(Solved) Case Studies on Finance

Running head: CASE STUDIES FINANCE 1
Case Studies Finance 1
Name of the Student:
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Table of Contents
Introduction:...............................................................................................................................2
Evaluating the underlying investment philosophy and strategy for the development of the
portfolio:.....................................................................................................................................2
Recommended investment component of the portfolio:............................................................3
Conclusion:................................................................................................................................6
Reference and Bibliography:......................................................................................................8

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Introduction:
The aim of the assessment is to prepare an adequate investment portfolio, which could
help in improving the level of returns from investment. In addition, the created portfolio also
helps in understanding risk and return attributes of the investors, where 75% of the
investment is conducted in Austrian equity,20% in ETP and LIC, and 15% in cash holdings.
Moreover, with the help of portfolio income from investment would eventually increase,
which might help in generating high level of returns from investment. The adequate short
selling is conducted with index hedging, which might help in improving the level of profits
from the created portfolio.
Evaluating the underlying investment philosophy and strategy for the development of
the portfolio:
The main investment psychology is to increase the returns from investment, while
minimising any kind of risk from investment. The investment psychological mainly indicated
the creation of adequate portfolio, which could help in generating high level of returns from
investment. The main psychology in preparing the portfolio is to select stocks which has
highest return calculated from historical price movement. This would eventually help in
creating an adequate portfolio which will generate the highest returns from investment. The
stocks with low return are relatively ignored to minimize the risk from investment while
improving the rate of success in generating higher income from the investment. The adequate
investment opportunity is relatively detected in ETP, LIC and Australian stocks, which would
generate the highest rate of returns from investment. The use of Technical Analysis relatively
helps in identifying the overall investment scope which could be generated from the
calculation (Cervelló-Royo, Guijarro & Michniuk, 2015). The use of 10 days simple moving
average daily helps in detecting the financial viability of the investments conducted in the

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particular stock. This would eventually help in understanding the level of returns, which
could be generated from a particular investment in stocks. In addition, the simple moving
average also helps in detecting the level of trend that the current stock is currently following.
According to Chandra (2017), Investment portfolios a relatively help in addressing
different types of risk while maximizing the profits that could be generated from investment.
In addition, the psychology of investors relatively indicate that they need higher returns from
investment while having the lowest risk possible. This investment psychology can only be
obtained if the investors use portfolios that comprises of different stocks having alternative
risk and return attributes. Furthermore, the use of portfolios would eventually help in
minimizing the risk allocated to a particular investment and maximize returns of the investor.
Moreover, the current portfolio is relatively distributed among equity shares, ETP, cash and
LIC, which eventually helps in minimizing the risk involved in investment. On the contrary,
Grant (2016) argued that Investment portfolios created without adequate research does not
provide Returns, while increases risk from investment. Hence from the evaluation of the
portfolio it could be identified that adequate investment psychology has been completed in
drafting the overall portfolio. the portfolio has all the relevant attributes of the investment
psychology, where there is from investment is relatively low in comparison to the return
capability of the portfolio.
Recommended investment component of the portfolio:
Particulars Price Number Cost Amount
Equity Shares – Purchases
Aristocrat Leisure 24.46 10,004 $ 244,697.84
BlueScope Steel Limited 15.49 10,000 $ 154,900.00
Altium Limited 20.07 10,000 $ 200,700.00
Bapcor Ltd 5.86 10,000 $ 58,600.00
Goodman Group 8.21 10,000 $ 82,100.00
Cochlear Limited 181.5 1,800 $ 326,700.00

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Qantas Airways Limited 5.73 10,000 $ 57,300.00 $ 1,124,997.84
Equity Shares – Short
Sales
Commonwealth Bank of
Australia 75.46 1,660 $ 125,263.60
$
(125,263.60)
LICs and ETPs
WAM Capital Limited 2.068 10,000 $ 20,680.00
VANGUARD US TOTAL
MARKET SHARES
INDEX ETF 178.21 850 $ 151,478.50 $ 172,158.50
Hedged Position for ASX
Equity Investments
Future contract ASX 200 5 20,000 $ 100,000.00 $ 100,000.00
Cash Investment in Cash
Management Trust
Cash Holding (minimum
requirement $227,520) $ 228,107.26
Total $ 1,500,000.00
Equity Shares – Purchases:
The equity section of the portfolio consists of 7 stocks, which relatively Indicates that
the total 75% of the portfolio is used for investing in the Australian equities. the adequate use
of technical analysis is conducted to identify stocks which would eventually generate highest
rate of return and has low risk involved in investment. The stocks such as Aristocrat Leisure,
BlueScope Steel Limited, Altium Limited, Bapcor Ltd, Goodman Group, Cochlear Limited,
and Qantas Airways Limited is mainly used for investing in the equity section of the
portfolio. Therefore, the stocks used in the portfolio is considered to be having an uptrend
after evaluating the historical returns provided by the companies. The historical returns a
relatively device by identifying the price movement of the stocks in previous years, which
helps in anticipating the future income that could be generated by the stock. The diversity of

