1. Cameron Turner 0184431
Campbell Stanley 1392078
Jacky Lin 1392601
Oliver Harding-Sheath 1301155
Rhenzelle Emboido 1318502
Yunfan Qiu 1376370
Stream 80 Group 5 396003
Investment and
Portfolio Analysis
Group Investment Project

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Contents
Introduction ............................................................................................................................................2
Company Background.............................................................................................................................3
Risk and Return Characteristics of Individual Stocks ..............................................................................4
Minimum Variance Portfolio...................................................................................................................4
Optimal Variance Portfolio .....................................................................................................................5
The Efficient Frontier ..............................................................................................................................5
Mr. Thompsen’s Portfolio with A.P. Investments...................................................................................6
Appendix .................................................................................................................................................7
Appendix A..........................................................................................................................................7
Appendix B..............................................................................................................................................7
Appendix C. .........................................................................................................................................8
References ..............................................................................................................................................9

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Introduction
The primary objective of this report is to provide a detailed analysis and clear investment
recommendation of an established passive portfolio for Mr. Thompsen. As A.P investment trainees
we have been assigned to select five liquid stocks and provide a diversified portfolio that would give
Mr. Thompsen the most return with the maximum amount of risk he is willing to take of 15%. This
portfolio includes risky assets such as stock shares. A minimum-variance, optimal portfolio and 95%
confidence interval is also included, to justify recommendations for the $10 million investment Mr
Thompsen wishes to invest for the coming year. There is also a brief description of the terminology
commonly used in the industry included in this introduction as these have been incorporated in the
findings of this report.
Beta
A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the
market as a whole. The beta of the market index is measured as 1.0 any stock with a beta lower than
1.0 demonstrates that the stock has decreased sensitivity to changing market conditions.
Correlation
A measure that determines the degree to which two variable's movements are associated. For Mr
Thompsen’s portfolio this represents the movements between two securities corresponding to each
other the range of the correlation co-efficient is between -1 and +1. +1 correlation indicates that
both securities will move in the same direction. -1 correlation indicates that when one security
declines the other with trend upwards.
Expected Return
Denoted as a percentage, expected return is the annual return that is expected to be received by an
investor who invests in the portfolio. This report uses 5 years of historical data to establish its
expected return.
Short selling
Short selling is the concept that the seller does not in fact own the stock or it is borrowed. An
investor will short a stock on the belief that the stock prices is going to decline. This portfolio utilises
the function of short selling to maximise its returns with minimum level of risk.
Standard Deviation
Standard deviation utilises the annual rate of return of the investment in order to measure the
investments volatility standard deviation is the measure of how much the prices are expected to
fluctuate. Standard deviation is used to measure the overall level of uncertainty.

