Investment & Portfolio
Management
BSB6302
Semester 1 2014-2015
Bahrain polytechnic
Zahra Abdulhusain Ahmed Hasan Ali
Group names and IDs
Zahra A. Ali
Ahmed Al-Sharif
Mustafa A. Hassan
Tutor’s Name
Due Date
201100963
201200112
201102031
Ms. Latifa AlFahdel
30th November 2014
Investment & Portfolio Management
BSB-6302
Group Assignment
Table of Contents
1.
Executive Summary ............................................................................................................................... 2
2.
Introduction .......................................................................................................................................... 4
3.
Development of Personal Investment Philosophy................................................................................ 5
4.
Investment Strategy .............................................................................................................................. 7
5.
Outlook and Research on the Four Stocks Selected ............................................................................. 9
6.1 Description of the Firm and Reasons for selecting it .......................................................................... 9
6.1.1 Firm 1: Apple Inc. ......................................................................................................................... 9
6.1.2 Firm 2: Johnson & Johnson ........................................................................................................ 11
6.1.3 Firm 3: FedEx Corporation ......................................................................................................... 13
6.1.4 Firm 4: Nike Inc. ......................................................................................................................... 14
6.2 Financial Ratios ................................................................................................................................. 16
6.3 Closing Share Prices as of 6th November 201.................................................................................... 36
6.4 Broker Recommendation .................................................................................................................. 37
6. 5 Earnings Forecasts (Nasdaq) ............................................................................................................ 40
6.6 Description and Performance of Bond: Colorado Bond Shares A Tax-Exempt (HICOX) ................... 43
6.7 Description and Performance of REIT: Alexandrian Real Estate Equities (AREE) ............................. 45
6.8 Fund Allocation ................................................................................................................................. 46
6.
Evaluation of the Portfolio Performance ............................................................................................ 47
7.1 HPR Calculation ................................................................................................................................. 47
7.2 Market Rate & Risk Free Rate ........................................................................................................... 50
7.3 Portfolio Return ................................................................................................................................ 50
7.4 Portfolio Beta .................................................................................................................................... 51
7.5 Jenson’s Alpha Analysis (α) ............................................................................................................... 53
7.6 Performance of the Portfolio Firms during the Holding Period........................................................ 54
7.
Suggestions for Improvement in the Investment Strategy ................................................................. 57
8.
Conclusion ........................................................................................................................................... 59
9.
List of References ................................................................................................................................ 60
10.
Appendices ...................................................................................................................................... 67
10.1 Financial Ratios ............................................................................................................................... 67
10.2 Securities’ closing prices and dividend payments during the holding period .............................. 105
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1. Executive Summary
The purpose of developing this portfolio is for practicing the management of a well-diversified portfolio
for almost 10 weeks starting from 21st September to 6th November. As portfolio managers, we were
requested to construct a portfolio which combines different kind of investment including bonds, stocks
and Real Estate Investment Trustees. In order to create a diversified portfolio, the following securities
were chosen which relates to different industries, sectors and fields:

The Colorado Bond Shares Tax-Exempt (HICOX) as the bond mutual fund which operates in taxexempt investment.

The Alexandria Real Estate Equities (ARE) as the portfolio REIT which relates to the Real Estate
Market.

Apple Inc. (AAPL) stock which comes under the consumer goods sector and the industry of
electronic equipment (Technology).

Johnson & Johnson (JNJ) stock which operates under the healthcare sector and the industry of
Drug Manufacturing.

FedEx Corporation (FDX) stock which relates to the service sector (transportation) specializing in
the Air Delivery and Freight Industry.

Nike Inc. (NKE) stock which operates in the consumer goods sector and the industry of Textile
Apparel Footwear and Accessories.
Basically, the selection of the stocks was based on the personal investment philosophy which has been
developed based on 2 principles: the growth seeking investment and the fundamental philosophy of
tracking the firms’ financial performance in term of management effectiveness, valuation, profitability
and financial strength.
In term of the investment strategy followed, it includes 3 steps: planning, execution and feedback. The
planning includes the development of investment policy statement (IPS) for investors who are r between
20-23 years old with medium wealth, risk-aversion tolerance and an objective of maximizing their
wealth.
While the execution step is applied through the bottom-up strategy starting with looking closer at the
firm’s financial performance during the past years using the following ratios: P/E Ratios, Beta,
Price/Sales, Price/Book, Price/CF, Price/Free CF, Earnings Quality, Sales 5yr. Growth Rate, Current Ratio,
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LTD/Equity, Total Debt/ Equity, Interest Coverage, EBITD 5yr. Average, ROA 5yr. Average, ROE 5yr.
Average and Asset Turnover. Comparing the firms’ performance to the performance of its industry,
sector and the overall market(S&P500) was helpful approach to make decision whether to invest in that
particular firm or not. A closer look was given to different bonds and REIT to choose the most suitable
one for the portfolio. Examining the broker recommendation and earnings forecasts for each firm was
part the execution step as well which helped finally in allocating a percentage of total investment fund
($100,000) for each of the stocks, the bond and the REIT. Basically, a higher percentage of fund were
allocated for the securities that are characterized by their sustainable growth such as Nike and the REIT
while a lower percentage were allocated for securities’ with fluctuated growth.
In the last step of feedback, the overall performance of the portfolio was evaluated by measuring the
performance of each security individually through the Holding Period Return Calculation (HPR) and their
contribution to the portfolio return which is estimated at (9.34%). Moreover, the sensitivity of the
individual securities and the portfolio to the market changes was evaluated through calculating beta
which is estimated at 0.4 for the portfolio. Additionally, the portfolio return was adjusted through the
Jenson’s alpha indicating that the portfolio has an excess return on its component because of having a
positive alpha estimated at 7.3%. Finally, it was found most of the IPS objectives were achieved as the
investor earned around $93,600 as return on this investment. However, a conclusion and several
recommendations were provided to improve the investment strategy in future.
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2. Introduction
As future investors, students are expected to identify, create and manage a well-diversified
financial portfolio. Mainly, the main objective of this report is to select 6 different securities including: a
Bond Mutual Fund, a publicly traded Real Estate Investment Trust (REIT) and 4 stocks with a minimum of
one long position and one short position on common shares, which will be combined together to
produce a well-diversified portfolio.
Hence, the report aims to reflect the process of managing that portfolio for a specified period (probably
10 weeks starting from 21st September to 6th November). Another objective is to measure the
efficiency and the successfulness of the investment strategy followed in relation to the characteristics of
the investment philosophy policy. To meet the report objectives, several calculation were made
including: the expected risk (beta), how much the individual securities and the portfolio in general were
capable to generate return at the end of the period and after risk adjustment in order to evaluate the
overall portfolio performance.
This report will comprise a detailed explanation of the stocks chosen, the financial ratios which
was used to determine and assess how productive, efficient yet profitable they are. Therefore, a bottom
up approach was followed by looking at the company’s financial situation first, as more focus were given
to the figures and the performance of the firms, in parallel to assessing the economic factors as a whole.
Both the Bond and the REIT invested in, has been included in the report with a full description of
what they are, and how well have they preforming and how much have the yielded and contributed to
the portfolio in general. The find allocation and individual fund contribution was included in the report
as well.
This Report will help in showcasing our investment strategy, and how it has been utilized in
various investment processes in order to guarantee the highest return.
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3. Development of Personal Investment Philosophy
In order to be able to manage the portfolio successfully, a clear working plan should be identified
starting with the investment philosophy. Basically, the investment philosophy is based on our conviction
in seeking high earning companies that are forecasted to have high growth of business. Hence our
investment strategy is seeking growth. Therefore we made sure that we choose companies that have a
higher earnings growth, which is higher than the market.
Sports Apparel and footwear have been an emerging industry ever since, investors started to invest
heavily in various companies. Such industries have big names such as Adidas, Nike and Rebook. All of
those companies where able to establish their names through the numerous products, event and player
endorsements. Especially after how the trend shifted and became one of the strongest industries. We
also decided to diversify and include other sectors such as Technology, Air Delivery and Freight services,
and health which all have a bright expected future.
In terms of our growth strategy we assessed the companies in term of their earnings quality ratio in the
past four years. To illustrate, , Nike has a constant growth of earning quality between 2009 and 2012
indicating its sustainability as the ratio increase gradually from 105% in 2009 to 117% in 2012. Besides,
the ratio of earning quality for apples was 120% in 2013, higher than its ratio recorded in 2012 at 99%
indicating a small fluctuation. Accordingly, both firms displayed a common prediction that their earning
growth will continue because probably the firms with a stable earnings growth, their stocks are
expected to grow as well. The only disadvantage of choosing the investment philosophy as growth
seeking is the time horizon, however it has high level of efficiency and reward.
Moreover we also have chosen a second investing strategy which is the fundamental philosophy, for our
strong belief that examining the company’s financial ratios will aid understanding the key indicators of
the organizational performance. Hence we have assessed various financial ratios such as management
effectiveness, Profitability Ratios, Financial Strength and Valuation and leverage Ratios. All of the
mentioned ratios have helped us in identifying which companies are doing well and how effectively have
they been performing in terms of the market. Therefore, tracking the company’s performance, its
history and expected futures were helpful to support our growth investment seeking.
Those two strategies has aided us in pin pointing which of them are performing better, hence facilitating
for use the fund allocation process. We have allocated larger funds for the star performing companies
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which are characterized by their sustainable growth, where as we allocated a smaller fund for the
normal performing funds which.
Hence based on the above mentioned strategies, we have decided to choose the following companies
Nike, FedEx, Apple, Johnson and Johnson, Alexandria Real Estate Equities (AREE) and Colorado Bond
Shares a Tax-Exempt (HICOX). More funds were allocated to Nike, Apple, FedEx and the REIT as their
past great performance suggests higher growth for their stock. However, the rest would have a lower
portion of the total investment cash (100,000) because of their fluctuated performance.
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4. Investment Strategy
Since we have already established the investment philosophy and the stocks that will make up
our portfolio, the next step will be on deciding our goals, risk tolerance and guide lines, in other words
we have to align our vision with our goals. Moreover we have decided to follow three steps that will
enable us to produce a well-rounded managed portfolio, which combines all of our visions and goals
together.
The first stage is the planning stage, where we have to determine the following factors age, risk
tolerance, goals, and preference. In other words an IPS (Investment Policy Statement) document that
where we can always check as we move further into the three phases. This will always guide us if we are
going in the right direction or not.
Since we are a group of investors ranging from 20 -23 years old students, classified as medium
wealth individuals. Therefore we cannot bear any huge losses, we decided to go with less risky stocks,
however went for riskier stocks if we will be compensated for such a risk. Hence we decided on the
perfect combination of risk free investments, low risk investment and high risk investments. In other
words we are risk-averse investors that are willing to take risky investments, only if we will be
compensated for the risk. To insure the portfolio diversification, the REIT of Alexandrian Real Estate
Equities was chosen beside the selection of a semi-risk free investment through the Mutual Fund Bond
“Colorado Bond Shares a Tax-Exempt (HICOX).
Our objectives in managing such a portfolio are the following:
Increase the return of the portfolio by 5 – 8 percent.

Focus on the on the companies that have high returns and promising increase in the future
growth.

Companies that have their vision and mission aligned with our goals and beliefs as ours.