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the stock is a relatively high as it compares and all the relevant industries and factors, which
helps in minimising the risk involved in external factors and maximize the profit generated
from investment (Au.finance.yahoo.com, 2018).
Equity Shares – Short Sales:
The portfolio mainly consists of only one stock which is being short for improving the
returns generated from investment. The Commonwealth Bank of Australia is relatively used
as the stock that is shorted in the portfolio. There is a current rumours that the Reserve Bank
of Australia is intending to increase interest rate and it is directly affecting the stock prices of
Banking sector, which relatively increases the chance of income that could be generated from
declining prices of Commonwealth Bank of Australia (Abc.net.au, 2017). After the
evaluation of the current prices of Commonwealth Bank it could be identified that decline in
share prices of the company is anticipated, which will directly improve the returns of shorting
position is taken by investors.
LICs and ETPs:
With the adequate investments in WAM Capital Limited and VANGUARD US
TOTAL MARKET SHARES INDEX ETF the portfolio is adequately diversified. The high
return calculation directly helped in selecting the investment option, which would eventually
help in generating the higher rate of returns for the portfolio. Moreover, the historical price
movement is directly help in understanding the level of returns that could be generated from
the Investments. Furthermore, the use of LIC and ETP eventually helps in reducing the risk
from investment and diversifying the portfolio.
Hedged Position for ASX Equity Investments:

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Adequate Hedge position is taken on the price movement of ASX 200, which mainly
helps in minimising the risk involved in investment. Moreover, the futures contract is taken
hedging the equity shares of the portfolio for minimising the negative impact of the index on
return generation capability of the portfolio. The hedging measure is relatively used for
minimising the impact of volatility on a particular investment, which directly increases risk
and reduces returns from investment.
Cash Holding:
From the valuation it could be identified that a minimum of $227,520 needs to be held
in cash reserves of the portfolio for effectively conducting all the relevant Investments. the
current cash balance is relatively adequate for supporting the capital liquidity condition of the
investment made on short selling procedures.
The contents of the portfolio relatively indicate an adequate investment option which
could allow investors to generate highest rate of return while having the least risk involved
Investments. With the help of adequate hedging procedures, equity Investments, short selling,
ETP and LIC adequate portfolio is created for supporting the investment psychology of
investors. hence the portfolio could eventually help in generating higher rate of returns in the
short run, as the investment is based on trends and technical analysis.
Conclusion:
Portfolio created in the above assessment relatively increases the return generation
capability of the investors and the pics and investment opportunity which has low risk and
high return capability. The contents of the portfolio mainly create the measure which helps in
maximizing the profits while minimising any kind of risk from investment. The portfolio
relatively consists of equity shares of Australia, short selling, hedging procedures, LIC and

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ETP, which helps in developing an adequate portfolio that minimises the negative impact of
volatile capital market. The stocks are relatively selected on the basis of 10-day simple
moving average, which helps in determining the trend of the stock and whether it would
benefit the portfolio to generate high rate of returns from investment. Hence, the creative
portfolio supports all the relevant investment psychology to have higher rate of returns while
low risk involved in Investments.

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Reference and Bibliography:
Abc.net.au. (2017). ABC News. Retrieved 8 June 2018, from
http://www.abc.net.au/news/2017-12-05/interest-rate-rise-tipped-for-next-year-by-
reserve-bank-watchers/9226618
Au.finance.yahoo.com. (2018). Au.finance.yahoo.com. Retrieved 8 June 2018, from
https://au.finance.yahoo.com/
Cervelló-Royo, R., Guijarro, F., & Michniuk, K. (2015). Stock market trading rule based on
pattern recognition and technical analysis: Forecasting the DJIA index with intraday
data. Expert systems with Applications, 42(14), 5963-5975.
Chandra, P. (2017). Investment analysis and portfolio management. McGraw-Hill Education.
Damodaran, A. (2016). Damodaran on valuation: security analysis for investment and
corporate finance (Vol. 324). John Wiley & Sons.
Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley &
Sons.
Hoffmann, A. O., & Shefrin, H. (2014). Technical analysis and individual investors. Journal
of Economic Behavior & Organization, 107, 487-511.