Advanced Financial Management

Verified

Added on  2023/04/21

|10
|2410
|77
AI Summary
This research assignment focuses on the technical and fundamental analysis of shares in order to beat the stock market and achieve a 5% profit. It discusses various theories and strategies for achieving target profit and evaluates the stocks in the portfolio. The report concludes that investing in the stock market requires careful analysis and the use of technical and fundamental approaches.
tabler-icon-diamond-filled.svg

Contribute Materials

Your contribution can guide someone’s learning journey. Share your documents today.
Document Page
Advanced Financial
Management
tabler-icon-diamond-filled.svg

Secure Best Marks with AI Grader

Need help grading? Try our AI Grader for instant feedback on your assignments.
Document Page
Table of Contents
Introduction......................................................................................................................................1
Literature review..............................................................................................................................1
Rational and methodology...............................................................................................................4
Result and analysis...........................................................................................................................4
Conclusion.......................................................................................................................................5
References........................................................................................................................................6
Appendix..........................................................................................................................................8
Document Page
Introduction
Fundamental analysis is considered as the analysis which is done on the company’s
technical part statistics. As it is seen that the fundamental analysis and the technical analysis are
the major terms that are used for the approaching market and are also considered as the opposite
ends of spectrum (Sun, 2017). The present research is based on the technical as well as the
fundamental analysis of the shares so as to beat the stock market. In this research assignment
around 20 companies are taken into the portfolio so that as to achieve the objective of beating the
stock market and achieving the 5% profit from investment. Also various theories and the
strategies that are used to achieve the objective of target profit are discussed in this. At last the
evaluation of the stocks that are taken into the portfolio would be discussed.
Investing in stock market is considered as an art where the scarifies is to be made in
present so as to achieve the deriving future benefits. As it is seen that investing in the stock
market is always a difficult task for the individuals who don't have any information about the
market hypothesis. Also it is difficult for them to predict what will happen in the next coming
hours. So it is important for any investor to check and analyse the results and the strategies
before investing into the stocks which would help them to achieve the objective of maximising
the returns on the invested amount (Shen, Lin, Tang, Hsiao,2016). The amount that was invested
in the stocks were able to give me a positive result to the some extend and in certain stocks their
were negative result which finally helped me achieving the target of profit booking.
Literature review
Investment includes numerous decisions such as the type of portfolio, amount, timing and
the grade of the share in which the amount has to be invested. As investment includes number of
theories through which the future benefits can be achieved. There are two types of analysis that
are done while investing in any stock of the company which includes the technical analysis and
the fundamental analysis.
Technical analysis is considered as the historical analysis of the data of the companies
shares which includes both the price and the volume factor. This is done by using both the
behavioural economies and the quantitative analysis (McAleer, 2018). Also the technical
analysis aims to use the past performance so as to predict the future trend of the market. This is
done through the following the chart patterns and statistical patterns. For technical analysis the
1
Document Page
Dow has defined its theory which includes the three trend theory. This theory helps in
distinguishing the overall direction of the market. For this the theory uses the trend analysis. As
it is seen that the market does not move only in straight lines, there are different market trends
according to which it moves (Lim, & Noh, 2015). As it is seen that the market not only moves or
rally up to the peak it also sells off to the low at the same instance. So it is seen that it does not
follows only one direction. These three movements includes the following:
ï‚· The main movement: it is the primary movement or the major trend in the index that last
from less than a year to the several years (Aerts, Thewissen & Yan, 2018). This trend can
be discussed as bearish to the bullish. As it is seen in the FTSE All share index that the
market is going in the up trend movement from if compared to the last year.
ï‚· Medium Swing: This is the reaction of the market which last for only not more than 3
months. In this movement the price of the shares retraces from 33% to 66% where the
major corrections and the profit booking on the shares are seen.
ï‚· Short Swing: this is the swing where the market trends changes from the hours and resist
till a month or so. This is the way which helps the market to move upwards where the
investor can book profit for the same and also can have a certain amount of loss.
It is seen that these three movements can be simultaneous and can also happen in a day.
So these trends has to be keep in mind while investing (Kaplan & Atkinson, 2015). As while
investing the chart of the companies has to be keep in mind so that the up trend and the
downtrend are analysed. This was the main strategy that was kept in mind by me while analysing
and investing in the shares. The shares that were taken into consideration for analysing and
investment includes the following. These shares made my portfolio for investment through
technical terms.
ï‚· EASYJET PLC
ï‚· SCHRODERS PLC
ï‚· NMC HEALTH PLC
ï‚· SPIRAX-SARCO ENGINEERING PLC
2
tabler-icon-diamond-filled.svg