To create a diversified portfolio that will be able to accommodate market changes, and not
get affected by any change in the market.
The second stage is the execution stage, which include the bottom-up strategy where we started
first with researching and analysing the company’s financial performance. We started to conduct all of
the above mentioned ratios. We started to compare their performance against the industry and the S&P
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500. We did not just base our decisions only on the financial ratios; we have also examined the market
news, stock history and broker analysis and recommendations. We had to insure that we combine all
both the news and the numbers in order to have a well-rounded overview of all the elements that can
affect the stock individually and the portfolio as a whole. In order to be able to find the well-priced and
under-priced stocks, we concentrate more on the P/E ratio for each company which indicates how well
the firm’s stock is priced which will be highlighted through the financial ratio section of this report.
The final stage is the feedback stage, where we go back to our IPS and insure that we are aligned to
our objectives and insure that we are performing well, moreover generating the profit margin mention
in the IPS. Throughout the feedback stage we will be continuously assessing our position, and adjust our
portfolio based on the different changes that will arise from the buying and selling, and any expected
changes in the market.
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5. Outlook and Research on the Four Stocks Selected
The following 6 securities from different sectors have been chosen in relation to the investment strategy
of diversifying the portfolio. Moreover, additional reason for selecting them will be analyzed throughout
this part:
6.1 Description of the Firm and Reasons for selecting it
6.1.1 Firm 1: Apple Inc. (Stock ticker: AAPL), Sector: Consumer Goods, Industry: Electronic
Equipment
Historically, Apple- the American Company- was founded by Steve Jobs along with its co-founders:
Ronald Wayn and Steve Wozniak on 1st of April 1976. Geographically, it is headquartered in Cupertino,
California. Taxonomically, Apple Inc. operates under the sector of Consumer Goods in the Electronic
Equipment (technology) Industry (Appendix 1).
Initially, Apple was established to make personal Computers (PCs), but currently it designs, develops,
manufactures and sells a variety of consumer electronics including: mobile communication and media
devices, movable digital music players besides the PCs. Particularly, the line of MAC computers, the
iPhone (smartphone), the iPad (tablet computer) and the iPod (media player) are the best-traded lines
of Apples’ products. Additionally, Apples sells consumer software, online services, network solutions,
accessories and applications. The most popular software are the operating systems such as OS
X and iOS , the creativity and productivity suites including iLife and iWork, the web browser (Safari) plus
the media browser (iTunes).
Apples’ stock, which is a piece of S&P500 stock indexes, is publicly traded in the NASDAQ exchange
(AAPL). Timothy Cook is the current CEO of Apple, who has been assigned after Steve Jobs death in
2011. The 1st iPhone announced by Apple in the Macworld Expo on January 9th, 2007, causing a
significant increase in its share price to reach about $97 on that particular day.
Collectively, Apple has a total of 92,500 permanent and full time employees who are working in 425
retail stores distributed in 14 countries. Apple has different segments of target markets to reach
including individual consumers, small and mid-sized enterprises, educational and governmental
customer (Yahoo Finance, 2014).
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Currently, Apple is classified as the second largest information technology company in the world in term
of revenue generation which is estimated lastly at 182 billion in October 2014, following Samsung
Electronics. Furthermore, it is considered as third largest mobile phone maker and the largest publicly
traded corporation in the world in term of market capitalization which is estimated at 669.65 Billion by
Yahoo Finance (2014).
In Addition, Apple is the largest music retailer worldwide through its online App store and iTunes store
(Villapaz, 2014). In 2013, Apple ranked 6th among the most successful 500 companies in the world as
identified by Forbes Magazine. Moreover, Apple has successful marketing strategies with high level of
brand loyalty and possesses the most valuable brand in the world, which is estimated at 118.9 billion
(Stuart, 2014). Accordingly, Apple’s good standing position financially and reputably creates a preferred
and trustful opportunity for investors to invest in.
Along with the previous reasons for selecting Apple stocks to be part of the portfolio, the main reason is
due to the continued growth of its share prices which is estimated at 500% cumulatively during the past
years. Moreover, investing in Apple is considered as stable investment which was proven after the death
of Steve Jobs. To illustrate, the expectations of Apple’s failure was offset by nonstop expansion as the
company release more developed products including iPhone 5, 5s and 5c, iPad Air, iPad mini and Apple
watch to continue generating money in the years followed his death.
Furthermore, Apple products are being used everywhere and in every field especially with the
technological and globalization revolution that swept the world indicating a bright future. For instance,
schools in Singapore have begun utilizing the application and features of Apple products to deliver
practical method of technological education (Apple Inc., 2014). Another sign of Apple’s future expansion
is the start phase on designing an iPhone which is well-matched hearing aids for people who suffer from
auditory problems. The release of this product is expected to raise the price of Apple Stock in future
(Apple Inc., 2014). Further reasons for selecting Apple stock will be demonstrated through the good
sense of its financial ratios in the next part.
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6.1.2 Firm 2: Johnson & Johnson (stock ticker: JNJ), Sector: Health Care, Industry: Drug
Manufacturer-Major
Johnson & Johnson (J & J) is a multinational American Company which was found initially by the three
Johnson brothers Robert Wood, James Wood and Edward Mead in 1885 by creating a surgical dressing
that is ready for use. However, the first J&J product was produced in 1886 and the company
incorporated in 1887. Geographically, it is headquarter in New Brunswick, New Jersey in the United
State, while the consumer partition is based in Skillman, New Jersey. Basically, J&J operates in the
Health Care Sector and the industry of Drug Manufacturing (JNJ, n.d).
In general, J&J involves in researching and developing, manufacturing and selling various types of health
care products in the world. Particularly, J&J operations are concentrated in 3 segments including
medical devices and diagnostics, Consumer and Pharmaceutical. In 2013, the company’s total revenue
estimated at $71,312,000 was contributed by 39% from Pharmaceutical segment, 40% from the medical
devices segment and 21% from consumer products (JNJ, n.d). The table below identifies the types of
products provided by J&J in each segment:
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J&J’s shares, which is a component of the S&P500 and the Dow Jones Industrial Average, has been
publicly traded in the NYSE (stock ticker: JNJ) since 1944. Currently, Alex Gorsky is J&J’s CEO. Besides,
the company has more than 275 subsidiaries operating in over 60 countries, while J&J products are sold
in more than 165 countries in the world. Besides, J&J’s human resources consist of approximately
128,700 full-time employees. “Our Credo challenges us to put the needs and well-being of the people
we serve first”. This is the philosophy that guides the business of J&J and it’s a blueprint for long term
growth and sustainability considering their responsibilities towards, employees and shareholders (JNJ,
n.d).
One of the reasons for investing in Johnson &Johnson is its strong brand enrichment as investors are
exposed to both surgical and pharmaceutical industries just by possessing J&J stock. Thus, it is
considered as a double diversification strategy of 2 in 1 that is highly preferred by investors. Besides, J&J
has a well-known brand that enhances its financial performance. For example, approving the Sirturo1 by
the Food and Drug Administration on December 31st, 2012 caused the firm’s share prices to increase up
to $108 due to this single factor. Another example is that in 2012, Remicade’s2 sales reached $6.1 billion
for J&J amounting to 10% of the total firm's revenue from one drug only (Stoffel, 2013).
Globally, J&J is the 6th largest consumer health, biologics and pharmaceuticals company. Besides, J&J is
considered as the largest and the most diverse company in the world in the field of medical devices and
diagnostics. Moreover, J&J was listed as number 6 by the INTERBRAND’s report of 2013 pointing the
Best Global Green Brands. According to JNJ’s website, Johnson & Johnson was successful to maintain its
position as “the ONLY healthcare company in the top 50 and highest ranked personal care company”. In
addition, J&J is one of the 2 exclusive companies that have been on the Management Strategies 100
Best list for 28 years, since the list was existed.
Accordingly, tracking J&J’s stable position as the market leader for the medical devices and the
healthcare sector for a long period will result in preferable, reassured and suited landscape to invest in
the firm. To illustrate, J&J’s constant performance-consisting of 52 consecutive years of dividend rises
and 30 successive years of adjusted earnings growth- is another simulative reasons for investing in J&J.
Besides, J&J concentrates heavily on innovation plus research and development as they are the essence
of the healthcare sector. Accordingly, J&J is well-positioned to face any operational instability in terms
1
2
It is a tuberculosis drug that is the first of its kind developed by J&J for the purpose of fighting the infection.
It is “a product that treats Crohn's disease and rheumatoid arthritis”.
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of technological advancements due to its professionalism in this area resulting in lowering the risk of the
investment as preferred by the investor. However, reducing risk is not accompanied by return reduction
in the case of J&J because it generates a total return of 8.9% for investor exceeding the S&P500 total
return of 7.4%. This goes in line with the investor desires (Mirza, 2012).
6.1.3 Firm 3: FedEx Corporation (stock ticker: FDX), Sector: Services, Industry: Air Delivery
and Freight Services
FedEx is an American-international corporation which is specialized in export and import activities.
Historically, the company has passed through three stages. Initially, it was founded in 1971 by Frederick
W. Smithas as the Federal Express Corporation which was incorporated in 1998 to be FDX Corporation.
Finally it became FedEx Corporation in January 2000. Moreover, FedEx’s Headquarter is located in
Memphis, Tennessee in the US. Operationally, FedEx operates locally (in USA) as well as internationally
the Service Sector and the industry of Air Delivery and Freight Services.
FedEx provides a variety of shipping and logistics services both for individuals and businesses including
the following operational facilities: Express, Freight, Ground and accelerated Delivery Service. Averagely,
FedEx’s Daily operation exceeds 10.5 million of shipments of its operational facilities provided.
Particularly, FedEx has 10 air express hubs and 1,250 stations to provide Express Delivery Service, 370
centers for Freight Service with more than 500 delivery terminals and 33 ground hubs for the Ground
Services. Generally, FedEx’s offices are located in more than 1,800 locations with a total of
approximately 700 Service Centers in the World . In term of Air operation volume, FedEx has around 656
aircrafts to serve in more than 375 airports in the world.
Furthermore, FedEx is a component of S&P 500 index that has been listed in NYSE for public trade since
December 1978. Currently, Frederick W. Smith, is the chairman, CEO and President of FedEx.
Collectively, FedEx represents $48 billion market share in its industry with more than 300, 000 full-time
employees who provides FedEx services in more than 220 countries and territories covering all
addresses in the US.
These statistical figures indicate the successfulness of the company operations worldwide which would
create a great investment opportunity. Besides, FedEx is considered to be one of the leading logistics
service providers in the industry today. To illustrate, FedEx is ranked 1st in the delivery industry and 8th
among the “Most Admired Company” list as classified by the Fortune Magazine in 2014. Also, the
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Magazine has identified FedEx as one of the 100 Best Places to Work For. According to the Reputation
Institute, FedEx is ranked 8th among the “Most Reputable Companies in America” list. Accordingly, FedEx
sounds well-positioned reputably which encourages selecting its stock as part of the portfolio.
Along with the previous reasons, choosing FedEx as one of the portfolio securities goes in line with our
investment philosophy and strategy of. Statistically, FedEx has a great financial progression from 2009 to
2014 which is reflected in its revenue growth. To illustrate, FedEx’s Revenue growth moved significantly
throughout the previous years to reach $45.6 billion as the end of September 2014. Moreover, the
Earnings per Share figures for FedEx have grown progressively from $4.90 in 2011 to $6.75(FedEx
Investors Relation, n.d). By tracking the firm’s financial performance in the past years, we can expect a
bright financial future for FedEx, leading to achieve the investment objectives of maximizing profit. This
will be proved in the next part of analyzing the financial figures.
6.1.4 Firm 4: Nike Inc. (stock ticker: NKE), Sector: Consumer Good, Industry: Textile Apparel Footwear & Accessories
Nike Inc. is an American international corporation which designs, develops, manufactures, markets and
sells a variety of sports related products including footwear, apparel, accessories, equipment and
services. Besides manufacturing sports related products and equipment, it also operates retail stores
