Assessment and Group Dynamics
To be frank, during this time, no investment is safe. It’s really hard for us to measure
the risk for different stocks. We were trying hard to make the risk lower than the
average. Our team members found their information varied based on their own
experience and channels. We mainly got our stock information from some financial
websites, such as Yahoo Finance, Google Finance etc. Basically, we chose our picks
based on diversification throughout our portfolio. According to the diversification of
our portfolio, we have to consider about different sectors, from those sectors, we need
to pick up the best ones we thought based on the different considerations. Firstly, we
found out lots of profiles of the companies from their websites and some articles. We
also considered about the companies’ strategies for the future to make sure they keep
consistency. This should be the entry level risk about the companies we picked.
Second, we tracked about the historical data about the companies we want to pick,
including P/E ratios, Beta, previous market return, the expected return forecasting,
dividend payment policy, current ratio, quick ratio etc. Thirdly, we almost kept
comparing the industrial ratios and percentages to those stocks we want to pick to
against the risk we took. We would like to describe our portfolio week by week to
illustrate the results we make.
From initial position to the week one:
Our portfolio:
BAC: Bank of America Corporation is a financial organization which provides financial service in
US and internationally. They provide retail banking business, investment banking service both for
persons and business organizations.
WFC: Wells Fargo & company offers banking and investing products and services in the US from
their three sectors: Community Banking, Wholesale Banking and Wells Fargo Financial
THI: well-known franchise brand which offers fast food from all their restaurants between US and
Canada.
ATA.TO: ATS is a dominate manufacture automation solutions provider around the world.
AAPL: A famous designer, manufacturer of digital products and computers.
HSB.PR.C: HSBC is the world’s local bank which provides every part of financial service around
the world.
YRI: Yamana Gold Inc is a leading company in gold mining industry.
CP: Canadian Pacific Railway Limited is a transportation company which provides transportation
services around US and Canada.
AMGN: Amgen Inc is a biotech company to discover, develop, manufacture and market the
human therapeutics base on cellular and molecular biology.
AAH: Astra Technologies Limited. The Group’s main business is to engage in the whole process
of communication and support systems of buildings.
WJA: WestJet Airlines Ltd. A airline service company to transport both people and goods around
North America.
NOK: Nokia Corporation, the designer, manufacturer and distributor of today’s most of cell
phones around the world.
Our sectors:
Financial
Service
technology
Basic
Materials
Week one’s sector’s beta
Financial:
BAC
HSB.PR.C
WFC
AVG
1.89
1.2
0.99
1.36
Service:
THI
ATA.TO
CP
WJA
AVG
0.89
1.22
1.14
1.19
1.11
Technology:
APPL
AAH
NOK
AVG
1.55
0.86
1.58
1.33
Basic Materials:
AMGN
0.32
YRI
0.95
AVG
0.635
Base on risk and return for our picks, we went through lots of company profiles from
some websites to get the information about the companies we wanted to pick. In
addition to the profiles, we found out the betas for every company which is showing
above from the table. Because the risk-free rate and market premium rate are the same
for all the stocks we picked, the only difference is the beta, the higher of the beta, the
higher risk we undertook in our portfolio, among our sectors, financial one was
considered the most risky one. Because the average beta of them is 1.36, it indicates
that we expect more return on those stocks. The second one is the technology section,
beta is 1.33 in average, it also demonstrated that we wanted high return for those ones.
In order to put our overall risk down to the average, we picked some service
companies and basic materials ones to balance out our risk. The betas of these two
parts are 1.11 and 0.634 respectively. Because it was our first week to begin to invest
the stock market, we tried to put more money on the higher risk ones to take a chance
to earn more money as a good start. Those above are how we assess the risk, how we
make the decisions about the picks.
Week two:
Portfolio change:
Purchased:
TA: TransAlta Corporation is a company providing electronic energy around the North America.
ACO.X：Atco Ltd. This company distribute electricity, gas, power transmission.
