Stock Analysis- Stock Investment Assignment help
- Your report must provide answers for all five questions. Each question carries 20 points. The total points for the report are 100. This report should be submitted via the Online submission point in Canvas before 4 pm on xxx2021.
- The real world is complicated and it is difficult, in practice, to determine the appropriate market view, expected rate of return, and risk. There is no definitive answer to these questions because your answer will depend on the assumptions you make and the methods you use. State your assumptions clearly and say why you make them: state your methods – which equations are you using, and why; display your working: let the marker see your thinking. Arithmetical mistakes will not be penalized (unless they result in implausible answers). Think about your answer – does it seem plausible?
- You are expected to demonstrate evidence of a wide background of reading and research. All references should be acknowledged (see Library handout on reference styles – Harvard approach is strongly recommended). Good standards of written English and presentation are expected and marks will be deducted if such standards are not met.
- There are two appendices at the end of this report. Appendix A is the list of companies in the FTSE100, from which you are required to choose your individual share. Appendix B are the marking rubrics where you can find criteria used for marking your report.
- The report should be no more than 2,000 words (+/- 10%) excluding the reference page(s), bibliography and appendices (if applicable). Marks will be deducted for excessively short or lengthy reports. A word count should be clearly displayed at the end of the report.
ASSESSMENT QUESTIONS: Please answer all questions. Each question carries 20 marks.
- In April 2020, a market view on the FTSE100 index from an analyst was given as below:
Update this market view and discuss your market view on the FTSE100 for the period from April 2021 to March 2022. Make clear what your subjective probability for each of the possible market scenarios is and their corresponding returns for the index. Although it is your subjective market view, you need to defend it by using most recent macro-economic news, references and/or historical data analysis. Historical data are available from either Bloomberg or internet sources (for example, https://finance.yahoo.com/quote/%5EFTSE%3FP%3DFTSE/history?period1=1428969600&period2=1586822400&interval=1d&filter=history&frequency=1d).
Based on your market view, calculate the expected rate of return for the FTSE100 index and its standard deviation for the period of April 2021 and March 2022.
- Choose a company listed in the FTSE100, which is provided in the appendix of this report. Discuss whether this chosen share has a defensive, neutral or aggressive beta. You have to back up the beta of your chosen share by either references, or by performing regression analysis using historical price data for this chosen company and the FTSE 100 index. Historical price data for individual shares in the FTSE100 index can be collected from either Bloomberg or internet sources (for example https://finance.yahoo.com/). Based on your own updated market view for the FTSE100 index from question 1 and beta for your chosen share, calculate the expected rate of return for this share based on the Capital Asset Pricing Model (CAPM). The risk-free rate of return is assumed to be 0.1% per year.
- In order to construct an optimal portfolio which maximizes a client’s utility score, which risky asset, either a FTSE100 index tracking portfolio or your individually chosen share from question 2, should be used to mix with a risk free asset?
Using your client’s degree of risk aversion A = 2, a utility score function and a risk-free rate of 0.1% per year, calculate the optimal weight allocation into the risk free asset for this client. Your discussion should be supported by relevant portfolio theories.
- Conduct a fundamental analysis of the chosen company in question 2. The analysis must employ both P/E and Dividend Discount Model (DDM) valuation approaches.
- a) You are required to demonstrate your forecasting process, backed up by relevant data sources and references, on (1) the earnings per share for your chosen company at the end of March 2022, (2) the price of this chosen share at the end of March 2022 using a reasonable P/E multiple.
- b) You are required to demonstrate the forecasting process by showing your prediction, backed up by relevant data sources and references, on (1) the growth rate for your chosen company for the coming 5 years from April 2021 to March 2026, and (2) the price of this chosen share at the end of March 2022 by using the DDM valuation approach.
Based on your analysis, summarize your recommendation to your potential investment clients.
- Discuss the links between financial markets and economic development and explain why a company’s share price today, in an efficient financial market, can provide information on economic performance for the coming year. Your discussions should be based on the efficient market hypothesis and empirical evidence in the literature.
