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("Stock Portfolio," 2011)
What stocks performed the best and worst?
The stocks that performed the best include: EFX, MCD, AAPL, SUX, PETM and GMRN. The positions that were underperforming the others include: MSFT, AXP, TIF and JPM.
Stocks for given portfolio were selected randomly what would you've done differently?
There would have been a focus on having firms that pay higher dividends and growth. This is when the total returns in the portfolio will be higher in comparison with other strategies.
What factors and why are they important when choosing stocks?
The factors that are most important when choosing stock are the earnings and dividends. The two elements will help everyone to quickly see the underlying strength of the company in comparison with other firms.
An Examination of the Companies in the Portfolio
The different companies that were selected as a part of the portfolio strategy are involving diversification across…… [Read More]
This helps managers to make informed decisions about possible reactions based upon systematic events. (Estrada, 2002)
Moreover, Brown (2010) determined that different approaches must be utilized under the CAPM model to account for risk. This is because the markets are constantly shifting and new events will take place which change the thinking of economists, analysts, fund managers and investors. To stay on top of what is happening, requires utilizing contrasting forms of investigation during the process. These insights are showing how different forms of regression analysis must be utilized to fully understand what is taking place. (Brown, 2010)
As a result, the CAPM approach can provide a good background about what is happening in the markets and effectively accounting for risks. However, there are times when different forms of analysis must be utilized. The best way to achieve for these objectives is use other areas which can be augmented under…… [Read More]
Using a Technical analysis is equally ineffective since this analysis would not necessarily focus on the financial statements of the company, but rely on trends in the economy, price trends and overall market tendencies to predict where a particular type of stock will go. While this strategy is risk aversive in general, the point becomes moot again as the overarching quality of all stock in this economy rise and fall together.
In Market B. however, the overall diversification of stock returns makes the possibility of creating a better risk averse portfolio much more likely. Both techniques of investing previously discussed work extremely well in this economy for both high risk and low risk strategies. Using a fundamental analysis one can make more valid assumptions about the future of a company from its financial statement. While any company health is certainly partially regulated by economic trends, in Market B. there is…… [Read More]
Portfolio Management Project
Selected 10 companies
purchase date purchase price
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
Industry/Sector: Steal & Iron -- Investment Style: International
Aereas Inteligentes SA
Industry/Sector: egional Airline -- Investment Style: International
Coffee oasters Inc.
Industry/Sector: Processed Pkgd gds -- Investment Style: Small Growth
io Tinto PLC
10/21 / 2009
Industry/Sector: Steal & Iron -- Investment Style: International
Industry/Sector: Steal & Iron -- Investment Style: International
Industry/Sector: estaurants -- Investment Style: Small Growth
Investing today is about taking advantage of growth from a broader…… [Read More]
Because of this, I would expect that U.S. Energy would have performed better, but that has not been the case. None of the individual holdings are overly dependent upon energy costs, such as we would see in the airline industry, so the performance of the portfolio does not seem to have been overly affected by the rise in energy prices.
The proper approach to investing involves diversifying, not only across different companies, but also across different sectors of the economy. In a given year, one sector of the economy will be up and another will be down. One-year large cap growth stocks will be up and foreign stocks will be down. The next year real estate will be up and large cap growth may be down. If we knew in advance which sectors would be on top, investing would be easy, but we don't. As a result, diversification across different…… [Read More]
Investment returns are the amount that the investment is worth (upon sale), net of taxes, over and above the price paid for the investment. The returns can be expressed either in absolute terms, or in annualized terms. The return on an investment that cost $1,000 and is sold for $1,060 a year later is as follows:
This graph shows that the odds of an outcome increase as the expected return approaches 6%. If there were an infinite number of scenarios, the graph would look like this, but the tails on the y axis would by fully extended infinitely as the probability of an outcome approaches zero.
The expected rate of return on the Treasury bonds is the weighted average of the probabilities and returns listed in the table. Thus:
The expected return therefore is 6%…… [Read More]
As a result, we received an execution price of $65.08.
First Energy was chosen, because it can provide the portfolio with stability. As, the company is focused primarily on: the distribution and production of electricity. These two elements are important, because this resource is always in demand regardless of shifts that are occurring in the economy. I selected this stock, because it can provide the portfolio with earnings stability and consistent dividends. During times when the markets are becoming very volatile, this will ensure that the value remains steady.
Time Warner was chosen due to the fact that: they own a large cable operation and they can benefit from the shifts to digital cable. This will ensure that the company is able to take advantage of the changes in how consumers want to be entertained. As, they are: demanding more services at home and they want them to be bundled…… [Read More]
Having wealth is one thing; managing hat wealth in an effective manner such that it produces more wealth at an efficient rate is quite another. As a great deal of wealth ends up in the stock market -- where wealth can be quickly created and even more quickly eroded -- understanding how to conduct a comparison of stocks is essential for proper portfolio management. There are many different considerations that should be taken into account when selecting stocks, but one simple and straightforward method of analysis is to simply compare the past performance of stocks that are being considered. Both the price changes and the volatility of past stocks performance can be an indicator of the risk and rewards associated with a given stock, especially in comparison with other potential investments, and this can lead to a better decision regarding which investment to select for the…… [Read More]
It is expected that the bond will mirror the performance of the S & P. 500. ("Transaction History," 2010)
November 24, 2010
On November 24th several more new purchases would take place to include: General Motors, erkshire Hathaway, the Fidelity Immediate Government Fund and the Strategic Advisors Income Fund.
