Part 2
1. Using the stocks in your initial portfolio, prepare a valuation of each stock and the initial portfolio 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 firms stock. Each firms required rate of return will depend on its beta.
2. Is the stock of each of these companies over or undervalued?
3. What is the expected return using the CAPM model?
4. Prepare a time series ratio analysis (liquidity, activity, debt, and profitability). 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.
Project Part 1 Price Stock Activision Blizzard 38.54 Capital One Exxon Mobile Starbucks Timberland Total Investment Cash Position Total Amount 09-Jun-16 09-Aug-16 No. of Shares Total Investment Portfolio Allocation 41.25 67.78 88.7 55.2 15.5 6000 3000 2000 3500 10000 231240 212610 181340 194530 151100 970820 29180 1000000 23% 21% 18% 1996 15% 97% 3% 70.87 90.67 55.58 15.11 2. Reasons for purchasing All the stocks except for capital one had a beta less than 1. This indicates lower risk. The stocks are from different sectors resulting in diversified stocks. All are dividend paying stocks. The forward P/E for the stocks is substantially lower than the trailing P/E indicating that the stocks may be selling at a cheap price. The stocks have healthy operating and profit margin, indicating good operational and financial capability furthermore, the analyst rating on most stocks is to buy, indicating overall good sentiment about the stocks in the market. The table below for data of this explanation: Profit i P/E(Forward) P/E (Traili EV/EBITDA Analyst Rati Beta 0.91 1.22 0.8 0.69 0.29 Pa 26.26% 22.60% 116.67% 42.70% 20.55% 14% 21% 5.13% 13% 24.80% 22% 34.66% 2.96% 17.70% 41.10% 20.47 8.8 33.37 24.76 44.73 9.9 19.27 30.19 10.62% 23.13 /Hold 1570% Hold NA Project Part 1 Price Stock Activision Blizzard 38.54 Capital One Exxon Mobile Starbucks Timberland Total Investment Cash Position Total Amount 09-Jun-16 09-Aug-16 No. of Shares Total Investment Portfolio Allocation 41.25 67.78 88.7 55.2 15.5 6000 3000 2000 3500 10000 231240 212610 181340 194530 151100 970820 29180 1000000 23% 21% 18% 1996 15% 97% 3% 70.87 90.67 55.58 15.11 2. Reasons for purchasing All the stocks except for capital one had a beta less than 1. This indicates lower risk. The stocks are from different sectors resulting in diversified stocks. All are dividend paying stocks. The forward P/E for the stocks is substantially lower than the trailing P/E indicating that the stocks may be selling at a cheap price. The stocks have healthy operating and profit margin, indicating good operational and financial capability furthermore, the analyst rating on most stocks is to buy, indicating overall good sentiment about the stocks in the market. The table below for data of this explanation: Profit i P/E(Forward) P/E (Traili EV/EBITDA Analyst Rati Beta 0.91 1.22 0.8 0.69 0.29 Pa 26.26% 22.60% 116.67% 42.70% 20.55% 14% 21% 5.13% 13% 24.80% 22% 34.66% 2.96% 17.70% 41.10% 20.47 8.8 33.37 24.76 44.73 9.9 19.27 30.19 10.62% 23.13 /Hold 1570% Hold NA
