Introduction
The investment theme will be industry-focused, emphasizing infrastructure businesses and resources in the digital and technology sectors since the speed of technology and internet usage will give a competitive edge in the future. Investment plans take a focused strategy, focusing on the initial investment in specific business subsectors to match societal trends and position clients well for equity investments. The industry emphasis supports distinct origins and values throughout the investment retention term, resulting in superior risk-adjusted returns for investors (Israel et al., 2020). The technology sector comprises businesses engaged in selling goods and services in the software, electronics, artificial intelligence, computer, and other information technology-related products.
Value investing and momentum investing are two strategies used in selecting stocks invested on the portfolio. These techniques will be used to identify valuable technical sector stocks. Value investing technique entails identifying stocks that are trading at a discount to their intrinsic value, which is often quantified by the ratio of stock prices to one or more essential company indicators. The price to income ratio is a commonly acknowledged metric of value. Momentum investing is an approach that entails purchasing stocks whose prices are increasing faster than the broader market. Momentum investors think that better-performing companies are likely to continue doing well since the variables that contributed to the higher returns do not vanish overnight (Galariotis and Karagiannis, 2021). Additionally, other investors seeking to profit from stocks’ superiority typically purchase shares, driving up their prices and expanding their holdings.
Financial instruments on the portfolio
Equities Investment
Intel Corporation’s stock
Intel Corporation is the world’s leading producer of massive semiconductors. Since Intel’s founding in 1968, the globe has evolved drastically. The business pioneered the microprocessor, sometimes known as a “chip computer,” paved the way for developing the first portable computers and personal computers (PCs). By the early 2000s, Intel microprocessors were present in over 80% of all computers on the planet. Intel produces computer components and peripherals, such as CPUs, chipsets, server products, memory and storage, Ethernet goods, and wireless equipment (Karayianni, 2019). Its solutions are optimized for existing and emerging computing technologies, including edge computing, cloud computing, 5G networks, artificial intelligence, and self-driving vehicles. Intel now employs roughly 110,600 people globally.
Intel’s stocks are currently undervalued making it suitable for investing in to reap profits in future. Intel intends to reclaim the market share lost to AMD with the launch of Alder Lake and future GPU offerings. Regarding Alder Lake, Intel has finally transitioned from a 14 nm process to a 10 nm process. Intel Mobileye drew scant attention, which is responsible for developing self-driving cars and sophisticated driver support technologies. INTC shares are in peril as speculators profit from EV shares. The chip titan might minimize its dependency on the PC industry and focus investors’ attention on Mobileye; in that case, his snails may become as large as Ambarella (Lécuyer, 2019). Enhances your processors with a performance core (P-Core) and an efficiency core (E-Core). Gamers desire a higher P-core count and speeds of up to 5.2 GHz. Intel has the edge over AMD in that these characteristics help keep Intel CPUs’ latency low. Intel developed the E-Kernel using its renowned Atom architecture, which consumes minimal power. As a result, E-Core significantly boosts the performance of multi-threaded and gaming CPUs.
HP Inc. stock
The Hewlett-Packard Company is a manufacturer of personal computers and other access devices, printers and image processing equipment, and related solutions, technologies, and services. It is active in the following business sectors: Corporate Investments in Printing, Personal Systems, and Corporate Investments in Printing. The Personal Systems segment sells consumer and business computers, accessories, support, and services in the consumer and business markets, including desktop and notebook computers, thin clients, workstations, commercial tablets, retail systems, mobile devices, monitors, and other related software (Kühl and Reefke, 2019). The print section manufactures hardware for consumer and business printers and solutions, materials, and scanning equipment. The corporate investment section includes HP Labs and company incubation initiatives. Customers of HP include individuals, corporations, and governments. The corporation is a holder of 27,000 patents and works in 170 countries.
HP’s commercial PC and printer sales are strong, compensating for a challenging post-pandemic comparison in the consumer market. HP Personal Systems, which offers laptops, desktops, and workstations, accounted for 71% of quarterly sales. The section has expanded significantly during the epidemic, as more individuals upgrade their computers for work and distance learning. However, bearish predicts that growth in this area will slow this year as pandemic-related winds subside, the computer industry suffers from a chip shortage, and supply chain problems occur (Carr and Kelan, 2021). While the consumer-oriented company has slowed in recent quarters, bears tend to underestimate the business’s durability, which has rebounded as more businesses reopen and modernize outdated systems.