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Company Background
Auckland International Airport Ltd (AIA)
Auckland International Airport Limited is a New Zealand-based Company. The Company provides
airport facilities and supporting infrastructure in Auckland, New Zealand. The Company earns revenue
from aeronautical activities, on airport retail concessions and car parking facilities, standalone
investment properties and other charges and rents associated with operating an airport. The
Company also holds investments in three other airports being Cairns Airport and Mackay Airport in
Queensland, Australia, as well as Queenstown Airport in New Zealand. The Company’s subsidiaries
consist of Auckland Airport Limited, Auckland International Airport Limited Share Purchase Plan,
Auckland Airport Holdings Limited, and Auckland Airport Holdings (No. 2) Limited (Google Finance,
2015).
Fletcher Building Limited (FBU)
Fletcher Building Limited is the holding company of the Fletcher Building Group. The Company is
involved in the manufacturing and distribution of building materials and residential and commercial
construction. Its segments include Heavy Building Products, Light Building Products, Laminates &
Panels, Distribution New Zealand, Distribution Australia and Construction. Heavy Building Products
division is a manufacturer, distributor and marketer of heavy construction material used in the early
stages of the construction cycle. Light Building Products division manufactures building products for
residential and commercial markets. Laminates & Panels division manufactures and distributes
decorative surface laminates. (Google Finance, 2015).
Goodman Property Trust (GMT)
Goodman Property Trust (the Trust) is a New Zealand-based company engaged in property business.
The Trust invests in industrial and business space property in New Zealand. Its portfolio includes
industrial estates, warehouse and distribution centres, business parks and office parks. The Trust has
over $2.0 billion of assets. The Trust issued debt securities through its subsidiary GMT Bond Issuer
Limited. Goodman Property Trust has over 1,750 customers globally. The Trust’s customers include
international companies in the industries such as logistics, pharmaceutical, automotive, retail and e-
retail. (Google Finance, 2015).
Contact Energy Limited (CEN)
Contact Energy Limited is a New Zealand-based diversified and integrated energy company, focusing
on the generation and retailing of electricity. It supplies electricity and natural gas through its Contact
Energy brand and bottled LPG through Contact Rockgas LPG. It operates electricity generation
stations, including renewable hydro power stations on the Clutha River in Central Otago, renewable
geothermal plants around Taupo and four natural gas-fired power stations in Taranaki, Auckland and
the Waikato. Its Clyde Dam on Lake Dunstan is a concrete gravity dam consisting of a million cubic
meters of concrete in the dam with another 200,000 cubic meters in the powerhouse. It is capable of
producing 432 megawatts of power from its four turbine generator units. (Google Finance, 2015).
Restaurant Brands New Zealand Limited (RBD)
Restaurant Brands New Zealand Limited together with its subsidiaries operates quick service and
takeaway restaurant concepts. The Company is engaged in operating outlets of KFC, Pizza Hut,
Starbucks Coffee and Carl's Jr. It has four segments: KFC, Pizza Hut, Starbucks Coffee and Carl's Jr.
The Company operates the New Zealand franchises for KFC, which is a fast food restaurant chain;
Pizza Hut, which offers fast food online ordering system for pizzas; Starbucks Coffee, which offers a
range of coffee, and Carl's Jr, which offers burgers, beverages and breakfasts. The Company
operates around 182 stores. (Google Finance, 2015)

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Risk and Return Characteristics of Individual Stocks
AIA FBU GMT CEN RBD
Average Weekly Return 0.0043 0.001 0.0021 0.0009 0.0032
Average Annual Return 0.223 0.052 0.108 0.048 0.164
Weekly SD 0.0196 0.0301 0.0135 0.0285 0.0249
Annual SD 0.142 0.217 0.097 0.206 0.18
Risk Free Rate 0.0283
A.P. investments advises Mr Thompsen that to achieve a higher expected return he must be
prepared to incorporate a higher degree of risk in his portfolio. Figures shown in the table above
present Contact Energy Limited with the highest level of standard deviation. Contact Energy Limited
has undergone a long period of large capital investment in its New Zealand operations. In 2013 these
infrastructure investments were completed. Based on these findings this report concludes that
Contact Energy Limited will experience increased value as they capitalise on completed projects. A.P.
investments view is an expected appreciation in Contact Energy stocks and it will continue to
distribute a healthy dividend.
Currently Auckland International Airport is in the process of heavy investment of its facilities. The
past 8 years have seen a massive upswing in travellers passing through Auckland International
Airport and the share price trend has tracked upwards accordingly. A.P. investment allocated
Auckland International Airport to this portfolio because of its significance in the NZX50 and both its 5
years of historical results accompanied by its trajectory both short and long-term (Auckland
International Airport , 2014).
Fletcher Building, Goodman Property and Restaurant Brands Limited correlative data presents us
with good market diversification. Restaurant bands has continued to broaden its revenues streams
while continuing to improve its annual results through affordable food outlets. Fletcher building is
forecasted to maintain strong growth over the next 18 months with a good portfolio of long-term
contracts including 10 year Christchurch Council plans. While Goodman Property and Fletcher
Construction feature in the same sector the business activities are in principle very different.
Fletcher is heavily weighted in construction for property development whereas Goodman Property
has derived its main cash flow is from property lease agreements and land banking.
Minimum Variance Portfolio
The minimum variance portfolio can be defined as a combination providing the lowest possible risk
denoted as standard for the rate of expected return. The minimum variance portfolio calculated in
this prospectus yields an expected return of 12.66% with a standard deviation of 7.81% (refer to Table
below for details of weights)
Based on asset allocation this report calculates the weights using Excel by using these weights we
were able to calculate how much money is invested in each stock and how much money we would
AIA FBU GMT CEN RBD risk free E(rp)
Weight 0.861709 -0.0773805 0.539154 -0.1548441 0.301862 -0.4705 0.275003
Money Allocation 8617089 -773805.27 5391536 -1548440.5 3018621 -4705000

