Bloomberg Trading Game Report - FN7003 Finance, Portfolio Analysis

This report details a student's experience and analysis of the Bloomberg Trading Game, focusing on portfolio management and investment strategies within the context of the FTSE 100. The report begins with an executive summary, followed by an investment policy statement outlining the investmen...Read More

BLOOMBERG TRADING GAME
Student number
DEGREE

Table of Contents
EXECUTIVE SUMMARY......................................................................................................2
CHAPTER ONE.......................................................................................................................3
Investment Policy Statement...................................................................................................3
Investment objective................................................................................................................3
Investment strategy..................................................................................................................3
CHAPTER TWO.....................................................................................................................5
Portfolio Summary...................................................................................................................5
CHAPTER THREE.................................................................................................................9
Portfolio Performance Analysis..............................................................................................9
CHAPTER FOUR..................................................................................................................28
Conclusion...............................................................................................................................28
References...............................................................................................................................29
Appendices..............................................................................................................................31
1

EXECUTIVE SUMMARY
The importance of this report is to provide information about wealth growth of an investor
through investments in securities or financial instruments. In other words, investors can
enhance their wealth by doing diversified investment in various different types of stocks
available in the capital market. Diversification is a unique technique which reduces risk by
apportioning investments among various different stocks or securities. The main aim of
diversification is to maximize returns by investing in different areas of capital market. In this
report a portfolio is set up where 150 million pounds are invested by using “Bloomberg
trading platform”. The investment is done in various classes of assets which include: retail
and consumer electronic products. Another important purpose of this report is to develop
investigative and creative expertise in trading with Bloomberg. With the help of Bloomberg
trading platform the investor can create an effective portfolio which provides maximum
return in the future.
2

CHAPTER ONE
INTRODUCTION
Investment Policy Statement
Investment objective
The main objective of this project report is to provide wealth maximization technique to an
investor through diversified investment. As a financial planner, it is very important to manage
the risk in portfolio while adopting risk management technique. The wealth can be
maximizing through balanced investment in the portfolio which contains broad range of
different securities or financial instrument of FTSE 100.
Investment strategy
For buying the securities or stocks from the capital market the growth strategy of investment
is used. Growth strategy of investment is about purchasing the securities or stocks with an
aim of increasing in the securities value over a period of time i.e. one month. This strategy
follows an approach of diversification to create and manage the securities in an effective
manner (Tsangas, et. al., 2019).
According to Harry Markowitz, the creation of portfolio depend upon the relationship
between the returns expected represented by mean and the variability of these returns
represented by standard deviation or variance. Markowitz theory emphasizes on “efficient
frontier”, which provides better return for a given level of risk or minimum risk for a given
level of returns as compared to other portfolios (Eskerod, et. al., 2015).
Both risk and returns can be divided into the following two parts:
 Systematic (cannot be diversified)
 Non- systematic (can be diversified)
Systematic is such a component of risk and returns which is on account of the market wide
factors. It includes a change in economic policy, central bank restrictive policy of credit,
recession in industry, etc. Whereas non-systematic is such a component of risk and returns,
3

which is on account of the performance of the company. It includes company strike,
unexpected entry of a new competitor in the market, etc (Barillas and Shanken, 2018).
4

CHAPTER TWO
Portfolio Summary
Portfolio management is an important for the investors because it minimizes the level of risk
and provide satisfactory rate of return. An investor should choose securities or assets that
offer a rate of return and risk level which is acceptable to him.
FTSE 100 index is affected by geopolitical factors, industry sectors, issues affecting specific
firms and monetary policy. So what are the factors which recently influencing the volatility
and level of the FTSE:
 Interest rates
 The Brexit referendum
 Earning reports
 The bank of England’s quarterly inflation report
 Changes to specific industry sectors
The FTSE 100 impact the portfolio of investors in positive or negative manner depends upon
stocks which are included in the portfolio. The stock market impacts the rate of return and
also minimizes or maximizes the level of risk associated with portfolio. The diversified
investment helps to investors to reduce the level of risk in the portfolio (Grinold, 2018).
Returns and risk of a portfolio totally depend upon the co-relation between the securities
contained in the portfolio. The construction of portfolio basically depends upon two notions:
 Notion of diversification
 Notion of negative co-relation
What sort of shares should investors buy?
Investors find that some companies are very sensitive to the economic cycle of bust and
boom which often called cyclical stocks while other tend to be much less volatile which often
called defensive stock. Defensive stocks include big multinational consumer brand
companies and utilities, while cyclical stocks are companies like banks and builders of house
who often see their profits fall down sharply or even make losses when the economy
struggles (Kaiser, et. al., 2015).
5

