Finance and Accounting - StockTrak - Case Study Example

Finance and Accounting StockTrak Final Paper Investment Plan The primary goal of this investment plan is to minimize the loss of capital and maximizing the income or capital appreciation. The main objectives of an investor in portfolio selection are based on hedging the market risk and maximizing the return from the investment portfolio. In this case, we have chosen five stocks to construct our portfolio namely Bank of America Corporation (BAC), Tesla (TSLA), TSL, Google (GOOG), AT&T. Along with this, corporate bond of Time Warner Cable Corporation has been considered in the portfolio as the return from market securities (Rm) and another five years Treasury Bond of United Sates Government has also been taken in the portfolio as return from risk free securities (Rf). Treasury Bonds and Corporate bonds have been selected in our portfolio to diversify the risk of investment. It helps the investors to diversify the risk of investment and it also helps to avoid the losses in the uncertain market condition. The portfolio investment selected by the investor has the potential of allowing income generation and capital appreciation in future due to the characteristic of the various assets considered in the investment. There is another reason which describes that the investment portfolio is the price of the stocks that have been selected. It can be seen that value prices of most of the stocks are undervalued that are selected in the investment portfolio. It has happened because of the recent mergers and acquisition by Tesla Corporation, BAC, Trina Solar Limited (TSL), AT&T and Google shows that the profitability of the companies will increase in the future. Mergers and acquisition are very much necessary for an organization as it helps the organization to expand its investment opportunities and generates revenue for the future. A merger is a fusion of two or more organizations into one business. Amalgamation might be characterized as the merger of one or more organizations with an alternate or the merger of two or more organizations to structure another organization, in such a path, to the point that all assets and liabilities of the amalgamating organizations get to be assets and liabilities of the amalgamated organization and shareholders at least nine-tenths in estimation of the shares in the amalgamating organization or organizations get to be shareholders of the amalgamated organization. An acquisition may be characterized as a demonstration of securing successful control by one organization over assets or management of an alternate organization without any synthesis of organizations. Therefore, in an acquisition two or more organizations may stay autonomous, separate legal entities; however there may be a change in control of the organizations. At the point when an acquisition is "constrained" or unwilling, it is known as a takeover. In an unwilling acquisition, the management of "target" organization would contradict a move of being assumed control. Be that as it may, when managements of getting and target organizations commonly and eagerly concur for the takeover, it is called acquisition or friendly takeover. The investor will also be able to generate revenue in future through the selection of portfolio as the chosen stocks have high potential of growth. Along with this, the corporate bond of Time Warner will be matured in 2032 and provides a coupon rate of 7.7% p.a. and its yield to maturity is 4.57%. Thus it will provide a consistent income to the investor till 2032 which is equivalent to 7.7% to the investment made on the corporate bond. Apart from this, the five years Treasury bond of United States will provide a yield to maturity at 1.52%.thus the investor will be able to increase