The stock market is where the share of a public listed firm is traded. The stock market is a paramount component of the free-market economy since it allows companies to acquire capital by giving investors a portion of the firms' ownership (Bodie et al. 2014). An individual is required to conduct an extensive market analysis of the past, present, and future trend of the products offered by their choice of the company before investing.
In consideration of the performance of businesses such as Coca-Cola, Exxon Mobile, General Electric, Pepsi-Cola, Procter & Gamble, and the General Motors. I would choose to invest in Pepsi-Cola and General Electric shares. The two companies show a more promising future as compared to the other four firms. Pepsi would highly benefit from the change of consumers taste to the preference of healthier options (Laseter 2017). The company's beverages which have less than 70 calories per 12 ounces and snacks with lower fat saturation and salt amount currently form 45 percent of its revenue. This is expected to rise with time due to the positive change of consumers taste and preference. The firm's plans to employ different methods of cost cutting its operational cost, for instance, closing down of unproductive plants would lead to an increase in its revenue thus increasing its profit margin. The expected reduction in the cost of raw materials used would also further aid in the reduction of operation cost.
Investing in General Electric shares seems wise since the firm expects to benefit from Presidents Trumps trade policies that promote infrastructure development, and positive tax and regulatory reforms. The possible effect of these reforms has seen the company's stocks rise by almost 9 percent from the day Donald Trump won the elections on November 8th, 2016. The firm's investment in manufacturing and digital technology would improve its performance thus increasing its revenue and profit margin. According to Eskinazi et al. (2017), the expected merger of its oil and gas business with Baker Hughes would secure the company's future in the petroleum industry. This is because it would become the second-largest oilfield service provider in the world. The net income of Pepsi dropped to $1.40 billion which is 97 cents per share from $ 1.72 billion which is $1.17 per share in its previous quarter. The drop was attributed to the firm's pension related settlements and debt redemption charges incurred. The previous quarter earnings of General Electric were revenue of $33.08 billion which is 46 cents per share. This was, however, a lower estimate from the expected $33.63 billion.
An investor investing in the two companies may face various risks that may lead them to register losses (Steenkamp 2017). One of the main risks they may face from investing in Pepsi may be the risk of recording a loss due to an increase in competition. Currently, the products offered by Pepsi are preferred by most consumers thus making the firm highly competitive. However, companies such as Coca-Cola may begin producing healthier products with the intent of attracting thus reducing the company's competitiveness. General Electric investors may suffer losses from management conflicts and issues that may rise from their merger with Baker. The introduction of trade policies that discourage investing in foreign countries is also another possible risk since the company has set up its firms in various other foreign nations (Eskinazi et al. 2017). Political instability is a risk that may affect both businesses since political tension usually negatively affects the economy of a nation.
Bodie, Z., Kane, A., & Marcus, A. J. (2014). Investments, 10e. McGraw-Hill Education.Eskinazi, S., Bruner, R. F., & Carr, S. (2017). General Electric's Proposed Acquisition of Honeywell. Darden Business Publishing Cases, 1-23.Laseter, T. M. (2017). PepsiCo: QTG Emerging Channel Investment. Darden Business Publishing Cases, 1-18.Steenkamp, J. B. (2017). Global Brands and Shareholder Value. In Global Brand Strategy (pp. 275-289). Palgrave Macmillan UK.
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