General Motors was selected, because it could help to provide the portfolio with above average growth. The results were that that stock would see an increase of 1.4%. ("Transaction History," 2010)
erkshire Hathaway was purchased to provide the portfolio with stability and diversification. This investment is expected to outperform the major market averages. The results were up .96%.( "Transaction History," 2010)
The Fidelity Intermediate Government Fund was selected because of their focus on medium term Treasury investments. This is expected to underperform the market averages. The results were that the position declined by 2.55%. ("Transaction History," 2010)
The…… [Read More]
That being said, the overall risks to the portfolio will vary, depending upon the type of stock that is purchased and how much diversification is being utilized. ("What are the Main Types of Stock.," 2010)
How much does a stock contribute to the return of a portfolio?
Historically the average return of the S&P 500 has been 9.8% a year. (Swedroe, 2009) However, the overall impact of the return will depend upon: the underlying amounts of growth and dividends that are received. These two factors are important, because they can cause the total return of the portfolio to vary. As a result, the overall contribution of stocks, on the return of the portfolio; will depend upon the type of equity securities that are being purchased and the holding period.
Clearly, the underlying amounts of risks and rewards will depend upon a number of different factors. As far as risks are…… [Read More]
Joy Global's success is tied to the cyclical mining industry. The firm's current P/E is 12.38, indicating a mature operating environment. As commodities markets begin to improve, growth in the mining business will pick up. Increased growth will improve Joy's multiple, perhaps up to 15 times. This will give the company a stock price of $64.95.
CTrip has a P/E of 77.21, very high but supported by the firm's high growth rate. Interest in China tourism will continue to grow at a faster rate than overall economic growth. As a result, the multiple is justified. Earnings will continue to improve at their historic rate, given the company an expected future share value of $143.61.
Gerdau's success is tied to industrial development in Brazil. The P/E is currently 64.40, which indicates a high level of growth. The Brazilian has performed well in recent years, but its growth is volatile. Gerdau's growth…… [Read More]
Stocks have fluctuated in exactly the same way. The Home Depot went up 1.46% during the first week, while Lowe's managed to go even further: 1.74%. The situation was quite the same during the second week: 1.41 for the Home Depot, and 1.11% for Lowe. The upward trend was maintained for three weeks, but the growth ratio was only 0.5-0.57. The fourth week was not so good for the two companies. Stocks went down 0.6% and 0.86%, respectively. The fifth week was not better, as the downward trend continued, but the percentage change was not that significant: 0.5%-0.6%. The stocks are currently at higher levels: $41.06 for Home Depot and $65.22 for Lowe's. Morningstar analysts estimate the fair value of the two stocks at $44 and $62 respectively.
1. Morningstar Analyst report on the Home Depot www.morningstar.com
2. Morningstar Analyst report on Lowe's www.morningstar.com
3. Information on the business…… [Read More]
("Gates, Bill," 2007) the company is in fact considered a regional financial backbone, in the Seattle-edmond area where its world headquarters are. The whole region and to some extent the whole world takes notice when Microsoft announces financial strategies and changes or when stocks rise or fall.
The software maker said it would buy back $20 billion through a tender offer set to be completed on Aug. 17. The company said that its board of directors has also authorized the company to buy back up to $20 billion worth of stock through June 2011. The company said it has completed the $30 billion stock buyback announced two years ago. "With our share repurchase programs announcement today, we reaffirm our confidence and optimism in the long-term future of the company and continue to execute on our strategy of returning capital to shareholders," Microsoft Chief Financial Officer Chris Liddell said in a…… [Read More]
Theory (MPT) and its role in asset allocation and diversification. The paper reviews arguments in favor of and against MPT, in addition to reviewing how MPT affects portfolio management.
MPT describes a theory on how risk-averse investors can build portfolios that optimize or maximize expected return based on a given level of market risk, while emphasizing that risk is an inherent factor of higher reward. MPT posits that it is possible to construct an "efficient frontier" of optimal portfolios that offer the maximum possible expected return for a given level of risk (Modern portfolio theory, 2011).
Modern Portfolio Theory
Typically, an investor looking for the ideal investment, would choose one whose attributes included high returns coupled with low risk. The ideal investment probably does not exist, but the search for it has caused financial managers and investment analysts to spend time to develop methods and strategies, many of which are…… [Read More]
financial assets in order to recommend the appropriate investment vehicle for the client. Analysis of different investment vehicles shows that ETFs are the best investment option for our clients. The ETFs are the basket of securities that combine stocks, bonds, cash, commodities and other securities. The report diversifies our investment options choosing the stocks, bonds and cash from different industries. Based on the historical data, our average annual returns are 38% revealing EU 32,997 as our annual returns from our initial investment capital of EU 100,000. After 3 years, the net worth of our investor will be EU 457,901, which include the cumulative returns and the capital. However, the net worth of our investor will be EU 5.38 Million after 10 years. The report also carries out the sensitive analysis on the investment option assuming that our investment choice is affected by the macroeconomic forces. The report reduces our annual…… [Read More]
Over the last several years, the markets have faced a tremendous amount of volatility. Part of the reason for this, is because the global financial crisis and subsequent recession caused the Dow Jones Industrial Average to decline to 6,547. Then, it would climb over 68% to cross above 12,000. This is important, because it is showing how there are tremendous opportunities for investors. However, in order to attain above average returns requires that you are using a strategy that is: embracing growth and minimizing risks as much as possible. To achieve this objective requires having: an asset allocation strategy that will incorporate balance and value. Once this takes place, it will provide the greatest insights as to how we should structure a portfolio that will maximize the total return investors are receiving in the year ahead.