under the name of Niketown. Geographically, Nike is headquartered in the Portland metropolitan area
of the US generally and near Beaverton, Oregon Particularly. Phil Knight is the Chairman of Nike while
Mark Parker is its President and CEO (Nike Inc., n.d).
Historically, Nike was founded on 25th of January 1964 by Phil Knight and Bill Bowerman as Blue Ribbon
Sports to distribute the products of Onitsuka Tiger, which is a shoe maker from Japan. Later, it became
Nike Inc. officially on 30th of May 1971. Throughout Nike’s history, Nick has expanded progressively by
purchasing more acquisition starting with the Cole Haan purchase in 1988 and ending with the two
subsidiaries Hurley International and Converse Inc. purchase. Similarly, Nike has extended its product
line gradually from running shoes only to skateboarding equipment that are lighter than their
competitors by 30%. Accordingly, the progressive expansion is an indicator of its successful management
and financial strategies, leading to a stable rather than fluctuated growth which is preferable for
investor to reduce the risk of sharp fluctuations in his investment .
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Generally, Nike has more than 44,000 full-time employees working in Nike offices which are located in
more than 45 countries rather than US. Besides, Nike deals with more than 700 shops in the world. Most
of Nike’s factories are placed in Asia including China, India, Indonesia, Thailand, Taiwan, Pakistan,
Vietnam and Philippines.
Nike is considered as one of the biggest suppliers of athletic shoes and apparel and one of the leaders in
term of manufacturing sports equipment. Additionally, Nike owns the most valuable brand among sport
companies, which is estimated at approximately $19 billion. Financially, Nike generated total revenue of
$24.1 billion in the first half of 2012 year, leading to a total net income (profit) in the same year. This
revenue was generated by 60% of Footwear Sales, 34% of 34% of Apparel and 6% of Equipment.
The Previous figures indicate a healthy financial and marketing performance that encourages investing
in Nike. Additional reasons for selecting Nike are due to its competitive advantages over its competitors
which are represented in two areas. One is the cost advantage of producing similar or even higherquality products at lower costs and expenses. The second area is the differentiation advantage of
providing a unique product or a service that increase the customer willingness to pay a price, exceeding
the additional expenses on differentiation. Both of them lead to reach higher rate of potential profit
than its competitor, matching the investors’ interest (Mishra, 2011).
Another reason is that the company itself is well-diversified because of providing different lines of
products as mentioned earlier. Therefore, if one line suffers from a loss the rest can recover leading to
reduce the risk for the investors. One further reason is Nike’s sustainability in term of achieving longterm growth which will be displayed later (Nike Inc, 2014).
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6.2 Financial Ratios
The following financial ratios are gathered for the 4 previous stocks, their sectors, their industries and
the S&P500. The overall interpretation of the following data encourages the selection of the stocks to be
part of the portfolio Securities.
1- Price-to-Earning (P/E) Ratio:
The Firm’s
The Firm’s
S&P 500 Stock
industry Ratio
Sector Ratio
Index Ratio
16.32
13.90
14.93
19.92
21.60
23.45
firm’s P/E Ratio
Apple Inc. (AAPL)
Johnson & Johnson
(JNJ)
FedEx Corporation
(FDX)
Nike Corporation
(NKE)
18.6
23.49
23.90
30.82
25.48
25.50
14.93
Measuring the firm’s market rating, whether it is cheap or expensive, and how much the market is
willing to pay in return for the firm’s earning through the P/E Ratio could be a sign to buy its stock or
not. By comparing the current share price to the Earning per share for each of the 4 stocks, we can
estimate that the higher P/E ratio is more likely to be converted into higher growth of earnings in the
future. Relatively, the previous thesis is applied to Nike Corporation as it has the highest P/E Ratio
among others (25.48) which reflects a faster growth and a lower risk associating with its expected
earnings. This goes in line with the preferences of potential investors to include the stock within their
portfolio.
In spite of the fact that Apple has the lowest P/E ratio (16.32), it exceeds the number recorded for its
main competitor (Samsung’s Electronics P/E Ratio = 6.28 ) its sector and its industry. This reflects a
valuable image for Apple in the investors’ eyes, as we expect that Apple’s earning will grow higher than
its competitor and the overall industry. While J&J and FedEx have a medium ratio estimated at 19.92
and 23.49 respectively, which are lower than the average P/E ratio for their industries amounting to
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23.45 and 30.82 respectively. Also, we can see that FedEx Nike’s figures are very close to the P/E ratio of
their industry, proving their stability in the market.
Moving to the comparison among the industries’ P/E ratio, it is noticed that Nike’s industry is the winner
again as it has the highest P/E ratio which is equivalent to (25.50). Thus, we expect that Nike’s industry
will record an extremely high earning growth in future compared to the other industries, which have
relatively lower figures of P/E ratio. However, the comparison between the 4 firms’ sectors has a
different theme as the highest P/E figure was recorded by FedEx (the service sector) with (30.82).
Generally, S&P 500 has a positive and not very low figure of P/E ratio which is 19.2. On the other hand,
firms with very low ratio, which indicate overlooking the stock or a “vote of no confidence” by the
market, are avoided during the process of stock selection as they do not suit our investment strategy.
2-
Beta (as of 19th September):
The Firm’s
The Firm’s
S&P 500 Stock
industry Beta
Sector Beta
Index Beta
1.26
1.14
0.74
0.84
1.10
1
firm’s Beta
Apple Inc. (AAPL)
Johnson & Johnson
(JNJ)
FedEx Corporation
(FDX)
Nike Corporation
(NKE)
1
1.30
0.94
1.28
0.78
0.42
0.74
Measuring the stock price sensitivity to the market price movement and estimating its systematic risk
could affect the stock selection criteria based on the investors’ aversion to risk. To illustrate, FedEx has
the highest beta which is 1.30 indicating that the stock risk exceeds the average risk in the market in
exchange for a higher return than the market return which meets our investment philosophy of being
risk averse. Moreover, FedEx’s beta exceeds the figure recorded for its industry where the beta equals
to 1.14 meaning that FedEx have a higher systematic risk and return and more sensitive to market
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fluctuation than its industry. The same thesis is applied for Apple as it has a very close figure to FedEx
and exceeds the beta of its industry as well.
However, the other 2 stocks have a beta figure that is less than 1, which means that they are less
sensitive to the market volatility and will have rate of return less than the market return. The rationale
behind this selection is that our investment philosophy is based on disliking risk. Particularly, Nike has
the lowest systematic risk (sensitivity to the market changes) as it has the lowest beta (0.78), while JNJ
sets in the middle in term of responding to market volatility since its beta is 0.84, which is very close to
reflect the market changes.
Moving to the industries level, we can observe the same order for the 4 stocks’ industries as Apple’s
industry has the highest beta which is estimated at 1.14 while Nike’s industry has the lowest beat which
is estimated at 0.42. Therefore, we expect that the industry of apple (electronic equipment) has much
higher return and risk than the industry of Nike (Footwear) has compared to the market risk and return.
Conversely, the case is different while comparing between the sectors’ beta as J&J has a systematic risk
and sensitivity to market which is equivalent to 1. This means that J&J’s sector (healthcare) has an
average rate of both risk and return that is equal to the average market risk and return. Therefore, we
can consider that J&J’s sector as a mirror of index, meaning that it will reflect whatever happens in the
market. The same analysis is applied for S&P500 since it is and index and has a very close figure to 1
usually.
However, FedEx’s sector has the highest beta figure (1.28), meaning that it has a higher risk than the
market risk which we expect to be compensated for a higher return than the market. On the other hand,
Nike and Apple’s sector (which is the same “Consumer Good”) has the lowest sensitivity to market
changes which is onlyo.74, expecting a lower return than the market. As overall, the mixture of different
grades of beta, focusing mostly on stocks that have a beta of less than 1 is due to the balance of risk
level required by the nature of being risk-averse investor.
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3- Price/Sales Ratio (TTM):
The Firm’s
The Firm’s
S&P 500 Stock
industry Ratio
Sector Ratio
Index Ratio
3.62
3.35
1.30
4.09
3.67
2.53
The firm’s Ratio
Apple Inc. (AAPL)
Johnson & Johnson
(JNJ)
FedEx Corporation
(FDX)
Nike Corporation
(NKE)
1.8
1.05
1.32
1.62
2.90
2.47
1.30
This is another indicator that guides the stock selection because as the firm’s price/sales ratio goes
down, investing in this firm becomes more attractive for the investor. Generally, the ratio shows how
each dollar of the firm’s sales is valued by comparing the stock price of the firm to its revenues. Starting
with the firms, it is observed from the above table that J&J and Apple have a greater price value of one
dollar of its sales which is equal to 4.09 and 3.62 respectively. However, Nike and FedEx have a poorer
price value of one dollar of its revenue, considering their p/sales ratio of 1.05 and 2.90 respectively.
Although FedEx and Nike seem to be more attractive to invest in than Apple and J&J as they have a
lower P/Sales ratio, the difference of industry and sectors nature for each sector should justify why
Apple and J&J have higher ratio. To illustrate, there is nothing goes wrong with investing in J&J and
Apple work as they work very closely to the industry value (3.35, 3.67 respectively). While the industries
of FedEx and Nike have a lower price value compared to the other two.
In terms of Sectors, J&J has the highest price value estimated at 2.53 compared to the other 3 sectors.
While the sector of consumer good (for Apple and Nike)has the lowest price value of the sales’ dollars
generated in this sector (0.95). Similarly, S&P 500 has also a low positive figure.
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4- Price/Book Ratio
The Firm’s
The Firm’s
S&P 500 Stock
industry Ratio
Sector Ratio
Index Ratio
5.93
4.10
2.14
3.98
3.78
5.61
The firm’s Ratio
Apple Inc. (AAPL)
Johnson & Johnson
(JNJ)
FedEx Corporation
(FDX)
Nike Corporation
(NKE)
2.7
3.22
6.17
-0.68
7.54
5.50
2.14
Measuring the Price/Book ratio is useful approach to find the undervalued stocks by comparing their
market value to their book value and this is part of our investment strategy of stock selection approach.
To illustrate, the ratio provides a sign for the company in term of how much is being bought, and what is
the amount remaining in case of going bankrupted.
By observing the table, we can figure that all the stocks are undervalued as they all have positive figures
of the Price/Book ratio. In particular, we can assume that Nike is the safest investment because it has
the highest ratio that could secure it from bankruptcy. This is served as evidence of being secured which
is preferred by the risk-averse investors who tend to minimize the risk as much as possible. However,
the other three stocks have lower ratio.
When we compare between industries, the case is different because the Air Delivery industry (FedeX)
considers as the most secured one amongst the others, since it has the highest figure (6.17) followed by
Nike’s industry and then Apple’s industry. While the riskiest industry in term of exposing to bankruptcy
is Drug manufacture (J&J) indicated by its low ratio (3.7).
Also, Sectors comparison has a different them because the healthcare sector is viewed as the most
secured one because it is one of the necessities for all people resulting in the highest Price/Book value
ratio. However, the only negative figure is due to FedEx Service Sector which we can interpret by the
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market belief of being overvalued or the poor earnings/return poor or (negative) return on its asset.In
fact, S&P figure is fairly low but it works closely to Apple and Nike’s Sector.
5- Price/CF Ratio (TTM) for 3rd Quarter:
The firm’s Ratio
Apple Inc. (AAPL)
Johnson & Johnson
(JNJ)
FedEx Corporation
(FDX)
Nike Corporation
(NKE)
319.56 (2nd
Quarter of 2014)
56.05
The Firm’s
The Firm’s
S&P 500 Stock
industry Ratio
Sector Ratio
Index Ratio
109.5
159
13.80
23285.45
995.5
10.10
15.50
64.03
24.10
21.90
159
This ratio and the following one are more conservative indicators of the firm’s profitability in term of
generating real cash which the investors cares about in order to decide whether to include the stock
within the portfolio or not. Therefore, it measures the attractiveness of the investment. Besides, they
are helpful to apply our investment strategy that is based on finding the undervalued stocks. As seen in
the table, there are all high positive numbers which meets investor’s preferences. However, we can view
Apple as the most attractive investment because of its highest figure (319.56), reflecting its high ability
to generates more cash flow (Profit).
Subsequently, Apple is followed by J&J, Nike and then FedEx. Also, Apple’s industry is again the most
attractive one, compared to other industries as it has the highest ability to generate cash flow estimated
at (109.5) followed by Nike, FedEx and then J&J. However, the P/CF ratio (TTM) is still not recorded for
JNJ Industry for the 3rd Quarter. Comparing between sectors’ ratio have completely different view,
because JNJ’s Sector has a very large ratio indicating the successfulness of healthcare sector in term of
generating cash flow (23285.45). While FedEx has the lowest level of cash flow generation estimated at
(64.03). The S&P 500 has a high figure as well that exceeds all the 4 stocks.
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6- Price/FCF Ratio (TTM)
The Firm’s
The Firm’s
S&P 500 Stock
industry Ratio
Sector Ratio
Index Ratio
19.50
7.90
30.79
45.80
34.90
21.48
