Final Project
Investment Analysis & Portfolio Management
COURSE OBJECTIVES
Upon successful completion of this course, the student will be able to:
1. Assess the characteristics and risks of stocks, bonds, money market, and property investments2. Evaluate the purpose and function of stock markets, interest rates, and international regulation
3. Analyze capital market theories, market efficiency, and the role of diversification in portfolio management
4. Prepare an investment analysis utilizing economic concepts, financial ratios, and market behavior
5. Examine hedging activities, stock options, and currency derivatives
CASE DESCRIPTION (OR BACKGROUND INFORM ATION)
Smith & Jones, LLC is a large national investment firm specializing in personal financial planning and portfolio management. You were just hired as a portfolio manager in their downtown Chicago office.
A client comes to you wishing to invest $500,000. Personal background information on the client is as follows: the client is a 37 year old marketing manager with an annual salary of $68,000. The clients spouse, also 37 years old, works part-time as a freelance journalist earning approximately $24,000 annually. They have two children ages 11 and 8 and live in a suburb of Chicago. They both hope to retire at the age of 62. The client participates in an employer-sponsored 401k plan, but has no other retirement savings. The couple recently received the $500,000 from an inheritance. They wish to invest the money to fund their future retirement.
You will construct a well-diversified portfolio for the client utilizing at least 90% of the investment or $450,000.
The portfolio should include a combination of four of the following options. Choose the four investment categories that you feel would best suit the client’s needs.
1. Common stock
2. Preferred stock
3. Bonds
4. Mutual funds
5. Property investments
6. Futures
7. Options
© 2013. Any unauthorized reproduction or distribution of this material is prohibited without express written permission. Students are expected to maintain the integrity of the assignment by refraining from reproducing or posting the assignment or their completed work where it can
be viewed by current or future students.Final Project
Investment Analysis & Portfolio Management
For this project, you do NOT need to list any specific stocks, bonds, or mutual funds by name. Rather, you will simply indicate the percentage of the total portfolio to be allocated to each investment category chosen and justify that investment strategy.
PROJECT INSTRUCTIONS
1. Provide the four selected investment categories for the client’s portfolio and the associated percentage allocations for each category relative to the entire portfolio. Discuss your diversification strategy.
2. Evaluate the risks and potential returns for each of the four investment categories that you chose to include in the client’s portfolio. Explain why the relationship between risk and reward for each category is appropriate for your client.
3. Distinguish the advantages and disadvantages for each of the three investments options that you chose not to include in the client’s portfolio. Explain why each category of investment was not the best choice for your client.
4. Examine how current and projected future economic conditions affected your selections for the portfolio. Discuss at least three specific, relevant economic factors.
5. Assess the impact of US and international regulation on investment decisions and portfolio management. Provide at least three examples of regulatory influences.
6. Choose two specific publicly-traded companies that you might consider including in the common stock portion of the investment portfolio. For these two companies, you will perform a detailed investment analysis. You will evaluate each company’s price ratios, profitability ratios, financial condition, investment returns, and management efficiency indicators as they compare with the industry and S&P averages.
MSN Money provides key ratios including industry and S&P averages for publicly held companies. To obtain the information needed to complete this section of the project, visit http://money.msn.com/investing. In the box that says “enter a name or symbol,” type in the ticker symbol or company name and select “get quote.” In the vertical menu on the left side of the screen, select “key ratios.” The first ratios that appear are related to growth. Beneath the stock price on the page, you will see a horizontal menu listing different ratio types. Select each type to view the key ratios for the company along with the industry and S&P averages.
A) Price ratios – Provide the following ratios along with the industry and S&P averages for both of the selected companies.
i. Current P/E ratio
ii. Price/book ratio
iii. Price/cash flow ratio
© 2013. Any unauthorized reproduction or distribution of this material is prohibited without express written permission. Students are expected to maintain the integrity of the assignment by refraining from reproducing or posting the assignment or their completed work where it canbe viewed by current or future students.Final Project
Investment Analysis & Portfolio Management
Discuss the results and explain which company appears strongest based on price ratios.
