MEMORANDUM

To:             Dr. D. L. T.

From:           Lyles Armour Jr

Date:           April 20, 2009

Subject:       ...
more time to invest with this stock I feel that there would be substantial growth. This belief comes from
an article relea...
Calculation Sheet

Final Portfolio final values
        Stocks, MF and ETF total value
            o $26,210.20
        Bo...
Reference Page

1. Amazon.com launches Inauguration Store – Amazon.com (Jan 5, 2009)

2. Wal-Mart Increases Employee Bonus...
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Closing Memorandum (Portfolio)

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Closing Memorandum (Portfolio)

  1. 1. MEMORANDUM To: Dr. D. L. T. From: Lyles Armour Jr Date: April 20, 2009 Subject: Portfolio Portfolio Performance After being given $25,000, I invested $24,996.48 into stocks, ETF and MF over a nine week period. I was able to finish with a 4.86% increase. This left this portion of my portfolio with a total worth of $26,210.20 compared to the benchmark of the S&P 500 who showed a 3% decrease, from 868.60 points to 842.50 points over the same nine week period. At the same time out $25,000 given, I invested $24,633.00 into two bonds. While the stocks, ETF and MF had a gain my bonds experienced a loss. I experience a decrease of 3.79% or $933.00 between the two bonds leaving a final worth of $23,700.00. I was unable to out gain the benchmark of the Dow Industrial Average who only showed a -3.18% decrease from 8280.50 to 8017.59. On and annual basis my stocks, ETF and MF will yield a 28.02% gain where as the S&P 500 shows a 17.33% loss. With the economic crisis hitting rock bottom I was able to invest my money into a secure venture that shows positive gains. These stocks, ETF and MF show relations to how consumer are reacting given the different tactics our government is taking to try and sure up of financial crisis. Closing Performance Summary for Stocks, ETF and Mutual Fund To keep things simple the chart below will show a more detailed explanation on the performance of the securities. Shares Beg. Invested End. Invested Cum % Annualized Purchased Amount Amount Change Exp. Return AMZN 130 $8,651.50 $10,162.10 17.46% 100.88% WMT 53 $2,630.39 $2,851.40 8.40% 48.52% MKC 74 $2,450.14 $2,166.72 -11.57% -66.85% JHNBX 34 $419.22 $413.44 -1.38% -7.95% IAU 121 $10,845.23 $10,616.44 -2.11% -12.19% S&P 500 - 868.60 842.50 -3.00% -17.33% Explanation of Stocks, ETF and Mutual Fund Selections Over the nine week period my stock selections for the most part had a negative correlation to the market. The performance of these socks was due to the belief that consumers will look for cheaper goods when the economy looks to be worsening. Meaning as the market showed strengths my stocks reacted opposite. (This can be seen on the chart 2 stocks vs. S&P 500.) Amazon (AMZN) was the strongest investment out of the entire portfolio, as you can see on chart 1. I further based this selection off of reports that Amazon had fourth quarter sales increase 18% in 2008, which was in the mist of the economic down turn. The push for the strong performance within the nine week period began with the “Inauguration Store” that Amazon released. This release help emphasize my belief that this portfolio was built for the consumer. Wal-Mart (WMT) too showed growth, but did not respond to the market as I thought. The week-by-week losses were greater than the gains. This can also be seen in chart 1. When Wal-Mart announced increase in employee bonuses was where the stock showed its greatest return. Given my belief that consumer would spend less and shop more at Wal-Mart is was disappointed to see this stock not fare well. If given
