The Task You have a nominal £15,000 with which to buy shares of a company that M

Question

The Task

You have a nominal £15,000 with which to buy shares of a company that MUST be listed on the London Stock Exchange. Try to invest in a company that you think will do well over the next six months and give you a good return on your investment, even though making a profit is not a key objective of this assessment.

You need to be able to justify your choice of company. In order to do this you should carry out some research on a range of companies using PEST analysis. You will need this information for your interim report.

Every Friday you must keep a record of the closing price of your share on the previous evening (or the closest trading day) along with the total current value of your share using an Excel spreadsheet. You should record the share prices and create chart/s to show the values graphically. Experiment with the sorts of chart that you can produce to find the best one for this task.

Every Friday you will be expected to check on the performance of your chosen share, keeping your spreadsheet updated. In Phase 3 you will also have an opportunity to sell your share and use the proceeds to invest in a different company. You have to decide whether that will give you better growth over the period of your investment.

The assessment is concerned with how you arrived at your choice of initial share, your analysis of the progress of your share/s, your judgement for keeping - or selling - the share/s and how well you justify your decisions. In order to do this, you should try to include more pieces of information than just the closing share price each Thursday. What other information might be relevant?

Explanation / Answer

Apart from just the perspective on closing price, the other information that can be sought for a better decision making are as follows:

1. The company's sales trends: This helps in knowing the company's growth rate and if the fall in share price is just a cyclical trend or an increase in price may be due to sale of some asset.

2. The rising shares: If the number of shares are increasing then earning per share is going to be divided by a larger pool of shareholders thus decreasing the earning per share while it can be opposite in case of smaller share holders where the earning per share is going to be large.

3. Any New product launch: If there is any speculation in the market or the news says that a new product is to be launched then that needs to be seen and selling can be with hekd as a new product in the market garners attention.

4. reading the News helps in knowing the company's situation where there are opportunities or challenges.

5. focussing on Moving Average: It helps in narrowing down the risk as it does not focus on the fall in price while the trend that is being followed since the past prices.

6. whether the stock is thinly traded or there are millions of transaction in a day that helps in knowing the volumes of trade that is being done. Greater the volume lesser the risk

7. Apart from that we should also focus in the interest rates and buying patterns of the industry that is going to affect the sales.

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