This paper aims to present and justify an appropriate investment portfolio for Mr. Flippinlaldi. He expects from his portfolio moderate returns, but Mr. Flippinlaldi is primarily a growth investor.
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Semester A / Session 200x Coursework A Consultancy for E. Flippinlaldi Name: xxx Matric. No. : xxxx Module: Financial Studies Programme: Seminar tutor: xxxx Words: 1558 List of contents 1. Introduction 1 2. Summary of Portfolio 1 2.1 BP p.l.c. 1 2.2 Royal Bank of Scotland Group plc 3 2.3 Siemens AG 4 2.4 UK- Government Gilt 5 3. Conclusion and summary 6 References 7 1. Introduction This paper aims to present and justify an appropriate investment portfolio for Mr. Flippinlaldi. He expects from his portfolio moderate returns, but Mr. Flippinlaldi is primarily a growth investor. Therefore he is willing to accept a moderate level of risk and return. A moderate investment portfolio may be suitable for him. It should be diversified in different industries, with preference to large, established companies. 2. Summary of Portfolio As investments three different shares are chosen and a government gilt. Each investment will be presented in the same way: 1. the justification for the choice with a historical review, 2. monitoring of the investment for a six-week period (28.09.2006 - 9.11.2006) and 3. prediction of future prospects for the investment. Company Industry Country % price (28-09-06) No. of shares amount BP plc (GB:798059)
Due to the fact, that the Royal Bank of Scotland Group is the second largest banking group in the UK and Europe, and the fifth largest in the world by market capitalization, the risk of this share can be evaluated as moderate. In comparison with his main competitors (see figure 5), the share of the Royal Bank of Scotland shows a lower P/E ratio. This indicates that the share is cheap relative to its industry peers. Furthermore it has the best dividend yield; hence the share returns a better income to his shareholders than his competitors. But at the same time, the Citigroup outperforms with a larger market capitalization and a higher EPS growth. RBS Barclays plc HSBC Holdings Citigroup market capitalization 59.88 Bil 45.85 Bil 114.24 Bil 130.16 Bil P/E Ratio 10,3 12.10 13.40 12.1 Dividend Yield 4,1% 3.92% 3.82% 3.88% EPS growth rate 8% 5.60% 15.5% 24.6% Figure 5: RBS vs. competitors (in British Pounds)6 Monitoring of the investment for a six-week period In this six-week period the share had its lowest point on the 28th September with 1812p and its highest point on the 13th October with 1912p.The average share price of this six-month-period (1873p)
Monitoring of the investment for a six-weeks period The fluctuations in gilt prices are not so important, because at maturity Mr. Flippinladi gets his principal back. Only if he needs his money before 2012 and he wants to sell the gilt, would it be important to monitor the prices. Nevertheless the prices of gilts do not change a lot. Future prospects of the investment As this form of investment is nearly 100% safe, there is no doubt that Mr. Flippinladi gets his money back. The UK government has a AAA credit rating from Standard & Poor's and Aaa from Moody's. 3. Conclusion and summary Company actual share price (09-11-06) "+/-" of share price actual value Profit/Loss % BP plc (GB:798059) 6,01 0,14 +2,3% 127.983 2.981,30 Royal Bank of Scotland (GB:754783) 18,77 0,65 +3,5% 129.513 4.485,00 Siemens AG (GB:798725) 50,04 3,06 +6,1% 133.206 8.145,72 Goverment Gilt 9% Treasury Stock 2012 (GB0008938465) 122,93 - 0,01 0,0% 124.894,67 - 12,37 +3,0% 515.597 +15.599,65 In conclusion, a diversified portfolio was created for Mr. Flippinlaldi with a moderate risk. Three shares from large companies within different industries, and a government gilt were chosen and presented in this paper. In the monitored six-week-period the portfolio performed well and produced a 3% yield. The future prospects for the portfolio were estimated as good, but share prices depend on many factors; therefore accurate projections are difficult to make.
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