Secure Best Marks with AI Grader

Need help grading? Try our AI Grader for instant feedback on your assignments.
Document Page
ï‚· BRITISH AMERICAN TOBACCO P.L.C.
ï‚· PRUDENTIAL PLC
ï‚· EXPERIAN PLC
ï‚· ASHTEAD GROUP PLC
ï‚· VODAFONE GROUP PLC
ï‚· TUI AG
These stocks were analysed on the basis of the technical charts and the statistics that they have.
Fundamental analysis means the analysis of the stock that is done on the basis real data
of the stock so as to find the stock value (Hsiao & Tsai,2018). This is considered as the best
method which helps in determining the health and the growth of the companies value and the
future implication of this. In this method the stock revenue, profit margins, the return on equity
and the future growth of the company is analysed. For this the method that I have chosen to
invest in the stock involves the price earning ratio. This method has helped in comparing the
price and the earning that the company is giving to the stock. Through this estimate of future
earning can be seen and a forward P/E can be expected to take into the consideration the growth
of the company (Holm, 2018). However if the estimate may turn out to be wrong, it would help
to anticipate the future the same way the market does when it prices a stock. The stocks that are
taken into consideration for this purpose includes:
ï‚· SSE PLC
ï‚· COMPASS GROUP PLC
ï‚· SCOTTISH MORTGAGE INVESTMENT TRUST PLC
ï‚· SMITHS GROUP PLC
ï‚· RENTOKIL INITIAL PLC
ï‚· RIGHTMOVE PLC
ï‚· DIRECT LINE INSURANCE GROUP PLC
ï‚· ANTOFAGASTA PLC
3
Document Page
ï‚· GVC HOLDINGS PLC
These 10 stocks build the portfolio for the fundamental analysis and helped in achieving
the objective of profit booking.
The Efficient market hypothesis is considered as the theory which helps in assessing the
financial aspects of the company (Chu, Wang, Xiao & Zhang, 2017). This theory initiates that
the assets price of the company reflects the financial information of the company. This theory
helps in depicting the alpha generation of the company. This theory is neither technical nor
fundamental.
Behavioural finance is considered as the field of economics that helps explain the stock
market anomalies which includes the severe rises and the fall in the stock prices. This helped me
to check that how many volume of shares were invested in the company and also the anchoring
level is seen through which the stock is determined (Harrison & Lock, 2017). Also the tendency
of people to make the stock at self rating level is checked so that the highest rated stock is
purchased which would give maximum results.
Rational and methodology
The companies that were selected for the purpose of purchasing the portfolio includes the
technical method which is used for the selection of stocks (Garofalakis, Gehrke & Rastogi,
2016). As the technical method includes the Dow theory through which the swing and the trends
of the chart are analysed. While purchasing the share of the company past trends of company
share price are analysed and the shares are done accordingly. As most of the trend showed up
ward movement and the charts were positive which helped in purchasing and making decision
for buying shares. Also the profitability of the companies in the recent years has been checked
and if the company is having a consistent growing market then it is taken in the portfolio.
Result and analysis
By investing in the two portfolios where the stock contained the technical as well as the
functional group it was seen that stocks that were chosen showed a significant results. Also it
was seen that the technical portfolio of the stock was able to outperform the functional portfolio.
The technical portfolio showed the profit of around of .10% and the functional portfolio returned
4
Document Page
very good (Gibson, Scott & Cheng, 2017). From the investment that was made it was seen that
the stock that showed the best result was ASHTED group PLC. This was one of the best and
outperforming stock of the portfolio. As of the result it is seen that the charts of the company
which were referred before purchasing or investing in the share were best and were profitable. So
