tesla stock – Page 2 –

A quick ratio of a company can determine a lot of assets about a corporation. Similar to the Treynor Ratio, a quick ratio formula can help determine a corporation’s financial strength- or lack of strength. In this era of COVID-19 and an economic downturn, a quick ratio of a company can help investors determine if a corporation has enough liquidity to weather a financial storm. With the quick ratio formula, investors can help plan their investment strategies.

This TradingSim article will help investors calculate the quick ratios of 10 of the top corporations. In this article, I will also compare them to see which one has the most liquidity to pay off short-term debts. Investors can use this information to possibly rebalance their portfolios.

What is the quick ratio formula?

A quick ratio formula measures a company’s short-term liquidity. A quick ratio definition means that the ratio incorporates a corporation’s ability to use its cash-ready assets to pay off debt. The short-term liquidity measure is also known as the acid test. The term quick ratio comes from a company’s ability to quickly convert assets into cash.

When calculating the quick ratio of a company, the formula is as follows:

[Current assets-inventory-prepaid expenses]/current liabilities=quick ratio

When including a corporation’s marketable securities, they include common stock, certificates of deposit, or government bonds. Accounts receivable is money a customer owes a company that can be collected in 90 days.

How to calculate a quick ratio

When determining liquidity, there are specific steps to calculate the quick ratio of a company.

Run a balance sheet. Corporations can run a standard balance sheet that takes into account liability and asset information. When companies run a balance sheet, a standard balance sheet can be better than a summary balance sheet. A standard balance sheet provides more details than a summary balance sheet.
Calculate assets. A quick ratio of a company can calculate liquid assets. When calculating assets, a corporation can include cash, accounts receivable, and funds that haven’t been deposited. Corporations don’t include inventory and prepaid expenses in calculating assets. They can’t quickly be converted to cash.
After running a balance sheet and calculating assets, companies can calculate current liabilities. Short-term debt that’s paid off within a year is part of a current liability. When a company calculates liabilities, the liabilities can include payroll and accounts payable. The liabilities can also include credit card debt and payable sales tax.
Complete the quick ratio of a company. Once a corporation has calculated its assets and liabilities, that quotient will determine the ratio.

What is a good quick ratio?

In determining a good quick ratio of a company, there are some numbers that are important. A total of one is usually a good number. That quotient means that for every $1 of liability, there is $1 of assets. A ratio below one typically means that a corporation may not have enough cash to pay off short-term liabilities.

A ratio of 15 means that for every $1 of liabilities, a company has $15 of assets. While a high ratio can be good, one that is too high can be detrimental. If a ratio is too high, that means the company may not be efficiently using its cash reserve.

What does a quick ratio of a company tell investors?

Corporations on Dow Jones can determine a quick ratio of a company

When investors look at the quick ratio of a company, a quick ratio interpretation can give investors a lot of information. A low ratio can lead to a negative quick ratio interpretation. A lower ratio tells investors that a corporation doesn’t have enough liquidity to withstand a bear market. A high ratio tells investors that a company has enough cash on hand to cover near-term debt-especially in an economic downturn.

What is the difference between quick ratio vs. current ratio?

While a quick ratio of a company is one way to determine the liquidity of a company, there are other ways as well. A current ratio also measures a corporation’s short-term liquidity. However, a quick ratio is more stringent than a current ratio because it has fewer items to configure its calculations.

A current ratio is calculated as follows:

Current assets/current liabilities

In contrast to a quick ratio’s shortened criteria, a current ratio calculates more factors. While a current ratio’s formula is shorter, it includes all the current assets of a corporation. For example, a current ratio includes inventory and prepaid expenses. Those factors are excluded from a quick ratio of a company.

Another difference in current ratio vs. quick ratio is that a current ratio measures liquidity over a longer period of time. A quick ratio of a company measures assets that are converted to cash in three months.

