Investments Portfolio Project

Initial Paper

Kiara Rush
&
Georgeanne Lee-Yarwood

March 4, 2016

* All data provided is accurate as of close of market March 2, 2016. *

Investments Strategy
As a team, we decided to use a Passive Investment Strategy for our portfolio with the
intentions of focusing on stocks to hold long-term. Our main goal was go plan for retirement
and/or any other major life events. We have been proceeding cautiously while learning more
about the market, doing our best to diversify our portfolio with stocks across the different
industries.
The Market & The Economy
As we began to consider our investment options, we immediately began to consider the
time of year. We were crawling towards the end of the winter season which meant one thing: It
was time to start thinking about spring and summer. After considering this, we quickly realized
the change in season meant a change in consumer needs and many industries would soon begin
to prepare for this change.
Immediately, our thoughts turned toward the clothing, apparel and retail industries.
Retailers would likely be placing orders to change their inventories from winter apparel to spring
and summer. In turn, consumers would begin buying the newest styles for their upcoming spring
break or summer vacation. We relied on these assumptions as we researched some companies
within the Clothing, Apparel and Retail industries.
In addition to meaning new fashion and vacation, the change in season can also influence
the Sporting Goods industries as people are generally more active (and sometimes more
motivated) as the weather warms. We began to research companies that could potentially benefit
from the change in motivation including Under Armor and Fitbit.

Research led us to Michael Kors Holdings, Ltd. (KORS) which was in the news at the
time for being a stock to watch as shares were up and estimates for third quarter earnings were
higher than anticipated. Next, we focused on Under Armour because they are a well-known
sports apparel company that has seen steady growth since beginning in 1996.
As we continued to watch the news and attempt to decipher market trends, we noticed
Chipotle was beginning to come back into the spotlight. Their company had suffered a great deal
of negative press (and sales) thanks to the E. coli and norovirus outbreaks. We became inspired
when it was announced all stores would be closed for part of the day on February 8 for a
company-wide meeting about food safety.
Major Holdings
Some major investments within the portfolio include American Eagle Outfitters,
Incorporated (AEO) which falls under the Apparel Stores industry in the services sector. We are
invested in this company with two thousand shares. The decision to invest in this company was
more on the fundamental end because of the season and the new clothing lines coming out. We
purchased AEO around the middle of their 52 week range at $14.43 and we have currently made
a 4.99% return on this investment and earnings of $1,440. AEO has a market capitalization of
2.95B, and a P/E ratio of 15. AEO has no total debt and a return on assets of 11.03% with a
current ratio of 1.82.
A major investment in our portfolio is Chipotle Mexican Grill, Inc. (CMG) which falls
under the Restaurant industry and the leisure/arts/hospitality sector. We are invested in CMG
with one thousand shares. After purchasing half at $467.38 and $527.64 with returns of 8.27%
and -4.10% with a current price of $506.01. What initially inspired this investment was

Chipotles stance in the news. After reports of E. coli found in the food and a country wide shut
down of stores to address the problem, stocks dropped. We purchased stocks during their
promotions to get their customers back, thinking that they would make a come-back. CMG has a
market capitalization of 15.32 billion and a P/E ratio of 33.77. CMG has total debts of zero and a
current ratio of 2.91.
Another major holding is Gap Inc. (GPS) which falls under clothing and retail industry
and sector. After purchasing five hundred shares at $24.51 and another five hundred at $27.03 we
have earned a return on investments of 11.10% and .74% with a current price of $27.23 and
current gains of $1,460. GPS has a market cap of 11.4 billion, a P/E ratio of 11.6, and total debts
of 1.73 billion and a current ratio of 1.57. Our initial interest in Gap Inc. came from our interest
in their clothing and how the business is run and we believe with the seasons changing, that the
stocks will spike.
Aetna Incorporated (AET) is another one of our biggest gainers, with three hundred
shares bought at $102.91 and another seven hundred purchased at $106.54 we have returns on
investments of 6.81% and 3.17% on a current price of $110.15. AET is in the Life Insurance
Industry under the Financial services sector and has a market cap of 38.17 billion. Aetna Inc. has
a P/E ratio of 40.92 billion and total debts of 7.83 billion.
The major holding in our portfolio that we have the highest percentage return on right
now is Michael Kors Holdings LTD. (KORS), we currently hold 1,000 shares. Five hundred
shares bought at $56.58 with a 13.57% return and another five hundred bought at $54.71 with a
3.42% return and total gains of $4,315. KORS is in the clothing industry in the consumer goods
sector. Our interest raised when we looked into Michael Kors, High revenue, current ratio, ROA

