A Report On Umuc Portfolio Management

Published Date: 02 Nov 2017

Today more and more people look for the ways how to save and increase their money savings. UMUC Portfolio Management offers highly-professional assistance in the developing portfolios consistent with clients’ objectives. This research is aimed to offer recommendations of the best investment variants according to the client’s goals. It becomes possible due to the comprehensive analysis and valuation of the carefully selected portfolio. The first step in the portfolio development is strategy selection. In the research the investments strategy is determined by the goals of the client who seek high return and therefore high risk portfolio consisting of five securities. According to these goals five stocks are selected: Codexis, Inc. (CDXS), IAMGOLD Corp. (IAG), Royal Dutch Shell (RDS.A), TECO Energy (TE), China Southern Airlines Co. Ltd. (ZNH). The analysis of industries shows that biotechnology, major airlines, metals& minerals, electric utilities and oil are ones of the most promising stocks for high-return investments. Such composition of portfolio is chosen to reduce high level of risk by international and industry diversification. As tools for risk assessment and industry analysis of portfolio, RiskGrades [1] and NASDAQ RiskMetrics [2] services are used. During three weeks the performance of the portfolio’ stocks, S&P 500 index and T-bills (1m) has been collected and processed to determine the excess return on the portfolio. To achieve investment’s goals one transaction is made that increased the portfolio return, which has totaled 2.61% by the end of the monitoring period. These results allow recommending the stocks that show optimal balance between risk and return with an allowance of the possible market changes.

Introduction

UMUC Portfolio Management is one of the most well-know financial consulting companies. We have worked in this sector for 30 years. Many respectable investors were our clients. Our mission is to help clients achieve their financial goals and dreams. We believe wealth creation requires a smart, proactive approach and we'll be with our clients at each step of the way so they can make informed investment decisions. We understand our investors have specific needs at different times throughout their lives, and we assist our clients by providing individual investment plans and comprehensive recommendations. All of these notions are implemented in this report that focuses on the portfolio construction and evaluation in accordance with the individual clients’ objectives.

Today individual investing has reached the high popularity. It occurs because of the increasing Internet usage. On-line trading attracts more and more people while the abundance of easily accessible information increases self confidence. However, it is difficult and pointless in some cases to operate without the assistance of professionals. Effective investment process requires great amount of time, money, physiological and physical efforts from investors. If potential investors want to increase their wealth they should consider Investments not as a venture game but as a serious science that is based on numerous scientific theories and studies. Reading this report you can face with some of them. The research presented in this work shows the main concepts of the portfolio management. It covers this process from the asset-allocation determined by the investor’s strategy to the evaluation of the portfolio performance at the end of the trial three-week period. Every of the report’s outcomes is supported by both fundamental financial theories and recent market information, i.e. it relies on the unique synergy of the past experience and the latest achievements. As a result of all this work, the report provides the specific recommendations that should become the comprehensive and understandable guidance for further client’s investment activities.

Portfolio Selection

Asset Allocation

Selection of investment strategy is purely individual process because it depends on personal preferences and goals of an investor. For our research the strategy was defined as a kind of active one in order to the investor’s risk-seeking attitude and short-period of investing. The next step is portfolio construction for which "top-down" [3] approach is used. This method starts with the asset allocation across broad assets classes. Requirements of the client dictate the specific choice of asset allocation. Considering the short time period of investing, the risk-seeking strategy, and the restriction to invest in mutual funds, stock looks the most appropriate investment allocation.

