Performance Of The Individual Stock Picks

Published Date: 02 Nov 2017

Investment Management

Individual Project

BAC 6005

Name: NGUYEN TRUONG XUAN AN

Student ID: st20036308

Word count 1200

Contents

This report aims to show the performance of individual stock picks, and compare with the group stock portfolios to reflect the understanding and learning through the process of trial investment. The individual stock portfolio has point out what are important lessons that an investor, at least, should consider.

The individual stock portfolio

Company

Industry

Market Cap (million)

GuocoLeisure

Hotels & Motels

S$ 998.69

Banyan Tree Holdings Ltd

Hotels & Motels

S$ 506.33

City Developments

Hotels & Motels

S$ 10,547.9

Mandarin Oriental International Ltd

Hotels & Motels

S$ 1,615.64

Stamford Land Corp Ltd

Hotels & Motels

S$ 492.38

Lian Beng Group Ltd

Engineering & Construction

S$ 225.15

SunVic Chemical Holdings Ltd

Chemicals

S$ 229.38

Fragrance Group Ltd

Real Estate

S$ 1,713.6

CapitaMalls Asia

Real Estate

S$ 7,940.35

Dairy Farm International Holding Ltd

Food

S$ 17,152.1

Source: Bloomberg 2013.

Performance of the individual stock picks

Weighting

The given initial amount to invest is S$100 million. Because the performance of each stock is unpredicted, price always fluctuates, and thus, the amount of investment for each stock is going to be divided equally before investment. At the end of observation process, we can be able to evaluate and analyzed the good performed stock or is this portfolio performing well?

Above are the tables recording the ten stocks with initial invested amounts and the market value of stocks at the end of observation period. Looking at the details of each stock, we are able to know there is only few shares which the price is going up, increase the profit, such as GuocoLeisure and Lian Beng Group Ltd.

Buying shares in the 6 Mar 2013, the project starts to observe from 12 Mar to 9 April 2013. GuocoLeisure’s price increases from $0.73/share (6/3/2013) to $0.89/share (9/4/2013) (Bloomberg, 2013). Hence, the profit earned from this stock equals: P1 = $12,193,000 - $10,000,100 = $2,192,900. Furthermore, considering the Lian Beng’s share, prices have gone up from $0.43/share (6/3/2013) to $0.46/share (9/4/2013). Profit earned from this share equals: P2= $10,672,000 - $9,976,000 = $696,000. To sum up, total profit earned so far by these two shares is: P = $2,192,900 + $696,000 = $2,888,900.

However, looking at the total profit earned from investment, we are making a loss of $634,800 (Calculation: L = $99,241,000 – $99,875,900). The cause is very clear that, still so far, other 8 stocks left have not made profit. Profits earned from GuocoLeisure and Lian Beng is not enough to cover the loss of the portfolio at the end.

Compare to group portfolio’s performance

For the group, during the 4 weeks, transaction was made and creating profits for each week.

Investment in group stock portfolio gives a good result, total profits after 4 weeks are $3,898,058 which is a distance when compares to the individual’s suggestion. There is a difference of $4,594,058 ($3,898,058 + $696,000) in between. Thus, we give highly consideration of differences in group’s stock picks and individual’s.

The group only takes 2 stocks from the individual’s suggestion, and picks rightly the 2 profiting stocks: GuocoLeisure and Lian Beng Group Ltd. The other stocks were picked from other members.

Group market value at 9 April 2013

Group was doing transactions during the 4 weeks to make profit, using the two different methods might lead to wrong conclusion between group’s and individual’s stock performance. However, even using the same method by comparing the market value at the end of observation period, it is clear that the group’s portfolio has better performance than that of the individual. Group’s portfolio earned profit of $3,080,500 ($103,072,000 - $99,991,500) while individual’s portfolio was making a loss of $696,000.

Learning points/ outcomes

After comparing the results, it is to say that individual’s portfolio is unacceptable and if in the reality, we made a huge wrong move, 80% of chosen stock made loss. The lessons are many, summarized in some categories.

Stock was chosen without much clearly of how its performance is, simply, based only on the chart and predicting its trend to move up is not right method to do in investment. As long as we dig deeply in, the foundation and insider information of company is the best source to let us consider choose stocks or not, which indicates originally, method of choosing stocks based mostly on chart and graph is not encouraged.

If taking consideration of chart and graph as a part of reason to invest, that stock is recommended having much fluctuation as possible. This is due to immobility price for 2-3 days then jump to other price is very tough to predict. Furthermore, the return is made up after long time of investment, creating uncertainty, for example: (Lasting 4 weeks of observation, the popular stock is in the group portfolio has not made profit but creates lose due to brokerage cost)

Popular’s stock chart: Source: Bloomberg, 2013

Even though there is careful stock pick up, the future is always something unknown. We can only use rational thinking to predict, but un-expectation can always happens.

This individual stock pick can only be seen as observation for a period, but cannot immediately take investment. It takes a long time to gather stocks, if for individuals, 2 out of 10 are chosen and make profit; it means the in reality, while doing diversification for investment, stocks available from market should be chosen and selected through many rounds before taking real investment.

Ideally, it takes around 20-30 stocks in diversification to minimize the risk. However, through doing in group and making transaction during the period, it is identified that only one person managing 30 stocks, there is a lot to handle. Time consumption, making right calculation and control, predicting the movement, searching information are number of things which must be resolved.

Reflection on the group’s acceptance of individual stocks’ suggestion

After group is taking consideration to choose out the GuocoLeisure and Lian Bang Group Ltd, I really appreciate that my group actually choose right 2 out of 10 which are making profit. The group picks stock by using the following steps:

Asking individual to choose the best 4 out of 10 stocks

Group discusses stocks for portfolio; chooses 2 stocks out of 4 from each individual’s suggestion.

By this method, my friends and I, equally, are able to choose the best 4 stocks. Firstly, we are satisfied with the respects of group to individuals. Secondly, individuals feel responsible for doing projects and puts effort to research. Comes to the next step, group discuss to choose 2 out of 4 to put in the portfolios. At this time, we are able to discuss about specific stocks at many angels, for example, 2 stocks can be compared at P/E, P/B, or at Beta figures, market capitalization, and also stock chart. Furthermore, other members have found and given more information on the stock. Giving all consideration at angels, I realize what a person is restricted, ability to find information and resources, looking overall dimension to take final decision on investment. It is so good that group has made a clear decision to choose out 2 of 10 stocks, and at the end the 2 stocks performs really well.