FINC605-PH2 (GP)

Assignment

Part1

ABC’s portfolio decision making is done through a committee approach. Often times, a stock referral (a buy suggestion) is made by a client or ABC advisor to a portfolio manager. The portfolio manager, in turn, assigns a team of 3–4financial analysts to conduct some preliminary research on a company and present the results of their research to a committee. The committee consists of a portfolio manager, the firm’s CEO, and a panel of other analysts and investment advisors. If the preliminary research seems promising,the company’s securities will then become candidates for “ABC’s approved securities list,” following a more in-depth due diligence process by the compliance department.

Mr. Thomas, one of ABC’s stock portfolio managers, has assigned your group with the task of putting together an initial portfolio committee presentation about a company with the following characteristics:

• A leading retailer of everyday casual apparel, accessories, or footwear
• A company with a strong growth pattern

Using the library as well as other available resources, research to find an appropriate company and its financial statements. You will need to locate a 10-K statement for the company. These reports can be retrievedon theEDGAR database of the Securities and Exchange Commission Website at http://www.sec.gov/.

Individual Deliverable: AQuantitative Analysis

1. Complete the quantitative analysis, and develop a report of 800 words that includes the following:

• Background and pertinent general information
• The most current stock price
• The stock’s 52-week highs and lows
• The stock’s beta
• The following financial ratios:
  • P/E ratio
  • Return on assets
  • Return on equity
  • Current ratio
• The following for the last 12 and 36 months:

Based on the results of your research, include the answers to the following questions in your presentation:

• Assume that your company’s stock has had a mean return of 14% and a standard deviation of 10%. If the historical returns for the stock are normally distributed, what is the probability that this stock will yield a return below 14%? Explain your reasoning.
• Assume that your company’s stock has had a mean return of 10% and a standard deviation of 0%. If historical returns for the stock are normally distributed, what is the probability that this stock will yield a return below 10%? Explain your reasoning.