Relative+Performance+Analysis+Paper+-+Team+A+-+1st+final+draft

Relative+Performance+Analysis+Paper+-+Team+A+-+1st+final+draft

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Relative Performance Analysis 1 Investment Portfolio Project: Relative Performance Analysis Paper University of Phoenix- FIN 402 December 8, 2008
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Relative Performance Analysis 2 Introduction Relative performance evaluation on selected securities (equities) demands to understand the underlying market components of risks and individual stock’s performance. Investors will be willing to invest capital with a pre-defined and known risk aversion. Risk aversion varies for each investor. The higher the risk level an investor accepts, the higher the expected return and vice-versa. One of the conditions is to recognize systematic (or un-diversified) risk due to the market situation. Although, systematic risks cannot be eliminated by diversification, recognizing its impact will facilitate the comparison, for example, between local stocks and international traded stocks. Un-systematic risk (firm risk) is company-dependant and, eventually, industry- dependant. This risk can be reduced in a great extent by diversifying the investment portfolio. Company’s return must be analyzed in the context of its industry (competitors) and in the context of the market they will operate. Ford Motor Inc Ford Motor Company has had an unpredictable five years of business, with stock prices ranging from $5.02 to $16.50. The average return for Ford Motor Company has been $9.95. The company falls under the industry of Auto Makers, along with Toyota Motor Company, Honda Motor Company, and General Motors Corporation. The Ford Motor Company started in 2003, with $9.93 and topped out the stock price with $16.50 in January 2004. Since then the stock as dropped to $5.02 and began to level off around the $7.50 range. Currently, the stock has recovered to same level of value from the previous year and over the last five years maintained a standard deviation rate of 3.06 (Google, 2008). The Ford Motor Company had a bad 2007 with -10.4
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3 percent growth in stock value, but turned around in 2008 with a 22.9 percent growth in 2008. To assess the Ford stock to a company in the same industry; Toyota stock is much more expensive at a five year range of $44.65 - $138.00 stock price. Toyota has had -20.3 percent change in 2007 and has started 2008 with -1.2 percent change in stock value. While General Motors Corporation has similar declines and gains with a stock price ranging from $17.47 to $55.55 in the last five years and lost -16.4 percent growth in 2007 and -5.9 percent in 2008 (Morning Star, 2008). Stock: Ford Motor Company Industry: Auto Makers The industry’s average, stock growth for the Auto Makers has been much lower than these three stocks, with a -49.7 percent growth for 2007. This highlights that the entire industry of Auto Makers is facing a decline in revenue and stock value. With a lower stock price and small deviation, the Ford Motor Company remains the preferred stock for Auto Makers industry. Last Close
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This note was uploaded on 08/17/2011 for the course BUS 200 taught by Professor Torres during the Spring '11 term at University of Phoenix.

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Relative+Performance+Analysis+Paper+-+Team+A+-+1st+final+draft

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