FINC 734-M01 |
Fundamental Analysis Project |
Kai Ye |
In this project, a fundamental analysis of BAC (Bank of America Corporation) will be given. The end goal of this project to produce a value that an investor can compare with the security’s current price, with the aim of finding out what kind of position to take with that security (undervalued = buy, overvalued = sell or properly valued=hold). There are three major fundamentals such as macroeconomic factors industry factors and company characteristics will be considered. In addition, factors such as politics, interest rate, inflation, market and investors’ psychology should also be analyzed. ...view middle of the document...
International commodity prices remained high and volatile, but the surge was unlikely. The main developed countries continued to tighten fiscal policies, monetary policies were expected to be loosed.
The U.S. economy had more signs of improvement, the real estate market continued to rebound, and employment situation continued to be improved; the Fed has implemented the loose monetary policy, which was conducive to economic recovery. But it was still difficult for the Euro zone to get out of the recession, though the European debt crisis tends to ease, financial market confidence had increased, but the unemployment rate rose. For some countries that had more debts, their financial institutions’ balances were deteriorating, to reduce the budget deficit and implement structural reforms will continue to drag on economic recovery in those countries. Japan's economic recovery, with factors of expanding of public spending; taking quantitative easing monetary policy; and keep undervaluing Japanese Yen by government’s actions, was expected to maintain growth at low rate .Emerging economies was continue to be restricted by external demand downturn and endogenous power fades, but the main countries intensified structural adjustment and actively expanded domestic demand, their situation of slowdown was likely to be reversed. Since the beginning of the year, the global financial market recovered markedly. The Dow Jones Industrial Average hit a record high. The 10-year U.S. Treasury yield rose slightly.
If we focus on the U.S. domestic economy, private consumption is still on the rise. The Personal Consumption Expenditure Index (PCE), up 2% from a year earlier. On February, retail sales rose 1.1% month-on-month and 4.6% year-on-year. Secondly, employment situation was further improved. In September, the unemployment rate fell to 7.7%, down 0.2% compared with January: non-farm payroll, an increase of 236000 is significantly higher than average of 181000 people in 2012.Thirdly, the real estate market’s further recovery. Sales of new homes in January was 437000 which was highest level since July 2008, stock of new homes fell to its lowest level since 2008.At the same time, the number of new Residence Permits and Housing Starts, in first 2 quarters 2013, had a month-on-month growth of 4.6% and 4.6% respectively. Fourth, the manufacturing boom index rebounded. Confidence keeps growing, the manufacturing PMI(Purchasing Managers’ Index) hit 53.5% in April, recording a five-month consecutive growth, the highest level since July 2011.In addition, quantitative easing monetary policy will continue to boost economic growth. On March 20, the FOMC (Federal Open Market Committee) decided the quantitative easing monetary policy on maintain 0 ~ 0.25% ultra-low interest rates unchanged.
All the good news above are set to herald a recovery of U.S. Stocks had been rising in recent months because of some mostly upbeat earnings and mounting expectations that the Fed would...