Advanced Financial Management: Portfolio Analysis Project Report

This project report focuses on advanced financial management, specifically analyzing the application of technical and fundamental analysis in creating and evaluating investment portfolios. The report begins with an introduction that outlines the methodologies used, including the selection of 20 companies from the top FTSE companies to construct two distinct portfolios. The first portfolio is built using technical analysis, focusing on market trends and stock price movements, while the second portfolio employs fundamental analysis, assessing financial statements and company performance. The report includes a literature review that explores key concepts like the Efficient Market Hypothesis (EMH) and behavioral finance, discussing how these theories influence investor decisions. The methodology section details the use of dividend discount and PE multiple models for stock valuation within the fundamental analysis portfolio, and line charts and moving averages for technical analysis. The results and analysis section presents a detailed analysis of individual stocks from each portfolio, providing insights into their valuation and performance. The report concludes by comparing the performance of both portfolios, highlighting the effectiveness of each approach and drawing conclusions about the best strategies for investment decisions.

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Project Report

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Introduction:
This report emphasize about the fundamental and technical analysis. For preparing
this report, various companies have been taken into the context to prepare two portfolios. For
preparing the portfolios 2 technique has been taken into the consideration which are technical
analysis and fundamental analysis. The top FTSE companies have been analyzed and 20
companies have been chose from them to make 2 portfolios.
Firstly, technical analysis has been taken into consideration to prepare the first
portfolio and second portfolio has been prepared after conducting the fundamental analysis
over that. Both the methods are quite crucial to make a better decision about the investment
in stocks. Technical analysis study considers the demand and supply of stocks and makes
investment decision on the basis of demand and supply at the same time fundamental analysis
considers the financial statement and various changes into the company in a particular period
and makes a better decision accordingly about the investment in the security. In fundamental
analysis, worth of business is the main concern whereas in technical analysis, stock price is
the main concern of the portfolio managers and the investors.
Literature review:
EMH (Efficient Market Hypothesis) is a theory which is supported by the “random
walk theory”. In this theory, stock prices are the main concern of the investors to analyze and
make a decision about the stocks and a portfolio. According to this theory, the hypothesis is
made by the investors according to the current market price. The random walk theory depict
that investors only look over the current stock price of the company. This theory says that
only current stock prices are reflected in the news and the changes in the stock prices are
independent. In addition, this theory depict that the changes in the stock price are quite
normal and impulsive. According to the result, the prices of the stock are only reflected over

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the current news and information. Although the unaware investors still trades according to the
market prices and also ignores the current trends and only look over the rate of return.
Schlichting (2013) has depicted in his research that the stock prices fluctuations are
independent and probability distribution is also similar. Normally stock prices are
unpredictable and random. Phillips and Stawarski (2016) has argued that the capital market
and the shares might be only recognized as an arbitrary in which a coin is tossed while it has
been depicted by Madura, (2014) into a study that share prices mainly explain about the
theory of random walks throughout a period: it has been found that the changes in the stock
prices are hasty as they take place just in the reaction to genuinely analyze the new
information which are currently new.
Additionally, behavioural Finance have been studied and found that this theory
depicts that the investors make decision by influencing through their individual behaviour.
Basically, this theory has been derived from the psychosomatic principles to make a better
decision. Normally, investors make a decision through using their behaviour such as changes
into one market would affect over the international market as well. Cognitive psychology
affects this theory that explains about the making process of and also explains the investors
about the economics of financial market (Kurth, 2013). Behavioral finance concept mainly
focuses over the interpretation of shareholders and proceeds according to the information to
make decision about the informed investment. Palicka, (2011)’s study depicts that Investors
do not always act in a standard, conventional and an unbiased manner. Behavioral finance
concept depicts about an accent upon investors behavior which leads to a selection of market
indiscretion. Krantz, (2016) has depicted into his study that Behavioral Finance is just a
psychological study that how the behavior makes an impact over the investor’s decision as
well as the capital market. According to Kinsky, (2011), this concept is quite good concept to
take a better decision.

