Stock Analysis- Stock Investment Assignment help

INSTRUCTIONS

  1. 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.
  2. 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?
  3. 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.
  4. 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.
  5. 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.

  1. In April 2020, a market view on the FTSE100 index from an analyst was given as below:
Probability Scenario FTSE100 Return
0.5 Bull 40%
0.3 Neutral 10%
0.2 Bear -30%

 

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.

 

  1. 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.
  2. 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.

 

  1. 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.
  2. 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.
  3. 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.

 

  1. 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
3i III Financial Services
Admiral Group ADM Nonlife Insurance
Anglo American plc AAL Mining
Antofagasta ANTO 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
Aviva AV Life Insurance
BAE Systems BA Aerospace & Defence
Barclays BARC Banks
Barratt Developments BDEV Household Goods & Home Construction
Berkeley Group Holdings BKG Household Goods & Home Construction
BHP BHP Mining
BP BP Oil & Gas Producers
British American Tobacco BATS Tobacco
British Land BLND Real Estate Investment Trusts
BT Group BT.A Fixed Line Telecommunications
Bunzl BNZL Support Services
Burberry BRBY Personal Goods
Carnival Corporation & plc CCL Travel & Leisure
Centrica CNA Gas, Water & Multi-utilities
Coca-Cola HBC CCH Beverages
Compass Group CPG Support Services
CRH plc CRH Construction & Materials
Croda International CRDA Chemicals
DCC plc DCC Support Services
Diageo DGE Beverages
EasyJet EZJ Travel & Leisure
Evraz EVR Industrial Metals & Mining
Experian EXPN Support Services
Ferguson plc FERG Support Services
Flutter Entertainment FLTR Travel & Leisure
Fresnillo FNN Mining
GlaxoSmithKline GSK Pharmaceuticals & Biotechnology
Glencore GLEN Mining
Halma HLMA Electronic & Electrical Equipment
Hargreaves Lansdown HL Financial Services
HSBC HSBA Banks
Hikma Pharmaceuticals HIK Pharmaceuticals & Biotechnology
Imperial Brands IMB Tobacco
Informa INF Media
InterContinental Hotels Group IHG Travel & Leisure
Intermediate Capital Group ICP Investment Services
International Airlines Group IAG Travel & Leisure
Intertek ITRK Support Services
ITV plc ITV Media
JD Sports JD General Retailers
Johnson Matthey JMAT Chemicals
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
M&G MNG Asset Managers
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
Pearson plc PSON Media
Pennon Group PNN Water
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
RELX REL Media
Rentokil Initial RTO Support Services
Rio Tinto RIO Mining
Rightmove RMV Media
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
Schroders SDR Financial Services
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
SSE plc SSE Electricity
Standard Chartered STAN Banks
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
Unilever ULVR Personal Goods
United Utilities UU Gas, Water & Multi-utilities
Vodafone Group VOD Mobile Telecommunications
Whitbread WTB Retail hospitality
WPP plc WPP Media