While there are slight differences between current and quick ratios, there are similarities. Both ratios calculate the liquidity of a company. In addition, a current ratio of one and above is a good sign for a company. A current ratio below one is a sign a company can’t pay its debt.

Is a quick ratio the best measurement of a stock’s liquidity?

A company’s liquidity can help sustain it even during a difficult economic period. Despite having a poorly performing Q1 2020 and quick ratio of 0.37, upscale retailer Nordstrom’s still has strong liquidity. Even though it isn’t a value stock , Nordstrom reported it has enough liquidity to survive a worse-than-expected earnings report.

Nordstrom’s CEO, Erik Nordstrom, noted that Nordstrom still has enough liquidity to carry it through Q2 2020.

“We’re entering the second quarter in a position of strength, adding to our confidence that we have sufficient liquidity to successfully execute our strategy in 2020 and over the longer term,” said Nordstrom.

While the quick ratio of a company is not the ultimate arbiter of a stock’s financial health, it is a strong measurement to determine a company’s liquidity.

Comparison of quick ratios: Amazon vs. Walmart

Both Amazon and Walmart are the biggest retailers in the world. I will compare both corporations’ quick ratios to see which corporation can better cover short-term liabilities.

Amazon resilient in bear market

Amazon (NASDAQ:AMZN) is the most valuable company in the world. The online e-commerce behemoth has been a recession-proof stock during the current recession. Chantico CEO and asset allocation expert Gina Sanchez noted that Amazon has benefited from the recent quarantine.

Amazon’s quick ratio can be related to stock performance

“Amazon is the big winner in all of this because everyone [putting] off going to the grocery store has ordered directly from Amazon, has ordered anything they need from any store as most retail has been shut down from Amazon. I think Amazon has the longest, broadest story that would come out of this with the trends still intact,” said Sanchez.

Amazon is also performing so well that during a recession, the corporation hired 125,000 temporary workers since the nationwide shutdown. Amazon CFO Brian Olsavsky noted that demand for workers will grow during the summer.

“Demand has been strong and the biggest questions we have in Q2 are more about ability to service that demand,” said Olsavsky.

Amazon’s strong sales and hiring surge prove that the corporation and its stock are robust in this economic downturn.

What is Amazon’s quick ratio?

As of March 2020, Amazon’s current assets are $67.13 billion. Amazon’s current liabilities total $79.71 billion. So, the quick ratio formula is:

67.13/79.71=0.84.

Amazon’s quick ratio is 0.84. While I mentioned earlier that a quick ratio below 1 is a negative sign for a corporation, obviously Amazon is financially sound. Amazon may have other reasons why it may be more difficult for the company to meet its short-term obligations.

The quick ratio of a company may be lower than one because of high inventory turnover or increased inventory, especially in the retail industry. Inventory isn’t accounted for in a quick ratio formula.

Walmart performs well during COVID-19

Walmart(NYSE:WMT) is another stock that has performed well during the coronavirus crisis. In Walmart’s Q1 2021 earnings report, CEO Doug McMillon noted that increased sales of groceries and cleaning materials helped the corporation reach $134.62 billion while people were quarantined.

“We experienced unprecedented demand in categories like paper goods, surface cleaners, and grocery staples. For many of these items, we were selling in two or three hours what we normally sell in two or three days,” said McMillon.

Analysts rate Walmart a buy

Because of Walmart’s strong sales, financial analysts rate Walmart stock a buy. Garrett Nelson is a senior equity analyst at the CFRA research firm. Nelson rated Walmart as a strong pick for investors in a note to clients.

“Walmart remains one of our top picks, as we see it as a ‘pandemic winner’ that is likely to pick up share from the distress taking place across retail, particularly small businesses, department stores, and others levered to shopping malls,” wrote Nelson.

Neil Saunders, managing director at GlobalData Retail, also noted that Walmart is a buy-even more so than Amazon.

“That Walmart has outperformed Amazon, at least in growth terms, underlines both the deficiencies of Amazon in grocery – which generated the bulk of sales this quarter – and Walmart’s growing power in the segment,” said Neil Saunders, managing director at GlobalData Retail.

