Running Portfolio Management 1

Name

Assignment

Course

Instructor

Date
Portfolio Management 2

Overall Investment Philosophy

I have chosen five multiple companies for investing in the stock market. The philosophy
of investing in the stock market is to make a portfolio basket of different stocks with the
diversification in different industries in terms of their Business Dynamics and Financial
Performances. I have decided to invest in the IT sector related to Graphics Processors,
Telecommunication Equipments Chips, Cosmetic Products, Warehouse Company which deals in
multiple processed and unprocessed food products, hardware and small appliances as well and
lastly in Airline Defense and Satellite Intelligence. The purpose of creating a portfolio of
different stocks is to hedge the risk regarding the break-down of the stocks and to avoid unusual
losses arising from the market fundamentals. Like every investor, my philosophy for investment
in the stock market is to earn from my investment by putting money on different renowned
stocks so that any down-fall could be covered from other supporting stocks.

Criteria for Initial Consideration of Stocks

The criteria for initial consideration of my stocks were to first check the operations of
different companies and the performances of those stocks at the time of economic contraction.
Probably the most concerning thing while building a basket of the stock market portfolio is the
level of diversification in the stocks. It’s very important to understand and divide your portfolio
in the broad number of different companies, asset classes, industries, sectors, segments, and all
the points so that no one is badly impacted by any down-fall in the market of a specific industry.
The diversification helps us to make our portfolio less risky rather than putting all eggs in one
basket.

Besides this, the following criteria are used while considering multiple stocks.

Value for Investment: - it means looking for the stocks which are underpriced at the
moment and in the future, the stock price is expected to be increased.

Fundamental Investment: - it means identification of the companies with strong

financial muscles in terms of strong earnings.

Growth Perspective: - it means buying the shares of companies whose products have got
potential to generate the high earnings for the company and higher returns in the form of
dividends, bonuses and share prices in the future.

Social Responsible Investment: - it means investing in the stocks of those companies

which are socially responsible and has a positive impact on society as well as on the
environment. In other words, the regulatory authorities should not have any issue with the
business conduct of that company.

Technical Investment: - it means while investing in new shares of any company, the
investor looks for the past trend of the stock market as well in terms of share price fluctuation,
financial impact, EPS and PE, etc.
Portfolio Management 3

Tabular Position of Stock Portfolio

10 Shares each NVDA QCOM EL COST BA

(USD) (USD) (USD) (USD) (USD)

*Acquisition 1,830.1 892.9 1,744.3 2,446.2 3,764.6

Cost
Current Market 2,025.9 835.8 1,865.8 2,960.9 3,451.9
Price
Holding Gain/ 195.8 (57.1) 121.5 514.7 (312.7)
(loss)
Dividends 0.16 per 0.62 per 0.43 per 0.65 per 2.055 per
Received share share share share share
Total Return 10.69% -6.39% 6.96% 21.04% -8.30%
(%)
Beta 1.96 0.91 0.79 0.80 1.21

Portfolio Beta 2.3487

*Note
 NVDA per share price is 183.01 USD as of 03-May-2019.
 QCOM per share price is 89.29 USD as of 03-May-2019.
 EL per share price is 174.43 USD as of 03-May-2019.
 COST per share price is 244.62 USD as of 03-May-2019.
 BA per share price is 376.46 USD as of 03-May-2019.

Best Performing Stock

The above table shows the Portfolio position of 5 stocks of different companies. The
analysis is based on the different parameters used to gauge the health of the stocks. However, in
light of the above data, the Best Performing Stock in terms of Holding Gain and Total Return is
Costco Wholesale Corporation (COST). Costco gain on its current holding is 514.7 USD
whereas the main determent of the Best Performing Stock is Total Return which is 21.04% of the
investment.
Costco Wholesale Corporation (COST) is involved in the business of merchandise
categories products at a significantly lower price and quality products as compared with other
marts. Products categories mainly include groceries, food snacks, nonalcoholic-alcoholic drinks,
meat, bakery, small appliances, pharmacies, optical, etc, and various online e-commerce
products all over the countries they are operating in.
The reason for the best Performing Stock of Costco Wholesale Corporation (COST) is
the fact that they are providing something extraordinary to its customers. Some of the important
reasons are mentioned below.
Portfolio Management 4

Business Model: - Customers need to get membership in order to purchase something

from COST which is different from other marts. COST is dealing on macro-level with bulk
quantity so they sell products at very low prices which are their competitive edge among others.
Value for Costco Members: - Costco is always very determined about its
customers/members and they provide different deals to their customers in order to retain them.
About 90% of customers are retained by the company which speaks about the company’s
policies.
Focus on Shareholders/Stakeholders: - Costco is one of those companies that always
focus on the interests of its shareholders/stakeholders. The company’s shares are owned by
renowned board members who are driving their company in the best way.
Recession: - Another reason is the performance of stock at the time of recession. Since
it’s a low volatile stock where beta is 0.80 which means it falls less when the market is down. So,
during the economic crisis although the stock price was down by in comparison to market the
drawdown was slow.
Financial Performance:- The revenues of the company are on the increasing, revenues
recorded in 2019 are 152,703,000/- USD as compared with 141,576,000/- USD which shows the
growth rate of 7.85%. In the same way, the Net Income recorded for 2019 is 3,659,000/- USD as
compared with 3,134,000/- USD which reflects the growth rate of 16.75%. The EPS is also on
the increasing trend as it has reached to 8.26 USD per share as compared with 6.08 USD in 2017
and 7.15 USD in 2018. The balance sheet side is also very strong as there’s no intangible and
goodwill available in long term assets of the company which means there is no risk for the
reduction in shareholder’s equity as it has reached 15,243,00/- USD as compared with
12,799,000/- USD. The PE ratio of the company stands at 35.85% which shows that the
shareholder is expecting a higher return in the future.

