Individual Assignment

Course Code-Fin 406

Portfolio management

Submitted To: MR. MD. ASAD NOOR

Assistant Professor
Green Business School
Green University of Bangladesh

Submitted By: Imran Uddin

182006014
Green Business School.
Green University of Bangladesh.

Date of submission: August 26, 2021

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 Letter of transmittal

August 26, 2021

Md. Asad Noor
Assistant professor
Green Business School,
Green University of Bangladesh.

Subject: Request to accept the assessment.

Respected Sir,

You have assigned me to prepare a mid-term assessment on the Impact of Security analysis for
making the best use of Investment. I have prepared the assessment in the mentioned timeframe.
The assessment is consists of security analysis for an investment decision. I tried to gather relevant
information to make it specific and coherent. Through the process of preparing the assignment, I
have managed to get some practical experiences.

To serve your purpose, I tried my best to find out the proper process in the assessment. I truly hope
and believe, this assessment will fulfill the requirements suggested by you.

Sincerely yours,

Imran Uddin
182006014
Green Business School
Green University of Bangladesh.

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 Table of content

Sl. Particulars Page

1 Introduction 5
2 Methodology 5
3 Objective of the survey 5
4 Reflection on survey 6-7
5 Security analysis indicators 8
6 Security analysis VS Market analysis 8
7 competitive analysis 9-10
8 Why security analysis is the best use? 10
9 Conclusion 11
10 Recommendations 11

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 Executive Summary

An investor can make an efficient decision via security analysis. Though security analysis has
some limitations it’s assumed one of the most effective ways to analyze the securities. To make
the best decisions security analysis indicators have to be analyzed carefully. The market has
available information now its investors/ security analysts' responsibility to analyze them.

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Introduction

“Don’t put all your eggs in one basket”

– Warren Buffet

“It’s ok to have your eggs in one basket as long as you can control what happens to that basket”
- Elon Musk

The common thing between both of them is they both are a billionaire. But one who has the power
to analyze the securities carefully another who has the power to take the risk. Assume all the eggs
are securities and the basket is the portfolio. Mr. Buffet wants to save the eggs whereas Mr. Musk
wants to save the portfolio. But as a common investor/ analysis we need to save both whether
securities or portfolios. There are few indicators and mathematical parts by which we can make a
safe a secure investment. Which we can do via security analysis. But we can’t say the security
analysis is the only analysis for the best investment but it has some qualitative and quantitative
methods by which we can reach near about a best investment.

Methodology

This assignment is focused on the qualitative result. In this assignment, the appointee has collected
his primary data from the investors via developed questionnaires. Secondary data was collected
from articles, books, websites, newspapers many more.

The objective of the Survey

The objective of the study is to see how investors think before the investment. Which factor makes
them before an investment is made. By this survey, the surveyor tries to find whether the
information is available in the market or not. Are they think of the data algorithm or overall
economy before the investment? “Impact of Security analysis for making the best use of
Investment” to prove that statement surveyor added a question that. For the tax exemption where
the company does the window dressing or not.

Reflection on Survey
Survey Name: Thoughts on investment Sample Size : 11
Surveyor : Imran Uddin Questions :5

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Q1:

81.8% of investors think ROI is the most important thing, 36.8% company reputation, 27.3%
capital structure of the company, 9.1% analyze the EMH before the investment, and 9.1% look for
other factors.

Q2:

As per the investors' thoughts, 45.5% thought there is maybe available information for the
investment, 36.4% said yes there is available information and 18.2% said no.

Q3:

72.7% think there is window dressing in the audit report, 27.3% said no about it.

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Q4:

An interesting result comes up with this question. Equal 45.5% of people think yes and no about
security analysis is the best way of making an investment decision and left 9.1% said maybe.

Q5:

63.6% made their decision based on [past data behavior of the company and 36.4% thoughts
about economy, industry, and company (EIC) before an investment made.

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Security analysis indicators

Before describing the security analysis an important topic comes up Efficient Market Hypothesis
(EMH) and Capital Asset Pricing Model (CAPM)

Efficient Market Hypothesis (EMH): AN investor should know about market efficiency. Based
on market form share price is reflected. For this, we can follow the efficient market hypothesis
(EMH). EMH states three types of form Weak form of EMH which states if it fully incorporates
the information in past stock prices. Finding the stock price movements based on the past data.
The semi-strong form of EMH states that the price of stock fully reflects all publicly available
information. The strong form of EMH suggests that stock prices reflect all the information,
whether it’s public or private. The interesting fact is the strong form efficiency implies semi-strong
efficiency, and the semi-strong form of efficiency implies the weak form efficiency.

