Q14. Fred Stroh is an international equity analyst for EmerWorld Capital Management (ECM). Stroh has been studying the opportunities associated with the rumors of proposed joint ventures involving U.S. firms and firms partially owned by the government in a recently democratized country. Clients of Stroh have called him to ask about the investment possibilities. This concerns Stroh somewhat as he has had great difficulty in finding and acquiring reliable information about the quality and accessibility of the inputs and labor in local markets. Furthermore, there is still considerable uncertainty about which U.S. firms will be offered partnerships, what the conditions of those partnerships will entail, and the accounting rules that will govern the new ventures. However, Stroh is confident that there will be demand for the output in local and international markets. Stroh begins his investigation and e-mails an old friend who was an entrepreneur in the U.S. and moved to the recently democratized country when he went into partial retirement. Although Stroh had not been in contact with the friend for several years, the friend writes back and says that this is a great time to invest in the country. He says that there will be national elections soon, and it seems that a pro-business chief executive for the country will be elected. The friend includes website URL addresses which link to reports from reputable news sources concerning the election. Stroh goes to those sites and sees that recent opinion polls in the country show that the pro-business candidate has a majority in the polls taken and is believed to be able to easily win the election. Stroh calls his friend, and asks if the labor costs and input availability in the country gave the country a comparative advantage in some areas. The friend says yes, and that APX Corp. is planning to partner with the country’s government to expand a plant for making car parts. APX is also in talks to make a tender offer for a French glass manufacturing firm, which was one of the few non-nationalized and foreign owned firms in the country. None of APX’s intentions were known to outsiders of the firm. Stroh asks his friend how sure he is of the information, and the friend says that he has been hired as a consultant for APX and has been a negotiator in the tender offer dealings, which are going well. Stroh warns his friend that he may be saying too much, and his friend says that there are no rules in the country associated with trading on this type of information. The friend says he has some other useful information, but first asks if Stroh thought investing in APX was a good idea. Stroh responds by saying that based on the information just provided, and his training as an analyst and a CFA charterholder, the analysis would indicate that his friend should buy APX. The friend then says that IMI Corp. has decided not to enter into any partnerships in the country. Stroh then asks about how sure his friend was of IMI withdrawing from partnering in the country, and the friend says that although he has no contacts in IMI, it was his own research that lead to that conclusion. Stroh continues his investigation. In his research he finds through public documents that APX has purchased the land next to the car parts plant. Some of APX’s managers are already working in the parts plant itself. He also finds that APX representatives have been visiting the headquarters of the French glass manufacturer. In public documents, APX is projecting a big increase in its production of engine parts and windshields. Stroh calls the CFO of IMI and during the conversation learns that IMI has decided to withdraw its bid to be a joint venture partner, but that the formal announcement of the withdrawal will not occur for another week. The CFO declines to give a reason. Stroh also finds that official statistics verify the friend’s assertion that the country’s labor and raw material supplies do give it a comparative advantage in the types of activities APX is seeking to engage in. Not wanting to miss an opportunity, Stroh completes his industry analysis and concludes that EmerWorld will issue a buy recommendation on APX. In the recommendation he says that APX is planning on expanding its production of car parts and windshields by acquiring new manufacturing plants in a country that offers great cost advantages, but does not mention his gathering the information concerning the land acquisition and the APX managers working in the existing plant because he wants to conceal his research methods. Stroh also says the advantages to APX are exceptionally good because a new pro-business chief executive will soon be elected. Upon the announcement of IMI to not partner in the country, Stroh issues a sell recommendation on IMI. Stroh says in the sell recommendation that IMI’s management does not seem competent because it will not be capitalizing on the opportunities in the country and apparently cannot recognize a good opportunity when it sees one. Which of the following pieces of information would Stroh have been able to use to trade upon? A) The plan by APX to partner in the car parts production in the country. B) IMI withdrawing from partnering in the country. C) The labor and materials comparative advantage of the country. | 
发表于 2009-1-9 16:49
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