What is Walmart’s quick ratio?

As of April 2020, Walmart’s current assets excluding inventory is $22.1 billion. Walmart’s current liabilities are $82.65 billion. The equation would then be:

22.1/82.65=0.27

In comparison between Amazon and Walmart, 0.84 is greater than 0,27. Amazon’s quick ratio is higher than Walmart’s ratio.

Walmart inventory make company’s liquidity lower than Amazon’s quick ratio

Walmart has a lower quick ratio because of its increased inventory. Because Walmart has more physical inventory than Amazon, which isn’t included in quick ratios, Amazon ranks higher.

In addition to inventory, Walmart’s quick ratio is lower than Amazon’s quick ratio because of debt. Even though Amazon has expenditures of $4 billion, Walmart’s expenditures are topping $900 million for Q1 2021. Because Walmart has more inventory and increasing expenses, its quick ratio is lower than Amazon’s quick ratio.

Walmart’s expenses increased because of its extra bonuses to workers and increased spending on sanitizing store locations. Brent Biggs, Walmart’s chief financial officer, noted that added expenses could add to Walmart’s liability.

“[W]e’ve already announced a second round of special bonuses in the U.S. which that will financially hit in the second quarter,” said Biggs.

The increased expenses and physical inventory give Amazon’s quick ratio an edge over Walmart.

Comparison of quick ratios: Apple vs. Google

Apple and Google are rivals in the smartphone market with Apple’s iPhones battling Google’s Android system. Both corporations have become giants in tech with their innovation. But which company has the best quick ratio?

Apple has positive Q2 2020 earnings report

In Apple’s(NASDAQ:AAPL) Q2 2020 earnings report, Apple had an increase in revenue. The company’s iPhone sales declined because of the coronavirus slowing down production in China. Chief financial officer, Luca Maestri, noted that Apple Watches and other wearable devices still had strong sales.

“Today Apple reports $58.3 billion in revenue, an all-time record for services and a quarterly record for Wearables, Home and Accessories. It was also a quarterly revenue record for Apple Retail, powered by phenomenal growth in our online store. Amid the most challenging global environment in which we’ve ever operated our business, we are proud to say that Apple grew during the quarter,” said Maestri.

Apple stock can rise with high quick ratio

Maestri also noted that Apple would continue its growth and commit and contribute more to the U.S. economy.

“We are confident in our future and continue to make significant investments in all areas of our business to enrich our customers’ lives and support our long-term plans — including our five-year commitment to contribute $350 billion to the United States economy,” added Maestri.

Analysts pick Apple stock as a buy

Even though Apple’s sales increased in the U.S., Apple has struggled to maintain a foothold in India. Despite that, JP Morgan Chase Samik Chatterje rates Apple stock as a buy. He believes that if Apple iPhone SE sales increase in India, Apple’s price target could rise from $350 to $365.

“Apple has struggled to date to build a material presence in India on account of premium price positioning as well as other drivers,” he wrote, We estimate if Apple were able to capture roughly half of the 30 million to 35 million opportunity, it would translate into a 215 million steady annual replacement run-rate for iPhones globally and a $7 billion revenue or $0.70 cents of EPS upside,” noted Chatterje.

Evercore ISI analyst Amit Daryanani is another financial analyst that’s bullish on Apple stock. He believes that Apple is a stock that will continue to outperform.

“Apple continues to offer the best risk/reward in large-cap tech and long-term investors should use any weakness to add to positions,” said Daryanani.

Daryanani also noted that Apple could also have a $2 trillion market value in the future.

“This implies EPS growth of 14% over next several years driven by combination of operational tailwinds and buyback support,” said Daryanani.

What is Apple’s quick ratio?

As of March 31, Apple’s assets minus inventory total $140.42 billion. The company’s liabilities equal $96.09 billion. The quick ratio formula is:

140.42/96.09=1.46.

