FNCE5001Integrated Financial Instruments Research Project

Group/Individual Project Total 70 marks

You must adhere to the formatting requirements, and provide well-presented and labelled charts (if appropriate) and include references

Question 1 [Total: 25 Marks]

Envestnet Inc (NYSE:ENV) is a stock listed on NYSE.

You will consider the time-period and daily share price of the company for the period 1 st of April 2022 until 10th of August 2023.

Provide a bar or candlestick chart (or multiple charts) of the daily share price for the time period above. Identify at least three days, where news stories, events or issues related to the company have majorly impacted the share price. Evaluate and discuss the magnitude and direction of the price changes (opening to close) of the instances you have identified.

Your answer should consider why the news/event/story impacted the share price in the manner that it did, as well as other behavioural considerations besides the identified news articles that you believe would have impacted the share price.

(15 marks)

Next, use the chart created above and a technical analysis tool from learning module 4 to predict future stock price movements. What does your analysis indicate if you were an existing investor? (would you buy, sell or hold?). What does the usage of technical analysis mean for the theory of market efficiency?

(10 marks)

Question 2 - [Total: 32 Marks]

You have been considering investing in Envestnet Inc (NYSE:ENV). You have decided to do a more thorough analysis of it.

1. Provide an industry and company analysis for ENV (see supplementary resources on Blackboard). You should consider the factors which influence ENV's share price (e.g. key competitors, peers, industry influences, company business, key financial ratios). (15 marks)
2. Identify and discuss at least one benchmark that you have chosen to compare ENV against. What considerations did you make in your choice of benchmark? Chart your choice of benchmark against ENV's share price over the same period in Question 1 and compare the two graphically. What, in your opinion has been the main driver for the share price movement? (12 marks)
3. Valuation multiples are often used to compare companies quickly. Identify an appropriate valuation multiple/ratio and evaluate if ENV is over, under or fairly valued. Explain the reasoning behind your choice of multiple that you utilised for your analysis. Are there any limitations of utilising multiples that you might need to consider? (5 marks)

Question 3 Ethics and behavioural finance [Total 13 Marks]

Please treat each part as an independent question.

1. Assume we are now in the first week of August 2023. You have made a decision to buy shares of ENV in late August. However, your friend who is a financial advisor for ENV tells you that its earnings for the second quarter 2023 will be higher than the analyst estimates. Your friend suggests you to buy its shares now (i.e. the first week of August 2023) before this information is announced to the public (and price changes). Please state and explain which CFA Institute Code and Standards your friend has breached. Please explain two standards breached. (4 marks)
2. [Ethics] A friend on social media would like to invest in JKHY (i.e. purchase its shares). She posts false rumours about JKHY currently losing market share to its competitors and having a downtrend in its relative performance to competitors in order to influence the share price. What is the current price of Jack Henry & Associates Inc. (choose any date from 1st of August 2023) ? How would her attempt to influence the share price be viewed if you considered this in light of the CFA Code of Ethics and Standards of Professional Conduct (Please explain two standards she has breached). (5 marks)
3. [Behavioural finance] Assume you have lost money from your investment in Black Knight Inc (NYSE:BKI) in July 2023. You now decide to invest your fund in a different stock. You have been monitoring the price and return movement of stock FIM (a random name) over the past few weeks. You find that FIM has been falling by more than 3% and listed among the top declining stocks each trading day over the past one week. You decide to buy BKI as you believe that there could be a very high chance for it to rebound and generate high return in subsequent periods. What is the best terminology to describe your behaviour? Please use the best behavioural terminology covered in the lectures and also explain your answers. (4 marks)

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