This exercise is an exciting assignment geared towards giving students a taste o

This exercise is an exciting assignment geared towards giving students a taste of real investing in the financial markets. It is a perpetual project: You start working on it at the start of the second week of this session and you continue working on it as we progress through the semester.  It is composed of 3 parts:
Part one : You start on this after we cover Chapter 1
Part two: You start on this after we cover Chapter 4
Part three: You start on this after we cover Chapter 8

PART 1:
You have $100,000 to spend on 10 stocks, and you allocate it at $10,000 each. The stocks MUST be picked from US publicly traded companies (no bonds, no mutual funds, no ETFs… Only stocks traded on the US exchanges.) So you are to allocate your $100,000 between the 10 stocks.  It does not have to be $10,000 exact. Plus or minus few $$ is OK, and so on for each of the 10 shares. And keeping track of it means looking at it twice per week say on Monday and Friday of each week, posting and saving it to a spreadsheet that you will turn in as part of this exercise and seeing how it is performing, Morningstar or Yahoo Finance will show you daily how it is doing. Your last track should be on the last Friday of the semester before you turn in the project. If you do not know how to create a portfolio in Yahoo Finance, go to Canvas and under Pages you will find a document entitled” How to Create Your Portfolio in Yahoo Finance”. If you can’t think of any publicly traded companies, go to Canvas and under Pages you will find a document entitled “ Sample of some publicly traded companies” and you can choose 10 companies from there.

How to track your portfolio: You can track them on Yahoo Finance or Google Finance. Or, you can track them using www.morningstar.com (Links to an external site.)Links to an external site. No need to sign up for the premium account and pay on Morningstar.com. It is FREE. I will not of course let you pay.  Go to that site, click on “Portfolio” on top, then click on “Create ” and set up your portfolio there.  You may track them using Excel, Word, or whatever. I really do not care. You may also use Yahoo Finance if you like, or Google Finance. It will ask you to sign up by creating a username and password. So: Part 1 is a perpetual par through the end of the semester. You are to monitor your portfolio twice/ week, save it and  turn it in end of the semester as part of this three part project. If you do not like Morningstar you can use Yahoo Finance. Again: if you do not know how to create a portfolio in Yahoo Finance, go to Canvas and under Pages you will find a document entitled” How to Create Your Portfolio in Yahoo Finance”.

PART 2:
Now that you have selected the ten stocks and invested approximately $10,000 in each, you are to answer the following questions in the same order, clearly, and separately:

Obtain the beta coefficient for each stock and calculate the Beta for your portfolio. [i]
What does your portfolio’s beta coefficient tell you about the tendency of the portfolio to more with the market?
How has each stock performed since the assignment began? What is your portfolio now worth? What is the percentage change in the portfolio?
How did an index of the market such as the S&P 500 stock index perform since this assignment started? Did your portfolio follow the market?
Compare the percentage change in the value of your portfolio with the percentage change in the market. Was your portfolio’s performance better or worse after considering the change in the market’ and the portfolio’s beta?
If an investor desired to construct a well-diversified portfolio with moderate market risk, do the stocks you have selected achieve that objective?
PART 3:
In part 1 you invested $10,000 in each of 10 stocks and set up a watch account (Yahoo Finance, Morningstar, Google Finance…) Some of the sites provide the rations illustrated in Chapter 8. This part of the assignment asks you to determine if any of the stocks you selected meet any of the following ratio requirements:

Current Ratio                                                at least 1:1
Profit Margin [ii]                                              minimum of 8%
Return on assets                                          minimum of 10%
Return on Equity                                          minimum of15%
Long-Term Debt to Total Assets                not to exceed 40%

(Most sources use long-term debt and not total liabilities. If you wish to use total liabilities to compute the debt ratio, you may find the information on the firm’s balance sheet.) Although these rations do not indicate whether the stock is over or undervalued, they can be a good place to start. For example, if the return on assets and the return on equity are negative, you might want to ask if you desire to own a stock that is operating at a loss.
All the above assumes you are using the current Edition of the text. You are to send me your final project by clicking on Assignments under Canvas, looking for the Stock Market Challenge tab, and uploading your work as an attachment in a Word, Excel or PDF format only. It is due on or before the FINAL EXAM DAY. You may NOT email it to me away from Canvas.  It is strongly advisable to start the assignment early on: the first Monday following the first week of the semester. You MAY NOT start the exercise after the 3rd week. The reason is to give students enough time to have the portfolio grow.

Your Final Report:
Your report should be designed in a way to answer all questions in the three parts as described above. It should be broken into three separate parts, typed up, and written legibly. It should be well organized and well presented. I will deduct points for ill organized reports. The three parts are to be done in sequence. Your textbook comes with a complementary access to Thomson ONE which is a web-based portal product to an enormous amount of financial information. You may use it if you want for the above exercise.

[i] No need for you to calculate the Beta of each Stock. Morningstar has the Beta calculated for you. Now: calculating your portfolio’s beta will give you a measure of its overall market risk. To do so, and once you have found the betas for all your stocks, each beta is then multiplied by the percentage of your total portfolio that stock represent (i.e. a stock with a beta of 1.2 that comprises 10 % of your portfolio would have a weighted beta of 1.2 times 10 % or .12). Then add all Betas and divide by 10.

[ii] Profit Margin, Net Margin, Net Profit Margin, or Net Profit Ratio are all the same. It is calculated by finding the net profit as a percentage of the Revenues: (Net Profit Margin = Net Profit divided by Revenues, where Net Profit = Revenues – Costs. Also Revenues is the same as Sales and Net Profit is the same as Net Income.)

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