Stock Market - Essay Example

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Summary Report of All Trades: During the course of the course trading project, my portfolio returned a -4.74% return on equity investments over the contest duration. During that time period, I made a total of six trades – 5 buys and one sale. The stocks that I purchased for my trading assignment were: OMX - OfficeMax Incorporated YONG - Yongye International Inc AAPL – Apple, Inc…
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Download file to see previous pages I chose these stocks as a foundation for a diversified portfolio and would like to build positions in each company for long-term holdings targeting 5-10 years. With the exception of Yongye, these stocks are all industry leaders and corporate entities with large asset bases and established business/consumer products. I chose these stocks because I believe that they should not only outperform the market but also limit downside risk to preserve capital. Due to the requirements of the assignment, I chose my entry points for the stock purchases late in order to capitalize on building my position through purchasing at a lower initial price. Over the course of the investment cycle, from 5/27/2011 to 6/2/2011, the rate of return of each of these stocks can be seen charted in comparison to the S&P 500 Index, the Dow Jones Industrial Average, and the TSX Index. As can be seen in the chart above (from Yahoo Finance), YONG outperformed all stocks including the index over this period by a wide margin, up over 30% on the period. Unfortunately, due to the weight of YONG in my portfolio vs. the other equities, this gain was not enough to offset losses, particularly in OMX which underperformed the Indexes by around 10% in this same period. AAPL outperformed the Indexes by a small margin, around 2% during this period. GOLD tracked the DJIA with very little deviation from the Indexes during this timeframe. I attempted a second purchase of OMX during this period to average down my entry price per share after the decline. Table 1: Buy and Sell Orders executed over the course of the project. Table 2: Buy and Sell Orders executed over the course of the project. Table 3: Portfolio – trading performance over the course of the project. Investment Analysis: In building my portfolio for the trading project, I wanted to implement the basics of a balanced portfolio by building positions in different sectors for the purpose of diversification. My interest in YONG was for rapid growth and in expectation of press release activity favorable to the company, and the stock was able to produce 30% gains over the course of trading which I locked in by selling a portion of my initial investment. The GOLD position can be considered as a hedge and also as a long-term investment in the future of the mining industry. My analysis of Randgold indicated that by owning the actual real estate in which the gold and other precious mineral reserves were located, this was a significant and appreciable asset of the company that indicated an undervalued state in the appreciating precious metals market. Furthermore, the company has the facilities for R&D in the precious metals mining sector which few other companies possess. In similar motivation, I chose Apple (AAPL) because of the leading effect of the iPhone, iPad, and other products in reflecting consumer lifestyle innovation through technology. I am impressed with Apple’s minimal debt load as a company, their international expansion prospects for product sales, and the financial position of the company as reflected in cash on the books, growing sales, expanding markets, etc. This company is the largest in the world by market capitalization and the benchmark of the NASDAQ index, outperforming on the ability ...Download file to see next pagesRead More
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