and ROE. Everything looking positive and the company was in the news with rising stock prices.
KORS has a market cap of 10.26 billion, P/E ratio of 9.56 billion, total debts of 3.98 million and
a current ratio of 3.93.
The major holding that has cost us the biggest loss right now is Fitbit Inc. (FIT), Fitbit is
in the Sports Goods industry under the consumer goods sector. Holding only 500 shares
purchased at $16.68 we have a $2,265 loss, a -27.16% return. Shares of the stock have fallen
33% in one month, compared to the S&P 500's decline of 4%. FIT has a market Cap of 2.65
billion, a P/E ratio of 21.63, no total debt and a current ratio of 2.67. We have held on to a small
amount of FIT stock in hope that the stock prices will turn around, but we might think about
selling in the future.
Industry, Competition, and Fundamental Analysis
Our portfolio has a number of investments that fall within the Apparel Stores, Clothing
Retail, and Clothing industries. These investments include KORS, GPS, AEO, and Under
Armour (UA). Although they are at least somewhat in competition with one another, each of
these stocks have held their own in the previous weeks. The biggest competitor to KORS is
Ralph Lauren (RL). KORS has a revenue of $4.59 billion, a return on assets (ROA) of 28.75%,
and a return on equity (ROE) of 40.86% while RLs same statistics are $7.42 billion, 8.27% and
12.16% respectively.
Within this same industry are two of our other investments, GPS and AEO. The two
companies are direct competitors and have demonstrated success on their own levels. GPS has a
revenue of $15.8 billion, ROA of 12.56% and ROE of 33.28% while AEOs same statistics are
$3.49 billion, 11.03% and 17.31%. Another competitor in this category that we have not invested

in is TJX. A much larger company, TJX has a market capitalization of 2.92 billion, revenue of
$30.94 billion, ROA of 20.47% and 53.15%. Although these are clearly extremely impressive
numbers, the two smaller companies are still producing quality numbers.
While we have seen success in the Retail and Clothing industry, our belief that FIT stock
would produce a positive return has not been so lucky. A relatively young company, FIT was
producing an impressive revenue of $1.86 billion, ROA of 19.78% and ROE of 30.81%.
Unfortunately, they have two extremely impressive competitors: Garmin (GRMN) and Apple
Inc. (AAPL). Both competitors have the competitive advantage of stronger brand recognition as
well as longer history. Although their revenues are higher at $2.82 billion, their ROA is 7.47%
and ROE is 13.52% - both statistics are significantly lower than the newer FIT.
Finally, we have invested in the Life Insurance industry with AET. Insurance is an
industry that will no doubt always be somewhat successful as it is not only one specific market
that is in need of it. AET has a revenue of $60.23 billion, a ROA of 5.57% and ROE of 15.59%.
Two of their main competitors are Anthem Inc. (ANTM) and Cigna Corp. (CI). ANTM is closest
to AET with revenues of $79.16 billion, ROA of 5.34% and ROE of 10,83. CI trails the group
with revenues of $37.88 billion, ROA of 4.14% and ROE of 18.07%.
Our Portfolio vs. The Market
So far, we have invested approximately $1,304,250 in our portfolio and have a remaining buying
power of $4,722,740 with $3,000,000 being available in a margin account. Our current net worth stands at
$3,031,514 with an overall gain of $31,514. Our current return without commission is 2.65%, and it is
2.63% with commission. This is slight ahead of the S&P 500 which as of now has a return of 1.97%. This
week is only the second time thus far where our portfolio has outperformed the S&P 500. During Week 1,

we had a return with and without commission of -2.36% and -2.40%, respectively while the S&P 500 had
a return of -3.10%.
At the end of Weeks 2, 3 and 4 the S&P 500 had a better return than our portfolio. We had a
return with and without commission of -2.40% and -2.36%, respectively, at the end of Week 2 while the
S&P showed a return of only -0.81%. Our returns with and without commission were 2.13% and 2.17%,
respectively, at the end of Week 3 and they fell to -0.18% and -0.16% at the end of Week 4. The weekly
return for the S&P 500 for Weeks 3 and 4 was 2.84% and 1.58%, respectively. As we continue to gain
confidence and knowledge within the market, we are eager to invest the remainder of our money.