Fluent Essays

Finish part 2 with the research in part 1. Project Part 2. Valuation of your portfolio and companies and reevaluation based on any changes you have made in your portfolio. Deliverable: Using the stocks in your initial portfolio, prepare a valuation of each stock and the initial portfolio using zero, constant or variable growth models with a market return at 8% and at 12%. [Note that the growth rate must be less than the required rate of return.] Make sure you list the date of the valuation and the closing share price of your firm’s stock. Each firm’s required rate of return will depend on its beta. Is the stock of each of these companies over or undervalued? What is the expected return using the CAPM model? Prepare a time series ratio analysis (liquidity, activity, debt, and profitability). Identify any events during the period that may have caused the stocks’ prices to increase or decrease, explaining how these events affect the stocks’ prices. Project Part 2. Valuation of your portfolio and companies (and reevaluation based on any changes you have made in your portfolio). Deliverable: 1. Using the stocks in your initial portfolio, prepare a valuation of each stock and the initial portfolio using zero, constant or variable growth models with a market return at 8% and at 12%. [Note that the growth rate must be less than the required rate of return.] Make sure you list the date of the valuation and the closing share price of your firm’s stock. Each firm’s required rate of return will depend on its beta. 2. Is the stock of each of these companies over or undervalued? 3. What is the expected return using the CAPM model? 4. Prepare a time series ratio analysis (liquidity, activity, debt, and profitability). Identify any events during the period that may have caused the stocks’ prices to increase or decrease, explaining how these events affect the stocks’ prices. Project Part 1 Initial Selection of Stocks Stock Analysis Initial Selection of Stocks For this project, a total of $955,420 was invested to five different stocks from five different industries (telecommunications, pharmaceutical and biotechnology, technology hardware and equipment, oil and gas, and lastly, food industry). Each of the company has at least $10 billion in market capitalization. Moreover, all the companies pay dividends to its investors. The stocks were purchased on Friday, May 8 and there is no short sales, fractional sales or margin trades made since then. The spreadsheet for this project shows the five stocks, stock exchanges, stock symbols, closing prices, number of shares bought, total value of investments and the dividends paid by each company. The following are the analysis of each stocks: AT&T, Inc. AT&T, Inc. is an American telecommunication company. AT&T is founded by the Bell Telephone Company. One main reason why this company was chosen is because AT&T is the largest telecommunications company worldwide. With a mission to inspire human progress through the power of communication and entertainment, AT&T continues to explore innovative ways to reinvent itself. The company offers mobile telephone services, fixed telephone services and entertainment video services. Recently, the company took a big step by adding WarnerMedia with a goal of reshaping the world of technology, media and telecommunications. As of May, the company has a total market capitalization of $207.52 B. Another reason why I chose to invest in this company is because AT&T has a high dividend yield. Currently, it has a dividend yield of 5.3%. Some of AT&T competitors include Orange Business Service, BT Group, SingTel, Verizon, T-Mobile, Spectrum, Cox Communications, Cricket Wireless, RCN and Comcast. The competition continues to grow but AT&T has surely adapted to previous changes in the industry and has the staying power to remain at the top. The reported beta of AT&T is 0.67. The adjusted beta is calculated using the formula: (2/3) x reported beta + (1/3) * 1.0. The adjusted beta is 0.78. Since the beta of the company is less than 1, it means that the security price tends to be less volatile than the market. This means that the stocks of AT&T can be considered less risky. Bristol-Myers Squibb Company Bristol-Myers Squibb Company is an global biopharmaceutical company headquartered at New York City. The company was founded in 1858. Since then, Bristol-Myers