Study On Trading On A Stock Market Simulation Finance Essay

Trading on the stock market simulation required an analysis of the hazard that one is willing to take in order to bring forth returns on investing. The determination was made to put in four companies: AT & A ; T, Target Corp, Direct Television and Merck & A ; Co. Inc. due to being risk averse. The stocks were chosen from different sectors of the market and this was done to suit a variegation of stocks. Although the variegation is really narrow in range, entire return of 2.26 % has been attained from the initial purchase of stocks.

Stocks

Target Corporation ( TGT ) Date Purchased: Feb 26 Measure: 3,000

Sector: Consumer Cyclicals Industry: Retailer – General Merchandise

Target Corporation is one of the universe ‘s premier retail merchants that is committed to making the ultimate shopping environment through its innovativeness and high quality ( Target, 2010 ) . It stands on its promise “ Expect More. Pay Less ” ( Target, 2010 ) . Target Corp. stocks were chosen due to its rapid rise in income during the period ( Mallas, 2010 ) . Income rose by about 50 % to $ 1.24 during the one-fourth ( Mallas, 2010 ) . Growth within in the company is apparent by the rapid rush even in this period of the economic recession. Additionally, analyst considered the stock a really strong bargain ( SmartMoney, 2010 ) . The company ‘s P/E ratio is as follows:

P/E Ratio = Market Price/EPS Earnings avble to c. shareholders = 2,488,000

Market Price = 56.87 No. of portions = 744,600

P/E Ratio = 56.87/3.34 EPS: 3.34

= 17.03

Target Corp. P/E ratio is 17.03 which is an index of the value investors place on each dollar of the company ‘s net incomes ( Gitman, 2007 )

Datas retrieved from SmartMoney, 2010

The determination was made to purchase an extra 3,000 portions in Target Corporation ( TGT ) stock in 23 Apr, 2010. This was in an attempt to take down the mean costs paid for portions as the market monetary value of Target stocks dropped significantly. In keeping consistence in the end to maximal returns, buying of extra stocks of the company facilitated higher returns on investing when the monetary value of stock rose as costs were reduced

DirectTV Group ( DTV ) Date Purchased: Feb 26 Measure: 3,000

Sector: Consumer Cyclicals Industry: Broadcasting & A ; Media

DirectTV is involved in supplying satellite telecasting capablenesss throughout the United States. The company is extremely technological in focal point and is committed to “ the bringing of a seamless screening experience ” ( DirectTV, 2010 ) . DirectTV ‘s presence in Latin America is besides one that is dynamic. DirectTV was chosen as an ideal stock due to its innovativeness. News dated Feb. 26 highlighted DirectTV ‘s newest HD receiving system and is smaller with high velocity than past theoretical accounts ( Drawbaugh, 2010 ) . This intelligence will peculiarly impact the technological understanding persons that are ever in front in country of invention. The ability of the company to present new merchandises that will heighten public presentation of its services is a stock that is deserving puting in. The P/E ratio for DirectTV is as follows:

P/E Ratio = Market Price/EPS Earnings avble to c. shareholders = 942,000

Market Price = 36.24 No. of portions = 933,187

P/E Ratio = 36.24/1.01 EPS: 1.01

= 35.88

AT & A ; T ‘s P/E ratio is 35.88 which is an index of the value investors place on each dollar of the company ‘s net incomes ( Gitman, 2007 )

Datas retrieved from SmartMoney, 2010

AT & A ; T ( T ) Date Purchased: Feb 26 Measure: 3,000

Sector: Telecom Industry: Telephone

In footings of gross, AT & A ; T is the biggest telecommunications company functioning the state with its high velocity 3G web ( AT & A ; T, 2010 ) . AT & A ; T service was chosen based on industry intelligence which highlighted that the company was rank top of PC universe ‘s “ 3G web trials ” ( McKee, 2010 ) . The article besides emphasized that as clients continue to turn so must the company ( McKee, 2010 ) . The growing of a company is normally reflected in the good health of a company ; hence, this stock was chosen with a positive mentality towards future growing and profitableness.