Its operating margin has grown year over year, and it expects to continue improving earnings per share through significant acquisitions. Another compelling case against HP is that declining margins in this section of the printing industry have resulted in declining earnings. On the other hand, HP’s overall profit margin improved by 120 basis points year over year, driven by considerable gains in both the PC and printing sectors. HP justified its margin expansion by better integrating lower-cost products with higher earnings, substantially compensating its increased cost of goods and additional expenditures. The stock remains inexpensive, and it pays a sizable dividend (Carr and Kelan, 2021). HP stock continues to trade at a price-earnings ratio of only eight. Additionally, it requires an attractive prospective dividend yield of 3.1%, backed by a low payout ratio of about 24 percent. Due to its low price and strong dividend yield may make an excellent defensive investment in stormy markets.
Alibaba’s stock
Alibaba is one of the largest mobile and online commerce corporation in gross merchandise value which as approximately $1 trillion as per 2020 fiscal year. It operates many Chinese online marketplaces, including and business-to-business (Tmall), and consumer-to-consumer (Taobao). Alibaba’s retail segment in China generated 69% of sales in December 2020, with income from advertising and other merchant data services accounting for C2C revenue and commissions accounting for B2C revenue. Other income streams include international retail (5%), Chinese wholesale (2%), cloud computing (7%), entertainment platforms and digital media (4%), wholesale market (2%), innovation initiatives (2%), and Cainiao Logistics services (2%) (5 percent ). Alibaba’s (tag: BABA) share price was down 46 percent in 2021, a dismal outcome despite the company’s continued presence in the market (Hao, 2021). To compound issues, the rest of the market is performing rather nicely. As a result, this demonstrates that the company’s stock is undervalued in light of its market domination in the online retail space.
It is no secret that Alibaba is always on the move. The Chinese government has deliberately tried to contain Mao Zedong’s authority as the creator of several significant Chinese technological enterprises, most notably Alibaba. Additionally, there are suggestions that China may close legal loopholes following Alibaba’s first public offering in the United States (Fang et al., 2021). Meanwhile, the US is forcing Chinese firms to adhere to US accounting norms to avoid future write-offs. Alibaba is a tough place to work. Sales increased 38.4 percent in the third quarter of 2021, exceeding the 32.1 percent and 35.6 percent growth rates in the same time of 2020 and 2019.
Tesla stock
Tesla’s mission statement states that the company’s goal is to speed the world’s transition to sustainable energy. The business entered the automobile sector as a niche differentiator, delivering market-disrupting premium electric vehicles. Elon Musk and the firm have since transitioned from a differentiated to a widely differentiated business model with the development of lithium battery products and the purchase of SolarCity. Tesla committed to automation and research in early 2015, but the investments became assets in 2018-2019 due to the company’s long-term sustainable competitive edge in product quality (Jenčová et al., 2019). Tesla’s marketing department is unusual in that it enables personalized online ordering. Marketing is organic, as Twitter’s Elona Mask is responsible for most earned media without the need for paid advertising.
Tesla has recently constructed a tent at its Fremont headquarters to make 5,000 models three times a week. Additionally, they produce important components for each vehicle, including the battery, charger and electric motor. Tesla currently has a slight competitive edge over numerous firms due to a strong relationship with Ganfeng’s lithium suppliers. The world is moving toward electric vehicles, and Tesla is a market leader in manufacturing high-quality electric vehicles. That does not appear to be much. However, the unit grew by 160 percent year over year. It is more than six times as quick as the whole automobile industry. Electric cars accounted for fewer than 1% of new vehicle sales globally in 2016. It increased to 4.6 percent last year. Adoption is speeding up. According to energy research firm Wood Mackenzie, this figure has increased to 7%. Many anticipate that electric vehicles will account for 25% of sales by 2035 (Perkins and Murmann, 2018). Tesla now holds a 15% market share. The surge in electric car ownership may not be immediately apparent to US investors, as adoption is vital in Europe and China. Since April, traditional automakers will ultimately phase out electric vehicles while Tesla has dominated the country’s electric car registrations with 79 percent.