Squibb Company made it a mission to bring patients better health solutions. Bristol-Myers Squibb Company manufactures prescription and pharmaceutical biologics. The main reason why I chose to invest at Bristol-Myers Squibb Company is because of its current drug portfolio. Two of Bristol-Myers Squibb Company’s products (Eliquis and Opdivo) take in almost $2 B each quarter. Analysts also expect an earnings growth of 15% annually over the next five years. Considerably, Bristol-Myers Squibb Company also has a favourable 3.4% as its dividend yield. It has 21 companies in its portfolio and according to macrotrends.com, it has a market cap of $143.34 B. Bristol-Myers Squibb Company’s top competitors include Merck, Roche, Gilead, Pfizer, Amgen, GSK, Astra Zeneca, Eli Lilly, Novartis, and AbbVie. Its drug portfolio and pipeline are its competitive edge against these competitors. The reported beta of Bristol-Myers Squibb is 0.72. The adjusted beta is calculated using the formula: (2/3) x reported beta + (1/3) * 1.0. The adjusted beta is 0.81. Since the beta of the company is less than 1, it means that the security price tends to be less volatile than the market. This means that the stocks of Bristol-Myers Squibb Company can be considered less risky. Apple, Inc. Apple is a multinational technology company. One of the Big Five, Apple manufactures and sells consumer electronic products, accessories, software and services. I chose to invest to this company because of the popularity of its products. The brand that Apple build continues to add to its value. Apple’s well-known products include iPhone, iPad, iMac, iPod, Apple Watch, Apple TV, macOS, iOS, iPadOS and iTunes to name a few. Apple’s top competitors include Microsoft, Dell, Samsung, Lenovo, HP, Sony, Asus, Google, Huawei and Philips. Apple is a well-known company worldwide. It has a market cap value of $1000 B. Apple utilizes not only its product but also its marketing strategies to remain at the top. The reported beta of Apple is 1.17. The adjusted beta is calculated using the formula: (2/3) x reported beta + (1/3) * 1.0. The adjusted beta is 1.11. Since the beta of the company is more than 1, it means that the security price tends to be more volatile than the market. This means that the stocks of Apple can be considered more risky. Exxon Mobil Corp Exxon Mobil Corp. is an American multinational oil and gas corporation. Exxon Mobil market fuels and lubricants under four brands namely Esso, Exxon, Mobil and ExxonMobil Chemical. I invested at Exxon Mobil because it is one of the world’s largest publicly traded energy providers and chemical manufacturers. Exxon Mobil has a market capitalization of $186.55 B. Exxon Mobil’s top competitors include Chevron, Shell, Total, BP, Eni, ConocoPhillips, Valero, Occidental, Marathon Oil and LukOil. As one of the biggest oil companies worldwide, Exxon Mobil continues to achieve both outstanding financial and operating results. The reported beta of Exxon Mobil is 1.36. The adjusted beta is calculated using the formula: (2/3) x reported beta + (1/3) * 1.0. The adjusted beta is 1.24. Since the beta of the company is more than 1, it means that the security price tends to be more volatile than the market. This means that the stocks of Exxon Mobil can be considered more risky. Kellogg Co. Kellogg Co. is an American multinational food manufacturing company. Kellogg’s manufactures and distributes cookies, cereal bars, convenience foods, savory snacks and beverages. Kellogg’s top competitors include General Mills, Mondelez International, Kraft Heinz, Smucker’s Ingredion, Quaker Oats, Nestle, Conagra Brands, Tyson Foods and Hershey. The market capitalization of Kellogg amounts to $21.77 B and has a 3.2% dividend yield. Additionally, what makes this company appealing is because it is projecting a 2.3% organic sales growth and 6% operating profit growth in 2020. The reported beta of Kellogg Co. is 0.59. The adjusted beta is calculated using the formula: (2/3) x reported beta + (1/3) * 1.0. The adjusted beta is 0.73. Since the beta of the company is less than 1, it means that the security price tends to be less volatile than the market. This means that the stocks of Kellogg Co. can be considered less risky. Total Portfolio Beta The beta of my initial portfolio is 0.79. This means that overall, my portfolio tends to be less volatile. The total