Mutual funds pool assets of individual investors—including retirement funds managed by state or municipal entities or other large institutional investors—to purchase shares in a collection of stocks, bonds, or other securities. A portfolio manager typically oversees mutual funds. Mutual funds can also be structured and listed as stocks to professional traders’ desires to trade mutual funds with the same ease as they trade stocks to allow purchasers the diversification of a mutual fund plus the flexibility of a stock.
In your role as a portfolio manager with Vantage Point Mutual Fund (a fictitious entity), you are concerned with economic conditions you believe may generate distress among firms in which the fund has invested. You have noticed an increase in loan modification requests, bankruptcy filings, and a rise in unemployment claims due to generate falls in consumer and investment spending.
You have initiated a review of each firm in your portfolio. You supervise a team of investment analysts. Each team member, including yourself, will choose one of these to review. Team members (including you) will research the economic firms in your portfolio to determine whether the investment value is expected to increase. Your team will proactively engage with clients to offer suggestions for improvement.
Your microeconomics study provides you with the tools, models, and concepts to understand consumer choices in the marketplace. Consumer preferences, price, income elasticity, and other determinants of demand offer firms clues regarding resource allocation. Leveraging these tools will allow you to assess the operation of a focus firm and suggest strategies for future success.
Assume that you are reviewing a firm within the portfolio of firms you oversee on behalf of your employer, Vantage Point Mutual Fund. Select a publicly traded firm currently operating in the U.S. market. Select a small to mid-cap firm listed on the New York Stock Exchange. Review the firm’s financial information found in its most recent Quarterly Report (10-Q) published electronically on the firm’s website or the Securities and Exchange Commission’s (SEC) EDGAR Database. For most companies, this information can be accessed by browsing the “investor relations section,” where you will be able to find the financial statements, including, in this case, the 10-Q (and the 10-K for more details).
Using the latest 10-Q and the corresponding 10-Q from the previous year, your task is to produce a Microeconomic Analysis and Recommendation with a recommended maximum of 2,200 words (tables/graphs not included) appraising the economic viability of the firm you selected for review. Employ the following microeconomic tools to explain and predict the implications of trends:
Company overview and firm-specific risks (max 200 words) [10 points]
Price elasticity of demand (max 500 words) [20 points]
Production (max 500 words) [20 points]
Market structure (max 500 words) [20 points]
Define what needs to be improved, given your determinations in other areas (max 200 words) [20 points]
Section B: Limitations
In concluding this section, elaborate on the limitations of the above analysis, including what further sources of information you would like to use to make a more informed decision (200 words max). [10 points]