Relative value securities Essay Example | Topics and Well Written Essays - 500 words

Relative value securities - Essay Example Total operating expenses remain the same, yet total revenues have decreased by a small margin. Another factor to mention is the operating income, which has experienced the same kind of trends. An additional worrying sign is that the fund underperformed the S&P 500 by 2% during the first quarter of 1991. This is in stark contrast to the exemplary performance over the preceding five years. Jupiter Venture was only one of two mutual funds that had outperformed the S&P 500 year on year since 1985. The opportunity to take the Sensormatic offer is an attractive one, but there is no guarantee that Sensormatic would continue to grow at its current pace. Sensormatic is looking to move away from the soft-goods market and turn to hard-goods protection. However, the gross margin of hard-goods EAS systems is only around 30%, which is half of the figure for soft goods. The hard goods market is extremely competitive, and there is no guarantee that Sensormatic would come out on top. Win Smith should close Jupiter Venture and get out while he still can. Although the short-term prospects do not look good for Jupiter Venture, there is no reason to suggest that the company’s long-term viability is under threat. While the income statement and comparative financial data show that the company is stagnating, so are many of its nearest competitors. The boom of the mid to late 1980s is over, and Jupiter Venture needs to reinvent itself to prepare to expand going into the 1990s and beyond. The company’s balance sheet shows an encouraging sign—total liabilities only make up about 15% of the company’s total assets (total liabilities of $12.2 million compared to total assets of $83 million). Jupiter Venture’s total long-term debt is only around half of this figure. This figures show that while the company may take a hit in the short-term, the foundations of the company are strong because it does not rely on debt to finance its operations. Looking at the comparative