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Further it has been depicted by Elton et al, (2009) that this study of Behavioral
finance is the psychology’s pressure on the behavior of practitioner in context of finance and
the consecutive effect over the financial markets. More it has been investigated that some
belongings of finance are probably depends over the shareholders which are quietly less
balanced behavior and it directly outcome from psychosomatic variables, prejudices and
heuristics.
It has been observed through study over both the theories and investment analysis
technique that fundamental and technical both the theories are quite different from each other
and thus both are crucial in their own way (Baker and Nofsinger, 2010). Usually, it has been
analyzed that if the investors want to make investment for a long time than they take the help
of fundamental analysis and analyze every single factor of the company whereas if the
investors want to make investment for a short time than they take the help of technical
analysis and only look over the stock price of the company (Ackert and Deaves, 2009).
It has been observed through a study that all the models are quite diverse in nature but
somehow they are connected to each other and help the investors to make a better decision
about the performance of the company and make a decision about the investment in the stock
or not. Both the techniques are quite important for the inventors and EMH and behavioral
finance affects the decision of the investors to invest or not to invest into the stock of the
company.
Rational and methodology:
For preparing the portfolio, 20 companies have been analyzed according to the
technical and fundamental basis and 2 portfolios have been prepared accordingly. First
portfolio has been prepared after analyzing the stock according to the technical analysis and

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at the same time second portfolio has been prepared after analyzing the stock according to the
fundamental analysis.
Firstly, technical analysis has been taken into consideration to prepare the first
portfolio and second portfolio has been prepared after conducting the fundamental analysis
over that. Both the methods are quite crucial to make a better decision about the investment
in stocks. Technical analysis study considers the demand and supply of stocks and makes
investment decision on the basis of demand and supply at the same time fundamental analysis
considers the financial statement and various changes into the company in a particular period
and makes a better decision accordingly about the investment in the security. In fundamental
analysis, worth of business is the main concern whereas in technical analysis, stock price is
the main concern of the portfolio managers and the investors.
Both the portfolios which have been made according to the fundamental and technical
analysis are connected to each other somehow. Fundamental analysis look over the stocks
selection which are mainly focuses over the financial performance of the company while the
technical analysis look over the share price while selecting the stock. For this report paper, it
has been analyzed that the performance of the CapitaLand Limited’s stock are quite strong
and the P/E ratio of the company is 22.66% (Yahoo finance, 2017). Further, various other
stocks have also been analyzed to prepare the portfolio as well as trading the share in the
market (Yahoo finance, 2017). Thus, it has been found that both the technical and
fundamental analysis has been focused to select the best stocks (Palicka, 2011).
It has been observed that the option of choosing both the methods of stock selection
are better the outcome is quite significant. Therefore, in this report, 2 portfolios have been
made where every portfolio includes 10 stocks which are based on technical and fundamental
analysis (Appendix-1).

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Results and analysis:
Analysis of one Stock from Fundamental Portfolio
For conducting the fundamental analysis, PE multiple model and dividend discount
model have been used as both the techniques are quite appropriate and significant for the
company. For this report, Courts Asia Limited has been taken into the context to analyze the
stock:
Dividend Discount Model
Dividend discount model has been taken into the context to calculate the intrinsic
value of the stock by analyzing the expected dividend. Intrinsic value of firm is as below:
Dividend Discount Model
Dividend expected 0.08
Growth rate 5%
Discount rate 5.26%
Intrinsic Value 30.67
Through the analysis over the courts Asia limited, it has been observed that intrinsic
value of the company is SGD 30.67 which has been investigated after applying the DDM
(Madura, 2014). Further, the current market price of stock is SGD 25.68 (Yahoo finance,
2017). Thus it has been found that the stock is undervalued.
PE Multiple Model
PE multiple models have been taken into the context to calculate the intrinsic value of
the stock. Intrinsic value of firm is as below (Madura, 2014):
PE Multiple Model
Industry PE ratio 20.00
EPS of Courts Asia