Therefore, Apple’s quick ratio is 1.46. That’s well above the standard for a quick ratio of a company.

Google Q1 2020 earnings report shows minimal fallout from ad revenue drop

Google’s (NASDAQ:GOOG) Q1 2020 earnings report was $41.16 billion, a strong showing despite a drop in ad revenue over the last few months. As a result of the economic slowdown, many corporations are not spending as much to advertise on Google as they did pre-pandemic.

YouTube drives Google revenue growth

Despite the decline in ad revenue in March, the decline wasn’t as deep as expected. YouTube has been a bright spot with its surge in revenue. The video-sharing site’s Q1 2020 revenue jumped by 36% to $15 billion. Google’s parent Alphabet chief financial officer Ruth Porat, spoke about YouTube, one of Google’s most valuable acquisitions.

“[For YouTube], the biggest part of ad revenue is Brand and we’re really excited about that and the upside there… One of the things we’re extremely focused on is ensuring that we’re providing advertisers with the tools they need to really present their brand the way they want, how they want and really to protect and measure that,” said Porat.

Analysts bullish on Google stock

Morgan Stanley analyst Brian Nowak says Google stock is a buy because the corporation is branching out into gathering health care data and moving into education.

“We are particularly positive on its emerging e-commerce products (shopping listings, virtual show rooms, deep linking, etc), focus on [small and medium-sized businesses], and efforts to drive digital transformation in the healthcare and education industries. Google’s Waymo autonomous vehicles business is also the market leader in AV technology,” said Nowak.

What is Google’s quick ratio?

In this equation to determine Google’s quick ratio, I’ll look at the current assets excluding inventory and liabilities. Google’s assets as of March are $146.13 billion. Google parent Alphabet’s liabilities total $40.19 billion. Therefore, the quick ratio formula is:

146.13/40.19=3.64

Google’s quick ratio is 3.64. That quotient is much higher than Apple’s 1.46. Google is more likely than Apple to be able to pay off short-term liabilities.

Quick ratio comparison: Twitter vs. Facebook

Trump war on social media affects Twitter stock

President Donald Trump has affected Twitter’s(NASDAQ:TWTR) stock. The social media site has been under fire from the president for fact-checking several of his latest controversial tweets and flagging some other messages. Twitter explained why it felt the need to flag a recent tweet of Trump’s for “glorifying violence.”

“We’ve taken action in the interest of preventing others from being inspired to commit violent acts, but have kept the Tweet on Twitter because it is important that the public still be able to see the Tweet given its relevance to ongoing matters of public importance,” noted Twitter.

Trump has threatened to sign an executive order to give the Federal Communications Commission more power to regulate Twitter.

While Twitter stock initially fell 4% last week after Trump’s threat, financial analysts say that Twitter stock won’t stay down for long. Baird Capital analyst Colin Sebastian wrote in a note to clients that Trump’s criticism won’t always adversely affect Twitter stock.

“It is difficult for us to see how the dispute over content moderation would meaningfully impact the vast majority of social media usage. Consequently, we would not expect any material impact on revenue, as advertisers will follow traffic and eyeballs,” wrote Sebastian.

Twitter has better-than-expected Q1 2020 earnings report

Twitter had a positive past earnings report in Q1 2020. However, Twitter had a downturn in its ad revenue.

“Revenue was $808 million in Q1, up 3% year over year, reflecting a strong start to the quarter that was impacted by widespread economic disruption related to COVID-19 in March. Reduced expenses partially offset the revenue shortfall, resulting in an operating loss of $7 million,” said Twitter.

Twitter also suffers from advertising decline

In addition to Google, Twitter also had a decline in ad revenue because of the COVID-19 crisis slowing down business. The company noted the at economic downturn hurt advertising revenue numbers.

