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Security Analysis and Portfolio Management

One of the major roles of a finance manager of a company is investment analysis and portfolio management.  This is considered a primary and a key role in an organization because the choice of investment opportunities and their management determines a lot the shareholder wealth hence success of a company (Bohm, 2009).  Investment analysis and portfolio management entails choosing from alternatives the best securities or projects to invest in order to maximize shareholder wealth.

A finance manager has to choose good securities based on risk and return characteristics of the securities.  The role of investment analysis and portfolio management extends to making decisions on the stocks to hold on, when to sell and the stocks to be sold.  A finance manager may also decide to combine several securities in order to reduce the risks of the investment.  In deciding which securities to combine, the finance manager has to carry out correlation analysis of the various stocks in order to know which securities to invest in (Reilly, Leahigh & Brown, 1996).

Investment analysis and portfolio management process is done in steps which are gathering of information, analysis of the information, making a choice, investing in the securities chosen and then managing the investment.  In this project, we will analyze the stocks of three companies listed in the Saudi Stock Exchange and make recommendations on the best stocks to invest in and also recommend on the target price for reselling.  In making these recommendations and decisions, we will use critical ratios for the companies, the companies SWOT analysis and technical forecasts (Rangantham, 2006).

Methodology

In this paper, the three companies which are the Savola Group, SADAFCO and Almarai will be analyzed and their individual strengths, Weaknesses, Opportunities and Threats (SWOT) determined.  They will be presented in form of table summaries and small bits of explanations.  Autocorrelation of the stocks of the three companies will also be discussed and a discussion on the best stock to invest will follow.

Analysis of the companies

  1. SAVOLA Group

His company is listed in the Saudi Stock Exchange and is a well diversified conglomerate well structures investments.  The company is one of the biggest in Middle East and Central Africa with a capital base of SR 5 Billion.  It is has grown very fast from the initial capital of SR 40 Million to the current capital base and has increased its portfolio.  The wide portfolio of the company includes oils, sugar, pasta, retail, real estate and franchising.  The company currently claims 62% edible oils market and 68% of Sugar markets in the area of operation (The Savola Group website).

The group has quite a number of retail outlets which help in supplies and contact with customers.  The group has four main sectors which are the foods sector, retail sector, real estate sector and the plastics sector.  In addition to the four sectors, there is also a franchising sector for international fashion brands.  The company was ranked number 12 in the top 100 companies in Saudi Arabia.

Savola Group also has interest in other companies in other sectors and other regions.  The company has invested in Almarai Dairy Company (30%), Herfy Foods Company (47%), and Jordanian Tameer Company (5%) among others.  The company is well vested in the area of corporate social responsibility, with a substantial amount of investments in social projects (The Savola Group website).

The group considers one of its strengths to be the company’s clear vision which is to give customers value for their money and to offer a good working environment for workers.  The other strength is the company’s marketing strategy which is creating a superior package for the customers and a good understanding of the changes in the market demands.  Savola group thus seeks to constantly carry out research and development in order to come up with products that give customers offer advantage.

Another strength to Savola group according o the company is its corporate ethics and values.  Savola Group remains committed to satisfying the expectations of all the various stakeholders who include the government, the customers, society, employees and shareholders among others.  Savola group also strains to ensure that there is less conflict between the various groups of stakeholders.  The corporate governance of the company is also exemplary.

Savola Group also banks on synergy of its investments for success.  It has chosen the food industry to be the basic investment and used its competitive advantage to outdo the competitors.  Savola Group is very careful in its choice of investments and seeks to ensure that the investment is well diversified.  Lastly, but not least, Savola Group believes in Allah and the group is always sincere which according to them, is one of their major strengths.

The opportunities to the Savola Group are the increasing globalization awareness, e-commerce and growth of consumer good market in the region.  Through globalization, the company will be able to operate in different countries without major business restrictions hence will be able to increase its profits.


Source by Risper

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