amount held in cash is $44,580. Sources AT&T, Inc. 1) https://about.att.com/pages/corporate_profile 2) https://www.fool.com/investing/2020/01/24/the-4-biggest-dividend-payers-in-the-stock-market.aspx 3) https://www.owler.com/company/att Bristol-Myers Squibb Company 1) https://www.bms.com/about-us/our-company.html 2) https://money.usnews.com/investing/dividends/slideshows/best-dividend-stocks-to-buy-this-year?slide=2 3) https://www.owler.com/company/bms Apple 1) https://www.owler.com/company/apple 2) www.apple.com Exxon Mobil 1) https://www.owler.com/company/exxonmobil 2) https://corporate.exxonmobil.com/Company/Careers 3) https://corporate.exxonmobil.com/Company/Who-we-are Kellogs Co. 1) https://www.owler.com/company/kelloggs 2) https://money.usnews.com/investing/stock-market-news/slideshows/top-food-and-beverage-stocks-to-buy?slide=4 MARKET CAPITALIZATION Each company has at least $10 Billion in Market Capitalization. INDUSTRY COMPANY MARKET CAP Telecommunications AT&T $207.52 B Ana: https://www.macrotrends.net/stocks/charts/T/at-t/market-cap Pharmaceutical & Biotechnology Bristol-Myers Squibb $143.34 B Ana: https://www.macrotrends.net/stocks/charts/BMY/bristol-myers-squibb/market-cap Technology Hardware & Equipment Apple, Inc. $1000 B Ana: https://www.macrotrends.net/stocks/charts/AAPL/apple/market-cap Oil & Gas Producers Exxon Mobil Corp. $186.55 B Ana: https://www.macrotrends.net/stocks/charts/XOM/exxon/market-cap Food Producers Kellog Co. $21.77 B Ana: https://www.macrotrends.net/stocks/charts/K/kellogg/market-cap PORTFOLIO Diversified Portfolio Initial Investment $ 1,000,000.00 As of Friday, May 8 INDUSTRY COMPANY STOCK EXCHANGE STOCK SYMBOL CLOSING PRICE # OF SHARES TOTAL VALUE OF SHARES LAST DIVIDEND (Amount) LAST DIVIDEND (Date) EXPECTED EX-DIVIDEND (Amount) Expected Ex-Dividend (Date) Telecommunications AT&T, Inc. NYSE T $ 29.79 Ana: https://finance.yahoo.com/quote/T/history?p=T 6,000 $ 178,740.00 $ 0.52 8-Apr-20 $ 0.52 Ana: https://www.dividendmax.com/united-states/nyse/telecomms/atandt-inc/dividends 9-Jul-20 Pharmaceutical & Biotechnology Bristol-Myers Squibb NYSE BMY $ 61.05 Ana: https://finance.yahoo.com/quote/BMY/history?p=BMY 3,000 $ 183,150.00 $ 0.45 2-Apr-20 $ 0.45 Ana: https://www.dividendmax.com/united-states/nyse/pharmaceuticals-and-biotechnology/bristol-myers-squibb/dividends 1-Jul-20 Technology Hardware & Equipment Apple, Inc. NASDAQ AAPL $ 310.13 Ana: https://finance.yahoo.com/quote/AAPL/history?p=AAPL 1,000 $ 310,130.00 $ 0.82 8-May-20 $ 0.82 Ana: https://www.dividendmax.com/united-states/nasdaq/technology-hardware-and-equipment/apple-inc/dividends 7-Aug-20 Oil & Gas Producers Exxon Mobil Corp. NYSE XOM $ 46.18 Ana: https://finance.yahoo.com/quote/XOM/history?p=XOM 2,000 $ 92,360.00 $ 0.87 10-Feb-20 $ 0.87 Ana: https://www.dividendmax.com/united-states/nyse/oil-and-gas-producers/exxon-mobil-corp/dividends 12-May-20 Food Producers Kellogg Co. NYSE K $ 63.68 Ana: https://finance.yahoo.com/quote/k/history?p=k Ana: https://www.dividendmax.com/united-states/nyse/telecomms/atandt-inc/dividends Ana: https://www.dividendmax.com/united-states/nyse/pharmaceuticals-and-biotechnology/bristol-myers-squibb/dividends Ana: https://www.dividendmax.com/united-states/nasdaq/technology-hardware-and-equipment/apple-inc/dividends Ana: https://www.dividendmax.com/united-states/nyse/oil-and-gas-producers/exxon-mobil-corp/dividends 3,000 $ 191,040.00 $ 0.57 2-Mar-20 $ 0.57 Ana: https://www.dividendmax.com/united-states/nyse/food-producers/kellogg-co/dividends May 29 ,2020 Total Investment Held $ 955,420.00 Amount Held in Cash $ 44,580.00 Total Shares 15,000 Adjusted Beta = (2/3) x Reported Beta + (1/3) x 1.0 COMPANY REPORTED BETA ADJUSTED BETA Ana: https://guides.lib.uwo.ca/bloomberg/equities AT&T 0.67 Ana: https://finance.yahoo.com/quote/T/key-statistics/ 0.78 Bristol-Myers Squibb 0.72 Ana: https://finance.yahoo.com/quote/BMY/key-statistics/ 0.81 Apple, Inc. 1.17 Ana: https://finance.yahoo.com/quote/AAPL/key-statistics/ 1.11 Exxon Mobil Corp. 1.36 Ana: https://finance.yahoo.com/quote/XOM/key-statistics/ 1.24 Kellogg Co. 0.59 Ana: https://finance.yahoo.com/quote/k/key-statistics/ 0.73 Portfolio Beta COMPANY WEIGHT REPORTED BETA PORTFOLIO BETA AT&T 0.40 0.67 0.27 Bristol-Myers Squibb 0.20 0.72 0.14 Apple, Inc. 0.07 1.17 0.08 Exxon Mobil Corp. 0.13 1.36 0.18 Kellogg Co. 0.20 0.59 0.12 Total Portfolio Beta 0.79