S. investments were all up at least 5% with a range of 4-16% profitability. The four U.S. investments that declined averaged 10% with the largest being General Motors with a decline of approximately 23%.
General Motors was affected by industry risk, when the entire automotive industry was perceived as losing sales due to the mortgage crises being felt in the U.S. And elsewhere. Since an vehicle is a big-ticket purchase many experts believe that General Motors, along with other car makers, will suffer as individuals cut back on their purchases in order to afford the rising home expenses.
POTFOLIO PERFORMANCE
The best performer for the portfolio was Amarin which made a nice profit after only 30 days, while sharing honors for the worst performing investments in the portfolio were the two Chinese firms Sinopec and COSCO, with the third Chinese firm in hot pursuit of that dubious honor.
RECOMMENDATIONS
Recommendations for this portfolio are that the investment period be extended (if possible) in order to allow for time to heal all wounds. The Chinese stocks that were adversely affected can recover since their financials are still the same when the stocks were purchased. In fact, it could be a good time to dollar cost average on those three investments by purchasing additional shares at this lower cost.
The same scenario...
There is further downside risk to General Motors, because in this case the perception could be reality. Homeowners who are faced with losing their homes, are probably not going to go out and purchase a brand new vehicle. A close watch on GM shares should be maintained due to these circumstances and if further erosion is seen, the shares should be sold.
The remaining U.S. investments should continue a general uptrend and perhaps stop losses and sell orders should be initiated at higher values to take advantage of the gains as they happen. The two Irish banks provide high rates of return and are relatively stable and should be maintained in the portfolio. While "evidence about the likely effects of foreign investment capital on regional economies remains scant and inconclusive" (Mullen, Williams, 2005, p. 266) the fact is that both of these banks provide investment capital and are stable institutions that show strong growth potential.
Bibliography
Fernald, J.; Rogers, J.H.; (2002) Puzzles in the Chinese stock market, the Review of Economics and Statistics, Vol. 84, No. 3, pp. 416-432
Mullen, J.K.; Williams, M.; (2005) Foreign direct investment and regional economic performance, Kyklos, Vol. 58, No. 2, pp. 265-282
