Directions
You have $50,000 to invest (imaginary money) in the stocks of your choice. You are expected to complete an individual project and turn it in. You may share researched data and information about companies with other class members, but you must analyze the companies yourself and write your own reports for your project. Do not analyze or write together – any evidence of plagiarism (copying each other) will be honored with an ‘F’.
Process:
Step 1. Identify two or more companies that sell stock and that interest you.
Step 2. Track the daily closing price for your stocks from the time we start the
project until one week before the due date. You do not have to check the paper daily to do this – there are websites that track stock price histories so you can look it up each week or even less often. You should use this data to determine if there is a trend and how that trend might be related to the rest of your financial analysis of the company.
Step 3. After we cover the chapter on financial analysis in the textbook, execute a
financial analysis of each of your companies. You will also be expected to analyze the portfolio using a worksheet for calculating the portfolio return and portfolio beta (these are covered in another chapter of the textbook – after the financial analysis chapter).
Step 4. Prepare a typed report to be turned in following the guidelines below.
Include these parts/sections:
- A cover page identifying you, the course, the semester, the name of the project, and the companies analyzed.
- A table of contents
- An executive summary – this is a quick summary written after everything else is finished. It tells the reader what to expect to find in the following pages. It includes information like what you did, how it was done (interviews? anything special?), what the purpose was (long-term growth, making a quick buck?), and what the results were. The executive summary is used in many business reports to state what the report is about at a glance.
- A page showing the contents of your stock portfolio. List the companies, how many shares, and how much they cost.
- A short (paragraph) history of the company.
- 2-3 pages of financial analysis for each company. Start by stating the company’s mission (what are they in business to do?) in one or two sentences. Include the CEO’s statements about where they are going in the next year or next few years (not the whole letter – YOU write a sentence or two summing up what they are saying. Include information about any extraordinary event (lost a plant to a hurricane this past year). Include the vertical, horizontal and ratio analysis for the company, draw conclusions from the analysis (so you’ll need to go back and read it after you write it). This analysis is written by YOU, not the company or an analyst, after you calculate percentages and ratios as shown in analysis chapter of the textbook. You will have ratios analyzed in categories such as Liquidity, Activity, etc. Include anything else that might help an investor make a decision about whether to buy the stock. You may use pre-calculated ratios in your financial analysis or you may calculate them from the income statement and balance sheet. If you have one year of pre-calculated ratios and you cannot calculate the other two years of ratios to go along with them, then calculate all three years of ratios – sometimes ratios that are pre-calculated use a different formula than the one you have learned in the textbook so the company’s ratio will not match yours. You need to compare at three years of ratios. Don’t worry about analyzing quarterly reports – it’s acceptable to go with the latest annual figures instead and may be hard to find all of the quarterly reports.
- An income statement for yourself as an investor. The income section will include dividends paid (you can count dividends from one quarter – 3 months – even though the project isn’t really that long), and any profits from the sale of your stock at the end of the project. You may decide if you want to sell or if you want to turn in without selling. The expense section of the income statement will include the fees you paid to a broker (researched, but pretend fees) for commission to buy and sell the shares. Net income will, of course, equal income minus expenses.
- A final summary/conclusions paragraph telling what you have learned and how you feel about investing knowing what you now know – chat about whether it was a worthwhile experience and whether it will affect your future investing activities.
- Include a bibliography listing your sources. You do not need to follow a particular format, but your instructor should be able to find and confirm the sources. You may list websites in the following manner –
- Corning, Inc. website www.corning.com
- Appendix: include your data from price tracking and your ratio calculations if you have them. Include your worksheet for calculating the portfolio return and portfolio beta.
