The R&D Index: Market Pulse – August 3, 2015

The R&D Index: Market Watch for the week ending July 31, 2015, closed at 1,653.60 for the 25 companies in the R&D Index. (The Index was adjusted down approximately 32.89 points when Astra Zeneca split 2:1 on July 27, 2015.) With this adjustment the market was up approximately 1.57% (or nearly 26 points) over the previous week (ending July 24, 2015). Pharmaceutical components of the R&D Index, represented in green, were up 1.72% for the week; automotive companies, represented in blue, were up 1.43%; and ICT (information and communication technology) companies, represented in orange, were up 0.90%. From the beginning of the year, the R&D Index is up 4.58%, with pharmaceutical companies up 9.69%, automotive companies up 4.33% and ICT still down by -1.81%.

The market recovered much of the losses from the previous week (ending July 24), with only five of the 25 Index members losing value during the week ending July 31 (all but three R&D Index members lost value the previous week). Automotive companies, in particular, gained value based on sharp earning upticks for June. Ford, for example, posted a 44% increase in profit for the second quarter of 2015 compared with the second quarter of 2014. As noted last week, Ford continues to pump up its R&D spending and is expected to outspend GM in 2016. Most automotive companies, except for Volkswagen and Ford, are expected to have mostly stable R&D investment portfolios in 2016. This includes GM, Toyota, Daimler, Honda, Nissan and Fiat Chrysler with annual R&D increases of 2 to 6% (VW and Ford are expected to increase their R&D investments by 7% to 10%).



While the R&D Index improved over the previous week, it’s still slightly below the elevated values of the March to mid-June time period. ICT stocks continue to languish with even Apple falling in value for the second straight week and smartphone market leader Samsung reported an 8% drop in profits following below expectations sales figures for its just launched Galaxy S6 smartphone. This was the second week in a row for both Apple and Samsung to report below expectation sales figures and dropping investor figures as a result.

Following a week when it announced $3 billion in write-offs due to its weak cell phone business (and falling stock values), Microsoft launched its long-awaited Windows 10 software last week amid tepid, although positive, reviews and an equally tepid gain in stock value. Most Windows users continue to rely on versions that are five to seven years old with few indicating that they will upgrade to Windows 10 products.

About the R&D Index
R&D Magazine's R&D Index is a weekly stock market summary of the top international companies involved in R&D. The top 25 industrial spenders of R&D in 2014 were selected based on the latest listings from Schonfeld & Associates' June 2015 R&D Ratios & Budgets. These 25 companies include pharmaceutical (11 companies), automotive (5), ICT (7) and conglomerate (2) organizations who invested a cumulative total of more than $170 billion in R&D in 2014, or approximately 10.8% of all the R&D spent in the world by government, industries and academia combined, according to R&D Magazine's 2014 Global R&D Funding Forecast. The stock prices used in the R&D Index are tabulated from NASDAQ, NYSE, XETRA and OTC common stock prices (in U.S. dollars) for the companies selected at the close of stock trading business on the Friday preceding the publication of the R&D Index in in R&D Magazine's R&D Daily eNewsletter.

The companies used in the R&D Index include Microsoft, Intel, Roche Holdings, Novartis, Johnson & Johnson, Pfizer, Toyota Motor, General Motors, Merck & Co., Ford Motor, Cisco, Apple Computer, Sanofi SA, Qualcomm, IBM, Astra Zeneca plc, Honda Motor, Daimler, Oracle, GlaxoSmithKline, Siemens, Eli Lilly Co., Ericsson, Bristol-Myers Squibb and Bayer AG. Stock prices are based on those stocks traded on the U.S. exchanges.

R&D Index trends (in the stock prices) are just one indicator of the amount of capital available to these high-technology companies to invest in R&D and should not be implied to indicate the absolute value of R&D investments made by these organizations. The companies chosen for the R&D Index have very large sophisticated internal and global R&D organizations with each company investing between $4.3 and $11.7 billion annually on their R&D efforts.

About the Author:
Tim Studt has served in a variety of senior editorial positions at Advantage Business Media (ABM) for the past 27 years, most recently as Editor-in-Chief of ABM’s R&D Magazine and Laboratory Design Newsletter and the R&D 100s Awards Program. He is currently working on the 2015 Global R&D Funding Forecast. R&D Index: Market Watch is a new, regular column for the R&D Daily eNewsletter and will appear every Monday.