The Benefits of Fundamental Analysis Towards the Creation of a Successful Portfolio

Published: 2021-06-29 06:57:53
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Name:        De Carvalho Horta, FlaviaZ No.:        Z23349188FIN4504_001Dr. Anna AgapovaStock-Trak AssignmentThe Benefits of Fundamental Analysis towards the Creation of a Successful Portfolio My portfolio only had an overall 0.81% return, mostly because of an ultra-conservative style and high degree of risk aversion, due to lack of experience in the financial market. However, as I learned in class, there is no reward without taking risks. This is the first lesson I definitely learned and will apply towards any investment opportunity in the future. The two best returns I had were a short position with AT&T, Inc. (T), which I short sold 200 shares for $40.90 and then, bought them for $36.70, which resulted in an HPR of 11.44%. The reason why I chose this security was due to it being overvalued at the time. Fortunately, the strategy was successful, the stock price decreased and I was able to incur a positive return. The second best strategy was a long position on Apple, Inc. (APPL), which I bought 200 shares for $107.57 and eventually sold them for $109.39. Unfortunately I waited too long to sell this security. This is what I regret having hold the position for too long. The HPR was only 1.69%. However, if I had sold it in mid- October (before presidential election and higher market volatility), I could had generated a 9% return on this trade. In order to diversify and, therefore reduce risk, I also made investments in bonds. My strategy when investing in bonds was to purchase the ones with higher coupon rates and lower time to maturity in order to have a lower risk. However, I acquired them at a premium (price greater than par), but with higher coupon payments (than YTM) as well. As far as for corporate bonds, I purchased 20 American Express bonds (B-AXP-8.125-20052019) for the price of $1,155.41 with a maturity date of 05/20/2019, which will generate me an annual coupon payment of $81.25. For a risk-free bond, I purchased 20 T-Bonds (B-T-8.750-15052017) for the price of $1,037.031 with a maturity date of 05/15/2017, which will generate me an annual coupon payment of $87.50.

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