Investment Analysis Report
Company and Market Analysis: Industry Trends: Microeconomic Data
The microeconomic data provides insights into asset allocation and performance. The portfolio
consists of five companies from different industries:
Apple (AAPL) – Technology sector
Caterpillar (CAT) – Industrials sector
Consolidated Edison (ED) – Utilities sector
Northern Trust (NTRS) – Financials sector
Macy’s (M) – Consumer Discretionary sector
Below is the summary of key portfolio metrics such as weights, average annual return, variance, and
risk:
Security Weights Average Annual Return Annual Variance Risk
(%)
Caterpillar (CAT) 4.33 -0.07% -15.87% 7.09%
Consolidated Edison (ED) 63.16 -0.04% -8.70% 3.04%
Northern Trust (NTRS) 0.00 -0.15% -31.79% 5.56%
Macy's (M) 30.73 0.08% 21.02% 19.91%
The quantitative data suggests that the portfolio covers a mix of high-growth (Technology), cyclical
(Industrials, Consumer Discretionary), and defensive (Utilities, Financials) sectors. The varying risk-
return profiles of these industries influence overall portfolio stability.
Company and Market Analysis: Industry Trends: Absolute and Relative Performance
Consolidated Edison (ED) holds the highest weight in the portfolio at 63.16%, followed by Macy's
(M) at 30.73%. However, Macy's delivers a higher average annual return (0.08%), outperforming
others in relative performance. The high variance of Macy's (21.02%) indicates its higher risk, as seen
in the risk column (19.91%).
Below is a visual representation of asset allocation by weight:
Portfolio: Assets: Asset Classes
The portfolio includes a mix of equities from industrial (Caterpillar), utility (Consolidated Edison),
financial (Northern Trust), and retail (Macy's) sectors. This diversification balances risk and return by
leveraging varying industry behaviours during market cycles.
Apple (AAPL): High-growth technology stock with potential for strong capital appreciation
but increased volatility.
Caterpillar (CAT): Cyclical industrial stock, sensitive to economic trends.
Consolidated Edison (ED): Defensive utility stock offering stable returns and lower risk.
Northern Trust (NTRS): Financial sector stock, providing moderate risk and return
potential.
Macy’s (M): Retail stock, highly sensitive to consumer trends and discretionary spending.
Portfolio: Assets: Allocation Weightings
The portfolio emphasizes utility stocks (63.16%) due to their stability and consistent dividend
payouts, which align with risk-averse objectives. Retail, despite its volatility, represents a growth
opportunity, contributing to 30.73%.
Portfolio: Securities: Historical
Analysing historical performance shows Macy's (M) as the only asset with a positive average annual
return. While the others have negative returns, their inclusion ensures stability (e.g., Consolidated
Edison’s low risk at 3.04%).
Portfolio: Securities: Intrinsic Value
Intrinsic Valuation is performed using DCF Valuation method for all the 5 companies. (Values are in
$Million).
1. Valuation of Apple is $ 3251 billion.
Valuation 2025 2026 2027 2028 2029 2030
Net Capex 11000 11000 11000 11000 11000 11000
113225. 16002 17371 18867 20500 222838.471
Free Cash Flow to Equity 8 3 9 4 6 9
Discount Rate 8.43% 8.43% 8.43% 8.43% 8.43% 8.43%
104422. 13610 13626 13649 13677
PV of FCFE 9 8 9 4 9
Growth Rate after 5 year 3%
4226954.43
Terminal Value 9
650073.
Sum of 5 Year DCF 9
Present Value for Terminal Value 2600943
Valuation of APPLE 3251017
2. Valuation of Caterpillar (CAT) is $ 309 billion.
Valuation 2025 2026 2027 2028 2029 2030
Net Capex 2100 2100 2100 2100 2100 2100
Free Cash Flow to Equity 16945 17572 18225 18905 19613 20351
Discount Rate 8.43% 8.43% 8.43% 8.43% 8.43% 8.43%
PV of FCFE 15627 14946 14296 13677 13086
Growth Rate after 5 year 3%
38603
Terminal Value 3
71631.4
Sum of 5 Year DCF 2
237535.
Present Value for Terminal Value 2
309166.