this way this share was chosen and the future profits of the company was also growing which
helped in deciding about investing the share.
Conclusion
From the above report it is concluded that making investment in stock market is not an
easy task. The individual has to go through different steps before they start to invest in the share
of the company. Also market analysis before making investment is important. Technical and
functional methods or approaches should be used for analysing the market demand and the chart
of the company. EMH and behavioural finance is important part of strategy that helps in deciding
about investing in company.
5
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
References
Online
Auto Trader Group plc (AUTO.L). 2019. Available through (online).
<https://finance.yahoo.com/quote/AUTO.L?p=AUTO.L>
BAE Systems plc (BA.L). 2019. Available through (online).
<https://finance.yahoo.com/quote/BA.L?p=BA.L>
British American Tobacco p.l.c. (BATS.L). 2019. Available through (online).
<https://finance.yahoo.com/quote/BATS.L?p=BATS.L>
Centrica plc (CNA.L) 2019. Available through (online).
<https://finance.yahoo.com/quote/CNA.L?p=CNA.L>
Compass Group PLC (CPG.L) 2019. Available through (online)
<https://finance.yahoo.com/quote/CPG.L?p=CPG.L>
EasyJet plc (EZJ.L) 2019. Available through (online). <https://finance.yahoo.com/quote/EZJ.L?
p=EZJ.L>
Experian plc (EXPN.L) 2019. Available through (online).
<https://finance.yahoo.com/quote/EXPN.L?p=EXPN.L>
FTSE ST All shares index (^FTSE). 2019. Available through (online).
<https://finance.yahoo.com/quote/%5EFTSE/components?p=%5EFTSE>
GVC Holdings PLC (GVC.L). 2019. Available through (online).
<https://finance.yahoo.com/quote/GVC.L?p=GVC.L>
Prudential plc (PRU.L) 2019. Available through (online)
<https://finance.yahoo.com/quote/PRU.L?p=PRU.L>
Schroders plc (SDR.L). 2019. Available through (online).
<https://finance.yahoo.com/quote/SDR.L?p=SDR.L>
Scottish Mortgage Ord (SMT.L). 2019. Available through (online).
<https://finance.yahoo.com/quote/SMT.L?p=SMT.L>
Scottish Mortgage Ord (SMT.L). 2019. Available through (online).
<https://finance.yahoo.com/quote/SMT.L?p=SMT.L>
Smith’s Group plc (SMIN.L). 2019. Available through (online).
<https://finance.yahoo.com/quote/SMIN.L?p=SMIN.L>
SSE plc (SSE.L). 2019. Available through (online). <https://finance.yahoo.com/quote/SSE.L?
p=SSE.L>
St. James's Place plc (STJ.L). 2019. Available through (online)
<https://finance.yahoo.com/quote/STJ.L?p=STJ.L>
TUI AG (TUI.L). 2019. Available through (online). <https://finance.yahoo.com/quote/TUI.L?
p=TUI.L>
Vodafone Group Plc (VOD.L). 2019. Available through (online).
<https://finance.yahoo.com/quote/VOD.L?p=VOD.L>
6
Document Page
Appendix
Table showing the price and the pruchase date as well as the total profit from investment.
COMPANY NAME
PRICE
ON
13TH
FEB,
2019
PRICE
ON 5TH
NOV, 2018
AMOUNT
INVESTE
D
NUMBER OF
SHARES
PURCHASED
AMOUNT AS ON
13TH FEB
Portfolio 1 functional
portfolio
SSE PLC 1194 1157 2314 2 2388
COMPASS GROUP
PLC 1758.5 1537 6148 4 7034
SCOTTISH
MORTGAGE
INVESTMENT
TRUST PLC 499.75 4.77 4777 1000 499750
SMITHS GROUP PLC 1479.5 1348 2696 2 2959
RENTOKIL INITIAL
PLC 351.7 307.1 614 2 703.4
RIGHTMOVE PLC 475.5 462.9 925.8 2 951
DIRECT LINE
INSURANCE GROUP
PLC 350 318 636 2 700
ANTOFAGASTA PLC 865 809.6 1619.2 2 1730
GVC HOLDINGS
PLC 653.5 893.5 893.5 1 653.5
PORTFOLIO 2
Technical PORTFOLIO
EASYJET PLC 1278.83 1224.5 2449 2 2557.66
SCHRODERS PLC 2711 2629 5258 2 5422
7
Document Page
NMC HEALTH PLC 2740 3390 3390 1 2740
SPIRAX-SARCO
ENGINEERING PLC 6630 6395 31975 5 33150
BRITISH AMERICAN
TOBACCO P.L.C. 2822.5 3407 3407 1 2822.5
PRUDENTIAL PLC 1543 1591 3182 2 3086
EXPERIAN PLC 2030 1772 3544 2 4060
ASHTEAD GROUP
PLC 2015 1877 3754 2 4030
VODAFONE GROUP
PLC 139.92 150 150 1 139.92
TUI AG 827.4 1309 1309 1 827.4
CARNIVAL PLC 4361 4248 12744 3 13083
RECKITT
BENCKISER GROUP
PLC 6085 6328 6328 1 6085
ST. JAMES'S PLACE
PLC 959.2 1015 1015 1 959.2
TOTAL AMOUNT
INVESTED 99128.5 1041 shares 595831.58
8
chevron_up_icon
1 out of 10
circle_padding
hide_on_mobile
zoom_out_icon
[object Object]

Your All-in-One AI-Powered Toolkit for Academic Success.

Available 24*7 on WhatsApp / Email

[object Object]