Assignment

The main aim of this investment is to grow the value of amount invested. The time horizon of the investment is medium to long term. Therefore, the risk tolerance of the investor is medium. The portfolio created will be diversified from the various market sectors of the stock markets in order to reduce the risk liability. The total amount invested is one million dollars with a hundred thousand invested in each of the ten investments. The investments are in the industrials, technology, financial and non cyclical consumer goods and services sectors. Delta Air Lines, Inc and Donaldson Company Incorporation are examples of the industrial sector whereas Microsoft lies within the technology sector. Realogy Holdings is in the financial sector and Coca-Cola Company and Icahn Enterprises LP are in the non cyclical consumer goods and services sector. The cyclical consumer goods and services sector hosts the Caesars Entertainment Corp, Supervalu Incorporation.

A figure showing the portfolio of ten investments

1. Summary of portfolio performance

The portfolio over the past week is seen to have accumulated 3.43% of the total initial investment of $999,965.71. The biggest gainers were Caesars Entertainment Corp, Supervalu Inc., and Delta Air Lines, Inc with +10.62%, +5.57% and +4.91% respectively. Some of the least performing investments are Microsoft, Coca-Cola Company and Icahn Enterprises LP with -0.23%, +0.69% and +0.83%.

2. Analysis of firm- and industry-specific causes of portfolio performance.

The Microsoft stock may have performed poorly due to several factors surrounding the Technology sector. One of such factors is the effect of the NSA surveillance on business of the companies. Investors get weary of the information considering the companies will need to invest a lot to make their products NSA proof. In addition, the absence of former CEO and founder of Microsoft, Bill Gates, may also be a cause for the poor performing stocks. His return as a technology investor, however, makes the investors hopeful that the stock will improve.

The Caesars Entertainment Corp recognized for sustainability by EPA, travel & tourism organizations. Besides, the company will venture into a partnership with a renowned company to create custom headphone designs. Such news makes investors to prospect for good performance of the company. Resultantly, the company’s stock performs excellently.

Donaldson Company which is in the industrials sector reported its quarterly earnings last Friday. The earnings per share beat the consensus estimate of $0.36 by $0.03. This can explain the +2.67% gain in performance of the investment.

Last week had a wave of uncertainties in the stocks of Coca-Cola Company in anticipation of quarterly earnings report to be issued. However, later that week, the Board of Directors had approved a 9% increase to its quarterly dividend from $0.28 to $0.305 per share. The impressive dividend growth is an attractive characteristic for such a portfolio whose main objective is growth.

3. Summary and analysis of market changes and their causes.

The markets changes are driven by market factors such as demand and supply forces and inflation and interest rates. The low inflation rates and interest rates are dictated by the monetary policies of the country whereas the demand and supply forces are dictated by the market dynamics between buyers and sellers.

4. Effect of market changes on the portfolio.

The effect of the market changes in the portfolio is seen by the increase in wealth from the invested stocks. The availability of information drives the investors to make informed decisions that affect the demand and supply forces. The low inflation and interest rates result to the good performance of portfolio.