The Portfolio Philosophy
The basic strategy that we will be using is to…… [Read More]
When the market crashes, turns bearish, or severely corrects, investors not only lose objective things such as money, they also lose the sustaining functions of which the investing process (and/or money, which may psychologically represent self-esteem, independence, power, etc.) has been the source. That means, in addition to objectively not having the money to buy that new house or car, self-esteem drops, and the investors capacity to calm themselves down is diminished, motivation wanes, confidence is shaken, and vitality ebbs. A down market represents an injury to our total sense of self and all the functions that sustain it. In a general way it represents a hope or fantasy lost.
For the young investor, with a large amount of earning power remaining in his life, the ups and downs of the market are small obstacles to the long-term objective of amassing a financial nest egg on which to…… [Read More]
Download stock prices companies - 22 daily closing prices company. You database obtain prices e.g. datastream, yahoo finance . Use prices September 2013 onwards. 2.Present a table companies, dates, prices returns ( %).
The 22 daily closing prices for IM, Microsoft and Apple reflect the period from October 1 to October 30. In order to calculate the price return for each stock, the previous day closing price has been subtracted from the present day closing price and the result was divided by the present day value. The result has been multiplied by 100, to reflect a percentage price return. The formula below resumes this calculation:
R% = ((Rt-Rt-1)/Rt) * 100
The table below shows the closing prices for the three selected companies (IM, Microsoft and Apple), as well as the percentage price returns for each of these companies, for the interval October 1 -- October 30.
Close…… [Read More]
Portfolio diversification as a form of risk management is one of the cornerstones of modern investment theory. According to the theory, the ideally-diversified portfolio is 'deeply diversified' within each asset class and also 'broadly diversified' across all the asset classes within the portfolio (Simon 2010:2). Asset classes consist of "stocks, bonds, real estate, commodities, precious metals and collectibles;" forms of market capitalization (micro-, small-, mid- and large-cap); style; sectors; industry types; and geography (Portfolio diversification, 2012, Investing in mutual funds). The objective of diversification is that "risk has virtually been eliminated within each class" by combining lower and higher-risk assets (Portfolio diversification, 2012, Investing in mutual funds). Theoretically, the perfectly diversified portfolio should incur no additional risks to the investor greater than what is posed by the general market conditions. There is always risk in investment, but portfolio management is designed to minimize the risk.
To achieve this objective,…… [Read More]
Target's chart, however, shows that the company has tracked the market and GDP fairly closely, indicating that perhaps it does not trade the way a discount retailer should.
Johnson & Johnson
JNJ is a pharmaceutical and consumer products company. It competes in pharmaceuticals, consumer products in the health and beauty segment and in medical devices. The company was founded in 1886 and today is a multinational conglomerate with operations in 57 countries and with approximately 250 subsidiaries.
To a certain extent, JNJ's product line is price inelastic. Pharmaceutical demand is tied to overall consumer demand and the state of the economy, but not to the same extent that many other consumer products are. As a result, JNJ would be expected to have less significant swings in its stock price relative to the GDP, other macroeconomic indicators, or the Dow Jones. The stock, however, has traded roughly in line with the…… [Read More]
Three -- Steel Dynamics, Alcoa and IE DuPont fell in excess of 6% for the week. The drop in the first two can be attributed to weakness in commodities. The other outlier was Pfizer, which was the only stock to gain this week, up 0.49%. Even fellow pharmaceutical firms JNJ and MRK dropped, indicating specific strength in Pfizer, most likely tied to merger talks. Most stocks in the portfolio, however, roughly tracked the market, which slumped on generally discouraging sentiment with regards to economic recovery, spurred by weak new home sales and durable goods sales, two key economic indicators (Perman, 2009).
Close Sept 18
Close Sept 25
Dow…… [Read More]
The first time that they attempted to build this system they did not follow the life cycle plan and the system ended up failing. Developing a new claims payment system that will talk to and be user friendly with the customer service management system would help to speed up efficiency and enhance quality of all departments within the organization. This streamlining would help the company as a whole to reduce costs and ultimately become more competitive and successful within the insurance market.
Being able to answer the following question is vital to any business. How would your organization continue to deliver mission-critical services if normal business operations were interrupted? Being able to quickly resume functioning enough to continue delivering the services that are critical to a company's mission are very important. When normal business operations are interrupted, an organization should use its business continuity plan to prevent disruption in the…… [Read More]
Components of a stock's realized return are distributions, dividends, bonds, and share price appreciation. Some kinds of stocks also offer income tax write-offs.
The characteristics of a realized return, in short, are the quantity of actual gains that is made on the value of a portfolio over a specific period of time. In other words, how much value one has received in terms of returns / gains as demonstrated in one's portfolio as a whole.
The realized return considers the profitable returns of the each of the assets contained in one's portfolios as well as each of the losses of particular assets incurred during that specific period, as a result of flucturtaitons that occurred to the market of particular assets. These are the components of each of the realized returns associated with each individual asset that is held in the portfolio.
