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					                                 SECURITY ANALYSIS AND
                                PORTFOLIO MANAGEMENT
                                        FIN 4332

Instructor:     H. Swint Friday, Ph.D., CFP
Phone:          (361) 825-2498
Assistant:      Phu Nguyen
Office:         Driftwood 201c
Office Hours:   TR: 11:00 am -12:30 pm, 1:45-2:00 pm, W: 1:00-2:00 pm, R: 6:00–7:00 pm, 9:30–10:00 pm
                or by appointment

Required materials:
1.     Portfolio Construction, Management, and Protection, Robert A. Strong, Most Current Edition,
2.     Study Guide and PowerPoint Slides
3.     Financial Calculator
4.     Internet Access

ACCT 2301, ACCT 2302, ECON 2301, ECON 2302, ORMS 3310, FINA 3331, and Junior standing or above

Course Description:
Evaluation of investment securities of both private and public institutions through external analysis of financial
statements and economic conditions, portfolio selection, expected return and risk selection, and conditions of
market efficiency.

Relationship to Other Coursework:
FINA 4332 is the second of a two course series in investment analysis. The first course is a survey of widely held
financial assets and the markets in which they trade. This course develops modern portfolio theory as a framework
for investment analysis. It emphasizes analysis and decision making, covering specific topics to include preferred
and common stock valuation, bond portfolio management, fundamental and technical analysis, as well as the
measurement and management of risk.

Instructional Methodologies:
Instructional techniques include lectures, invited lectures, videotape, computer applications, class discussion,
simulation of real-time securities trading, and extensive use of electronic databases.

Performance Evaluation and Grading:
Three tests will be given, including a comprehensive final exam. Test materials will come from lecture notes, the
text, assigned readings, and class discussion. Test format is primarily multi-art problem solving and discussion;
questions will emphasize understanding and application of concepts and topics covered. Students will complete a
group semester project as discussed below.

Grades will be assigned based on the following weights:
Exam 1                                                                  30%
Exam 2                                                                  35%
Portfolio Project                                                       25%
Participation (Class and Homework)                                      10%
Test dates will be announced in class the week before they are to be administered. Should circumstances make it
necessary, changes in exam dates may occur. Should classes be cancelled on a test date, the next class date
scheduled will be the exam date. No make-up exams will be administered. If you must miss an exam, notify me in
advance and provide me subsequent comprehensive documentation from the appropriate entity within one week of
the exam that the absence was an excused University activity, a severe illness, or a dire emergency. If these
conditions are met, your score on a comprehensive final exam will be substituted for the exam you missed.
Otherwise, I will assign you a zero for the exam.

Exams are closed book unless otherwise stated. To protect the integrity of the test banks employed, exams will not
be returned. However, exams are available for review in my office during scheduled office hours for two weeks
after the exam.

Students are responsible for all material in the assigned readings, handouts, homework, and class presentations.
Furthermore, students are expected to attend class on a regular basis. However, in the event of an absence, students
are responsible for obtaining all missed information and notes from a classmate.

All assignments are to be turned in at the beginning of the class on their due date unless otherwise instructed. Late
assignments are penalized 20 percentage points for each day that they are late.

I expect everyone to follow all rules of common courtesy during classroom lecture and discussion. The presence of
cell phones and pagers as well as other disruptive items or actions are prohibited in the classroom. If the disruptive
or inappropriate behavior persists, action will be taken to have the party removed from the course.

While the projects are worth no more than 20% each, they are not optional. Failure to complete these projects will
result in a failing grade in the class.

Oral and Written Communication Requirements:
However, students are expected to participate actively in class discussion of the topics and issues covered in the
course and will be rewarded through their class participation grade for doing so. Students are required to prepare a
formal written presentation for each of the two semester projects and may be expected to present their findings
orally to the class as part of the projects final grade. Effective written communication is also necessary for exams.

Technology Applications:
Students are required to make extensive use of both computer applications and computer databases for this course.
The stock trading semester project requires that students use electronic spreadsheets to record asset portfolios, and
to track and analyze the performance of these portfolios. The security analysis project requires that students use
extensively computer databases, e.g., Moody’s Company Reports, Disclosure. Students are also required to obtain
Internet access and to make use of online information services. Students must use word processors to prepare
semester project reports.

Ethical Perspectives:
Securities analysis and trading may present ethical problems for both dealers and investors. While this course does
not deal with securities law in depth, we will discuss such topics as insider trading, securities manipulation, and
fiduciary responsibilities.

Global Perspectives:
Securities analysis and trading is a global activity. This course considers international diversification, foreign
equity and debt and derivative securities markets, foreign currency trading, and international risk management.

Political, Social, Legal, Regulatory, and Environmental Perspectives:
The course will consider the structure and regulation of securities markets to include the SEC, CFTC, NASD.
Attendance Policy:
Attendance is required and is reflected in the student’s participation grade. Every student is responsible for their
homework assignments, lecture notes, handouts, and exams. Excuses are not accepted unless a student gains prior
permission for missing a class, assignment, or exam. Gaining class notes for missed classes from other students is
encouraged. The student is responsible for collecting all handouts and assignments from the professor for all classes
that are missed. Excessive absences will result in lower grades.

