Investment and Portfolio Management Assignment

Download Investment and Portfolio Management Assignment

Post on 09-Mar-2015

1.287 views

Category:

Documents

4 download

Embed Size (px)

TRANSCRIPT

<p>INVESTMENTS AND PORTFOLIO MANAGEMENT</p> <p>Name: Synandre Montaque-Dwyer ID#: 9911339 Lecturer: Dr. Neville Swaby</p> <p>In partial Fulfilment for the Masters in Business Administration (MBA), University of Technology Jamaica, 2008</p> <p>2 Table of Contents Assignment Outline ...................................................................................... 3 Introduction ................................................................................................... 4 Investment Portfolio Breakdown .................................................................. 5 SECTION A Introduction to Investment Portfolio Brief Overview of Stocks 1) Caribbean Cement Limited (CCC) 2) GraceKennedy Limited (GK) 3) Jamaica Broilers (JB) 4) Montego Freeport (MFP) 5) Scotia Jamaica Limited (SGJ) Overview of other Investment Instruments 1) Foreign Exchange 2) Treasury Bills 3) Mutual Funds 4) Miscellaneous SECTION B Analysis of Investment Portfolio Analysis of Stocks ..................................................................................................... Analysis of Foreign Exchange Investment ............................................................... Analysis of Treasury Bill Investment ....................................................................... Analysis of Mutual Funds Investment ...................................................................... Analysis of Miscellaneous Investment ..................................................................... SECTION C Critique of Portfolio Conclusion and Assessment of Overall Portfolio ..................................................... Critique on Portfolio Performance ............................................................................ Glossary .................................................................................................................... References ................................................................................................................. Appendices ................................................................................................................</p> <p>3</p> <p>Students in the course Investments Analysis and Behavior ofandMasters of Business Assignment Task: Investment Analysis the Behaviour Administration, Montego Bay Cohort were given the task of developing an investment portfolio for the course Investments Analysis and Behavior of the Masters of Business Students in Jamaican $15,000,000.00 based on the information listed below and report on its performance at the end of twelve (12) weeks over the period July to September 2008. Administration, Montego Bay Cohort were given the task of developing an investment portfolio for Jamaican $15,000,000.00 based on the information listed below and report on its 1. Stock Market:end of twelve (12) weeks to bethe periodin sixto September 2008. performance at the Total of $7,000,000.00 over invested July stocks currently traded on the Jamaican Stock Exchange (JSE) Treasury Bills, proportions: Investments included Stocks, Foreign Exchange,in the following Mutual Funds and a a) investment of miscellaneous$2,500,000.00 our choice. b) Total of $7,000,000.00 to be invested in six stocks currently traded on the Stock Market:$1,600,000.00 c) $1,000,000.00 Jamaican Stock Exchange (JSE) in the following proportions: STOCK Ad) STOCK Be) f) STOCK C$900,000.00 $2,500,000.00 $600,000.00 $1,600,000.00 $400,000.00 $1,000,000.00</p> <p>STOCK D - $7,000,000.00 $900,000.00 2. STOCKForeign Exchange: $2,500,000.00 E - $600,000.00 3. Treasury Bills: STOCK F - $400,000.00 $2,000,000.00 4. Mutual Funds: $2,000,000.00 TOTAL STOCKS $7,000,000.00</p> <p>5. $1,500,000.00 Foreign Miscellaneous: Exchange: $2,500,000.00 Treasury Bills: $2,000,000.00</p> <p>A detailed analysis of the performance of the portfolio is required for written submission. Mutual Funds: $2,000,000.00 Miscellaneous: $1,500,000.00</p> <p>A detailed analysis of the performance of the portfolio is required for written submission.</p> <p>4</p> <p>Introduction</p> <p>This Portfolio looks at various investments and how as an investor you are able to assess their performance. The assignment sought to simulate an actual investment environment. Basic guidelines for the investment portfolio was limited to just the allocation amount of funds to each type of investment. Investors had free reign to make choices re the investment as they would in a real investment environment. Investment concepts taught throughout the course were put into practical application. Stock Investments looked at concepts such as capital appreciation, dividends, arithmetic mean, geometric mean, variance, standard deviation, covariance and correlation. Information for the portfolio was obtained from various Jamaican institutions resource centers, such as the Jamaica Stock Exchange (JSE) and various financial Institutions. Tables, charts and graphs are included in the portfolio to help facilitate better assessment of the data presented. A point to note is that the period of this investment was one in which the financial sector worldwide was experiencing a lot of instability. Excerpts from the spreadsheet used in the calculations are included in the Portfolio.