Final ProjectJOMC 451
Professor Chris Roush
Fall Semester, 2016
University of North Carolina at Chapel Hill
Final Project
Instead of a final exam, each student in Economics Reporting will be required to write a 2,000-word paper analyzing their stock picks at the end of the semester and why those respective stocks rose or fell during the semester. You are to write this paper based on many of the economic factors and measures discussed during the semester. The paper is due at 9 a.m. on Dec. 9, 2016, and can be e-mailed to me at r dropped off at my office.
The best way to understand economic factors on a corporation's financial performance is to have a personal interest by investing in that company. As such, you will each have a hypothetical $10,000 to invest in five stocks for the semester.
Each student will select five stocks by Sept. 15. On this date, you will need to turn in a 1,000-word paper explaining the rationale for your selections, and how you would allocate your $10,000 among the five stocks. You can choose to spread the $10,000 in any way as long as shares of five individual and separate companies are purchased. I will calculate how many shares you have purchased in each of your five companies based on your allocation and the closing stock prices of those companies on Sept. 15.
Students may review any information or consult with anyone, including a stockbroker, to make their five stock picks. However, the stocks must be widely held and traded on either the New York Stock Exchange or NASDAQ. No penny stocks or thinly traded stocks will be allowed.
Each student would also probably enjoy the final project more if they had a personal interest in the stocks they’re selecting.
Here’s the kicker. The five stock selections must come from the following industries:
-- Auto/manufacturing/industrial;
-- Banking and financial services, which includes insurance;
-- Real estate;
-- Retail, which includes restaurants;
-- Health care, which includes pharmaceutical companies as well as hospitals.
Each of these industries and economic measures of companies in these businesses will be discussed later in the semester. However, we will spend a good portion of the class before the stock picks are required discussing broader economic issues that have great effect on these industries. For example, when the Federal Reserve Board raises or lowers interest rates can have great effect on the performance of banks and financial services companies as well as real estate companies. The Consumer Confidence Index can be a barometer of how sales in the auto and retail industries may be in the future.
So use an understanding of what you've learned about the economy in the first month of class to guide your picks.
Now, here is a wrinkle: Students may choose to select all five of the stocks in their portfolio from a specific industry as long as they're reasoning for making that choice is valid based on economic factors. For example, students who believe that consumer confidence is on the upswing may want to heavily weight their portfolio toward retail or auto stocks. Students who believe the economy is struggling based on higher unemployment rates may want to look at health care stocks, which are considered to be resistant to many economic factors.
Understand, however, that the beauty of a diversified stock portfolio is to limit the investor's risk of a downturn in the stock market. By investing in a variety of sectors of the country's economy, a stockholder limits his or her risk to a downturn. An investor who puts all of his or her eggs in one basket, such as real estate, may reap huge rewards, but also face huge risks if the economy should falter.
If you are unsure if a stock you're interested in is eligible for the final project, please consult the instructor for a ruling. Stocks can be researched using the Bloomberg terminal in the library by entering the stock ticker, then hitting the yellow “equity” button and then the green GO button.
Each student will be required to provide an update on how his or her portfolio is performing on Oct. 4, Oct. 25 and on Nov. 15 with an oral report to the rest of the class as well as a 1,000-word paper to the instructor on each date. On Oct. 25, students will have the opportunity of changing up to two of the stocks in their portfolio if they so choose. If a student does decide to change stocks, then the "buying" and "selling" will be based on the closing stock prices of Oct. 25.
Final stock prices for each student’s portfolio and for the final project will be based on the closing prices of Wednesday, Dec. 7, which is when each student will "sell" their portfolio.
Please note that the total returns of the stocks in a student's portfolio will not include any dividends paid during the semester. The performance will be based solely on stock price performance.
You may use whatever resources you wish in writing your final project paper on your stocks, and the more resources you discover and use, the better your final project will be. The final paper, however, must be entirely your own work. You will be graded on that final project.
If you are unsure of how long 2,000 words is, it is approximately four to five single-spaced typewritten pages, or eight to 10 double-spaced typewritten pages.
The final project will be graded based on how well you are able to successfully explain why the stocks in your portfolio rose or fell during the semester based on economic factors and other issues affecting performance. Well-written economic stories are able to analyze and critique a company or sector through the use of well-documented research that uses other sources as the critical voice. The paper should not sound as if it is the writer actually critiquing the company's stock performance, but explaining the economic factors and other issues that caused a company's stock to rise or fall.
A student's grade on this project will not necessarily be determined by how successful their portfolio performs. Conversely, a poor performing stock portfolio does not doom the student to a low grade. The final project should be based on sound reasoning, solid research and explanation as to why the stocks rose or fell. If that is the case, then the grade on the final project may not correlate to the performance of the stock portfolio.
As part of your research on your company, you are expected to use the Bloomberg terminal located in the Park Library. During class, we will occasionally review news stories, filings and other information that can be accessed via the Bloomberg.
There will also be a session on Sept. 5 to review some important functions on the Bloomberg terminal to access economic data and information. Some of the more important ones are:
-- ATSL <GO> -- Information on auto sales;
-- CNFC <GO> -- Information on U.S. consumer confidence
-- CPI <GO> -- Information on the Consumer Price Index;
-- ECI <GO> -- Information on Employment Cost Index;
-- ECO <GO> -- An economic calendar that lets you know about upcoming economic reports;
-- EMPR <GO> -- Employment statistics;
-- ESNP <GO> -- An economic snapshot;
-- FED <GO> -- For news on the Federal Reserve Board;
-- FODG <GO> -- Factory orders and durable goods;
-- FOMC <GO> -- For news on the Federal Open Market Committee;
-- GDP <GO> -- Information on the gross domestic product for numerous countries;
-- HMHK <GO> -- Ben Bernanke testimony;
-- HSST <GO> -- Housing sales and starts;
-- INPD <GO> -- Information on industrial production;
-- PINC <GO> -- Information on personal income;
-- PMIN <GO> -- Purchasing manager index;
-- RTSL <GO> -- Information on retail sales;
-- TRBL <GO> -- Information on the trade balance;
-- WEI <GO> -- World equity indexes. Watch how markets around the world fluctuate.
These functions on the Bloomberg terminal may be important in a student's research prior to picking his or her stock portfolio. It may be wise to review some of these before making the final stock picks, and periodically during the semester for data or information that may be affecting a portfolio. While making the most "money" is not the point of the final project, the student whose stock portfolio gained the most during the semester -- or lost the least -- will be awarded a special prize.