Portfolio
In the business world, a high risk is associated with an equally high potential gain. On the other side of the spectrum, low risk is associated with a little possible return on an investment scenario. This is called the risk-return trade-off. The risk-return tradeoff is linked to investment portfolio for any investor eyeing a specific business idea they think of as viable to them. The risk-return tradeoff is one of the components of an investment portfolio. Most importantly, the risk-return tradeoff is part of the decisions to be made by the investor regarding investments.
The release of new products by Apple Inc., a company headquartered at Cupertino, California, in the United States of America, has turned the tables and provided a light at the end of the tunnel for Apple's financial sector. The company's financial industry has wallowed in stagnated economic conditions for the last half a decade. High investment in technological products has exposed the company to stiff competition and the likelihood of the company indulging in heavy losses owing to market preferences on the competitors' technological products. Apple Inc. is a leading manufacturer of products such as mobile phones and computers, and it is known all over the world for the quality of its goods. Nevertheless, the company's determination to establish a favorable market position is as a result of the high-risk investments, which have evidently brought about high gains regarding the revenues, stocks, and bonds.
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Caterpillar Inc., headquartered in Peoria, Illinois, in the United States of America, resembles apple Inc. in a number of ways. First, being an engineering company, it has faced competition from within and without the United States of America. Nevertheless, the company has been outstanding in its industry. Similarly, Consolidated Edison, located in New York City, New York, in the United States of America has done a remarkable job in edging local and international competition in the energy sector. The other related companies are Northern Trust, a financial services company located in Chicago, Illinois, and Macy’s Inc., a departmental store based in Cincinnati, Ohio. Both companies are in the United States.
According to Sommer (2017), Apple Inc. has released the new iPhone gadgets as it has been doing in the past years. Nevertheless, 2017 has been a year that Apple Inc. has been more productive than the other years. Ostensibly, the company has invested a huge amount of money and taken many risks in the technologically dynamic market and has aspired to make more profits than the other years. Sommer (2017) states that the release of the new iPhone brands in 2017 by Apple Inc. has skyrocketed its market shares up to 37%, ahead of market leaders in the United States of America such as Exxon Mobil. Also, Apple Inc. has shot up its revenues to one trillion United States dollars, ahead of Exxon Mobil.
Caterpillar Inc., in December 2017, recorded a higher growth percentage compared to the industrial average. The company stood at 32.85% while the industry was far below at 22.70%. Also, the company’s return on equity stood at 28.69% compared to the industry’s 8.80%. Therefore, Caterpillar Inc. is doing much greater than most of the companies in its sector (Zacks Investment Research, 2018). Northern Trust has recorded a 12.77% return on equity while the industrial average for the financial services sector is 10.67% (Zacks Investment Research, 2018). Due to the government’s regulations on the energy industry, Consolidated Edison has had the return on equity slightly lower than the industrial average. Furthermore, there is increasing popularity in the wind and solar power generation which may send the company further down in the economic perspective (Zacks Investment Research, 2018). On the other hand, despite of the rapid technological advancements such as the customers shopping online, Macy’s Inc. has recorded a higher return on equity than the industrial; average (Zacks Investment Research, 2018).
The release of the new products by Apple Inc. has led to a sudden increase in the stock returns, according to Sommer (2017), a return that would take some companies almost decades to actualize. Some of the products released by Apple Inc. in 2017 in its huge risk investment are three iPhone brands, various software for their devices, and updates for the televisions (Miller, 2017). Apple Inc. expected a return of 1.8% after investing 20% of the company's wealth into the development of the products. Therefore, it was challenging for the company to come up with the best products that would beat the competitors' and lead to the expected returns (Zacks Investment Research, 2018).
Executive Summary
At first blush, Apple Inc. was set to have high returns in the market in 2017 due to the high risks in the investments the company took and the competitive advantage the company has gained from investing in technology for the past many years. Apple Inc. has had many competitors within and without the United States of America. One of the main competitors to Apple Inc. in the personal computers within the United States of America is Dell, a computer company with its headquarters in Round Rock, Texas. The other competitor in PCs is Hewlett-Packard, located in Palo Alto, California. On the international market, Apple Inc. competes with Samsung Group, headquartered in Samsung town, Seoul in South Korea. Samsung is a competitive smartphone manufacturer with a global presence. The other competitor on the international market is Lenovo PC International, based in Beijing, China and also in Morrisville, North Carolina, in the United States of America (Bhasin, 2017).