Should investor buy non-UK stocks?
Now a days a lot of companies especially the biggest ones on the market of UK, sell their
products and services all around the world these days. In fact about 70% of profits from
FTSE 100 companies now come from outside UK. So it is better to invest little part in non-
UK companies to earn more profits (Liao, et. al., 2018).
Following are the 8 steps which help to the investor to build a high- yield low- risk
portfolio of stocks or securities:
 Only invest in companies with a track record of consist growth
 Only invest in companies with small pension and debt obligations
 Only invest in companies with a track record of inflation- beating growth
 Only invest in companies with consistently high profitability
 Invest in companies who have sustainable competitive advantages in the market
 Always focus on the long- term and ignore the short term
 Regularly improve the portfolio by continuously selling the weakest link
 Create a low risk portfolio by broadly diversifying
The major buying by an investor which included following stocks:
 ROKU
 OCADO
Portfolio information
The five largest holdings or portfolios above 5%, at the end of the trading period are shown
below.
Holding % of Fund value as at 22.04.19
RUKO 14.96
OCADO 5.25
Barclays 24.19
6

Portfolio performance record (example)
Investme
nt
Numbe
r of
shares
Beginnin
g price £
Beginnin
g market
value £
Endin
g
price
£
Ending
market
value £
Holdin
g
period
yield
% (Ri)
Mark
et
weigh
t (Wi)
Weighte
d rate of
return
(WiRi)
A 800,
000
20 16,000,00
0
15 12,000,00
0
25 0.05 1.25
B 500,
000
50 25,000,00
0
25 12,500,00
0
10 0.20 2.00
C 600,
000
40 24,000,00
0
45 27,000,00
0
5 0.75 3.75
Total 65,000,00
0
51,500,00
0
7.00
Overall, the return on the portfolio is 7.00%. Performance is cumulative over the period from
2/01/2018 to 22/04/2018.
7

Note: Formula for calculating the expected rates of return: E(Rport) = ∑
i=1
n
W i Ri
Where:
Wi = the weight of an individual asset in the portfolio (use the beginning market value)
Ri = the rate of return for asset i
8

CHAPTER THREE
Portfolio Performance Analysis
In this part each stocks or securities that were traded are explained and analysed. We have
five stocks where we traded but analysed and described only three most profitable in detailed
based on models like the SWOT analysis, PESTEL and Porter’s Five Forces.
OCADO Group PLC
Ticker Symbol: OCDO
Sector: Consumer Staples
Company description
Ocado Group plc. was established in 2000 by Tim Steiner, Jonathan Faiman and Jason
Gissing and is headquartered in Hatfield, the United Kingdom (Bodie, Kane and Marcus,
2013). In United Kingdom the company operates its business in online grocery and also
internationally. Ocado functions its business operations through two sections: Retail and
solution. The company involved in the monetization and development of intellectual property
and technology used for the online logistics, consumer goods, retailing and distribution of
grocery. On its website: Ocado.com, the company also sells general merchandise products
which includes three speciality destination sites like sizzle, a kitchen and dining store; fabled,
a premium beauty store; and fetch, a pet store.
Opening Message
The company main strategic objective is to align the interests of our investors, customers and
other important stakeholders to offer long term shareholder value. Ocado relies on online
shopping done by the customers (Liao and Chou, 2013). Following are the key points of
company which are mentioned below:
Delivery Punctuality: 94.9%
Mature CFC efficiency: 164 units per hour
194 deliveries per van per week
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Average basket size: £106.85
Order Accuracy: 98.8%
Average orders per week: 296K
Performance
1 week 5.39% (rise) 1 year 159.51% (rise)
1 month 31.82% (rise) 2 year 471.58% (rise)
3 months 69.94% (rise) 3 year 374.84% (rise)
6 months 63.25% (rise) 5 year 200.11% (rise)
Past performance is an indication of future performance and Performance figures are based
on the previous close price.
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Financial Analysis
11

