Portfolio Investment Analysis

The performance of the various stocks employed in constructing the portfolio investment has been undertaken using the attached Excel spreadsheet. The analysis has considered the return of the shares on the three different dates they were traded. The average performance of each stock has also been derived in the spreadsheet to determine the portfolio returns during the simulation period. From the analysis, the worst-performing store during the period is Vanguard Comm. Services EFT (VOX) at -25.10%. The reason for the worst performance of Vanguard Comm. Services EFT during the period is attributed to the current Covid-19 pandemic.

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Vanguard Comm. Services EFT is involved in holding an investment in companies offering communication services, such as Google, Verizon, and Facebook (Money.USNews 1). Companies offering communication services have traditionally experienced increasing stock prices; the fear of the Covid-19 pandemic on their potential to continue improving their earnings has caused their demand to slow down. Investor interest in acquiring a given stock is influenced by the company’s potential to increase future profits, which is critical in maximizing their wealth. Consequently, market sentiments indicating that a given company will experience decreasing payments in the future have the effect of lowering the demand for its stock (Damodaran 259).

Equally, investors holding the company’s stock are likely to sell them at a lower price to avoid suffering substantial capital losses in the future. Decreasing demand for a given stock, with the investors’ willingness to sell the same stock increasing, has the effect of causing the prices to diminish at a high rate (Brealey et al. 241). Consequently, the fear that has been shared in the market that the earnings of Vanguard Comm. Services EFT are at high risk of decreasing has been responsible for causing the stock prices to diminish at a high rate.

Similarly, the worst performance of Vanguard Comm. Services EFT in the three months is attributed to the lockdown in China. The leading communication companies that Vanguard Comm. Services EFT holds funds in, such as Verizon and Google, have invested heavily in China. However, operations in China were significantly closed between January and April due to massive coronavirus infections. Closing its primary earnings sources signaled its financial stability was at risk, which could expose investors to huge losses. Consequently, investors responded by selling the stocks at a high rate, even lower prices, to avoid the eventual loss. The trend of investors unwilling to buy or hold the company’s stocks caused the declining market value, as demonstrated by the analysis conducted in the attached spreadsheet. Accordingly, Vanguard Comm. Services EFT stock suffered a substantial loss due to the effect of the coronavirus plague, causing fear among active and prospective investors regarding its ability to maximize its wealth.

A comparative analysis between the portfolio investment and the standard & poor 500 (S&P 500) has been undertaken for the three months under consideration. S&P 500 is a market index that tracks the average performance of 500 major publicly listed corporations (Damodaran 74). Thus, comparing the portfolio performance against the S&P 500 is essential in determining if the selected stocks offered a higher or lower return to the market performance. The version of the S&P 500 between January 21 and April 30, computed in the attached Excel spreadsheet, is -0.11%. In contrast, the determined performance of the portfolio during the three months amounts to -4.87%.

Accordingly, the S&P 500 performed better compared to portfolio investment. A lower performance realized from the portfolio investment compared to the S&P 500 market index indicates that the stocks selected were not optimal. An optimal stock selection in constructing the portfolio should have a higher or equal return than the market index. Nevertheless, the negative returns by S&P 500 market index indicate that investors, on average, suffered a loss due to the increasing fear that companies will suffer financial losses due to the diminishing productivity and loss of revenue attributed to the rise of the coronavirus pandemic worldwide.

A close observation of the portfolio that has been selected offers further information that could have attributed to its poor performance compared to the S&P 500 market. The portfolio selection of stocks employed in constructing the portfolio is not optimally diversified. Diversification of supplies in building a portfolio is recommended due to its effect on reducing risk (Brealey et al. 183). The risk associated with a portfolio investment is diminished once the stocks are optimally diversified since it is spread across the different assets. This aspect implies that the loss suffered by one store is applied to the rest of the stocks. The portfolio that has been constructed has concentrated on specific industries and sectors. The economic difficulties experienced in the sectors and industries where the stores have been selected fail to spread losses across the portfolio. Consequently, it is recommendable for the group to consider observing optimal diversification of the supplies in the future to spread the risk effectively.

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Work Cited

Brealey, R. A, S. C Myers, and F Allen. Principles of corporate finance. New York, NY: McGraw-Hill Education, 2012.