P/E Ratio = Market Price/EPS Earnings avble to c. shareholders = 12,535,000

Market Price = 26.06 No. of portions = 5,901,930

P/E Ratio = 26.06/2.12 EPS: 2.12

= 12.29

AT & A ; T ‘s P/E ratio is 12.29 which is an index of the value investors place on each dollar of the company ‘s net incomes ( Gitman, 2007 )

Datas retrieved from SmartMoney, 2010AT & A ; T ‘s Price/Earnings Ratio is as follows:

Merck & A ; Co. Inc ( MRK ) Date Purchased: Feb 26 Measure: 3,000

Sector: Health Care Industry: Pharmaceuticals

Merck & A ; Co. Inc is a company whose purpose is supplying merchandises that contribute to a healthier society ( Merck, 2010 ) . Their merchandises include vaccinums, consumer prescription merchandises, and animate being merchandises ( Merck, 2010 ) . Merck was chosen because it was strongly recommended by analysts ( SmartMoney, 2010 ) . Additionally, Merck ‘s coaction with Nycomed in its co-promotion understanding with specific states outside the U.S. was a perfect tantrum with Merck ‘s ends ( Merck, 2010 ) . This is an chance for Merck to spread out operations and should hold a positive consequence on investings and returns. The P/E ratio for the company is represented below:

P/E Ratio = Market Price/EPS Earnings avble to c. shareholders = 10,910,300

Market Price = 35.04 No. of portions = 3,108,222

P/E Ratio = 35.04/3.51 EPS: 3.51

= 9.98

AT & A ; T ‘s P/E ratio is 9.98 which is an index of the value investors place on each dollar of the company ‘s net incomes ( Gitman, 2007 )

Datas retrieved from SmartMoney, 2010

From the initial trading on the stock market, the returns on investing has fluctuated with returns every bit high as 3.25 % to every bit low as 1.37 % . From the beginning of trading, one-year per centum output can be calculated as follows: APY = ( 1 + % month net incomes ) – 1 ( Gitman, 2009 ) .

Therefore, annualized return ( Feb 26 – Mar 25 ) : [ ( 1 + 1.35 % ) ^ 12 ] – 1 = 17.6 %

Annualized return ( Mar 26 – Apr 25 ) : [ ( 1 + 1.85 % ) ^ 12 ] – 1 = 24.6 %

Annualized return ( Apr 26 – nowadays ) : [ ( 1 + 0.74 % ) ^ 12 ] – 1 = 9.6 % ( Note: month is non yet completed )

Based on the computation above, the per centum mean return has been highest in the 2nd period dated Mar 26 – Apr 25 of 24.6 % . Throughout the period, TGT ( Target ) has done exceptionally good as compared to the other stocks in the portfolio with per centum equity of 33 % compared to T ( AT & A ; T ) with per centum equity of 7.65 % . DTV ( Direct Television ) besides contributed to the returns experienced by the portfolio although non every bit important as that of TGT. As to day of the month, the entire returns on investing are at 2.26 % with a entire equity of $ 1,022,599.95.

Many factors influenced the value of the portfolio. First, the ability to take on more hazard since this can be a cardinal finding on the sum of returns that is generated. Although the stocks that were chosen were limited due to the effort to bound hazard, the stocks were from different industries which spread hazards, though narrowly, over the scope. Besides, the volatility of the market affected the portfolio significantly. Due to fluctuations in the market monetary value of stocks the return on investing showed important diminution ensuing in returns every bit low as 1.35 % and rose every bit high to over 3 % . For illustration, to day of the month DTV has showed a diminution in market monetary value for the twenty-four hours although the company has generated returns for the portfolio over the period. Last, external and internal factors can significantly impact the market value of companies particularly those that are more sensitive to alterations in the market place. For illustration, a pharmaceutical company such as Merck is less likely to be affected by twenty-four hours to twenty-four hours events happening as most of their investings are on a long-run footing. However, companies in the consumer cyclical sectors may be more sensitive to events such as alterations in consumer gustatory sensations which will impact demand and profitableness of the company.