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Balance Sheet: 02/12/2018 03/12/2017 27/11/2016 29/11/2015 30/11/2014
£
(Millions)
£
(Millions)
£
(Millions)
£
(Millions)
£
(Millions)
Assets:
Non-Current Assets:
Property, Plant &
Equipment:
556.70 468.20 397.30 327.30 275.20
Intangible Assets: 143.20 112.40 79.70 52.90 38.40
Investment
Properties:
n/a n/a n/a n/a n/a
Investments: 52.20 51.00 57.10 62.00 67.80
Other Financial
Assets:
4.10 3.00 2.60 n/a n/a
Other Non-Current
Assets:
17.40 14.30 14.20 12.90 9.80
773.60 648.90 550.90 455.10 391.20
Current Assets:
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Inventories: 56.50 42.90 39.10 29.90 27.60
Trade and Other
Receivables:
104.70 66.80 59.40 60.80 43.10
Cash at Bank & In
Hand:
410.80 150.00 50.90 45.80 76.30
Current Asset
Investments:
n/a n/a n/a n/a n/a
Other Current Assets: 4.30 0.40 0.30 n/a n/a
576.30 260.10 149.70 136.50 147.00
Other Assets: n/a n/a n/a n/a n/a
Total Assets: 1,349.90 909.00 700.60 591.60 538.20
Liabilities:
Current Liabilities:
Borrowings: 22.90 27.20 82.70 28.10 30.90
Other Current
Liabilities:
306.40 222.60 208.20 167.90 137.10
329.30 249.80 290.90 196.00 168.00
Net Current Assets: c n/a c n/a c n/a c n/a c n/a
14

Non-Current
Liabilities:
Borrowings: 337.70 350.80 133.10 144.70 144.80
Provisions: 17.70 15.80 14.20 6.30 5.20
Other Non-Current
Liabilities:
108.60 45.00 n/a 2.70 2.00
464.00 411.60 147.30 153.70 152.00
Other Liabilities: n/a n/a n/a n/a n/a
Total Liabilities: 793.30 661.40 438.20 349.70 320.00
Net Assets: 556.60 247.60 262.40 241.90 218.20
Capital & reserves:
Share Capital: 14.00 12.60 12.60 12.60 12.50
Share Premium
Account:
587.00 258.40 256.90 258.70 255.10
Other Reserves: (124.00) (163.50) (164.00) (167.90) (168.30)
Retained Earnings: 79.60 140.10 156.90 138.50 118.90
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Shareholders Funds: 556.60 247.60 262.40 241.90 218.20
Minority Interests /
Other Equity:
n/a n/a n/a n/a n/a
Total Equity: 556.60 247.60 262.40 241.90 218.20
16

PESTEL Analysis
PESTEL analysis of Ocado plc. discovers that how PESTEL could affect the company in
various ways.
Following table shows PESTEL Analysis
17

