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Stock evaluation case study Apple aapl Buffalo wild wings inc

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					CLU Business 521-Red Team: Brannen,
    De Lorimier, Kaeberle, Pham
~ Data and Histograms

~ Descriptive Statistics

~ Time Plots

~ Derived Data

~ Correlation/Covariance

~ Comparing two sample averages
   ~Histograms help us visually understand trends of stocks by distributing data to show
    common trends such as daily closing prices. Histograms allow investors to view the
    level of performance and general idea of what to expect regarding past performance
    measures.



         ~Coming up: Histograms of AAPL, BWLD, CVX, DNA, NWA, SHLD ~
What is lost in converting the raw data into
  histograms?

What is gained?
About our stocks and their:

                 ~ Mean
                 ~ Variance
                 ~ Standard deviation
                 ~ Coefficient of variation
    Stock Means:
                   AAPL:     101.92   CVX:    71.54
                   BWLD:     26.79    NWA:    18.67
                   DNA:      79.71    SHLD:   149.55



    Standard Deviation:
                  AAPL:     39.93    CVX:    12.86
                  BWLD:     8.41     NWA:    2.76
                  DNA:      5.17     SHLD:   25.24



   Coefficient Variation:
                   AAPL:     30.18%   CVX:    17.97%
                   BWLD:     31.4%    NWA:    14.76%
                   DNA:      6.48%    SHLD:   16.88%
   Time plots are another simple tool for comparing price series over time...
   ~ How we analyze our stocks returns.

   ~ Mean return, variance, and standard of their
    returns.

   ~ What is risky what is not????
   CONSIDERATIONS FOR BASIS OF DATA:
       Substituted U. S. Airways (LCC) for Northwest Airlines (NWA)
         Bankruptcy prior to May 2007
       Time Span of the Stock Data
       Time Frame for Conducting the Analysis
       Professional Statistical Analysis Norms


   REASONS FOR OUR BASIS SELECTION:
       Quarterly Returns Eliminated
         Sample Size (n = 8)
         Matching Time Frame and Return period
       Daily Returns Eliminated
         Sample Size (n = 525)
         Time Frame for Conducting Analysis
       Monthly or Weekly?
         Sample Size (n=25 vs. 108)
         Time Span of Data and Analysis
         Professional Norms for Returns
Stock / Statistic Value     Mean *          Variance        Standard Deviation   Standard Deviation
                            (Monthly        (Monthly        (Monthly Returns)    (Monthly Price)
                            Returns)        Returns)
AAPL                        3.067           149.262         12.217               41.71
BWLD                        2.797           194.973         13.963               8.11
CVX                         1.671           21.520          4.639                12.75
DNA                         -0.692          16.014          4.002                5.22
LCC                         -1.697          166.253         12.894               12.87
SHLD                        -0.043          76.134          8.725                26.52

                         BWLD         Buffalo Wild Wings     13.96      Risky
                         LCC          Northwest Airlines     12.89
                         AAPL         Apple Computer         12.22
                         SHLD         Sears Holding          8.73
                         CVX          Chevron                4.64
                         DNA          Genentech              4.00        Safe
   Symbol   Stock                  SD Current Price (Monthly)
   AAPL     Apple Computer       41.71       $133.75
   SHLD     Sears Holding        26.52       $108.31
   CVX      Chevron              12.75       $81.90
   DNA      Genentech            4.00        $70.81
   BWLD     Buffalo Wild Wings   12.87       $25.35
   LCC      Northwest Airlines   12.87       $15.39
                                  Apple Computer Beta                                                             Buffalo Wild Wings Beta

                                                  30                                                                                40
                                                  20                                                     y = 1.453x + 2.247         30
                    y = 2.915x + 1.965




                                                                                  BLWD Return
APPL Return




                                                  10                                                                                20
                                                   0                                                                                10
              -8         -6       -4        -2   -10 0           2        4   6                                                      0
                                                 -20                                             -8       -6       -4         -2   -10 0        2           4   6
                                                 -30                                                                               -20
                                                 -40                                                                               -30
                                            S$P Return                                                                        S&P Return

                                AAPL Return            Linear (AAPL Return)                                      BWLD Return         Linear (BWLD Return)


