Questions 1 to 3

Examples of Questions 1 to 3
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  1. (10 points)
    1. What did you learn from this assignment?

This assignment taught me a couple things. The biggest thing I learned is that when investing, I should really think about how a company will perform in the market considering what our economy is demanding. Another thing I learned is which companies can prosper in times of crisis (I know that sounds immoral but when it comes to investing, it’s definitely something to take into consideration because at the end of the day, you want to end with gains, not losses.)

I learned about the impact of the news on stock prices.  This actually really made sense.  When I first started, it seemed like a real time suck to be reading the news.  Now that I am fairly well versed with the companies I chose, I can see a real correlation to understanding how politics, technology, financial reporting and results, all really impact the price of a stock.  And let’s not forget about speculation and how people may be feeling in the future about things.

Another big important thing that I learned from this experience is that when volatility in the market is this high and with such uncertainty, day traders invest in panic mode. One day it could move up and down significantly, just as the Dow would move at least 500 points on most days in either direction and overreact for any news. Other events such as the price war on oil affected even more so and when other commodities such as gold should be higher with higher uncertainty, it was often very low and even hit the $1400’s. It has been a great learning experience for myself as well as many others I believe. It’s as if I was starting a game or challenge on the hardest level, in this case I’ll be prepared for future situations.

Overall I learned to be conservative when investing. Especially in times like the one we are currently in. I learned that in these instances, I should not be trading on Fridays and when we have a three day weekend. The uncertainty of what could happen over the weekend as other news are released either of Covid-19 or on oil, a certain and even an unrelated stock could open significantly higher or lower after the weekend. Also, I learned that if in doubt, especially as I’ve said over the weekend, then sell my positions in order to minimize risk and losses.

    1. How would you describe the experience?

This assignment was actually so much fun, especially on Fridays when I really felt like an investor reviewing the performance of my portfolio throughout the week. Thanks for assigning this assignment Ms. B I really appreciated it! I feel that I learned a considerable amount of information and techniques to improve my strategy in order to see which investment would be better and on what period of time. However, the research required for this assignment has taught me to look for better opportunities and synthesize the information in an adequate manner.

I believe that this pandemic has been a wake up call for most industries and consumers to start changing the way we do things. We can see that in just a few months we were able to clean much of the environment by not adding to the carbon footprint and are able to do many of the things we usually do but from home. Furthermore, investing in companies that are prospering during this pandemic was a very enjoyable experience. This assignment requires a lot of dedication and self-discipline. Translating this to real life, work like this will require such commitment, since in theory I would be dealing with real money and real people’s assets if I were to invest for other people. I have to be careful with their capital as if it were my own. This has been an overall great learning experience and I’m excited to apply what I’ve learned to my investment strategy.

    1. What type of emotions, if any, did you feel during the assignment?

Simply put, even though this wasn’t real money, I felt like I was on a bit of a roller coater ride.  Of course I wanted to see my name at the top of the rankings – mainly because I’m a competitive person and an active investor.  That didn’t always happen, so my ego was slightly inflated on certain days.  I learned how to be resilient and to approach this with a long term mindset (if it really was real money) on the days that the market was down and my picks just weren’t all that great. I learned that this is like gambling unless you really know what you’re doing, and how closely emotions really can be tied to investing.  I also learned that doing something like this hands-on, even though it was 8-10 hours of work each work, was truly a valuable experience. No pain, no gain. I also learned that I want to major in finance and possibly become a financial advisor – which means that I would get my Series 7 license.

I felt many emotions during this assignment ranging from happiness to mild frustration. I was happy when I was making gains on my stocks but felt frustrated when I picked Uber as a stock. If I would’ve known that the coronavirus was actually going to have a severe economic impact on retail and transportation companies, I would have selected other companies accordingly. At certain times it was all very frustrating with the potential losses that I could have with this situation and how nervous the thought of the losses made me. Most stocks have had the highest volatility in history and stocks would not behave as they normally would in an otherwise regular market.

