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FTSE 100 Index

FTSE 100 Index

 

There are 10 major sectors of FTSE 100 Index; Basic materials, Consumer Goods, Consumer Services, Financial, Health Care, Industrial, Oil & Gas, Technology, Telecommunication and Utility. Total market value of Index is £1,468,250.72 millions. I have selected five of the major industrial sectors. Total market value of five sectors is an £ 818,294.03 millions which is 55.73% of the whole index value.

 

 

 

Sector market capital

 

 

Major Sector Names

Sector Market Cap

(£ million)

Sector Market Cap Percentage

1

Basic materials

177771.6

12.11%

2

Consumer Goods

169968.13

11.58%

3

Consumer Services

116169.53

7.91%

4

Financial

339948.92

23.15%

5

Health Care

147272.89

10.03%

6

Industrial

42288.54

2.88%

7

Oil & Gas

307748.5

20.96%

8

Technology

12138.54

0.83%

9

Telecommunication

85443.96

5.82%

10

Utility

37523.66

2.56%

 

Total

1436274.27

100%

 

Selected sectors

720293.58

49.37%

              

The names of selected sectors are given bold text in the above table naming Consumer Services Sector, Financial Sector, Industrial Sector, Oil & Gas and Technology Sector are having 7.91%, 23.15%, 2.88%, 20.96% and 0.83% respectively percentages of total market value of Index.  

 

We have selected one company form each sector considering the broker recommendation. We have not selected any company which was stated overweight by the broker or having negative P/E ratio.

 

Companies Selected

 

Major Sector

Company

Consumer Services

Pearson

Financial

Standard Chartered

Industrial

BAE Systems

Oil & Gas

Antofagasta

Technology

Inmarsat

 

 

 

We invested equal to the beginning price of each in each company in 13 Oct. 2009 and kept is holding until Dec. 7, 2009.  Investment details are presented in the following table:

 

Investments details

 

Company

Investment £

Ending Value £

Return

Return in %

Pearson

791.5

854

62.5

7.90%

Standard Chartered

1,574.00

1,492.50

-81.5

-5.18%

BAE Systems

317.7

341.1

23.4

7.37%

Antofagasta

814

920.5

106.5

13.08%

Inmarsat

533.5

663

129.5

24.27%

Total

4030.7

4271.1

240.4

5.96%

FTSE

5,154.10

5,310.66

156.56

3.04%

 

 

 

We have invested in Pearson, Standard Chartered, BAE Systems, Antofagasta and Inmarsat £791.5, £1,574.00, £317.7, £814, £533.5, £4030.7and £5,154.10respectively, with the total investment of 4030.7 in the portfolio.

 

 

 

Percentage Return Comparison

Name

We can see the percentage of returns in each company in the above graph. The only investment which suffered from loss is 5.18% in financial sector in Standard chartered bank. The highest percentage of return by an individual investment is Inmarsat which is 24. 27%. The portfolio return is 5.96% which is higher than FTSE of 3.04%. The portfolio has outperformed the FTSE 100 Index.

 

CURRENT ACTIVITIES OF COMPANIES SELECTED

 

This part of the report reflects the companies

 

Antofagasta plc

 

Antofagasta plc is a copper mining group related to basis material sector based in Chile, with other interests in transport and water distribution. It is in a high volume growth phase with accelerating revenues. Carbon Energy Limited just has made a first international contract with Antofagasta. Antofagasta plc has also started a coal mining project in North West America. It has the stake of 30% in the coal exploration project. World copper price which had a shot up a 125% in year 2007 had a severe down turn in the last year.

 

 

BEA Systems:

 

BEA Systems manufactures and delivers a wide range of systems & services for land, air and naval forces. It is also specialized in advanced electronics and information technology. In the recent times, BEA SYSTEMS has been able to win an order of manufacturing 129 armored vehicles which is a deal of £220m deal. This is historically the biggest order given by French Armed Forces to any British company in last many years. BEA system is also working for a $3bn defense contract for production of FMTV Vehicles for US Department of Army.

