Investment Portfolio

Stock portfolio

Apple

Apple Inc. trades as AAPL at NASDAQ and provides a range of products including Smartphones, McBooks, personal computers and Smartwatch and various software products. The capital structure for the firm includes both capital and debt capitalization and cash holdings .Investing in Apple Stock now can have a good pay off in the long run. Even though some periods in the Company’s history would have seen investors experience significant losses in share price, general history of the stock has comprised very high gains. Currently the company has set high records and over the past one and half decade , the total annual returns for its shares has been over 35% , including those periods the company has undergone sickening declines (Apple Inc.,  2016).

 A major basis for investing in Apple is looking beyond the icon iPhone product. Although the firm has been generating most of its revenue from sale of iPhone, it has not shown any sign of decline. The product has been in the market for less than 10 years, has created a tidal shift in the industry and there is no indication that it is aging. The firm keeps on launching a new iteration of iPhone and is expected to unveil iPhone 8 an upgrade that is likely to bring about huge results in terms of share price. The recent versions of the product have been improved and many users may be various generations behind and a new demand for the upgraded product can be expected to be huge (Apple Inc.,  2016). The service business of the firm has been growing, and is currently on double-digit growth rates and has been second to iPhones in terms of sales generating over $ 24 billion. Since services segment has various revenue streams including Apple Pay and AppleCare, it is likely to be a major driver for growth as seen in 18 % growth in recent quarter and more customer activity in Apple store (Sparks, 2016).

 Moreover, the firm has been earning huge profits since 2001 and despite a slip in 2016 revenues the free cash flow was a high of $52.3 billion. The balance sheet for the company has been swelling driven by periods of strong generation of profits or cash. The $ 750 billion market capitalization is a very tantalizing valuation if the firm was to maintain the present profitability level. Lower-priced competition has not shaken the fortunes for Apple and it’s logical to believe that the situation will persist in the future.  Therefore, the big profits and strong balance sheet are adequate reasons for investing in Apple’s stock.  There company has also experienced high amount of capital returns, amounting to almost $ 15 billion returns to shareholders in the past quarter which included $3.1 billion in terms of dividend, a repurchase of shares worth $ 5 billion on open market and much more (Apple Inc.,  2016). The firm has been able to exhaust about $ 201 billion out of its large amount of capital return. Given the  amount of cash  returns that has been put in the pockets of shareholders over the recent periods and its marketable securities in the balance sheet , as per the year ending 2016 ,  it  is also logic to expect that capital returns in future will increase to the advantage of investors (Apple Inc.,  2016). Predicting that Apple’s icon product – iPhone will continue experiencing increases sales is not farfetched given the previous and current performance both in domestic market and foreign markets. In fact, in markers like India, the company is experiencing increased growth for both the older iPhone products and the new products (Business Insider, 2016).

Amazon

Amazon.com Inc. trades as AMZN at NASDAQ and is a platform for e-commerce and is among the largest retailers in the world. The capital structure for the company is heavily based on equity financing rather than debt, even though there has been an increment of debt capitalization as the firm matured. The debt/capital ratio decline in 2015 fiscal year but remained within the range of peers in the industry. For the year 2016, the firms Debt/Capital ratio was 26.19 %, as compared to 55.70 % in the previous year. The P.E ratio for the year 2016 was 202.85 (AMAZON.COM, INC., 2016). Amazon has been able to time and again trounce the market over the last decade. Even though the historical analysis for the company does not provide much information about present return – on- investment, the state of affairs indicated by the recent Price Per share - $974.60 and a market capitalization of $457.5 billion shows a lot of potential for the future (AMAZON.COM, INC., 2016)..

 A major reason for investing is that revolution in e-commerce is yet to reach its peak, and its growth is quite high. For instance, e-commerce made up 8.3 percent of overall retail sales in U.S market in the fourth quarter of 2016 and only 8.7 percent of global retail sales for a similar period.  There is a great potential for the Amazon to be consistent in expanding market share in both domestic and international market. The firm’s sales also look significant especially the unique goal of vertically integrating many supply chains for consumer goods around across the world. The firm’s long-term growth is enabled by AWS cloud sales which reached a high of $12.2 billion and this is just a small portion of the expected overall public expenditure on cloud services (AMAZON.COM, INC., 2016).

Investment in Amazon will be based on the expectation that it can sustain a 40 % growth in stock price each year.  For the year 2016, Amazon e-ecommerce growth represented a 33 % of overall e-commerce market which indicates the strong performance in market for this company. The firm also controlled 40 % of overall market for cloud service in the same year, and posted a growth of 55% which enabled it to attain and surpass projections with $ 12 billion in revenue for AWS cloud services (RENO, NV, (2017).  This performance has also been informed by the delivery of quality customer service that beat its rivals in the market. The company depicted a commitment for increased information, which includes patent warehouses and on-time delivery by use of drones.

 Even though the firm has not been issuing dividends to shareholders, it has experienced an annual growth in cash-flow over the past 5 years which presently is 30 percent, and after its stocks were split 3 times, the stock price has been more than $800. The dividend yield on average has been 1.74 % as per the Consumer Discretionary Sector and this yield is expected to increase in the future (Ervin, 2017). In addition, investing in Amazon stock is a good bargain for the purpose of long-term vision, given that its stock has already hit the $ 1000. This removes any worries about short-term performance of the firm and banking on the current momentum in growth especially in market for cloud services which is expected to continue growing over the next years.

Facebook

Facebook, Inc. trades as FB at NASDAQ is a provider for internet information – social network- and has more than 1.5 billion active monthly users. . The firm is also owns other subsidiaries including WhatsApp and Instagram. It has not been pursuing debt financing meaning that its capital structure is wholly based on equity capital.  The value of the firm is about $20 billion and has been growing rapidly over the past few years (FACEBOOK, INC., 2016). After the value of the company’s stock plunged back in 2002 due to uncertainty over management’s capability to steer the company during growth, the shares were to gain over 600 %. A major reason for investing in Facebook is the massive industry in form of digital advertising, whose growth is double digit on yearly basis.  Even though Google has the largest market share, Facebook’s share growth is higher, and in fact, it is projected to grow at 37 percent. Moreover, the average revenue for each user, whose growth has been the focus of the company, given its ability to provide marketers with ad spots that are most targeted that has facilitated the monetization of its users (Balakrishnan, 2017). The size of this platform – averaging at 1.86 billion monthly users is facilitating the incredible growth for the firm as per fiscal year 2016. Before any possible plateau in user growth, the growth is expected to increase making its stock a good by for the investors (FACEBOOK, INC., 2016).

Facebook revenue

    The sales and also the profits have grown substantially driven by the large growth in the users of the platform. With sales reaching $26.8 billion as per 2016 and net income $ 10.2 billion in that period, it is reasonable to bet on its future stock and performance (FACEBOOK, INC., 2016). A 117 % increase in net income in that year can only be tantalizing to investors. Even though the growth is expected to moderate in future, the company’s growth rate is still expected to be above-average in the near future. The earnings per share for the firm can expected to increase by 16-24 % for the 2017-2018 periods. The earnings per share for the company were $ 1.41 which was driven by a 53 % growth in ad revenue and the expectations is that EPS will continue to increase in the near future (Balakrishnan, 2017). Given the past performance, the annual average rate of growth for EPS is also expected to growth and this informs the decision to invest in the stocks of the firm. The growth is enough for supporting an investment decision where share price is expected to continue increasing for the stock of this company. Over the past year the average dividend yield for tech firm was 1.31 %, with a payout ratio of $ 4.89 Earnings per Share (FACEBOOK, INC., 2016).

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