                                       Chevron Beta                                                                       DNA Beta

                                                 10                                                                                10
                   y = 1.0936x + 1.2571
                                                  5                                                                                 5
 CVX Return




                                                                                    DNA Return
                                                   0                                                                                 0
              -8         -6       -4        -2    -5 0           2        4   6                  -8        -6      -4         -2    -5 0        2           4   6

                                                 -10                                                  y = -0.0902x - 0.6579        -10
                                                 -15                                                                               -15
                                            S&P Return                                                                        S&P Return

                                  Cvx Return      Linear (Cvx Return)                                            DNA Return         Linear (DNA Return)


                                           LCC Beta                                                                      SHLD Beta

                                                 40                                                                                20
                                                                                                                                   10
                                                                                   SHLD Return


                    y = 0.8972x - 2.0357
Lcc Return




                                                 20
                                                                                                                                     0
                                                  0                                              -8       -6       -4         -2   -10 0        2           4   6
              -8         -6       -4        -2         0         2        4   6
                                                 -20                                                                               -20
                                                                                                                                            y = 1.0137x - 0.4265
                                                 -40                                                                               -30
                                            S&P Return                                                                        S&P Return

                                  Retrun LCC     Linear (Retrun LCC)                                            SHLD Return         Linear (SHLD Return)
Stock   Beta     Yahoo
AAPL    2.915    3.06    Risky
BWLD    1.454    1.40
CVX     1.094    1.35
SHLD    1.014    0.61
LCC     0.897    0.90
DNA     -0.090   -0.40   Reverse
   Let’s assume you invested $1,000 into each stock at the close of the market on
    January 3,2006. Based on the stock prices, what would each stock be worth on
    January 31, 2008? What would your portfolio be worth?


    Stock prices at close

                 January 3, 2006              January 31, 2008
    AAPL                 $74.75                       $135.36
    BWLD                 33.95                        25.17
    CVX                  59.08                        83.25
    DNA                  94.00                        70.16
    LCC                  37.45                        13.84
    SHLD                 117.08                       110.49
At the close on January 31, 2008, each stock would be worth:


   AAPL                          $1,810.84
   BWLD                          $1,482.77
   CVX                           $1,409.11
   DNA                           $746.38
   LCC                           $369.56
   SHLD                          $943.71

   With this given information, we calculate that our total portfolio would
   be worth $6,762.37, giving us a profit of $762.37.
As calculated in our excel spreadsheet, our portfolio has a
standard deviation of 1,038.01 and a coefficient of variation
of 14.25%. This compares to individual stocks:

                                 Difference from Portfolio
          SD       COV           SD             COV
AAPLE     557.83   40.53%        -480.18        26.28%
BWLD      490.80   31.38%        -547.21        17.13%
CVX       218.26   17.96%        -819.75        3.71%
DNA       58.76    6.86%         -979.25        -7.39%
LCC       337.69   33.63%        -700.32        19.38%
SHLD      250.20   19.47%        -787.81        5.22%
                                  Portfolio Beta
                               0.2000
                                                            y = 1.5519x + 0.0003
                               0.1500
                               0.1000
                               0.0500                                      Series1
                               0.0000
        -0.1000       -0.0500 -0.05000.0000        0.0500                  Linear
                              -0.1000                                      (Series1)
                              -0.1500
                              -0.2000




   Weighted average beta: (2.915 + 1.454 + 1.094 - 0.09 + 0.897 + 1.014)/6 = 1.214
    Set up a model under the assumption that the returns of your stocks in
    those industries (AAPL & DNA) are simple random samples from the
    populations of interest and use the model to find a 95% confidence
    interval for the difference in average returns of the two portfolios and a
    significance test of the hypothesis that this difference is zero. What do
    you conclude? Are the returns of tech stocks and biotech/pharma
    stocks different from each other? Explain.




   Confidence Interval = -0.01 to 0.10
   P-value = between 0.10 and 0.20
   P-value > 0.05; “Do not reject” the null hypothesis
Do you think it is reasonable to assume that the
data are representative of the populations of all
stock price data for the two industries? If not, what
do you think the effect would be on the inferences
you draw of any biases in the samples presented?

				
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posted:12/7/2011
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