Portfolio Management Project Term Paper

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Portfolio Management Project

Selected 10 companies



purchase date purchase price

Apple, Inc.


Industry/Sector: Technology/Personal Computer -- Investment Style: Large Growth



Communications Systems Inc.

Industry/Sector: Technology/Data Storage -- Investment Style: Small Growth

Joy Global Inc.


Industry/Sector: Farm/Const/Mach -- Investment Style: Large Growth



Industry/Sector: Consumer Services -- Investment Style: International

Gerdau SA


Industry/Sector: Steal & Iron -- Investment Style: International

Gol Linhas


Aereas Inteligentes SA

Industry/Sector: Regional Airline -- Investment Style: International

Green Mountain



Coffee Roasters Inc.

Industry/Sector: Processed Pkgd gds -- Investment Style: Small Growth

Rio Tinto PLC


10/21 / 2009

Industry/Sector: Steal & Iron -- Investment Style: International

Vale SA




Industry/Sector: Steal & Iron -- Investment Style: International





Group Inc.

Industry/Sector: Restaurants -- Investment Style: Small Growth


Investing today is about taking advantage of growth from a broader international perspective. Every aspect of industry now functions in a global economic environment. Even a mom and pop shop that creates handmade baskets in Singapore can now sell their wares over the internet and compete with the likes of Sears and Wal-Mart. By approaching investing from the view that globalization creates new fixed and floating exchange rates, macroeconomic volatility and new roles for governments, investors can address important questions like which group of nations will come out of the current economic recession and then begin normalized growth. How will decisions made in the United States, the European Union and China affect economic volatility in smaller emerging nations and in what ways can investors take advantage of the new financial globalization?

This report offers insights into my portfolio that was built with the sole intention of taking advantage of global economic potential with a historic view. Consider for example, the steel industry will need to meet all new growth expectations from around the world as more emerging nations attempt to drop their current second and third world statuses. "We live in a world so rich that global income is more than $31 trillion a year. In this world, the average person in some countries earns more than $40,000 a year. But in this same world, 2.8 billion people -- more than half the people in developing countries -- live on less than $700 a year. Of these, 1.2 billion earn less than $1 a day." (Chossudovsky)

Brazil is an excellent example of a nation ready to move into the first world. They have a stable government, a young well educated population, unmatched natural resources and all new vast offshore oil reserves, the 2014 World Cup soccer tournament, 2016 Summer Olympics, and a tourism industry that can match both the United States and Europe. This country will need more steel in the next ten years than even China in order to meet the growing demand for modernizing their tourism industry for the Olympics, offshore oil rigs and ships to tap the oil reserves and a new roads and housing infrastructure to handle their new found wealth. Their auto industry is thriving thanks to their homemade ethanol reserves and they also are rich in resources such as gold, silver, iron ore, beef, pork, sugar, ethanol, fruits and vegetables and now they have more potential oil than the Middle East. As businesses continue to expand and become multi-national conglomerates, they have a responsibility to not only help their home markets but to any and all areas that they happen to migrate in to. The nations that become the new homes for these organizations also undergo a transition that converts them into stakeholders of the companies. "Recognizing the moral claims by stakeholders other than the shareholders introduces other values than financial value in the spectrum of what needs to be pursued by the organization. Stakeholder management is not merely instrumental to create shareholder value, but normative." (Windsor, 1999)

These are all powerful motivators to incorporate a piece of that growth potential into a portfolio. Applying the intricacies of international finance into a personal portfolio only makes sense as debt hinders growth in the United States and China has nowhere to sell its plethora of exports. So other avenues like Brazil should be taken into consideration.

Class & Industry

Economic indicators such as unemployment and consumer spending will not play a major role in this portfolio because the object is to incorporate international growth into the picture. The indicators needed for this type of portfolio will follow reports from organizations like the United Nations and the World Bank. It is true that growth in the United States may be slow until mid-2010, but Brazil is growing now and has even great potential for double digit growth over the next ten years. This portfolio is taking into consideration world demand for steel. Cutting costs and postponing expenditures are popular ways to make short-term profits grow in the United States and may add investor values. But, to make global finance and globalization work, it seems like a better idea to hold true that organizations must find a perfect mix between long-term goals and objectives and the short-term maximization strategies of their global corporate management. The world continues to become smaller as new technologies like the Internet and the business communities face all new challenges from the highly competitive global economy. Over the last few decades, few industries represent better approaches in ways to incorporate globalization better than the steel industry.

The economic downturn has dramatically slowed this industry but global demand is expected to rise sharply in 2010. The portfolio carries three very strong steel players, Vale, Rio Tinto and Gerdau. All three are large well established and well managed international organizations and all three are dominating forces in the steel industry for Australia, Brazil the African continent and China; all areas with very high expectations of growth. Also in this group is Joy Global, an American company but their reach is definitely global when it comes to their machinery which is used in the agricultural and manufacturing arena.

Also in line with the international approach is Gol which is a regional airline in Brazil that will get a boost in passenger and cargo miles from the growth in Brazil, especially from the World Cup and the Olympics. Travel is the background of CTRP.com. This company has been growing exponentially as travel both in and around china continues to rise. The company was built on the principles of a Priceline.com which recently shot over 200, CTRP may do the same. The portfolio adds in a few tech plays. Apple has recently entered China with their iPhone and IPods and they are nowhere near saturating their markets. Brocade is in the process of trying to sell themselves to a bigger partner to drop their debt load so this is a speculative purchase as vendors like HP and IBM go searching for data supplies and the weak dollar make international giants take notice. Wendy's is also in this portfolio because it is selling at over 100% less than its intrinsic value which makes it an excellent take over player. The company will provide a modest dividend until the stock is acquired or maybe the economic recovery can help the company boost sales.

The portfolio closes with a company that may grow really fast from small cap to large cap as they increase sales. Green Mountain Coffee Roasters have been building new distribution centers for their ingenious K-cup coffees for the single cup coffee lover. They have recently made a deal with Kmart and William Sonoma so they will be reaching all areas of their potential customer base.

Markowitz & Risk

Investors face the dilemma of taking an amount of money today or investing it in some other project or financial vehicle like stocks or bonds with the intention of receiving additional funds at some future date. It is important to be able to understand the current and the future value of money. The idea is based on the question; does a dollar today have the same value as a dollar one year from now? The bill is physically the same but money now can do more over time because of the fact that there is interest and compounding. A simple example can provide insight. If an investor has $10,000 to invest (Option A) over the course of the next three years or he could keep the money in reserves (Option B).

In this example, if the investor chose option A with an expected annual rate of return of four and half percent, the future value of the investment after one year would equal $10,450 which would be calculated by multiplying the principal amount by the interest rate and then adding the amount to the principal:

First Year Return = $10,000 x (0.045 + 1) = $10,450

Second Year Return = $10,450 x (0.045 + 1) = $10,920.25

Third Year Return = $10,920.25 x (0.045 + 1) = $11,411.66

In other words, the future value of money would have the simple…[continue]

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