I did however have many positive experiences with certain companies such as Clorox, Teledoc and Zoom, as their demand went significantly up. This all resulted from the same situation that has nearly tumbled our economy. It has been a great ride for some companies, but for most others it has almost driven them to bankruptcy, if it hasn’t already. It makes me especially sad that many small businesses had to close and lay off employees. They do not have the equity required to keep them on payroll and those employees have responsibilities in their homes and with their families as well.

  1. (10 points) For each of the six stocks you chose to purchase, discuss in detail the basis of your decision i.e., why you decided to purchase each stock.  Elaborate in lots of detail.  Carefully research each company and formulate a well-planned and thought out answer. The more you know about a company, the more you can also decide why the purchase made sense (or not)….
    1. Why you purchased stock A

The reason why I purchased Tyson Foods was because I felt that it would prosper during the pandemic. I figured demand for meat would increase and people would also stockpile on their frozen products thus resulting in more sales, which would overall result in positive performance during this crisis. I figured that people around the nation and in the world always need to eat, and therefore the pandemic would not affect it as much. I did not foresee that there was a possibility of the african swine flu infection in the meat industry in the U.S. Perhaps even if this stock didn’t behave the way I thought it would, it could be a great opportunity at the moment for it’s low stock price since businesses and the economy seem like it would improve with hopes for new vaccines and medicine. People will start to demand higher end products in the meat industry and even more so as they slowly start to go to restaurants once they start opening.

    1. Why you purchased stock B

The reason why I purchased Zoom Video was because I was confident they would perform well in the pandemic. More people would be working from home and schools/universities would move online, enabling them to have virtual conferences, meetings, and teachings through a professional platform. I feel that I have chosen this stock correctly as people have had to use it as I predicted.

Most companies and schools that needed to have conferences and even regular people that just wanted to have a video conference with other friends would use the platform since no one can really go to other people’s homes and/or work to have regular face to face interactions. If this platform and others alike are the possible way to do business in the future, then it could have positive effects throughout our lives. We would have reduced traffic, pollution and exposure to possible negative diseases outside of our homes. Students could also learn to attend school in this way in the future, perhaps a decade from now it would be more normalized and companies such as Zoom could be like how Google was in the early 2000’s.

    1. Why you purchased stock C

The reason why I purchased Zillow was because I’ve been following them closely since November and I heard about their “iBuying” plan which enabled users to buy homes on demand through the platform. To me that plan was a great idea once they got all the legal issues worked out and I figured their stock would increase in value once they were able to implement the “iBuying” feature.

I bought them in November for 27 dollars per share and now they’re at $42. This has proven correctly since people are bored and can’t leave their homes unless it’s an absolute necessity. Their platform providing virtual real estate services has surged and might even change the way we buy homes in the future. I have high hopes for this company and more are likely to follow that will provide a similar service. Everything is moving towards a digital service and is likely to positively affect our way of living.

    1. Why you purchased stock D

The reason why I chose Uber as one of my companies to invest in was because I thought that people would use Uber more during this pandemic, but I was sorely mistaken. Once I made my purchase I realized that it didn’t make much sense because since Uber is a ride-sharing company people would avoid taking ubers in order to reduce potential exposure to the virus. In my defense, I figured that people would much rather pay more to avoid public transport, but then again, no one was going to work physically if they could work from home.

It would have been a great opportunity to short the company. It’s somewhat possible that if platforms such as Uber and Lyft don’t file for bankruptcy after the pandemia that perhaps they’ll merge and would be great for one another. Their future is very uncertain and for the meanwhile I would not invest in either one for the time being at least until the quarantine period is over.

    1. Why you purchased stock E

The reason why I chose Clorox as one of my companies was because I knew demand for disinfectant products would skyrocket during this pandemic. Clorox is a well-known established company that’s popular among consumers so it made complete sense to choose them as one of my companies. Demand for their products has increased significantly and has been great during this pandemic, and hopefully will still be after the pandemic is over as consumers are more aware of the dangers of germs, viruses and bacteria.

