mruby7188/portfolio_analysis

4 Stock Portfolio that outperformed the S&P 500 between April 2013 and April 2018

Computational Finance And Financial Econometrics Project

Introduction

This report consists of an analysis of the returns for four assets; Netflix, Inc. (NFLX), Nvidia Corporation (NVDA), Acuity Brands, Inc. (AYI), and NVR, Inc. (NVR). These companies each enjoyed positive returns between April 2013 and April 2018, with AYI seeing the most moderate returns while NVDA saw by far the greatest returns. Finally, we will compare the returns of a portfolio consisting of these three assets, which are all elements of the Standard and Poor's (S&P) 1500 Composite, to the returns of an similar investment in the S&P 500 Composite during the same period.

Netflix, Inc. is an internet based entertainment company headquartered in Los Gatos, CA and traded on NASDAQ. While they began by offering video rentals through the mail, they have largely shifted away from this model and have began to focus on streaming video content. This content is sourced from network and cable television programs as well as their own generated content. They monetize this content by offering a monthly subscription based service to users in exchange for unlimited streaming of their content. Netflix has seen steadly increasing revenue in recent years due to increasing tendency towards "cord-cutting", or a reduced use traditional viewing methods and shifting towards more on-demand viewing. With a 2017 revenue of $11.7 billion Netflix ranks as the 10th largest internet company by revenue. During the time period being analyzed they saw dramatic growth from an inital value of $30.85, to a final value of $291.94.

Nvidia Corporation is also a technologically focused company that is also traded on NASDAQ. Nvidia Corporation however produces computer hardware such as Advanced Micro Devices' (AMD's), Graphical Processing Unit's (GPU's) and System on a Chip units (SoCs). Headquartered in Santa Clara, CA; Nvidia has seen rapid growth since late-2015 growing from a stock price of just $22.00 per share in August 2015 to $224.80 per share in April 2018. This surge in price is likely due to increased demand for GPU's as a result of the rapid growth of Bitcoin which grew in value from $283.73 to $6,943.77 during this period peaking as high as $13.850.49 during the same time frame. The reason these two are likely tied is due to the use of GPU's in ``mining'' Bitcoin, a process in which people can earn this cryptocurrency by processing transactions completed utilizing the same currency. However the volatility of Bitcoin may be cause for concern for long-term investment in Nvidia as if there is a dramaitic drop in the price of Bitcoin we will also likely see a similar dip in Nvidia stock.

Acuity Brands, Inc. is an Atlanta, GA based company traded on the NYSE, and is in the Commercial and Industrial Lighting Industry. They operate throughout North America, Europe and Asia andare the largest lighting manufacturer in North America in terms of market share. During the analyzed period Acuity Brands saw steady growth until late 2016 peaking at nearly $275.00 per share before steadily losing value through April 2018 to just $119.70. The loss in value seems indicative of a potential long term issue as they follow repeated failures to meet projected quarterly earnings due to decreased margins. However if they are able to correct this issue they are likely due for a long-term rebound.

NVR, Inc. is a homebuilding and mortgage company based out of Reston Virginia, and is traded on the NYSE. Their heavy focus in the housing industry means they will see consistently positive returns, while the housing market continues to climb which would make them a safe investment. They would be highly succeptible to another market dip as they would see a reduction in revenue on the production front as well as the financial services front which could be compounded further if they were to see any increase in defaults on mortgages.

The Standard and Poor's 500 is a market index based on 500 large companies which has common stock issued on either the NYSE or NASDAQ. The S&P 500 weighs each company in it's index by using the number of shares each company has availible for public trading. During the period the index saw overall positive returns as the value increased from $1598 to $2648 during the period of analysis.