Given the little figure of stocks purchased, puting in Target Corp. ( TGT ) was a good determination. Additionally, the stocks chosen was ideal as it has proven that one can still do a return by strategically taking stocks good. DirectTV ( DTV ) has besides done good in bring forthing returns for the portfolio. Although AT & A ; T ( T ) has generated returns every bit good, the per centum equity is the lowest which indicates that there is possible to make better on returns of investing. Merck ( MRK ) is soon bring forthing a loss for the portfolio although the per centum equity is on par with DirectTV ( DTV ) . As compared to schoolmates, the portfolio now stands at the 11th place. This can be attributed to figure of factors. Portfolios that are executing better may be attributed to pure fortune such as puting in the right stock at the right clip. However, it can besides be due to carefully and strategically analyzing the market before taking stocks every bit good as listening to reexamine and penetrations from individuals such as analysts and fiscal gurus like Warren Buffet. The variegation of stocks can besides lend to a good – executing portfolio. In footings of ill executing portfolio, the combination of stocks may be a major subscriber. Harmonizing to Gitman ( 2009 ) , in order to cut down the degree of hazard, combine assets with a negative or low positive correlativity. However, portfolios may non hold followed this rule ensuing in losingss on all stocks during hard periods in the market.

Changes to be made in the continuance of the game include supervising the market more carefully. A batch of clip has non been invested in analysing stocks and the impact of events on the market value of stocks in the portfolio. Additionally, deficiency of monitoring besides contributed on lost chances for potentially feasible stock options. Hence, the market will be monitored more often and more in – deepness. Besides, the portfolio can be a spot more diversified. The degree of variegation within the portfolio is really narrow and can be a subscriber to the degree of returns that have been generated. The greater variegation leads to the potency for greater returns while restricting hazards. As such, more companies within different sectors will be evaluated as possible investings. Finally, it is recognized that the clip value of money is really of import to any investing. As such, the hard currency that has non been invested WILL be invested as it represents money that involvement can be earned on. The money represented as hard currency balance on the portfolio represents money that could hold been invested and bring forthing returns. Hence, investings will be made with that hard currency that is non utilised soon.

Overall, there is betterments that can be made in order to accomplish maximal returns on investing. Being hazard – averse, it is indispensable that the portfolio is decently managed and determinations are strategically made to avoid incurring any loss.

