Essay Sample on Portfolio's Performance

Introduction

The average daily return on the portfolio for the period under consideration was 0.0195%. The annualized return on the portfolio is 7.048%. On the other hand, the average daily return on the S&P 500 was -0.2014%, translating into an annualized return of -73.513%. The portfolio's average return was higher than that of the benchmark. The annualized standard deviation of the portfolio was 2.9973% while that of the S&P 500 index was 23.78%. This indicates that the daily returns on the portfolio were less volatile than the S&P 500 index. Standard deviation measures total risk associated with an investment. Thus, the portfolio had a lower risk than the S&P 500.

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Sharpe ratio shows the risk-adjusted performance of a portfolio or stock. As shown above, the portfolio's Sharpe ratio was 1.0392. The positive sign shows that the portfolio generated a higher return than the risk-free rate (Brigham & Ehrhardt, 2016). The Sharpe ratio for benchmark was -3.2579 indicating that its return was less than the risk-free return. The portfolio's Sharpe ratio is more than that of the benchmark. This indicates that the portfolio delivered a higher risk-adjusted performance than the benchmark (Brigham & Ehrhardt, 2016). Thus, the portfolio beat the S&P 500.

Biggest Winners and the Contributing Factors

The three biggest winners in the portfolio were Twitter Inc., Tesla Inc., and L'OREAL CO ACT with percentage gains of 17.39%, 12.25%, and 10.67% respectively. The stock of Twitter Inc. increased for most days during the period with a 15.47% surge on October 25, 2018. The rise was driven by the company's third-quarter earnings which beat earnings estimates by 7% (Osterland, 2018). The company also reported a 29% increase in advertising revenues (Osterland, 2018). However, this was partly offset by the company's measures to remove automated bot accounts which are necessitated by security and privacy issues facing social media networks.

Tesla's surge was also driven by its third-quarter performance which beat Wall Street estimates. The company sold 83,500 vehicles in the third quarter of 2018, which was more than 80% of its total sales in 2017 (Ferris, 2018). The stock also surged due to the SEC settlement with Elon Musk in which he is allowed to continue serving as the CEO but was barred from the chairman's position for at least three years (Assis & Kollmeyer, 2018).

Biggest Losers

The three biggest losers were India Globalization Capital, Inc., Ctrip.com International Ltd., and Apple with percentage losses of -88.75%, -21.07%, and -192% respectively. The losses on India Globalization Capital, Inc. were due to the company's decision to issue additional shares worth $30 million (Choudhury, 2018). Investors did not like the move due to the dilutive effects. However, the industry had favorable events especially after Canada legalized marijuana.

The shares of Ctrip.com International Ltd. fell after it reported a net loss of -RMB1.14 billion in Q3 of 2018. Apple stock also fell due to concerns about iPhone sales. The company announced the plans to cut the production of XR by about 70 million units (Imbert, 2018). It is also attributed to uncertainties such as trade relations between the US and China, among other challenges facing tech stocks.

References

Assis, C., & Kollmeyer, B. (2018). Tesla's stock soars after surprise SEC settlement, hint of profitability from Musk. Retrieved from https://www.marketwatch.com/story/tesla-stock-set-to-soar-after-surprise-sec-settlement-hint-of-profitability-from-musk-2018-10-01

Brigham, E., & Ehrhardt, M. (2016). Financial Management: Theory & Practice (15th ed.). Cengage Learning.

Choudhury, U. (2018). Shares of India Globalization Capital fall after $30M offering. Retrieved from https://www.proactiveinvestors.com/companies/news/206291/shares-of-india-globalization-capital-fall-after-30m-offering-206291.html

Ferris, R. (2018). Tesla beats Wall Street estimates for overall vehicle deliveries. Retrieved from https://www.cnbc.com/2018/10/02/tesla-third-quarter-auto-production.html

Imbert, F. (2018). Apple shares fall into bear market again after report of slashed iPhone production orders. Retrieved from https://www.cnbc.com/2018/11/19/apple-shares-fall-on-report-of-slashed-iphone-production-orders.html

Osterland, A. (2018). Twitter's Stock Price Jumped 15 Percent Today. Here's Why. Retrieved from https://www.entrepreneur.com/article/322377