Twelve months ago, you had a $20 000 windfall, and decided to invest all of this money by purchasing shares in companies listed on the ASX. Decide, with reasons, on the companies you invested in, and then access the price you paid for their shares twelve months ago. Discuss the growth, or otherwise, of your investment and compare the performance in the share values of each of the selected companies against an appropriate market indicator.
Mathematical Investigations Using ET where appropriate, investigate the profitability of their investment by calculating: The total purchase price of the shares at their market value 12 months ago The break-even price for each company The return from any dividends issued within the last 12 months Any other issues that occurred, eg rights or bonus issues The return on selling the shares at the current market value and therefore any profit or loss The appropriate taxation obligation Any other useful mathematical information. You should include graphs for each company you include that illustrates the performance of the share price against an appropriate index.
Analysis/Discussion Analyse the quality of the investment decisions you made. You may wish to consider: The performance of each of the selected companies and any identifiable reasons The profitability of their investment The performance of each company against an appropriate market indicator A comparison using appropriate calculations with other shares in their sector Any assumptions made and limitations of the investigation.
Resources www.asx.com.au www.weblink.com.au individual company web-sites Share Investment Strategies (handout)
A completed project should include: an introduction that outlines the problem to be explored, including its significance, its features, and the context; the method of solution in terms of the mathematical model or strategy to be used; the appropriate application of the mathematical model or strategy, including: the generation or collection of relevant data and/or information, including details of the process of collection; mathematical calculations and results, and appropriate representations; the analysis and interpretation of results; reference to the limitations of the original problem as well as appropriate refinements and/or extensions; a statement of the solution and outcome in the context of the original problem; appendixes and bibliography as appropriate.
Your report should be structured to include: Introduction Mathematical Investigations Analysis/Discussion Note: Your report should be written in the form 'The analysis ……' rather than 'When I analysed……' or 'When you analyse…….'.
Performance will be assessed on the extent to which the following are demonstrated: Mathematical skills and understandings (with and without electronic technology) Analysis and interpretation of results and information The communication of mathematical information The organisation and presentation of material The ability to work independently YEAR 12 MATHEMATICAL APPLICATIONS
Share Investments Assignment Strategies Investment Strategies - by R Ambrose Dogs of the Dow This was a strategy thought up in the US, hence the reference to the Dow. This method removes any randomness from your stock picking and removes any need to monitor your portfolio more than once a year, so it can save a lot of time if you are a part time investor. At the beginning of the year you put an equal amount of money into the ten shares in the Dow (or other stock exchange, e.g. FTSE100) that have the highest yield, i.e. pay the highest dividend relative to their current share price. You then ignore them for a year, when you then sell them all and do it all again. The theory behind this is that shares go in and out of favour. The ones with the highest yield are currently out of favour, so you buy them. After a year they will hopefully have come back into favour and their prices will have increased. Also, because you are selecting from the biggest companies around (i.e. shares in the Dow or FTSE100) your investment should be fairly safe. There are several variations on this strategy to try and improve the return. One variation is to ignore the share with the highest yield and share your money out between the other nine companies. This is because it is likely that this company has a high yield for a reason, i.e. problems with the company, rather than it just being out of favour. Investment Strategies - by R Ambrose Technical Analysis As with growth investors, technical analysts often ignore the fundamentals of a company. They decide when to buy or sell shares based on analysis of the share price graph of a company, making use of various technical indicators to act as buy or sell signals. Technical analysts often have a short term view of the market compared to fundamentalists. They believe that charts follow trends and patterns that do not necessarily reflect the fundamentals of a company as the graph does not show how a company's absolute value is changing over time, rather it is describing how thousands of investors' opinions of the company are changing. So, if a company is increasing in value it could continue more than the company's fundamentals would suggest, as there is human psychology at work. Investment Strategies - by R Ambrose Growth Investing Growth investors look for companies that are growing and will continue to grow quickly. They are less concerned about companies that have high price/earnings ratios as they expect that as the company rapidly grows its earnings will also rise quickly, which will reduce the price/earnings ratio in the future. Growth investors can often ignore the fundamentals of a company, paying far more than a value investor would think sensible. They are hoping that the earnings growth of the company will justify the price they paid, but there is more danger that prices could fall a long way if the company does not meet the market's expectations. Investment Strategies - by R Ambrose Value Investing Value investing is a strategy where investors try to find companies that represent good value, e.g. their price/earnings ratio is low compared to similar companies. The theory is that these companies are currently out of favour and so have low prices, but one day they will come back into favour and the price will go up. Also, as the company is already good value it is less likely to drop as far as other higher rated companies if the stock market took a down turn. People that use value investing are often called 'Fundamentalists', as they are interested in the fundamentals of a company Investment Strategies - by R Ambrose Dollar cost and Value Averaging Dollar cost averaging is where an investor would invest a set amount in the stock market at regular intervals. For instance, he may put £200 in each month into a mutual fund. This helps smooth out the fluctuations of the stock market as the investor isn't putting a lump sum in, which would be good if the market went up but bad if the market dropped. Value averaging is similar to dollar cost averaging. Imagine the investor put £100 into the stock market in month 1. If at the start of month 2 the value of his investment had dropped to £90, he would invest £110. If it had gone up to £110, he would only invest £90. This method results in the investor buying more shares when prices are down and investing less when prices are up.
Table of Contents 1) Guide to Stock-Picking Strategies - Introduction 2) Guide To Stock-Picking Strategies - Fundamental Analysis 3) Guide To Stock-Picking Strategies - Qualitative Analysis 4) Guide to Stock-Picking Strategies - Value Investing 5) Guide to Stock-Picking Strategies - Growth Investing 6) Guide to Stock-Picking Strategies - GARP Investing 7) Guide to Stock-Picking Strategies - Income Investing 8) Guide to Stock-Picking Strategies - CANSLIM 9) Guide to Stock-Picking Strategies - Dogs of the Dow 10) Guide to Stock-Picking Strategies - Technical Analysis 11) Guide to Stock-Picking Strategies - Conclusion