Portfolio Final Report

By: Med Amine Bekkal

Investment Management I

Spring Semester 2014

The Beta for each stock:

Netflix: 2.07 KB Home: 2.41

Yelp: 2.76 Dow Chemical: 1.69

Lockheed Martin: 0.66 Pfizer: 0.78

McGraw Hill Financial: 0.93 Exxon Mobil Co.: 0.92

Cisco Systems: 1.25 JPMorgan Chase & Co.: 1.93

Source: Finance.yahoo.com

Netflix: 2.07 KB Home: 2.40

Yelp: 2.76 Dow Chemical: 1.69

Lockheed Martin: 0.63 Pfizer: 0.78

McGraw Hill Financial: 0.91 Exxon Mobil Co.: 0.90

Cisco Systems: 1.26 JPMorgan Chase & Co.: 1.96

Source: www.morningstar.com

Half of the stock Betas changed from a source to another, the stocks that were affected are; Lockheed Martin, McGraw Hill Financial, Exxon Mobil Co, Cisco Systems, JPMorgan Chase & Co

We notice only a slight difference of basis points in the beta of these stocks that doesn’t exceed 3 basis points for the largest change.

Portfolio Beta:Proportion Beta %*B

10% 2,07 0,20710% 0,78 0,07810% 0,91 0,09110% 2,4 0,2410% 2,76 0,27610% 1,69 0,16910% 0,9 0,0910% 1,96 0,19610% 0,63 0,06310% 1,26 0,126

Portfolio Beta 1,536

Source: Finance.yahoo.com Source: www.morningstar.com

With a Beta of 1.54 i conclude that my portfolio follows the market general trends and is positively sensible to market fluctuations.

The difference between the two Betas is only of a small value that is 0.04 from that we conclude that the two betas are practically equal. The difference range may be the result of the contrast between the calculation means of the two sources.

Stocks Risk Ranking:

Yelp

KB Hom

e

NetFlix

JP M

orga

n Cha

se

Dow C

hemica

l

Cisco S

ystem

s

McG

raw H

ill Fi

nanc

ial

Exxon

Mob

il

Pfize

r

Lockh

eed M

artin

2.76

2.41

2.071.93

1.69

1.25

0.93 0.920.78 0.66

Beta

Proportion Beta %*B10% 2,07 0,20710% 0,78 0,07810% 0,93 0,09310% 2,41 0,24110% 2,76 0,27610% 1,69 0,16910% 0,92 0,09210% 1,93 0,19310% 0,66 0,06610% 1,25 0,125

Portfolio Beta 1,54

Portfolio Performance:

The chart above illustrates the performance of the stocks in my portfolio from the date of purchase 28/01/2014 until the closing date 30/04/2014. The two stocks that performed the best are Yelp by 14.53% return, and lockheed Martin Co. by 10.06% return we notice also the fact that Yelp has the highest Beta in portfolio 2.76 as to be one of the most aggressive stocks in the market. In contrast Lockheed Martin has the lowest Beta in the portfolio.

All the other stocks were very sensible to the fluctuations of the market with ups and downs but showed a positive stability most of the time. The worse performance is that of KB Home with a negative 9.93% return, investing in the stock was a risky bet on the health of the construction industry in the U.S. it is clear that the industry hasn’t recovered yet and the sale of the stock is the most recommended option meanwhile.

The portfolio is currently worth $103,532.35

Portfolio Performance relative to the Market:

Source : Finance.yahoo.com (S&P 500 performance last 6 months)

The graph above illustrates the performance of the S&P 500 index performance for the last 6 months. We observe that the market index saw its largest decline in February, after the fall comes a major increase with numerous fluctuations.

The adjusted closing price for the S&P 500 on the 28/01/2014 is $1,794.19, and on the 30/04/2014 is $1,883.95. Therefore the HPR is (1883.95-1794.19)/1794.19= 5.0028%

The return of my portfolio 3.56% was outperformed by the market with a return of 5% this explains more the tendency of my portfolio to move with the market considering a Beta of 1.54.

Conclusion

Banks - Global

Drug Manufacturers

Oil & Gas Integrated

Business Services

Aerospace & Defense

Chemicals

Specialty Retail

Communication Equipment

Internet Content & In-formation

Residential Construction

The diversification achieved in this portfolio is capped at 100% I also believe the current position of my portfolio can be classified into the moderate risk section which is a good deal if the risk tolerance of the investor is slightly high. In my case I’m satisfied with the current position of my portfolio as a risk-taker investor but i would consider the sale of the stocks with a beta higher than 2, as to decrease the overall beta and end up with a more passive stock considering the recent Crimea events and their negative impact on the market.