Investment management
Assessment Instructions
You are an investment manager, and your client would like to invest her/his money in a company that has listed shares on major stock exchanges. You are required to write a report on the company that the client is interested in investing in. You may assume that the client has an understanding of the risk involved in investing in shares.
You will be allocated a publicly listed company. You are expected to produce an investment report and recommendation on the shares of this company.
This should include the following sections.
Company profile: a single paragraph giving an overview of the company summarising its performance over the last twelve months, its products and the markets in which it operates. The remainder of the first page would summarise data on price performance and valuations. It would end with your recommendation on whether to buy, sell or hold the shares in the company.
Performance and news analysis: Compare the company’s returns with that of the market as well as calculating the company’s risk adjusted return Identify news which are relevant to the firm’s price performance as well as supporting your analysis in the report.
Valuation: Perform a multistage growth dividend discount model (DDM) using the capital asset pricing model (CAPM) to calculate the cost of equity. Use Price multiples such as PE (Price to earnings), PB (Price to Book) and PS (Price to Sales) and DY (Dividend Yield) metrics to complement the DDM valuation.
The valuation results are to be presented using the security market line (SML). Finally, a discussion on the DDM versus price multiples to inform the client is required.
Conclusion: This will demonstrate your understanding of the subject and ability to include the results in a coherent summary
Assessment aims:
To think critically and examine the investment in question from a number of perspectives, and concepts, and present good arguments.
To write a professional report and communicate with clarity and coherence.
To apply theoretical concepts studied throughout the module .
To evaluate the reaction of the company’s share price to financial news and to the index.
To apply DDM and price multiples valuation methods.
To develop skills using available financial software, including but not limited to Fame and Bloomberg, to synthesise and evaluate investment information.(The use of Bloomberg system is not compulsory and all the information is available from a range of financial databases)
To be able to evaluate companies’ performance and to propose recommendations.
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