more active in buying and selling shares in the top 30 companies, BAC and MCD included.

Conclusion

BAC and MCD have not only existed for very long time, but have also been showing growth evidenced by the increase in number of branches, number of employees a profit margin. It is for this reason that investing in the is a wise choice. BAC stocks were observed over a 6-week period. The average fluctuation in its stock prices was found to be +1.33%, while that of MCD is 0.38%. Although the value of BAC stocks decreases in week 5 and 6, the overall trend is a change upwards. MCD shows almost negligible change in stock prices, representing some sort of stability.

This analysis has been done over a period of less than two months, a short-term period. Going by the trends, investing in BAC stocks will bring in a lot of profit within a short period. BAC stocks are prone to sudden fluctuations; they should be bought when the prices are at the lowest and sold immediately when the price is seen to have dramatically increased, for instance, buying in week 6 and selling in week 8. For MCD, stock prices are fairly stable, representing a good option for long-term investment.

Works Cited:

Faerber, Esme. All About Stocks: The Easy Way to Get Started. New York, NY: McGraw-Hill, 2007. Print.

O’Neil, William. 24 Essential Lessons for Investment Success. New York, NY: McGraw-Hill, 2000. Print.