Investment Portfolio Report

Abstract 

The investment portfolio entails stocks of ten companies picked from different industries. The stocks have shown significant performance within the period of study with only one of them having a slump, as well as, few reductions of the volumes traded. A defensive portfolio was chosen initially following the growth investing strategy, which was relevant in ensuring that the investor adopted high growth stocks that would translate to higher returns. However, an income portfolio strategy would be necessary to guarantee the consistent flow of income to the investor. The asset allocation of the portfolio was conceived following fundamental and technical analyses that directed the investment choice of the investor. Some of the key fundamental analysis elements that were employed in the portfolio include PE ratio, EPS, and beta. These were significant in ensuring that the chosen assets would have higher returns for the investor. The technical analysis employed the current share prices and current market trends to inform the investor about the best portfolio choice. The investment portfolio was influenced by different economic news and events, as well as government issues that shaped the returns from the assets invested. Some of the major government issues being trade wars, barriers, and regulations that negatively affected some of the stocks. The three main recommendations for the improvement of the investment portfolio in the future include diversification of the portfolio, rebalancing, and tactical asset allocation. 

Investment Portfolio Report 

The investment portfolio adapted by the investor consisted of ten high performing stocks on the market. The stocks for this portfolio are for companies, which include Dell, Nike, Amazon, Starbucks, Target, Walmart, Netflix, Toyota, Tesla, and Facebook. It is evident that these companies are enjoying a significant performance in their respective markets; hence, the need to have them bundled in this portfolio investment. After one week, all the stocks of these companies have shown a significant increase except that of Starbucks Corporation. This is an indication of the profitability capacity of this investment portfolio. 

A defensive portfolio was chosen when making this investment, given that it offers a low-risk approach to business (Abraham, 2019). All the stocks selected for this portfolio have a lower beta of below 2, which implies that these stocks are less responsive to market movements (Yahoo Finance, 2019). The defensive investment portfolio is relevant in assuring the investor of steady profits that would remain unchanged in case of any cyclical economic situations. For instance, out of the ten stocks invested in this portfolio, only Starbucks’ shares have shown a slump in the share price. This exception could be attributed to the company’s problem of market saturation and stiff competition from other coffee companies such as the Chinese Luckin Coffee. In the conception of this defensive investment portfolio, a growth investing strategy was adopted to ensure the selection of high growth stocks that would withstand harsh economic environments. 

The growth investing strategy enables an investor to choose a portfolio that would have greater expectations of future prospects (Dichtl, Drobetz, & Wambach, 2016). The majority of the stocks in this investment portfolio are high value and would continue to grow over time. For instance, the technology companies’ stocks such as Netflix, Facebook, Amazon, and Tesla portray an expected higher growth in the future. A revision of this initial strategy would necessitate the inclusion of an income portfolio strategy to ensure that the investor makes steady incomes from dividends of the stocks invested. The income portfolio strategy would enable the investor to accrue positive cash flows, hence, getting rid of stocks experiencing downward shifts of prices (Thune, 2019). The adoption of this strategy would be marked by the addition of master limited partnerships (MLP) and real estate investment trusts (REITs), which are perfect income-producing portfolios. The income portfolio strategy would also ensure that the investor chooses companies that have a valuable dividend policy or provide capital gains for the principal invested. 

The allocation of the investment portfolio was undertaken after careful consideration of the fundamental and technical analyses of the ten stocks considered for the investment. For the fundamental analysis of the stocks, the main elements considered by the investor were the PE ratio, beta, and earnings per share (EPS) of the companies (Thune, 2019). The achievement of the fundamental analysis of the portfolio followed scrutiny of the financial statements of these companies. The investor was interested in companies that indicated a high PE ratio to ensure that the return on investment would be greater. All the ten companies had stronger PE ratio, which was proof of significant earnings from the stocks. As stated earlier, the beta of the companies selected in this investment portfolio was below 2. This was to make sure that the investor could not engage in high-risk stocks that would jeopardize the amount invested in the portfolio. 

The EPS was also a relevant aspect of the fundamental analysis because the investor was interested in finding out the earnings to be expected per share invested on the ten companies (Thune, 2019). The higher EPS depicted by the ten companies would translate to greater earnings from the investments. On the other hand, the technical analysis of the investment portfolio was achieved by a practical evaluation of the current market trends and the stock prices of the companies invested. The ten stocks traded by the investor portrayed stability in their current share prices over time. The current market trends of the industries operated by these companies were also significant in delivering the allocation of the investment portfolio. For this reason, the investor chose to invest in stocks operating in the technology, retail, and automobile sectors. These sectors are viewed to have fewer disruptive economic movements that would affect the performance of the investment portfolio. 