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Limited 1.50
Intrinsic Value 30.00
Through the analysis over the courts Asia limited, it has been observed that intrinsic
value of the company is SGD 30 which has been investigated after applying the PE multiple
model (Madura, 2014). Further, the current market price of stock is SGD 25.68 (Yahoo
finance, 2017). Thus it has been found that the stock is undervalued.
Analysis of a Stock from Technical Portfolio
For conducting the technical analysis, line chart and moving average model have been
used as both the techniques are quite appropriate and significant for the company. For this
report, Chip Eng Send Corporation limited has been taken into the context to analyze the
stock:
Line Chart:
05/06/2017
08/06/2017
11/06/2017
14/06/2017
17/06/2017
20/06/2017
23/06/2017
26/06/2017
29/06/2017
02/07/2017
05/07/2017
08/07/2017
11/07/2017
14/07/2017
17/07/2017
0.7
0.705
0.71
0.715
0.72
0.725
0.73
0.735
0.74
0.745
Chip Eng Seng Corporation Ltd
Price
Figure 1: Analysis of Chip Eng Seng Corporation Ltd

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Through the line chart over the Chip Eng Seng Corporation Ltd’s stock price, it has
been found that the stock price of the company is quite fluctuate and currently the share price
of the company is enhancing and thus it is a good option for the investors to invest into the
stock of this company.
Moving Average:
Further, the moving average model has been analyzed over the Chip Eng Seng
Corporation Ltd’s stock price, it has been found that the stock price average of the company
is 0.72664 and currently the share price of the company is quite good and thus it is a good
option for the investors to invest into the stock of this company.
Activities in Fundamental Portfolio
In fundamental portfolio, 2 trades have taken place. Under 1st activity, Star Hub Ltd’s
1000 shares have been traded at the rate of S$2.81 per share on June 30, 2017. The stock of
Star Hub Ltd has been taken into the context as the stock price of the company was on peak
and thus the profits of the company could be maximum. More, in 2nd activity, courts Asia
limited’s 4697 shares had been purchased on august 22, 2017 at the rate of SGD $0.455
(Appendix). The total profit of the investor which has been got through selling the shares of
Start hub limited has been used in buying the shares of courts Asia limited.
Activities in Technical Portfolio
In technical portfolio, 2 trades have taken place. Under 1st activity, OUE Ltd’s 1000
shares have been traded at the rate of S$0.57 per share on June 30, 2017. The stock of OUE
Ltd has been taken into the context as the stock price of the company was quite less and thus
the profits of the company could be maximum. More, in 2nd activity, Chip Eng Seng
limited’s 800 shares had been sold on august 22, 2017 at the rate of SGD $0.72 (Appendix).

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The total profit of the investor which has been got through selling the shares of OUE limited
has been used in buying the shares of Chip Eng Seng limited.
Evaluation of Performance of both the Portfolios
Through investigating over both the portfolio, it has been found that the second
portfolio of the fundamental analysis has been performed better than the first portfolio of
technical analysis. It has been analyzed that the portfolios would perform better.
Conclusion:
Thus according to the report, it has been found that the second portfolio of the
fundamental analysis has been performed better than the first portfolio of technical analysis.
It has been analyzed that the portfolios would perform better.

