Nvidia Corp. Share Tracking Report

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Table of Contents

Rationale statement………………………………………………………………………………………………………………………….2

Share one: NVIDIA Corporation…………………………………………………………………………………………………………3

Share two: Lotus Bakeries NV…………………………………………………………………………………………………………...4

Comparison of Share Performance……………………………………………………………………………………………………5

Conclusion and recommendation……………………………………………………………………………………………………..6

References……………………………………………………………………………………………………………………………………..…7

Appendices……………………………………………………………………………………………………………………………………....8

Rationale Statement

For the investment of €50,000 the following companies have been chosen: NVIDIA Corp., an American technology company trading their stocks at the Nasdaq stock exchange, and Lotus Bakeries NV, a Belgian bakery found at Euronext Brussels. NVIDIA Corp. designs graphic processing units for a rapidly expanding gaming industry as well as system-on-a-chip units for the mobile computing and automotive market. Lotus Bakeries NV produces biscuits and is mostly known for their “Speculoos” biscuit.

The reasons for investing in these companies are the following: credible ratings, diversification of sector and currency and an expected increasing trend after moderate, recent drops. NVIDIA Corp. is rated as BBB+ by S&P Global, which stands for investment grade and adequate capacity to repay, making it a credible company. Lotus Bakeries NV has an Altman Z-score of 5.62 and a Piotroski F-score of 7, both high scores indicating that this is a credible and healthy company as well. These companies are in very different sectors: on the one hand the gaming industry which is currently booming, on the other hand the food industry which is very stable and reliable. This makes the investment safe and reallocation possible if necessary. Moreover, the companies are noted in dollars and euros respectively, making diversification in currency possible.

Recently both share prices suffered a drop. NVIDIA Corp., after hitting its five-year peak, dropped on October first going from $289.36 to $214.39 opening price on November 5th. Lotus Bakeries NV share price started to decline moderately from August 9th to October 22th going from €2,680.00 to €2,510.00. A more notable drop occurred between October 22th and 26th losing €350.00. However, both shares are expected to climb again as they have done the previous years.

Share one: NVIDIA Corporation[pic 4]

On October 12 Nvidia closed at $246.54, the coming seventeen days it tumbled to $185.62. From the 29th of October it started recovering towards $218.11 on November first. This was the result of J.P. Morgan upgrading the stock from neutral to overweight, which means they have a positive view on this share leading to increased demand. However, from November first on, Nvidia slowly started plummeting again and from the 15th of November through the 19th of November it made a steep drop, going from $202.39 to $144.77. This drop was an immediate response to the publication of their disappointing earnings rapport. In the following days Nvidia regained a positive trend after Credit Suisse upgraded it to outperform (cf. overweight), only to worsen again after hitting $170.04 at December third. On the seventh of December Nvidia is sitting at $147.61 per share; losing a staggering 40.53% over the simulation period.

Over the entire tracking period Nvidia describes a negative trend. This can be explained by the crypto crash, which led to reduced demand for high-end GPUs which traditionally are used in the gaming industry, but in recent years also in crypto miners. The reduction in demand was expected by many tech companies, including Nvidia. However, the prices of certain GPUs have not come down with the crypto crash, making them too expensive for everyday gamers, thus leaving Nvidia with an oversupply. These events then resulted in reduced revenue and a disappointing earnings rapport, which are clearly reflected in their stock price.

Share two: Lotus Bakeries NV[pic 5]

The share price of Lotus Bakeries NV fell by € 290 from October 12 to December 7, the tracking period chosen to examine this share. The company’s share price had to endure its largest recession between October 22 and October 26, losing € 350. This downward trend is uncharacteristic, compared to global evolution of the shares issued by Lotus Bakeries NV. Reasons include an overall bad preforming BEL20 and a negative report by commercial bank NIBC.  

In October, NIBC released a report in which they changed their advice on Lotus to sell. A hard pill to swallow for the Belgian bakery that evidently saw their share price drop to €2,160. Analysts at NIBC came to this conclusion after they noticed that consumers are starting to eat healthier as well as living a more sustainable lifestyle. Consuming high calorie biscuits produced on a large scale, doesn’t really fit either of these. Hence the evident share price decline the past months.

Economic growth has tempered during the last year, affecting European businesses and consequently creating a bearish market. Part of this decline can be justified by the ECB’s decision to end the quantitative easing, decreasing liquidity and putting the break on investments. Furthermore, the trade war between the USA and China doesn’t help either. Although, assuming China and the USA will not get along any time soon, Europe can benefit from their dispute, as China might give the EU more access to its markets and collaborate more freely. Who knows, maybe the Chinese can’t resist Speculoos.

Comparison of Share Performance[pic 6]

The performance of both shares over the tracking period is extremely poor. The portfolio, starting at €49,387.04 with 50% in both Lotus and Nvidia, lost €12,578.41 or 25.47%. In the tracking period’s last two weeks, Nvidia made a steep drop, making their share responsible for three-quarters of this loss. Lotus’s performance was also rather poor, yet their loss only represents 5.87% of the total value and was far more gradual.

Conclusion and recommendation

Despite these bad results, a mid-term investment in both companies is suggested. Nvidia is suffering a short-term decline, making their shares relatively inexpensive. Currently momentum crowd money flows are extremely negative for Nvidia and smart money flows are returning to neutral after being negative for several month. This refers to big crowds pulling out money because of negative news and performance, in opposition to more experienced traders investing money to take advantage of low stock prices. This illustrates the expected return of upward momentum.