The firm’s Ratio
Apple Inc. (AAPL)
Johnson & Johnson
(JNJ)
FedEx Corporation
(FDX)
Nike Corporation
(NKE)
20.73
120.40
52.50
30.76
67.20
48.60
30.79
This ratio compares the market price of the firm to the annual FCF level generated by the firm
operations. Besides, it measures whether the company is cheap or expensive based on its
ability to generate cash flow to be paid as dividend for its shareholders. Therefore, it indicates
whether the firm need to enlarge the asset acquisition or maintain the same level of assets.
Looking closely to the table above, FedEx and its industry are considered as the most expensive
one compared to the other three as it has the highest figure of Price/FCF ratio (120.40).
According to GuruFocus statistics, FedEx have a higher P/FCF ratio than 80% of the total
companies (1202 Firms) in its industry which is a sign for the enormous amount of cash flow
(profit) generated by FedEx. However, JNJ’s sector of “Healthcare” is the cheapest one with a
figure of (21.48), reflecting a lower performance than the other 3 sectors in the area of
generating cash flow to be available to dividend distribution. Generally, S&P 500 has very close
figure to JNJ’s sector.
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7- Earning Quality as the end of September of Each year
Apple Inc.
(AAPL)
Johnson &
Johnson (JNJ)
108.46%
303.2%
FedEx
Corporation
(FDX)
85.53%
2010
118.06%
27.4%
148.19%
115.02%
2011
116.20%
41.8%
64.55%
114.77%
2012
99.21%
40.7%
58.65%
117.77%
2013
120.42%
84.3%
95.57%
99.79%
2014
126.36%
35.0%
78.79%
N/A
Earning Quality (%)3
(Source: GuruFocus)
2009
Nike Inc. (NKE)
105.68%
According to the table above, it can be concluded that Apple has the highest earning quality indicating
the firm’s capabilities to generate sales at lower expenses. During the past 5 years, it can be figured out
that Apple’s earning quality has recorded a significant drop in 2012 while it started to recover in the
following two years to reach its highest at 126%. Nike comes in the second place as it has lower
numbers, to reach its lowest in 2013 at 99.79% because of the economic recession. For the rest of years,
Nike has achieved a constant growth in term of generating sales at controllable expenses. Despite of the
fact that Apple has greater quality of earning in figures, Nike can be considered as more sustainable
because the earning quality fluctuations for Nike are less than for Apple which is more preferable for the
investor. Thirdly, FedEx sets in the middle as its earning quality figures have increased sharply from 85%
in 2009 to 145% in 2011. However, it started to fluctuate up and down in the next years.
Lastly, J&J has the least earning quality which means that the firm is able to generate sales however; the
cost of research and development spent on drugs has started to become inefficient in the recent years.
This result in sharp fluctuation in J&J’s earning quality as they dropped from its peak in 2009 at 303% to
35% in 2014. Therefore, J&J needs to concentrate more on managing its operational expenses
effectively.
3
As calculated through the Excel sheet.
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8- Sales 5y Growth rate as the End of September of each year
2009
2010
2011
2012
2013
2014
Apple Inc. (AAPL)
14.44%
52.02%
66.90%
43.62%
9.55%
6.72%
Johnson & Johnson (JNJ)
-2.90%
-10.194%
-0.49%
5.52%
3.45%
5.92%
FedEx Corporation (FDX)
-6.4%
-2.15%
13.6%
8.59%
3.77%
2.89%
Nike Corporation (NKE)
2.94%
-0.8%
10.17%
15.47%
5.01%
9.68%
According to the above table, Apple is the only company that has not recorded any negative growth rate
compared to the rest during the period from 2009 to 2014 which indicates its successful management
strategies to control its operational expenses. Besides, it can be observed that the 4 companies suffered
from a negative or recorded just small growth rate between 2009 and 2010 due to the effect of the
economic crises that cause a significant market collapse. FedEx and J&J are the most effected companies
by the crises they have higher betas (sensitivity to market volatility) as explained earlier. This can be
observed through their significant drop in sale’s growth during the crises.
The growth of Apple’s sales increased significantly from 14.44% in 2009 2010 to 52% in 2013, reaching
66.90% in 2011 due to their product lines expansion including advanced models of iPads and iPhones
smartphones. Besides, it could be an indicator of how the technological globalization helped Apple to
expand their business rapidly and generate high profits by increasing brand loyalty and extending their
target market groups as said earlier.
Generally, the firms have fluctuated figures of sales growth during the last 5 years representing the
unexpected or unique changes in the market causing their sales to go up and down in respond to these
changes.
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The Sales 5 year Growth rate (Source: Daily Finance)
The firm’s Rate
Apple Inc. (AAPL)
Johnson & Johnson
(JNJ)
FedEx Corporation
(FDX)
Nike Corporation
(NKE)
The Firm’s
S&P 500 Stock
industry Rate
Index Rate
35.01%
-2.7%
3.84%
-3.30%
5.12%
4.92%
8.92%
11.59%
3.39%
According to the above table, we can observe that Apple has the highest sales 5yr growth rate indicating
its successfulness and expansion while JNJ has the lowest figure. This is not necessary interpreted that
JNJ was not successful at that period because of specific firm factors, it might be due to uncontrollable
reasons. Apple is followed immediately by Nike in terms of its sales growth. In term of industries, JNJ
and Apple’s industries have negative growth rate indicating unexpected changes in the overall market
that lead to affect the overall industry sales growth. In fact, S&P 500 has a lower rate than all the 4
stocks estimated at 3.39% indicating a small and slow process of generating sales.
9- Current Ratio (Source: Daily Finance)
The firm’s Ratio
Apple Inc. (AAPL)
Johnson & Johnson
(JNJ)
FedEx Corporation
(FDX)
Nike Corporation
(NKE)
The Firm’s
industry Ratio
The Firm’s Sector
S&P 500
Ratio (Source:
Stock Index
CSIMarket)
Ratio
1.10
1.30
N/A
2.61
1.70
0.85
1.65
1.80
1.70
2.18
2.81
3.30
N/A
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Generally, the 4 companies have a current ratio of more than 1 which represents their high ability to
meet their short-term obligations when they become due. In other words, all the stocks do not suffer
from serious liquidity problems as their current assets exceed their current liabilities. Analytically, this
goes in line with the interest of the current shareholders and potential investors because the more
liquid the firm is the more demand on its stock by investors and the higher stock prices they will be.
By looking closely to the figure, it is obvious that Nike has the highest current ratio followed
immediately by JNJ and then Fedex, indicating that they have sufficient amount of capable resources to
be repaid for their short term commitments. On the other hand, Apple has the lowest ratio which means
that they might face little issues related to the repayment of short-term obligations. By comparing the
figures to the market (S&P 500), it can be concluded that all the firms have higher ratio than the S&P
(1.65) except for Apple, meaning that all the 3 firms exceeds the market performance in term of meeting
their short-term borrowings.
At the industries level, we can figure that all the above industries are healthy and fairly able to pay their
short-term debt as their figures of current ratio are located between 1.50 - 3. However, the highest one
again is Nike’s industry while FedEx and JNJ have the same number.
10- LTD/Equity Ratio (QRM)
The Firm’s
The Firm’s
S&P 500 Stock
industry Ratio
Sector Ratio
Index Ratio
0.19
0.39
0.32
0.17
0.39
0.53
0.27
0.67
0.79
0.11
0.16
1.34
The firm’s Ratio
Apple Inc. (AAPL)
Johnson & Johnson
(JNJ)
FedEx Corporation
(FDX)
Nike Corporation
(NKE)
0.73
This ratio measures firm’s exposure to debt commitments and its debt leverage. Thus, the lower the
ratio figure is, the better is the financial situation of the firm because there are less debt and liabilities
imposed on the firm. In general, all the stocks are not risky as they have relatively low ratios figures. To
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illustrate, Nike has the lowest ratio, followed by JNJ and AAPL which have very close figures to each
other. This indicates their little exposure to debt commitments, resulting in reducing the risk of
investing in the firm as preferred by risk-averse investors.
However, FedEx has the highest ratio, meaning that it has a greater level of leverage compared to the
other 3 firms.
The same scenario applied at the level of industries, it is obvious that FedEx’s industry and sector have
the highest figure again; indicating that investing in FedEx is viewed as more risky by investor than the
other because they are more likely to depend more on debt rather than equity to finance their
operation. Thus, they might face some issues to repay their long-term borrowings. However, Nike’s
industry has the lowest figure again. Secondly, the industry of JNJ and AAPL has the exact figure to be
ranked as the 2nd highest leveraged industry after FedEx Industry.
Conversely, the case is completely different when we compare between the sectors. In fact, the Service
sector of “Nike” is the most leveraged one as it exceeds 100% dependency on debt financing followed
by FedEx and J&J as they ranked the 2nd and the 3rd leveraged sectors among the 4 stocks. On the other
hand, Apple has the lowest sector ratio (only 0.34) compared to the other sectors. This results in
increasing its attractiveness to the investors because of being less risky (exposing to few liabiliries).
Moreover, S&P 500 exposes to high level of long-term debt commitment (almost near 80% dependency
on debt).
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11- Total Debt to Equity Ratio (QRM)
The Firm’s
The Firm’s
S&P 500 Stock
industry Ratio
Sector Ratio
Index Ratio
0.21
0.46
0.37
0.22
0.38
0.61
0.31
0.31
0.72
0.12
0.21
1.48
The firm’s Ratio
Apple Inc. (AAPL)
Johnson & Johnson
(JNJ)
FedEx Corporation
(FDX)
Nike Corporation
(NKE)
0.86
This ratio is another kind of measuring the firm’s ability to meet its long term borrowings in Future
which would ease the selection process by expecting the risk associated with each firm based on its debt
commitment level. Nike has the lowest exposure to debt commitments as its ratio is very low.
Alternatively, Nike depends more on equity financing rather than debt financing to facilitate their
business operation or expansion. Positively, this will reduce the probability of vulnerability to business
downturns and this is the case preferable for risk-averse investors. Despite of the fact that Nike has the
highest ratio, it is not considered as highly leveraged because their dependency on debt does not reach
50%. In fact, J&J and Apple have approximately the same level of debt commitment as suggested by
their close figures to each other.
The industry of Apple is the most leveraged one as it has a 50% debt financing, followed by J&J and then
FedeX while Nike is the least leveraged industry and it is less expected to face debt repayment issues. By
comparing between sectors, the previous table shows that the growth of Nike’s sector is financed
aggressively with debt and borrowings as it exceeds 100% of debt financing. It is followed by FedEx, J&J
and lastly Apple’s Sector which has lower exposure level to debt which makes it less risky compared to
the other sector. Besides, S&P depends highly on debt financing (almost 90%) resulting in more future
issues related to paying the loans back.
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12- Interest Coverage(QRM)
The Firm’s
The Firm’s
S&P 500 Stock
industry Ratio
Sector Ratio
Index Ratio
140.28
109.4
53.84
54.51
124.43
25.4
34.08
26.61
13.06
153.89
78.34
10.93
The firm’s Ratio
Apple Inc. (AAPL)
Johnson & Johnson
(JNJ)
FedEx Corporation
(FDX)
Nike Corporation
(NKE)
13.07
This ratio measures the number of times that the firm is able to cover interest expenses. Therefore, the
higher the figure is, the more attractive is the firm to invest in. Generally, the majority of the stocks have
high numbers which is interpreted positively as they generate sufficient amount of cash flow to be paid
for interest expenses. Nike and Apple have the first and the second highest figure of interest coverage is
highly preferred by potential investor to be more confident about the firm’s financial future position in
term of fulfilling its interest expenses. Thus it supports the selection of Apple Inc. and Nike stocks as
part of the portfolio. Relatively, FedEx has the lowest figure compared to others which can be justified
by having difficulties in generating more cash flow and thus in paying back their interest expenses.
Alternative Justification for FedEx’s low figure might be linked to their higher debt commitment than
others as mentioned above which result in affecting this ratio negatively. Generally, all industries have
high figures except for FedEx industry which is facing difficulties to pay their interest expenses. Most of
the sectors along with the S&P 500 suffer from the same problem as the have low figures except for
Apple’s sector which is fairly able to cover its interest expenses.
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13- EBITDA 5Yr. Average
EBITD
Apple Inc.
(AAPL)
Johnson &
Johnson (JNJ)
FedEx
Corporation
(FDX)
Nike Inc. (NKE)
2009
N/A
19.4 billion
N/A
N/A
2010
19.3 billion
19.76billion
3.97 billion
2.7 billion
2011
36.31 billion
19.5 billion
4.44 billion
3.09 billion
2012
57.91 billion
19.67 billion
5.43 billion
3.49 billion
2013
55.08 billion
23.61 billion
5.6 billion
3.61 billion
2014
60.03 billion
N/A
6.03 billion
4.2 billion
31.37 billion
30.71 billion
20.82 billion
15.08 billion
EBITD 5 yr.
Average
(Source: Daily
Finance
S&P 500
29.78
Throughout the period, we can see that all firms have positive numbers which is interpreted
positively as they are able to generate income out of their operations. Particularly, Apple has the
highest figures followed by JNJ, FedEx and lastly Nike which has the lowest figures of EBITD
compared to other firms. On average, Apple and JNJ have very close figures of EBITD to each
other. This indicates their high levels of financial strength to generate income out of their
business operation during the period (2010-2013) as they exceed the average EBITD generated
by S&P 500 index. However, FedEx and Nike have lower abilities to generate income during the
same period from their operational activities. Generally, we can figure that no one of the
