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Portfolio Management
Table of Contents
Major influences on portfolio.
Influence of market and major events.
Idiosyncratic factor influencing on the company.
Major Influences on Portfolio
In the previous segments of this report, the description of the performance portfolio has been described. Additionally, the outline of the strategy used to manage this portfolio and the reason behind the change of strategy has been mentioned. Now, the factors influencing the portfolio need to be revisited and analysed. As per the idea of Fernández et al. (2017), both the influence of the market and the internal factors of the company have its contribution over the upward movement or decline of the share price of the company. In this case also the same factor has critically been identified which has contributed directly in the decline of the stock price of Xero and Kogan. The investment has been done for the companies associated with the IT market of Australia and for global level as well. For the period of investment, it has been noticed that the IT market tagged with Australia has not been doing well and this has imparted direct influence over the sharp decline of the stock prices. Additionally, the influence of pandemic and the decline of economic growth in the worldwide level have imparted influence over the stock price of the companies. Additionally, for the companies like Xero, there are certain internal factors which have its relationship with the decline of the growth of stock price for Australian market.
Influence of Market and Major Events
Major decline in the national economy Australia is one of the major factors which have imparted negative influence over the growth of each and every business organisation. Soedarsa and Arika (2015) have researched and mentioned that with the decline of GDP of the market, the stock price of the companies tagged with the same market also decreases. This invoked an overall decline in the economic and financial growth of a market. This factor has been noticed for the stock price of the companies like Prophecy international, Kogan, Tesserent LTD. The Pandemic of COVID-19 has imparted direct influence over the national economy of Australia. As per the official report, 7% shrinkage in the national economy has been noticed with a 7% decrease in the GDP and this has driven the market towards technical recession (Huang 2020). Hence, from this angle, it can be analysed that this factor has imparted negative impact over the overall growth of the IT sector of Australia. Moreover, this economic depression from pandemic outbreak has happened in the global context and each and every nation around the globe has faced economic depression in different intensity. The company that has been selected for this performance portfolio are majorly acting at the international level and has been facing an economic crisis in every operating market. Hence, this is a common factor for decline in the stock price of every company selected for this portfolio.
On the other hand, the influence of the tech bubble has its direct influence over the IT sector and the stock price of the companies tagged with the same. It has been identified that excessive speculation in the internet related companies are getting into the fear of the tech bubble and this is creating a decline in the share price of the companies. For example, Tesserent LTD is associated with the providence of the service of cyber security. Hence, this is tagged with internet related business and speculation over the company has created the fear of the dot-com bubble of 2020. This is another common cause behind the decline of share price for all the companies tagged with the IT sector (Namouri et al. 2018).
Idiosyncratic Factor Influencing on The Company
In this section, the internal factors or events of the companies which have its influence over the share price of the same in the market is needed to be discussed. As per the idea of Andreou et al. (2016), the crises in the resources like financial resource, human resource or technological resource often invoked decline in the productivity of the company. This has a negative influence over the stock price of the company in the competitive market. Investor management is also another factor which is tagged with the market performance of the company, regarding stock price. As per the idea of Utami et al. (2015), positive attitude of inventors and enhancement of the association of the inventors with the company helps to enhance its share price in the market. This factor is applicable for the downfall of the share price of Xero. After a mediocre performance for a couple of months, the investors have not been willing to wait and this has invoked a major decline in the share price of Xero for the market. Hence, from this angle, it can be analysed that this is an idiosyncratic factor having its influence over the decline of share price for a specific company like Xero. In the performance portfolio, it has been mentioned that the owner of Xero has sold its stock for 100 million dollars. The company has provided a 3.9% discount over each of the shares and the price is 99 dollars (as per portfolio description). Hence, from this angle, it can be mentioned that the lack of management of the stakeholders and investors often invokes a major crisis is the stock price management.
On the other hand, Xero is such a company, which provides cloud service and accounting software (cloud based) for medium and small business ventures. In the context of pandemic, the client companies are running in shortage of financial resources as they are majorly small and medium enterprises hence this has imparted direct impact over the business and stock price of Xero. From this angle, it can be mentioned that that is another exclusive and specific case which has invoked decline in the share price of the company, in the competitive market of Australia. On the other hand, as per the idea of Murniati (2016), the fact of profitability is also attached with the aspect of the share price in the market. Profitability is tagged with the availability of the financial resource and investment has its direct relationship with the same. This is applicable for the context of Tesserent LTD. The company has shown a decline of 34% in the share price for the last three years as the house is not currently running with profitability. The lack of association of the investors has been identified mainly for this reason.
Reference List for The Effect of Internal and External Factors on Stock Return
Andreou, P.C., Antoniou, C., Horton, J. and Louca, C. 2016. Corporate governance and firm‐specific stock price crashes. European Financial Management, 22(5), pp.916-956.
Fernández, A., Schmitt-Grohé, S. and Uribe, M., 2017. World shocks, world prices, and business cycles: An empirical investigation. Journal of International Economics, 108, pp.S2-S14.
Huang, E. 2020, Australia’s record economic growth run has ‘officially come to an end,’ says treasurer. [online]
Murniati, S. 2016. Effect of Capital Structure, Company Size and Profitability on the Stock Price of Food and Beverage Companies Listed on the Indonesia Stock Exchange. Information Management and Business Review, 8(1), pp.23-29.
Namouri, H., Jawadi, F., Ftiti, Z. and Hachicha, N., 2018. Threshold effect in the relationship between investor sentiment and stock market returns: a PSTR specification. Applied Economics, 50(5), pp.559-573.
Soedarsa, H.G. and Arika, P.R. 2015, July. The influence of inflation, gdp growth, size, leverage, and profitability towards stock price on property and real estate companies listed in Indonesia stock exchange period 2005-2013. In International Multidiciplinary Conference on Social Sciences (IMCoSS) (Vol. 1, p. 50).
Utami, W.R., Hartoyo, S. and Maulana, T.N.A. 2015. The effect of internal and external factors on stock Return: empirical evidence from the Indonesian construction subsector. Asian Journal of Business and Management, 3(5), pp. 221-239.
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