Portfolio - Management Performance
Portfolio - Management Performance
Selection of stocks
• Technical analysis
• Fundamental analysis
Performance Evaluation
• Standard Deviation
• Beta
Performance Measure
Rp - Rf
Treynor Measure :
p
Rp - Rf
Sharpe Measure :
p
• Fundamental analysis
• Technical analysis
Fundamental Analysis
• Evaluating the intrinsic value of a security
or investment by analyzing various
financial and economic factors.
Steps Involved:
Step 1: Economic and Market Analysis
Step 2: Analysis of Financial Statements
Step 3: Forecasting relevant payoffs
Step 4: Formulating a security value and
finding intrinsic value
Step 5: Making a recommendation
Fundamental Analysis
• Macroeconomics Analysis
• Industry Analysis
• Financial Statement Analysis
• Equity Valuation Model
Equity Valuation
Major categories of equity valuation models:
• Present value models or discounted cash flow models:
Estimate the intrinsic value of a security as the present
value of the future benefits expected to be received
• Multiplier Models or market multiple models: Based
mainly on share price multiples or enterprise value
multiples
• Asset based valuation models: Estimates the intrinsic value
of a common share from the estimated value of the assets
of a firm minus the estimated value of its liabilities and
preferred shares
Equity Valuation- Present Value Models
• Discounted Cash Flow Models
V0 =
•
V0 =
V0 = Value of the share today, at t=0
Dt = Expected dividend in year t
r = required rate of return
Equity Valuation- Present Value Models
• Gordon Growth Model
• For companies in the mature stage of their life cycle, assumes dividends grow
indefinitely at a constant rate perpetually
• V0 = =
g=b*ROE
b = earnings retention rate
ROE = return on equity
Dividend (Rs) 6 10 12
Dividend (Rs) 6 10 12
• MV of debt = 56,000,000
• Cash = 1,500,000