Calculating the rate of return would enable the investor…… [Read More]
nvestments: Stock Selection
On March 9, 2009 the stock market settled on a 12-year closing low with the Dow Jones ndustrial Average (DJA), a barometer of the economy and stock market trajectory, closing at 6,547.05. (Twin, A. March 9, 2009). The precipitous plunge for the DJA from an "all-time high of 14,164.53" (Twin, A. October 9, 2007) reached on October 9, 2007 marked the timeline of the country's worst recession since the Great Depression. From the historic lows however, the market has rebounded dramatically closing at 12,105.78 on February 23, 2011, a gain of over 75% from the March lows (CNBC.com. February 23, 2011). The vicissitudes of the stock market over the past three plus years limn the debate over whether an investor who is risk averse would choose to invest in a stock market in which all stocks rise and fall together, or a market in which individual stocks…… [Read More]
(Dow Jones and Company, 2009). The DJIA can be used in three principal ways: as a yardstick, as a barometer, or as an investment.
When the DJIA is used as a yardstick, the goal is to measure performance from one period of time to another:
The most common use of an index by investors is to evaluate the performance of their own portfolios on a monthly or quarterly basis. This is the "benchmark" function of an index, and it constitutes the bogey that many investors try to beat with individual stock picks or with mutual funds. There is no official benchmark for the stock market. Each investor chooses his or her own. The only logical requirement is that the benchmark chosen should represent the part of the stock market that is targeted by the investor's portfolio. For example, if the investor dabbles in large stocks from a variety of industries,…… [Read More]
These types of investments are often illiquid, so the investor needs to view them as long-term investments. However, the lack of liquidity also means that for the most part they have low levels of correlation with the broad market.
Derivatives are another possibility, and their potential impact on the portfolio will be discussed in the next question. They can either increase risk or decrease risk, depending on the type of derivative and how it is used.
Overall, the impact of alternative investments is to reduce the degree to which the portfolio is subject to the equity and fixed income markets. Alternative investments are often used as an ancillary component of the portfolio, to reduce the portfolio's overall volatility but with the hopes that returns will not suffer as a result.
3. Derivatives can be used for a couple of different purposes in a portfolio. The first is to increase leverage…… [Read More]
One of the most significant factors in the decision to invest in ICICI Bank is to determine the affects of recent capital expenditure and the anticipated return for these investments. Entry into microfinancing represents a considerable amount to risk, due to the financial instability of the target market. The following chart highlights the most significant changes affecting the financial health of ICICI bank that result from expenditures associated with entry into the rural finance venture. It compares key indicators and explains the effects of ICICI's most recent changes to their banking strategy.
Income Statement for years 2003-2006 (in millions USD)
Cost of evenue
Balance Sheet for years 2003-2006 (in millions USD)
Cash Flow for years 2003-2006 (in millions USD)
Net Cash Flows Investing
Net Cash Flows Financing
Net Cash Flow
Data Source: Nasdaq.com (2007).
The income…… [Read More]
The John Deere Health Pan was conceived of to provide quality health care at reasonable costs for its many employees, and also for its non-employees in Deere and Company in the states of Illinois and Iowa and Tennessee and Virginia. (McCollum, John Deere Health cultivates successful IT Project Management)
What Michael McCollum felt was that his IT department was like the IT Department at many other corporations, with many more projects than appropriate resources for them, and no practical and effective method with which to prioritize them, and to make a definitive analysis of which project would have a greater impact on the company, and which the least. In the same way, the organization lacked the means by which a particular project could be assigned with appropriate resources to the appropriate person, and more often than not, priority was decided on the requestor's persistent efforts, or on his management skills…… [Read More]
Such events are usually difficult, slow, and distasteful processes. Figuring out whether bond obligations are likely to be fulfilled by issuers is best left to bond investment specialists.
Securities pricing is the bond market is complex and different from the stock market. hile a firm usually has only one kind of common stock, it could have dozens or even hundreds of different outstanding bond obligations. Setting current bond prices is complex. Few individual investors have the required skill, knowledge, information, and experience to make such assessments.
For individual investors it is much more straightforward simply to hold bonds through a bond fund. Once a bond fund establishes its "style" for the type, maturity, and quality of bonds it will hold, it selects and purchases bonds with an eye toward maintaining that style. Maintaining targeted maturity is relatively straightforward. Determining investment quality is less straightforward, but bond mutual funds have analysts…… [Read More]
How important is it for you to diversify your investment portfolio?
An investment portfolio is extremely important to diversify primarily because it shows a unique approach towards business. A diversified portfolio will ensure that the individual or company is not only smart in their investment but it will also show other companies that wide array of knowledge of the industry that the investor has. The importance of a diversified portfolio lies in the fact that it provides the investor a wise perspective on the market and allows him to handle the entire range of investments in a calculative and profitable manner. A diversified portfolio also portrays an image that the investor is skilled in assessing and reacting positively to the different market and investment sectors (Allen, 2008).
The biggest advantage of having a diverse portfolio is the fact that the risk factor decreases to a level that is…… [Read More]
Employee Stock Ownership on Employees in the Airlines Industry since September 11th.
Review current materials on the issue.
Airline industry ESOPs tend to be very volatile.
This paper will examine the effects of the September 11th tragedy on employees' employee stock ownership plans in the airlines industry. The following generic information is provided for background before examining the main issue for this paper.