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References:
Ackert, L. and Deaves, R. (2009). Behavioral Finance: Psychology, Decision-Making, and
Markets. Cengage Learning.
Baker, H.K. and Nofsinger, J.R. (2010). Behavioral Finance: Investors, Corporations, and
Markets. John Wiley & Sons.
Elton, E.J., Gruber, M.J., Brown, S.J., and Goetzmann, W.N. (2009). Modern Portfolio
Theory and Investment Analysis. John Wiley & Sons.
Kinsky, R. (2011). Charting Made Simple: A Beginner's Guide to Technical Analysis. John
Wiley & Sons.
Krantz, M. (2016). Fundamental Analysis for Dummies. John Wiley & Sons.
Kurth, S. (2013). Critical Review about Implications of the Efficient Market Hypothesis.
GRIN Verlag.
Madura, J. (2014). Financial Markets and Institutions. Cengage Learning.
Palicka, V.J. (2011). Fusion Analysis: Merging Fundamental and Technical Analysis for
Risk-Adjusted Excess Returns. McGraw Hill Professional.
Phillips, P.P. and Stawarski, C.A. (2016). Data Collection: Planning for and Collecting All
Types of Data. John Wiley & Sons.
Schlichting, T. (2013). Fundamental Analysis, Behavioral Finance and Technical Analysis on
the Stock Market. GRIN Verlag.
Yahoo finance. (2017). SBS transit Limited: Key Statics. [Online]. Available at:
https://sg.finance.yahoo.com/quote/SBVV.SI/history?p=SBVV.SI [Accessed on: 28
Aug 2017].

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Yahoo finance. (2017). Chip eng Seng corporation limited: Key Statics. [Online]. Available
at: https://sg.finance.yahoo.com/quote/C29.SI/history?p=C29.SI [Accessed on: 28 Aug
2017].
Yahoo finance. (2017). Global Logistic Properties Limited. [Online]. Available at:
https://finance.yahoo.com/quote/MC0.SI/profile?p=MC0.SI7 [Accessed on: 28 Aug
2017].

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Appendix:
CapitaLand Limited
Ezion Holdings
Limited Courts Asia Limited
Wing Tai H
Limit
Date
Adj
Closing
Daily
return
Adj
Closing
Daily
return
Adj
Closing
Daily
return
Adj
Closing
D
r
17-06-2017 3.03 0.345 0.445 1.61
18-06-2017 3.03 0.00% 0.35 1.45% 0.44 -1.12% 1.61
19-06-2017 3.08 1.65% 0.34 -2.86% 0.44 0.00% 1.615
20-06-2017 3.08 0.00% 0.36 5.88% 0.45 2.27% 1.61
21-06-2017 3.07 -0.32% 0.365 1.39% 0.44 -2.22% 1.625
22-06-2017 3.08 0.33% 0.38 4.11% 0.445 1.14% 1.63
23-06-2017 3.10 0.65% 0.37 -2.63% 0.445 0.00% 1.635
24-06-2017 3.10 0.00% 0.365 -1.35% 0.45 1.12% 1.625
25-06-2017 3.10 0.00% 0.375 2.74% 0.45 0.00% 1.625
26-06-2017 3.10 0.00% 0.375 0.00% 0.45 0.00% 1.645
27-06-2017 3.11 0.32% 0.405 8.00% 0.445 -1.11% 1.635
28-06-2017 3.10 -0.32% 0.405 0.00% 0.45 1.12% 1.63
29-06-2017 3.08 -0.65% 0.4 -1.23% 0.445 -1.11% 1.63
30-06-2017 3.04 -1.30% 0.39 -2.50% 0.445 0.00% 1.615
01-07-2017 3.02 -0.66% 0.375 -3.85% 0.445 0.00% 1.6
02-07-2017 3.00 -0.66% 0.39 4.00% 0.45 1.12% 1.6
03-07-2017 3.00 0.00% 0.375 -3.85% 0.45 0.00% 1.59
04-07-2017 2.99 -0.33% 0.375 0.00% 0.445 -1.11% 1.585
05-07-2017 2.97 -0.67% 0.36 -4.00% 0.44 -1.12% 1.58
06-07-2017 2.98 0.34% 0.37 2.78% 0.445 1.14% 1.575
07-07-2017 2.98 0.00% 0.37 0.00% 0.445 0.00% 1.575