Bond investment
The portfolio will also contain five-year government bonds purchased in the United Kingdom. Government bonds are debt securities issued by the federal and state governments to fund their operations and maintain monetary stability. Governments frequently use these bonds to finance infrastructure development and government spending. As a result, the government issues bonds to entice investment (Zaremba et al., 2019). The government shall return the principal and interest on the bond on the due date specified in the bond’s conditions. Investing in government bonds aims to provide a fixed income strategy that diversifies the portfolio and minimizes risk.
Investors in government bonds receive a guaranteed rate of return and financial stability. Historically, they have been a risk-free security paradigm. As a result, government bonds are an ideal investment for risk-averse individuals. Government bond yields, like bank deposits, are typically favorable. Additionally, the guarantee covers both principal and interest. In comparison to bank deposits, these bonds have a longer duration. Individuals can purchase and sell government bonds similarly to stock market products. These bonds have the same liquidity as those issued by banks and financial institutions (Alexandre et al., 2020). Government bonds provide investors with a diverse portfolio. This lowers the portfolio’s total risk, as government bonds are risk-free assets. According to the UK Government Bond Guidelines, interest on government bonds should be paid to bondholders every six months. As such, it enables bondholders to generate a monthly income stream through the investment of their passive assets.
Hedging strategy
Forward contract
The rationale behind hedging the investment in a forward contract is because the strategy is a form of a contract in which two parties agree to acquire or sell an asset at a specific price in the future. Futures contracts are suitable for hedging because their atypical character makes them particularly well-suited for hedging. The forward contract will be tailored to the stocks and delivery date. Futures contracts can be paid in cash or physical delivery. Since forward contracts are not traded on central stock exchanges, they are classified as over-the-counter products (Ostaszewski and Davies, 2019). The risk in this case will be avoided because future contract will entail the sale of a commodity at a specific price in the future.
The hedging method s also safe because many of the world’s greatest firms utilize futures to hedge currency and interest rate risk making the market is enormous. However, because the specifics of futures contracts are confidential and not available to the public, it is impossible to assess the market’s size. Because the futures market is so vast and unregulated, it may go bankrupt in the worst-case situation, although the probability of such a thing happening is less. While banks and financial businesses use extreme caution in selecting counterparties to mitigate this risk, the danger of illiquidity is substantial.
References
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Carr, M. and Kelan, E.K., 2021. HP LASER TONER-HP 5SI/8000-# C3909A-HP: Office Products. Human Relations.
Carr, M. and Kelan, E.K., 2021. HP MSM720 Wireless LAN Controller: Electronics. Human Relations.
Fang, W., Tao, B., Zhang, J. and Zhao, L., 2021, December. Analysis of Financial Risks in the Process of Enterprise M&A-Taking Alibaba M&A Process as an Example. In 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021) (pp. 1450-1454). Atlantis Press.
Galariotis, E. and Karagiannis, K., 2021. Cultural dimensions, economic policy uncertainty, and momentum investing: international evidence. The European Journal of Finance, 27(10), pp.976-993.
Hao, Z., 2021. Features of HR management at various stages of the company’s life cycle (by the example of Alibaba Company): annotation to master’s thesis.
Israel, R., Laursen, K. and Richardson, S., 2020. Is (systematic) value investing dead?. The Journal of Portfolio Management, 47(2), pp.38-62.
Jenčová, S., Vasanicova, P. and Litavcová, E., 2019. Financial indicators of the company from electrical engineering industry: the case study of Tesla, inc. Serbian Journal of Management, 14(2), pp.361-371.
Karayianni, F., 2019. Reorganization on employee satisfaction: The gray area of corporations: A case study on Intel Corporation’s employees.
Kühl, C. and Reefke, H., 2019. Implementing circular economy at HP. In Operations Management for Business Excellence (pp. 422-425). Routledge.
Lécuyer, C., 2019. Confronting the Japanese Challenge: The Revival of Manufacturing at Intel. Business History Review, 93(2), pp.349-373.
Ostaszewski, A. and Davies, R.O., 2019. Optimal forward contract design for inventory: a value-of-waiting analysis.
Perkins, G. and Murmann, J.P., 2018. What does the success of Tesla mean for the future dynamics in the global automobile sector?. Management and Organization Review, 14(3), pp.471-480.
Zaremba, A., Kambouris, G.D. and Karathanasopoulos, A., 2019. Two centuries of global financial market integration: Equities, government bonds, treasury bills, and currencies. Economics Letters, 182, pp.26-29.
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