RM Investments Investments- Fall 2005 Marshall Blake Rachel Swartzbaugh.
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Transcript of RM Investments Investments- Fall 2005 Marshall Blake Rachel Swartzbaugh.
RM InvestmentsRM Investments
Investments- Fall 2005Investments- Fall 2005
Marshall BlakeMarshall Blake
Rachel SwartzbaughRachel Swartzbaugh
OutlineOutline
AllocationsAllocationsRM Index vs. S&P 500RM Index vs. S&P 500RatiosRatiosExpected Returns and BetasExpected Returns and BetasCorrelationsCorrelationsEfficient PortfolioEfficient PortfolioConclusionConclusion
DiversificationDiversification
1.1. Exxon Mobile (XOM)Exxon Mobile (XOM)2.2. Texas Utilities (TXU)Texas Utilities (TXU)3.3. United Health Group (UNH)United Health Group (UNH)4.4. AstraZeneca plc (AZN)AstraZeneca plc (AZN)5.5. Time Warner (TWTC)Time Warner (TWTC)6.6. AT& T (T)AT& T (T)7.7. Citigroup ( C)Citigroup ( C)8.8. Washington Mutual (WM)Washington Mutual (WM)9.9. Chicago Bridge & Iron (CBI)Chicago Bridge & Iron (CBI)10.10. Jacobs Engineering Group Inc. (JEC)Jacobs Engineering Group Inc. (JEC)11.11. Martha Stewart (MS0)Martha Stewart (MS0)12.12. TRX Inc (TRXI)TRX Inc (TRXI)
Sector AllocationsSector AllocationsCompany Allocation % September 30, 2005
Energy, 16.69%
Biotechnology, 17.02%
Financial, 10.98%
Manufacturing, 11.53%
Engineering, 10.10%
Media, 10.10%
Technology, 11.14%
Communications
11.47%
Asset AllocationAsset Allocation
Asset Allocation
50%
28%
10%
12%
Large Cap
Mid Cap
Small Cap
Micro
Market Trend (Sept-Nov)Market Trend (Sept-Nov)
Trend of S&P 500 vs. RM Index
$0.00
$200.00
$400.00
$600.00
$800.00
$1,000.00
$1,200.00
$1,400.00
Date
$
S&P 500
RM Index
Note: Index Multiplier was 8E-04
RatiosRatios
P/E Price/Book Profit Dividend Qtrly Earnings
Ratio Ratio Beta Margin Yield Growth Rate
XOM 11.14 3.42 1.08 10.67% 1.90% 74.60%
TXU 51.53 30.2 0.83 7.59% 1.60% -15.70%
UNH 26.13 6.88 0.90 7.23% 0.02% 20.60%
AZN 20.36 5.69 0.59 16.16% 2.20% 1.00%
TWTC N/A 3.98 1.77 -17.62% 0.00% -2.50%
T 21.80 1.99 0.77 10.13% 5.10% -1.70%
C 11.07 2.23 0.92 27.99% 3.60% 34.60%
WM 11.41 1.62 0.78 20.92% 4.50% 21.80%
CBI 31.22 5.01 1.09 4.03% 0.40% 327.00%
JEC 25.56 3.34 1.14 2.68% 0.00% 40.40%
MSO -11.88 6.69 0.94 -46.35% 0.00% 30.00%
TRXI -34.85 4.93 0.75 -10.40% 0.00% 29.70%
Using Historical Data (past 5 years)Using Historical Data (past 5 years)
S&P 500S&P 500 PortfolioPortfolio
(Oct.)(Oct.)
PortfolioPortfolio
(Dec.)(Dec.)
E (r )E (r ) 2.37%2.37% 1.30%1.30% 1.95%1.95%
BetaBeta 1.001.00 0.950.95 0.950.95
CAPMCAPM
Expected Returns
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
Name
%
CAPMCAPM
Risk Free Rate= 4.02%Risk Free Rate= 4.02%
Return of Market= 2.37%Return of Market= 2.37%
Portfolio’s E ( r)=2.41%Portfolio’s E ( r)=2.41%
What was expected of portfolio is higher than market’s return.
CorrelationsCorrelations XOM TXU UNH AZN TWTC T C WM CBI JEC MSO
XOM 1
TXU 0.24 1.00
UNH 0.06 -0.03 1.00
AZN 0.26 -0.13 0.21 1.00
TWTC 0.12 -0.07 -0.15 0.00 1.00
T 0.35 -0.19 0.07 0.48 0.07 1.00
C 0.28 -0.21 0.06 0.27 0.39 0.32 1.00
WM 0.00 0.00 0.01 0.25 -0.10 0.33 0.13 1.00
CBI 0.34 0.15 0.04 0.20 0.19 0.10 0.24 0.22 1.00
JEC 0.32 0.16 0.08 0.08 0.25 0.03 0.15 0.20 0.42 1.00
MSO 0.21 -0.02 0.03 -0.05 0.39 0.09 0.37 0.06 0.16 0.21 1
Efficient PortfolioEfficient Portfolio
Por tf ol i o Wei ghts i n an Opti mal (T angent) Por t.
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
1 2 3 4 5 6 7 8 9 10
Asset Number
RM InvestmentsRM InvestmentsConclusionConclusion
A low-risk portfolioA low-risk portfolioDiversifiedDiversifiedNot as efficient as could beNot as efficient as could beRelatively stable compared with S&P 500Relatively stable compared with S&P 500
Remember RM Investments!Remember RM Investments!