“As an indication of the rapid change in advertising behavior, from March 11 (when many events around the world began to be canceled and we made working from home mandatory for nearly all our employees globally) until March 31, our total advertising revenue declined approximately 27% year over year,” noted Ned Segal, Twitter’s chief financial officer.

What is Twitter’s quick ratio?

As of March 2020, Twitter’s current assets minus inventory total 8467.579. Twitter’s liabilities equal 710.02. In the quick ratio formula,

8467.579/710.02=11.93

Therefore, Twitter’s quick ratio is 11.93.

Facebook stock caught in Trump tirade

Just as Twitter stock dropped slightly after challenging Trump, Facebook(NASDAQ:FB) stock dipped after the company also caught in Trump’s war on social media.

Facebook CEO Mark Zuckerberg noted that he disapproved of Trump’s attempts to control social media companies.

“I’ll have to understand what [the President] actually would intend to do, but in general I think a government choosing to censor a platform because they’re worried about censorship doesn’t exactly strike me as the right reflex there,” said Zuckerberg.

In contrast to Twitter, Facebook isn’t flagging Trump’s posts and refuses to fact-check posts on their site.

“I just believe strongly that Facebook shouldn’t be the arbiter of truth of everything that people say online. Private companies probably shouldn’t be, especially these platform companies, shouldn’t be in the position of doing that,” said Zuckerberg.

Analysts bullish on Facebook because of foray into online shopping

Before the controversy around Facebook, analysts rated Facebook as a buy. Many of them believe that the controversy will have a short-term effect on Facebook stock. Financial analysts believe that since Facebook announced an e-commerce division of the site, Facebook Shops. Deutsche Bank analysts wrote in a note to clients that Shops could be a multibillion revenue stream for Facebook.

“We think Facebook Shop in a simplistic bull case could drive up to as much as a $30 [billion] revenue opportunity, across a combination of take-rate driven transactional and advertising revenue,” wrote the analysts.

Facebook stock can be independent of a quick ratio

AB Bernstein analysts also rated Facebook stock a buy because of the new Shops venture. They believe that Facebook can be a vital part of e-commerce like Amazon.

“We have long viewed FB as the ‘rent’ to the digital economy and a core component of the online retail ecosystem,” the analysts wrote.

What is Facebook’s quick ratio?

As of March 2020, Facebook’s current assets excluding inventory are $69.349 billion. The social media’s company’s liabilities total $15.69 billion. To calculate the quick ratio formula, the equation would be as follows:

Facebook’s quick ratio formula is: 69.349-/15.69=4.60

Therefore, Twitter’s quick ratio of 11.93 is much greater than Facebook’s 4.60. Twitter has a greater ability to pay off short-term debt than Facebook.

Comparison of quick ratios: Uber vs. Lyft

Uber (NASDAQ:UBER) and Lyft (NASDAQ:LYFT) are competing ride-sharing services that have been struggling as people are staying home during the quarantine. Despite the troubles the companies are experiencing, they have different quick ratios.

Uber touts liquidity in Q1 2020 earnings report

Uber’s Q1 2020 earnings report was positive despite COVID-19’s effect on the company’s ridership numbers, creating $2.9 billion in losses. The corporation made $3.5 billion in revenue, a 14% increase. Uber’s chief financial officer, Nelson Chai, noted that the company has enough liquidity to weather the current economic volatility.

“Our ample liquidity provides us with substantial flexibility to navigate the current crisis, but we are being proactive and taking actions to emerge stronger and more focused as a company,” said Chai.

Uber also said that while ridership fell, the company had success with its food delivery service Uber Eats. CEO Dara Khosrowshahi noted that Uber stock should rise once the economy re-opens.

“Along with the surge in food delivery, we are encouraged by the early signs we are seeing in markets that are beginning to open back up,” said Khosrowshahi.

Some analysts bullish on Uber after cost cuts

Financial analysts rate Uber stock after its positive earnings report. As Uber cut its workforce, the company has cut costs. Ironically, Uber’s decision to eliminate 6,000 jobs lifted the stock up and is a good sign to CFRA analyst Angelo Zino. Zino wrote in a note to clients that Uber’s ride-sharing division can be more profitable with fewer overhead costs.

