As a requirement of the Financial Securities Analysis course that I am taking this semester I had to construct a simulation of a stock portfolio using the Wall Street Journal online account. Through the simulation I was to gain experience trading in the real-time market and implement the trading strategies and concepts that have been discussed throughout the course. Prior to this activity I have never traded stocks or had much experience with the stock market. I have taken other finance courses but none ever exposed me to working with actual market conditions and other variables that affect stock prices and a portfolios performance. I had learned about the possible effects that the market could have on stock prices but I had no experience when it came to taking the market conditions into account and trying to make a profit.
Before starting the project I was clueless as to where I should begin and what factors were the most important to consider in my initial asset selection and during the period where I would make trades. Through the simulation I was to trade various stocks, exchange traded funds (ETF's) and a mutual fund. I choose to read the news articles posted on the Wall Street Journal and Yahoo Finance in order to see which stocks I could find significant information on and which companies I was familiar with. The trading strategy that I decided to try to implement was directional trading and market timing. I purchased stocks that I thought I would be able to correctly predict their movement based on market conditions, news releases, and also historical data. I also decided that I would make short term investments as well as long term investments. I had one million dollars to invest in my portfolio and I did my best to try to make a profit. In the end I successfully had gains of $7,700.50.
After reading numerous news articles I decided to make some purchases and construct my portfolio. I decided to purchase 150 shares of Johnson & Johnson (JNJ) stock and 150 shares of Chevron (CVX) stock. I decided that I would purchases theses shares and hold them as a long term investment. My decision to purchase these stocks was based on an article that I read titled "Will you really get rich with this stock?". The article discussed how long term investors should construct a portfolio that consists of stock from high quality companies that have the potential to deliver attractive returns over the next couple of years. As the market continues to recover the stock prices of large companies are trading at a discount to the rest of the market; the stocks also have dividend yields that have not been seen in a while. Johnson & Johnson and Chevron are both huge companies and they are said to have the quality of business and dedication to dividends that could help them deliver significant returns for decades. Chevron is expected to experience growth of about 11% per year over the next five years. After reading this article I reviewed the financial statements for both companies and purchased 150 shares of JNJ at $63.39 per share and 150 shares of CVX at $77.11. At the end of the trading period I sold my shares in the companies for a combined loss of $1,217.00. I feel that if I had held these shares for a much longer period of time I would have made a profit but for this project it was not a good idea to buy these shares as long term investments.
The next purchases that I made were based on my knowledge of the companies whose stock I purchased and the current news related to the companies as well as the historical data on the stocks prices. I initially purchased 250 shares of Google Inc. (GOOG) stock at $507.53 per share. My purchase was based on my knowledge of the company's success and its historical prices which I was able to view through Yahoo Finance. Since the beginning of May the stock price had been steadily increasing. After I made my initial purchase I read a news article, which I obtained through Yahoo Finance, related to privacy issues concerning Google. The company had also had privacy issues in the past and I concluded that this would have a negative effect on the stock price. Because of this issue I decided that I should sell some of the shares I had purchased before the stock price dropped lower. I then sold another 100 shares as the stock price continued to drop. I chose to monitor the stock price changes from day to day and after May 24th the stock price rose and I purchased some shares on the 25th and after the price of the stock continued to rise on the 27th, I purchased more shares on the 28th. I chose to purchase more shares since the company is a very strong company and I realized that they could quickly recover from any effect the negative news had on they're stock price. At the end of the trading period I gained $1,410.00 from my trades with Google Inc. stock.
I also decided to purchase Apple, Inc. (AAPL) stock for the same reason which I purchased the Google Inc. stock. The company has performed great and with the recent release of their new product the iPad and the upcoming release of the new version of the iPhone I figured that their stock price would go up in the short term. I initially purchased 400 shares at $253.82. After my initial purchase I saw that stock price dropped and I decided to purchase more shares at the lower price because I expected that the stock price would rise. I read many articles related to Apple's new products and the response that they were getting. I concluded that sales would rise significantly with the release of the new products and decided I would try to purchase more shares at the lowest price possible and hopefully make a profit by selling when the stock price rose. I made a purchase of another 400 shares at $237.76 and another purchase of 400 shares at $244.11. I was already experiencing gains on the shares I held and decided to purchase another 500 shares at $243.20. At the end of the period I sold all of my shares in Apple, 1,700 shares for $253.51 per share. I feel that the small increase in the stock price came as pure luck at the end of the project period as I did not expect that the stock price would rise so soon. In the end of the trading period I had gains of $15,051.00 on my shares of Apple stock.
