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Creating a 3 Stock Portfolio

Suppose you are given an imaginary $894,000. how you should invest this $894,000?

Pick three stocks you want to invest in.

Which investments did you chose? Which philosophy or strategy did you use in making your choices?
What are the number of shares of the stocks you chose to buy? What is the total amount you spent to make this purchase? Why did you chose this portfolio of stocks?

Include the following in your report together with other information that you think is necessary to answer the questions:
- Total debt/equity ratios of the companies that you choose (keep in mind that higher the debt ratio, higher the risk).
- Ratios such as P/E (Price Earning Ratio), profit margin, return on equity, return on assets, EPS (earning per share), book value per share...etc.
- The betas of all companies that you choose (e.g., keep in mind that the higher the beta, the higher the risk).
- Explanation on the riskiness of all the companies that you choose in brief (e.g., the higher the beta, the higher the risk).
- Current ratio, quick ratio, and book value per share of all the companies that you choose.

Solution Preview

Choosing from the S&P 500 under the following criteria:

Performance VS industry greater than 10%;
Performance VS S&P 500 greater than 10%;
Current ratio (MRQ) is 3 to 4;
Quick Ratio (MRQ) is 2 to 3;
Price to Book (MRQ) is greater than 3;

These choices produce a result of the following three stocks:

ABBV (pharmaceuticals - AbbVie) Current ratio: 2.65 Quick Ratio: 2.49 Price to Book: 22.83 Debt to Equity: 3.11 Price/Earnings: 28.86
Profit Margin: 21.97% return on equity: 90.29% return on assets: ...

Solution Summary

The author creates a portfolio of 3 stocks and explains what criteria he used and why. He gives his thoughts on investing in the current market.