Investment Portfolio Analysis

The investment portfolio project aims to provide long-term capital appreciation by investing in stocks across various industries, with Nike being the first security to enter into the portfolio. The portfolio will be managed to reap benefits from specific industries and then shift investments to other industries for optimal returns. Financial ratios analysis reveals that Nike is a better performer than Adidas, except for P/E ratio, which is higher for Adidas. However, Nike's strong performance in profit and operating margin, as well as its return on assets and equity, makes it a more attractive investment option.

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INVESTMENT PORTFOLIO PROJECT

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Table of Contents
INVESTMENT STRATEGY 3
FIRST SECURITY TO ENTER THE PORTFOLIO 3-5
COMPUTATIONS 5-6
FINANCIAL RATIOS ANALYSIS 6-7

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Investment Objective:
The Fund seeks to provide long capital appreciation.
Principal Investment Strategies:
The Fund invests 95% of its assets in stocks of companies across varies industries depending upon
the boom in the market for a particular industry. Once the benefits are reaped from that industry, the
funds are taken out and invested in other industry. This helps in gaining the industry specific profits
and appreciating the capital of the Fund. Ultimately resulting in increase of the value of the
portfolio in the hands of investors.
First Security to enter into Portfolio:
Nike is the first security to enter into portfolio.
The PE Ratio of the Stock is at 22.76 times it Earnings Per Share which is to stay that the stock is
trading at 22.76 time its Earnings.
The Financial Highlights of the stock are provided below:

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Stocks selected: Nike and Adidas
A. Computations:
Stock/Index Nike Adidas S&P 500
Mean (0.10%) 0.25% 0.01%
Standard Deviation 1.48% 1.58% 0.88%
Beta Co-efficient 0.89 0.73 -
Systematic Risk 0.0078 0.0116 -
Unsystematic Risk 0.0148 0.0158 -
Systematic Risk is also known as non-diversifiable risk. It depends on the market forces.
Unsystematic Risk is also known as diversifiable risk. It is company specific and can be
eliminated.
PORTFOLIO:
Weightage:
Nike 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Adidas 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Portfolio Return 0.216% 0.182% 0.147% 0.113% 0.078% 0.043% 0.009% -0.026% -0.060% -0.095%
Portfolio Variance 0.0248% 0.0244% 0.0241% 0.0238% 0.0235% 0.0232% 0.0229% 0.0226% 0.0222% 0.0219%
Portfolio Beta 0.75 0.77 0.78 0.80 0.81 0.83 0.84 0.86 0.87 0.89
Expected Return 0.65% 0.61% 0.57% 0.53% 0.49% 0.45% 0.41% 0.37% 0.33% 0.29%
Portfolio Variance 0.000291 0.000290 0.000289 0.000287 0.000286 0.000285 0.000284 0.000283 0.000282 0.000281

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Efficient Frontier for Portfolio Return:
0.0248
% 0.0244
% 0.0241
% 0.0238
% 0.0235
% 0.0232
% 0.0229
% 0.0226
% 0.0222
% 0.0219
%
0.0205%
0.0210%
0.0215%
0.0220%
0.0225%
0.0230%
0.0235%
0.0240%
0.0245%
0.0250%
Portfolio Variance
Portfolio Return
Efficient Frontier for Expected Return:
0.000291
0.000290
0.000289
0.000287
0.000286
0.000285
0.000284
0.000283
0.000282
0.000281
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
Portfolio Variance
Expected Return
FINANCIAL RATIOS ANALYSIS: (Source: finance.yahoo.com)
Particulars Nike Adidas Peer Company –
Skechers U.S.A
P/E Ratio 22.76 times 28.44 times 12.92 times
Profit Margin 11.60% 5.24% 7.53%
Operating Margin 13.05% 7.86% 11.23%
Return on Assets 12.85% 6.77% 11.90%
Return on Equity 30.57% 16.82% 20.58%
Total Debt/Equity 17.99 33.52 4.45
Current Ratio 2.72 1.33 3.66
Dividend Payout
Ratio
28.3% - -

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Beta 0.53 - 0.2
In terms of P/E Ratio, Adidas is trading at highest multiple of its Earnings, however Nike is a
better performer in terms of Profit and Operating Margin. Also Nike has a better edger over other
peers in terms of Return earned on the Assets and Equity introduced. Adidas is highly levered as
its debt component is huge. This might be one of the reasons for lower profits as debt involves
fixed interest payments.