FIN 4504 – 001-Assignment #2
Stock Selection and Security Trading
The purpose of this assignment is to first select a specific industry (such as
Clothing, Financial Services, Health Care, Restaurants, etc.) that you are interested in and/or believe will perform well in the current economy. From that industry, you will pick a specific company that you will follow throughout the semester. In this assignment, you will also begin building your STOCKTRAK portfolio, in which you will be given $100,000 to trade with. There will be approximately $25,000 of required trades, while the remainder is yours to invest as you wish with no restrictions.
With regard to the specific company, no two students may follow the same company and companies will be assigned on a first-come, first-served basis.
Therefore, all students should pick several companies, list them in order of preference (with ticker symbols), and email them to me (please put "stocks" in the subject line) for approval. I will notify you of the company that you have been assigned.
The companies you select must be publicly traded and must meet the following requirements:
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have a market cap of over $1 billion have positive earnings pay a dividend have bonds outstanding have options traded on the stock

All of this can be quickly ascertained on Yahoo! Finance and other financial websites. Ideally, your companies should currently trade for more than $10 but less than $100 per share and have positive earnings. Note that gathering data for your analyses will be much easier if investment analysts follow the company (e.g., a research link exists for the stock at financial websites such as Hoover's Online, Thomson Analytics, or Yahoo Finance).
Part I: Stock Selection
1. Email me your stock. If you procrastinate in doing this, it is very possible that your company will have already been chosen by another student and that you will have to continue looking for a company.
2. Establish your investment goals for the STOCK-TRAK portfolio simulation. In your write-up for this assignment, state assumptions that would be a part of these goals. Specifically, identify how your
STOCK-TRAK portfolio should be weighted (percent held in stocks, bonds, cash, etc.). Describe how the current state of the economy and current stock price levels may affect your investment performance.

Note: Each student must turn in a 1-page report with the name of their company, and the information noted above, along with the investment goals for the STOCK-TRAK portfolio. You must turn this in by the beginning of class on Tuesday, January 20th and there is a 20% penalty for failing to do so. Your STOCK-TRAK account must also be open by this date to avoid the 20% penalty.
Part II: Trading in your STOCK-TRAK account:
1. Go to your STOCK-TRAK account. If you have not registered for this account, you must do so immediately. Take a long position (buy) of at least $10,000 of the company that you have been assigned. You should purchase these shares in round lots (100 shares). This will be your first stock purchase. You may purchase shares of some other companies as well.
2. Next, buy two different mutual funds. One must be a closed end fund while the other must be an open-end or "retail" fund. The closed end fund can be a closed-end (actively managed) stock mutual fund, an
ETF (exchange traded fund), or a REIT. The open end fund can be either an actively managed stock fund or an index fund. If you do not choose a REIT, then one fund should be actively managed and the other a (passively managed) index fund. To find funds, check out CNN
Fund Screener, MSN Money, TheStreet.com, Quicken Investments,
Yahoo Finance, or any of the hundreds of other mutual fund websites on the Internet. The total value invested in each fund should also be at least $10,000.
Note: in STOCK-TRAK, ETFs and REITs are traded as stocks only open-end mutual funds are traded as mutual funds.
3. Take a short position for a security. The initial value