The global financial crisis had what analysts would call a dramatic effect, on the world's most developed, and also the developing economies. Indeed, to understand the effect that this crisis had on the economy, it is important to analyze the trends, both in terms of share market price and also in terms of shareholders wealth, of some major blue chip companies. This study seeks to look at the major blue chips and analyze them to see whether a shareholder should continue to hold on to them, while providing alternatives of the best companies to invest in.
Analysis and Recommendation
It is important to first of all understand what the term 'blue chip' means. These are stocks that belong to a company that is well recognized, and which sell products which are favored and widely accepted by the citizens of that particular country. However, the most important factor that attracts investors to these blue chips is that, they are able to weather down turns, as a result of economic and or political hardship. The general reason why an investor should hold on to a blue chip is because; these companies are already well established, while at the same time they bring in a stable income, without the risk of major liabilities. The chart shows some eight blue chips in the NYSE, which shall be used for the purpose of this study.
It is important to note that all indicators show that the prices of stocks are falling. While well before the 2008 they were stable. Most companies have blamed this downward trend, on the price of oil, which has continued to grow, greatly over the recent years.
Analysis of the Coca Cola Company
It is a fact that the revenue culminating from the sale coke, both in the United States and internationally have been growing rapidly over the years. This includes the price of the concentrates as well as the company's bottled beverages. While its largely expected that the revenue will continue to increase to about $1.40 by the closing end of the Trefis forecast period, Trefis generally estimates a higher revenue of $2 which is a representation a 6% ko shares.
Analysis of the Caterpillar Company
The Caterpillar Company is located in Peoria in the state of Illinois. This company was established in 1925, with its major area, being the manufacture of machinery and exploration gear. Like most blue chips, it has three lines through which its operations are carried through. First, there is the machinery line, which provides construction as well as exploration equipments among other things. Secondly, there is the engine line, which basically deals with diesel engines. The third line is the financial line, which is put in place in order to give both retail and wholesale funding for the caterpillar products.
It is therefore right to say that caterpillar has diversified its line of business and have therefore reduced their risk factor by a considerable margin. Having said this, it is important to observe their stock performance at the NYSE. Going by the recently published data from the NYSE, this company has an employee population of 105,394 scattered all around the world and a market capitalization of 6531 billion dollars. On average, its quarterly revenue grows by about 57.2 %. This will result to about 47.30 billion dollars in the total generated revenues.
The net income for this company was also put at about 3.69 billion dollars which in essence resulted in an earning per share of 5.63 dollars. The current earning ratio stands at 18.00 dollars. The volatility of these shares can best be understood by taking a looking at the share price of General electric.
Analysis of General Electric
The shares of this company reached a peak of $53, but were quick to fall below $17 between the years 2008 and 2009. However, most of the shareholders decided to hold on to their shares despite their wealth being eroded by a very big margin. Indeed, any investor seeking to purchase blue chip shares should not only look at the short term factors or benefits that a company has to offer, but also the long term benefits. This is because these shares will weather the economic hardships, as most blue chips are producers of goods and services, which are trusted in their mother countries. As such these company's stocks are sure to rebound. The earnings per share are considerably high in these companies too. Blue chips are therefore suitable for long-term investors. People who are willing to hold the shares for a considerable period of time, ought to invest in such companies.