Industry Selection

This stage starts with the analysis of world economy to determine the industries for investments. The revision of financial analytics and world news has showed that there are some areas, investments in which will be more profitable due to new powerful trends and vital global problems related with them. According to Fortune 500, the most profitable industries in 2009 were network and communication equipment, internet services and retailing and pharmaceuticals. [4] However, it becomes clear that trends have changed by 2011 and these industries, remaining a good position, look a bit overvalued while such essential industries as food production and retailing, oil and gas production, electric and gas utilities, metals, and other natural resources keep their popularity or even increase it. It occurs because of the growing demand for these goods caused by increasing population and manufacturing growth while the supply tends to decrease. In addition, these industries have been in the ten of the most profitable industries rating for more than five years [5] . The cause is simple, at any stage of the economy cycle they are in demand. The shocking catastrophe in highly-developed Japan [6] shows the doubtful value of high technologies in times when the country suffers from dearth and lack of energy. Another example is the Middle East conflicts [7] showing that the possession of oil fields is an enough reason for human victims. However, there are comparatively new trends that in 2011 may play significant role. So, pharmaceutics and medical products originate new trend such as biotechnology. Yahoo Finance [8] stated that it is one of the most promising industries. Another trend - globalization stimulates people to travel more that makes airlines more profitable investments, especially in the growing markets such as China and India. These issues were supported by professional opinion of analysts. Haugerud from Galtere Ltd. and Deshpande from First Eagle Investment Management argued that "gold will eventually go higher, but it's a very volatile commodity… we've said for ages is keep 5% to 10% of your assets in gold, just in case" (2010) [9] . Imaging Genetics (2011) posted that biotechnological trend continuous and the industry greatly outperforms major indexes [10] . Numerous recommendations to invest in industries related with energy sources: oil and gas, electric and gas utilities, copper mining, etc (2010). So, Biotechnology, Electric Utilities, Industrial Metals & Mineral (Gold), Airlines, and Oil and Gas industries form the portfolio. These industries effectively supplement each other. Electric Utilities are defensive stocks and may be considered as low-risk investments because they tend to outperform the general stock market when the market falls. However, in security selection it is possible to increase risk choosing the company involved in cross-industries activities. Besides, they compensate possible losses from Biotechnology and Airlines if the market goes down and vice versa. Gold and Oil are main cash cows of the portfolio because the forecasted demand for them is very high.

International Diversification

After choosing industries it is reasonable to diversify the portfolio by international investing. In addition, some countries are more successful in the selected industries because of the international specialization of labor. The most obvious diversification decision is to buy a stock of Biotechnology company operating in India because many US and Euro companies collaborate with Indian firms to benefit from good scientific base and cheap labor of this country. Another logical decision is airline investments in China. The population and living standard of China become higher. More and more Chinese people travel around the world. China is considered high risk country [11] that accords with the client’s strategy. For international diversification of Oil and Metal industries it is reasonable to seek companies that have the broad resource base and fields in different countries. So, the last of selected industries – Electric Utilities should be realized in a US company because the US is one of the eagerest consumers of energy.

 Security Selection

The security selection is indisputably one of the most important stages of the portfolio construction, in our research it is the choice of specific companies’ stocks. The first industry in which a company for investments should be chosen is Biotechnology. As written above, to increase the portfolio diversification a biotechnology company has to be Indian or operate in Indian market. Unfortunately, not all Indian companies are available for trade. However, after analyzing the list of the largest Nasdaq Short Interest Percent Increases [12] , Codexis Inc. has been selected as the first portfolio component. This company was incorporated in 2002 and is based in Redwood City, California with additional offices in Budapest, Hungary; Singapore; and Bangalore, India [13] . This company looks very promising for short-term investing. According to its financial ratios (see: Appendix A), Codexis demonstrates very rapid growth, which; however, is forecasted to decrease. The possible cause of the decrease may be some problems with profit generation about which the disappointed price, profit and return ratios evidence. However, the company has a very good place at the top of the Earnings Season Top 50. [14] That is supplementary argument to buy this stock for a short period of time.

The next component of the trial portfolio is IAMGold Corporation. IAMGOLD Corporation, together with its subsidiaries, engages in the exploration, development, and production of mineral resource properties worldwide [15] . The company primarily explores for gold, silver, zinc, copper, niobium, diamonds, and other precious metals. There is a point of view among analysts that IAMGOLD is one of the most gold undervalued companies. [16] Look at its financial profile confirms this opinion. The outstanding income growth of +476.50% and a P/E ratio of 29.22, below the average metals & mining industry P/E ratio of 29.2 and above the S&P 500 P/E ratio of 16 may be signals of stock’ undervaluation. According to stock valuation theory, P/E ratio is a king of ratios that show how the market evaluates the company’s earnings. Of course, there are other methods to evaluate a stock, but IAMGOLD is an achiever in them too. So, the company also surpasses industry ratios in ROA, ROE and other ratios (see: Appendix A).

Major Airlines Industry is represented by China Southern Airlines Co. Ltd (ZNH). As it is clear from the company name China Southern Airlines Co. Ltd operates in China airlines that is consistent with the portfolio diversification strategy. Due to domestic travel growth in the Peoples Republic, the company is well positioned to benefit from this trend. It is the cause why China Southern Airlines Co. Ltd is emphasized as on of the most promising growth stock in emerging markets [17] . Financial highlights of the ZNH support this opinion. The company has significantly higher growth ratios than they are in industry while price ratios remain at middle level (see: Appendix A). However, managing this stock it is necessary to be careful with company’s performance because ZNH has a very high beta – 4, especially in comparison with other airline companies [18] .