In the United States, the main vehicle for employee ownership in a company is the Employee Stock Ownership Plan (ESOP) which first became a recognized plan in 1974. There are between 17 and 20 million U.S. employees participating in large ESOPs or other contribution plans holding stock. Employees may own stock directly in their companies through stock purchase programs or be members of work cooperatives.
Studies find the employee ownership has a positive impact on performance even in adverse times. September 11th adversely affected the majority of…… [Read More]
Indian Stock and Bond Markets
Do you think an investment in the Indian stock market is a good long-term investment?
The Indian stock market has experienced a number of fluctuations over the past 20 years or so that would suggest that investors might want to adopt a "wait-and-see" approach before making the plunge into these financial waters. For example, Schmidt and Hersh emphasize that, "The history of the operation of the Indian stock market has been dotted with brokers often unable to meet their commitments, allegations and proved instances of insider trading, and deliberate manipulation of stock prices by bears and bulls" (2000, p. 131). The prices for stocks listed on the Indian stock have experienced a number of highs and lows, with the most significant boom taking place during the period 1993 to 1995; however, although there have been some spikes, there has been a downward trend experienced since…… [Read More]
As Mokoaleli-Mokoteli et al. (2009) point out, though, previous research has confirmed that while it is accurate to suggest that analysts provide optimistic reports on the majority of the stocks they include in their analytical portfolios, such recommendations do not routinely affect the market in any substantive way. According to these researchers, "After accounting for risk and transaction costs, investors do not earn better than average returns from following analysts' stock recommendations" (Mokoaleli-Mokoteli et al., 2009, p. 388). There is also the matter of the human propensity to be overly optimistic in those situations where there are complex issues involved, a tendency that has also been well documented in the scholarly research (Mokoaleli-Mokoteli et al., 2009). According to Mokoaleli-Mokoteli and his colleagues, "Both analyst overoptimism, as measured by the tone of their report, and conflicts of interest distinguish between new buy and new sell recommendations. This is consistent with the…… [Read More]
UnitedHealth Group Stock
This report will provide insight into the UnitedHealth Group Stock from an investor's perspective. The report will show a financial analysis included with an overview of the company's current health standing. The paper will also provide a summary of the company and their products and services. The key to any intelligent investing strategy lies in the investor knowing what a stock is really worth and also if it is safe to buy, sell or hold. Therefore, since this report is from an investor's perspective, the company's stock and industry will be reviewed so as to present a big picture of where United Health is today and where they want to go in the future.
Over the five past years the UnitedHealth Group stock has been making great progress as analysts consistently consider the group a strong buy option. As can be seen from the two…… [Read More]
50) to 2097 -- the price of this bond is of $58 (Yahoo Finance, 2009).
Despite their past low popularity, the investors are now beginning to seek more vividly the Ford preferred stock (F-PF) and this is generally explained by the fact that the popularity of the common stock has suffered demises. The company officials have decided to allow owners of common stocks to exchange them with preferred stocks and vice versa, in order to increase investor satisfaction. The preferred stock is being traded at a value of $38.86. Preferred stocks are among the riskiest investments and the specialized advice is that they be kept for long periods of time, but in small amounts. Additionally, it is necessary to diversify the portfolio and the preferred stock should not make up more than one percent (Neubert, 2007).
Neubert, D., 2007, Ford Preferred (F-PS): Used Only with Diversification, The Panelist, http://thepanelist.com/Neubert%27s_Trades/Neuberts_Trades/_20070805502/last…… [Read More]
S. market for counterfeit goods and if Coach and other companies are taking advantage of law. It is foolish according to the attorney of Kim for Coach to threaten its customers with $2 million lawsuits and before antagonizing customers the company must do a minimal investigation and it is not known how many customers got scared and paid off Coach. Kim, had worked for the Coach in 2004, filed suit saying among other major charges that the company wanted to suppress online sale of used items to pay high prices to the company for a Coach handbag. There is a problem for all companies which grapple with counterfeiting and it is often seen on Craigslist and eBay. Along with Kim one more eBay seller, James Caffarella of Littleton, Mass was also sued when he tried to sell legitimate silver golf-ball Tiffany key chain using a stock photograph. He too received…… [Read More]
The first component is as follows: Net Margin = Net Income/Sales. How much profit Abbott laboratories makes for very $1.00 it generates in revenue, and the higher a company's profit margin the better. The second component is as follows: Asset Turnover = Sales/Total Assets. The amount of sales generated for every dollar's worth of assets. This measures Abbott's efficiency at using assets, and again, the higher the number the better. The final factor of the Du Pont analysis is as follows: Leverage Factor = Total Assets/Shareholder's Equity. The higher the number, the more debt the company has. Abbott's Du Pont analysis is computed using the following equation:
In this case, for the end of 2006, Abbott Laboratories reported a net income of $717 million dollars, sales of $22,476 million, total assets for 2006 of $36, 178 million, and equity of $14,054 for 2006. Placing these figures into the equation above…… [Read More]
Assessing WalMart Cost of Equity
Cost of Equity Using CAPM
To calculate the cost of equity using the capital asset pricing model (CAPM), the equation requires collection of some data regarding the firm and the market. The equation tells us what data is needed, the equation is cost of equity = F + ?(M - F). F is the risk free rate, M is the return on a market portfolio, and ? is the beta.
The equation starts with the requirement to determine the risk free rate (F). The risk free rate is usually the current rate for government bonds. There is some flexibility here, as government bonds are issued over different periods, a common term used is the one year bond rates. The current rate given for 20th December 2013 is 0.13% (U.S. Department of Treasury, 2013).