Appendix

Performance Summary

Date

Long Value

Short Value

Cash

Entire Equity

Tax return

3/23/10

$ 458,820.00

$ 0.00

$ 561,419.90

$ 1,020,239.90

+2.02 %

3/24/10

$ 454,290.00

$ 0.00

$ 561,419.90

$ 1,015,709.90

+1.57 %

3/25/10

$ 452,280.00

$ 0.00

$ 561,419.90

$ 1,013,699.90

+1.37 %

3/26/10

$ 454,500.00

$ 0.00

$ 561,419.90

$ 1,015,919.90

+1.59 %

3/27/10

$ 454,500.00

$ 0.00

$ 561,419.90

$ 1,015,919.90

+1.59 %

3/28/10

$ 454,500.00

$ 0.00

$ 561,419.90

$ 1,015,919.90

+1.59 %

3/29/10

$ 454,770.00

$ 0.00

$ 561,419.90

$ 1,016,189.90

+1.62 %

3/30/10

$ 450,840.00

$ 0.00

$ 561,419.90

$ 1,012,259.90

+1.23 %

3/31/10

$ 448,800.00

$ 0.00

$ 561,419.90

$ 1,010,219.90

+1.02 %

4/01/10

$ 453,660.00

$ 0.00

$ 561,419.90

$ 1,015,079.90

+1.51 %

4/02/10

$ 453,660.00

$ 0.00

$ 561,419.90

$ 1,015,079.90

+1.51 %

4/03/10

$ 453,660.00

$ 0.00

$ 561,419.90

$ 1,015,079.90

+1.51 %

4/04/10

$ 453,660.00

$ 0.00

$ 561,419.90

$ 1,015,079.90

+1.51 %

4/05/10

$ 456,540.00

$ 0.00

$ 561,419.90

$ 1,017,959.90

+1.80 %

4/06/10

$ 457,170.00

$ 0.00

$ 561,419.90

$ 1,018,589.90

+1.86 %

4/07/10

$ 453,390.00

$ 0.00

$ 561,419.90

$ 1,014,809.90

+1.48 %

4/08/10

$ 459,600.00

$ 0.00

$ 561,419.90

$ 1,021,019.90

+2.10 %

4/09/10

$ 462,990.00

$ 0.00

$ 561,419.90

$ 1,024,409.90

+2.44 %

4/10/10

$ 462,990.00

$ 0.00

$ 561,419.90

$ 1,024,409.90

+2.44 %

4/11/10

$ 462,990.00

$ 0.00

$ 561,419.90

$ 1,024,409.90

+2.44 %

4/12/10

$ 463,530.00

$ 0.00

$ 561,419.90

$ 1,024,949.90

+2.49 %

4/13/10

$ 464,280.00

$ 0.00

$ 561,419.90

$ 1,025,699.90

+2.57 %

4/14/10

$ 466,440.00

$ 0.00

$ 561,419.90

$ 1,027,859.90

+2.79 %

4/15/10

$ 465,240.00

$ 0.00

$ 561,419.90

$ 1,026,659.90

+2.67 %

4/16/10

$ 459,540.00

$ 0.00

$ 561,419.90

$ 1,020,959.90

+2.10 %

4/17/10

$ 459,540.00

$ 0.00

$ 561,419.90

$ 1,020,959.90

+2.10 %

4/18/10

$ 459,540.00

$ 0.00

$ 561,419.90

$ 1,020,959.90

+2.10 %

4/19/10

$ 463,530.00

$ 0.00

$ 561,419.90

$ 1,024,949.90

+2.49 %

4/20/10

$ 464,880.00

$ 0.00

$ 561,419.90

$ 1,026,299.90

+2.63 %

4/21/10

$ 462,300.00

$ 0.00

$ 561,419.90

$ 1,023,719.90

+2.37 %

4/22/10

$ 461,460.00

$ 0.00

$ 561,419.90

$ 1,022,879.90

+2.29 %

4/23/10

$ 642,690.00

$ 0.00

$ 389,359.95

$ 1,032,049.95

+3.20 %

4/24/10

$ 642,690.00

$ 0.00

$ 389,359.95

$ 1,032,049.95

+3.20 %

4/25/10

$ 642,690.00

$ 0.00

$ 389,359.95

$ 1,032,049.95

+3.20 %

4/26/10

$ 643,140.00

$ 0.00

$ 389,359.95

$ 1,032,499.95

+3.25 %

4/27/10

$ 629,490.00

$ 0.00

$ 389,359.95

$ 1,018,849.95

+1.88 %

4/28/10

$ 628,200.00

$ 0.00

$ 389,359.95

$ 1,017,559.95

+1.76 %

4/29/10

$ 637,890.00

$ 0.00

$ 389,359.95

$ 1,027,249.95

+2.72 %

4/30/10

$ 633,240.00

$ 0.00

$ 389,359.95

$ 1,022,599.95

+2.26 %

5/01/10

$ 633,240.00

$ 0.00

$ 389,359.95

$ 1,022,599.95

+2.26 %

Retentions

Performance

Orders

Transaction History

Corporate Actions

Minutess in the last 40 yearss

Corporate Actions in the last 40 yearss