SWOT Analysis for Ocado is presented below:
Strengths Weaknesses
1. Strong platform of technology and also
have proprietary software.
2. Wide range of grocery offer and
competitive pricing
3. Company expand their business of own
brand name.
4. Ocado’s do their business in partnership
with strong brand such as Carrefour,
Morrison’s and Waitrose (Woodside-
Oriakhi, Lucas and Beasley, 2013).
1. Single market exposure and relatively in
small scale considering the whole UK market
of grocery.
2. The main business operations basically
dependent on credit debt and facilities.
Opportunities Threats
1. Investment in technology to increase
competitive advantage in the market and
also enhancement in capabilities (Hoesli,
and MacGregor, 2014).
2. In other European markets, expansion by
replicating the business model.
3. Robotics licensing allowed warehouse
platform working automatically.
1. Reduction in consumer spending due to
Brexit which slowdown the whole economy.
2. Strong price-wars in between various
grocery retail sectors affect the profit margin
of a company.
3. A great competition in between online
retail giants such as AMAZON FRESH.
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PORTER’s five forces model
19

20

21

22

23

RUKO, Inc.
Ticker Symbol: RUKO
Sector: Communication
Industry: Media
Company Description
ROKU Inc. was founded in October, 2002 by Anthony Wood and established as a Limited
liability company. It is an American traded company based in California. Company
manufactures a different variety of digital media players for customers who can easily access
the streamed video with the help of internet and services of audio via TV. The company also
licenses its software and hardware to other companies and earn more profits.
Financial Analysis
24

Roku Company’s PESTLE, SWOT and Porter 5 Forces:
SWOT analysis, PESTLE and Porter five forces are the strategic tools which are useful for
making the strategic planning. While they are assisting in identifying the company’s strengths
and weakness relative to the sartorial opportunities and challenges. Management of the cited
company could take the decisions by using these tools (Sevkli and et. al., 2012. ). Ruko
running in dynamic environment, where this is affected by the consumer spending attitude,
enhancing regulatory framework for environmental components, technological variation,
collective social trends, enhancing environmental activism among consumers, and regulatory
systems. Company’s SWOT is:
Strengths: Company’s strengths are:
 Brand identification of Affiliates.
 No monthly charges.
 Easy to get, user friendly, reasonable services, Accessible.
Weaknesses:
 Lack of Promotion
 Education
 Deficiency in specific brand image.
Opportunities:
25

 Consumer Lifestyle
 Deficiency in the direct Competitors
 Increasing popularity of online media
Threats:
 Easy to get in.
 Possible substitutes: Such as: game systems, Laptops
 Too relied upon the success of other media channels such as: Netflix, Amazon Prime and
others.
Porter’s five forces of Roku Inc.
This is the tool which helps to identify competitive landscape of an industry. Each force
assists strategic planners to assess an inherent profit potential throughout an industry. These
are mentioned as under:
Threat of new Entrants: Economies of scale is difficult to attain in the sector in which the
cited company is running. Hereunder, companies which are having large scale of business get
the competitive advantages. Roku Inc. is operating in the large scale and gain the cost
advantages (E. Dobbs, 2014). This also creates issues in terms of production cost for new
entrants, which ultimately creates the weaker force for the new entrants.
Bargaining Power of Suppliers: In this market, suppliers have the lesser control over the
prices and this turns the suppliers’ power in the weaker one.
Bargaining Power of Buyers: In this industry, suppliers are more than the buyers.
Therefore, they don’t have major control over the prices. This makes the bargaining power of
buyer is weaker one.
Threat of Substitute products: There are lesser substitutes available for the goods which are
manufactured in this industry. Henceforth, this makes the weaker force within the industry.
Rivalry Among existing Firms: Number of competitors are very less. Some of them are
large in size. This makes rivalry among existing firms a weaker force throughout the industry.
26