the capital investment on Treasury bond by 1.52% by the end of five years as it is risk free in nature. Thus the portfolio selected and invested by the investor has got high potential to grown and generate income to appreciate the capital in future. Strategy In this portfolio we have used strategy to maximize the rate of return and minimize the risk of losses. As per goals stated above we have chosen the stocks that are undervalued and these companies have undergone with mergers and acquisition in recent future. Thus there is a high chance that the value of the shares will increase in future. Stock Analysis BAC Date BAC y=BAC-Rf x=Rm-Rf 7/1/2009 Monthly Return     8/3/2009 19.00% -0.015295 Alpha 9/1/2009 -3.76% 1.633429 Beta 10/1/2009 -13.82%     11/2/2009 8.72% 8.760% 6.204% 12/1/2009 -4.94% -4.983% 1.861% 1/4/2010 0.81% 0.810% -3.630% 2/1/2010 9.71% 9.727% 3.139% 3/1/2010 7.20% 7.200% 6.085% 4/1/2010 -0.11% -0.070% 1.594% 5/3/2010 -11.68% -11.725% -7.986% 6/1/2010 -8.65% -8.667% -5.195% 7/1/2010 -2.33% -2.287% 6.870% 8/2/2010 -11.21% -11.208% -4.499% 9/1/2010 5.21% 5.212% 8.959% 10/1/2010 -12.62% -12.638% 3.793% 11/1/2010 -4.34% -4.340% 0.000% 12/1/2010 21.94% 21.966% 6.708% 1/3/2011 2.89% 2.885% 2.330% 2/1/2011 4.06% 4.059% 3.474% 3/1/2011 -6.67% -6.667% 0.008% 4/1/2011 -7.83% -7.827% 2.899% 5/2/2011 -4.37% -4.391% -1.146% 6/1/2011 -6.64% -6.638% -1.681% 7/1/2011 -11.36% -11.357% -1.999% 8/1/2011 -15.73% -15.729% -5.505% 9/1/2011 -25.09% -25.071% -6.914% 10/3/2011 11.55% 11.595% 10.952% 11/1/2011 -20.27% -20.288% -0.425% 12/1/2011 2.23% 2.248% 1.068% 1/3/2012 28.31% 28.334% 4.654% 2/1/2012 11.88% 11.859% 4.325% 3/1/2012 20.10% 20.123% 3.232% 4/2/2012 -15.26% -15.285% -0.688% 5/1/2012 -9.19% -9.193% -6.002% 6/1/2012 11.22% 11.261% 4.097% 7/2/2012 -10.21% -10.209% 1.189% 8/1/2012 8.77% 8.767% 2.501% 9/4/2012 10.71% 10.705% 2.536% 10/1/2012 5.57% 5.553% -1.842% 11/1/2012 5.71% 5.733% 0.591% 12/3/2012 17.94% 17.941% 0.893% 1/2/2013 -2.51% -2.506% 5.116% 2/1/2013 -0.71% -0.709% 1.280% 3/1/2013 8.48% 8.482% 3.792% 4/1/2013 1.07% 1.092% 1.943% 5/1/2013 10.91% 10.890% 2.342% 6/3/2013 -5.73% -5.705% -1.314% 7/1/2013 13.47% 13.474% 5.168% 8/1/2013 -3.29% -3.294% -2.995% 9/3/2013 -2.20% -2.178% 3.184% 10/1/2013 1.23% 1.256% 4.650% 11/1/2013 13.26% 13.283% 2.986% 12/2/2013 -1.52% -1.519% 2.594% 1/2/2014 7.58% 7.584% -3.524% 2/3/2014 -1.31% -1.336% 4.527% 3/3/2014 4.12% 4.138% 0.852% 4/1/2014 -11.98% -11.977% 0.695% 5/1/2014 0.00% 0.000% 2.321% 6/2/2014 2.97% 2.994% 0.940% From the above table we can see the monthly return from the stocks of Bank of America. We have also determined the alpha and beta for the bank. The beta is higher than 1 which means the company is more risky. Google Google Date Adj Close* 2 Jun, 2014 553.93 30 May, 2014 559.89 29 May, 2014 560.08 28 May, 2014 561.68 27 May, 2014 565.95 23 May, 2014 552.7 22 May, 2014 545.06 21 May, 2014 538.94 20 May, 2014 529.77 19 May, 2014 528.86 16 May, 2014 520.63 15 May, 2014 519.98 14 May, 2014 526.65 13 May, 2014 533.09 12 May, 2014 529.92 9 May, 2014 518.73 8 May, 2014 511 7 May, 2014 509.96 6 May, 2014 515.14 5 May, 2014 527.81 2 May, 2014 527.93 1 May, 2014 531.35 30 Apr, 2014 526.66 29 Apr, 2014 527.7 28 Apr, 2014 517.15 25 Apr, 2014 516.18 24 Apr, 2014 525.16 23 Apr, 2014 526.94 22 Apr, 2014 534.81 21 Apr, 2014 528.62 17 Apr, 2014 536.1 16 Apr, 2014 556.54 15 Apr, 2014 536.44 14 Apr, 2014 532.52 11 Apr, 2014 530.6 10 Apr, 2014 540.95 9 Apr, 2014 564.14 8 Apr, 2014 554.9 7 Apr, 2014 538.15 4 Apr, 2014 543.14 3 Apr, 2014 569.74 2 Apr, 2014 567 1 Apr, 2014 567.16 31 Mar, 2014 556.97 28 Mar, 2014 559.99 27 Mar, 2014 558.46 From the above table we can see the stock analysis of Google. The beta of the stock is 1.14 which is greater than 1 and it indicates that the stock is more