</p> <p>5</p> <p>Investment Portfolio Breakdown</p> <p>The investment portfolio being assessed in this project is diversified into five (5) areas. Each area will be analysed individually and then assessed as one entity the portfolio. Fig. 1 shows a graphical representation of the allocation of funds for the portfolio. The majority of funds, 47%, is allocated to stocks (six stocks in total), with foreign exchange following second at 17%. Treasury Bills and Mutual Funds had 13% of the total funds allotted to each with the smallest amount of 10% allocated to miscellaneous investments, of which I chose Certificate of Deposits or CDs.Portfolio Investment Breakdown Total Investment 15 Million Dollars</p> <p>Certificate of Deposits 10% T-Bills 13% Stocks 47%</p> <p>Stocks Foreign Exchange Mutual Funds T-Bills Certificate of Deposits</p> <p>Mutual Funds 13% Foreign Exchange 17%</p> <p>Fig. 1</p> <p>6</p> <p>Section A: Introduction to Investment PortfolioBrief Overview of Stocks Caribbean Cement Limited (CCC) Grace Kennedy Limited (GK) Jamaica Broilers (JB) Montego Freeport (MFP) Scotia Jamaica Limited (SGJ) Overview of other Investment Instruments Foreign Exchange Treasury Bills Mutual Funds Miscellaneous</p> <p>7</p> <p>Portfolio Investment: Stocks</p> <p>The following Portfolio consists of six stocks comprising companies listed on the Jamaica Stock Exchange (JSE). The stocks invested in spans various industries. These include, Caribbean Cement Company Limited, Grace Kennedy, Jamaica Broilers, Kingston Wharves, Montego Freeport and Scotia Group Jamaica Limited. Information on the different companies is gathered from the companys website.</p> <p>Caribbean Cement Limited (CCC) Caribbean Cement Company Limited, through its subsidiaries, engages in the manufacture and sale of Portland cement primarily in Jamaica. The company offers gypsum materials and Carib cement, as well as offers technical support services to commercial concrete producers and block makers. It also engages in the management of port facilities. The company was incorporated in 1947 and is based in Kingston, Jamaica. The idea of a cement company in Jamaica was aired in 1921. However, serious consideration was given to the idea in the years just prior to the end of World War II. The arguments used for a local plant were to curb the shortage of cement being experienced as a result of the war, the presence of a large local market, an adequate supply of cement for government's building projects and to utilize the shipping space made available by the reduction of cement imports for other necessary commodities. Also, it was the aim to produce and sell on the local market at a price less that the cement imported from Britain. Before the war, cement was shipped from Britain at a cost four times the cost of producing in Jamaica. Caribbean Cement Company Limited was incorporated and in 1948 accepted the government's cement franchise terms for the construction of a plant with a capacity of</p> <p>8 100,000 tonnes. (Excerpt Taken from: http://www.caribcement.com/about/history.asp &amp; http://investing.businessweek.com/research/stocks/) Grace Kennedy Limited (GK) GraceKennedy is one of the Caribbean's largest and most dynamic corporate entities. The company started in Jamaica in 1922 as a small trading establishment and wharf founders. It has expanded and diversified over the years, changing from a privately-owned enterprise to a public company listed on the stock exchanges of Jamaica, Trinidad, Barbados and the Eastern Caribbean. Today, the GraceKennedy Group comprises a varied network of some 60 subsidiaries and associated companies located across the Caribbean and in North and Central America and the United Kingdom. Our operations span the food distribution, financial, insurance, remittance, hardware retailing and food-processing industries. Excerpt Taken from: http://www.gracekennedy.com/GRACE/corp_Profile.htm) Jamaica Broilers (JB) Jamaica Broilers Group Limited and its subsidiaries engage in the production and distribution of poultry, beef, fish, animal feeds, and agricultural products in Jamaica. It operates in three segments: Poultry Operations, Feed and Farm Supplies, and Fish Operations. Further, Jamaica Broilers Group involves in cattle rearing, ocean freight consolidation, captive insurance, property rental, and electricity generation businesses. The company sells its products through a range of retailers, wholesalers, and shopkeepers. Jamaica Broilers Group was founded in 1958 and is headquartered in St. Catherine, Jamaica.Using state-of-the-art technologies throughout the production and processes, each of our Groups divisions constantly strives to achieve and surpass international standards of efficiency and quality.