Wall Street Journal Portfolio Trading Analysis Finance Essay

Upon being assigned the undertaking of making a personal investing portfolio utilizing The Wall Street Journal ‘s on-line resources with a “ hard currency ” allocation of $ 1,000,000 in fake money, I was immediately intimidated and concerned. I had no experience with puting and was perfectly made uncomfortable by the thought that 15 % of my class class would depend on my public presentation and analysis in this stock market simulation. Although I should hold been a bit more relaxed given the fact that I have done rather good in my past finance classs, I still felt a certain degree of uneasiness about really seeking to use the theory to existent pattern. Nevertheless, armed with my new pupil Wall Street Journal subscription and the undertaking guidelines, I made a strong attempt at seeking to voyage the daftness that comes with working to make a profitable investing portfolio, while besides keeping a inactive investing scheme. My scheme pick resulted from my apprehension of the efficient market hypothesis which implicates a inactive scheme as the best option given the premise that “ stock monetary values reflect all relevant information ” and that it may basically be pointless to seek to “ crush the market ” through stock analysis ( Bodie, 233 ) .

Portfolio Construction Process

After eventually being able to put up my Wall Street Journal subscription on May 13th, I found myself perplexed as I had no thought of where to get down when it came to taking stocks. As a consequence, I spent the following twosome of hebdomads reading the newspaper and shoping on-line resources in hopes of go oning upon an epiphany of some kind that might maneuver me in the right way. Despite my remaining abreast of my schoolmates ‘ remarks and trading suggestions, I was still utterly unsure of how to take a “ victor ” .

All the same, with my belief that “ nil beats a failure but a attempt ” I had no pick but to travel in front and do my first dealing on May 28th as I had no more clip to blow on procrastinating. At that clip I settled on the thought that it would be best to take stocks from companies that I recognized which were besides executing good at that clip. The list that I lined up consisted of: AutoZone Incorporated, Bank of America Corporation, Dollar General Corporation, Goldman Sachs Group Incorporated, US Airways Group Incorporated, Sprint Nextel Corporation, Vanguard REIT ETF, and Washington Post Company. Prior to my purchase of the aforesaid investings I located articles which indicated possible positive public presentation of these investings.

With respects to Sprint Nextel Corp. , on Friday, May 21st, The Wall Street Journal ran an article discoursing the possibility that the Federal Communications Commission would probably be publishing new ordinances in order to do the telecommunications market more competitory ( Schatz, B2 ) . Given that Sprint has late lost market portion to some of its larger challengers, such ordinance would decidedly be good to the corporation since it could help in giving it a new border on the competition ( Schatz, B2 ) . Dash has besides late engaged in a big advertisement docket holding had legion full-page ads in The Wall Street Journal and other publications. Such behaviour would besides bespeak good intelligence for the company as it can probably obtain more clients and perchance recover some of its lost market portion through a large selling run. As a consequence of this appraisal, I felt it probably that Sprint would shortly see a monetary value addition as a consequence of such positive intelligence.

Similarly, for Goldman Sachs Group Inc. , an article detailing the great public presentation of Accretive Health Inc. ‘s initial public public presentation, which Goldman Sachs managed, besides shed a bright visible radiation in this corporation ‘s way ( Cowan, C6 ) . Much the same consequence that a positive net incomes study for a company might hold, the aforesaid intelligence of Goldman Sachs strong public presentation in pull offing Accretive Health should hold besides yielded an addition in the market value of Goldman Sach ‘s stock ( Cowan, C6 ) . This great indicant led me to desire to put in the corporation.

In maintaining in the fiscal kingdom, my pick to buy stock in Bank of America came as a consequence of an article depicting the corporation ‘s programs to sell interest in its private Brazilian bank, Itau Unibanco Holding SA ( Jelmayer, C3 ) . This move would let Bank of America to increase its capital degrees ( Jelmayer, C3 ) . Such a measure is surely good since Bankss with higher degrees of capital are less likely to neglect in the event that it makes a few bad loans. With a better capital construction, the bank is besides disposed to derive more assurance from the populace, particularly in the aftermath of the recent fiscal crisis. This renewed assurance in Bank of America would besides take to a higher market value for its stock. Besides taking into the history that Bank of America is a extremely traded stock, this addition would besides likely be reflected instead rapidly, therefore giving a speedy net income. Give the aforesaid, I decided that Bank of America was a good pick, even though it would besides give my portfolio higher hazard given that it would non add variegation since like Goldman Sachs, it excessively has a footing in the fiscal kingdom.

