Finance 3050 Investment Project Outline

Finance 3050

2016 Investment Project Outline

 Part 1 is worth 10% of the Project.

Part 2 & 3 is worth 90% of the Project.

 

1. You begin the project with $100,000 to invest.

2. During the first week of the semester, you must select five (5) companies for your portfolio. These companies must be worth at least $5 per share at the time you purchase the stock.  The Company must be listed on an US Exchange and must have traded on an exchange for at least one year and must have a Beta.

3. Use the closing prices on Friday, May 20^th, when setting up your portfolio. You will decide how much of the $100,000 to invest in each stock.  You then divide this amount by the price of the stock to arrive at the number of shares you are purchasing for each of your five stocks.  Round the number of shares to the nearest whole unit.  Do not use fractional shares.

($ Amount Invested / Price per Share = Number of Shares)  All Money should be used.

4. At the beginning of class on May 24^th you will hand in:

1). The names and ticker symbol of the five companies you selected and

2)  How many shares you purchased of each stock.

3)  The Purchase Price of each stock as of May 20^th.

4)  The Beta of each stock.

5)  The Starting Value of the S&P 500.

5. You may not use any derivatives, options, mutual funds, ETF’s, shorts, etc. (Only Stocks!)

6. There is no trading. Once your stocks are selected, you must keep and follow the same stocks the entire semester.

7. Along with your five stocks, you need to track the S&P 500’s weekly value. This market index will serve as the “Benchmark” for our game.  Each week you need to compare your portfolio’s performance to that of the index.  The S&P 500’s value can be found each day on the front of the Money & Investing section of the Wall Street Journal or any investment website.

8. Set-up a spreadsheet to track your portfolio’s performance. Remember to use the closing prices for the stocks on Friday of each week.

Helpful Websites:

• http://finance.yahoo.com
• http://finance.google.com
• http://bloomberg.com/markets

PART 2

1. At the end of the semester, you will hand in a final summary of your portfolio.  The summary should be 1-2 pages single spaced and must answer the following questions: Each is scored 5 points out of 100 for a total of 25 points possible for Part 2.

1. How did you select your stocks? What criteria did you use?
2. What is the beta of your portfolio? (Use a weighted average of each stock’s beta according to what percent of your portfolio is represented by each stock

• Did your portfolio take more risk than the market? Include your calculations.

1. Did you beat the market (our Benchmark) based on the amount of risk taken? Include your calculations.
2. What did you learn from the game and what would you do differently given your new knowledge?

1. Once again, use the closing prices of the stocks on every Friday during the semester. Your final write-up and spreadsheet along with Part Three explained on the next page.

PART 3

Using the material and information from this course, you will need to perform an in-depth analysis on one of the five companies you selected in Part One and prepare a written research report on this company.  Your target audiences are portfolio managers and analysts. Part Three should be no longer than three pages of single-spaced text and three optional pages of graphs, charts, spreadsheets, etc.  The optional items should be used to illustrate and back up the body and conclusion of your research report.  Do not include copies of financial statements or charts from the 10K/10Q as the portfolio manager already has access to these items.

The goal of the research report will be to determine the intrinsic value of the selected company through use of a valuation model.  You may determine that the company is overvalued, undervalued, or fairly valued based on your calculations. The important aspects of the report will be the method and logic you use to come up with your “accurate” valuation.  The structure of the report and the date/exhibits will be left up to you.  There is no right or wrong report format.

You may use any valuation method as long as it makes sense and you effectively back-up the report’s conclusion. Include a copy of your valuation spreadsheet as one of your exhibits.

One useful tip is to become familiar with other Wall Street research reports and see how the “Pro’s” value an individual company.  Once you have your valuation, be sure to compare and contrast your valuation vs. that of the current market.  Remember that you will be graded on how well you make your valuation case, using a valuation method that is both sound and accurate.

Major topics to cover in the report:  Business model analysis (10 Points)

Risk/Return and Financial Ratio analysis discussion (15 Points)

Historical and Future performance (10 Points)

Earnings and Cash-flow analysis (15 Points)

Assumption Justification (10 Points)

Intrinsic Value and Valuation Model. (15 points)

Length:  Parts 2 & 3 combined should not exceed 5 written pages.  The report should be short, concise and accurate. Investment Project Outline

Make sure you complete both Part Two and Part Three of the investment project and turn them in together.  Investment Project Outline Investment Project Outline Investment Project Outline