University of San Francisco Investment Analysis of Companies Discussion

Project Part 1. Initial selection of stocks. Due date: Week 2, Sept 14. (This Part is of 10% of your Project grade). Assume that you have $1,000,000. You will use this to form a hypothetical large-cap (each with at least $10 Billion in Market Capitalization) diversified stock portfolio by investing it in five stocks chosen from five different industries. Be sure to pick companies that pay dividends. No short sales, fractional shares, or margin trades are permitted. To determine how much you have invested in any particular stock, multiply the stock price by the number of shares you buy. You must use at least $900,000. Any funds left over will be held as cash, earning no interest. Dividends and other cash distributions will be added to cash, not reinvested. Trades are not permitted except in extraordinary situations, with my specific approval beforehand. Trading will only be considered between Friday of Week 1 to Thursday of Week 13, Sept 8 to December 15. Should I allow a trade, you need to notify me about the exact trade you make within 24 hours by e-mail. Deliverable:

1. Spreadsheet that includes the number of shares you purchased for each stock and the closing prices as of the Friday of Week 1, Sept 11, of your stocks. Report the last dividend paid date and amount as well as the expected next ex-dividend and paid dates. Also, include your total investment and the amount held in cash. To get stock price information, go to www.google.com or www.yahoo.com and click on “Finance.” Enter the ticker symbol of your stock and click on historical prices. Use the column that contains closing prices.

2. Conduct an analysis of the stocks, telling me why you chose these particular stocks based on your analysis. The analysis (3 to 6 pages plus spreadsheets) should include the following: a) 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.

b) Find the reported beta and the adjusted beta of the companies, calculating the other if only one 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.

c) What is the beta of your initial portfolio?