I chose these 3 stocks, Teladoc(TDOC)- Health Inc, Vertex Pharmaceuticals(VRTX), and eHealth inc(EHTH). Identify which companies...

I chose these 3 stocks, Teladoc(TDOC)- Health Inc, Vertex Pharmaceuticals(VRTX), and eHealth inc(EHTH).

Identify which companies you invested in on the TDAU thinkorswim platform.
Explain why you selected those companies.
Address whether you feel your portfolio is diversified. Explain your assessment.

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Expert Solution

Answer:

The three stock that we selected are Healthcare companies. We should analyse few things about the company before we invest in these company stock. They are price to earnings ratio , Debt to equity ratio, beta, Market capitalization, etc.

Also, we must consider how much the investors will take the risk or what is the risk profie of an investor.

Teladoc(TDOC)- Health Inc

The EPS ( earnings per share ) of this company is negative which means that comany is at loss. The current Market Cap is 13.717B . Beta of the company is 0.44. The return on Equity is a negative value. The value of return on Equity should be greatre than 20%.

Vertex Pharmaceuticals(VRTX)

The price to earnings ratio is 49.96. The current Market Cap is 74.851B. Beta of the company is 0.91. The return on Equity 27.02%.

eHealth inc(EHTH).

The price to earnings ratio is 39.91. The current Market Cap is 3.016B . Beta of the company is 0.02. The return on Equity is 12.20%.

From, the above information it is evident that Vertex Pharmaceuticals(VRTX) have high P/E ratio , High Market Cap and good Return on equity ratio. Higher the p/e ratio higher will be the growth in future. Higher the return on equity higher will be the intrinsic value of the company. The beta of the company is greatre than the other two companies. Higher the risk higher will be the return. So, I will prefer to invest in this company.

But investing in Teladoc(TDOC)- Health Inc is very much riskier because for the past 5 years the EPS is a negative value which means that the company is in loss. Also, Return on Equity is negative. If an investor is risk averse and do not want to take much risk, it will be preferable to invest eHealth inc(EHTH) because price to earnings ratio is high and preferable return on equity.

If we consider diversification, It will help to reduce the risk and will give higher return. There is a statement regarding this, dont put all your eggs in one basket. Inorder to reduce the risk,we can invest in Vertex Pharmaceuticals(VRTX) and eHealth inc(EHTH).

jeff jeffy answered 1 year ago

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