For investments in Oil &Gas Industry it is reasonable to choose well-known and dependable company because it is planned to invest in this industry significantly more than in other. In order to this strategy Royal Dutch Shell PLC was selected. Shell is the largest European oil company operating worldwide. The company has wide range of operations and owns interests in approximately 35 refineries. It demonstrates perfect growth ratios, considerably higher than in industry, and moderate level of other financial ratios (see: Appendix A). This company is good for both short-term and long-term investments due to persistent demand for oil and gas products. So, the analysts of MoneyCentral evaluate this stock at 9 of 10 scores. [19] 

The last position in the portfolio belongs to the very controversial company - TECO Energy (TE). The Electric Utilities industry traditionally is considered low risk that is incompatible with the client’s strategy. However, there are some assumptions that allow choosing this security for the portfolio. First of all, not all companies in the industry are low risk. The second important factor is the very high risk of other portfolio components. The too high risk level of CDXS and ZNH needs to be equilibrated by the comparatively defensive security that may decrease potential losses. TECO engages in the generation, purchase, transmission, distribution, and sale of electric energy in Florida. The company also involves in the purchase, distribution, and sale of natural gas for approximately 334,000 residential, commercial, industrial, and electric power generation customers. In addition, TECO Energy owns mineral rights; and owns or operates surface and underground mines, and coal processing and loading facilities in Kentucky, Tennessee, and Virginia. TECO Energy, Inc. was founded in 1899 and is headquartered in Tampa, Florida [20] . While the TECO financial ratios represent a dependable position of the company in the market: good P/E ratio, perfect profit margin ratios and outperforming the industry returns ratios, growth ratios indicates about the stagnation stage of the company life cycle (see: Appendixes A). According to these issues it doesn’t recommended holding this security for a long period of time. TE also has the non-low beta-coefficient – 0.83 that is an evidence of the comparatively close relation between market and stock performance. As an indicator of a systematical risk Beta enables to conclude that TE is enough risky to include it in the portfolio.

Initial Portfolio Weights

The portfolio theory allows constructing an optimal risky portfolio that means the best combination of risky and safe assets [21] . However, the client’s risk-seeking strategy doesn’t permit to include risk-free and low-risk securities in the portfolio. So, it is constructed from high risk stocks. The weights were allocated in the following way:

Ticker

Market Value

Shares

Weight

CDXS

1590

150

0,47%

IAG

4094

200

1,21%

RDS.A

324000

150

96,00%

TE

2727

150

0,81%

ZNH

5080

200

1,51%

Total

337491

850

100,00%

More than 90% of portfolio is invested in Royal Dutch Shell. It is high liquidity company with the most dependable position at the market from the selected stocks. In consideration of the conflicts in the Middle East where the largest oil suppliers locate it looks reasonable to invest in Oil & Gas industry that promised to prosperous in this short three-week period. It is necessary to define that investing for long run requires the selection of absolutely another construction strategy. Among other stocks investments allocated almost in equal proportion. However, it is a bit less investments in CDXS and TE. Analyzing their financial highlights and experts opinions it is possible to conclude that their market positions are more unreliable. In addition, CDXS is considered very risky investment while TE is reputed as low risk, defensive stock. To balance the risk of these stocks such weights are chosen.

Besides, to achieve the most appropriate for the client risk-return combination of stocks it is possible to plot Efficient Frontier. Graph representing a set of portfolios that maximizes expected return at each level of risk [22] . So, for a final portfolio construction the client can choose an acceptable level of risk that enables to realize the return opportunities at this level.

Final Portfolio Weights

On the February 22, 2011 two transactions were made, one of which was the sell of ZNH stock (see: Appendix B). The reason was the news from the International Airlines Group (IAG). This company announced the list of small airline companies that it would plan to merge. China Southern Airlines (ZNH) was in this list as a primary target. In addition, ZNH has demonstrated an increase of 2.17% in the price; (see: GutnikD.xlsx, Return.spreadsheet) it looks the good moment to sell the stock with gain and avoid possible losses within the last week. In the same day Unilever was bought. According to the news, the shortage of food has been already a serious problem for some countries. But it is not a single are where the company operates. It focuses on everyday consumer needs for nutrition, hygiene and personal care. Unilever’s portfolio includes brands, as Knorr, Lipton, Hellmann’s, Magnum, Omo, Dove, Lux and Axe/Lynx. The Company’s products are sold in over 170 countries around the world [23] . Despite the fact that most of Unilever financial ratios are below the industry; however, ROE and ROA outperforms not only industry ratios but the market too (see: Appendix A6). So, I think UN is a good way to invest money for long run.