Different news and events affected the individual stocks invested in this investment portfolio. To begin with, the news regarding Facebook’s entry into the blockchain digital technology using the Libra cryptocurrency was significant in choosing the company’s stock in the portfolio. This is because the company would experience enhanced profitability after its engagement in digital financial markets. The news about Amazon’s consistent growth approaching the $1 trillion market capitalization also signified the stability of the company’s stock. The news about the growth of the online streaming market in the world also influenced the choice of Netflix stocks because of expected higher prospects. Tesla’s news regarding its entry into airline and spaceships business segment, as well as, its prowess in the electric vehicle segment was relevant in its choice in the investment portfolio. 

One of the economic events that have affected the investment portfolio is the slowdown of global economic growth, which in turn affects trade in various sectors. Trade wars that exist between the largest economies in the world, that is, the US and China have also added to the economic slow down because of reduced trade activities (Waters, 2019). The US-China trade wars have affected the operations of Starbucks Corporation in the Chinese market, and this would explain the slump of the company stocks on the market. The slowdown of economic growth also affected the stock volumes traded in this investment portfolio. For instance, the volumes traded for Target, Dell, and Starbucks reduced from the initial volumes traded. The current advancement of technology and technological platforms has also had an impact on the investment portfolio because of the tech stocks chosen by the investor. The adoption of different technologies coupled with an increased global technology uptake has enhanced the tech stocks as symbolized by the significant increases in their current prices. For instance, the Amazon current share price increased from $1799.484 to $1838.16 while that of Netflix increased from $289.58 to $294.51 (Yahoo Finance, 2019). 

Another significant event that could influence the performance of this investment portfolio is the impending Brexit. According to pundits, it could weaken the European Union, thus, resulting in various economic implications. Some of the major government issues that have affected the investment portfolio include trade regulations, barriers, and wars. The increase in tariffs and other trade regulations imposed by governments have affected the profitability of companies, hence, impacting the stocks market. For instance, the increase in tariffs for US companies in the UK and China has created a burden for the majority of the companies, hence, affecting their stocks (Waters, 2019). The trade wars also continue to negatively impact the majority of businesses, hence, affecting the companies in the investment portfolio. 

The three core recommendations that would help in improving the growth of this investment portfolio include diversification of the portfolio, rebalancing, and tactical asset allocation. Firstly, diversification is imperative in ascertaining that the investment portfolio would remain steady in the prevailing and future economic conditions. The investor should diversify across, and within asset categories, for instance, there is a need to have an investment portfolio that includes bonds, stocks, and cash equivalents (Thune, 2019). Consequently, the investor can diversify within these stock categories by taking assets from different industries that have consistent growths on the market. Secondly, the investor can undertake rebalancing of the investment portfolio to ensure that the original asset mix is restored. Rebalancing is done to ensure that non-performing assets are exchanged with high-performing assets (Dichtl, Drobetz, & Wambach, 2016). The investor would consider bringing in new assets that would enhance the profitability of the portfolio. Lastly, tactical asset allocation would help the investor in adjusting and balancing the three primary asset categories, that is, stocks, cash, and bonds with an intention of enhancing the returns of the investment portfolio. 

References 

Abraham, S. (2019). 5 Popular Portfolio Types. Investopedia. Retrieved from https://www.investopedia.com/articles/basics/11/5-popular-portfolio-types.asp 

Dichtl, H., Drobetz, W., & Wambach, M. (2016). Testing rebalancing strategies for stock-bond portfolios across different asset allocations. Applied Economics , 48 (9), 772-788. 

Thune, K. (2019). The Best Investment Strategies. The Balance . Retrieved from https://www.thebalance.com/top-investing-strategies-2466844 

Waters, R. (2019). How the trade war is damaging the US tech industry. Financial Times. Retrieved from https://www.ft.com/content/16fa93ba-bf69-11e9-b350-db00d509634e 

Yahoo Finance. (2019). Amazon.com, Inc. (AMZN) . Retrieved from https://finance.yahoo.com/quote/AMZN?p=AMZN&.tsrc=fin-srch 

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