Portfolio Management – Investment Principles and Analysis Project


The requirements of the security analysis project are the following:

1. form a team of three students for the project
2. as a team choose a stock from the attached list of companies
3. complete an analysis of the stock to determine its acceptability as an investment
4. present your formal analysis and investment recommendation to the class
5. submit the analysis and recommendation to the instructor in the form of a research paper

The basis for your team’s recommendation should be a fundamental analysis of the company and the stock as an investment. You may want to extend the analysis by including a technical analysis of your stock – charting the price, volume, indicators, and so forth. I encourage your creativity in this project. You must remain scientifically objective and not identify with or become an advocate for the company you are analyzing.

Your presentation and written report must have the following minimum content:

  1. A description of the company, its products and services, recent events that are relevant to the valuation of the company, and recent trends in sales and earnings.
  2. An analysis of current macro-economic and that are relevant to the company. You might consider discussing current monetary policy, interest rates, inflation, business cycle conditions, and any other macroeconomic subject that is relevant to value of the company you choose.
  3. An analysis of stock market conditions including recent returns on stock market indexes and average valuation ratios such as P/E ratios of stock market indexes.
  4. An analysis of the industry, i.e., degree of competition, growth of industry-wide sales, profitability of competitors, life cycle stage of the industry, Porter’s five factors, and P/E ratios of competing companies.
  5. A complete analysis of the company’s financial statements for a minimum of the most recent three years of available data including a comparison of the company’s ratios to most recent year’s peer company average ratios. Complete the ratio calculations yourself. Do not copy them from another source.
  6. A pro forma income statement analysis that includes a forecast of revenue for the coming year, major cost and expense categories, earnings, earnings per share, and dividends. Rely on your own forecast. Do not base your analysis on a sales or earnings forecast from a secondary source such as Value Line.
  7. A valuation of the stock or a range of values that would provide a basis for an investment decision. Include the assumptions you make and your calculation steps. You may calculate the stock’s required return from an SML or APT equation.
  8. An unambiguous buy or sell investment recommendation based on your analysis.

You may add content to the list above, but do not omit any of items 1 through 8 from your paper. Your team’s presentation should include relevant charts and graphs, but be sure you discuss the relevance of those exhibits in your paper if you present them. You may use Power Point for the presentation with the computer data projector.

In order to be complete, your paper must also include the following:

  1. complete citations of sources within the narrative of the paper;
  2. a complete bibliography or list of references presented in a style among those that are made available by the Coates Library at http://lib.trinity.edu/research/citing/index.shtml;
  3. a copy of the company’s most recent balance sheet and income statement from the company’s most recent annual report to shareholders.

A paper without citations is incomplete and will will receive a grade of F. If there a citiations that are missing, I will give you an opportunity to add them to your paper and grade the paper as a late submission. If you have any questions on how to cite a source, please ask me for assistance. Your word-processed, error-free paper is due in my office no later than 5:00 p.m. on the day of the presentation. Late papers will be penalized a letter grade per day. I do not accept emailed papers. The length of your paper should be about 15 double spaced pages of 12 point type exclusive of references and appendix documents.

Among your many references there must be references to the following sources: the company’s most recent annual report to stockholders, the most recent Value Line analysis of the company, S&P Industry Survey report on the industry, and an S&P Outlook report on current and expected economic conditions. Both Value Line and S&P are accessed through the library’s website.

Finally, this is a pledged assignment for all team members, and your paper must be original and not reused from any other course without my permission.

The class will evaluate the presentations including whether they agree with your recommendation. Members of the teams will evaluate each other, and I will grade the papers. A student’s grade on the project is the weighted average of the presentation grade (1/3) and the grade on the paper (2/3). Peer evaluations may be used by the instructor to adjust project grades or final grades for individuals.

Participation in this project is not optional, and the instructor reserves the right to adjust individual grades on the project to reflect participation. A student who is not a full participant in the security analysis project may be dropped from that team and given a grade of zero on the project.

Click Here to see how this project fits in to the full course.

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