After these transactions the portfolio construction is the following:

Ticker

Market Value

Shares

Wheight

CDXS

1560

150

0,46%

IAG

4206

200

1,23%

RDS.A

328875

150

96,06%

TE

2668,5

150

0,78%

UN

5049

170

1,47%

Total

342358,5

820

100,00%

Portfolio Assessment

Portfolio Sector Analysis

RiskGrade [24] is a very convenient tool to conduct the portfolio sector analysis. This analysis lets to compare the portfolio’s concentration and risk contribution in each industry against the market benchmark index (S&P 500 index). It is interesting to compare initial and final portfolio against the benchmark (see: Appendix C). So, in the new portfolio Industrials is the most underweighted and underexposed sector to risk while in the old portfolio Industrials is the most overweighed sector. In both portfolios Materials is the most overexposed sector to risk; however, the most overweight sector of new portfolio is Consumer Discretionary. The comparison gives the amazing results; the change of one security on another can greatly affect the portfolio’s sector concentration.

Risk Ranking

The process of risk ranking is a comparison of portfolio against the stocks in S&P 500. Analyzing charts (see: Appendix C2) it is easy to observe that initial and final portfolios almost don’t differ in risk grades. The latest portfolio a bit riskier; however, they are both less risky than 94% of S&P 500 stocks. The main cause of such low risk grade of the portfolio is the diversification benefits. While separate stocks are ranked with a high risk grade the composition of these stocks compensate their risks that decreases portfolio overall grade.

Return Analysis

According to the Risk vs. Return Chart (see: Appendix C3), the expected return of old portfolio is a bit higher because ZNH, being a very risky security, provides the high expected return while UN has an average risk grade, therefore the average expected return. However, it isn’t reason to become anxious because the risk grades of securities have constantly changed during the time that is possible to notice comparing the tables under the charts (see: Appendix C3). Risk grade of every stock has changed a little from the time when the initial portfolio was bought. In addition, to achieve higher return it is possible to change the portfolio composition in accordance with investor’s strategy. Another questionable stock is TE. Its position at the chart shows that the expected return of the stock is inadequate its high level of risk. However, using "What If" Analysis this portfolio with TE in comparison with portfolio, where TE is changed on AAPL, demonstrates almost the same results (see: Appendix C4). Moreover, the expected losses increase slightly. This example doesn’t mean that it is pointless to sell TE and buy another security, but it proves that the selection of new security requires a very careful approach to avoid the waste of time and money.

Computation of Returns

To evaluate the portfolio performance the convenient table is constructed (see: GutnikD.xlsx, "Return" spreadsheet). This table shows how stocks, portfolio and S&P 500 index returns have changed during the three-week period. Investigation of this table allows finding the relation between portfolio, stocks and market performance.

Security, Portfolio and Market Statistics

Using the Return table it is possible to compute various characteristics of the portfolio, stocks and market statistic. In the Excel spreadsheet (see: GutnikD.xlsx, "Risk" spreadsheet) it is calculated the following statistics for every stock, portfolio and S&P 500 index: standard deviation (measure of the dispersion of a set of data from the mean or the investment’s volatility [25] ), arithmetic and geometric means of the returns, terminal wealth, variance (measure of total risk), percent of systematic and unsystematic risks. After examination of these data it is possible to make some observations:

There are three stocks which demonstrate the highest terminal wealth: IAG (4.84%), RDS.A (2.71%) and ZNH (2.17%). In addition, the overall portfolio has the terminal wealth of 2.20%.

The least terminal wealth belongs to TE (-1.1%). Only S&P 500 demonstrates the negative return too (-0.42%).

It is possible to conclude that the portfolio greatly outperform the market in these three weeks.

The beta coefficient of portfolio is very low; moreover, it is negative (-0.07). It means that market or systematic risk almost doesn’t affect the portfolio performance. This inference is supported by the percent of systematic risk that is very small – only 0.54% against 99,46% of systematic risk.