The other companies such as Caterpillar Inc., as aforementioned, have also had both internal and external competitors. Being a multinational corporation in the construction and mining industry, Caterpillar Inc. has been faced with increasing levels of competition from companies all over the world. The most significant platform of competition has been technology, and especially in the automation of the machines. Technology has based competition for both Macy’s Inc. and Northern Trust and their competitors. The need for alternative sources of power has been the most significant competition platform for Consolidated Edison and the other companies in the energy sector in the United States of America. In the case of Consolidated Edison, the United States government is responsible for part of the competition in the energy industry.
As Miller (2017) highlights on the various products that Apple Inc. has come up with in 2017, it is clear that the company has invested a fortune towards seeing itself gain a better market position in the united states of America and beyond. Having spent a fifth of the company's total wealth, there was no exact surety that the products would realize the aspired returns for the company. Had the products failed to bring in the aspired profits, the company would have incurred massive losses and have an unstable market position about its local and international competitors. If the company's 2017 products were to have a full sales returns, the market position of the company. The company's decision to invest in the products was a welcome idea as it improved the absolute performance of the investments, and enhanced the investment portfolio for the companies. Unrelated to Apple's technology industry, Exxon Mobil, a leading American company in an investment portfolio, had to recognize a new giant to the same in 2017, Apple Inc.
Duggan (2017) explains that Apple's stock returns in 2017, after investment, has doubled the overall stock returns of the United States of America. Standing at 51% stocks, the company has indicated a remarkable investment performance and has contributed mainly to the company's financial position in the United States of Americas technology market. Duggan (2017) also states that in what looks like an overrated pace of Apple's returns on investment, the investors of the company are set to gain such high profits in the subsequent years when the strategies put in place in 2017 are replicated in 2018. Further innovations, beyond the smartphones and the personal computers, such as the watches and the software developed by Apple Inc. will ensure the profits of the company keep soaring higher, and the stock returns will hit the higher limits for the expectations of its returns on investment.
The stock returns for Caterpillar Inc. are well above the average industrial gains, but are not as outrageous as those of apple Inc. the main reason for this is the increasing competition in the construction and mining industry in both within and without the united states of America. The returns for Northern Trust and Macy’s Inc. are also slightly above average. Both companies are at the cutting edge of technology and have utilized the latest developments to stabilize themselves in the market. Consolidated Edison is currently performing below the industrial average owing to the harsh governmental regulations on the energy sector in the United States of America.
References
Bhasin, H. (2017, December 17). The Top 11 Apple Competitors - Competitor Analysis of Apple . Retrieved March 28, 2018, from https://www.marketing91.com/Apple-competitors/
Duggan, W. (2017, December 19). Apple Stock May Be Overvalued, After All. U.S News . Retrieved from https://money.usnews.com/investing/stock-market-news/articles/2017-12-19/Apple-inc-aapl-stock
Miller, C. (2017, December 27). Year In Review: Everything Apple released across 2017 . Retrieved March 28, 2018, from https://9to5mac.com/2017/12/26/everything-Apple-released-in-2017/
Sommer, J. (2017, September 22). The Best Investment Since 1926? Apple. New York Times . Retrieved from https://www.nytimes.com/2017/09/22/business/Apple-investment.html
Zacks Investment Research. (2018, March 28). AAPL: Apple Inc. - Comparison to Industry - Zacks.com . Retrieved March 28, 2018, from https://www.zacks.com/stock/research/AAPL/industry-comparison
Zacks Investment Research. (2018, March 29). CAT: Caterpillar Inc. - Comparison to Industry - Zacks.com. Retrieved March 30, 2018, from https://www.zacks.com/stock/research/CAT/industry-comparison
Zacks Investment Research. (2018, March 29). Zacks Investment Research: Stock Research, Analysis, & Recommendations. Retrieved March 30, 2018, from https://www.zacks.com/stock/research/NTRS/industry-comparison
Zacks Investment Research. (2018, March 29). Zacks Investment Research: Stock Research, Analysis, & Recommendations. Retrieved March 30, 2018, from https://www.zacks.com/stock/research/ED/industry-comparison
Zacks Investment Research. (2018, March 29). Macy's, Inc. - M - Stock Price Today - Zacks. Retrieved March 30, 2018, from https://www.zacks.com/stock/quote/M?q=m?q=M