6. 5 | P a g e
receive and lend out from short selling. Auckland International Airport gave us the highest return out
of all the securities which is why majority of the portfolio is allocated to this security.
Optimal Variance Portfolio
The optimal portfolio can be defined as the portfolio offer the highest possible expect return with
the lowest value of risk.
In this case, according to data form five company, the most suitable combination of five weight
respectively are 0.5860, -0.0526, 0.3666, -0.1053, 0.2053. In this way, it will get highest expect
return with the amount 19.61%, almost 20%. At the same time, it also achieves the target of
standard deviation with value of 15% which fulfil customer’s request. Visual representation of the
optimal variance portfolio is displayed in Appendix C.
The Efficient Frontier
The graph of Efficient Frontier graphically depicts detail of expect return and their standard
deviation for five different stocks and their combinations. The portfolio is derived from five years of
historical data acquired from multiple online data sources This data accompanied by recent financial
statements has been interpreted to provide Mr Thompsen with this portfolio. On the one hand, five
different stocks combinations have different expect return and standard deviation which create the
curve. On the other the graph of Efficient Frontier is easily present at the optimal risky portfolio for
highest expect return and minimum risk portfolio for lowest risk portfolio. The graph of Efficient
Frontier also displays a straight line which is the Capital Allocation Line (CAL), it is created by Mr
Thompson’s portfolio and risk free rate. The points which locate on the Capital Allocation Line
depicts five possible stock combinations of risk and return providing Mr. Thompsen’s portfolio with a
range of viable investment options.
0
0.05
0.1
0.15
0.2
0.25
0.3
0 0.05 0.1 0.15 0.2 0.25
E(rp)
σ(rp)
CAL and Efficient Frontier Graph
Mr Thompsens porffolio
risk free rate 2.83%
Optimal risky portfilio
Minimum risk portfilio
Auckland International Airport
Goodman Property Trust
Contact Energy Limited
Fletcher Building
Restaurant Brands Limited

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Mr. Thompsen’s Portfolio with A.P. Investments
Based on investment criteria detailed, this report provides a portfolio containing five stocks from the
S&P/NZX 50. adhering to the constraints including a maximum overall risk figure of 15%. This report
has based its risk free rate at 2.83% aligned with the 90 day rate set in August 2015. While being able
to maximise his return over a 1 year period. Interpreting our calculations, in order to meet Mr
Thompsen’s requirements we recommend that an investment is made in an optimal risky portfolio
with 147% and short sell 47.05% in risk free asset. This findings in this report has created a portfolio
where Mr Thompsen will be holding and shorting risky assets, lending out the excess money at the
risk free rate. In this report we advise short selling firstly because the portfolio requires more capital
to invest in the optimal portfolio. With this we have calculated Mr. Thompsen’s portfolio expected
return of 27.50% with his desired maximum standard deviation of 15%. It is of our opinion that these
five selected stocks together offer a high potential growth for the one year time horizon.
If Mr Thompsen wishes to invest based on the recommendations provided in this portfolio. We have
calculated the 1 year maximum gain and loss with 95% confidence. The maximum gain and loss for
the investment is shown in the graph below.
Return( 95% confidence)
95% confidence factor = 1.64485
Investment value $ 10m
At 15% standard deviation
Return Value after 1 year Gain/Loss
Expected return 0.2750034 $12,750,030 $2,750,030
95% confidence max. return 0.5217324 $15,217,324 $5,217,324
95% confidence max. loss 0.0282744 $10,282,744 $282,744
From the above table we can see that the maximum gain with 95% confidence is $5,217,324 and the
maximum lost being a positive number/ gain at $282,744
Mr.Thompsen's Portfolio
Portfolio Return 27.50%
Standard Deviation 15%
Portfolio Beta 0.394470681
Market Premium 62.54%
portfolio market risk 25%
portfolio firm specific risk -0.0967034
______________________________________________________________________