companies face struggles to generate income (profit) as they have constant growth of EBITD
every year which goes in line with the inventors’ desire and preferences to maximize their
wealth.
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14- ROA 5yr. Average
(Source: GuruFocus)
Apple Inc.
(AAPL)
Johnson &
Johnson (JNJ)
FedEx
Corporation
(FDX)
Nike Inc. (NKE)
2009
19.68
13.66
0.39
11.57
2010
22.84
13.5
4.82
13.7
2011
27.06
8.93
5.55
14.50
2012
28.53
9.24
7.09
14.59
2013
19.34
10.89
4.92
14.98
2014
18.01
N/A
6.29
14.90
19.60
10.7
5.94
14.06
The industry
19.21
8.01
6.90/5.94%
13.84
The sector
13.74
7.86
1.60/5.94%
13.07
ROA (%)
ROA 5 yr. Average
Source: Daily finance
The firm
S&P 500
9.28
Since profitability is one of the main investors’ objectives, the ROA and ROE figures would be useful to
measure the firm’s ability to generate profit over the specified period. Thus, these are useful
measurement to help us in stock selection process by assessing the effectiveness of the firm’s
management strategies.
Looking at the previous figures of ROA indicate that all firms have a progressive growth with relatively
low numbers recorded in 2009 in response to the effect of the economic crises. To illustrate, FedEx has
the lowest ROA as it has the highest sensitivity to market fluctuations as explained earlier.
Averagely, it is expected that Apple and Nike apply good management techniques to control its
operational expenses as they have the two highest average of ROA during the last 5 years (19.60% and
13.84% respectively). Besides, their industry and sectors have the highest figures compared to others,
exceeding even the S&P figure. These high figures suggest that their management strategies are
successful in utilizing their available resources of assets to generate lots of profits. This would support
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the decision of including Apple and Nike stocks within the portfolio which leads to achieve the objectives
of our investment philosophy (maximizing personal wealth).
On the other hand, FedEx and J&J have the first and the second lowest figures respectively as well as
their industries and sectors, compared to others. To analyze their low figure, they might due to their
management strategies that are not that much efficient or it is possible that they might face struggles in
optimizing their asset to generate profit.
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15- ROE 5yr. Average
(Source: GuruFocus)
Apple Inc.
(AAPL)
Johnson &
Johnson (JNJ)
FedEx
Corporation
(FDX)
Nike Inc. (NKE)
2009
30.54
26.35
0.70
18.00
2010
35.28
24.88
8.63
20.68
2011
41.67
17.02
10.00
21.77
2012
42.84
17.81
13.57
21.98
2013
30.64
19.92
9.72
23.04
2014
33.61
N/A
12.84
24.59
32.77
19.93
13.51/11.38
21.92
The industry
32.56
16.98
23.00/11.38
22.45
The sector
24.22
17.49
18.25/11.38
21.74
ROE (%)
ROE 5 yr. Average
(Source: Daily Finance)
The firm
S&P 500
20.52%
Similarly to ROA, Apple has the highest figure of ROE average during the last five years compared to the
rest of stocks. Particularly, Apple is highly able to make profits out of the available equity capital
resources that are invested in the firm and its ability is estimated at average rate of 32.77%. Apple’s
industry and sector have again the highest Return on Equity figures compared to others. By comparing
the Annual ROE figures of Apple, we can highlight its highest ability which was recorded in 2011 and
2012 at 41.67% and 42.84% respectively. Accordingly, Apple can be viewed as the greatest opportunity
to invest in.
Nike is ranked 2nd in term of its ability to generate return on available equity resources. On average, it
has an annual ROE of approximately 22% during the period of 5 years. In fact, Nike’s return on equity
has grown progressively from 18% in 2009 to 24.6% in 2014 (as the end of May of each year).. By
evaluating the annual ROE figures for each firm, we can conclude that Nike is the only company that has
a constant growth of ROE without up and downs fluctuations as happened to the other firms. This
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means that Nike follows effective management techniques to get the maximum benefits from the
current equity invested in the firm by shareholders
JNJ sets in the middle with a quite close figure to Nike as the average ROE on yearly basis is 20%,
indicating a quite high ability to convert shareholders’ investments into profit. Lastly, FedEx has the
lowest average of yearly ROE during the same period which is estimated at 13.51%, giving a sign of its
inefficient management and weakness in the area of profit generation from equity. The highest return
on equity was recorded by FedEx in 2012 at a rate of 13% only while the lowest was in 2009 and 2010
due to its respond to the economic crises that hit the market in 2008 .
Generally, all companies have positive and relatively high ROE average (considering the lowest one is
13.51% for FedEx which is still positive). This means that they are careful while developing their equity
optimization tactics in order to be efficient in benefiting from equity investment to be turned into net
income they.
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16- Asset Turnover (TTM) (Source: Daily Finance)
The Firm’s
The Firm’s
S&P 500 Stock
industry Ratio
Sector Ratio
Index Ratio
0.84
0.80
0.63
0.56
0.47
0.87
1.40
1.73
0.89
1.59
1.56
0.93
The firm’s Ratio
Apple Inc. (AAPL)
Johnson & Johnson
(JNJ)
FedEx Corporation
(FDX)
Nike Corporation
(NKE)
0.37
A supplementary factor that affects the selection criteria is the firm’s efficiency and
effectiveness in term of optimization of their economic resources and employing its assets and
to produce sales and obtained current assets as represented through the Asset Turnover.
Therefore, as the ratio goes higher, the firm’s stock becomes more valuable in the investors’
eyes because of its efficient ability to generate sales out of its available assets and resources
which means that it works more closely to capacity.
When we compare between the 4 companies, it is obvious that Nike and Fedex are the most
efficient firms in optimizing their resources to generate profit from its sales as they have higher
ratio than the other (exceeding 1). This is also applied for their industries as they have the
highest efficiency level (highest turnover). They are followed by Apple, which has almost the
same figure for its industry that is very close to the benchmark of 1 reflecting its quite high
efficiency of profit generation and not standing behind the overall efficient performance of the
industry. Lastly, JNJ is the least efficient company, which operates in the least efficient industry
as the have the least ability to convert its hold assets into profit. In order to calculate the asset
turnover of S&P500 index, the average turnover of all its components is taken, resulting in the
lowest ratio of asset turnover compared to other (estimated at 0.37). Generally, all sectors have
almost close figures to each other (range between 0.8 and 0.9), representing a quite high
efficiency in profit generation except for Apple which has a lower efficiency rate
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6.3 Closing Share Prices as of 6th November 201
Company
Share Price ($)
Apple (AAPL)
108.70
Johnson & Johnson (J&J)
109.01
FedEx (FDX)
171.70
Nike (NKE)
94.06
Colorado Bond Shares
Tax-Exempt (HICOX)
9.10
Alexandria Real Estate
Equities (ARER)
82.47
When we compare between the close prices of the 4 firms’ stocks, we can figure that J&J has the highest
share price at the end of the period while Nike has the lowest figure. However, this does not mean that
J&J has achieved the highest return and the same for Nike as will be analyzed later on.
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6.4 Broker Recommendation
(Sources: Yahoo Finance and NASDAQ)
1- Apple Inc. (APPL) Recommendation
Apple Inc. (APPL)
The firm
Recommendation
1.9
The industry
1.78
The sector
N/A
S&P 500
Strongly Buy
(1= strong buy, 5=sell)
According to Apple’s Recommendation Trend as published in Yahoo Finance, the Recommendation
Mean is 1.9 for Apple which is very close to the recommendation of “Strong Buy” according to the scale
shown below.
Since the brokers recommend for buying Apple stock and not selling it, it is expected that Apple’s share
prices will increase in future since its buying rate would exceed the selling. Therefore, the broker
recommendation supports the selection of Apple Stock as a long position since no analyst advised to sell
it during the last 4 months. On the contrary, most of analysts’ opinions (estimated at 27 analysts) go for
strongly buy Apple stock.
2- Johnson & Johnson (JNJ) Recommendation
Johnson & Johnson (JNJ)
Recommendation
The firm
2.3
The industry
1.71
The sector
N/A
S&P 500
Strongly Buy
(1=strong Buy, 5= Sell)
According to J&J, the average recommendation is 2.32 which is higher than the mean for the industry
estimated at 1.71. However, both numbers have a buying average recommendation because both
means are fairly close to 1 as shown below. This indicates a strong brightness regarding the future share
of J&J.
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Additional reason for investing in J&J as a short position are supported by this figure as it has the highest
recommendation mean compared to others. Besides, there is very small number brokers who advice to
sell J&J which is totally not existed in the case of other stocks.
3- FedEx (FDX) Recommendation
FedEx (FDX)
Recommendation
The firm
2.1
The industry
1.87
The sector
N/A
S&P 500
Strongly Buy
(1= strong buy, 5=sell)
In spite of the fact that the average recommendation of the industry is lower than the mean of the firm
itself, both averages are categorized under the “Buy” position. Particularly, FedEx stock has an average
recommendation of “2.1” which leans more towards buying the stock as shown in the scale below.
Therefore, it seems that most of the brokers are agreeing on the same opinion between advising
potential investor to buy the stock and the current shareholders to hold it. As a total of 23 brokers, 16 of
the have recommended to hold the stock, while "9" and "3 recommendations" to strongly buy and to
buy the share respectively; while there were no recommendations given to sell the stock.
Supportively, Cowen Research Firm has recommended an upgrade action, as the stock will outperform
the market. Optimistically, FedEx share will have a greater value in future.
4- Nike (NKE) Recommendation
Nike Inc. (NKE)
Recommendation
The firm
2.0
The industry
1.8
(1= strong buy, 5=sell)
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The sector
N/A
S&P 500
Strongly Buy
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The average recommendations of Nike and its industry are very close to each other, as they are 2.0 and
1.8 respectively. Therefore, both averages recommend to strongly buying Nike’s stock and not selling it.
This was supported by Jenney Research firm how recommend an upgrade action for Nike to be moved
significantly from the neutral to the buy position.
Furthermore, a total of 21 brokers have recommended the potential investor to buy Nike Stock, 6
brokers advised current shareholder to hold it while no one recommend selling it. When investors
respond to this recommendation positively, Nike’s share prices are expected to increase in future
because the buy rating will exceed the rate of selling.
Finally, the average recommendations for S&P 500 is strongly buy, indicating a well performance of the
market as the total points during period was exceeding 2000. (investing.com, 2014).
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6. 5 Earnings Forecasts (Nasdaq)
(Considering the years end as of Sep of each fiscal year)
1- Apple Inc. (AAPL) Earning Forecast
Apple Generally, Apple’s Earning is expected to grow rapidly during the coming period and it is
estimated to be 17.46% higher than the previous year with an estimated growth of 2.59%
particularly for the next quarter. In addition, it is stated by analysts that Earning of Apple is
projected to grow approximately at 11.59% in the next years. Considering the projection of its
earning during the following 5 years, the average annual rate of Apple’s earning growth will be at
12.81% for every year.
2- Johnson & Johnson (JNJ) Earning Forecast
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For the following 5 years, analysts, who track the performance of J&J, expect that the firm will have an
annual earnings growth rate of approximately 6.04% on average. Particularly, J&J’s forecasted earnings
for this year are estimated to grow at 8.05%, compared to this year. After 2 years from now, it is
expected that J&J’s earnings growth rate will be 4%.
3- FedEx Corporation Earning Forecast
As shown in the graph above, it is expected that the earning of FedEx will grow at 32.48% in this year. In
the following, NASDAQ’s analysts have an expectation that FedEx’s Earning will grow at approximately
21.51%. In term of predicting the earnings growth of FedEx during the coming 5 years, the analysts
estimate that the average annual growth rate will be 14.22% for every year.
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4- Nike Inc. (NKE). Earning Forecast
The previous graph shows the growth rates of Nike’s forecast earnings. For the next year, the Earnings
growth of Nike is estimated at 20.91%, compared to this year figure. After 2 years, the analysts, who
monitor FedEx earnings, predict a lower growth of earnings at 15.19%, compared to the next estimated
growth. Considering the next 5 years, it is expected that Nike will have an average annual earnings
growth rate of approximately 13.94%.
When we compare between the 4 stocks, FedEx has the highest earnings growth rates for the coming
periods while J&J has the lowest figures.
.
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6.6 Description and Performance of Bond: Colorado Bond Shares A TaxExempt (HICOX)
The Bond objectives:
The main objective of the Colorado Bond Shares A-Tax-Exempt is to maximize profit which is exempt
from taxes by both of the federal and Colorado income taxes, as well as preserving capital.
(Finance.yahoo.com, 2014)
General information:
These are general information about the Colorado Bond Shares A-Tax-Exempt (Ticker: HICOX)
Category:
Muni Single State Interim
Fund Family:
Freedom Funds
Net Assets:
900.40M
Morningstar Rating:
Fund Inception Date:
Jun 4, 1987
Asset manager:
Fred Kelly, Jr
Advisor Company:
Freedom Funds Management
Corporation
The Fund Strategy:
In term of HICOX’s Fund strategies, the bond follows the following 3 strategies based on the market
condition (Yahoo Finance.com, 2014):