Worst Performing Stock

The table shows that among all 5 stocks of the companies, The Boeing Company (BA)
has been the most Worst Performing Stock in terms of its Holding (Loss) and Total Return on
the Investment. The holding (loss) for BA is (312.7) USD whereas the main reason for being the
worst performer among all other stocks is the Total Return which is -8.30% of the investment.
The Boeing Company (BA) is involved in the business of manufacturing, developing,
designing, sales-services and support functions of commercial planes, satellites, missile defense,
military aircraft, a launch system, and human space flight. They are operational in four different
segments. Commercial Air jets, Space and Security, Defense and Boeing Capital. The
Commercial Airplanes section provides planes for passengers and cargo, the defense and space-
defense section is committed in research, development, manufacturing, modifications of military
jets. The BA section is involved in the financial services of the portfolio.
The reason for the being Worst Performing Stock among the 5 companies is the fact that
after two deadly crashes of Boeing 737 Max jets the company’s reputation has badly affected
and all over the world BA has to face the criticism. The Boeing 737 Max operations are
grounded by the company and BA has stopped delivering their most popular air jets which have
Portfolio Management 5

thrown them into hell as 737 Max accounts for almost 70% of their Boeing shipment. The last
crashed was occurred in Mar’19 which has led to the grounding of the planes.
According to the recent 3rd quarter report of The Boeing Company (BA), their revenues
are dropped to 50,514 million USD till Sep’19 as compared with 64,848 million USD in Sep’18.
In the same way since their delivery of Boeing 737, Max has been stopped and planes are
grounded it has greatly impacted on their net income as well, net earnings recorded for Sep’19 is
374 million USD as compared with 7,036 million in Sep’18. In the same way, earning per share
is also dropped from 12.08 USD per share to 0.66 USD per share.
These aspects are the point of concern for the stakeholders/shareholders of the company.
However, Boeing’s CEO has told to the market analyst that they are quite hopeful that the
Federal Aviation Administration might clear them to fly in the next three months. So, once their
operations related to their most selling product is started their graph in terms of revenues and
profitability will be increased again. Once these financial indicators are improved EPR will be
increased itself and the shareholders/stakeholder’s confidence will be developed itself.

Forecast on Portfolio’s Total Return Performance as on 27-Nov-2019

10 Shares each NVDA QCOM EL COST BA

(USD) (USD) (USD) (USD) (USD)

Acquisition Cost 1,830.1 892.9 1,744.3 2,446.2 3,764.6

Current Market 2,025.9 835.8 1,865.8 2,960.9 3,451.9

Price
*Forecasted Price 2,228.49 919.38 2,025.38 3,256.99 3,797.09

Forecasted Holding 398.39 26.48 281.08 810.79 32.49

Gain/ (loss)
Actual Total 10.69% -6.39% 6.96% 21.04% -8.30%
Return (%)
Forecasted Total 21.76% 2.96% 16.11% 33.14% 0.86%
Return (%)
*Note: - The forecast is based on a 10% increase on the current market price of all shares.

Comments
The above table shows the forecasted position of all the stocks of (NVDA, QCOM, EL,
COST, and BA). It shows that with the increase in 10% on all the stocks, the forecasted total
return of the portfolio has been improved. The impact on each stock is given below:
NVDA: - It shows that with the increase in share price the forecasted total return has been
improved and has reached 21.76% as compared with 10.69% which shows fair better results of
the stocks and net gain eventually.
QCOM: - It shows that with the increase in share price the forecasted total return has
been improved and has reached to 2.96% as compared with -6.39% which shows the forecasted
Portfolio Management 6

return on the stock has shown the betterment on the stock and there’s a gain of 26.48 USD as
compared to a loss in current situation.
EL: - It shows that with the increase in share price by 10% the forecasted total return of
EL has been reached to 16.11% as compared with 9.96% in actual return. It shows the way a
better position on the stock holding.
COST: - It shows the best performing stock of my Portfolio by showing the forecasted
total return of 33.14% as compared with 21.04% in actual return. It shows by having such shares
in the overall gain on stocks gets boosted.
BA: - It shows the with the increase in share price the forecasted annual return has been
improved from negative to positive, as it has reached 0.86% as compared with -8.30% due to
which BA was considered the worst-performing stock of my portfolio. However, as forecasted
above the increase in stock price by 10% can allow me to take the welcome exit from this stock.
Portfolio Management 7

References
Retrieved from: https://finance.yahoo.com/quote/NVDA?p=NVDA&.tsrc=fin-srch
Retrieved from: https://finance.yahoo.com/quote/QCOM?p=QCOM&.tsrc=fin-srch
Retrieved from: https://finance.yahoo.com/quote/EL?p=EL&.tsrc=fin-srch
Retrieved from: https://finance.yahoo.com/quote/COST?p=COST&.tsrc=fin-srch
Retrieved from: https://finance.yahoo.com/quote/BA?p=BA&.tsrc=fin-srch
Retrieved from: https://www.marketwatch.com/story/boeing-faces-a-40-drop-in-quarterly-profit-
2019-10-18
Retrieved from: https://www.nytimes.com/2019/10/23/business/boeing-earnings-737-max.html
Retrieved from: https://sec.report/Document/0000012927-19-000077/
Retrieved from: https://www.infrontanalytics.com/fe-EN/30022NU/The-Boeing-
Company/beta##targetText=The%20Boeing%20Company%20shows%20a%20Beta%20of%201
.21.
Retrieved from: https://www.nasdaq.com/market-activity/stocks/nvda/dividend-history