The next input is the return on the market portfolio. This…… [Read More]
There are three different models that can be used to estimate a company's cost of capital. Basically, each of these three is used to estimate the cost of equity. The cost of debt is usually calculated on the basis of the current weighted average of the yield to maturity on the company's debt. Thus, it is the cost of equity that must be calculated. The cost of equity reflects the return that the shareholders need to be paid in order for them to own the stock. This have given us three major approaches to calculating the cost of equity.
The first of these is the capital asset pricing model. The formula for this is:
The cost of equity therefore reflects three major components. The first is the risk free rate, which is inherent in all securities. The second is the market risk premium, which is added to…… [Read More]
Stock Market Investing
Stock market investing is not new to me. In fact, I plan to invest in the stock market in future because I have adopted the overly cautious investment approach for too long. It is now time for me to move into risky investments that will help me cash after a large fall. However, I will be risking making a temporary loss to be permanent. The global direction taken by many stock market investors is one showing relentless efforts: their continual rise is valuable over a long time. It is also punctuated by regular or even very significant falls. The rule displayed by the stock market is that it rises, falls and recovers one-third of the time.
For me, investing will mean looking at the different asset classes available to enable me to spread the loss because long-term investment in the stock market means that they are like…… [Read More]
ith the health food trend in full gear, Amplify Snack Brands, Inc. (BETR) is a perfect stock for one's portfolio. Q1 2016 Earnings showed a "net income increased 71.3% to $8.4 million, or $0.11 per share, compared to $4.9 million, or $0.07 per share a year ago" ("Earnings Reported After the Bell May 2"). Sales were up over 20% compared to the same quarter the year previous and the company slightly beat analysts' expectations. Growth for the company looks positive with analysts expecting yearly revenues to report a "net income of $.062 per share" ("Earnings Reported After the Bell May 2").
Thus, from January to May 2016, BETR has been on a tear, breaking out of its range bound trading from January to March after the 2015 earnings report. The stock soared from $11 to $16 from mid-March to May with considerable volume buoying the stock over the 2…… [Read More]
To generate returns within the day-trading of stocks, it is imperative to find stocks that will, in a short span, appreciate and increase in value. This encompasses making a sophisticated approximation about demand for the firm’s products or services as well as making certain that the stock chart is indicative of an upward trend or a rebound (Johnston, 2017). In this regard, the three main stocks that were selected for trading include Amazon, Broadridge Financial Solutions, Inc., and the Brink’s Company. The following is a portfolio indicating the shares that have been selected and purchased and the total number of shares purchased as well as the total cost incurred in this transaction.
Number of Shares
Proctor & Gamble Company
Wells Fargo & Company…… [Read More]
Open communication is key to organizational success, and this openness can be demonstrated to employers through honesty and forthrightness (within the bounds of professionalism, of course) during the interview process.
In addition to these directly employment-related knowledge and skill areas, the course I took in Personal Finance will have a substantial positive impact on the way I approach my profession and my attractiveness to potential employers. Not only have I been provided with information on how to spend wisely, save appropriately, and even gauge investment opportunities in my personal life -- all of which will give me enhanced stability and security, which will be seen as a benefit by potential employers -- but these skills will also transfer to my profession in terms of assisting home health care recipients and practitioners alike in reducing their own expenses and thus providing additional value to expected services and relationships. In addition, appropriate…… [Read More]
asset classes, setting out their characteristics and risks.
Australian shares are shares in the market of publicly traded companies that range from small to medium to large-cap stocks. Shares can or cannot provide dividends to shareholders, depending on their makeup. Shares can increase or decrease in value, depending on a number of factors ranging from fundamental valuation to market or sector conditions, to laws of supply and demand to market psychology, momentum and stop-hunting algorithms. Trading shares in today's market conditions can be viewed as more perilous than ever before because of the inherit risk of losing to HFTs, of improperly hedging one's investment and being exposed to downside risk, and of improperly diversifying or investing in the wrong sector or company at the wrong time (for example, as it is poised to pull back, collapse, or be diluted through toxic debt).
Australian bonds can come in the form of…… [Read More]
Equities and Energy Options
The trades executed are for long MSFT, short AAPL in tech; long XOM and short CHK in energy. These trades are based on both sector sentiment and fundamentals. MSFT appears to be in an outperform trend while AAPL is poised to underperformed following poor sales data in China, slowing down of growth.
In energy, the price of oil is a big factor in any stock's performance and with crude hitting a ceiling at $50, it will not be good for companies like CHK which are overwhelmed by debt and need oil prices to be higher in order to maintain any kind of leverage. XOM on the other hand is in an outperform trend which looks to continue as it nears a deal with Russia to deliver gas to China and as the company continues to invest along these lines, giving it an outlet should oil prices…… [Read More]
alternative investment vehicles have been using by the investors to reduce the risk and maximize the profit. In this paper, we will discuss alternative investments opportunities and reducing the risk of portfolio by using the stock index future. Buying or selling the stocks is highly risky because of weak economic conditions. Investors should include various types of assets in the portfolio so that portfolio will not suffer the impact of a decline of any one security. For example; if an investor uses stocks and bonds in his/her portfolio, if stock price decline due to market fall then, the bonds would get higher return and it will eliminate the risk of decline. In the portfolio management it says that "not putting all eggs in one basket," it means investor should not invest in only one asset; they should construct the portfolio containing various types of assets. Thus, the portfolio must be…… [Read More]
eta of CSX Railroad
Find the eta of CSX
What is the estimated beta coefficient of CSX? What does this beta mean in terms of CSX to include them in my overall portfolio?
