II. ANALYSIS

Return is the rate of profit from the investments that consist of capital gains or losses and dividend yield. Yield is a component of return that reflects the components of cash flow or income earned from the investments periodically. If we invest in stocks, dividend yield is indicates by the amount we earn. Meanwhile, the capital gain (loss) as the second component of the return of an increase (decrease) in prices of securities (stocks or bonds), which can provide gain (loss) for investors. Return is one of the factors that motivate investors to invest and also a reward for the courage of investors to bear the investment risk.

Analysis of Daily Market and Stock Return

In this calculation, market and stock return that we used is capital gain (loss). Capital gain or loss is differentiation of gain or losses that faced by investor because now the price of stock that relatively higher or lower than the price of stock before. For example in Jan 20, 2010, closing price is Rp 1,490 than the next day the value of that investment had appreciated to Rp 1,570 that means investor get capital gain of Rp 1,570 - Rp1,490 = Rp 80 per share. In other world, if the investor invested their money in Jan 20, 2010 then the next day they will get profit of 0.0537 or 5.37% from the money that they invest (if they sell). But sometimes investor also can meet losses when they invest their money in Bisi international. For example in July 17, 2008, closing price Rp 4,725 and the next day being Rp 4,000. It means investor get losses Rp 4,725 - Rp 4,000 = (Rp 725) per share. In other word, if the investor invested their money in July 17, 2008 then the next day they will get losses for 0.1534 or 15.34% from the money that they invest (if they sell). Because of that, the investor must see the market return to know about the history of gain or loss when they buy the stock. Then they can make prediction about their expected return. In general rate, the nominal return measures how much more money you will have at the end of the year if you invest. Market and stock return that shows positive number will giving gain and the negative number will produce losses for investors. From the both, LQ45 is therefore a more comprehensive index than the IHSG.

From the movement of closing price of BISI, we can see that BISI is stable company that has a stable range of return. The return never changed too sharply. This is also proved that the risk of investment in BISI is small because the return didn’t change too high or low.
Now, looking from the impact of capital market, we can see significant return from LQ45 in February 1, 2010 that the return until -0.999 (the number almost -1). The graphic of the return of LQ45 is down significantly. The same condition also happened in IHSG, the market return of IHSG also in minus number (suffered losses). But, it is not give the big impact to the stock return of BISI because BISI still can give the gain for 0.051948 or 5.195% from the total investment.

Then in 2008, Augusts 13, we can see that the return of investment in the capital market show the indexes both LQ45and IHSG gave the capital gain only in small value. IHSG give positive return only for 0.00289 (2.89% from total investment in BISI’s stock) and LQ45 for 0.00437. But that small number of return not happened in BISI because they can give the capital gain for investor until 0.20174 or 20.174% from the total investment in BISI stock. This number of return is the highest rate of return from 2008 until March 2010.

This proved that the condition of stock in BISI not too much affect by macroeconomics condition that represent by the market index both of LQ45 and IHSG. In other word, the return of BISI stock not sensitive with condition of economic in Indonesia. The condition of stock isn’t suffered by fluctuation like the economic condition.

Analysis of Beta (ß)

Beta is also called the market beta. With the assumption that the relationship between securities return and market return is linear using regression techniques. With the requirement, return from stock or security as the dependent variable and the market return as independent variables. From the regression equation, we will find the coefficient of beta that is assumed stable over the period of observation.
We can get the regression analysis from the daily market return and daily stock return. Daily market return consists of IHSG and LQ45 for period January 2, 2008 until March 31, 2010. We use regression analysis to find the beta to know the sensitivity of a stock’s return on the market portfolio. So we can know how the condition of capital market influences the stock of the company. In this case, risk depends on exposure to macroeconomic events and can be measure as the sensitivity of a stock’s return to fluctuations in returns on the market portfolio.

In the regression analysis, we use stock return as dependent variable and market return as an independent variable because we want to know how the capital market that represent the macroeconomics condition influences the movement stock of BISI international. In the first regression analysis, we used daily market return of IHSG as independent variable and stock return as a dependent variable. The result of the beta is 0.968 (less than 1). The slope is 0.968. This means that for each increase of 1 in X, the mean value of Y is estimated to increase by 0.968. In other word, for each increase of 1% of return in the market, the mean values of risk are estimated to increase by 0.968%. Thus, the slope represents the portion of the daily stock return that is estimated to vary to the market return. The Y intercepts is 5.00765E-05 = 0. The Y intercept represents the mean value of Y when X equals 0. Because the percent of the market return can be 0, this Y intercept has practical interpretation.

Then for the result of regression analysis between LQ45 and BISI international based on market and stock return. The slope is 0.146. This means that for each increase of 1 in X, the mean value of Y is estimated to increase by 0.1461. In other word, for each increase of 1% of return in the market, the mean values of risk are estimated to increase by 0.146%. Thus, the slope represents the portion of the daily stock return that is estimated to vary to the market return. The Y intercepts is 0.000521 = 0. The Y intercept represents the mean value of Y when X equals 0. Because the percent of the market return can be 0, this Y intercept has practical interpretation.

We know that Beta that based on LQ45 is smaller than IHSG. LQ45 is 0.146 and beta for IHSG is 0.968. So the sensitivity of BISI in IHSG is bigger than LQ45. The condition of market in IHSG is more representative to the condition of stock in BISI than LQ45. It happened because LQ45 just consist of 45 companies that active in trade and it different with IHSG that consists of many company both active or not.
The both result of beta proved that BISI is a defensive stock (the result of beta smaller than 1). Why? Betas greater than 1 meaning that their return tend to respond more than one-for-one to changes in the return of the overall market (condition of aggressive market). The betas of defensive stock are less than 1, the returns of these stocks vary less than one-for-one with market returns. Defensive stock is a stock that tends to remain stable under difficult economic conditions. The stock BISI International is defensive stocks because that company operating in food industry. These stocks hold up in hard times because demand does not decrease as dramatically as it may in other sectors. Defensive stocks tend to lag behind the rest of the market during economic expansion because demand does not increase as dramatically in an upswing.

Looking from the type of stock, Investor that likes to use defensive investment strategy can include BISI in their portfolio. Portfolio management strategy aims at investing in low-risk products. Stock of BISI is defensive stocks because undervalued (the value of return in stock less than market), less volatile, steadily growing, and offering reasonable dividends. The main advantage of a good defensive investment strategy is the minimized risk of losing the capital. Other advantages include better planning of investments, almost steady and predictable income, and better use of risk-minimizing practices like close stop-losses. Beginner investors can invest their fund in BISI because BISI have less risk-tolerance and investors having less time to monitor their portfolio.