The high level of unsystematic risk evidences that variance is the better measure of risk for the portfolio.

From the forth observation follows another conclusion – portfolio is greatly liable to unsystematic risk.

Ignoring some day-to-day variations in the investments we receive the lower average return that instantiate by Arithmetic and Geometric Means estimations. The lower results calculated by Geometric Mean may be caused by the less money is at risk [26] .

The portfolio has the lower Total risk than the market. The cause may be in diversification; especially, in international.

IAG, TE and UN have the maximum systematical risk – they are not internationally diversified.

ZNH and IAG have the highest percent of Total risk; however, their returns are also ones of the highest in portfolio. Nevertheless, RDS.A that provides the return even slightly more than ZNH (2.71%) has significantly low Total Risk percent (0.0065%).

It is possible to conclude that the level of ZNH Total risk (0.0810%) is inadequate its terminal wealth (2.17%)

Correlation

It is prepared two types of correlation matrix (see: GutnikD.xlsx, "Diversification" spreadsheet), one of which bases on a big massive of historical prices and other relies on the data collected within the trial portfolio period. According to both of these tables ZNH provides the best correlation with other securities. In 3-week correlation matrix the low correlation results TE demonstrates that is not surprising due to its constant decrease during these weeks while other stocks increase. The maximum correlation with the market was displayed by UN that has already mentioned in the previous section. In addition, UN has a comparatively high positive correlation with other stocks. That indicated that this stock poorly improved portfolio diversification. It is also importance to notice that the results in two tables greatly differ. So, correlation greatly depends on the amount of processed information and its time range. Besides, the correlation analysis looks not effective for short-term investments.

Capital Market Line (CML) and the Efficient Frontier

CML Chart is constructed from the three-week data collected within he research that greatly change the traditional state of the chart (see: GutnikD.xlsx, "Risk" spreadsheet). According to Efficient Frontier theory the market portfolio return is above the risk-free rate and this market portfolio is the optimal for inventors in the efficient market. So, nobody can outperform the market. However, our research proves to the contrary. The market portfolio locates below the risk-free rate (1m T-bills) that caused by its negative performance within this period of time. In comparison to CML our portfolio is undervalued because it is above the line. Besides, while most of stocks have high risk percent the level of portfolio risk is very low. This is an indicator of effective diversification.

Security Market Line (SML) and the CAPM

Due to the usage of the same data as for previous chart SML also has a specific look (see: GutnikD.xlsx, "Risk" spreadsheet). The fundamental theory states that:

"the SML provides the required rate of return that will compensate investors for the risk of

that investment, as well as for the time value of money. Because the security market line is

the graphical representation of the expected return- beta relationship, "fairly priced" assets

plot exactly on the SML. The expected returns of such assets are commensurate with

their risk. Whenever the CAPM holds, all securities must lie on the SML in market

equilibrium [27] ".

Nevertheless, from the SML chart it becomes clear that in this case theory doesn’t work. Our portfolio locates above the line. It means that the portfolio is undervalued and earns more than it is possible at its beta-coefficient (β). However, such abnormal return is predicted by CAPM and names alpha (α).

Performance Measures

The last measures that are used for portfolio analysis are Sharp, Treynor and Alpha ratios. In the research these ratios evaluate the performance of portfolio in whole, every stock and the market. There are (see: GutnikD.xlsx, "Risk" spreadsheet) First of all, it is necessary to determine what these ratios evaluate. Sharp ratio measure the return that an investor may expect to get for every increase of 1% of standard deviation (i.e. risk). Traynor measure a bit differs from Sharp one it evaluates the incremental return on the increase of systematical risk. Alpha or Jensen’s measure considers both total and systematical risks. However, it doesn’t sufficient without positive Sharp and Treynor ratios. So, ratios’ charts indicate that only ZNH, RDS.A and overall portfolio provide the adequate return on their level of risks.