The estimated beta coefficient on CSX is 1.24. It is used to determine the underlying volatility in the stock. In general, when you see a beta factor greater than 1.0 this is an indication that the security is more volatile than the stock market average. In the case of CSX, the reading of 1.24 indicates that the stock is 24% more volatile than the major stock market averages. This will increase the overall amounts of volatility in the portfolio. While providing, a way to see above average returns, because of the increased volatility. ("eta," 2010)
Given the beta of CSX, the present yield to maturity on U.S. government bonds maturing in one year (currently about 4.5% annually)…… [Read More]
For each of the scenarios below, explain whether or not it represents a diversifiable or undiversifiable risk. Explain your reasoning a. It is announced that a company is under investigation from the federal government for fraudulent accounting practices.
This represents a diversifiable risk. This risk is unsystematic and is unique to the company that is under investigation. Hopefully, if this stock was part of a portfolio, the effect of this risk will be relatively small on the overall value of the portfolio.
A major terrorist attack occurs in the U.S. again.
A terrorist attack would be an undiversifiable risk. The consequences of the attack would ripple through the entire economy and would influence a large number of assets. This market risk is systematic and can't be eliminated by diversification.
c. A large increase in the price of oil.
Although this development might affect a range of stocks the risk…… [Read More]
Article 3: Evaluation of high- and low- risk investment projects
Ispas, Constantin, Eduard Lovin, & Dana Tilina. (2009). Risk analysis in investment projects.
Annals of DAAAM & Proceedings. Retrieved October 23, 2010 at FindArticles.com http://findarticles.com/p/articles/mi_7105/is_2009_Annual/ai_n53386583/
Accurately evaluating the technical, economic and social risk of a new investment project is critical. Common potential risks include errors in evaluating opportunity growth; errors in data-gathering; misevaluating the priority of the economic objective to be achieved, mis-projections of project scope (otherwise known as 'project creep'); and radical and unexpected changes in the economic environment. Evaluating risk is a multi-faceted process. It entails an understanding of the physical, functional, and staff required to realize the project; assessing vulnerabilities and possible remedies; risk adjustment; prioritizing on organizational risk hierarchies; making risk comparisons within the organization and globally; and appropriate use of risk matrices.
Article 4: Valuation of stock and stock portfolios
Lerzan, Aksoy, Bruce Cooil, Christopher…… [Read More]
Are there potential risk reduction and diversification opportunities in adding commodities to a Norwegian investor's asset portfolio?
ecent global economic turmoil has inspired investors all over the globe to look for ways to protect their portfolios and to continue to make them grow despite a weak economy. Investments in commodities have been suggested as a solid hedge against future turmoil in the markets. The question is whether this is good advice or not for investors of all types and operating in different home economies. It is difficult to make a suggestion that will work for every investor and in all parts of the world. Therefore, the potential for commodity investing as a hedge against future instability is a question that must be answered for every country in the world on an individual investor basis. This research will explore whether commodity futures can be added to the portfolios of…… [Read More]
Difference between FF and Markowitz Portfolio Theory
Fama-French Three Factor Model
Eugene Fama and Kenneth French designed Fama-French three factor model to describe stock returns. Fama -- French model uses three variables. They added two factors to CAPM:
r = RF + ?3 (Km -- Rf) = bs . SM + bv . HML + ?
r = portfolio's rate of return,
RF = risk-free return rate,
and KM = return of the whole stock market.
Over 90% of the diversified portfolios returns are explained by the Fama-French Three Factor model. It further measures investment returns with academic and mathematic approach. Consequently, the "small cap" stocks and stocks with a high book-to-market ratio provide a more return than the general market. For Fama and French, high returns are a reward for high risk, which means if returns increase with price, stocks with a high price ratio should be…… [Read More]
Does having two companies' stock increase the expected value of your portfolio? If not, then why is diversification a good thing in this example?
Having the portfolio which consists of two equal stocks doesn't increase portfolio's value, which will remain the same ($105,000), yet it decreases the risk of winding with nothing, as the probability of winding with nothing in case portfolio consists of two companies' stocks is twice smaller (0.25 against 0.5) and the probability of favorable outcome is 0.75 compared to 0.5 for a one company stock portfolio.
A d) Calculate the probability that you will end up with nothing, and the probability that you will end up with $210,000, for each of the following cases: splitting your money evenly between 3 stocks, between 5 stocks, and between 10 stocks. What is happening to the probability of "in-between" outcomes as portfolio diversification increases in this example (no exact…… [Read More]
Risk Management 
If you believe a stock will appreciate and want to risk little to speculate that the stock will rise what are your option?
Holding a call option is fairly low risk because it would allow me to buy future stocks at a current price. An increase in stock value would limit my losses and allow me to profit by means of leveraged speculation. As a holder exercising a call option, I would be able to benefit from the same profit in underlying stock by paying only a minimal amount of money. By risking only a small percentage of my capital towards an insurance premium, I am potentially able to benefit from trends and hedge away risks within the call-option deadline.
