Stock Case Analysis

Topics: Investment, Stock market, Standard deviation Pages: 4 (1134 words) Published: December 1, 2012
After a nine-week period of $100,000 investment divided equally among four stocks (3D Systems, Microsoft, Nordstrom and Sony), our portfolio has been liquidated, analyzed, and compared to the surrounding markets by investing the same $100,000 in each of 3 different indexes: the VFINX, the VHGEX and the NASDAQ 100. These portfolios represent the overall U.S., global equity and technology market, respectively. Shown below are the results from the portfolio and its comparisons. Performance/Risk Assessment

Among the four evaluated portfolios, ours was the most profitable (see Exhibit 1). We generated an average weekly return of .2 percent, with a standard deviation of 3.6 percent (Exhibit 2). This is the only positive return compared to our proxy markets: the VFINX Index (-.4%), NASDAQ 100 (-.7%), and the VHGEX Index (-.1%).

Along with generating the highest return, our portfolio had the highest risk. Compared to the 3.6 percent standard deviation of returns on our portfolio, the VFINX Index (1.87%), the NASDAQ 100 (2.54%), and the VHGEX Index (1.60%) all show less volatility (Exhibit 2 shows the standard deviations of the 4 portfolios; for graphical evidence see Exhibit 3).

The fact that we bore the highest risk makes sense given the stocks we chose. When compared to the Vanguard S&P 500 benchmark beta of 1, we can see that the average beta of our portfolio (1.47) is much higher than the market. Even if we had diversified as much as possible, we would have born a higher (systematic) risk than the overall market given the difference in portfolio betas. However, this bigger risk was compensated by the higher average return of our portfolio.

Portfolio / Market Growth
The P/E (price to earnings) and P/CF (price to cash flow) multiples are two measures of the investor's expected growth of a company. Investors purchasing growth stocks expect to receive higher capital gain yields (price appreciation) relative to value stock buyers, while those buying...
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