Appendix A

Companies’ Profiles

Codexis Inc. (CDXS)

Financial Highlights

Symbol

Value ($)

Sales*

107.10 Mil

Income*

-8.54 Mil

Sales Growth*

+29.20%

Income Growth*

+57.90%

Net Profit Margin

-7.98%

Debt/Equity Ratio

0.00

Beta

NA

EPS

-0.75

Forward P/E

550.00

P/E

-31.43

Market Cap

385.87 Mil

Shares Outstanding

35.08 Mil

52-Wk High

14.98

52-Wk Low

6.88

Volume

173,619

Avg Daily Vol (13 Wks)

149,031

50-Day Moving Average

10.35

200-Day Moving Average

9.68

Growth Rates %

Company

Industry

S&P 500

Sales (Qtr vs year ago qtr)

23.00

2,172.40

11.60

Net Income (YTD vs YTD)

NA

7.90

53.20

Net Income (Qtr vs year ago qtr)

90.40

-15.90

72.40

Sales (5-Year Annual Avg.)

55.49

29.74

7.74

Price Ratios

Company

Industry

S&P 500

Current P/E Ratio

NA

14.0

20.6

P/E Ratio 5-Year High

NA

53.1

14.5

P/E Ratio 5-Year Low

NA

8.7

2.2

Price/Sales Ratio

3.60

32.67

2.21

Price/Book Value

3.57

5.64

3.64

Price/Cash Flow Ratio

NA

18.00

17.10

Investment Returns %

Company

Industry

S&P 500

Return On Equity

NA

1.7

22.5

Return On Assets

-7.1

-2,384.7

8.0

Return On Capital

-10.6

-6.0

10.5

Return On Equity (5-Year Avg.)

NA

-2.0

19.2

Return On Assets (5-Year Avg.)

NA

-2.3

7.5

Return On Capital (5-Year Avg.)

NA

-4.2

10.1

Appendix A2

IAMGOLD Corp. (IAG)

Financial Highlights

Symbol

Value ($)

Sales*

973.45 Mil

Income*

87.94 Mil

Sales Growth*

+5.10%

Income Growth*

+476.50%

Net Profit Margin

9.03%

Debt/Equity Ratio

0.00

Beta

0.48

EPS

0.23

Forward P/E

17.58

P/E

29.22

Market Cap

8.44 Bil

Shares Outstanding

374.64 Mil

52-Wk High

23.38

52-Wk Low

13.17

Volume

2.4 Mil

Avg Daily Vol (13 Wks)

3.23 Mil

50-Day Moving Average

20.24

200-Day Moving Average

18.51

Volatility (beta)

0.48

FINANCIALS

 

Last 12 Mos

5-Yr Growth

Sales

973.45 Mil

49.64%

Income

87.94 Mil

44.37%

Dividend Rate

0.08

3.71%

Dividend Yield

0.36%

0.60%

Growth Rates %

Company

Industry

S&P 500

Sales (Qtr vs year ago qtr)

8.00

74.20

11.60

Net Income (YTD vs YTD)

-16.20

68.50

53.20

Net Income (Qtr vs year ago qtr)

-37.20

174.30

72.40

Sales (5-Year Annual Avg.)

49.64

26.71

7.74

Net Income (5-Year Annual Avg.)

44.37

20.63

7.64

Dividends (5-Year Annual Avg.)

3.71

1.23

4.87

Price Ratios

Company

Industry

S&P 500

Current P/E Ratio

96.0

40.4

20.6

P/E Ratio 5-Year High

NA

17.5

14.5

P/E Ratio 5-Year Low

NA

5.5

2.2

Price/Sales Ratio

8.67

180.63

2.21

Price/Book Value

3.18

3.31

3.64

Price/Cash Flow Ratio

36.90

16.60

17.10

Investment Returns %

Company

Industry

S&P 500

Return On Equity

3.5

3.2

22.5

Return On Assets

2.9

-22.8

8.0

Return On Capital

3.1

-4.2

10.5

Return On Equity (5-Year Avg.)

1.0

2.9

19.2

Return On Assets (5-Year Avg.)

1.8

2.2

7.5

Return On Capital (5-Year Avg.)

1.9

3.1

10.1

Appendix A3

China Southern Airlines Co. Ltd.

