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FINC 340 INVESTMENT

3-Portfolio Case Project Description

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3-Portfolio Case Written Assignment Guidance

The 3-Portfolio Case Project Term Papers is designed to illustrate field knowledge and experience is applied in the term-long case study. Students will construct three, investment portfolios during week one of the course –

(1) an actively selected portfolio (P1)

(2) a randomly selected portfolio (P2)

(3) a passive portfolio (P3)

Each of the three portfolios will contain four common equity stocks of 100 shares each (400 shares). In other words, the total number of companies to be analyzed in the 3-Portfolio Case Project is 12 companies and 1,200 shares of common stock. The transaction cost for buying and selling shares is $15 and should be included in your analysis.

Weekly 3-Portfolio Project Evaluation

Some students have a difficult time getting started on the 3-Portfolio Assignment. Therefore, on a weekly basis the student’s Stock Track Spreadsheet will be submitted to the Weekly Assignment folder. Student’s receive academic credit for this activity (please see Grading Information for details.)

Helpful Articles:

1) Active vs passive portfolios

http://www.raymondjames.com/advisorsitesfiles/publicsites/tws/files/forefieldactivevspassweb.pdf

2) Portfolio performance evaluation methods

http://what-when-how.com/finance/portfolio-performance-evaluation-finance/

Weekly Directions for your Stock Tracker

Week 1: Students select four companies and purchase 100 shares for each of the three portfolios. The purchase prices are recorded on the attached Stock Tracker Spreadsheet. Please include the reason you selected each company.

Create an Investment Policy for Each Portfolio:

Did you create and use an investment policy statement? If so, what is your investment philosophy? Here are a few examples:

(1) an actively selected portfolio (P1) – Stocks from Kiplinger’s List of Best Performing Stocks

(2) a randomly selected portfolio (P2) – Stocks from consumer-oriented companies that produce the products I use (Apple, Amazon, ATT &T, Bank of America, etc.)

(3) a passive portfolio (P3) – Russell 2000 stocks with high dividends

Expected Ending Price:

Expected stock prices can be calculated in many ways.

1. The estimated market rate for the year (such as the one used in the Stock Tracker Example)

2. Expected return based on the historical rate of return (Welch, Chapter 7)

3. The expected rate of return based on the historical rate of return for a type of stock (see attached presentation)

4. Estimated return as determined by a stock analyst for a stock. For example, at Yahoo Finance (http://Finance.Yahoo.com) there is a one year estimated target price of $322.38 for Tesla. The current price is $289.65. Using these numbers, you can derive what the expected price will be in six weeks.

Dividend Pay-Out

The dividend payout ratio is the number of dividends paid to stockholders relative to the amount of total net income of a company. The company holds the amount that is not paid out in dividends to stockholders for growth. The amount that is kept by the company is called retained earnings. Here is the formula: Total dividend amount = (net income + retained earnings at the beginning of the reporting period) – retained earnings at the end of the reporting period.

Here is an article about dividend investing that you may find useful: http://www.dividend.com/dividend-education/what-is-an-ideal-payout-ratio/

Week 2: Students record the ending price of all stocks in P1, P2, and P3 each Friday at 4:00 PM EST., Stocks in P1 can be traded at any time the market is open. Record the transaction costs of any trades. Use the attached Stock Tracker Spreadsheet to record prices, stock sold and stocks purchased.

Week 3 to Week 5 are the same as Week 2. Use the attached Stock Price Tracker Spreadsheet to record stock prices. Monitor the portfolios and collect end-of-the week price data

Week 6: On Friday at the closing bell, sell all securities. Record the ending prices. Use the attached spreadsheet template included below to assist you in your analyses, interpretations, and conclusions about the 3-Portfolo Case Project. (See Portfolio Construction and Data Management for more information.)

Week 7: Submit your Stock Tracker and Your 3-Portfolio Project Term paper to your #-Portfolio Project Assignment Folder.

The Term Paper must be a minimum of 12 to 15 double-spaced MS Word formatted pages plus exhibits, related documentation (e.g., tables, charts, reports, etc.), and at least four appropriate supporting references. It should include an abstract or executive summary of around two hundred (200) words. The written 3-Portfolio Case Project Written Report is evaluated using the Grading Criteria listed below.

Note: For an easy-to-understand MS Excel template to assist you in evaluating the three portfolios, please refer to http://www.financetoys.com/portfolio/portfolio.html

3-Portfolio Case Term Paper Guidance

This report must be a minimum of 12 to 15 double-spaced MS Word formatted file plus exhibits, related documentation (e.g., tables, charts, reports, etc.), and at least four appropriate supporting references. It should include a cover sheet, abstract or executive summary of around two hundred (200) words, content, and reference page. The written 3-Portfolio Case Project Written Report will be evaluated based on the following criteria:

3-PORTFOLIO CASE WRITTEN PAPER OUTLINE

Cover sheet

Table of Contents

Abstract or Executive Summary

Part I: Portfolio Construction and Management- Data Collection

State the objectives for the construction and management of each of the three (3) portfolios.

  1. This includes your policy statement (why were certain stocks purchased), strategy, asset allocation, and industry analysis.
  2. Implementation and application of specific and well-articulated portfolio management strategies; portfolio design, security selection criterion, initial and final Portfolio value.
  3. Show time series record including, price, value, cash, return, cumulative wealth, and profit and loss table with discussion.