ADA Compliance
The Americans with Disabilities Act (ADA) is a federal anti-discrimination statute that provides comprehensive
civil rights protection for persons with disabilities. Among other things, this legislation requires that all students
with disabilities be guaranteed a learning environment that provides for reasonable accommodation of their
disabilities. If you believe you have a disability requiring an accommodation, please contact the Disability Services
Office at (361) 825-5816 or visit the office in Driftwood 101.

Student Ethics Code
This course, and all other courses offered by the College of Business (COB), requires all of its students to abide by
the COB Student Code of Ethics (available online at Provisions and stipulations in the code
are applicable to all students taking College of Business courses regardless of whether or not they are pursuing a
degree awarded by the COB.

Academic Honesty:
University students are expected to conduct themselves in accordance with the highest standards of academic
honesty. Students are subject to penalty for all forms of cheating including forgery and plagiarism. Please refer to
the Texas A&M University-Corpus Christi Student Handbook for a full discussion of University policy on
academic integrity and honesty.

Summary of Topical Coverage:
Asset Allocation                                                  3 hours
Risk and Return                                                   3 hours
Portfolio Management Process                                      3 hours
Securities Markets                                                3 hours
Modern Portfolio Theory                                           6 hours
Fixed Income Investments                                          6 hours
Financial Statement Analysis                                      3 hours
Fundamental Equity Analysis                                       6 hours
Technical Equity Analysis                                         3 hours
Futures and Options                                               3 hours
Exams                                                             6 hours
Total Hours                                                      45 hours

Textbook Coverage:
1. The Process of Portfolio Management.
2. Valuation, Risk, Return, and Uncertainty.
3. Setting Portfolio Objectives.
4. Investment Policy.
5. The Mathematics of Diversification.
6. Why Diversification Is a Good Idea.
7. International Investment and Diversification.
8. The Capital Markets and Market Efficiency.
9. Picking the Equity Players.
10. Stock Selection Models.
11. Security Screening.
12. Bond Pricing and Selection.
13. The Role of Real Assets.
14. Alternative Investments.
15. Revision of the Equity Portfolio.
16. Revision of the Fixed Income Portfolio.
17. Principles of Options and Option Pricing.
18. Option Overwriting.
19. Performance Evaluation.
20. Fiduciary Duties and Responsibilities.
21. Principles of the Futures Market.
22. Benching the Equity Players.
23. Removing Interest Rate Risk.
24. Integrating Derivative Assets and Portfolio Management.
25. Contemporary Issues in Portfolio Management.
                                            Securities Analysis Project

Teams of students will perform a comprehensive analysis of an industry assigned by the instructor. Each student
will be responsible for one firm from that industry for individual analysis. Student grades will be a function of the
form and content of the presentations, reports, and peer evaluations. Note: Up to three points can be deducted in
each section for grammatical errors.

I.      Introduction                    (Group: 5 points)                         Due Date __________
                Firm and Industry description

II.     Economic Analysis                (Group: 13 points)                       Due Date __________
              Government policies
              Economic indicators
              Business cycle

III.    Industry Analysis                         (Group: 13 points)              Due Date __________
                Sensitivity to the business cycle
                Industry life cycles
                Industry structure and performance

IV.     Top Management and Agency Analysis (Individual: 13 points)                Due Date __________
              Board of director composition
              Ownership structure
              Top management background and compensation
              Related transactions

V.      Financial Statement Analysis (Individual: 13 points)                      Due Date __________
                Ratio analysis
                Five year trends
                Industry comparisons
                Performance Forecasts

VI.     Technical Analysis             (Group: 13 points)                         Due Date __________
               Price Patterns
               Moving averages
               Relative strength index (RSI)

VII.    Equity Valuation                        (Individual: 13 points)           Due Date __________
               Valuation with sensitivity analysis
               Dividend growth models
               P/E models

VIII.   Conclusion                      (Group: 12 points)                        Due Date __________
               Integration of Sections I - VII
               Provide discussion addressing:
               1. Short term outlook
               2. Long term outlook

IX.     Appendices                    (Group: 5 points)
              Industry information sources
              Firm information sources
              Economic information sources
              Proxy statement
                                              Portfolio Analysis Project

An advisory team of students will evaluate a client scenario and develop an investment policy statement and a
portfolio of investments that best suits the investor’s profile. Student grades will be a function of the form and
content of the presentations, reports, and peer evaluations.

I.      Introduction                                      (10 points)             Due Date __________
                Description of the investor

II      Investor objectives and constraints               (25 points)             Due Date __________
                Liquidity requirements
                Return requirements
                Risk tolerance
                Time horizons
                Tax considerations
                Unique needs

III.    Economic Analysis                                 (20 points)             Due Date __________
              General climate
              Government policies

IV.     Portfolio Selection and Composition              (35 points)              Due Date __________
                Investments to be placed in portfolio
                Investment objectives
                Historical performance evaluation
                Allocation across investments
                (Utilize modern portfolio theory to determine weights)

V.      Conclusions                                       (5 points)              Due Date __________

VI.     Appendices                                        (5 points)              Due Date __________
              Investment information sources
              Economic information sources
              Miscellaneous sources

Key considerations in determining your grade are:
1.     An asset allocation consistent with the stated objectives of your portfolio
2.     An adequately diversified portfolio
3.     Risk of portfolio consistent with the stated objectives
4.     Few or no grammatical errors
5.     Overall appearance of the report
       (For a client the appearance of the report is often more important than the substance.)