Valuation of Caterpillar 6
3. Valuation of Consolidated Edison (ED) is $ 105 billion.
Valuation 2025 2026 2027 2028 2029 2030
Net Capex 1000 1000 1000 1000 1000 1000
Free Cash Flow to Equity 5450.5 5731.7 6027.6 6338.8 6666.3 7010.7
Discount Rate 8.43% 8.43% 8.43% 8.43% 8.43% 8.43%
PV of FCFE 5026.7 4875.1 4728.2 4585.7 4447.7
Growth Rate after 5 year 3%
13298
Terminal Value 4
23663.4
Sum of 5 Year DCF 4
81828.1
Present Value for Terminal Value 6
105491.
Valuation of Consolidated Edison 6
4. Valuation of Northern Trust (NTRS) is $ 42 billion.
Valuation 2025 2026 2027 2028 2029 2030
Net Capex 100 100 100 100 100 100
Free Cash Flow to Equity 1571.4 1777.7 2012.9 2281.1 2586.9 2935.5
Discount Rate 8.43% 8.43% 8.43% 8.43% 8.43% 8.43%
PV of FCFE 1449.2 1512 1579 1650.2 1726
Growth Rate after 5 year 3%
Terminal Value 55684
7916.42
Sum of 5 Year DCF 3
34263.3
Present Value for Terminal Value 5
Valuation of Northern Trust 42179.7
(NTRS) 7
5. Valuation of Macy’s is $52 billion.
Valuation 2025 2026 2027 2028 2029 2030
Net Capex 100 100 100 100 100 100
Free Cash Flow to Equity 5006.25 4546.4 4127.9 3747.1 3400.5 3085.2
Discount Rate 8.43% 8.43% 8.43% 8.43% 8.43% 8.43%
PV of FCFE 4617.034 3866.9 3238 2710.8 2268.8
Growth Rate after 5 year 3%
Terminal Value 58522
Sum of 5 Year DCF 16701.61
Present Value for Terminal Value 36009.91
52711.5
Valuation of Macy's 2
Portfolio: Rates of Return: Historical
Apple: High return, high risk.
Caterpillar: Moderate return, moderate risk.
Consolidated Edison: Low return, low risk.
Northern Trust: Moderate return, moderate risk.
Macy’s: Volatile returns, high risk.
The portfolio's overall return is influenced heavily by the high weighting of Consolidated Edison,
reducing overall volatility.
Portfolio: Rates of Return: Calculate
The Portfolio return is negative for this duration of the year (Feb-2024 to Feb-2025). Daily Return,
Annual Return and the Portfolio Return is as given below:
Security Weight Daily Average Annual Return Annual Variance Risk
s Return
Apple (AAPL) 0.02 -0.00086172 -0.193184714 0.055883395 0.2363967
Caterpillar (CAT) 0.04 -0.00069370 -0.158686793 0.070937259 0.2663405
Consolidated Edison 0.63 -0.00036546 -0.086997643 0.030431785 0.1744471
(ED)
Northern Trust (NTRS) 0.00 -0.00153538 -0.317916329 0.055579075 0.2357521
Macy's (M) 0.31 0.00076660 0.210228534 0.199108788 0.4462161
Sum 1.00
Portfolio Return -0.000653472
Portfolio Variance 0.033921305
Portfolio Risk 0.184177374
Articulation of Response
Historic industry microeconomic data plays a vital role in assessing the performance and growth
potential of a portfolio comprising Apple, Caterpillar, Consolidated Edison, Northern Trust, and
Macy’s. These companies represent diverse sectors—Technology, Industrials, Utilities, Financials,
and Consumer Discretionary—providing a comprehensive perspective on market dynamics.
Microeconomic data such as revenue growth rates, profit margins, and cost structures provide
benchmarks for relative performance analysis. For instance, Apple’s strong margins and innovative
capabilities position it as a growth leader in the technology sector. Conversely, Consolidated Edison’s
stability and consistent cash flow reflect the defensive nature of the utilities sector.
Absolute and relative performance measurement further reveals the cyclical nature of Industrials
(Caterpillar) and the sensitivity of Consumer Discretionary (Macy’s) to economic trends. Northern
Trust, operating in the Financials sector, balances risk and return through steady earnings growth and
prudent asset management.
By analysing these companies, their industry-specific trends, and macroeconomic influences, we can
identify how each sector contributes to the portfolio’s risk-return trade-off. Quantitative metrics such
as beta, earnings volatility, and growth potential enhance the valuation models, ensuring that the
portfolio aligns with market expectations and investor objectives.
References
1. “Morningstar India. (n.d.). Morningstar India. Retrieved February 9, 2025, from
[Link]