“We[CFRA] applaud [the cost savings] as it will allow the Rides segment to be profitable at a much lower run rate. We anticipate a tempered recovery in the ridesharing market without a vaccine for Covid-19, with the segment unlikely seeing previous peak volume over the next 2 years,” wrote Zino.

“That said, we see UBER being profitable on an adjusted EBITDA basis by the second half of ‘21. We believe the moves (includes office reductions) will allow UBER’s cost structure to become more variable,” added Zino.

Bank of America Securities analyst Justin Post is also bullish on Uber stock after the cost-cutting measures.

“We think these changes underscore a more focused and mature Uber and will likely result in an accelerated path to break-even if end markets recover,” wrote Post.

Other analysts see slow recovery for rideshare stocks

Even though Uber and Lyft have survived the economic slowdown, there are other financial analysts who think the ridesharing services still face an uphill climb. Wedbush analyst Dan Ives noted that Uber and Lyft need more time to recover after the economy re-opens.

“It’s still a slow thaw, and with multiple macro levers over the course of the year, and likely an even longer return to normal environment, including business travel, there’s still a long road ahead for rideshare,” said Ives.

What is Uber’s quick ratio?

As of March, Uber’s current assets are $11.11 billion. Uber’s liabilities are $6.63 billion. The quick ratio formula is:

11.11/6.63=1.68

So, Uber’s quick ratio is 1.68.

Lyft perseveres despite COVID-19

Even though Lyft stock was adversely affected by the nationwide lockdown, the company still reported good news. Lyft reported Q1 2020 sales of $955.712 million. That figure beat experts’ expectations of $897.860 million.

Lyft stock also jumped after reporting that ridership increased by 26% in May. CEO Logan Green noted that Lyft was able to withstand economic headwinds.

“While the COVID-19 pandemic poses a formidable challenge to our business, we are prepared to weather this crisis. We are responding to the pandemic with an aggressive cost reduction plan that will give us an even leaner expense structure and allow us to emerge stronger,” said Green.

Similar to Uber, Lyft’s chief financial officer Brian Roberts also noted that the corporation was reducing costs.

“In these uncertain times, we are building on that progress by taking decisive action to reduce costs and further improve our operating efficiency. We expect to remove approximately $300 million from our annual expense run-rate by the fourth quarter of 2020 relative to our original expectations for 2020,” said Roberts.

Analysts split on whether Lyft is a buy

Financial analysts are divided on whether Lyft is a buy. Piper Sandler’s Alex Potter downgraded his rating of Lyft. He believes that riders will be hesitant to enter Lyft cars because of COVID-19 fears.

“Sequential gains are encouraging, but since ride-hailing involves sharing indoor air with strangers, we expect riders may remain wary for some time,” said Potter.

While Potter is bearish on Lyft stock, Needham’s Brad Erickson is bullish on Lyft stock. He rates the ridesharing company’s stock as a buy.

“We are unwavering in our view that the secular story of ride-hailing adoption is intact if and as we move through COVID,” noted Erickson.

What is Lyft’s quick ratio?

As of March, Lyft’s current assets totaled $3.144754 billion. Liabilities equaled $2551.14 billion. In the quick ratio formula,

3.144754/2551.14= 1.23

Lyft’s quick ratio of 1.23 is less than Uber’s 1.68. Uber has a greater ability to pay its short-term liabilities than Lyft.

Quick ratio comparison: Tesla vs. GM

Tesla was founded just a few years ago, but is already challenging the established automobile company General Motors (GM). I will examine which corporation has a higher quick ratio.

Tesla makes a profit despite COVID-19 challenges

Like all automobile corporations, Tesla’s( NASDAQ:TSLA) production ground to a halt after coronavirus caused a nationwide shutdown. Despite the shutdown, Tesla turned a profit in a better-than-expected Q1 2020 earnings report with revenue of $5.99 billion. CEO Elon Musk spoke about the results.