Part II: 3-Portfolio Case Evaluation and Assessment

Data analysis and Critical Thinking for each of the three (3) portfolios

  1. Compare P1 to P2 to P3. Which portfolio made the most profit or had the greatest losses?
  2. Complete the following analyses of P1, P2, and P3.
  1. Return of investment
  2. Expected rate of return
  3. Variance
  4. Standard deviation
  5. Risk return analysis
  6. Compare the returns (or losses) of P1, P2 and P3 to:
  1. The S & P 500
  2. Dow Jones Industrial Averages
  3. Russell 2000.
  4. Use the Sharpe and Traynor formulas to evaluate P1, P2, and P3

Part III: Quantitative Analysis and Critical Thinking –Summarization

  1. Accurate computation of statistics, use of quantitative methods, utilizing professional analyses and critical thinking; when comparing and contrasting the 3-portfolios.
  1. Active versus passive portfolio management
  2. Strategic versus tactical asset allocation
  3. Observations of the 3-Portfolio Case Study

Reference Page: Include your research sources and significance of research information and data, use of APA citations and URL links

Note: 3-Portfolio Case Study Term Paper – Overall Evaluation

  1. Organization, format and presentation of paper including title page, executive summary, table of contents, introduction, body, etc. (Submitted on time?)
  2. Writing, grammar, spelling & punctuation; methodology, explanation of all tables and figures
    Use of tables, figures and other graphics with labeling to summarize and support analysis, quality of charts & tables.
  3. Logical and smooth flowing transitions and relationships among sections of the written report, with conclusions and recommendations.

3-Portfolio Case Study Project Grading

The 3-portfolio project is graded on a 100-point scale, and it represents 25% of the overall course-grade weighting. The grading rubric follows:

Three-Portfolio Case Project
CriteriaOutstandingCommendableMarginalBelow AvgMax Score
Data Collection (35 points total)
Portfolio construction (P1, P2, P3)9-116-83-50-211
Weekly portfolio mgmt. and data collection21-2415-207-140-624
Sub-total:
Written Paper (65 points)
Data analysis and critical thinking31-3521-3011-200-1035
Summarization and practical connections9-106-83-50-210
Writing proficiency, organization of paper9-106-83-50-210
Sub-total:
Overall Evaluation (10 points)
Overall evaluation9-106-83-50-210

Grading the Three Portfolio Paper Categories

Outstanding –

  • DataCollection– The student demonstrated outstanding attention to detail in the creation of their P1, P2, and P3 portfolios. Each week portfolio pricing data was accumulated and submitted in a timely manner, the data was accurate, and all portfolios were consistently maintained in accordance with case study guidelines.
    • WrittenPaper– The research paper was very well written and included: an introduction, description of project design, composite return data, analysis, and interpretation of results and summary. The student’s analysis and interpretation of real-time composite results was exceptional. In synthesizing conclusions, the student made numerous valid connections to core concepts learned during the course and showed the interconnections between composite results from different terms. In summarizing the paper, the student described learning “take-aways” and how the case learning could be put to practical application.
  • OverallEvaluation– The student’s effort and focus on the research project throughout the entire eight weeks of the term was outstanding.

Commendable –

  • Data Collection – The student demonstrated above average attention to detail in the creation of their P1, P2, and P3 portfolios. Each week portfolio pricing data was accumulated and submitted in a timely manner and the data was mostly accurate. Except for a few minor issues, the active portfolio was maintained in accordance with case-study guidelines.
  • Written Paper – The research paper was generally well written and included: an introduction, description of project design, composite return data, analysis, and interpretation of results and summary. The student’s analysis and interpretation of real- time composite results were well above average. In synthesizing conclusions, the student made several connections to core concepts learned during the course and attempted to explain interconnections between composite results from different terms. In summarizing the paper, the student described learning “take-aways” and practical applications.
  • OverallEvaluation– The student’s effort and focus on the research project throughout the entire eight weeks of the term was commendable.

Marginal –

  • Data Collection – The student had some difficulty in building their P1, P2, and P3 portfolios; however, the portfolios were eventually created with some instructor assistance. Portfolio pricing data was generally accumulated and submitted, although in some of the weeks the data was either late or missing. Several times during the term active portfolio, maintenance was not consistent with case study guidelines.
  • Written Paper – The research paper could benefit from better organization and several of the required sections were missing. The student’s analysis and interpretation of real-time composite results was only average and in analyzing the data the student made few connections to core concepts learned during the course. Interconnections between composite results from different terms were not established and practical learning- implications of the case were not discussed. There were some spelling or grammar errors.
  • OverallEvaluation– The student’s effort and focus on the research project throughout the entire eight weeks of the term was average.

Below Average (Needs Substantial Improvement) –

  • Data Collection – The student’s effort in regards to P1, P2 and P3 portfolio construction and data collection was below average. The student failed to construct the portfolios and the instructor or instructor-assistant ended up being instrumental in its completion. On- going portfolio-pricing data was either missing or inaccurate, and the active portfolio was not maintained in accordance with case guidelines.
  • Written Paper – the report is unorganized and fails to include required sections. The student’s analysis and interpretation of real-time composite results was below average and in analyzing the data, the student failed to make connections to core concepts learned during the course. Interconnections between composite results from different terms were not established and practical learning-implications of the case were not discussed. There were numerous spelling or grammar errors.
  • OverallEvaluation– The student’s effort and focus on the research project throughout the entire eight weeks of the term was poor.

If you have any questions about the #-Portfolio Case Project Term Paper, please do not hesitate to contact your instructor.

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