Stock Trak Report - In recent two months we have been...

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Unformatted text preview: In recent two months, we have been involved in Stock-trak Portfolio Simulations to experience what it would be like to invest in real financial markets. Portfolio Construction Process The first question ahead of us was to decide what type of difierent assets that we wanted in our portfolio. We decided to invest in all of the major business sectors in order to diversify our portfolio. Since our time was very limited for the simulation, our investments were as follows: we decided to invest approximately 80% of our l, , ,x J a money in stocks, 4% in the futures market, we still have approximately 15% of money) ' \b " v _ v u . . . . . EX: "’ - 'f r" that has not been allocated as of yet, that IS earnmg minimal interest. , ,. ' vb .._r Our next step was to decide on which stocks from the various major sectors to invest in. We used sources such as Yahoo Financial, Wall Street Journal, Router, and local newspaper business articles to gather vital information to guide us to choose the best stocks for our portfolio. Since the beginning of the year, the financial markets have been producing high returns. We figured that the markets could not keep performing at these high levels; we decided to take the conservative approach. Our expectation was to gain the 10% return that our professor indicated to us that we should expect from our simulation if you have a diversified portfolio. However, we had a brilliant point before, where we earned about 5.05% in the three weeks ago. Since then, our investment portfolio has declined slightly to 3.75% at July 20th, which is well below our expectations due to some poor choices throughout the simulation. N "W “L "‘Y' Tiufi 1 kn?“ 3/9.“) Best and Worst As of today, our stock portfolio brings us a roughly 3.75 capital gain for a 2-month period. Our portfolio did not perform as well as we expected. The assets that have performed well for us are as follows: AUR-To performed very well for us two reasons. The first is that there was a take over by Teck Cominco. The Stock ofi‘er price was $41 a share, when current stock price was $30.?S.This was a great offer, which was accepted by AUR-To. The second reason was Teck Comninco Wanted to increase the copper producing value by 200Million pounds per year which equates to a 43% increase in production, and will go up to 342 million pounds; this equates to 72% increase. This is due to a very high demand in the market for copper. Aur, is located in Toronto, with major assets are Chile’s copper Ming. includes stand up 76.5% equity capital of Quebrada Blanca Ming’ share, stand up 90% equity capital share of Andacollo company (copper and golden Ming), also Aur has stand up equity capital share of the Newfoundland province’s Duck Pond (copper, zinc Ming). So, we say that Aur stock is worth us to invest in long term. Apple-We bought this stock on June 6Lh for $122.42 based on the anticipation of the release of the I-phone, which was predicted to have strong sales of 500,000 units for their official launch week. The stock price went up to $140 per share after the launch of the I-phone, but because of negative response from customers about poor battery problems and overheating, we decided that we should sell our shares before the strong possibility of negative stock price fluctuations of the Apple shares. Google-We purchased Google stock because of many other peers in our class had also purchased, and had made profitable gains in the short time. In the history record, Google is a winner in the long run and most of wall Street‘s investors believed that Google is the Golden stock in their heart. However, recently according to the technical chart analysis showed us that Google had the potential risk of dropping from $525 to down to $380 in the short term. The other reason why Google stock goes down is because of in the second quarter Google ‘profit raised about 28%, which one was lower than predict number. Whereas, meanwhile in the last year, that "5 growth rate is 58%. Google's past excellent performance has spoiled the investors. So, it declined a lot in those two weeks. Observantly, right now we chose Google not enough wise, put too much emotional color on it! Because of that we are in the Stock-trek Portfolio Simulations, we don’t wanna to have any regrets if we have not bought Google stock yet in the past two months. Overall, we just wanted to own Google, which is just like a little kid wanting candy, can’t put it down, following a fashion by psychologically. Whereas, in our realistically world, we wouldn‘t buy it until] the price jump down about $380, base on the chart‘s technologcial analysis what time is the best time to pick up this stock in this year. However, in the next year, Google will have strong growth, especially in the year of 2008, perhaps growths up to $600 and even more about it. m l MGTACI-EA The central bank of Canada / _/ The fact that the Government of Canada decided to raise the bank rate to 4.?g% had a minimal impact on our investment strategy, because most everyone had expected the rate hikes, and also expecting another small hike in September. If the rate hike had been a surprise, then the market would have had a negative effect on the stock prices and bond prices. It has been proven through our experience in this course that when interest rates go up, bond prices go down and the stock market becomes more volatile. in addition, the federal government uses monetary policies, to control the inflation rate by raising interest rates. Although the current inflation rate is 2.2%, it is not high enough for more rate hikes, but potential inflation risks still exist. Therefore, to avoid the inflation fluctuations in the future, hiking the interest rates are a defensive method, which is necessary to do in Canada’s current market. Moreover, due to the crude oil market, which has had strong growth, and the Canadian dollars appreciation. This has brought outside money (world’s money fund), which rolls rigit into the Canadian stock market and real estate market, which has made the stock markets overheat. So, even with the hiking interest rates, it still hasn’t had too much of an effect in our stock market at this point in time. General Investment Advice Since we have limited experience in investing, we have a few suggestions for people who want to invest in trading with real money. Gathering financial information about companies from financial reports, news articles, and understanding how to value a .L . . . . . . . l” i company based on financial mtorrnatlon. Therefore usmg fundamean analysrs such UL 5 L .) i if" as, Beta, PIE ratios, price to book ratios can give vital information about the health of company. It is important to have a portfolio that is well diversified so that fluctuations in the market can be dealt with or without too much pain. A proper diversified portfolio eliminates the risks of an up or down market. When investing, it is important to obtain data on each security especially when you have multiple assets. You can determine their volatility, the correlations of each pair of securities and use mathematical ’ I .)"*"'£L"L d...) theories to generate the most optimal portfolio structure. Perhaps, even buying ___._.- computer software that is available to construct an optimal portfolio, or buy stocks from industry leaders in each market segment. E. g. (oil, gas, transpotation. . .etc) With our stock-trak simulation, we have gained some valuable investing experiences. We did not make the 10% return that we had hoped for, but now that we have gained insightful knowledge about investing, and someone would be able to so well when 521.1 . ii . I 'u.- "I: \r L {LL l'-"“' j. ‘ 1nvestmg.. r, * c r \l‘w. cc - .- 1.»; a" jut-h, ,-_ .. x L {WW-L i9*‘L-é-i"‘£'_l3’ ‘J ...
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