Overview
For the final project, you will submit an investment analysis report for a hypothetical company, based on provided constraints and research of market and industry trends. You will need to utilize the topics covered throughout the course in order to demonstrate mastery of the knowledge and skill required of a corporate investment manager. Through research and calculations, you will be analyzing the company's place in the financial market, constructing a portfolio, and compiling your findings in an executive summary to justify your investment strategies and decisions, along with evaluating the investment performances.
As a corporate investment manager, it is your responsibility to construct an investment portfolio that will generate the maximum rate of return within a given risk class. In order to be successful in this, you need to synthesize your knowledge of your company's industry and its place in the wider financial markets and of the modern portfolio theory, along with utilizing both qualitative and quantitative skills.
This project addresses the following course outcomes:
- Evaluate financial market conditions in order to assess impact on companies and their portfolios
- Calculate rates of return for shareholders utilizing the dividend discount model and market multiples
- Determine appropriate balance between risk and return when constructing company portfolios
- Justify how securities in a portfolio reflect stakeholders' investment objectives and meet professional standards
- Analyze industry trends in relation to company valuation on an absolute and relative basis for informing investment decisions
- Implement portfolio management strategies that meet the investment objectives of a corporation
Prompt
You are a new investment manager of XYZ Tech Company. The CEO has asked you to produce an investment analysis report. Using the provided information and investment parameters for the company along with your own financial database research, prepare an investment analysis report for the company. Your analysis report should include compiled data spreadsheets, a complete portfolio, and a justification of your investment strategies in an executive summary.
Specifically, the following critical elements must be addressed:
I. Company and Market Analysis: In this section, you will analyze the company and its position in the financial markets.
A. Financial Markets
i. Analyze the five-year performance of the domestic economy relative to the financial markets.
ii. Explain specific market performance data based on compiled asset valuation model inputs supported by database research of five-year sector and industry performance and current trends.
iii. Evaluate the impact of the five-year and current macroeconomic data on asset prices.
B. Company Valuation
i. Analyze the company's financial items and key ratios in order to demonstrate a comparison to peers and industry.
ii. Determine the intrinsic value of assets by inputting data into the various asset valuation models, and explain how each model was applied.
C. Industry Trends
i. Compile historic industry microeconomic data from database research for relative comparisons and inputs into asset valuation models.
ii. Analyze quantitative data across sectors and industries to measure absolute and relative performance.
D. Stakeholders
i. Identify five key stakeholders and their needs in relation to the company's portfolio.
ii. Identify the common stockholders' primary objective and their required return on equity.
II. Portfolio: With your company and market analysis in mind, construct a complete portfolio that includes the following:
A. Assets
i. Explain the inclusion of specific asset classes for the portfolio, considering the portfolio's risk/return trade-offs and the company's investment objectives.
ii. Apply the asset allocation weightings across asset classes, sectors, and industries.
B. Securities
i. Analyze the company's historical revenue and earnings growth in order to demonstrate a comparison to that of peers in the industry.
ii. Determine the intrinsic value of assets utilizing the asset valuation models.
C. Rates of Return
i. Analyze the assets' historical risk and rates of return, utilizing a comparison of the assets' rates of return to similar securities or benchmarks for support.
ii. Calculate required rates of return, utilizing various asset valuation models (e.g. stock valuation models, bond valuation models, real estate valuation models, etc.).
D. Compare the risk/return trade-off on the investments.
III. Executive Summary: Justify your investment strategies in a summary, utilizing your company and market analysis and portfolio for support. Include the following in your justification:
A. Describe how making these investments will position the company within its industry in the market. Support with examples.
B. Explain the benefits of the investments to stakeholders.
C. Assess investment performance utilizing specific performance measurements.
D. Assess investment performance based on risk/return metrics, citing specific examples.
E. Explain how the strategies implemented in the portfolio meet the company's investment objectives.
Milestones
Milestone One: Company Profile
In Module Three, you will submit your company profile. Using the investment parameters for XYZ Tech Company along with your own financial database research, you will complete several Excel spreadsheets and write a brief 1- to 2-page paper briefly outlining the securities and bonds that your company might possibly invest in to create a well-diversified investment portfolio. You will analyze each company and its performance in the financial markets over the past five years, include a company valuation for each firm, and identify stakeholders in the company. This milestone will be graded with the Milestone One Rubric.
Milestone Two: Portfolio
In Module Five, you will first complete the Company and Market Analysis portion of your final project. Using historic and quantitative data, you will provide a brief discussion of the absolute and relative performance of the chosen companies in terms of industry trends. Next, with your completed company and market analysis in mind, you will begin to construct an investment portfolio that includes a consideration of assets, securities, and rates of return for each of the companies that you will be including in the portfolio. This milestone will be graded with the Milestone Two Rubric.
Milestone Three: Portfolio Performance Analysis
In Module Seven, you will first complete your portfolio by comparing the risk/return trade-off on the investments you are compiling. Then, as part of the beginning of your executive summary, you will describe how your investments performed on both an absolute and a relative basis. You will also assess investment performance for the seven securities by calculating the portfolio's overall investment performance and briefly note how each security contributed to the portfolio's performance. This milestone will be graded with the Milestone Three Rubric.