Investment Analysis and Portfolio Management
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Transcript of Investment Analysis and Portfolio Management
INVESTMENT PORTFOLIO(09/03/2013 TO 11/20/2013)
Thu NguyenFIN-640/Investment Analysis and Portfolio
Prefer• Include five different stocks from U.S • Each have different invested amount• Portfolio is monitored, evaluated and estimated on period
of 12 weeks (September 3rd – November 20th, 2013)• The portfolio is a medium to high-risk appetite
Investment Objective• Achieve short-term profit with $1,000,000 account balance• Expected profit for portfolio is approximate 10% of
$1,000,000.
Strategies• Chosen Industries: technology, business services, steel
& iron, copper and health care• Chosen Stocks: Apple Inc. (AAPL), Steel Dynamics
Inc. (STLD), Global Payments Inc. (GPN), Freeport-McMoRan Copper & Gold Inc. (FCX) and Rite Aid Corporation (RAD)
• Mixing of top-down and bottom-up approach • Using the top-down approach to identify key macroeconomic->
identify stocks’ benefit from the same sector• Applying the bottom-up approach based on individual
companies provide attractive investment opportunities in various industry and market conditions.
Strategies (cont.)• Three high-risk stocks and
two low-risk are chosen-> keep the portfolio balance
• Two stocks have betas lower than 1 (market’s beta), and three other stocks have betas higher than 1• The riskier high-beta stocks
are, the higher returns • The less risk low-beta stocks,
the lower returns
• The expectation of this portfolio is gain 10% in 12-week period
CompanyTicker Symbol Industry Shares Beta
Apple Inc. AAPL Technology 400 0.35
Steel Dynamics Inc STLD Steel & Iron
13,100 1.41
Global Payments Inc. GPN
Business Services
4,200 0.79
Freeport-McMoRanCopper & Gold Inc. FCX Copper
6,400 1.32
Rite Aid Corporation RAD Health Care
30,000 1.71
Decision• STLD and FCX are affected by gold price, which is
recently in the good shape – stocks’ prices will increase• AAPL – many new products in September and October• GPN – electronic payments transaction processing
services worldwide – large market – big income. • RAD – new change in Obamacare
CompanyTicker Symbol Industry Shares
Beginning Price
Total transaction amount Market Weight
Apple Inc. AAPL Technology 400 $ 488.58 $ 195,432 21.69%
Steel Dynamics Inc STLD Steel & Iron 13,100 $ 15.22 $ 199,382 22.13%
Global Payments Inc. GPNBusiness Services 4,200 $ 47.85 $ 200,970 22.30%
Freeport-McMoRanCopper & Gold Inc. FCX Copper 6,400 $ 31.12 $ 199,168 22.10%
Rite Aid Corporation RAD Health Care 30,000 $ 3.54 $ 106,200 11.78%
$ 901,152 100.00%
Portfolio Performance ( Profit/Loss)• The Beta is important to measure of stock’s volatility in
relation to the market. • AAPL underperformed comparing to the market because
the actual increase is less• STLD, GPN, FCX and RAD outperformed the market
S & P 500
DATESCHANGE IN PRICE %
% x β β9/3/2013 11/20/2013 1,639.77
1,781.37 141.60 9%
AAPL 488.58 515.00 26.42 5% 2% 0.35
STLD 15.22 18.93 3.71 24% 34% 1.41
GPN 47.85 62.81 14.96 31% 25% 0.79
FCX 31.12 36.18 5.06 16% 21% 1.32
RAD 3.54 5.10 1.56 44% 75% 1.71
Reasons of the changes• New products, new investment, or any movement in the
management strategies or acquisitions-> stock prices change
• Also have some specific reasons regarding possible changes in the stocks’ prices
Apple, Inc. (AAPL)• AAPL announced new products in 2013 such as iPhone
5S, iPhone 5C, iPad Air, iPad mini Retina, Mac Pro, MacBook Pro, iOS5 and OS X 10.9 Mavericks
• Given dividends $3.05• Put on “NEUTRAL” rating• Small gains
Arithmetic 0.117%Geometric 0.103%Standard Deviation 1.620335
Avg Excess Return -2.57327Beta 0.35Coefficient of Variation 1085.478
HPR 0.991242HPY -0.876%
Steel Dynamics, Inc. (STLD) • Announcing two notes in operating:
• Offering up to $400,000,000 aggregate principal amount of its registered 6 1/8% senior notes due in 2019
• Offering up to $350,000,000 aggregate principal amount of its registered 6 3/8% senior notes due in 2022
• Dividends $0.11• Preventing from “BUY’ to “NEUTRAL”
Arithmetic 0.411%Geometric 0.395%Standard Deviation 1.356826
Avg Excess Return -2.27907Beta 0.35Coefficient of Variation 283.0919
HPR 0.994223HPY -0.578%
Global Payments, Inc. (GPN) • First quarter profit increased to 87 cents/share from 59
cents/share• Announce an accelerated $100 million stock buyback plan• The effect of changing in management, new chief
executive-> share of GPN up almost 4%• Put GPN on “HOLD” and wait for price increasing more
Arithmetic 0.503%Geometric 0.479%Standard Deviation 1.808762272
Avg Excess Return -2.187839025Beta 0.35Coefficient of Variation 267.5375346
HPR 0.990381583HPY -0.962%
Freeport-McMoRan Copper & Gold, Inc. (FCX)
• Return on equity is respectable• The exploration of mineral resource • Limits:
• feeble growth in the earnings per share• deteriorating net income • higher debt management risk.
• Decide to rate as a “HOLD”
Arithmetic 0.295%
Geometric 0.281%
Standard Deviation 1.347124
Avg Excess Return -2.39555
Beta 0.35
Coefficient of Variation 393.4673
HPR -0.0095
HPY 9.744%
Rite Aid Corporation (RAD)• Based on Jim Cramer, stock analyst on Wall St. Cheat
Sheet, reported on August 29, 2013• Have upward movement in the stock’s value.• Decide to rank it as “BUY”
Arithmetric 0.713%Geometric 0.643%Standard Deviation 3.628434
Avg Excess Return -1.97763Beta 0.35Coefficient of Variation 267.1958
HPR 1.005917HPY 0.592%
• The following graphs show the correlation between stocks inside portfolio and the overall performance of the portfolio during 12 weeks of investment.
Conclusion• Good diversified portfolio• Different industries
• Not correlated• Profit of $204,997.00
9/3/
2013
9/9/
2013
9/15
/201
3
9/21
/201
3
9/27
/201
3
10/3
/201
3
10/9
/201
3
10/1
5/20
13
10/2
1/20
13
10/2
7/20
13
11/2
/201
3
11/8
/201
3
11/1
4/20
13
11/2
0/20
13 800,000 850,000 900,000 950,000
1,000,000 1,050,000 1,100,000 1,150,000 1,200,000 1,250,000
Investment Performance
Series1Total Value