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Investment portfolio

management
Final Assignment

SUBMITTED BY:
Omer Fayyaz Paracha
Bilal rehman

Investment portfolio management


INTRODUCTION:

The stocks that we have chosen for the purpose of the project are as follows:
1. Attock Refinery Limted
2. Indus Motors Co

*ATTOCK REFINERY LIMITED


Attock Refinery Limited (ARL) was incorporated as a Private Limited Company in November,
1978 to take over the business of the Attock Oil Company Limited (AOC) relating to refining of
crude oil and supplying of refined petroleum products. It was subsequently converted into a
Public Limited Company in June, 1979 and is listed on the three Stock Exchanges of the country.
The Company is also registered with Central Depository Company of Pakistan Limited (CDC).
Original paid-up capital of the Company was Rs 80 million which was subscribed by the holding
company i.e. AOC, Government of Pakistan, investment companies and general public. The
present paid-up capital of the Company is Rs 852.93 million.

*INDUS MOTORS CO
Indus Motor Company Limited (IMC) incorporated in 1989 as a joint venture company between
the between the House of Habib (HOH), a local conglomerate and Toyota Motor Corporation
(TMC) and Toyota Tsusho Corporation (TTC) of Japan. The company manufactures and markets
Toyota and Daihatsu brand automobiles for domestic consumption. The main product offerings
include several variants of the flagship Corolla in the passenger cars category, Hilux in the
light commercial vehicles segment and Fortuner in Sport Utility Vehicle (SUV) segment.

Investment portfolio management


REASONS FOR SELECTING STOCKS

1. ATTOCK REFINERY LIMITED

During last two months of the 3rd quarter, refinery margins started to improve.
Stability in Pak Rupee versus the US Dollar has helped the company suffering from
heavy losses in earlier quarters of the year. Profit has increased from 1.92 million to
1.937.81 million.
Attock refinery has declared a better annual total cash dividend of 50% for their
shareholders.
The company successfully recovered from circular debt crisis and however has
maintained a better position in its liquidity.

Beta: 0.1632
Annual Dividend: Rs. 50
Earnings per Share: Rs. 45.91
Share Price: Rs. 210.96

2. INDUS MOTORS

The investment in Indus Motors has been opted for because of the following
reasons:
Auto sales have therefore increased by 6 percent annually since 2012.
Pakistani rupee is strengthening against Japanese Yen and also the demand
for cars have therefore increased so its likely to improve future profit
margins with better returns.
Past five year analysis showed that the annual dividend and earnings per
share growth ranked in line with the industry averages and eventually have
improved fromRs. 22.50Rs. 54.74

Investment portfolio management


The main reason for selecting Indus motor co is that it is less risky company
with a competitive return in future compared with the other stock.
Beta: 0.937
Annual Dividend: Rs. 22.50
Earnings per Share: Rs. 54.74
Share Price: Rs. 430

RESULTS

ATTOCK
REFINERY
0.021145

INDUSMOTORS

KSE - 100

0.01156

0.02

Standard
Deviation

0.7611

0.4198

0.8019

Correlation

0.1719

1.1531

0.6310

Sharpe Ratio

Treynor
Measure

Porfolio Beta

Expected
Return

0.02001

0.03757

0.09124

0.01172

Total Returns

The standard deviation of the stocks is comparatively average . The standard deviation of an
asset shows the variability of distribution of returns about its mean or expected value. The
standard deviation of Attock Refinery is the highest which indicates that its a risky investment.
Similarly, the risk of Indus motors co. is the lowest.

Investment portfolio management


The correlation of two stock or assets shows the co-movement of stock with one another and is
the bounded by the range +1 and -1. The correlation of Attock refinery with Indus motors shows
a positive correlation which means that if Attock increases in value, then Indus will also increase
in value. Similarly, if Attock decreases in value, then Indus will also decrease in value.
Therefore, all the 2 stocks are positively correlated with one another.
The beta of the stock shows the sensitivity of the stock with the market. A beta of 0.93 of Indus
shows that it is less sensitive to the market changes (KSE). A beta of 0.16 Attock shows that the
stock is also less sensitive to the market changes hence both the stocks are less than 1 beta.
Therefore Attock refinery relatively has high risk and high return.

RESULTS & DISCUSSION


WEIGHT
INDUS

WEIGHT
ATTOCK

WEIGHT TBILLS

42%

18%

40%

42% Of the investment has been done in INDUS MOTOR Co. because the correlation of INDUS
motor Co. and Attock Refinery Limited is 0.1719 which is low.

Securi
ties
Attock
Indus
T-Bill

Ending/closi
ng rate
216.74
381
95.27359941

Market
Value

No. Of
Current
Current
Shares
price
Market Value
830.4881
180000
425
210.96
175199.7785
1102.362
420000
205
430
474015.748
400000 4198.434 98.39086
413087.6347

Investment portfolio management


849
SUM

1000000

458
SUM

Actual
Return

1062303.161

0.062303161
0.00519193
0.519193011

Investment options
We were provided with 1 million from which we had to decided how much to invest in stocks
and T-bill. We decided to invest 18% of the investment to invest in Attock refinery limited
because it has higher standard deviation which results in high risk. However the return is
relatively high. The remaining investment from which 42% was invested in Indus motor co
because it is less risky having low standard deviation whereas its return is average compared to
Attock. 40% of the investment which was left over we decided to invest in risk-free which show
that the investment is secured.

Risk taker or Risk Averse?


A risk-averse investor dislikes risk, and therefore will stay away from adding high-risk stocks or
investments to their portfolio and in turn will often lose out on higher rates of return. Investors
looking for "safer" investments will generally stick to index funds and government bonds, which
generally have lower returns. Riskaverse because we have invested in less risky stocks. We have
invested 18% in Attock because it has high risk due to high standard deviation. InIndus, we have
invested 42% because it is less risky as the standard deviation is low. We have invested 40% in
T-Bills as it is secured.

Investment portfolio management