BIR：Birchcliff Energy Ltd. They are doing the oil and natural gas reserves’ exploration,
development and production in the western Canadian Sedimentary Basin
BVF：Biovail Corporation, a pharmaceutical company being involved in the formulation, clinical
testing, registration, manufacture, and commercialization of pharmaceutical products around the
US and Canada.
GE：A conglomerate who is producing almost everything we need in our life.
OIL：Oilexco Incorporated, oil and natural gas exploration, development and production Company
in the UK North Sea.
TCW：Trican Well Service Ltd is manufacturing products being used in the drilling completion
stimulation and reworking of oil and gas.
ARZ：Aurizon Mines Ltd. is a Canada-based gold producer with operations and development
activities in the Abitibi region of northwestern Quebec.
Sold:
ATS Automation Tooling Systems Inc.
Apple Inc
HSBC Bank – Canada
Canadian Pacific Railway Ltd
Nokia Corp.
Our sectors:
ATA.TO
AAPL
HSB.PR.C
CP
NOK
Financial
Service
Technology
Basica
Materials
conglomerates
health care
Financial :
BAC
WFC
1.89
0.99
1.44
Basic Materials
YRI
0.95
BIR
-0.7
OIL
2.1
ARZ
1.5
TCW
1.43
1.056
Service:
THI
WJA
ACO.X
TA
0.89
1.19
0.58
1.49
1.0375
Conglomerates:
GE
1.27
Technology:
AAH
0.86
Health care:
AMGN
0.32
BVF
0.83
0.575
Since the unsuccessful practice in the stock market, we decided to withdraw some
money back from the financial sector and technology sector. We put less money in
these sectors in terms of higher risk. We added a health care sector to our portfolio to
bring the risk down a little bit. We did not want to give the financial sector up,
because it has higher return for our whole portfolio. We sold two financial stocks to
get our money to a safer sector. We put more money on the basic materials and the
service sector. The average beta for financial, service and basic materials are 1.44,
1.0375 and 1.056 respectively. The average beta for technology decreased to 0.86. we
added one conglomerate company to our portfolio which is high risky. The beta for
this one is 1.27. For the health care sector, the beta is only 0.575, we just want to put
some money on there to earn some cash equivalent to the inflation.
Week three:
Portfolio changing:
Portfolio change:
Purchased:
TXT: Textron, Inc. operates in the aircraft, industrial, and finance businesses worldwide. It
operates through five segments: Cessna, Bell, Textron Systems, Industrial, and Finance.
BFC: BFI Canada, Ltd is a income trust units that provide some financial services.
L: Loblaw Companies Limited. The Group's principal activity is to distribute food and provide
general merchandise products, drugstore and financial products and services through its operating
banners.
Sold:
Wells Fargo & Company
General Electric
Oilexco
WFC
GE
OIL
Our sectors:
Financial
Service
Basic
Material
Conglomerate
s
Health care
Our beta for every sector
Financial :
BAC
BFI
avg
Basic Materials
YRI
1.89
0.93
1.41
0.95
Service:
THI
WJA
ACO.X
TA
L
avg
Conglomerates:
TXT
0.89
1.19
0.58
1.49
0.4
0.91
2.36
Health care:
AMGN
0.32
BIR
ARZ
TCW
avg
0.7
1.5
1.43
1.145
BVF
avg
0.83
0.575
For the third week, the financial sector was the same with last week we had. For the
service part, we adjusted our stocks to lower the risk based on beta, it was 0.91 in the
third week. The basic materials, we almost kept the same amount and stocks in our
portfolio. The beta is 1.145. We changed the conglomerate; we sold the GE stock to
buy a even more risky one called TXT. We were trying to make a high return for this
one. For the health care sector, as I mentioned in the last week’s portfolio, we would
keep it for a long-term investment to go along with the inflation rate.
Week Four:
Portfolio changing:
Purchased:
EDU: New Oriental Education & Technology Group, Inc is a China-base leading English-training
organization which has a comprehensive English teaching system being used around 30 cities in
China.
