Analytical note

In this research, we constructed a portfolio based on different types of stocks from several
industries and the Invesco QQQ ETF fund. First of all, we will analyze the stocks, as we
know this type of securities are characterized by large exchange rate fluctuations ― an
investor can earn both by buying and selling these securities, and the stocks themselves are
more liquid. The best option, of course, is a diversification of different types of securities in
the portfolio. Following this, the first company that we would speak about is Canadian
Natural Resources Ltd (ticker symbol is CNQ). The organization 's goals are to enhance the
production of the crude oil and natural gas output, reserves, working capital, and value of net
assets per ordinary stock by economically and sustainably developing current crude oil and
natural gas fields and discovering and/or acquiring new reserve funds.

Dividend payments are consistently increased by the corporation. CNQ increased their
quarterly payouts for 2021, leading to an overall yearly rise of 38% to $2.35 per stock each
year. At the start of 2022, the firm boosted its dividend payment by 28% to $0.75 per stock,
which would be equivalent to $3 per share on an annual basis according to the graph. The
corporation has increased its payouts for 22 consecutive seasons, with a total annual growth
of 22% throughout that timeframe.

Source: https://www.macrotrends.net/stocks/charts/CNQ/canadian-natural-resources/

Canada is a fascinating example of a sophisticated natural resource sector on the opposite end
of the globe. Their future scenario has evolved ever since commencement of the Russian and
Ukrainian conflicts. The TSX increased in value while the RTS plummeted. Punitive
measures restrict Russia's access to global distribution channels, clearly benefiting Canadian
issuers. RTS has dropped 40% during October, while the TSX index has gained by 8%.
Throughout the 2022, the Canadian financial sector has already emerged as one of the most
profitable in the globe. Whereas the indexes in the United States, China & Europe are down
7-12%, the TSX is up to 5% in $.

Nevertheless, to diversify our portfolio we would need to invest in securities from the
different sectors. In this assignment, we have chosen Taiwan Semiconductor Manufacturing
Corporation as our portfolio selection in the technology sector. TSMC, the world's biggest
and most sophisticated contractual tech giant, generates the 's tiniest, toughest, and most
effective semiconductors for multinational technology device manufacturers such as AMD,
Apple, Nvidia, Qualcomm & Huawei. TSMC is a commendable enterprise with enormous
potential and a bright future. The stock is currently trading at a good value, while it is not as
low as it was in the previous autumn. Based on our research, investors may expect gains of
roughly 10% in 2022.

Source:https://www.macrotrends.net/stocks/charts/TSM/taiwan-semiconductor-
manufacturing/

Our prediction is that TSM's earnings per share would increase by around 20% this year. If
this occurs, TSM would need to endure a 20% various compression in order for its stocks to
remain steady each year, and a further larger value decrease might be necessary for TSM
shares to fall. That is not inconceivable, and some macroeconomic risks, notably the war
between Taiwan and China, may possibly result in certain repeated recession.

Cardinal Health has a long history of profit expansion that extended in the most recent
quarter. Organization anticipates that distribution network interruptions will be resolved by
the conclusion of the latest accounting year. It is now undervalued, offering a 4% regular
dividend. At the present price, share repurchases will be fairly advantageous to investors.
Cardinal Health stock (NYSE: CAH) has risen 36% in the year, outpacing the S&P 500
index, which has dropped 15%. Nevertheless, over the long run, CAH shares have lagged the
S&P 500 index, returning 14% from mid 2017 levels.

Source: https://www.macrotrends.net/stocks/charts/CNQ/canadian-natural-resources/

The NASDAQ Index

In order to diversify our portfolio we have decided to add the NASDAQ 100 Index. The
index consists of 100 actively traded US blue chip companies. The previous three stocks of
our portfolio mainly represent industrial companies. In contrast to them, the index that
consists of tech and IT-companies is an appropriate decision to diversify the risks. The
exchange consists of only non-financial companies, therefore there is a noticeable
concentration of technological companies which make up about 50% of the index. Since the
value of each company is weighted by their market capitalization, tech companies have more
significant impact on the performance of the index.

For private investors it is hard to buy all the shares directly from the index, therefore, we
have bought the ETF’s of that index. In this case we bought the ETF Invesco QQQ that
passively keeps track of the performance of NASDAQ 100. For the investor with limited
budget it would be better to buy the ETF, rather than pick up the shares by his own. The tech
sector is highly unpredictable and volatile, so the investor can not operate fully in the market
and diversify his portfolio due to lack of money for investments. Frequent transaction in the
market require additional commissions from the investor, whereas the ETF insure a high
liquidity of his shares. Compared to ETF of S&P500, Invesco QQQ is based only on blue
chip growth companies of NASDAQ.This is one of the reasons that during the bull market,
QQQ has more returns compared to S&P 500 for the last several years. On the graph shown
below it is noticeable that the average return for the last 5 years of QQQ have doubled the
returns of SPDR that keeps track of S&P 500.
On the table shown below we made an overview of our portfolio with a budget of $5000. We
allocated 90% of our budget to the securities with the highest expected returns CNQ - 9,08%,
TSM - 9,52%, ETF of NASDAQ represented by Invesco QQQ - 16,14%.

We’ve made the correlation analysis in order to identify if our portfolio is well diversified or
not. On the table below it is clear that there is a low correlation between CAH and CNQ,
because they operate in different sectors. The first one is a healthcare company, whereas the
second company is based on crude oil and natural gas production. The same scenario we have
between CAH, CNQ and Taiwan semiconductor manufacturing company, where the
companies have negative correlation due to geographical allocation. From the table it is clear
that there is a high correlation of 0,9 between NASDAQ ETF and Taiwan semiconductor
manufacturing (TSM). We have these results, because both of them represent the
technological sector. NASDAQ consists of 100 blue chip tech companies, which operations
in the market will eventually affect the TSM.
To finalize all our calculations, we have identified that the expected return of our portfolio is
equal to 11,26%. It is a good result for our active investment strategy and for our portfolio
that consists of shares of various companies with high returns and the ETF fund with stable
returns. The variance that measured the difference between the returns of our portfolio Our
portfolio The standard deviation of 1,37 and variance of 1,8 indicate that we can get the
returns that are above average and suit the risk appetite of investors. Our portfolio is
appropriate for investors with average ability to take risk. Our securities generate high returns
which coexist with the average level of risk. On the other hand, the portfolio is also well
diversified and consists of shares of blue chip companies represented by ETFs, therefore our
portfolio is recommended to investors who want to get the full advantage of thei
rinvestments.

References:

1. https://www.fool.com/investing/2022/07/18/is-taiwan-semiconductor-manufacturing-
tsmc-stock-a/
2. https://www.macrotrends.net/stocks/charts/CNQ/canadian-natural-resources/stock-
price-history
3. https://seekingalpha.com/article/4475261-cardinal-health-stock-dividend-great-
bargain-buy-cah
4. https://capital.com/nasdaq-100-forecast
5. https://finance.yahoo.com/quote/QQQ/chart?p=QQQ
6. https://seekingalpha.com/article/4475261-cardinal-health-stock-dividend-great-
bargain-buy-cah