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STOCK SPLIT ANNOUNCEMENTS: A TEST OF MARKET EFFICIENCY

Extracts from this essay...

Introduction

Stock Analysis - Consumer Discretionary Sector SONY CORPORATION INTRODUCTION Sony Corporation aims to create new value based on the linked concepts of "inspiration" and "shared experience" and to thus strengthen products and applications. However, after analyzing the relevant market of Consumer Discretionary, Sony financials, Sony's future risk, Sony's future growth and their competition, buying stock at this time during an economic recession could be very risky. This paper is intended to help guide individuals through their crucial decision making process of purchasing and selling stock. RELEVANT MARKET The Consumer Discretionary Sector of the market, which Sony Corporation is a part of its consumer goods sector, includes those industries that tend to be the most sensitive to economic cycles. The manufacturing segment includes automotive, household durable goods, textiles & apparel and leisure equipment. The services segment includes hotels, restaurants and other leisure facilities, media production and services, and consumer retailing and services. Currently the Consumer Discretionary sector makes up 9.98 percent of the total market. Illustrated below is a visual of the year S&P 500 index vs. the Consumer Discretionary sector: (Fidelity Investments) As shown, the Consumer Discretionary sector is positively correlated with the S&P 500. Year to date through November 20, the sector index, which represented 9.98 percent of the S&P 500 Index, was up 33.2 percent compared with a 20.8 percent rise for the S&P 500. The economy however is in a recession and even though the sector is positively correlated with the S&P 500 now the longer the recession last this sector will begin to show negative effect.

Middle

4. Their ability and timing to recoup large-scale investments required for technology development. 5. Their ability to implement successfully its networking strategy for its Electronics, Game and Pictures segments 6. Their ability to secure adequate funding to fiancé restructuring activities and capital investments given the current state of the global markets 7. The outcome of pending legal and regulatory proceedings 8. The impact of unfavorable conditions in the Japanese equity markets on the revenue and operating income of the Financial Services segment. FUTURE GROWTH Sony Corporation has announced a series of measures designed to improve its profitability and drive future growth in response to the deterioration of the global economy. There are three areas which Sony would like to focus on. First, structurally reform Sony's core electronics operations to better compete with its best in class peers in terms of speed to market and profitability. Second, continue margin improvement activities to lessen the impact of the weak economic profile of key markets. And third, accelerate the integration between products and network services by leveraging the combined strengths of Sony's electronics and computer entertainment operations. With the changes above in mind Sony Corporations expectation for future growth is broken down by the four segments of Sony: Electronics, Game, Pictures and Financial Services. To begin, the Electronic segment does not have sight for future growth. It's expected that a decrease in sales is expected mainly due to the continuing weakness in the business environment and the impact of the appreciation of the yen against the U.S.

Conclusion

Also the 52-week high and low has a difference of $15.18. This wide different in price illustrates that Sony Corporation is not stable. Sony Corporation has had a constant decrease in stock price due to the recession and competition therefore; the Lancer Student Investment fund should take a hit and sell their 150 stocks at the current price. Selling these shares will open up the opportunity to purchase shares in different sectors of the market. Ideally recession proof sectors such as: Health Care, Utilities and Consumer Staples. CONCLUSION Sony Corporation's transformation will not be a one-time restructuring, but rather an ongoing process of driving growth, efficiency and innovation across their businesses. With improved operating performance and cash flow, a lighter asset base and a stronger software and network infrastructure, we will be in a solid position to strengthen our core businesses while offering new alluring products that will beckon to our customers. However, the forecast of future growth for Sony Corporation is based on management's current expectations and is subject to uncertainties and changes. The Consumer Discretionary sector is highly sensitive and should benefit from a gradual economic recovery although the lingering uncertainty regarding the slope of the recovery leaves the success of the Consumer Discretionary sector unknown. Therefore, as the recession continues and more jobs are lost the amount of money individuals choose to spend on unnecessary goods will decrease. The money that individuals do have will be spent on the necessities of everyday life which will hurt the Consumer Discretionary sector. So, depending on how risky an investor one is, selling Sony Corporation at this time could increase the portfolios return in the future.

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