In turning now to Dollar General, my pick to buy its stock did non ensue from the reading of any one article. Alternatively the impression came from glimpsing what I deemed to be a instead favourable tendency. In this tendency, the corporation ‘s stock was listed ( on more than three occasions prior to my eventually doing the purchase of it ) , among the New York Stock Exchange ‘s list of stocks which had highs. Although in hindsight, my purchase timing may hold been excessively late, given that I failed to see that most things that go up will besides finally come back down. At that clip nevertheless, I thought that I had made a reasonably logical determination.

Similar to my find of Dollar General, I besides found US Airways Group listed among the per centum gainers and as such I decided to travel in front and buy it every bit good. As it turns out, this determination was a moneymaking 1 since this corporation was my lone stock choice which afforded me a positive net addition at the completion of this portfolio assignment. The lone other net addition achieved from my investing portfolio resulted from my purchase of portions in the Vanguard REIT ETF. This development was one that I found particularly surprising since this exchange traded fund is one that consists of existent estate, an industry that has non been improbably well-off late ( Vanguard-Vanguard Fund ) . My initial intent of doing this investing was to add variegation to my portfolio, and given the fact that it earned me a net income when about all of the remainder of my portfolio did non, lends to the thought that it was a good pick.

Portfolio Performance

Despite holding what I deemed to be reasonably sound principle for my investing picks, after doing the first minutess to put up my portfolio, I saw immediate losingss on 50 % of my investing picks. The mentality did n’t acquire much better from there and merely a speedy glimpse at the graphical public presentation of my stock picks ( found in the Graphical Representations ) illustrates why. All stocks except for Goldman Sachs experienced major beads in market value before doing slow recoils. Rather than doing a speedy diminution, Goldman Sachs descended easy and does n’t look to be bouncing any clip in the close hereafter. Figure 9 compares all of my portfolios investings to each other on a individual graph. In reexamining it, it is rather obvious that the portfolio was non adequately diversified as most of the investings moved in measure dropping and lifting at about the same times, although non ever to the same extent. In shuting my portfolio I experienced a loss of $ 13,785. Throughout the public presentation of the portfolio my highest overall addition was $ 1,210 from US Airways and my greatest overall loss was $ 8,060, ensuing from my investing in Washington Post Company.

Lessons Learned

Given the immense shortage that I experienced as a consequence of my investing picks, I was able to take away a batch of lessons as a consequence of take parting in this portfolio simulation. The first and perchance most of import thought that I realized was the importance of elaborate research. Reading a few articles and doing sweeping premises does non vouch that one will see the return that they expect. I besides learned that puting takes a batch of clip, concentration, and forbearance. Particularly given the volatile province of the stock market recently, holding a tough tegument and being able to rapidly bounce from big losingss is indispensable. After my first losingss I rapidly discovered that I did n’t hold the tummy to watch monolithic sums of money “ twirl down the drain ” , whether existent or simulated. I besides felt stabs of purchaser ‘s compunction, but alternatively of acquiring rid of some of my bad investings, I could n’t look to allow them travel, alternatively preferring to keep on to this obscure phantasy of a complete turnaround perchance looking out of nowhere. I besides realized that there is no room for emotions when it comes to puting since most of my bad determinations resulted from emotions non based in logic or laced with concrete support. Additionally, I do experience that had I gotten started earlier, I may hold had the chance to gain greater returns. In maintaining on the subject of clip, I besides ascertained that a inactive “ clasp and delay ” scheme may non hold been the best pick since there was merely non adequate clip to realistically anticipate high returns after keeping the stocks for merely a few yearss.