Potential losses can be offset against either long-or-short stock portfolios by means of trading call strategies. A Fiduciary call would allow for a reduced capital outlay by…… [Read More]
Technical Analysis in the Implication of Efficient Market Hypothesis on Silver Market
The thesis is for the study of simple commonly used technical trading rules, which are applied on silver market. It covers years 1989 to 2005. A famous study carried out by Lakonishok, Lebaon and in year, 1992 has clearly shown that technical analysis can lead to abnormal prices when compared with buy-and-hold strategy. Other studies have been carried out and found out that technical trading rules cannot over-rule passive investment management strategy. The study uses Brock et al.'s methodology. Several trading rules are discussed (Dawson & Steeley 2003).
In financial theory, efficiency of financial silver market is highly disputed. This has led to many attempts to explain efficiency of silver markets. Eugene.F. Fama formulated the most famous definition in 1970 referred to as the, Efficient Silver market Hypothesis (EHM). The basis of the hypothesis is that…… [Read More]
In contrast with the mutual funds, 'Mutual funds trade hundreds of stocks in many unrelated industries, with very little of the total portfolio in any single stock. By contrast, when a company expands into a new area, its portfolio consists of two stocks, typically 90% in the core operation and 10% in the new businesses' (Tirole, 2005). The diversification in majority of the cases is responsible for lower return and maximal risk factor. esearchers have observed that there is possibility of higher failure rates and lower returns for unrelated acquisitions than for related acquisitions. When the company acquires businesses in their own industry, it is observed that lowest failure rates and highest returns phenomenon occur. The reason why the diversification into unrelated business is considered to be risky is that the corporate is unfamiliar about the industry itself, and therefore the corporate is likely to overlook critical risk factors during…… [Read More]
The optimal payoff is $0, which would occur under scenario D1, O1.
The EMV for the first decision, which is the decision not to evacuate, is the highest. The reason for this is that the costs associated with the hurricane hitting the area, and the area not being evacuated, are very high. If the hurricane does not hit, the do nothing option has the lowest cost, but because of the risk of the hurricane hitting at least partially, the EMV for this option is the highest. The EMV for the second decision is the second-highest. This is a recommended evacuation, which incurs some costs, but a lower dollar value than the cost of a full evacuation. There are some savings, but the EMV is still fairly high.
The lowest EMV comes with a mandatory evacuation. This has the highest base incurred cost, but the likelihood that the hurricane…… [Read More]
Because Ameritrade's Initial public offering was in March of 1997, the time series is to short for estimating beta (August 1997), as the provided data will give inaccurate results. That's why in order to estimate beta for Ameritrade correctly we can refer to the finance data of the comparable companies. It means that we should choose companies, which have cash flows with similar risk indexes, as these companies will have same asset beta indexes. For running such test 14 different firms in 4 industries (investment services, Internet services, discount brokerage, internet) were chosen: A.G. Edwards, Bear Stearns, Lehman Brothers, MSDW, Paine Webber, . James, Merrill Lynch, Mecklemedia, Netscape, Yahoo, Charles Schwab, E*Trade, Quick & eilly, Waterhouse Investor Services.
We can use the following formula to calculate beta for the firms above:
In order to estimate reliable results we should choose firms, which specialize in brokerage services. Discount brokerage firms get…… [Read More]
disrupting America's economic system is a fundamental objective of terrorists
Even as the world continues to struggle with the terrible shock from the September 11 attacks in New York and Washington, one principle lesson has already become clear: disrupting our economic system is a fundamental objective of terrorists.
Prior to September 11, our economic environment was certainly not immune to terror, in comparison to many other nations; we lived relatively terror-free. Now, however, the aftermath of the terrorist attacks serves as a grim reminder that international relations and security developments can dramatically affect economic performance.
US History is replete with countless examples when macro fundamentals are overtaken by what economists refer to as, exogenous shocks -- surprise events that can profoundly and often unpredictably shift political and economic resources, and send even the most accurate forecasts astray. Commodity shocks, such as the two OPEC jolts in the 1970s, are classic…… [Read More]
The company I am going to use is Google. According to Yahoo! Finance (2012), the beta for Google is 1.18. This beta means that the company has a greater risk than the market overall (Investopedia, 2012). The market risk is 1.0, so a beta greater than this indicates that the firm's stock is more volatile than the broad market. A beta below 1.0 indicates that the firm's stock is less volatile than the broad market.
The current maturity on one-year Treasuries is 0.18%, according to FRED (2012). If we assume a market risk premium of 6.5%, the cost of equity for Google can be calculated with the capital asset pricing model:
The estimated rate of return for Google using CAPM is 7.85%.
Two other companies are FedEx and Southwest Airlines. The beta for FedEx is 1.62 and the beta for Southwest is 1.23. If a portfolio is…… [Read More]
She is well-connected within the community and is confident that her business would be profitable within a year or two. She has a strong, charismatic personality and is also connected to Milwaukee's artistic community through her husband's architectural work restoring some of the city's beautiful historic buildings. She has a considerable portfolio, and occasionally sold stock photos or worked as a wedding photographer when she was in law school.
Laura realizes that in the current market, individuals and companies may be cutting back on "luxuries" like professional family and staff pictures. However, she has a range of expertise in architectural and interior photography as well as portrait and event photography. She is willing to diversify her skill set and pursue further education if necessary, although in her field an additional artistic degree would only be desirable for teaching or competing for gallery showings at a national level.
According to her…… [Read More]