My decision to purchase BP stock was based on all of the news surrounding the company during the trading period. I decided to take my chances at short selling the stock to see if I could make a profit. Due to the recent oil spill and all of the negative news related to the damages surrounding the oil spill I expected that the stock price would drop and maybe I could short sell and have some gains. I purchased 300 shares of the stock and did two short sales once when the shares were at $37.66 and another at $37.16. I monitored the current stock prices and that how I decided when to short sell. I then bought back my shares when the stock continued to drop at $29.20 and at the close of the period I sold all of my shares at $33.97. Again I feel that the rise in stock price was pure luck at the time that the trading period ended. In the end I had gains of $367.50 on the BP stock.
Another purchase that I decided to make was to purchase stock in Oil (OIL). I read an article which discussed how assets such as oil and copper are critical components in any economic recovery and that now that they are cheaper than ever investors should take some risk, help stimulate economic growth and the economic recovery by investing in growth assets such as oil. I purchased 100 shares of OIL at $20.65 per share. The stock price remained fairly constant throughout the trading period and I was unsure on how to trade my shares. I tried to monitor to stock price and the news looking for an opportunity to short sell my shares but I did not do so. At the end of the trading period I sold my 100 shares for $22.28 and I had a gain of $153.00. I feel that if I had held and traded this stock for a longer period of time I may have been able to make more money.
As a requirement of the project I was supposed to trade ETF's as part of my investments. I had no clue which ETF's to trade and I did research before decided which ETF shares to purchase. I read various articles on TheStreet.com about the weekly ETF winners and losers. Based on the reports I decided to purchase iShares MSCI Australia Index Fund (EWA). I read various articles regarding the change in the stock price due to a combination of the falling Australian dollar and a proposed mining tax which threatens major commodity producers based in the nation. At the close of the week the report stated that EWA was able to report profits but because of the proposed mining tax and the fact that the price of the stock had risen to about the same amount which I had initially paid, I decided to short sell my shares. I then read an article that stated that now may be the time to gain exposure to the Australian miners via the EWA at the sale price and I repurchased my shares at $18.65 per share compared to the $21.21 per share that I had paid with my initial purchase. At the close of the trading period I sold my shares for $20.63 per share. Overall I had gains of $386.00 from trading the EWA ETF.
My decision on which mutual fund to purchase was based on an article which I read on TheStreet.com which discussed ETF's vs. Mutual Funds: Commodity Producers. I had read other articles encouraging investors to invest in commodities and chose to give it a try. I chose to invest in the Fidelity Global Commodities Fund (FFGCX). The fund has $392 million in assets and has had success in its short life. I decided to purchase 200 shares at $12.71 per share and thought that it would be best to hold these shares for long term investments. At the close of the trading period I sold my shares for $13.07 per share. In the end I had gains of $62.00 from investing in the fund.
Overall I had gains of $7,700.50 from my trades. The stocks which had losses were Johnson & Johnson and Chevron which I concluded would be good long term investments and performed poorly during the course of the trading period. I feel that most of my gains were due to luck at the end of the period and the fact that I tried to make my purchases at the lowest price possible. I relied heavily on the change in the stock prices from day to day and the news related to the stocks and how current events could impact the stock price. I also tried to invest in stock that could provide potential gains from short sell transactions. Having had absolutely no experience with trading in the market I feel that I did well. I had much more gains than I had imagined and minimal losses. I speculate that in the long run I may not have done so well as my decisions were based on very current information and day to day transactions. I learned more about short sales and how they can be used to make a profit and about all of the different things that need to be considered when investing in stock. I would advise future students to conduct extensive research and monitor their stocks very closely in hopes to make a profit throughout the course of the project.