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Appendix
Appendix A.
Appendix B.
Correlations AIA FBU GMT CEN RBD
Auckland International Airport (AIA) 1 0.210654 0.174575 0.283464 0.129627
Fletcher Buliding Limited (FBU) 0.210654 1 0.065537 0.204576 0.079273
Goodman Property Limited (GMT) 0.174575 0.065537 1 0.068037 0.068037
Contact Energy Limited (CEN) 0.283464 0.204576 0.068037 1 0.110726
Resturant Brands Limited (RBD) 0.129627 0.079273 0.068037 0.110726 1
Auckland International BETA
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -0.016068596 0.002840027 -5.65790217 4.2634E-08 -0.02166258 -0.01047461 -0.02166258 -0.01047461
S&P NZX50 0.337042607 0.092925946 3.627002147 0.00034883 0.15400694 0.520078279 0.154006935 0.52007828
Fletcher Building BETA
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -0.015634439 0.004363382 -3.58310151 0.00040955 -0.02422897 -0.00703991 -0.02422897 -0.00703991
S&P NZX50 0.472352906 0.142770236 3.308483042 0.00107901 0.19113924 0.753566572 0.191139239 0.75356657
Goodman Property BETA
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -0.020881933 0.001948171 -10.7187373 3.112E-22 -0.02471923 -0.01704463 -0.02471923 -0.01704463
S&P NZX50 0.242885612 0.063744329 3.81030931 0.00017558 0.11732879 0.36844243 0.117328794 0.36844243
Contact Energy BETA
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -0.019839345 0.004139527 -4.79265986 2.8554E-06 -0.02799295 -0.01168574 -0.02799295 -0.01168574
S&P NZX50 0.322242497 0.135445694 2.379126926 0.01812048 0.05545594 0.589029057 0.055455938 0.58902906
Restaurant Brands Limited BETA
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -0.02083151 0.003638287 -5.72563663 3.0032E-08 -0.02799782 -0.0136652 -0.02799782 -0.0136652
S&P NZX50 0.205268328 0.119045081 1.724290718 0.08591669 -0.02921404 0.439750699 -0.02921404 0.4397507

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Appendix C.
Optimal Risky Portfolio
Stocks Weighting
Auckland International Airport (AIA) 0.585997227
Fletcher Buliding Limited (FBU) -0.052621915
Goodman Property Limited (GMT) 0.366646448
Contact Energy Limited (CEN) -0.105300273
Restaurant Brands Limited (RBD) 0.205278513
E(rp) σ(rp) Sharpe Ratio
19.61% 0.102046242 1.644042888

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References
Auckland International Airport . (2014). Airport of the Future. 37.
Construction, F. (2014, October 5). Our Vision Fletcher Construction. Retrieved from
http://www.fbu.com/investor-centre/2014-annual-report/annual-report/
Google Finance. (2015). Google Finance. Retrieved October 10, 2015, from Google Finance Beta:
http://www.google.com/finance
Limited, C. E. (2015, October 14). Contact Energy Limited Investor Information. Retrieved from
https://contact.co.nz/corporate/media-centre/results-and-reports/annual-and-half-yearly-
reports
Limited, G. P. (2015, October 14). Goodman Investor Center. Retrieved from
http://investors.nz.goodman.com/phoenix.zhtml?c=164117&p=irol-IRHome
Reports, R. B. (2015, October 14). Resturant Brands Limited. Retrieved from
http://www.restaurantbrands.co.nz/share-price-graph/shareholder-reports/
Ross, S. A., Westerfield, R. W., & Jaffe, J. (2013). Corporate Finance 10th ed.
Zealand, R. B. (2015). Monetary Policy Statement .