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Trading and Money Management in a Student-Managed Portfolio by Jason Greene, Brian Bruce

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Chapter 3

Security Selection

Security selection is one of the critical aspects of portfolio management. This chapter discusses key steps in selecting securities for a portfolio. Security selection progresses from an initial ranking or screening of securities to individual security analysis. Since most student-management investment funds pursue active fundamental strategies, we discuss the importance of both company analysis and security valuation. We review the practical application of theoretical valuation models and link them to market-based valuation measures, such as P/E, price-to-sales, and price-to-cash flow.

Keywords

Active; discounted cash flow model; dividend discount model; earnings; Excel; free cash flow; fundamental analysis; intrinsic ...

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