Financial Highlights

Symbol

Value ($)

Sales*

9.83 Bil

Income*

362.37 Mil

Sales Growth*

-0.90%

Income Growth*

+106.80%

Net Profit Margin

4.07%

Debt/Equity Ratio

5.36

Beta

1.75

EPS

2.28

Forward P/E

5.12

P/E

67.74

Market Cap

10.16 Bil

Shares Outstanding

9.82 Bil

52-Wk High

39.30

52-Wk Low

18.83

Volume

36,426

Avg Daily Vol (13 Wks)

63,974

50-Day Moving Average

24.72

200-Day Moving Average

27.36

Volatility (beta)

1.75

FINANCIALS

 

Last 12 Mos

5-Yr Growth

Sales

9.83 Bil

17.98%

Income

362.37 Mil

6.67%

Dividend Rate

NA

NA

Dividend Yield

NA

0.00%

Growth Rates %

Company

Industry

S&P 500

Sales (Qtr vs year ago qtr)

39.80

-1.30

11.60

Net Income (YTD vs YTD)

8,184.00

1,530.90

53.20

Net Income (Qtr vs year ago qtr)

8,184.00

1,621.30

72.40

Sales (5-Year Annual Avg.)

17.98

8.58

7.74

Net Income (5-Year Annual Avg.)

6.67

-4.41

7.64

Dividends (5-Year Annual Avg.)

NA

-0.27

4.87

Price Ratios

Company

Industry

S&P 500

Current P/E Ratio

10.1

20.8

20.6

P/E Ratio 5-Year High

3,747.1

9.3

14.5

P/E Ratio 5-Year Low

22.2

1.9

2.2

Price/Sales Ratio

1.03

6.00

2.21

Price/Book Value

1.95

4.07

3.64

Price/Cash Flow Ratio

11.50

9.10

17.10

Investment Returns %

Company

Industry

S&P 500

Return On Equity

24.4

32.4

22.5

Return On Assets

2.7

-210.9

8.0

Return On Capital

4.7

4.0

10.5

Return On Equity (5-Year Avg.)

-8.8

-145.5

19.2

Return On Assets (5-Year Avg.)

-1.0

1.2

7.5

Return On Capital (5-Year Avg.)

-2.1

1.3

10.1

Appendix A4

Royal Dutch Shell (RDS.A)

Financial Highlights

Symbol

Value ($)

Sales*

368.06 Bil

Income*

20.13 Bil

Sales Growth*

+32.30%

Income Growth*

+60.80%

Net Profit Margin

5.56%

Debt/Equity Ratio

0.30

Beta

0.98

EPS

6.56

Forward P/E

8.24

P/E

11.96

Market Cap

228.94 Bil

Shares Outstanding

6.29 Bil

Sales

368.06 Bil

3.71%

Income

20.13 Bil

-4.71%

Dividend Rate

3.36

8.28%

Dividend Yield

4.62%

4.50%

Growth Rates %

Company

Industry

S&P 500

Sales (Qtr vs year ago qtr)

24.20

16.50

11.60

Net Income (YTD vs YTD)

60.80

117.30

53.20

Net Income (Qtr vs year ago qtr)

246.30

63.00

72.40

Sales (5-Year Annual Avg.)

3.71

7.74

7.74

Net Income (5-Year Annual Avg.)

-4.71

1.98

7.64

Dividends (5-Year Annual Avg.)

8.28

6.61

4.87

Price Ratios

Company

Industry

S&P 500

Current P/E Ratio

11.1

10.6

20.6

P/E Ratio 5-Year High

NA

13.5

14.5

P/E Ratio 5-Year Low

NA

3.6

2.2

Price/Sales Ratio

0.62

1.37

2.21

Price/Book Value

1.51

1.88

3.64

Price/Cash Flow Ratio

6.30

8.20

17.10

Investment Returns %

Company

Industry

S&P 500

Return On Equity

14.2

16.0

22.5

Return On Assets

6.7

8.6

8.0

Return On Capital

9.6

11.2

10.5

Return On Equity (5-Year Avg.)

18.9

19.7

19.2

Return On Assets (5-Year Avg.)

8.7

10.3

7.5

Return On Capital (5-Year Avg.)

13.4

13.8

10.1

Appendix A5

TECO Energy (TE)

Financial Highlights

Symbol

Value ($)

Sales*

3.49 Bil

Income*

237.30 Mil

Sales Growth*

+5.40%

Income Growth*

+11.90%

Net Profit Margin

6.87%

Debt/Equity Ratio

1.49

Beta

0.84

EPS

1.11

Forward P/E

11.77

P/E

16.44

Market Cap

3.92 Bil

Shares Outstanding

214.90 Mil

52-Wk High

18.77

52-Wk Low

14.46

Volume

1.17 Mil

Avg Daily Vol (13 Wks)

1.88 Mil

50-Day Moving Average

18.08

200-Day Moving Average

17.26

Volatility (beta)

0.84

FINANCIALS

 

Last 12 Mos

5-Yr Growth

Sales

3.49 Bil

2.99%

Income

237.30 Mil

2.38%

Dividend Rate

0.82

1.41%

Dividend Yield

4.49%

4.90%

Growth Rates %

Company

Industry

S&P 500

Sales (Qtr vs year ago qtr)

1.30

9.50

11.60

Net Income (YTD vs YTD)

-1.40

11.20

53.20

Net Income (Qtr vs year ago qtr)

6.00

30.70

72.40

Sales (5-Year Annual Avg.)

