Documente Academic
Documente Profesional
Documente Cultură
Asset Allocation
For the asset allocation scheme, I used the top down approach. By
using this approach I will allocate 40% of the total funds to REITs and then
allocate 40% to Large CAP Growth stocks and the remaining 20% will go
to the Large CAP Value stocks. I will then choose the stocks that fall into
those categories and then split the funds in each category. For each of
Providers, Oil and Gas, Medical Instruments and Supplies, and finally
Financial industry.
I have chosen to include REITs in this portfolio for two reason, first income
and secondly diversification. REITs are dividend-paying stocks that will provide a
stream of income. Besides the income reason, a study of investor returns from 1972
to 2004 showed the decline in correlation between REIT and other asset classes.
According to the study, adding REIT to a portfolio can reduce the risk and boost the
return. REITs are not correlated with Large CAP stocks; hence I decided to invest in
them. I further diversified into Large CAP growth and Large CAP value. Large Cap
growth stocks are Shares in a company whose earnings are expected to grow at an
Section II
stocks in this portfolio. I used market cap, price earnings ratio, return on
equity and net profit margin as the characteristics to screen the stocks to
be included in this portfolio. For the REITs I chose a minimum market cap
of $100 million. For the Large cap growth stock I used a market cap
minimum of $10 billion and finally for Large Cap Value stocks a minimum
$30 billion. I also used price earnings ratio as a criteria, however I made
the decision by comparing the P/E of each with other stocks in the same
choose some stocks, which did not satisfy this criterion, but have a proven
record of performance in the past 5 years. Finally, I used net profit margin
Section III
Market Cap
However, the P/E ratio does not always tell the whole story by itself. It is
usually more useful to compare the P/E ratios of one company to other
company's own historical P/E. It would not be useful for investors using the
P/E ratio as a basis for their investment to compare the P/E of a technology
company (high P/E) to a utility company (low P/E) as each industry has much
Return On Equity
net profits divided by sales. It measures how much out of every dollar of
indicates a more profitable company that has better control over its costs
Section IV
Summary Of Companies
supported by the cash flow from the portfolio of retail properties leased to
regional and national retail chains. The Company has in-house acquisition,
leasing, legal, retail and real estate research, portfolio management and
properties. During the year ended December 31, 2008, the Company owned
LTC Properties, Inc. is a healthcare real estate investment trust (REIT) that
(REIT), which invests in health care properties primarily in the long-term care
investment trust (REIT). The Trust invests in healthcare and human service-
Ventas, Inc., a real estate investment trust (REIT) with a portfolio of seniors
First Real Estate Investment Trust of New Jersey, an equity real estate
holding of real estate properties primarily in New Jersey, Maryland, and New
tenanted properties.
would not be subject to federal income tax to the extent it distributes 90% of
independent living properties, and assisted living properties. This REIT would
not be subject to federal income tax, if it distributes at least 90% of its REIT
Google Inc. maintains an index of Websites and other online content, and
makes this information freely available through its search engine to anyone
helps people obtain nearly instant access to relevant information from its
advertising.
global Internet brand. Together with its owned and operated online
Affiliate sites.
eBay Inc. (eBay) provides online marketplaces for the sale of goods and
exploration, development, production, and sale of crude oil, natural gas, and
producing natural gas and oil wells that are producing approximately 2.3
billion cubic feet equivalent (bcfe) per day, 92% of which is natural gas.
through various oil and gas, chemical, midstream, marketing and other
specialties.
products that save and sustain the lives of people with hemophilia, immune
disorders, infectious diseases, kidney disease, trauma and other chronic and
acute medical conditions. As a diversified healthcare company, Baxter
Shell (Royal Dutch Shell plc) is a holding company, which owns, directly
Shell is engaged globally in the principal activities of oil and natural gas
production, gas and power, oil sands, oil products, and chemicals.
mining operations of coal and other minerals, power generation and energy
services.
affiliates is engaged in exploration for, and production of, crude oil and
specialty products.