If I were in charge of that company, I would start developing new technology that would require less effort to clean and/or disinfect surfaces in our homes and places where we regularly spend time such as an office or workplace. However, I fear that it might not be the case and people might forget and not care in the near future, perhaps six months from now people won’t see these products as a necessity. I believe it to be a great short term investment if it was acquired before or very soon after the pandemia started and gained momentum.

    1. Why you purchased stock F

The reason why I chose Teladoc as one of my companies was because they offered virtual health check-ups and other services related to healthcare. That being said, I knew for a fact that their platform would see an increase in users for 2 reasons: 1. That people would fear going to the doctors during the pandemic and would seek alternatives. Thus, Teladeoc offered such services that allowed people to have their check-ups from home. 2. People that feel like they are getting sick would look online to see if their symptoms aligned with the coronavirus symptoms.

As we can see from their stock valuation (which is currently overvalued) it has been a great investment. Just as most other companies that offer virtual services such as Zoom and Zillow, Teladoc in the same way might change the way we use the health industry in the future. The performance outlook for short, medium and long term is bullish which justifies my expectations of the way people will interact with healthcare professionals in the future. I believe that companies such as this one will behave much in the same way as Zoom and Zillow, by not requiring us to be at a specific place physically and instead allowing us to be there virtually.

  1. (10 points)
    1. What was the overall result (gain or loss) of each of your six stocks from the beginning of the assignment for each of the five weeks of the assignment? Simply record the gain and/or loss for each of your six stocks from 3/9 until 4/10.
  • For Tyson Foods I had a loss of $10.83 per share (bought it at 64.65 and on week 5, they were 53.82 — -16.75%)
  • For Zoom Video I had a gain of $13.88 per share (bought it at 114.32 and on week 5, they were 128.20 — 14%)
  • For Zillow I had a loss of $19.04 per share (bought it at 49.35 and on week 5, they were 30.31 — -38.58%)
  • For Uber I had a loss of $8.86 per share (bought it at 31.68 and on week 5, they were 22.82 — -28%)
  • For Clorox I had a gain of $4.28 per share (bought it at 173.26 and on week 5, they were177.54 — 47%)
  • For Teladoc I had a gain of $20.31 per share (bought it at 135.9 and on week 5, they were 156.21 — 94%)

 

    1. What was your expectation?  On an ongoing basis, spend a lot of time thinking about this one.

I thought I would “make” lots of money and that all my picks were good ones.  Little did I know that this just wasn’t the case. Seeing my doing really made me realize just how difficult investing really can be, and how losses, even by experienced investors, can really mount quickly! My expectation at first was obviously positive since I thought I had a pretty well thought out portfolio that would stand well against the coronavirus. I tried making it as diversified as I could; including companies from sectors that I predicted would prosper. Although, halfway through it became evident that Uber and Tyson Foods might’ve not been the best picks to hold up against the coronavirus. Once I realized that, my expectations went from thinking I would have strong gains throughout this assignment, to me hoping to stay above $95,000. As I have stated above, it has been a great learning experience that I can use in the future if certain events similar to this one were to happen again.

If this assignment were to continue, I would expect Tyson Foods and Uber to make a small comeback but not enough to offset the losses. If I were to start a new investment at the moment, I would invest in these companies but more towards the end of the pandemic, since we’re more likely at the peak of it at the moment, at least in our country and especially California. However, as the way the market has behaved during this whole situation, I could not be certain for sure as to which direction the market would move, given the daily volatility in the past two months.

    1. What would you do differently?

What I would do differently would be taking more time to thoroughly think about the forecast for how a company will perform in the near future market. Making sure to take all factors into consideration from public health concerns, international relations, imposed taxes/ tariffs, and which sectors will perform well. I would also follow macroeconomic news more closely  before we began this assignment in order to see which nations were likely to be affected the most by the virus and which might not be hit as hard, depending on their attitude and preparedness for such extreme cases.

