For this Part, you will be making a report to your investment committee that discusses and summarizes the performance of your stock portfolio. Use closing prices as of Sunday of Week 13, April 18, to calculate your returns. What is the final market value of your portfolio (including dividends received and added to non-interest earning cash)? If the final market value of your portfolio is less than $1,000,000, your portfolio lost money.
the stocks are
NATIONAL HEALTH INVESTORS. Ticker: NHI
Artisan Partners Asset Management Inc Ticker: APAM
International Business Machines. Ticker: IBM
NextEra Energy, Inc. Ticker: NEE
Safety Insurance Group, Inc. Ticker: SAFT
Provide a graph of the daily stock prices (high, low, and closing) for each of your stocks. Include the volume on each graph, with the scale shown on the right side of the graph. Be sure to label the graphs!
Provide a graph of the value of your portfolio and the value of the closing S&P 500 if $1,000,000 were invested in that initially. This is the normalized value. By normalized, you have scaled the S&P 500 closing prices so that its price on the first day ($1,000,000) is the same as the portfolio’s closing price on that first day.
In the final section of your report, recommend for or against the inclusion of each of these stocks in the portfolio and defend your recommendation. Use the information you have obtained in Part 1 Deliverable 2 to support your argument.
Calculations: Use the closing price of your stocks on Sunday of Week 13, April 18, to calculate your returns.
- Report the “purchase” and “sale” price of your stocks from the beginning and end of the semester along with any dividends you might have received.
- Calculate the buy-and-hold return on each stock [(MVend – MVbeginning + DIV) / MVbeginning] and the buy-and-hold return on your portfolio.
- Determine the final market value of your portfolio (including dividends received). If the final market value of your portfolio is less than $1,000,000, your investment lost money.
- Calculate the market value of
- Your portfolio for each day (including cash). I suggest that you do this by adding up the daily closing market values of your assets held and the cash you hold, including the total dividends received up to date.
- The S&P 500 index over this same period assuming you keep the same amount in cash. We are using the S&P 500 index as our proxy for the market.
- Plot the daily market value of your portfolio and the daily market value of the S&P 500 using your calculations in #3. (Dates on the X-axis, values on the Y-axis)
- Using the market values you calculated in #3, calculate the daily returns (percent) for your portfolio and the S&P 500 index.
- Using your calculations in #5, calculate
- The average daily return and the standard deviation of daily returns for both the S&P 500 index and your portfolio.
- your portfolio’s beta by calculating the covariance of your portfolio’s daily returns with the S&P 500’s daily returns and dividing that by the variance of the S&P 500.
- Plot risk-return relationships for your portfolio and S&P500 benchmark for 1 year prior to January 31, 2021 and for the holding period since February 1, 2021.
- Discuss any changes that took place in terms of your portfolio relative performance compared to S&P500. What, in your view, explains these changes?
Write-up: Assume that you are preparing a relatively short report (maximum of 10 pages double-spaced) for your investment committee. You will be graded on the quality of your writing as well as the quality of your analysis. Do not simply answer the following questions – this should be a financial report! These questions are intended to provide guidance.
- Comment on the individual and portfolio returns and on any information/events (market-wide or firm-specific) that may have contributed to the performance of your stocks. Describe and explain any trades you made. (Suggested length: a short, concise paragraph for each stock).
- From your calculations, if you held the S&P 500 instead of your stocks, how much money would you have ended up with? Would you have been better or worse off to hold the index? Analyze the reasons for any differences.
- Based on your calculations for standard deviation and beta, how risky was your portfolio compared to the index? Again, analyze the causes of the differences.
- Finally, what are your plans going forward? That is, if this class continued and you had the chance to alter your portfolio holdings now, would you choose to sell any of your stocks or would you want to keep holding them? What will you tell the investment committee? Be explicit.
- Your report (7 - 10 pages double-spaced, 12 pt. font) plus graphs.
- Spreadsheet of returns and calculations, and market value plots – make it neat and readable.