Financial Management: Investment Strategy Report for US Stock Market

This report, prepared for a financial management course, presents an investment strategy for a client, Mr. Tom Karman, focusing on the US stock market. The report begins with an Investment Policy Statement outlining the client's profile, including age, investment horizon, risk tolerance, and liquidity needs. It then details the rationale behind selecting Brookfield Asset Management (BAM) as a suitable stock, based on factors like long-term trends, return history, financial performance, and valuation. The report includes an analysis of the economic environment and business analytics supporting the stock choice, emphasizing the importance of dividend-paying stocks and the company's growth prospects. The report also references several sources to support the analysis and recommendations.

Running head: FINANCIAL MANAGEMENT
Financial Management
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Part 1................................................................................................................................................2
Investment Policy Statement...........................................................................................................2
Stock Selection................................................................................................................................3
References........................................................................................................................................5

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Part 1
Investment Policy Statement
The investment policy statement has been specifically prepared for Mr Tom Karman, who is
looking for investment related specific consideration to invest a sum of around $100,000 in the
US Stock Market. The key details of the client are as follows:
 Client Name: Tom Karman
 Client Age: 25
 Amount Available: $100,000
 Dependants: None
 Investment Horizon: Long Term (15 Years).
 Stock/Portfolio Review: Monthly.
 Return Benchmark: Higher than Benchmark Index (S&P 500 Index).
 Risk Tolerance: Moderate
 Liquidity Requirement: None.
The profile of the client well says that the available amount will be well invested into a key
stock in the US Market which can well help the client achieve or earn a better set of return for
the term period of investment. Since, liquidity is not a key constraint and time horizon
considered for equity investment is considerably long, thus we expect that the stock considered
would be able to provide a superior set of return for Mr Karman. The notional amount of
$100,000 that would be invested in the US Equity Market would be well invested into a key
stock which would be providing the client with a regular dividend income along with a scope of

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capital appreciation in the form of increase in the stock price. In order to well analyse the correct
stock in response to the investment profile screening of the stock would be done which well
matches with the client’s profile. Economic Analysis, Business and Industry Analysis of the
stock selected would be acting as the key basis for us to evaluate, analysis and examine the
movement of the stock.
Stock Selection
The 2010’s were a kind to the Average Wall Street Investors, as the decade is primed to
go down as the financial market enters as the first uninterrupted full decade bull market in the
history. The ongoing trade war between US and China stills looms on as we are in the year 2020.
However, the U.S Economy is set to improve as the industry growth and business operations
increases widely. While it is important to note, that each of the year can set a record high of 20%
plus gains as seen in year 2019. It is important that investor select such a company which have a
good line of business, with a solid prospectus and a handful of defensive minded names as
prudent looking forward (Alden 2020). When the overall interest rate prevailing in the economy
remains at a conservative low levels, it becomes attractive for the equity investors to create a
significant amount of wealth from the equity market by selecting and investing into right stock.
Considering the economic growth prospects and the business analytics for the company it is
important to well select a stock that pays dividend on a regular basis (Financial Report 2017). In
order to well screen and analyze the stocks we would be specifically considering stock that has a
consecutive dividend growth, solid growth prospect, sustainable amount of dividend pay-out
ratio. The strategy that would be followed in this respect would be that the dividend paid by the
company would be meeting the clients regular income needs if needed or would be invested or

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used for the purpose of reinvesting into the stocks. The stock that has been primarily selected for
the purpose of analysis is Brookfield Asset Management (BAM). The key set of criteria that the
stock has set up for the stock were as follows:
 Criteria 1: The Company benefited from the long-term trend rate and has a little amount
of foreseeable risk of obsolescence.
 Criteria 2: The Company has a return history of above-average return on the capital
invested and has a durable economic moat to keep that way.
 Criteria 3: Strong financial performance along with strong balance sheet.
 Criteria 4: Company enjoys a profitable set of growth.
 Criteria 5: The valuation of the company is reasonable well and is fairly traded.
Since, the above criteria set for the stock selection are well matched up for the stock and the
clients requirement are well in response to the considered stock, the BAM stock would be
considered for further analysis purpose.

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References
Alden, L. 2020 7 Top Stocks to Buy Today and Hold Forever, Lynalden.com. Available at:
https://www.lynalden.com/top-stocks-to-buy/ (Accessed: 18 February 2020).
Alden, L. 2020 7 Top Stocks to Buy Today and Hold Forever, Lynalden.com. Available at:
https://www.lynalden.com/top-stocks-to-buy/ (Accessed: 18 February 2020).
Annual Report 2017 Bam.brookfield.com. Available at:
https://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR-V2/quarterly-reports/2018/
annual/BAM-Annual-2018.pdf (Accessed: 18 February 2020).
Annual Report 2018 Bam.brookfield.com. Available at: Annual
Rehttps://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR-V2/quarterly-reports/
2017/bam-annual-2017/bam-annual-report-2017-r.pdf (Accessed: 18 February 2020).
BAM - Brookfield Asset Management Inc Forecast - CNNMoney.com 2020. Available at:
https://money.cnn.com/quote/forecast/forecast.html?symb=BAM (Accessed: 18 February 2020).
BAM Stock Rating and Data | Brookfield Asset Management - GuruFocus.com 2020. Available
at: https://www.gurufocus.com/stock/BAM/summary (Accessed: 18 February 2020).
Bloomberg 2020. Available at: https://www.bloomberg.com/markets/rates-bonds/government-
bonds/us (Accessed: 18 February 2020).
Brookfield Asset Management - BAM - Stock Price & News | The Motley Fool 2020. Available
at: https://www.fool.com/quote/nyse/brookfield-asset-management/bam/ (Accessed: 18 February
2020).

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Brookfield Asset Management 2020. Available at: https://bam.brookfield.com/ (Accessed: 18
February 2020).
Financial Report 2017. Available at: https://bam.brookfield.com/reports-and-filings/financial-
reports/annual-reports/2017 (Accessed: 18 February 2020).
Inc, B. 2020 Brookfield Asset Management Reports 2019 Net Income and FFO and Announces
Three-for-Two Stock Split, GlobeNewswire News Room. Available at:
https://www.globenewswire.com/news-release/2020/02/13/1984415/0/en/Brookfield-Asset-
Management-Reports-2019-Net-Income-and-FFO-and-Announces-Three-for-Two-Stock-
Split.html (Accessed: 18 February 2020).
Ratings, A. et al. 2020 BAM Stock Price, Forecast & News (Brookfield Asset
Management), Marketbeat.com. Available at: https://www.marketbeat.com/stocks/NYSE/BAM/
(Accessed: 18 February 2020).
Stock analysis - including stock price, stock chart, company news, key statistics 2020. Available
at: https://www.bnnbloomberg.ca/stock/BAM/A:CT (Accessed: 18 February 2020).
Yahoo Finance 2020. Available at: https://finance.yahoo.com/quote/%5EGSPC/history?
period1=1424217600&period2=1581984000&interval=1mo&filter=history&frequency=1mo
(Accessed: 18 February 2020).