If given the chance to make this undertaking once more after holding taken this class, I would do a few simple alterations which I feel could hold truly benefited me. I would do better usage of the ratios that we learned which can bespeak everything from liquidness to profitableness. I would besides hold tried to more accurately diversify my portfolio such that I would n’t hold had such major losingss. In prosecuting in this undertaking prior to holding learned all the subjects covered in this class I truly feel like I was merely able to rub the surface of what it takes to be a good investor.

While I realize that there are some alterations that I could hold decidedly made to let this undertaking to travel rather a spot a drum sander, I do besides experience that the make-up of the undertaking itself could besides be adjusted. A starting point or list of possible stock purchases to get down with would hold been particularly good. Such an add-on would surely help those pupils who, like me, may hold besides felt unprepared or missing in way. Nevertheless, I do acknowledge the value of being able to acquire “ hands-on ” experience as many times there is no better manner to larn than by making. As such, I truly experience that this undertaking provided me with an experience that I wo n’t shortly bury, one that taught me volumes non merely about puting, but besides about myself.

Figure 1: AutoZone Inc. Performance during Undertaking

Figure 2: Bank of America Corp. Performance during Undertaking

Figure 3: Dollar General Corp. Performance during Undertaking

Figure 4: Goldman Sachs Group Inc. Performance during Undertaking

Figure 5: US Airways Group Inc. Performance during Undertaking

Figure 6: Sprint Nextel Corp. Performance during Undertaking

Figure 7: Vanguard REIT ETF Performance during Project

Figure 8: Washington Post Co. Performance during Undertaking

Figure 9: Stallion Portfolio Performance during Project

5/13/2010

— –

Cash

— –

— –

— –

— –

— –

$ 1,000,000.00

5/28/2010

AutoZone Inc.

AZO

US Stock

Buy

$ 191.92

500

$ 10.00

( $ 95,970.00 )

5/28/2010

Bank of America Corp.

BAC

US Stock

Buy

$ 15.92

1,000.00

$ 10.00

( $ 15,930.00 )

5/28/2010

Dollar General Corp.

Decigram

US Stock

Buy

$ 30.56

1,000.00

$ 10.00

( $ 30,570.00 )

5/28/2010

Goldman Sachs Group Inc.

Gram

US Stock

Buy

$ 144.81

500

$ 10.00

( $ 72,415.00 )

5/28/2010

US Airways Group Inc.

LCC

US Stock

Buy

$ 8.70

1,000.00

$ 10.00

( $ 8,710.00 )

5/28/2010

Sprint Nextel Corp.

Second

US Stock

Buy

$ 5.21

1,000.00

$ 10.00

( $ 5,220.00 )

5/28/2010

Vanguard REIT ETF

VNQ

US Stock

Buy

$ 49.67

1,000.00

$ 10.00

( $ 49,680.00 )

5/28/2010

Washington Post Co. Cl B

WPO

US Stock

Buy

$ 467.30

500

$ 10.00

( $ 233,660.00 )

6/11/2010

AutoZone Inc.

AZO

US Stock

Sell

$ 189.30

500

$ 10.00

$ 94,640.00

6/11/2010

Bank of America Corp.

BAC

US Stock

Sell

$ 15.60

1,000.00

$ 10.00

$ 15,590.00

6/11/2010

Dollar General Corp.

Decigram

US Stock

Sell

$ 29.97

1,000.00

$ 10.00

$ 29,960.00

6/11/2010

Goldman Sachs Group Inc.

Gram

US Stock

Sell

$ 135.64

500

$ 10.00

$ 67,810.00

6/11/2010

US Airways Group Inc.

LCC

US Stock

Sell

$ 9.93

1,000.00

$ 10.00

$ 9,920.00

6/11/2010

Sprint Nextel Corp.

Second

US Stock

Sell

$ 4.87

1,000.00

$ 10.00

$ 4,860.00

6/11/2010

Vanguard REIT ETF

VNQ

US Stock

Sell

$ 50.00

1,000.00

$ 10.00

$ 49,990.00

6/11/2010

Washington Post Co. Cl B

WPO

US Stock

Sell

$ 451.22

500

$ 10.00

$ 225,600.00Portfolio Transaction Listing