Investment Decisions Using Investment Strategy and Philosophy

Using Investment Philosophy and Strategy to Make Investment Decisions
1. Which investments did you chose?
The portfolio requires a mix of United States companies and foreign companies. The three investment that I chose consist of China Life Insurance, Proctor & Gamble, and Wells Fargo. The following is a portfolio that delineates all the pertinent information of the investments:
Stock
Symbol
Cost/Share
Purchase Price
Number of Shares
Total Cost
Gain
Transaction Costs
Total Costs
Proctor & Gamble Company
PG
$ 87.58
$ 86.95
1,600
$ 139,120.00
$ 1,008.00
$ 347.80
$ 139,467.80
Wells Fargo & Company
WFC
$ 54.26
$ 53.50
1,700
$ 90,950.00
$ 1,292.00
$ 227.38
$ 91,177.38
China Life Insurance
LFC
$ 17.41
$ 17.24
7,000
$ 120,680.00
$ 1,190.00
$ 301.70
$ 120,981.70
In total, the investment of these three stocks will amount to $351,626.88 with the rest of the funds being set aside for future investments.
The following are eight financial ratios and other measures for analyzing the three investments in the portfolio. These financial ratios are based on the company’s most recent financial quarter ending June 2017.
Financial Ratio
Wells Fargo & Company
China Insurance Company
Proctor & Gamble
Profit Margin
 This ratio indicates the profitability of a company with respect to generating revenue. Profit margin = net profit / sales
24.86%
3.45%
23.56%
Operating Margin
This ratio indicates the company’s level of efficiency in its business operations as well as power in its pricing.
Operating profit margin = Operating Profit / Net Sales
38.32%
5.91%
22.57%
Return on Assets
 This profitability ratio indicates the returns generated by a firm from utilizing its total assets
1.10%
0.82%
7.41%
Return on Equity
This profitability ratio indicates the return that stakeholders obtain from the business and general earnings
10.40%
6.92%
17.92%
Revenue per Share
 This is the revenue amount for every single share issues by the company
17.03
16.18
25.04
Diluted EPS
 This metric is imperative in assessing the quality of a firm’s earning per share
0.0387
0.55
0.0559

Book Value per Share
 This ratio is employed to calculate the value of every share of a company on the basis of the equity that is available to its common stakeholders
36.99
8.19
21.22

Current Ratio
 This is indicative of the firm’s liquidity position. It shows how well a firm is prepared and armed in meeting its short-term obligations
Current ratio = Current assets / Current liabilities
0.85
0.68
0.88

Total Debt/Equity
 This ratio is indicative of how much a firm is leverage. This encompasses the level of debt that is involved in the business in relation to equity capital
Debt to equity ratio = Total Liabilities / Total Equity
N/A
55.87
56.64



2. Which philosophy or strategy did you use in making your choices?
The investment philosophy that I used in making my choices is the fundamental analysis strategy. This philosophy and investment strategy takes into account aspects that can influence the value of the shares taking into account financial conditions, circumstances within the industry and also management of the company. The basic notion in this particular philosophy is that the real and actual value of a stock can be linked to its financial aspects of the business. This can take into account the growth projections of the stock, risk visibility, as well as the cash flow statements. More often than not, this is a long-term value, which is purposed to generate profit in the long run. Significantly, through this approach, the main aspects that are taken into consideration and analyzed are the revenues, expenses, assets, together with liabilities together with all other financial features of an entity. This makes it possible to obtain information on the future performance of the company and its stock (Qwoter, 2017).
3. Why did you choose this portfolio of stocks?
The main reason why I selected this portfolio of stock is owing to the reason that they had outstanding financial performances in the preceding financial periods. In addition, such performances are projected to prevail in the forthcoming future and are therefore great prospects for investment. To begin with, both of these assets recorded progressively increasing revenues and net income amounts for the past three financial quarters of the prevailing financial year. The inference of this is that the company should end the years with solid and consistent financial performance, which projects a likely increase in the stock of the company. The aspects of uncertainty, volatility and also profitability played a significant influence in selecting the three investment choices. Taking into consideration that shares are not a long-term investment, volatility can easily have an adverse impact on shares. The consistent financial performance in the preceding financial quarters indicates that the three investment choices are not volatile and are not substantially uncertain. Therefore, they make significantly good investment choices for the forthcoming financial period to generate increased returns. In accordance to Morrell (2017), the financial quarter earnings from Wells Fargo reported an earnings per share of $1.07, which is greater than the initial predictions of $1.01 EPS. The company’s share has been indicative of a strong financial performance. Similarly, despite a challenging and competitive environment, Proctor and Gamble was able to surpass its financial objectives and targets with an increase of 19 percent in its EPS compared to the previous year. Similarly, the financial performance and position of China Life Insurance appears to be positive. According to its financial quarter results, there was a 6.6 percent increase in total assets, 17.3 percent yearly revenue increase and a 17.8 percent increase in net profit.



References
Morrell, A. (2017). Wells Fargo beats on earnings, misses on revenue. Business Insider.
Qwoter. (2017). 6 Different Investment Philosophies. Retrieved from: http://www.qwoter.com/college/Trading-Psychology/different-investment-philosophies.html
Yahoo Finance. (2017). China Life Insurance Company Limited. Retrieved from: https://finance.yahoo.com/quote/LFC?p=LFC
Yahoo Finance. (2017). The Proctor & Gamble Company. Retrieved from: https://finance.yahoo.com/quote/PG?ltr=1
Yahoo Finance. (2017). Wells Fargo & Company. Retrieved from: https://finance.yahoo.com/quote/WFC/