 

 

Standard Chartered:

 

Is company form financial sector provides banking and financial services and has more than 1600 branches worldwide. Standard Chartered PLC has recently involved more in investing in emerging markets. In year December 2008, it has completed an additional stake of 25.9% in its subsidiaries in Pakistan, Malaysia, Taiwan and Hong Kong. In July 2009, Standard Chartered plc has announced the acquisition of its outstanding 75% interest in the First Africa Group Holdings Limited.    

 

 

Pearson plc

 

The company is related to the consumer services sector, is involved in the business of international media, education, business information and consumer publishing. In October 2009, company has announced the acquisition of A+RISE. Financial Times- Pearson one of the largest of three part of Pearson plc has just launched ‘Active English Program,’ which involves a series of paid-for conversational courses in English language worth 8 million pounds. Pearson generates approximately 60% of its revenues form North America and it operates more than 60 countries around the globe.

 

 

Inmarsat Plc

 

Inmarsat Plc provides global mobile, portable broadband communication services & solutions via satellite. It also operates in maritime, aeronautical and land mobile. In April 2009, Inmarsat Plc completed acquisition of Stratos Global Corporation. In November 2009, it acquired Segovia, Inc. which provides secure Internet protocol managed solutions and services in United States to military and government agencies. These days inmarsat is busy in making the satellite internet more secure, organized and effective with the help of other satellites companies.  Inmarsat Plc’s major clients are Asia- Pacific's, Cosco and China Shipping. These are the leading shipping companies in the world.

 

 

Sector Avg. P/E

 

In this section, we calculated the average P/E of each sector, we had selected above. The calculation is done by averaging the P/E ratio of all the companies in the FTSE 100 Index’s individual sector asunder:

 

`Company

Major Sector

P/E

Sector Avg. P/e

Antofagasta

Basic materials

8.6

 

Anglo American

Basic materials

9.9

 

BHP Billiton

Basic materials

16.3

 

Bunzl

Basic materials

12.6

 

Eurasian Natural Resources

Basic materials

7.1

 

Fresnillo

Basic materials

68.1

 

Johnson Matthey

Basic materials

16.8

 

Kazakhmys

Basic materials

9.1

 

Lonmin

Basic materials

n/a

 

Randgold Resources

Basic materials

153

 

Rexam

Basic materials

9.2

 

Rio Tinto

Basic materials

5.1

 

Vedanta Resources

Basic materials

33.9

 

Xstrata

Basic materials

3.5

28.71667

Pearson

Consumer Services

18.3

 

Reed Elsevier

Consumer Services

11.4

 

Sainsbury (J)

Consumer Services

14.5

 

Tesco

Consumer Services

14.7

 

Thomas Cook Group

Consumer Services

8.8

 

TUI Travel

Consumer Services

10.4

 

Whitbread

Consumer Services

14.9

 

WPP Group

Consumer Services

10.6

14.26111

 3i Group

Financial

n/a

 

Admiral Group

Financial

21

 

Alliance Trust

Financial

36.1

 

Aviva

Financial

6.2

 

Barclays

Financial

4.7

 

British Land Co

Financial

10.9

 

Capita Group

Financial

22.3

 

Experian Group

Financial

15.8

 

G4S

Financial

15.9

 

Hammerson

Financial

10.5

 

HSBC Holdings

Financial

28.1

 

ICAP

Financial

12.4

 

Land Securities Group

Financial

10.3

 

Legal & General Group

Financial

n/a

 

Liberty International

Financial

16.8

 

Lloyds Banking Group

Financial

6.9

 

London Stock Exchange Group

Financial

9.6

 

Man Group

Financial

8.5

 

Old Mutual

Financial

8.9

 

Prudential

Financial

14.8

 

Resolution

Financial

n/a

 

Royal Bank of Scotland Group

Financial

n/a

 

RSA Insurance Group

Financial

6.9

 

Schroders

Financial

17.4

 

Schroders NV

Financial

14.1

 

SEGRO

Financial

65.7

 

Serco Group

Financial

23.8

 

Standard Chartered

Financial

14.4

 

Standard Life

Financial

45.9

17.916

Aggreko

Industrial

19.9

 

Amec

Industrial

17.8

 

BAE Systems

Industrial

9.4

 