In normal market conditions: investing 100% of the total net asset value.

In abnormal market conditions: investing 80% of the total net asset value in tax-exempt bonds
and other tax-exempt securities

Up to 20% might be invested in securities that may subject the investment to federal alternative
minimum tax.
The Risk
Generally, HICOX has a risk rate of 1 according to the Morningstar rating scale indicating a very low
risk exposure. Besides, the bond’s total risk is estimated at a standard deviation of 0.78 while its
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systematic risk and sensitivity to market changes is estimated at a beta of 0.26. In regard with the risks
associated with the HICOX, it can be summarized as the following:

This investment fund is not protected by any government agency.

There is probability of losing the investor's money in this fund due to the effects of market
conditions and interest rate fluctuations on the bond values.

There is no limitation on the percentage invested of the asset in Tax-Exempt Obligations.

100% of this fund's asset will be invested in not rated Tax-Exempt Obligations.

Investing in Tax-Exempt Obligations that are lower-rated quality as determined by the
Investment advice is an option for the fund managers

The limitation of the Tax-Exempt Obligations market in selling of buying.

Tax-Exempt Obligations may be modified or eliminated through legislative action.
Note that any of the previous risks could lead to affecting the Fund’s net asset value, yield or the total
return (Quote.morningstar.com, 2014). In general, it is expected that the Bond will have a relatively low
return because if the low risk were taken. To illustrate, the 1-year bond of has a mean annual return of
0.46 while the 3-Year maturity has an annual return of 0.36% on average. This indicates that the shortmaturity of HICOX bond has a higher return than the longer maturity on average. The following table
illustrates some of the key statistics for the 1-year HICOX Bond:
Statistic
HICOX
Alpha
3.68
Beta
0.26
Mean Annual Return
0.48
R-squared
70.74
Standard Deviation
0.78
Sharpe ratio
7.31
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6.7 Description and Performance of REIT: Alexandrian Real Estate Equities
(AREE)
Alexandria Real Estate Equities, Inc. was chosen as the real
estate investment trust (REIT). The company operates in the
financial sector and employs 220 employees in its Pasadena
office. To illustrate, it operates from Pasadena California in
the United States. Since they are part of the financial sector,
there operations vary from property solutions to medical and
biodefence research, it currently employs 220 employees.
Based on the research and the figures provided about the
fund, it was founded that Alexandria Real Estate Equities has
high confidence from investors, for the fact that it had a price
earning equivalent to 46. With regards the companies value, it is valued to be greater than 8$ billion.
In terms of market capitalization Alexandria Real Estate Equities fund is $6 billion, and said to be the
largest trust in the country, for the fact that it is expected to continue increasing in the near future.
The company was able to generate a profit margin of 22%, indicating their efficient ability to turn their
products into profits very quickly. However in terms of turning invested capital into profits, is quite low
for they had a 2% on return on assets ratio, and 4% return on equity. The firm was able to have a Beta of
0.81.
Broker analysis of this fund was a 2.4, which is most probably a strong buy. Moreover since it was
mentioned in the news that they have successfully leased the entire project, this will stimulate the
market and forecasts growth in the coming time. Based on Yahoo Finanace! It was stated that on Sept
26th 2014 Alexandria Real Estate Equities, distributed dividends of 0.72. Which indicates the strong,
secure and stable the company has been and will be.
Hence investing in this company will add to our portfolio, and will aid in increasing the expected
portfolio revenue.
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6.8 Fund Allocation

First of all, $ 10,000 was allocated the bond and $20,000 was allocated for the REIT each. Hence
having a total of $30,000 for both. Meaning that each of the Bond amounts to 10% and the REIT
amounts to 20% of the total portfolio.
The remaining $80,000 was allocated among the remaining stock on the following matter:

$10,000 was allocated for the short position stock which is Johnson and Johnson to buy 92
shares as of 21st of September, 2014. Therefore, J&J stocks will represent 10% of the total
portfolio.

$24,939.39 was allocated for Nike to buy 309 outstanding shares as of 21st of September,2014.
Thus, Nike will have a 25% portion of the total portfolio.

$19,908.82 was allocated for Apple to buy 197 outstanding shares as of 21st of September, 2014
which is equivalent to 20% of the portfolio.