Damodaran, A. Applied Corporate Finance: A User’s Manual. New York, NY: John Wiley & Sons, 2011.

Portfolio

Ticker	Company	Price as of 1/21/2020	Price as of 4/17/2020	Return	Price as of 4/30/2020	Return	Average Return
AMZN	Amazon		$ 2,375.00		$ 2,474.00	4.17%	4.17%
CRM	salesforce. Com, inc.	$ 185.27	$ 162.62	-12.23%	$ 161.95	-0.41%	-6.32%
AAPL	Apple Inc.	$ 316.57	$ 282.80	-10.67%	$ 293.80	3.89%	-3.39%
TXN	Texas Instruments Incorporated	$ 130.86	$ 113.55	-13.23%	$ 116.07	2.22%	-5.50%
HOPE	Hewlett Packard Enterprise		$ 9.71		$ 10.06	3.60%	3.60%
VGT	Vanguard Info Tech EFT	$ 259.30	$ 235.57	-9.15%	$ 242.00	2.73%	-3.21%
DVA	DaVita Inc.	$ 79.90	$ 78.16	-2.18%	$ 79.01	1.09%	-0.55%
LH	Laboratory Corporation of America		$ 148.52		$ 164.45	10.73%	10.73%
BDX	Becton, Dickinson, and Company	$ 277.53	$ 261.40	-5.81%	$ 252.53	-3.39%	-4.60%
VHT	Vanguard Health Care EFT	$ 196.80	$ 189.31	-3.81%	$ 188.42	-0.47%	-2.14%
C	CitiGroup	$ 76.74	$ 45.45	-40.77%	$ 48.56	6.84%	-16.97%
JPM	JpMorganChase	$ 132.20	$ 95.18	-28.00%	$ 95.76	0.61%	-13.70%
AIG	American International Group	$ 50.13	$ 24.50	-51.13%	$ 25.43	3.80%	-23.67%
VFH	Vanguard Financials EFT	$ 76.42	$ 54.40	-28.81%	$ 55.81	2.59%	-13.11%
NFLX	Netflix	$ 338.11	$ 422.96	25.10%	$ 419.85	-0.74%	12.18%
CHTR	Charter Communications, Inc.	$ 503.59	$ 499.42	-0.83%	$ 495.23	-0.84%	-0.83%
DIS	Walt Disney Company		$ 106.63		$ 108.15	1.43%	1.43%
VOX	Vanguard Comm. Services EFT	$ 183.14	$ 83.73	-54.28%	$ 87.15	4.08%	-25.10%
F	Ford		$ 5.12		$ 5.09	-0.59%	-0.59%
LOW	Lowes	$ 120.04	$ 97.10	-19.11%	$ 104.75	7.88%	-5.62%
CCL	Carnival Corporation		$ 12.56		$ 15.90	26.59%	26.59%
VCR	Vanguard Consumer Disc. EFT	$ 194.02	$ 194.02	0.00%	$ 177.22	-8.66%	-4.33%
BA	Boeing		$ 154.00		$ 141.02	-8.43%	-8.43%
ALL	American Airlines Group		$ 11.57		$ 12.01	3.80%	3.80%
RHI	Robert Half International Inc.	$ 62.58	$ 43.24	-30.90%	$ 47.27	9.32%	-10.79%
VIS	Vanguard Industrials EFT	$ 157.75	$ 117.80	-25.32%	$ 120.78	2.53%	-11.40%
COST	Costco	$ 313.26	$ 317.92	1.49%	$ 303.00	-4.69%	-1.60%
ADM	Archer-Daniels-Midland Company		$ 37.19		$ 37.14	-0.13%	-0.13%
VDC	Vanguard Consumer Staples EFT	$ 163.45	$ 152.52	-6.69%	$ 147.97	-2.98%	-4.84%
XOM	Exxon Mobile Corporation	$ 67.58	$ 43.22	-36.05%	$ 46.47	7.52%	-14.26%
CVX	Chevron		$ 87.17		$ 92.00	5.54%	5.54%
VDE	Vanguard Energy EFT	$ 78.19	$ 44.76	-42.75%	$ 50.53	12.89%	-14.93%
EIX	Edison International	$ 78.20	$ 62.06	-20.64%	$ 58.71	-5.40%	-13.02%
VPU	Vanguard Utilities EFT	$ 148.49	$ 132.80	-10.57%	$ 125.87	-5.22%	-7.89%
HST	Host Hostels & Resorts	$ 16.65	$ 11.37	-31.71%	$ 12.31	8.27%	-11.72%
VNQ	Vanguard Real Estate EFT	$ 95.62	$ 76.11	-20.40%	$ 76.11	0.00%	-10.20%
NUE	Nucor Corp	$ 49.19	$ 37.33	-24.11%	$ 41.19	10.34%	-6.89%
VAW	Vanguard Materials EFT	$ 131.77	$ 106.50	-19.18%	$ 110.97	4.20%	-7.49%