Bank of America Corporation (Bank of America) is a bank holding
America announced the purchase of Merrill Lynch & Co., Inc. On July 1, 2008,
Corporation.
treasury services and others. In March 2009, it acquired JPMorgan Trust Bank
%
40% in Allocatio
REIT Company n $ Allocation
1 Realty Income Corp. 3.50% $350,000.00
2 Inland Real Estate Corp. 4.50% $450,000.00
3 LTC Properties Inc. 5.00% $500,000.00
4 National Health Investors Inc. 4.00% $400,000.00
Omega Healthcare Investors
5 Inc 4.00% $400,000.00
Universal Health Realty
6 Income 4.00% $400,000.00
7 Ventas Inc. 6.00% $600,000.00
8 First Real Estate Investment T 3.00% $300,000.00
Mid-America Apartment
9 Communit 4.00% $400,000.00
Senior Housing Properties
10 Trus 2.00% $200,000.00
$4,000,000.
40.00% 00
40% in Large Cap Growth
11 Google 5.00% $500,000.00
12 Yahoo 4.00% $400,000.00
13 eBay Inc 4.00% $400,000.00
14 Cnooc Ltd 6.00% $600,000.00
15 Chesapeake 5.00% $500,000.00
Occindental Petroleum
16 Corporation 4.00% $400,000.00
17 Stryker 5.00% $500,000.00
18 Alcon Inc 4.00% $400,000.00
19 Baxter International 3.00% $300,000.00
$4,000,000.
40.00% 00
20% in Large Cap Value
20 Shell 3.00% $300,000.00
21 Chevron 3.00% $300,000.00
22 Exxonmobil 4.00% $400,000.00
23 Bank Of America 4.00% $400,000.00
24 Bank Of New York 3.00% $300,000.00
25 Wells Fargo 3.00% $300,000.00
$2,000,000.
20.00% 00
$10,000,000
Total funds 100.00% .00
40% in REIT
Market ROE Net Profit
Description Cap P/E % Margin (mrq)
REIT - Retail 46.89B 18.8 9 14.5
7.54
1 Realty Income Corp. 2.30B 20.715 6 41.529
9.29
2 Inland Real Estate Corp. 516.14M 15.388 6 7.056
REIT - Healthcare
Facilities 19.99B 16 10.1 36.3
9.15
3 LTC Properties Inc. 459.28M 16.008 3 58.908
National Health Investors 12.6
4 Inc. 809.21M 14.147 64 84.741
Omega Healthcare 11.3
5 Investors Inc 1.28B 16.61 08 31.954
Universal Health Realty 7.63
6 Income 402.73M 34.597 5 10.894
9.15
7 Ventas Inc. 3.86B 16.648 5 25.652
REIT - Residential 24.82B 12.5 13.3 26.2
First Real Estate 25.8
8 Investment T 105.87M 17.039 58 14.15
Mid-America Apartment 7.14
9 Community 980.86M 54.044 7 8.179
Senior Housing Properties 7.14
10 Trust 2.00B 16.357 7 44.388
40
%
in Large Cap Growth
Internet Information
Providers
16.0
11 Google 120B 28 3 19.39
12 Yahoo 20.05B 48.75 4.08 2.32
15.5
13 eBay Inc 18.38B 10.55 2 20.83
Oil & Gas
23.3
14 Cnooc Ltd 50.51B 8.23 4 34.45
15 Chesapeake 12.28B 19.26 4.62 6.22
Occindental Petroleum 27.2
16 Corporation 45.43B 6.74 9 27.25
Medical Instruments &
Supplies
15.3
17 Stryker 14.84B 13.39 5 17.08
50.7
18 Alcon Inc 26.4B 13.04 5 32.52
30.6
19 Baxter International 50.60B 15.15 4 15.31
20
%
in Large Cap Value
Oil & Gas
20.9
20 Shell 133.38B 5.04 8 5.78
29.2
21 Chevron 130B 5.56 3 8.77
38.5
22 Exxonmobil 326.05B 7.63 8 9.47
Financial
23 Bank Of America 56.11B 14.05 1.81 5.51
24 Bank Of New York 32.16B 22.81 5.15 10.56
25 Wells Fargo 79.83B 24.15 4.09 6.34
Section VI
Portfolio Expectation
have selected stocks whose company has shown a track record of high
performance.
I expect that this portfolio will perform very well given the quality of
stocks that it contains. Even though companies are going through tough
times now, it is important to notice that since the new administration came
into office, many policies have been put in place to make the economy
better. Therefore, in the long run, these companies will have even better