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Securities Analysis and Portfolio Management
Finance & Accounting
Pages 11 (2761 words)
Securities Analysis and Portfolio Management - Main Assignment Q1 In September 2010 Simon reviewed his equity portfolio, which was then valued at ?4 million. Simon had been much impressed by a biography he had read about Warren Buffett and had take to heart the principle that “Buying quality is always the cheapest in the long run.” Simon has always believed that it is better to invest in a few high quality companies so was holding investments in only ten different companies, all listed on the FTSE 100.
Louis is no longer working as a stock broker and Simon is now using the services of Cheryl who has strong views about Simon’s portfolio. Cheryl, a graduate in finance from York University, believes that markets are essentially efficient and admires the work of Harry Markowitz and Fama and French. She believes that the important thing is to have a good portfolio rather than good individual investments. Cheryl tells Simon that she doesn’t feel that he even has the best companies now even if they had been when the portfolio had been set up. Cheryl goes on to say that that a good portfolio needs to include exposure to overseas companies and smaller companies thus reducing the “beta” and improving the “alpha” of the portfolio. Cheryl also argued that it is vital to watch the “momentum” and have stop-losses on all the holdings in order to protect against primary downside movements. Simon is very concerned about his share holdings after talking to Cheryl and has approached you for advice. ...
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