PEST analysis of Roku Inc.
This tool mentioned that might influence the profitability of survival of organization are
much diverse.
Political: Political risks dynamics from accidental variations in existing regimes of political
to civil conflict to quite decisions taken by the government. To adequately appraise an extent
of entire systematic political risk which Roku Inc. might be exposed to, following
components must be adhered before taking part in any investments (Zalengera and et. al.,
2014):
 Level of political firmness which has in current years.
 Politician integrity and their likelihood in order to involve in corruption.
 High tax rate in the country.
Economic: These are linked to the economy. For example, inflation rate, interest rate, GDP
and existing stage of economic cycle.
 Economic framework is operational in sector in question.
 GDP growth rate will affect Roku Inc’s growth rate.
 Interest rate will ultimately assist about at what amount company’s is forecasted to grow
in the future period of time.
Social Factor: The social factors which influence Roku Inc are direct reflection on the
society. Social factors influences are not only crucial for functional aspects of the cited
company but also on the marketing culture of the organization.
Technological Factor: This might dismantle the price framework and competitive landscape
of an industry in a lesser period of time. Henceforth, this becomes highly crucial to have
innovative in the market.
27

CHAPTER FOUR
Conclusion
This report concluded that efficient portfolio helps the investor in generation of more income
from the investment in various types of security. While using diversified technique the
investor can reduce the level of risk and achieve the satisfactory return from this portfolio. In
this report various models which include Porter’s five force model, SWOT analysis and
PESTLE analysis are used for analysis the performance of companies.
Number of words after excluding Executive Summary and References: 2451
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References
Barillas, F. and Shanken, J., 2018. Real-time Portfolio Choice Implications of Asset Pricing
Models.
Eskerod, P., Huemann, M. and Savage, G., 2015. Project stakeholder management—Past and
present. Project Management Journal, 46(6), pp.6-14.
Grinold, R., 2018. Linear Trading Rules for Portfolio Management. The Journal of Portfolio
Management, 44(6), pp.109-119.
Kaiser, M.G., El Arbi, F. and Ahlemann, F., 2015. Successful project portfolio management
beyond project selection techniques: Understanding the role of structural
alignment. International Journal of Project Management, 33(1), pp.126-139.
Liao, X.Z., Peng, L.H., Wu, L.X., Tian, M.W. and Yan, S.R., 2018. Research on the
optimization of modern portfolio model based on optimal investment weight. Journal of
Interdisciplinary Mathematics, 21(5), pp.1157-1162.
Tsangas, M., Jeguirim, M., Limousy, L. and Zorpas, A., 2019. The Application of Analytical
Hierarchy Process in Combination with PESTEL-SWOT Analysis to Assess the
Hydrocarbons Sector in Cyprus. Energies, 12(5), p.791.
Zalengera, C., Blanchard, R.E., Eames, P.C., Juma, A.M., Chitawo, M.L. and Gondwe, K.T.,
2014. Overview of the Malawi energy situation and A PESTLE analysis for sustainable
development of renewable energy. Renewable and Sustainable Energy Reviews, 38, pp.335-
347.
Sevkli, M., Oztekin, A., Uysal, O., Torlak, G., Turkyilmaz, A. and Delen, D., 2012.
Development of a fuzzy ANP based SWOT analysis for the airline industry in Turkey. Expert
systems with Applications, 39(1), pp.14-24.
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), pp.32-45.
Hoesli, M. and MacGregor, B.D., 2014. Property investment: principles and practice of
portfolio management. Routledge.
29

Liao, S.H. and Chou, S.Y., 2013. Data mining investigation of co-movements on the Taiwan
and China stock markets for future investment portfolio. Expert Systems with Applications,
40(5), pp.1542-1554.
Bodie, Z., Kane, A. and Marcus, A.J., 2013. Investments and portfolio management. McGraw
Hill Education (India) Private Limited.
Woodside-Oriakhi, M., Lucas, C. and Beasley, J.E., 2013. Portfolio rebalancing with an
investment horizon and transaction costs. Omega, 41(2), pp.406-420.
R. Vlastelica, Roku Tumbles as Analysts See Competition From Apple and Amazon. 2019.
(Online). Available through:< https://www.bloomberg.com/news/articles/2019-04-04/roku-
tumbles-as-analysts-see-competition-from-apple-and-amazon>.
Ocado, 2019. (Online). Avaialbe through:< https://www.bloomberg.com/quote/OCDO:LN>.
30

Appendices
OCADO PLC.
ROKU Inc.
31