risky. Tesla Motors Tesla Motors Date Adj Close* 2-Jun-14 204.7 1-May-14 207.77 1-Apr-14 207.89 3-Mar-14 208.45 3-Feb-14 244.81 2-Jan-14 181.41 2-Dec-13 150.43 1-Nov-13 127.28 1-Oct-13 159.94 3-Sep-13 193.37 1-Aug-13 169 1-Jul-13 134.28 3-Jun-13 107.36 1-May-13 97.76 1-Apr-13 53.99 1-Mar-13 37.89 1-Feb-13 34.83 2-Jan-13 37.51 3-Dec-12 33.87 1-Nov-12 33.82 1-Oct-12 28.13 4-Sep-12 29.28 1-Aug-12 28.52 2-Jul-12 27.42 1-Jun-12 31.29 1-May-12 29.5 2-Apr-12 33.13 1-Mar-12 37.24 1-Feb-12 33.41 3-Jan-12 29.07 1-Dec-11 28.56 1-Nov-11 32.74 3-Oct-11 29.37 1-Sep-11 24.39 1-Aug-11 24.74 1-Jul-11 28.17 1-Jun-11 29.13 2-May-11 30.14 1-Apr-11 27.6 1-Mar-11 27.75 1-Feb-11 23.89 3-Jan-11 24.1 1-Dec-10 26.63 1-Nov-10 35.33 1-Oct-10 21.84 1-Sep-10 20.41 2-Aug-10 19.48 1-Jul-10 19.94 29-Jun-10 23.83 From the above stock we can see the stock analysis of Tesla Motors. The beta of the stock is 1.37 and it is higher than 1 which indicates that the company is more risky. Trina Solar Limited Trina Solar Limited Date Adj Close* 2 Jun, 2014 13.41 1 May, 2014 13.67 1 Apr, 2014 11.18 3 Mar, 2014 13.45 3 Feb, 2014 16.03 2 Jan, 2014 14.85 2 Dec, 2013 13.67 1 Nov, 2013 14 1 Oct, 2013 14.67 3 Sep, 2013 15.46 1 Aug, 2013 9.39 1 Jul, 2013 7.42 3 Jun, 2013 5.96 1 May, 2013 5.84 1 Apr, 2013 5.11 1 Mar, 2013 3.63 1 Feb, 2013 4 2 Jan, 2013 5.17 3 Dec, 2012 4.34 1 Nov, 2012 2.87 1 Oct, 2012 4.15 4 Sep, 2012 4.58 1 Aug, 2012 4.51 2 Jul, 2012 4.72 1 Jun, 2012 6.36 1 May, 2012 6.15 2 Apr, 2012 7.26 1 Mar, 2012 7.13 1 Feb, 2012 7.7 3 Jan, 2012 8.04 1 Dec, 2011 6.68 1 Nov, 2011 8 3 Oct, 2011 8.07 1 Sep, 2011 6.08 1 Aug, 2011 15.88 1 Jul, 2011 17.91 1 Jun, 2011 22.42 2 May, 2011 22.95 1 Apr, 2011 28.49 1 Mar, 2011 30.12 1 Feb, 2011 27.6 3 Jan, 2011 26.07 1 Dec, 2010 23.42 1 Nov, 2010 22.32 1 Oct, 2010 26.76 1 Sep, 2010 30.18 2 Aug, 2010 25.78 1 Jul, 2010 21.74 1 Jun, 2010 17.28 3 May, 2010 17.5 1 Apr, 2010 25.87 1 Mar, 2010 24.41 1 Feb, 2010 22 4 Jan, 2010 21.93 1 Dec, 2009 26.99 2 Nov, 2009 23.29 1 Oct, 2009 16.24 1 Sep, 2009 16.08 3 Aug, 2009 13.35 1 Jul, 2009 14.13 From the above table we can see the stock analysis of Trina Solar Limited. The beta of the stock 3.03 and it is higher than 1 which indicates that the company is more risky. AT&T AT&T Date Adj Close* 2-Jun-14 35.44 1-May-14 35.47 8-Apr-14   1-Apr-14 35.7 3-Mar-14 34.62 3-Feb-14 31.52 8-Jan-14   2-Jan-14 32.89 2-Dec-13 34.25 1-Nov-13 34.3 8-Oct-13   1-Oct-13 35.26 3-Sep-13 32.51 1-Aug-13 32.52 8-Jul-13   1-Jul-13 33.9 3-Jun-13 33.6 1-May-13 33.21 8-Apr-13   1-Apr-13 35.55 1-Mar-13 34.41 1-Feb-13 33.68 8-Jan-13   2-Jan-13 32.63 3-Dec-12 31.21 1-Nov-12 31.6 5-Oct-12   1-Oct-12 32.03 4-Sep-12 34.51 1-Aug-12 33.54 6-Jul-12   2-Jul-12 34.71 1-Jun-12 32.24 1-May-12 30.89 5-Apr-12   2-Apr-12 29.75 1-Mar-12 27.84 1-Feb-12 27.27 6-Jan-12   3-Jan-12 26.22 1-Dec-11 26.57 1-Nov-11 25.46 5-Oct-11   3-Oct-11 25.75 1-Sep-11 24.68 1-Aug-11 24.64 6-Jul-11   1-Jul-11 25.32 1-Jun-11 26.81 2-May-11 26.93 6-Apr-11   1-Apr-11 26.56 1-Mar-11 25.76 1-Feb-11 23.88 6-Jan-11   3-Jan-11 23.16 1-Dec-10 24.37 1-Nov-10 23.05 6-Oct-10   1-Oct-10 23.65 1-Sep-10 23.38 2-Aug-10 22.1 7-Jul-10   1-Jul-10 21.21 1-Jun-10 19.44 3-May-10 19.52 7-Apr-10   1-Apr-10 20.94 1-Mar-10 20.43 1-Feb-10 19.62 6-Jan-10   4-Jan-10 20.05 1-Dec-09 21.83 2-Nov-09 20.99 7-Oct-09   1-Oct-09 20 1-Sep-09 20.72 3-Aug-09 19.99 8-Jul-09   1-Jul-09 20.12 From the above table we can see the stock analysis of AT&T. The beta of the company is 0.29 and it is lower than 1 which indicates that the company is less risky. Conclusion From the above study it can be concluded that the company AT&T has the lower beta which indicates that the company is less risky among all. Works Cited:- Yahoo Finance. Trina Solar Limited (TSL). 2014. Web. June 24th, 2014 https://in.finance.yahoo.com/q?s=TSL. Read More