B) Profitability – Provide the following ratios along with the industry and S&P averages for both of the selected companies.
i. Gross margin
ii. Pre-tax margin
iii. Net profit margin
Discuss the results and explain which company appears strongest based on the profitability ratios.
C) Financial condition – Provide the following ratios along with the industry and S&P averages for both of the selected companies.
i. Current ratio
ii. Quick ratio
iii. Debt-to-equity ratio
iv. Interest coverage ratio
Discuss the results and explain which company appears strongest based on the financial condition ratios.
D) Investment returns – Provide the following ratios along with the industry and S&P averages for both of the selected companies.
i. Return on equity
ii. Return on assets
iii. Return on equity (5 year average)
iv. Return on assets (5 year average)
Discuss the results and explain which company appears strongest based on the investment return ratios.
E) Management Efficiency – Provide the following ratios along with the industry and S&P averages for both of the selected companies.
i. Revenue per employee
ii. Receivable turnover
iii. Inventory turnover (if applicable)
iv. Asset turnover
Discuss the results and explain which company appears strongest based on the management efficiency ratios.
F) Conclusion/Recommendation – Analyze each companys overall performance and position compared with the industry and S&P averages. Based on this analysis, explain whether you expect each companys stock price to rise or fall within the next year. Choose the company that you feel is stronger to include as a component of the clients common stock portfolio.
© 2013. Any unauthorized reproduction or distribution of this material is prohibited without express written permission. Students are expected to maintain the integrity of the assignment by refraining from reproducing or posting the assignment or their completed work where it can be viewed by current or future students.Final Project
Investment Analysis & Portfolio Management(CO4)
7. Prepare a PowerPoint presentation for your client summarizing your investment plan, diversification strategy, and investment analysis techniques. The presentation should be 10 to 15 slides.
Reviewing your paper before submission is very important. Please complete the following steps to ensure that your paper is ready for submission.
1. Edit your paper closely for grammar, mechanics, and typing errors. If you prepare your paper in Word, you should review any green or red lines in your paper as those lines indicate possible grammar problems or spelling errors.2. Review the format of your paper. Does it conform to the appropriate format? In the project instructions, it will specify the format for the project. If your paper requires APA and you need assistance with APA format, see the APA section of the Online Writing Lab (OWL) at Purdue University at http://owl.english.purdue.edu/owl/resource/560/01/.
3. Check your references. If you have used someone elses original writing, ideas, or material in your paper, you need to cite it and include the full reference in a reference page at the end of your paper. All references should be formatted according to APA style regardless of the format of the project.
4. Review your paper using the project scoring rubric. Print out the scoring rubric in the Project section of your course. Using the scoring rubric, review your paper as if you were the faculty member grading the paper. Make any necessary additions or changes to your paper based on your review. You can greatly improve your chances of passing the project on your first attempt if you self-evaluate your work using the scoring rubric and make any needed corrections. The evaluator will use the same rubric to evaluate your work.
PROJECT SUBMISSION
1. A title page is not required for project submissions. Because evaluators do not see student names when reviewing student work, it is important that students not include any personal identifiers in their project submissions.2. Save your document as a PDF file. In Microsoft Word, you can use the Save As option to select PDF as your file format.3. If your project requires a video, you should post the video to a free video hosting site like www.youtube.com, www.photobucket.com, or one of the other free webhosting websites. The following website maintains a list of video hosting sites; http://www.videohostings.com/.In the written materials that you submit as part of the assignment, you should include the title of the video and a link for the faculty member to use to grade your submission.4. Upload the PDF file in your course
5. Your assignment will not be returned to you, so keep a copy for your files.
© 2013. Any unauthorized reproduction or distribution of this material is prohibited without express written permission. Students are expected to maintain the integrity of the assignment by refraining from reproducing or posting the assignment or their completed work where it can
be viewed by current or future students.
