Part 1
- Identify one of the stocks that you included in your stock market game portfolio and why?
- Identify one of the stocks that you picked for the Special Project and what influenced your decision?
- What does risk mean to you?
- If given the opportunity, would you invest in the stock market?
- How is your stock market game portfolio performing so far?
- Anything of interest in the news lately that is having an impact on the stock market game?
- What role does the overall economy play in investing?
- What exactly is fundamental analysis?
- What did you learn from participating in the class stock market game?
Part 2
Special Project:
Identify three stocks for potential inclusion in a large-cap diversified stock portfolio, conduct an analysis of the stocks, and make a recommendation for or again inclusion based on your analysis. To begin, choose three stocks from different industries and track their daily high, low, and closing prices as well as volume beginning on the first Monday of the term and ending with the closing information on the Friday of Week 8. Be sure to pick companies that pay dividends.
To prepare your report:
A. Identify the three stocks you are analyzing and briefly explain why you chose them.
B. Analyze each of the stocks, including the following:
(1) Give a brief history of the companies and their products. Briefly discuss where the company is heading (new products, ventures). Identify who each company's competitors are and what each company's ranking is amongst its competitors.
(2) Prepare a time series ratio analysis (liquidity, activity, debt, and profitability)
(3) Find the beta and the adjusted beta of the companies, calculating the other if only is reported. Report your source and describe how they calculated the betas including frequency of observations, as methods vary. Explain what the beta tells you about each company.
(4) Valuation of the company's stock using zero, constant or variable growth models with a market return at 8% and at 12%. [Note that the growth rate must be less than the required rate of return.] Make sure you list the date of the valuation and the closing share price of your firm's stock. Your firm's required rate of return will depend on its beta.
(5) Identify any events during the period that may have caused the stocks' prices to increase or decrease, explaining how these events affect the stocks' prices.
(6) Is the stock of each of these companies over or undervalued?
C. Provide a graph of the daily stock prices (high, low, and closing) for each of your stocks. Plot the normalized closing S&P 500 on the same graph. By normalized, scale the S&P 500 closing prices so that its price on the first day is the same as the company's closing price on that first day. Include the volume on each graph, with the scale shown on the right side of the graph. Be sure to label the graphs!
D. 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 B to support your argument.
This report should be 6 - 8 pages in length plus the three graphs. A Preliminary Report is due as shown on Week Schedule.