2.99

6.40

7.74

Net Income (5-Year Annual Avg.)

2.38

7.23

7.64

Dividends (5-Year Annual Avg.)

1.41

4.38

4.87

Price Ratios

Company

Industry

S&P 500

Current P/E Ratio

16.5

14.5

20.6

P/E Ratio 5-Year High

21.7

9.1

14.5

P/E Ratio 5-Year Low

6.0

9.8

2.2

Price/Sales Ratio

1.12

2.08

2.21

Price/Book Value

1.81

1.62

3.64

Price/Cash Flow Ratio

7.10

8.00

17.10

Profit Margins %

Company

Industry

S&P 500

Gross Margin

33.4

25.7

38.3

Pre-Tax Margin

11.7

7.6

17.0

Net Profit Margin

6.9

8.9

12.4

5Yr Gross Margin (5-Year Avg.)

NA

4.4

38.0

5Yr PreTax Margin (5-Year Avg.)

10.5

8.8

15.3

5Yr Net Profit Margin (5-Year Avg.)

6.5

5.2

10.9

Investment Returns %

Company

Industry

S&P 500

Return On Equity

11.2

9.6

22.5

Return On Assets

3.3

2.4

8.0

Return On Capital

3.7

3.3

10.5

Return On Equity (5-Year Avg.)

12.9

11.4

19.2

Return On Assets (5-Year Avg.)

3.1

3.5

7.5

Return On Capital (5-Year Avg.)

3.5

4.2

10.1

Appendix A6

Unilever NLG.

Financial Highlights

Symbol

Value ($)

Sales*

62.33 Bil

Income*

5.98 Bil

Sales Growth*

+11.10%

Income Growth*

+25.90%

Net Profit Margin

10.39%

Debt/Equity Ratio

0.66

Beta

0.84

EPS

2.06

Forward P/E

12.37

P/E

19.33

Market Cap

91.56 Bil

Shares Outstanding

2.98 Bi

 

Last 12 Mos

5-Yr Growth

Sales

62.33 Bil

2.88%

Income

5.98 Bil

6.31%

Dividend Rate

1.40

4.74%

Dividend Yield

4.53%

3.30%

Growth Rates %

Company

Industry

S&P 500

Sales (Qtr vs year ago qtr)

12.00

17.90

11.60

Net Income (YTD vs YTD)

25.90

30.80

53.20

Net Income (Qtr vs year ago qtr)

14.90

30.40

72.40

Sales (5-Year Annual Avg.)

2.88

7.99

7.74

Net Income (5-Year Annual Avg.)

6.31

12.17

7.64

Dividends (5-Year Annual Avg.)

4.74

7.96

4.87

Price Ratios

Company

Industry

S&P 500

Current P/E Ratio

14.9

21.1

20.6

P/E Ratio 5-Year High

32.3

11.1

14.5

P/E Ratio 5-Year Low

10.2

3.7

2.2

Price/Sales Ratio

1.47

1.96

2.21

Price/Book Value

4.23

4.26

3.64

Price/Cash Flow Ratio

11.60

13.60

17.10

Investment Returns %

Company

Industry

S&P 500

Return On Equity

32.0

26.7

22.5

Return On Assets

11.8

8.7

8.0

Return On Capital

17.7

13.6

10.5

Return On Equity (5-Year Avg.)

34.8

27.3

19.2

Return On Assets (5-Year Avg.)

11.3

9.4

7.5

Return On Capital (5-Year Avg.)

18.0

13.5

10.1

Appendix B

CBOE Trade

Appendix C

Sector Analysis (Initial Portfolio)

Sector Analysis (Final Portfolio)

Appendix C2

Risk Ranking Chart

Old Portfolio

Portfolio Risk Grade: 85

New Portfolio

Portfolio Risk Grade: 88

Appendix C3

Return Analysis

Old Portfolio

New Portfolio

Appendix C4

"What If" Analysis