Moreover, I would try to predict how it would affect not only the ongoing virus situation but also the way a certain country’s situation would affect ours. An example would be the way México is handling the situation and not enforcing the quarantine period. Evenmoreso, the president was promoting taking a vacation and giving each other hugs. The exponential rate of infected people is likely to affect most manufacturers in that country for an extended amount of time, most likely even more than how we were affected, since their economy is less strong and more uncertain that ours and most other developed nations. The way a virus like this affects a nation is directly reflected on the industries in which they are the strongest. In México’s case, it would be manufacturing. We will likely see how the automotive industry is hit hard if the manufacturing plants in this country are shut down due to our current situation. It will affect the supply of most automobiles throughout north and SouthAmerica.

    1. What type of investor do you think you are? (Research different types of investors and see which one might match the type that you are).

The type of investor I think I am is probably a passive investor because I like investing in ETFs. They allow me to not worry about my investments at night and plus what’s not to like about the power of compounding. The reason I like these types of investment, other than not having to worry about them daily is that ultimately in the long term they always go up, for the most part. I happen to like the S&P 500 to see how the market as a whole may be doing during a specific time period and what possible moves I could make. However, since there are a number of ETFs, I like to diversify in which ones I invest in. I believe that the future of the world is moving towards sustainable companies that try to better the environment and I think that they are likely the ones that will increase in price and gains in the not so far future.

I have recently been more intrigued by options and started learning as much as I can about them. It is a very complicated concept to learn, as gains and losses can be exponential but if done correctly, can yield a low risk and high gains. I don’t have an interest in exercising options, but I am about trading them. I like these since I can buy options contracts of 100 shares for cents per share and if I am correct about my prediction, I could more easily increase my gains exponentially. I feel that I am a more conservative investor, especially after all the situations that have affected the stock market this year. Hence my preference for stock derivatives.

I will say that I have been diversifying the way I invest, doing half my portfolio passively invested, 20% semi-actively, and 30% into stock options. All in all, I try to incorporate different strategies when it comes to investing.

    1. What type of investor do you aspire to be? Again, do research about different types of investment strategies and types of investors (active, passive, bargain hunter, retirement, etc).  There is no right or wrong answer.

The type of I aspire to be would probably be a passive investor but also using technical analysis when bargain hunting. I want to minimize risk and make sure my money is secured which is why I like investing in ETFs but at the same time I do want to take risks in pursuit of a larger return on my investments.  That’s why I want to incorporate multiple strategies when I invest. I do not care for risky investments, as I would not like to lose not only my money, but that of others that I may be investing for in the future. I like low risk in overall investing. Derivatives allow me to invest a smaller amount of capital with higher returns, if my research is correct for a certain investment that I may make. I aspire to be somewhat in the middle of active and passive but on the conservative side of investing. I believe that the best way to invest has to do with having just the right amount of diversification as I myself do and have previously stated so. This would be with 50% in ETFs, 30% in derivatives and 20% semi-active investing.

The reason passive investing may make sense is because of my money personality. I can feel nervous about making a mistake and then my emotional responses might include buying or selling impulsively. I also know that I have the tendency to develop an emotional attachment to a stock, and that I may then hold longer than I should, hoping that it will begin to perform better.

If I had more time, I may also want to be more of an active investor.  Why?  Because I enjoy picking my own stocks. I enjoy reading financial news and spend a few hours each day trying to figure out the impact of the news (so, this assignment really was great practice, Ms. B). I don’t want to be a day trader, however.  That would be way too much of an emotional roller coaster for me.  And simply put, as tempting as the swings in tech stocks are, I don’t have the money to lose while I’m putting myself through school.  However, when I get my degree and graduate from hopefully, Cornell, I can invest! I want to take a hands-on approach with my investments and be more emotionally invested in the process, but I don’t know if I can restrain myself from checking too often.  That can also take an emotional toll. I know I’m all over the place.  But you asked!

As an active investor, I would choose my own companies, not always invest in a diversified portfolio (I have to feel it for the companies and industries I choose – for example, no interest in green tech or private prison systems), I need to know more terminology and what terms mean, along with reading financial reports and really understanding fundamentals.  That should help after I complete my accounting coursework. As an active investor, I would be able to learn how companies operate and how macroeconomic events (like Trump favoring the private prison system) impact a stock’s price.

 

 

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