$14,996.70 was allocated for FedEx for buying 95 outstanding shares as of 21st of September,
2014. Therefore, FedEx stocks represent 15% of the total portfolio.
Based on the research result and the report detailing the past-years performance of every company, it
was decided to allocate the least portion for J&J compared to other stocks because of its fluctuated
performance that the risk-averse investor dislikes especially that is not guaranteed to be transferred
into higher return. However, Apple and Nike have the highest portion because of its sustainable growth
that is preferable for our investor.
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6. Evaluation of the Portfolio Performance
7.1 HPR Calculation
The following table summarizes the closing prices changes for the 6 securities during the holding period
The Securities
Closing share
Price as of 21st
September 2014
($)
Closing share
Price as of 6th
November 2014
($)
Apple (AAPL)
101.06
108.70
+ 7.64
+ 7.55%
0.47
Johnson &
Johnson (J&J)
107.88
109.01
+ 1.13
+ 1.04%
-
FedEx (FDX)
157.86
171.70
+ 13.84
+ 8.76%
-
Nike (NKE)
80.71
94.06
+ 13.35
+ 16.54%
-
9.10
9.10
0
No Change
0.065
75.18
82.47
+7.29
+ 9.69%
0.72
Colorado Bond
Shares TaxExempt (HICOX)
Alexandria Real
Estate Equities
(ARER)
Percentage of
Change Prices
Change in Prices
amount ($)
(%)
Dividend paid
during the
Period($)
Based on the above table, the holding Period Return for the securities (Expected Return) is calculated
through the following formula
HPR =
=
End of Period Value
Obening of Period Value
−1
End of Period Value−Obening of Period Value+Dividend Payment
Obening of Period Value
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The Securities
Formula Substitution
HPR /
Expected
Return E(R)
Apple (AAPL)
108.70 − 101.06 + 0.47
101.06
8.02%
Johnson & Johnson
(J&J)
109.01
−1
107.88
1.05%
FedEx (FDX)
171.70
−1
157.86
8.77%
Nike (NKE)
94.06
−1
80.71
16.54%
Colorado Bond Shares
Tax-Exempt (HICOX)
9.10 − 9.10 + 0.065
9.10
0.72%
Alexandria Real Estate
Equities (ARER)
82.47 − 75.18 + 0.72
75.18
10.65%
Return on S&P 500 (R m)
1.51%
Return on 3-Months Treasury Bills ( Risk Free Rate (R f) )
0.02%
The Expected Return (holding Period Return) of the 6 portfolio securities differs significantly from one
security to another. However, all of them have achieved a positive return at the end of the period which
is interpreted positively as overall. Among the 6 securities, Nike has the highest return which is
estimated at 16.54%. This is due to the significant increase in Nike’s stock price by approximately 16.4%
amounting to $13.35 during the holding period of approximately 10 weeks (from 21st September to 6th
November 2014). Nike has presented an outstanding performance during the specified period by
outperforming the market (S&P 500) which is estimated at only 1.5% and the other portfolio securities
as well.
Nike is followed by the Alexandria Real Estate Equities (ARER) which has a holding period return of
around 10.65% as the price of the REIT increased by $7.29 which is equivalent to 9.69% positive change
in the price. Besides, a total of $0.72 was paid as dividend at once during the holding period. The
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significant increase in the REIT price reflects its excellent performance during that period, leading its
return rate to exceed the market return (S&P 500).
The REIT was followed by FedEx and Apple subsequently as the third and the fourth highest return
estimated at 8.77% on FedEx stock and 8.07% on Apple Stock. Accordingly, it seems that both stocks
have a very close return to each other during the holding period. However, FedEx has a greater rate of
return because the price of FedEx has increased by 8.76% which amounts to $13.84 while the price of
Apple has increased by 7.55% which amounts to $7.64. In fact, it seems that the increase in FedEx’s
stock price which is $13.84 is almost doubled of the increase in the Apple’s stock price which is $7.64,
however, the increase in Apple’s stock price worth more than the increase in FedEx stock price as they
achieved very similar return at the end of the holding period. In the case of Apple, a total of $0.47 was
paid as dividend while no dividend payment in FedEx case. Generally, Apple and FedEx have a quite
good performance during the holding period.
On the Contrary, the bond and J&J stock have the poorest performance during the holding period
among the portfolio securities as they have a lower return than the market estimated at 1.05% for J&J
and 0.78% for the Bond meaning that they have underperformed the market. This is due to the little
increase in J&J’s stock price by only 1.04% which amounts to $1.13. Despite of the lack of changes in the
price of the bond, the small return on the bond was generated from the dividend amount which was
paid on two batches. To illustrate, the first bond’s dividend payment was $0.033 while the second
dividend payment was $0.032 making a total of $0.065. In other words, if no dividends were paid during
the holding period, the return on the bond would have been equal to zero as the bond price did not
witness any negative or positive moment during the period.
As overall, the return on the portfolio securities did not show a brilliant performance except for Nike. By
tracking the changes in stock prices in the days following the end of the holding period immediately, we
can observe an extra increase in prices. Therefore, if the holding period were extended for a longer
horizon, a higher rate of holding period return on the stocks selected would have been generated.
Furthermore, the selection of Apple, the REIT and the bond were excellent choices due to the dividends
paid by all of them during the holding period which has resulted in increasing the return on each of
them and subsequently the portfolio return.
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7.2 Market Rate & Risk Free Rate
According to (YCharts), the average risk free rate is 0.02% which is the 3-months Treasury Bills Rate
during the holding period. In addition, the market rate is estimated at average of 1.51% during the
holding period from September 21st to November 6th. This figure indicates the return on the S&P500
stock index during the same period. Basically, the S&P 500 index has increased significantly by more
than 19 points to reach 2,057 points at the end. Added to the increased points, the brokers have
recommended to strongly buy the S&P 500 stocks index indicating that investing in its component might
be considered as appropriate choice for the portfolio.
7.3 Portfolio Return
To Calculate the Return on the Portfolio the Following Formula is used:
Return on Portfolio (Expected Return of the Portfolio)=
W Apple E(R Apple) + W J&J E (RJ&J) + W FedEx E(R FedEx) + W Nike E(R Nike) + W bond E (R bond)
+ WREIT E(RREIT)
The following table clarifies the components of the portfolio return:
The Securities
Expected Return
for each security
Fund allocation
for each security
($)
Weight for each
Security
Weight * HPR
Apple (AAPL)
8.02%
19,908.82
20%
0.01597
Johnson & Johnson
(J&J)
1.05%
10,000
10%
0.00105
FedEx (FDX)
8.77%
14,996.70
15%
0.01315
Nike (NKE)
16.54%
24,939.39
25%
0.041250
Colorado Bond Shares
Tax-Exempt (HICOX)
0.72%
10,000
10%
0.00072
Alexandria Real Estate
Equities (ARER)
10.65%
20,000
20%
0.02130
Total Portfolio Return (%)
9.34%
Total Return amount ($)
$ 9340
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The portfolio return depends on the individual contribution of the return of each stock to the total
return of all the investment securities. Based on the fact that stocks with high return including Nike, the
REIT, FedEx and Apple representing almost 80% from the overall portfolio weight, the return on the
portfolio was reasonably acceptable at a rate of 9.34% which amounts to an extra of $9340 . The
portfolio return was the outcome of the increase in the price of highest weighted stocks in the portfolio
added to the dividend payments of some of them as explained earlier. Generally, the portfolio return
demonstrates an upturn in the performance of the majority of the stocks which means that we need to
strength our position in the market by taking advantage of the top performed stocks over the long-term
investment horizon.
7.4 Portfolio Beta
The following table identifies the beta for each security and the overall beta for the portfolio:
The Securities
Beta of the
Security 4
(1)
Weight for
each Security
(2)
Weight * Beta
(1*2)
Apple (AAPL)
0.055712
20%
0.011091527
Johnson & Johnson
(J&J)
0.072106
10%
0.007210612
FedEx (FDX)
0.086996
15%
0.013046528
Nike (NKE)
0.026145
25%
0.006520322
Colorado Bond Shares
Tax-Exempt (HICOX)
-0.00017
10%
-1.74498E-05
Alexandria Real Estate
Equities (ARER)
0.00339
20%
0.000677497
Total Portfolio Beta
0.038529
The Colorado Bond Shares Tax-Exempt (HICOX) is the only security that has a negative beta (in minus)
which is estimated at-0.00017. This means that the bond will respond to every change in the market of 1
by 0.00017 in the opposite direction of the market. However, the Alexandria Real Estate Equity (REIT)
4
Calculated through Excel Sheet submitted.
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will be much more responsive to the market change by only 0.00339. The REIT’s response goes in line
with the market change as it has positive betas. By looking again at the stocks’ beta according to each
stock’s contribution to the overall portfolio, it can be concluded that all the stocks are responsive in the
same direction to the market change as all of them have positive betas. However, each one of them will
respond by different amount. In particular, Nike and Apple is the least reactive to the market volatility as
their individual betas are 0.026 and 0.056 respectively. These figures mean that Apple’s stocks will
respond collectively to the market changes by 0.01 while Nike’s total stocks will have a lower rate of
response estimated at 0.0065. On the other hand, FedEx and J&J are more affected by market
fluctuations and changes. To illustrate, for every market change of 1, J&J will respond positively by 7.2%
while FedEx will follow the changes in the market by 2.6%
As overall, the portfolio beta is 0.4 which is calculated based on the individual contribution of the beat
of each individual security to the overall portfolio beta according to the following formula:
W Apple βApple + W J&J βJ&J + W FedEx β FedEx+ W Nike βNike + W bond βbond + WREIT βREIT
Having a beta of 0.4 indicates that the portfolio’s response goes in line with the market changes by
almost 4%. Therefore, the portfolio almost reflects almost half of the e market conditions as the
portfolio is affected by market circumstances regardless whether they have positive or negative impacts
on the portfolio. In regard with the response amount, the portfolio will respond about half to the
variations occur in the market. However, this can be positively viewed in the case of large market
meaning that the stocks will respond to the positive change in the market as well as getting affected by
market turmoil. Besides, it is very realistic figure as people tend to increase spending on luxury goods
when the market operates normally which is the opposite in the case of unstable market as people tend
to save money.
Controversially, it can be criticized that if the portfolio reflects approximately half of the market, what
the advantage would be behind diversifying this portfolio instead of investing in the market directly. As
mentioned in the previous part, it can be observed that the portfolio return has outperformed the
market significantly which means that the investor has been compensated for the extra risk he had
taken.
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7.5 Jenson’s Alpha Analysis (α)5
Based on the given information below, the Jenson’s Alpha of the portfolio is calculated through the
following formula:
α p = R p – (R f + βp (R m – R f))
Portfolio Return ( Rp)
0.0936
Risk Free Rate (Rf)
0.02
Portfolio Beta (βp)
0.39
Market Return (Rm)
0.0151
(R p)
(R f)
(R m – R f)
βp (R m – R f)
αp
(1)
(2)
(3)
(4)
(1)-(2+4)
0.936
0.02
-0.0049
-0.004606
0.0736
Using Jenson’s Alpha model, which is a performance measure adjusted by risk, to analyse the
performance of the stock is helpful in defining whether the portfolio earns the appropriate rate of
return, compared to its risk level or not.
Basically, having a positive figure of Jenson’s Alpha for the portfolio, which is estimated at 0.07, means
that the portfolio has beaten the market by earning excess returns on its components. Therefore, it
would express the successfulness of the investment strategy as the right stocks were selected.
Therefore, it can be concluded that the investor has been compensated for the risk he was taking by
earning an excess return on his portfolio securities.
Separately, 4 out of 6 securities have a quite high return value, which might be interpreted by the excess
return earned on each stock as their actual return have exceeded their expected return. By comparing
between the previous expectation of the stocks’ return and the actual return rates, some of the stocks
are considered to be reasonable such as Apple and FedEx, while other underperformers as of J&J and
the Bond while some are outperformers as of Nike and the REIT.
To illustrate, Nike, the REIT, FedEx and Apple have positive figures of Jensen’s alpha, which are
estimated at approximately 0.146, 0.09, 0.07 and 0.06 respectively (from the highest to the lowest).
5
The Jenson’s Alpha Analysis for each stock is attached in an Excel Sheet.
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These figures indicate that the actual returns on these 4 securities have exceeded their expected
returns. On the other hand, J&J and the bond has negative Jenson’s Alpha values (-0.009 and -0.012
respectively) indicating that their actual rates of return are less than their expected returns.
7.6 Performance of the Portfolio Firms during the Holding Period
1- Apple Inc. (AAPL) (Apple Inc. hot news, 2014)
The contribution of Apple’s good financial performance to the overall portfolio is highly observable as
discussed previously. In summary, the extra risk was taken by holding Apple stock for a period of
approximately 10 weeks was accompanied by a compensated return. Therefore, receiving an excess
return on Apple Stocks because of the increase in stock prices and the dividend paid has resulted in
increasing the profit of the investor and his total portfolio return. The following events are evidenced of
the great performance of Apple during the holding period.
In reality, the increase in the price and the dividend payment were due to the sales generated after the
release of iPhone 6 and iPhone 6 plus model in the market. To illustrate, Apple has generated a sales
from selling more than 10 million items of both products within the first weekend that follows the
release of the two products by 3 days. This was above the expectation as the products were only
distributed to some countries at the beginning. Progressively, the products reached an additional 20
countries on 26th of September and reached China on 16th of October resulting in higher sales
generation. This has lead Apple to reach a revenue of $42.1 billion for its fourth accounting quarter and
a net income of $8.1 billion, and a Diluted EPS of $1.45 for that quarter as published in their Quarterly
financial report. By Comparing those figure to the previous year figures for the same quarter, a gross
margin of 38% was recorded.
On 16th of October, Apple has updated its product category of Mac mini with more advanced
technological features at a lower starting price than the old version in order to increase Apple’s products
affordability. For the same purpose, Apple has cancelled the charge imposed on the Upgrade of the OS
X-Yosemite operating system for MAC to be free for Mac users. Furthermore, Apple has introduced the
27-inch iMac with Retina 5K display that has the highest rate of display resolution estimated at 14.7
million pixels causing texts to appear sharper than before and videos to be viewed more realistic. One
further point is Apple’s Announcement of being able to make transactional payments through iPhone 6
touch finger. Additionally, Apple has introduced its iPad mini 3 which offers Touch ID and iPad Air 2
which is the tinniest and most influential iPad in term of its resolution and better cameras. Based on
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that, we can figure the high level improvements of Apple’s operational performance that led to increase
its stock prices and earnings.
2- Johnson and Johnson (J&J)
J&J was the most underperformer stock in the portfolio. Generally, J&J have a poor performance during
the holding period as the stock price has fluctuated rates of changes resulting in 1.3% increase only at
the end of the holding period. This can be justified through the negative impacts of the underperforming
Ortho-Clinical Diagnostics that J&J has ditched by unloading them to the Carlyle Group. However, this
was not the only weakness of J&J as all diabetes devices were facing a decline in its sales during the
same period. To illustrate, the sales of diagnostics has declined by 8.9% while the sales of diabetes care
has fallen by 11.2%. Therefore, J&J has very poor performance in its main segment of diagnostics which
was dominated geographically in the US as their diabetes care sales has plummeted by 32.3% causing
the company’s worldwide sales to fall by 14.7%. Therefore, it is concluded that J&J was highly affected
by the poor performance of its diabetes care in the United State (Hartford, 2014).
However, the company survived through the sales generated from its consumer goods division. To
illustrate, the drop in the US sales was offset by the consumer goods sales increases of 1.98%. Besides,
the international sales have helped to boost the picture as they increased by 14.4% by benefiting from
currency translation. Therefore, the internal diversification among the firm itself has helped it to recover
the loss recorded in one segment (Pitman, 2014).
3- FedEx Corporation (FDX)
Generally, FedEx has a quite good performance during the holding period as the Diluted EPS increased
to 2.47$ with a total revenue of $11.8 billion and a net income of 730 million. This was due to the
increase in the Capital Expenditure which was compensates into a quite high return at the end of the
period. One of the most influential factors for FedEx stable Performance was the re-election of the
board of Directors as 12 directors was re-elected for the next-one year term. Accordingly, the annual
dividend yield was only 0.5% as there was no dividend payment announced by the new broad directors
during the holding period. FedEx figure’s was below the figure recorded for its competitor (United Parcel
Service at 2.75%) (Morningstar, 2014).
The most successful division of FedEx Corporation was FedEx Express as it showed a remarkable
improvement. Mainly, FedEx Express has grown by 0.9% during the holding period and it is expected to
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continue growing in the upcoming period to reach a revenue growth rate of 4.5% at this particular
division (Market Watch, 2014).
Besides, launching the program of buying back a total of 32 million shares has contributed positively to
the increase in the stock price as the company started it programme by the end of October. Therefore,
the firm’s stock prices have increased more after the end of the holding period to reach $110 in
November 13th as a result of the shares repurchase programme (Morningstore, 2014).
4- Nike Inc. (NKE)
In general, Nike was the top performer stock within the portfolio securities as it has achieved the highest