Capital Asset Pricing Model (CAPM): The Capital Asset Pricing Model is one of the ways to
analyze which suggests the relationship between the expected return and risk of a security. This
concept is developed by William Sharpe, Treynor, and Linter. It also includes the notions of
systematic and unsystematic risks. The formula is

E(Ri) = Rf+ β ( E(Rm) – Rf)

Now back to the security analysis indicators. We find two indicators of security analysis

1 Fundamental Analysis (EIC- Economy, Industry, Company) what is the economic condition,
Are the industry booming or turning into a sick industry & what the condition of the company,
who is in company management, company background check.

2 Technical Analysis (Historical data): Based on previous data investment can occur. The thing
we need to see company’s share price algorithm is it going up or going down with the harmony,
or having continual drastic changes.

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Market Analysis Vs Security Analysis

Particulars Market Analysis Security Analysis

Definition Market Analysis refers to the Security Analysis refers to the
investment decision by analyzing the investment decision by analyzing
whole market the individual stock
Prediction Predict the market as a whole Predict the individual stock
Investment Analyzing the whole market direction Analyzing the individual stock’s
strategy and movement extent buy at a low direction and movement extent
rate and sell high rate buy at a low rate and sell high
rate
Fair market The market analysis doesn’t have the Security analysis has the
level benchmarks of fair market value. benchmarks of fair market value.
Specification As it analyzes the whole market Specified the individual stock

Competitive Analysis between the approaches of investment

Limitations of Top-down investing approach: A top-down approach is an approach that focuses

on macroeconomic factors like GDP, employment, and taxation many more.

 Based on the top-down investing approach indicators market won’t give accurate results
whereas through security analysis can get the approximate result of investment return.
Which is near about accurate.
 In this approach, all won’t be available and bit complex and security analysis has available
data (past data behavior) to calculate.
 It takes a lot of time to get the result and security analysis takes less amount of time than
the top-down investing approach.

Limitations of the Bottom-up investing approach: This approach analyzes the individual stocks
and is less concerned with the overall economy and market conditions.

 Ignoring the macro-economic factors. Security analysis concern about the micro and
macroeconomic factors.

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  This approach can lead to risky whereas the security analysis approach calculates the
systematic and unsystematic risks.

From the above limitations, it’s clear that security analysis is the best for the investment. Because
it covers micro and macro-level economic factors which are covered by fundamental analysis and
technical analysis. These 2 analyses covered up most of the mathematical calculations for a secured
investment purpose.

Why security analysis is the best use?

In the company’s statistical exhibit quantitative and qualitative elements are analyzed in security
analysis. Qualitative factors focused on capitalization, earnings, dividends, equity conditions.
Qualitative factors focused on the nature of the business, the relative position of the company,
management. All of these factors are examined in security analysis.

1. Security analysis helps to analyze the risk which is involved in investment.

2. Enabled to analyze the market influence on securities
3. Details information regarding the financial statements
4. Analyze the securities with maximum return and minimum risks.
5. Forecasting flows about securities are easily done via security analysis.

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Conclusion

There is a principle for the securities analyst which refers-

“Nearly every issue might conceivable be cheap in one price range and dear in another”

It’s exactly tough to say security analysis for making a best of investment. But this analysis has
those qualities to ensure minimum risks with maximum return. From the survey report, it’s clear
that most of the investor look for technical analysis which is a part of security analysis. Finally, it
can be referred that security analysis can be used as one of the ways for the best investment.

Recommendation

As an investor, three main obstacles hamper the analysis the inadequacy or incorrectness of the
data, the future uncertainties, and the irrational behavior of the market.

i. Every investor should take their decision based on scrutinizing true and fair view of the
audit report then do the security analysis.
ii. As the future is always uncertain so that security analysis must proceed on the assumption
that the record affords so that it can guide for the future.
iii. Try to understand the market algorithm then do the analysis. Because it’s usual to see the
irrational behavior of the market.
iv. Discover the undervalued and overvalued securities
v. Should concern about tempering activities
vi. The intrinsic value may change before the price reflects that value, so an analyst should
concern about that factor.

Thank You.

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References

(Survey document)
https://docs.google.com/forms/d/e/1FAIpQLSeWEMaw3f1vdbGRPvPyhKyn0w_i-
Oht62LH-LZ54NmIKOY7pQ/viewform

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2123994

https://www.slideshare.net/sar84067/security-analysis-and-portfolio-theory

https://www.investopedia.com/terms/t/topdowninvesting.asp

https://finance.yahoo.com/news/methods-investment-analysis-213045740.html

https://bizfluent.com/info-8541160-advantages-disadvantages-bottomup-approach.html

https://www.wisdomjobs.com/e-university/security-analysis-and-investment-management-
tutorial-356/benefits-of-portfolios-11619.html

http://www.backtothe50sweekend.com/the-benefits-of-security-analysis-summary/

http://vinodp.com/documents/investing/security_analysis/chapter52.html

http://icdeolhpu.org/downloads/course-406FM-02.pdf

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