British Airways

Industrial

n/a

 

Cobham

Industrial

15.9

 

Petrofac Ltd

Industrial

20.7

 

Rolls-Royce Group

Industrial

13.1

 

Smiths Group

Industrial

13.5

 

Wolseley

Industrial

13

15.4125

Autonomy Corporation

Technology

39.8

 

Inmarsat

Technology

36.8

 

Invensys

Technology

20.9

 

Sage Group

Technology

13.5

27.75

 

 

A P/E ratio states the relationship between the price per share and earning per share. It lets us know that how much investor pays per dollar in common stock of current earning. It is a valuation technique and also knows as earning multiplier model.  In the each sector above we have highlighted one stock with the blue colors from each sector which has a significantly high or low P/E ratio comparing the average P/E Ratio of that stock.

In the first section of Basic material sector we have highlighted the Randgold Resources company ratio which is 153 and is extensively higher comparing the Basic material sector ratio of 28.71. The second company we have selected is Pearson Plc which is from the consumer services sector. This P/E Ratio is the highest in the sector worth 18.3 times comparing the 14.26 times P/E ratio of the sector average ratio.

 

In the third sector of Financials, we have selected Barclays which is having the lowest ratio in the sector and is considerably lower than the average sector ratio. Barclays Plc’s ratio is 4.7 comparing the average sector P/E ratio of 19.1 in the same time. Form industrial sector we have selected Petrofac Ltd Company which has the highest P/E Ratio in the sector of 20.7 comparing the average sector ratio of Industrial worth 15.41.

 

 

Form the last and the final sector of Technology, the highest Ratio is of Autonomy Corporation of 39.8 times and the sector average P/E Ratio is 27.75 times, which is moderately lower comparing its sector.

 

Stock with the P/E ratios which are extensively higher (Comparing the sector average P/E Ratio) are like Randgold Resources in Basic materials sector are expected to be overweight. Ratios like Barclays which is considerable lower is likely to be underweight and other like Pearson in the consumer service sector are not significantly higher can be Naturally weighted. While, stock weights can be resulted differently by extensive analyses. Where, Stock overweighed is expected to be declined and vice versa.   

 

 

LIBOR

 

LIBOR stands for London Inter-Bank Offered Rate. It is an interest rate at which banks borrow unsecured funds in the whole sale market from other banks in London. Libor has a huge importance in many areas of financial system. LIBOR rates are extensively used as a reference rate for many financial instruments including forward rate agreements , interest rate swaps, inflation swaps, short-term-interest-rate futures contracts, syndicated loans, floating rate notes, variable rate mortgages, and currencies. Libor lays foundation for liquidation and for extremely active interest-rate markets.

 

It is also used as daily reference rate. For example, multinational organizations are able to borrow one or two percent plus the Libor rate. GBP LIBOR is also used to compute the reference rate for other currencies including Pound Sterling, US dollar, Euro, Japanese Yen, Canadian dollar, Swiss Franc, Swedish Krona, New Zealand dollar and Australian Dollar.

 

USD LIBOR for the period of six months is used as an index for various US mortgages and in London a three-month GBP LIBOR is used for a few mortgages especially for the companies with poor credit history.

 

In the similar way as the Libor, when banks have to borrow form the European markets in Euro currency, the reference rate is called Euribor. Eurodollars or Euroyen are two types of Libor. These terms define the interest rate at which one bank can borrow US dollars or Japanese Yen in the London market of banks. Libor is published by the British Bankers association everyday in ten currencies. It has the maturity of overnight to one year period. The rate of Libor fluctuates the whole day and it is based on the maturity of borrowing, higher the maturities lower the borrowing rate and vice versa.  It is the perception of cost to the banks as an inter-bank rate. LIBOR is also represented as a benchmark for the global short term borrowing and which is used to settle interest rate contracts in a lot of futures and options exchanges around the world.

 

Banks are often estimated to be understated as having the Libor as their cost. But participants in Libor markets also understand this fact that banks has a substantial incentive for under-reporting the LIBOR values as most of the debt instruments in floating-rates are based on the LIBOR value plus some number of basis-points.

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