Mid-year Progress Assessment for 2021 Stock Picks by Investment Company

Word count for the assignment:
800 words, 10% above this word limit is acceptable.  Any excess beyond this point will be penalised. Note that References including in-text citations and the at-end reference list are not counted in the word count.

 

Requirements: Each student is required to write a report that addresses the questions for your workshop class. While this written assignment does not require a standard essay structure of introduction, body, and conclusion, each student needs to follow the rules and conventions of good essay writing, including grammar and syntax, paragraphing and logical sequencing of arguments and referencing.

 

Please note that this assignment focuses on writing for the purposes of investment analysis. You need to use relevant information including charts to support your arguments. Please do not write in the format of questions and answers.
 
Description of the written assignment:
For many years, the New Zealand Herald asks some investment companies in New Zealand to nominate five NZX companies that they think will do well in the year ahead.  The following was the 2021 stock picks made by each of the four investment companies together with stock holding period returns (HPR) over the period from 31 December 2020 to 30 June 2021 and beta (calculated based on historical monthly data of the past five years). Note that the HPR of NZX50 index over this period is -3.34%.

 

For this assignment, you are supposed to work as an intern in a New Zealand investment company and you are given a task to write a short report about mid-year progress assessment for the 2021 stock picks of a particular investment company assigned to your workshop class. Particularly, you should write an essay to respond to the following three questions based on the 2021 stock picks of a particular investment company assigned to your workshop class. 

 

Question 1: Comment on mid-year progress for the 2021 stock picks made by the investment company assigned to you based on the stock holding period returns (HPR) and beta values and explain why the stock holding period return over the whole year of 2021 could differ significantly from the corresponding stock HPR for the first six months reported in the above tables. Your answer to this question should contain relevant concepts taught in this course and information based on the historical data of the stocks picked by the investment company with proper charts to support your arguments. (3 marks)
 
Question 2: The Markowitz portfolio selection model suggests that security selection should achieve the best risk-return combinations. Use the given information in the above tables to discuss why investors are likely better off if they invest in all the five selected stocks rather than only one or two of the five selected stocks recommended by the investment company.   In addition, explain why investing an equal amount of money in each of the five selected stocks may not achieve the best risk-return combination among all possible strategies of investing in the five selected stocks, regardless of individual investor’s level of risk tolerance. (3 marks)
 
Questions 3: Describe how an investor can combine a risk-free asset with the five selected stocks recommended by the investment company to produce the optimal investment portfolio suitable for the investor’s level of risk tolerance. (3 marks)