Portfolio Average Return							-4.87%
							-25.10%

S&P 500

Date	Adj Close	Return
21/01/2020	3320.790039
22/01/2020	3321.75	0.03%
23/01/2020	3325.540039	0.11%
24/01/2020	3295.469971	-0.90%
27/01/2020	3243.629883	-1.57%
28/01/2020	3276.23999	1.01%
29/01/2020	3273.399902	-0.09%
30/01/2020	3283.659912	0.31%
31/01/2020	3225.52002	-1.77%
03/02/2020	3248.919922	0.73%
04/02/2020	3297.590088	1.50%
05/02/2020	3334.689941	1.13%
06/02/2020	3345.780029	0.33%
07/02/2020	3327.709961	-0.54%
10/02/2020	3352.090088	0.73%
11/02/2020	3357.75	0.17%
12/02/2020	3379.449951	0.65%
13/02/2020	3373.939941	-0.16%
14/02/2020	3380.159912	0.18%
18/02/2020	3370.290039	-0.29%
19/02/2020	3386.149902	0.47%
20/02/2020	3373.22998	-0.38%
21/02/2020	3337.75	-1.05%
24/02/2020	3225.889893	-3.35%
25/02/2020	3128.209961	-3.03%
26/02/2020	3116.389893	-0.38%
27/02/2020	2978.76001	-4.42%
28/02/2020	2954.219971	-0.82%
02/03/2020	3090.22998	4.60%
03/03/2020	3003.370117	-2.81%
04/03/2020	3130.120117	4.22%
05/03/2020	3023.939941	-3.39%
06/03/2020	2972.370117	-1.71%
09/03/2020	2746.560059	-7.60%
10/03/2020	2882.22998	4.94%
11/03/2020	2741.379883	-4.89%
12/03/2020	2480.639893	-9.51%
13/03/2020	2711.02002	9.29%
16/03/2020	2386.129883	-11.98%
17/03/2020	2529.189941	6.00%
18/03/2020	2398.100098	-5.18%
19/03/2020	2409.389893	0.47%
20/03/2020	2304.919922	-4.34%
23/03/2020	2237.399902	-2.93%
24/03/2020	2447.330078	9.38%
25/03/2020	2475.560059	1.15%
26/03/2020	2630.070068	6.24%
27/03/2020	2541.469971	-3.37%
30/03/2020	2626.649902	3.35%
31/03/2020	2584.590088	-1.60%
01/04/2020	2470.5	-4.41%
02/04/2020	2526.899902	2.28%
03/04/2020	2488.649902	-1.51%
06/04/2020	2663.679932	7.03%
07/04/2020	2659.409912	-0.16%
08/04/2020	2749.97998	3.41%
09/04/2020	2789.820068	1.45%
13/04/2020	2761.629883	-1.01%
14/04/2020	2846.060059	3.06%
15/04/2020	2783.360107	-2.20%
16/04/2020	2799.550049	0.58%
17/04/2020	2874.560059	2.68%
20/04/2020	2823.159912	-1.79%
21/04/2020	2736.560059	-3.07%
22/04/2020	2799.310059	2.29%
23/04/2020	2797.800049	-0.05%
24/04/2020	2836.73999	1.39%
27/04/2020	2878.47998	1.47%
28/04/2020	2863.389893	-0.52%
29/04/2020	2939.51001	2.66%
Average performance		-0.11%