contribution to the overall portfolio return. The significant increase in Nike’s stock price was due to the
strong performance of Nike in North America and Europe, leading to maintain a sustainable long-term
growth as targeted by Nike. To illustrate, the sluggish performance of Nike’s footwear in China was
estimated at 2% growth only. However, this was offset by Nike’s surprising performance in Europe and
North America through retail stores and online sales of Apparel and sports equipment. Therefore, Nikes
has benefited from its internal diversification of different lines of products distributed through different
channels (Forbes, 2014).
Moreover, Nike has a constant growth earnings and dividend payment record. To illustrate, the value
delivered to shareholders has been increasing over the past 13 years. In particular, a dividend of $0.72
was paid at once during the holding period. Totally, Nike’s Quarterly dividend has increased by 17%
indicating a high financial strength and confidence level of the company’s ability to generate cash flow in
in future (Nike Inc., 2014).
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7. Suggestions for Improvement in the Investment Strategy
Due to the lack of control on several factors in the market including interest rates, inflation and the
currency exchange rates fluctuation, it would be a good idea to focus on controllable factors. Basically,
diversification is one of the controllable factors. Therefore, we have insured to produce a welldiversified portfolio, which will help us in eliminating any un-systematic risk or what is identified as the
“diversifiable risk”. Once you are able to eliminate those types of risk to a certain extent, you will be
able to overcome or deal probably with systematic risk. This was successfully achieved through selecting
6 different securities relates to different sectors and industries. In other terms, our investment strategy
focused on several elements that will enables us to accommodate any changes in the market in terms of
interest rates, currencies, inflation and the return of the investments.
We were assigned with a short investment period of less than 2 month, leading to difficulties in
predicting prices or changes. Hence we believe if we had a longer investment period we would have
been able to study the market better, and experience more of that market changes.
We also did not increase the number of stocks in our portfolio, and limited ourselves to a total of six.
The reason for that was due to the risk tolerance level of risk-averse investors, which cannot afford
losing their initial investment amount. To illustrate, only 15% of the total fund was allocated for FedEx to
buy 95 shares due to its level of risk. However, they worth more than the 197 shares of Apples which
represents 20% of the portfolio since FedEx stocks produced higher return than Apple which was above
expectation. Therefore, it would be better to sell 30 shares from Apple to buy an extra 20 shares from
FedEx.
Moreover, for the future we believe if we change our analytical approach from bottom up to top
bottom, we will be able to understand the market better, and understand what is happening which
might show is certain trends that would be of an importance in picking the stock. Especially when we are
buying stocks from different industries, understanding the economy first will always have a great step in
comprehending different market stimuli.
Based on the research that we have did, another suggestion could be investing in one of the indexes.
This could always be an addition in terms of keeping our portfolio strong and dynamic, and being able to
withstand any changes in the market. The reason for that is when you invest in something as big as the
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S&P 500, your portfolio will be able to accommodate market changes, and have a stock that will cover
for the other.
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8. Conclusion
To conclude, we believe that given next time a longer investment window and the above suggestions,
we can say that in conclusion, we believe as investors we had a successful investment as we have
generated 9% return on our portfolio. And although we had a successful investment, but we think that
our success will be much greater in future if we followed the previous recommendations.
Although as a team we had different point of views on the management of our portfolio, we have
managed to utilize our strategy and philosophy on our portfolio and manage it successfully.
Finally as beginners in the investment world, this experience has been very informative and useful for
us; as we had the opportunity to gain knowledge and experience at the same time through searching,
investing and observing the best preforming stocks in the market. Now thanks to all this information and
experience we have the vital tools to be successful investors in the future.
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9. List of References
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CSIMarket. (n.d). FedEx Corporation Financial Strength Comparisons
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GuruFocus. (n.d). 10 Year Financial Data of Apple
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BSB-6302
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Nike Inc. (n.d). Company Profile. Retrieved from http://about.nike.com/pages/company-profile
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Retrieved
from
http://investors.nike.com/investors/news-events-andreports/investor-news/investor-news-details/2014/NIKE-Inc-Announces-17-Percent-Increase-inQuarterly-Dividend/default.aspx
Pitman, S. (April 20th, 2014). Johnson and Johnson hit by poor US sales. Retrieved from
http://www.cosmeticsdesign.com/Business-Financial/Johnson-Johnson-hit-by-poor-US-sales
Reuters,
(n.d).
Healthcare
Overview.
Retrieved
from
http://www.reuters.com/assets/curtainMainContentLoader?view=RSM-US-Curtain-MainContentSector-Healthcare
Reuters,
(n.d).
Technology
Overview.
Retrieved
from
http://www.reuters.com/assets/curtainMainContentLoader?view=RSM-US-Curtain-MainContentSector-Technology
Reuters. (n.d). Ishares Dow Jones Us Consumer Goods Sector Idx Fd (IYK.P). Retrieved from
http://www.reuters.com/finance/stocks/overview?symbol=IYK.P
S&P 500 Price to Sales Ratio. Retrieved from http://www.multpl.com/s-p-500-price-to-sales
S&P 500 Sales Growth Rate. Retrieved from http://www.multpl.com/s-p-500-sales-growth
S&P Capital IQ, Bloomberg and the Fed (US companies), (2014). Betas by Sector. Retrieved from
http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/Betas.html
S&P Capital IQ, Bloomberg and the Fed (US companies). (2014). Price and Value to Book Ratio by Sector.
Retrieved from http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pbvdata.html
S&P Capital IQ, Bloomberg and the Fed (US companies). (2014). Revenue Multiple by Sector. Retrieved
from http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/psdata.html
Stock Analysis on Net. (n.d). Johnson & Johnson (JNJ) Price to FCFE (P/FCFE). Retrieved from
http://www.stock-analysis-on.net/NYSE/Company/Johnson-Johnson/Valuation/Price-to-FCFE
Stock Analysis on Net. (n.d). Nike Inc. (NKE) Price to FCFE (P/FCFE). Retrieved from http://www.stockanalysis-on.net/NYSE/Company/Nike-Inc/Valuation/Price-to-FCFE
Stoffel, B. (May 28th, 2013). 3 Big Reasons to Own Johnson & Johnson Stock. Retrieved on November
19th, 2014 from http://www.fool.com/investing/general/2013/05/28/3-big-reasons-to-own-johnsonjohnson-stock.aspx
Stuart, E. (October 8th, 2014). Technology Titans Lead Ranking of Most Valuable Brands. The New York
Times. Retrieved from http://www.nytimes.com/2014/10/09/business/media/tech-companies-leadranking-of-most-valuable-brands-.html?_r=1
Page 65 of 111
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The Wall Street Journal, (2014). P/Es & Yields on
http://online.wsj.com/mdc/public/page/2_3021-peyield.html
Major
Indexes.
Retrieved
from
Villapaz, L. (November 13th, 2014). Apple Inc. (AAPL) Breaks Market Cap Record As Stock Surges To AllTime High After Series Of Upgrades. International Business Times. Retrieved from
http://www.ibtimes.com/apple-inc-aapl-breaks-market-cap-record-stock-surges-all-time-high-afterseries-1723244
Yahoo Finance, (2014). FedEx Corporation (FDX):Analysts
http://finance.yahoo.com/q/ao?s=FDX+Analyst+Opinion
Yahoo
Finance,
(2014).
FedEx
Corporation
http://finance.yahoo.com/q/ks?s=FDX+Key+Statistics
(FDX):Key
Opinion
statistics.
Retrieved
from
Retrieved
from
Yahoo
Finance,
(2014).
FedEx
Corporation
(FDX):Profile.
Retrieved
from
http://finance.yahoo.com/q;_ylt=ApZcwRttL02.nhHhO.5qMoPp8rcF?uhb=uhb2&fr=uh3_finance_vert_g
s&type=2button&s=FDX%2C
Yahoo Finance, (2014). Industry Browser - Healthcare Sector - Industry List. Retrieved from
Yahoo Finance, (2014). Industry Browser - Services Sector - Industry List. Retrieved from
http://biz.yahoo.com/p/7conameu.html
Yahoo Finance, (2014). Johnson & Johnson
https://finance.yahoo.com/q/ks?s=JNJ+Key+Statistics
Yahoo
Finance,
(2014).
Johnson
&
https://finance.yahoo.com/q/pr?s=JNJ+Profile
(JNJ):
Johnson
Key
(JNJ):
Statistics.
Profile.
Retrieved
Retrieved
from
from
Yahoo Finance. (2014). Apple Inc. (AAPL)/profile. Retrieved on November 17th, 2014 from
http://finance.yahoo.com/q/pr?s=aapl
Ychart, (November 19th, 2014). Johnson & Johnson PE Ratio (TTM):17.99 for Nov. 19, 2014. Retrieved
from http://ycharts.com/companies/AAPL/pe_ratio
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10.
Group Assignment
Appendices
10.1 Financial Ratios
Appendix 1: The Sector and the Industry that Apple Inc. operates in.
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Appendix: The only dividend paid during the period is 0.47
Appendix: The Beta for Apple Inc. (AAPL).
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Appendix: The closing Price as of 6th November 2014 is
108.70 and the dividend paid during the period is 0.47
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Appendix: The P/E, Price/Sales and Price/Book Ratios for Apple Stock (AAPL)
Appendix: The financial Ratios for the Sector
of ofConsumer
Good and the Electronic Equipment
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Industry
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Appendix: The financial Ratios for the Sector of Healthcare and the Industry Drug Manufacture -Major
Appendix: The financial Ratios for the Sector of Services and the Industry of Air Delivery & Freight
Services
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Appendix: The P/E Ratio for the S&P 500 (Source: The Wall Street Journal).
Appendix : The Beta for the Electronic Equipment. (Source: S&P Capital IQ, Bloomberg and the Fed (US
companies)
Appendix: The Beta for the Healthcare Sector. (Source: S&P Capital IQ, Bloomberg and the Fed (US
companies)
Appendix: The Beta for the Consumer Good Sector
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Appendix: The Beta for the Drug Manufacture
Appendix: The Beta for the Air Transport Industry
Appendix: The Price/Sales Ratio for Sectors
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Appendix: The Price/Sales Ratio for Drug Manufacture Industry
Appendix: The Price/Sales Ratio for S&P 500
Appendix: The Price/Sales Ratio for Consumer Goods Sector
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Appendix: The Price/Book ratio for the JNJ Industry.
Appendix: The Price/CF for Apple Industry
.
Appendix: The Price/CF
forof
JNJ
and S&P 500.
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Group Assignment
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Group Assignment
Appendix: The Price/CF ratio for Apple Industry and S&P
Appendix: The Price/CF ratio for Drug Manufactory Industry
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Appendix: The Price/CF ratio for JNJ
Appendix: The Price/CF ratio for the Sector and S&P 500
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Appendix: The Price/CF ratio for Nike
Appendix: The Price/CF and Price/FCF ratio for FedeX and its industry
Appendix: The Price/CF and Price/FCF ratio for Nike and its industry
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Appendix: The Price/CF and Price/FCF ratio for Apple and its industry
Appendix: The Price /FCF ratio for Consumer Goods Sector and S&P
500 (Source: CSIMarket)
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Appendix: The Price /FCF ratio for Healthcare Sector (Source: CSIMarket)
Appendix: The Price /FCF ratio for Service Sector (Source: CSIMarket)
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Appendix: The P/E Ratio for FedEx (Source: Ychart, 2014).
Appendix: The P/E Ratio for Nike Inc(Source: Ychart, 2014).
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Group Assignment
Appendix: The Current Ratio, Total Debt to Equity, ROA and
ROE for Apple Stock (AAPL)
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Appendix: The Sales growth of AAPL for 5 years is calculated through this formula (current year sales-previous year
sales)/previous year sales
Appendix: The Sales growth of JNJ for 5 years is calculated through this formula (current year sales-previous year
sales)/previous year sales
Appendix: The Sales growth of NKE for 5 years is calculated through this formula (current year sales-previous year
sales)/previous year sales
Page 83 of 111
Appendix: The Sales growth of FDX for 5 years is calculated through this formula (current year sales-previous year
sales)/previous year sales
Investment & Portfolio Management
BSB-6302
Group Assignment
Appendix: The most recent Annual Turnover is 0.83 while the most recent Quartered Turnover is 0.19
for AAPL. (Source: GuruFocus, 2014)
Appendix: The EBITDA 5 year Average for AAPL is calculated by adding the EBITDA figures for the last
5 years and divide the result by 5 resulting in 45.78 Billion (Source: marketwatch, 2014)
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Appendix: The 5 year sales growth rate for JNJ and its industry (Source: daily Finance)
Appendix: The 5 year sales growth rate for S&P 500 (Source: daily
Finance)
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Appendix: The Sales 5 year Growth Rate for FedEx is calculated by taking the average of the Growth
rate over the last 5 years. (Source: marketwatch, 2014)
Appendix: The LTD/Equity, Total Debt/Equity Ratio and Interest Coverage for JNJ, the industry and
sectors. (Source:CSIMarket)
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Appendix: The LTD/Equity, Total Debt/Equity Ratio and Interest Coverage for
AAPL, the industry and sectors. (Source: CSIMarket)
Appendix: The LTD/Equity, Total Debt/Equity Ratio and Interest Coverage for
FDX, the industry and sectors. (Source:
Page CSIMarket)
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Appendix: The LTD/Equity, Total Debt/Equity Ratio and Interest Coverage for
NKE, the industry and sectors. (Source: CSIMarket)
Appendix: The EBITDA for 5 years for FedEx . (Source: MarketWatch)
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Appendix: The EBITDA for 5 years for JNJ . (Source: MarketWatch)
Appendix: The EBITDA for 5 years for NKE . (Source: MarketWatch)
Appendix: The EBITDA for 5 years for AAPL . (Source: MarketWatch)
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Appendix: The Sales 5 year Growth Rate for AAPL is calculated by taking the average of the Growth
rate over the last 5 years which is equal to 32% (Source: marketwatch, 2014)
Appendix: The Price-to-Cash-Flow (TTM) Ratio for Apple Inc. (Source: CSIMarket, 2014)
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Appendix: The Price-to-Free-Cash-Flow (TTM) Ratio for Apple Inc. (Source: CSIMarket, 2014)
Appendix: The Interest Coverage Ratio for Apple Inc. (Source: Market Analysis on Net, 2014)
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Appendix: The LTD/Equity Ratio for Apple Inc. (Source: CSIMarket, 2014)
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Appendix: The ROA, ROE and Asset Turnover for NKE. (Source: GuruFocus)
Appendix: The ROA, ROE and Asset Turnover for NKE. (Source: GuruFocus)
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Appendix: The ROA, ROE and Asset Turnover for JNJ. (Source: GuruFocus)
Appendix: The ROA, ROE and Asset Turnover for AAPL. (Source: GuruFocus)
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Appendix: The Asset Turnover for Nike, industry, sector and S&P 500. (Source: CSIMarket)
Appendix: The Asset Turnover for APPL, industry, sector and S&P 500. (Source: CSIMarket)
Appendix: The Asset Turnover for JNJ, industry, sector and S&P 500. (Source: CSIMarket)
Page 95 of 111
Appendix: The Asset Turnover for JNJ, industry, sector and S&P 500. (Source: CSIMarket)
Investment & Portfolio Management
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Group Assignment
Appendix: The ROE and ROA for FDX, industry, sector and S&P 500. (Source: CSIMarket)
Appendix: The ROE and ROA for AAPL, industry, sector and S&P 500. (Source: CSIMarket)
Appendix: The ROE and ROA for JNJ, industry, sector and S&P 500. (Source: CSIMarket)
Appendix: The ROE and ROA for NKE industry, sector and S&P 500. (Source: CSIMarket)
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Appendix: The Broker Recommendation mean (Analysts Opinion) for Apple Inc.
Appendix: The Recommendation Trend by Brokers for Apple Inc.
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Group Assignment
Appendix: The Forecast Earnings Growth for Apple Inc for the coming 5 years.
(Source: Nasdaq, 2014).
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Group Assignment
10.2 Appendices for stock 2: Johnson & Johnson (Stock Ticker: JNJ)
Appendix: The Sector and the Industry that J&J operates in.
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Appendix: The P/E Ratio for JNJ.
(Source:Ychart, 2014).
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Appendix: The Beta for JNJ.
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Appendix: Price/Sales and Price/Book Ratio for J&J.
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Appendix: Price/CF Ratio for JNJ, the industry and the S&P500. (Source: Moringstar, 2014)
Appendix: Price/FCF for J&J as the end of Q3 in 2014.
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Appendix: Price/FCF for J&J as the end of Q3 in 2014.
Appendix: The Current Ratio and Total Debt to Equity Ratio for JNJ.
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Group Assignment
10.2 Securities’ closing prices and dividend payments during the holding
period
Appendix: Closing Prices of JNJ as 19th September.
Appendix: Closing Prices of JNJ as of 6th November
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Group Assignment
Appendix: Closing Prices of HICOX as 19th September.
Appendix: Closing Prices of HICOX as 6th November.
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Group Assignment
Appendix: Closing Prices of ARE as 19th September.
Appendix: Closing Prices of ARE as 6th November.
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Appendix: Closing Prices of NKE as 19th September.
Appendix: Closing Prices of NKE as 6th November.
Page 108 of 111
Group Assignment
Investment & Portfolio Management
BSB-6302
Group Assignment
Appendix: Closing Prices of FDX as of 19th September.
Appendix: Closing Prices of FDX as of 6th November
Page 109 of 111
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Group Assignment
Appendix: Dividend payment for ARE during the holding period.
Appendix: Dividend payment for HICOX during the holding period.
Page 110 of 111
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Group Assignment
Appendix: Closing Prices of Apple as 19th September.
Appendix: Closing Prices of Apple as 6th November and Dividend payment.
Page 111 of 111