INVESTMENT MANAGEMENT

Investment Management: Rational and Irrational Markets



Investment Management: Rational and Irrational Markets

Initial Portfolio at Week 3

I have created a following portfolio with the £1000000 that are alloted for the investment.

Company Name

Stock Price

Number of Shares Acquired

Value of Investment

CHAMBERLIN PLC

129.50 1,000

129500

CHRISTIE GROUP

54.00 2,101

113454

ADEPT TELECOM

33.00 2,300

75900

ALLIANCE PHARMA

28.88 1,600

46208

BAYFIELD ENERGY HLDGS PLC

60.00 2,850

171000

BEOWULF MINING

25.25 1,670

42167.5

DQ ENTERTAINMENT PLC

72.00 1,750

126000

HEAVITREE BREWERY

167.50 1,400

234500

STEPPE CEMENT

32.25 1,525

49181.25

MANX FINANCIAL GROUP PLC

7.75 1,560

12090

Total

 

17,756 £ 1,000,000.75

Final Portfolio at Week 12

During these ten weeks, i rebalanced my portfolio by selling the stocks that were expected to be low returned with the low price change and reinvesting in the shares of the profitable companies. At the end, following portfolio wasdeveloped.

Company Name

Stock Price

Number of Shares Acquired

Value of Investment

ETFs switch

Transaction Cost

Current Investment Value

CHAMBERLIN PLC

144.50

1,300

187850

1%

1878.5

185971.5

CHRISTIE GROUP

61.00

2,100

128100

1%

1281

126819

ADEPT TELECOM

35.75

2,300

82225

1%

822.25

81402.75

ALLIANCE PHARMA

27.25

1,000

27250

1%

272.5

26977.5

BAYFIELD ENERGY HLDGS PLC

74.50

2,900

216050

1%

2160.5

213889.5

BEOWULF MINING

30.50

1,700

51850

1%

518.5

51331.5

DQ ENTERTAINMENT PLC

72.50

1,100

79750

1%

797.5

78952.5

HEAVITREE BREWERY

167.50

1,400

234500

1%

2345

232155

STEPPE CEMENT

40.50

1,600

64800

1%

648

64152

MANX FINANCIAL GROUP PLC

8.38

1,000

8375

1%

83.75

8291.25

Total

16,400

£ 1,080,750

£ 10,807

£ 1,069,942

Total Return=

£ 69,942.50

Investment Philosophy

The investment philosaphy that that I have taken in this portfolio investment scenario is industry diversification. As the spread sheet is showing that the ten companies in which I have invested are from different business sectors ranging from telecom to cement, financial to brewery and pharmaceutical to the entertainment industry. This diversification reduces to risk of loss in investment. If the performance of one company decreases due to the industry trend, the other companies will not necessarily go down.

The stock price fluctuates because of the dynamics of supply and demand for it, which moved the company reports, news, technical indicators and the mood of the crowd. Causes of fluctuations in the stock price at the low-lying level - supply and demand. Demand exists, when traders and investors want to buy cheaper and sell dearer then waiting a price increase on the stock. A proposal appears when investors and traders are waiting for the fall, and they want to sell more (and then buy cheaper). This constant struggle between those who are waiting for growth (bulls), and those who are waiting for the fall (bear), and is, in fact, the driving force behind changes in stock prices (Lintner, 2005). Perhaps one of the most compelling reasons the share price fluctuations is income of the issuer. When public companies publish financial reports, market immediately reacted to the alleged results of operations. If profits exceeded the expectations of traders, investors and analysts, the market participants are responding positively. They understand that it is likely that information about the company will raise interest and prices, and buy accordingly in order to sell more. These bulls their behaviour raises the share price even higher (Nigel, 2003).

But on the other hand, if the record company profit was below expectations Analysts and traders, then everything is exactly the opposite: the entire market knows that the interest in this particular stock will fall, and so the price will fall. As a result, everyone is starting to sell at the current price, then to buy the ...