Portfolio Analysis Flashcards
Blue chip companies
highest quality proven earnings and dividends
Growth companies
in period of above average growth; do not have proven track record
Emerging Growth
brand-new; high risk, high reward
Income
mature companies with high dividend payouts
Cyclical
Stocks whose fortunes track the business cycle closely
Counter-cyclical
Fortunes operate in reverse of business cycle; example would be grain and gold
Defensive
companies remain unaffected during business downturns
Speculative
do very well during cycle upturns
Special situation
company going through a takeover, bankruptcy, etc
Risk Premium
Amount of increased return over the “risk free” rate ie 1 year treasury bond
Active return
difference between return achieved vs benchmark return
Passive return
Return earned simply be investing in a benchmark fund
Annualized returns
Returns always annualized - ie 10% return for 6 months is 20% return for the year
What is the biggest risk for a long-term horizon portfolio?
Inflation; equity is better choice
What 3 categories are in a traditional portfolio?
US Government Treasury Bills
Long Term Corporate Bonds
Large Company Stocks
9 Asset Classes: Low Risk to High Risk
Treasury Bills Treasury/Agency Bonds International Bonds Large Cap Stocks Mid Cap Stocks Small Cap Stocks International Stocks REITs Micro Cap Stocks
Market Capitalization Levels
Micro-Cap:
What is wrong with a buy and hold approach to investing?
maximizes equities held when entering bear market and minimizes equities held when entering bull market
Growth investing
companies potential for growth prioritized
Value investing
looks for companies that are currently undervalued
Constant dollar plan
Fixed amount kept in equity securities; excess goes to buy debt…if value falls below fixed amount debt is sold
Constant ratio plan
fixed percentage of all assets kept in equity
Systematic risk
risk of general market decline (Market Risk)
Non-systematic risk
risk of a single investment going sour; mitigated by diversification
Capital Asset Pricing Model
breaks down investments return into risk free and risk premium components
3 versions of efficient market theory
weak form: stocks only reflect historic information
Semi-strong form: stocks reflect public information
Strong form: stocks reflect all information
Beta
measures price volatitlity compared to the market as a whole
What kind of risk would a portfolio with a beta of 1 have?
Only systemic
Alpha
Measure of how over or under a stock performed teh marked