SINA: A comprehensive Chinese website like Yahoo in North America.
TM: Toyota Motor Corporation operates in the automotive industry worldwide. It engages in the
design, manufacture, assembly, and sale of passenger cars, minivans, and trucks and related parts
and accessories.
Sold:
BFI Canada Ltd.
BFC
Our sector:
Financial
Service
Technology
Basic
Materials
Conglomerates
Health care
consumer goods
Beta for every sector:
Financial :
BAC
1.89
Basic Materials:
YRI
0.95
BIR
-0.7
avg
0.125
Service:
THI
0.89
WJA
1.19
ACO.X
0.58
TA
1.49
L
0.4
EDU
1
avg
0.925
Conglomerates:
TXT
2.36
Technology:
SINA
1.34
Health care:
AMGN
BVF
avg
0.32
0.83
0.575
Consumer Goods:
TM
0.62
In the fifth week, due to the market changing, we sold one more financial stock to
withdraw our money back from the risky financial sector. We put more and more
money into the service sector in terms of the great practice in the past couple of weeks.
The beta was going to be lower than before which is 0.925. We sold out our
technology stocks we bought from the previous weeks, we bought a now Chinese tech
stock instead to keep the diversification. We sold some basic materials too to lower
this sector’s risk. In addition, we bought Toyota to lower our overall risk, because the
beta is only 0.62. We are going to more conservative way to invest.
Week five to week seven:
Our portfolio changing :
Our chart:
Financial
Service
Technology
Basic
Materials
Conglomerates
Health care
consumer goods
Beta for every sector:
Financial :
BAC
1.89
Basic Materials:
YRI
0.95
BIR
-0.7
avg
0.125
Service:
THI
0.89
WJA
1.19
ACO.X
0.58
TA
1.49
L
0.4
EDU
1
avg
0.925
Conglomerates:
TXT
2.36
Technology:
SINA
1.34
Health care:
AMGN
BVF
avg
0.32
0.83
0.575
Consumer Goods:
TM
0.62
From week 5 to week 7, the stock market was stable; we actually haven’t done any
transaction except for one disposal. We sold TXT based on risk consideration.
Because the beta of TXT is extremely high for us, all of us decided to keep them in
our portfolio for these weeks.
Week 8:
Portfolio changing:
Portfolio change:
Purchased:
TLM: Talisman Energy Inc., an upstream oil and gas company, engages in the exploration,
development, production, transportation, and marketing of crude oil, natural gas, and natural gas
liquids (NGLs) in primarily North America, the United Kingdom, Scandinavia, and the Southeast
Asia. The company was founded in 1925 and is headquartered in Calgary, Canada.
MGO: Migao Corporation, based in China, produces specialty potash-based fertilizers for the
high-value agricultural Chinese market.
POT: Potash Corporation of Saskatchewan Inc. engages in the production and sale of fertilizers,
and related industrial and feed products in North America.
Sold:
Bank of America Corporation
BAC
Loblaws
Amgen Inc.
West Jet Airlines
Atco LTD
The New Oriental Education & Technology Group
SINA
Toyota
L
AMGN
WJA
ACO.X
EDU
SINA
TM
Our chart:
Service
Basic
Materials
Health care
Final Shot
Beta for every week:
Service:
THI
TA
avg
0.89
1.49
1.19
Health care:
BVF
0.83
Basic Materials:
YRI
0.95
BIR
-0.7
avg
0.125
Last week
TLM
2.13
MGO
1.25
POT
1.79
avg
1.7233333
Because of the terrible condition of the stock market, we lost part of our money. The
amount of we lost is smaller than the whole market, but we still need to take our final
shot to pull our money back. We almost sold half of our stocks in the beginning of the
final week; we put cash to three stocks. We all want to take more risk to get more
return for our investment. We picked TLM, MGO, POT, there were all high risky, the
average beta for this final shot is 1.7233 which is higher than any other sector we ever
had before. Finally, we gained from one stock, and we lost from another stock. It
balanced out finally.