  2. 2. more time to invest with this stock I feel that there would be substantial growth. This belief comes from an article released by the Wall Street Journal released on April 6, 2009 titled “Retail Sales Data to Show Whether Spending Slump Is Ebbing.” It states that there will be boosted sales in Wal-Mart because there will be new merchandise released for the spring. McCormick & Co. Inc (MKC) was by far the weakest stock in the portfolio. Up until March MKC was a profitable stock. At that time MKC then “warned that sales growth in fiscal 2009 would likely be at the lower end of its previous range due to weakness in some parts of its business.” From that point on MKC was never able to recover and experienced 3 week of loses in that same month. If I could do anything different I would reinvest the $2,400 that was originally invested into a different stock. As for my ETF selection it carried the securities for the early weeks and tiered off as the economy showed strengths. This reaction allowed me to see that heavy loading my ETF iShares COMEX Gold Trust (IAU) as shown above may not be a good thing to do as the economy showed growing strength. Whereas my mutual fund Jhancock Bond A (JHNBX) showed a steady growth with minor declines along the same nine week period. With that being the case, in the future it may be smarter to invest a little more into my mutual fund. Bond Portfolio Performance Looking over the same nine week period for my bonds they both did not meet the return that the Dow Industrial Average showed. As stated above in the Portfolio Performance section the benchmark of the Dow Industrial Average showed a -3.18% decrease from 8280.50 to 8017.59 whereas my bonds showed an overall decrease of -3.79% from $24,633.00 to $23,700.00. Individual Bond Performance Again to keep things simple the chart below will show a more detailed explanation on the performance of the bonds. Bonds Purchased Beg. Invested End. Invested Cum % Change Amount Amount Verizon New 18 $18,693.00 $18,540.00 -0.82% York General Elec Cap 6 $5,940.00 $5,160.00 -13.13% Corp. Dow Industrial - 8280.59 8017.59 -3.18% Average Explanation of Bond Selections Out of the two bonds Verizon New York Inc was a better selection. It was the shorter of the two bonds, which left me believing that over a short time frame there is not much risk involved if the economy were to continue with how it has been. As far as my long-term bond General Elec Cap Corp. selection I believe that this was a good selection over the long run. As you can see on the chart 3 General Elec is showing signs that over the full period of investment gains will tend to follow.
  3. 3. Calculation Sheet Final Portfolio final values Stocks, MF and ETF total value o $26,210.20 Bonds total value o $23,700.00 Portfolio Expect Rate of Return R(AMZN) = .0449 + (.05) (1.60) = 12.49% R(WMT) = .0449 + (.05) (.26) = 5.79% R(MKC) = .0449 + (.05) (.48) = 6.89% RJ(HNBX) = N/A R(IAU) = .0449 + (.05) (.19) = 5.44% R(S&P 500) = .0449 + (.05) (1) = 9.49% Portfolio Returns Stocks, MF and ETF o ($26,210.20 – $24,996.48) / $24,996.48 = $1,213.72 or 4.86% (Gain) Bonds o ($23,700.00 - $24,967.95) / $24,967.95 = -$933.00 or -3.79% (Loss) S&P 500 o (868.60 – 842.50) / 842.50 = -26.10 or -3.00 % (Loss) Dow Industrial Average o (8280.59 - 8017.59) / 8017.59 = -321.41 or -3.18% (Loss) Individual Stocks, MF, and ETF returns and Bonds R(AMZN) = ($10,162.10 - $8,651.50) / $8,651.50 = $1510.60 or 17.46% (Gain) R(WMT) = ($2,851.40 - $2,630.39) / $2,630.39 = $221.01 or 8.40% (Gain) R(MKC) = ($2,166.72 - $2,450.14) / $2,450.14 = -$283.42 or -11.57% (Loss) RJ(HNBX) = ($413.44 - $419.22) / $419.22 = -$5.78 or -1.38% (Loss) R(IAU) = ($10,616.54 - $10,845.23) / $10,845.23 = -$228.69 or -2.11 (Loss) R(Verizon New York) = ($18,540.00 - $18,693.00) / $18,693.00 = -$153.00or -0.82% (Loss) R(General Elec Cap Corp) = ($5,160.00 - $5,940.00) / $5,940.00 = -$780 or -13.13% (Loss) Annualized Stock Returns Annualized (RAMZN) = (.1746)(52/9) = 100.88% (Gain) Annualized (RWMT) = (.0840)(52/9) = 48.53% (Gain) Annualized (RMKC) = (-.1157)(52/9) = -66.85% (Loss) Annualized (RJHNBX) = (-.0138)(52/9) = -7.97% (Loss) Annualized (RIAU) = (-.0211)(52/9) = -12.19% (Loss) Annualized (RPORTFOLIO) = (.0486)(52/9) = 28.08% (Gain) Annualized (RS&P 500) = (-.0300)(52/9) = -17.33% (Loss)
  4. 4. Reference Page 1. Amazon.com launches Inauguration Store – Amazon.com (Jan 5, 2009) 2. Wal-Mart Increases Employee Bonuses – WSJ.com (Mar 19,2009) 3. Retail Sales Data to Show Whether Spending Slump Is Ebbing - WSJ.com (April 6, 2009) 4. McCormick & Co. shares fall on sales warning – Yahoo Finance (Mar 24,2009)

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