Appendix A: FTSE 100 LIST (Constituents in 2020):
|Company||Ticker||FTSE Industry Classification Benchmark sector|
|Admiral Group||ADM||Nonlife Insurance|
|Anglo American plc||AAL||Mining|
|Ashtead Group||AHT||Support Services|
|Associated British Foods||ABF||Food Producers|
|AstraZeneca||AZN||Pharmaceuticals & Biotechnology|
|Auto Trader Group||AUTO||Media|
|Aveva||AVV||Software & Computer Services|
|BAE Systems||BA||Aerospace & Defence|
|Barratt Developments||BDEV||Household Goods & Home Construction|
|Berkeley Group Holdings||BKG||Household Goods & Home Construction|
|BP||BP||Oil & Gas Producers|
|British American Tobacco||BATS||Tobacco|
|British Land||BLND||Real Estate Investment Trusts|
|BT Group||BT.A||Fixed Line Telecommunications|
|Carnival Corporation & plc||CCL||Travel & Leisure|
|Centrica||CNA||Gas, Water & Multi-utilities|
|Compass Group||CPG||Support Services|
|CRH plc||CRH||Construction & Materials|
|DCC plc||DCC||Support Services|
|EasyJet||EZJ||Travel & Leisure|
|Evraz||EVR||Industrial Metals & Mining|
|Ferguson plc||FERG||Support Services|
|Flutter Entertainment||FLTR||Travel & Leisure|
|GlaxoSmithKline||GSK||Pharmaceuticals & Biotechnology|
|Halma||HLMA||Electronic & Electrical Equipment|
|Hargreaves Lansdown||HL||Financial Services|
|Hikma Pharmaceuticals||HIK||Pharmaceuticals & Biotechnology|
|InterContinental Hotels Group||IHG||Travel & Leisure|
|Intermediate Capital Group||ICP||Investment Services|
|International Airlines Group||IAG||Travel & Leisure|
|JD Sports||JD||General Retailers|
|Just Eat Takeaway||JET||Software and Computer Services|
|Land Securities||LAND||Real Estate Investment Trusts|
|Legal & General||LGEN||Life Insurance|
|Lloyds Banking Group||LLOY||Banks|
|London Stock Exchange Group||LSE||Financial Services|
|Meggitt||MGGT||Aerospace & Defence|
|Melrose Industries||MRO||Automobiles & Parts|
|Mondi||MNDI||Forestry & Paper|
|Morrisons||MRW||Food & Drug Retailers|
|National Grid plc||NG||Gas, Water & Multi-utilities|
|Next plc||NXT||General Retailers|
|Ocado||OCDO||Food & Drug Retailers|
|Persimmon plc||PSN||Household Goods & Home Construction|
|Phoenix Group||PHNX||Life Insurance|
|Polymetal International||POLY||Precious Metals and Mining|
|Prudential plc||PRU||Life Insurance|
|Reckitt Benckiser||RB||Household Goods & Home Construction|
|Rentokil Initial||RTO||Support Services|
|Rolls-Royce Holdings||RR||Aerospace & Defence|
|Royal Bank of Scotland Group||RBS||Banks|
|Royal Dutch Shell||RDSA||Oil & Gas Producers|
|RSA Insurance Group||RSA||Nonlife Insurance|
|Sage Group||SGE||Software & Computer Services|
|Sainsbury’s||SBRY||Food & Drug Retailers|
|Scottish Mortgage Investment Trust||SMT||Equity Investment Instruments|
|Segro||SGRO||Real Estate Investment Trusts|
|Severn Trent||SVT||Gas, Water & Multi-utilities|
|Smith & Nephew||SN||Health Care Equipment & Services|
|DS Smith||SMDS||General Industrials|
|Smiths Group||SMIN||General Industrials|
|Smurfit Kappa||SKG||General Industrials|
|Spirax-Sarco Engineering||SPX||Industrial Engineering|
|Standard Life Aberdeen||SLA||Financial Services|
|St. James’s Place plc||STJ||Life Insurance|
|Taylor Wimpey||TW||Household Goods & Home Construction|
|Tesco||TSCO||Food & Drug Retailers|
|United Utilities||UU||Gas, Water & Multi-utilities|
|Vodafone Group||VOD||Mobile Telecommunications|