</p> <p>9 Jamaica Broilers Group has been a publicly-listed entity since 1977 and, in that same year, became one of the first companies in the world to offer an Employee Share Ownership plan. The company presently has a workforce of over 1,500 workers and operates from seven locations islandwide, with two divisions located in the U.S.A. Excerpt Taken from: http://www.jamaicabroilersgroup.com &amp; http://investing.businessweek.com Kingston Wharves Founded in 1945, Kingston Wharves Limited (KWL) is one of the Caribbean's leading multipurpose terminal operators. Listed on the Jamaica Stock Exchange, with net assets of US$ 54 million, the Company has experienced steady growth and boasts a steady profit stream with a high proportion of retained earning ploughed back into the business. Kingston Wharves Limited operates a terminal in Port Bustamante, just east and adjoining Kingston Container Terminal. A continuous quay nearly 1,600 meters long provides nine deepwater berths for ro-ro, lo-lo,container, general break bulk and bulk shipping services. The 25 hectare terminal offers 22 hectare of open storage with 30,000 square meters of covered warehousing and cold storage. The company also has 53, 000 square meters of secure off-dock storage for motor vehicles. Excerpt Taken from: http://www.kingstonwharves.com.jm) Montego Freeport (MFP) Montego Freeport Limited (the company) is a company limited by shares. The Government of Jamaica, through the Urban Development Corporation, owns approximately 82% of the issued share capital of the company, which is listed on the Jamaica Stock Exchange. The company and its subsidiary (the Group) are incorporated and domiciled in</p> <p>10 Jamaica and have registered offices at Montego Freeport Shopping Centre, Montego Bay. The principal activity of the Group is property ownership and rental (Taken From: Montego Freeport Financial Reports, March 21, 2008) Scotia Jamaica Limited (SGJ) Scotia Group Jamaica Limited operates as the holding company for The Bank of Nova Scotia Jamaica Limited (bank), which provides a range of financial products and services to individuals and businesses in Jamaica. The bank operates in five segments: Retail Banking, Corporate and Commercial Banking, Treasury, Investment Management Services, and Insurance Services. The Retail Banking segment offers personal banking services, personal customer current accounts, savings deposits, custody, credit and debit cards, customer loans, and mortgages. The Corporate and Commercial Banking segment provides non-personal direct debit facilities, current accounts, deposits, overdrafts, loans and other credit facilities, and foreign currency transactions. The Treasury segment engages in liquidity and investment management functions, management of correspondent bank relationships, and foreign currency trading. The Investment Management Services segment engages in investments and pension fund management, and the administration of trust accounts. The Insurance Services segment offers life insurance products and services. The bank operates approximately 42 branches and 149 automated banking machines. The company was founded in 1889 and is based in Kingston, Jamaica. Excerpt Taken from: http://investing.businessweek.com/research/stocks/) The following spreadsheet excerpt shows the performance of the stocks over the twelve weeks. It shows weekly price and value of the stock as well as calculates any capital gains or losses. The weekly percentage return is also highlighted.</p> <p>11</p> <p>Portfolio Investment: Foreign ExchangePortfolio Investment Amount = $2,500,000.00 Foreign exchange refers to trading one type of currency for another. Unlike other financial markets, the FX market has no physical location and no central exchange. It operates "over the counter" through a global network of banks, corporations and individuals trading one currency for another. The FX market is the world's largest financial market, operating 24 hours a day with enormous amounts of money traded on a daily basis. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, political and social events at the time they occur, without having to wait for exchanges to open.</p> <p>12</p> <p>Portfolio Investment :Treasury BillsPortfolio Investment = $2,000,000.00 Treasury bills are short term government debt instruments. In the United States, for example, the market for short term central government debt is mainly comprised of Treasury bills with a maturity of one year or less. Standard maturities are 3 months, 6 months and, in some cases, 1 year. Liquidity in short-term government debt is usually high. This is because of: </p> <p>the high credit standing/low default risk of the issuer i.e. government the homogeneity of the instruments the high (and regular) volume and low denomination size of the debt.</p> <p>Treasury bills are usually issued at a discount and are redeemed at their full face value at maturity. Mutual Funds Portfolio Investment = $2,000,000.00 Known also as an open ended fund or in the UK as unit trusts, mutual funds are pooled inv...</p>