[STOCK TRACK PROJECT Harvard Case Solution & Analysis

Stock Track Project Case Solution

Executive Memo:

The investor is deciding to invest its $100,000 in a portfolio asset class both domestically and internationally that would save him from currency risk and other systematic risk in diversifying the portfolio. The Motley fool has described the advantages of investments and the best strategy to follow in order to get maximum return.

The critical trade logs that help to estimate the return includes number of trades, win ratio, loss ratio, risk, return, expectancy. Along with this, trading helps determine the risk adverse strategies by incorporating futures and options. Option is considered as best way to speculate and protect our portfolio investment.

The excel file shows the list of 3 US (domestic), 3 international asset class portfolios and results are measured by regression, covariance and correlation. Benchmark is set as S & P 500.

The asset allocation mix of domestic and international portfolio shows, regression of AAPL is highest and followed by Intel, which shows overall r square of 34.25%. On the other hand, international portfolio regression shows higher relationship with S&P is 15.9% that resulted of 33% r square.

 Week 1:

The asset allocation mix between domestic and international assets is selected on the basis of market capitalization, earning per share and the future trend that might occur based on past performance; weights are assumed based on their respective return. Three United States stocks are selected as Apple Inc, EBay, and Intel Corporation and three international portfolios are chosen as Netflix, Delta, and McKesson Corporation.

The data is selected from the beginning of March 2, 2016 until May 13, 2016, and data is collected for around two and half months. The change of the price is considered as the starting and close price, which are adjusted accordingly and multiplied by the assumed weight of investment.

The decision of theses portfolio is made on the basis of high close price and it is expected to give high price change, market capitalization, EPS of each and most importantly, price to earnings ratio (that shows the earning of stock with market price)

US Portfolio Stocks

AAPL

Market Cap495.82 b
EPS9
Prev Close90.34
Open Price90
Yield2.52%
PE Ratio10.10

EBay

Market Cap27.32 billion
EPS 1.33
Prev Close23.58
Open Price23.65
YieldN/A
PE Ratio17.90

Intel (INTC)

Market Cap141.24 b
EPS 2.35
Prev Close29.76
Open Price29.85
Yield3.48%
PE Ratio12.70

International Portfolio Stock

NETFLIX (NFLX)

Market Cap37.46 b
EPS 0.29
Prev Close87.74
Open Price87.39
YieldN/A
PE Ratio303

Delta (DAL)

Market Cap32.1 b
EPS 5.95
Prev Close41.07
Open Price40.75
Yield1.3%
PE Ratio7

McKesson Corp. (MCK)

Market Cap37.3 b
EPS 9.70
Prev Close167.30
Open Price166.92
Yield0.67%
PE Ratio17.10

Expected Return:

The expected return is calculated by the simple formula as shown in excel file. In US portfolio, its expected return is 0.1116% after excluding some amount of cash as the cash in hand. On the hand, the international investment in portfolio results in 0.012% of expected return.

 Therefore, the return of domestic portfolio is profitable as compare to investment in international market. This is due to higher expected return.

2.      By the 2nd week, adjust your asset allocation mix based on the performance of each asset class in week one. Also invest in 2 mutual funds and 2 bonds. .

The asset allocation mix is adjusted by investing in domestic class portfolio (that is US asset class), which includes investment in three good return companies such as: Apple Inc., EBay, and Intel because it shows better return that is 0.116% as compared to 0.012%, which is of international investment portfolio.....................

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