Date
Security
Ticker Type
Action
Price
Quantity
Commission
Transaction Amount
Last Trade
Change
Change Percent
Volume
5/14/2010
AAPL
usstock
Buy
253.82
400
10
101,538.00
253.51
3
1.20%
19,491,412
5/20/2010
AAPL
usstock
Buy
237.76
400
10
95,114.00
253.51
3
1.20%
19,491,412
5/26/2010
AAPL
usstock
Buy
244.11
400
10
97,654.00
253.51
3
1.20%
19,491,412
6/9/2010
AAPL
usstock
Buy
243.2
500
10
121,610.00
253.51
3
1.20%
19,491,412
6/11/2010
AAPL
usstock
Sell
253.51
1,700.00
10
430,957.00
253.51
3
1.20%
19,491,412
5/14/2010
BP
usstock
Buy
46.87
200
10
9,384.00
33.97
1.19
3.63%
132,861,873
5/25/2010
BP
usstock
Buy
42.56
100
10
4,266.00
33.97
1.19
3.63%
132,861,873
6/2/2010
BP
usstock
ShtSell
37.66
150
10
5,639.00
33.97
1.19
3.63%
132,861,873
6/4/2010
BP
usstock
ShtSell
37.16
100
10
3,706.00
33.97
1.19
3.63%
132,861,873
6/9/2010
BP
usstock
Buy
29.2
200
10
5,850.00
33.97
1.19
3.63%
132,861,873
6/11/2010
BP
usstock
Sell
33.97
250
10
8,482.50
33.97
1.19
3.63%
132,861,873
5/14/2010
CVX
usstock
Buy
77.11
150
10
11,576.50
74.06
-0.11
-0.15%
8,346,366
6/11/2010
CVX
usstock
Sell
74.06
150
10
11,099.00
74.06
-0.11
-0.15%
8,346,366
5/14/2010
EWA
usstock
Buy
21.21
200
10
4,252.00
20.63
0.11
0.54%
4,051,373
5/28/2010
EWA
usstock
ShtSell
20.24
200
10
4,038.00
20.63
0.11
0.54%
4,051,373
6/7/2010
EWA
usstock
Buy
18.65
200
10
3,740.00
20.63
0.11
0.54%
4,051,373
6/11/2010
EWA
usstock
Sell
20.63
200
10
4,116.00
20.63
0.11
0.54%
4,051,373
6/1/2010
FFGCX
usfund
Buy
12.71
200
10
2,552.00
13.07
0.04
0.31%
0
6/11/2010
FFGCX
usfund
Sell
13.07
200
10
2,604.00
13.07
0.04
0.31%
0
5/14/2010
GOOG
usstock
Buy
507.53
250
10
126,892.50
488.5
1.49
0.31%
1,784,318
5/18/2010
GOOG
usstock
Sell
498.37
100
10
49,827.00
488.5
1.49
0.31%
1,784,318
5/21/2010
GOOG
usstock
Sell
472.05
150
10
70,797.50
488.5
1.49
0.31%
1,784,318
5/25/2010
GOOG
usstock
Buy
477.07
100
10
47,717.00
488.5
1.49
0.31%
1,784,318
5/28/2010
GOOG
usstock
Buy
485.63
100
10
48,573.00
488.5
1.49
0.31%
1,784,318
6/11/2010
GOOG
usstock
Sell
488.5
200
10
97,690.00
488.5
1.49
0.31%
1,784,318
5/14/2010
JNJ
usstock
Buy
63.39
150
10
9,518.50
58.46
-0.04
-0.07%
14,712,954
6/11/2010
JNJ
usstock
Sell
58.46
150
10
8,759.00
58.46
-0.04
-0.07%
14,712,954
5/25/2010
OIL
usstock
Buy
20.65
100
10
2,075.00
22.28
-0.37
-1.63%
479,304
6/11/2010
OIL
usstock
Sell
22.28
100
10
2,218.00
22.28
-0.37
-1.63%
479,304
6/12/2010
Cash
unknown
XIn
1,000,000.00