“So, Q1 ended up being a strong quarter despite many challenges in the final few weeks. This is the first time we have achieved positive GAAP( generally accepted accounting principles) net income in a seasonally weak first quarter,” said Musk.

Musk also spoke about how Tesla has $8 million available in cash despite a reduction in demand for Tesla during the economic slowdown.

Analysts divided on whether Tesla is a buy

Tesla’s positive Q1 2020 earnings report makes Tesla a buy to Wedbush’s Dan Ives. He wrote in a note to clients that he believes Tesla stock can continue to perform well now that the company’s factories are re-opened.

“Tesla appears to be turning the corner from both a demand and production perspective heading into the month of June,” wrote Ives.

Ives also believes that the international demand for Tesla’s Model 3 will help the company’s stock.

“While second-quarter delivery numbers remain in flux due to a host of logistical issues as well as overall lockdown conditions now starting to ease across the U.S. and Europe, it appears underlying demand for Model 3 in China is strong with a solid May and June likely in the cards and clear momentum heading into the second half,” added Ives.

While Ives is bullish on Tesla stock. Bank of America analysts are bearish on Tesla stock. The analysts believe that even though Tesla is re-opened, production restarts will still be difficult to implement.

Analysts also noted Tesla’s re-opening “will likely prove toughest with production restarts/ramps that continue to be pushed out, which may disproportionately hit (Tesla) by derailing its ongoing capacity/production expansion across its plants (Model Y in Fremont, Model 3 in Shanghai, Giga (Berlin)”.

What is Tesla’s quick ratio?

As of March, Tesla current assets excluding inventory are $14.893 billion. The company’s liabilities equal $ 11.986 billion. The quick ratio formula would be:

10.40/11.986=0.87.

Tesla’s quick ratio is 0.87.

GM touts liquidity despite economic slowdown

GM had a better-than-expected earnings report despite COVID-19 slowing down production. Chief financial officer Dhivya Suryadevara touted the corporation’s liquidity in its latest financial results.

“Our liquidity continues to be very strong at $33.4 billion at the end of first quarter. Even in an extreme scenario with zero production, our current levels of liquidity will take us into Q4 of 2020. In addition, the capital markets continue to be open as a way to access additional layers of liquidity to take us beyond that time frame,” said Suryadevara.

Deutsche Bank bullish on GM stock

Because of GM’s positive earnings report, Deutsche Bank upgraded its rating of GM stock to a buy in May.

“GM’s strong 1Q performance and forward-looking outlook, in our view demonstrate the benefit from its proactive actions to transform the business, right size its costs and boost profitability. They should leave GM best positioned to weather challenging 2Q conditions, and yield considerable improvement in profit and free cash flow in 2H and into 2021.”

GM’s stock rose 6% after the Q1 2020 earnings report. The company had its stock slide 40% throughout the year. However, GM is showing resilience as it re-opens its factories as the economy re-opens.

What is GM’s quick ratio?

As of March, GM’s current assets equaled $86.90 billion. GM’s liabilities totaled $91.29 billion. Therefore, the quick ratio formula is:

86.90/91.29=0.95.

GM’s quick ratio is 0.95.

GM’s 0.95 is greater than Tesla’s 0.87. GM has more liquidity and can more easily pay off short-term debt better than Tesla.

How can traders use quick ratio interpretations to pick stocks?

While a quick ratio of a company is just one way to measure a corporation’s success, it is a vital metric. A quick ratio interpretation can help investors choose the best stocks that can pay off short-term debt. TradingSim charts and blog posts can also help investors find the best stocks with the most liquidity to easily pay off debt and give investors better results.

There are many ratios to measure a stock’s performance. That is especially true with mutual funds. The COVID-19 crisis caused the current bear market. With that uncertainty, traders want to use the most precise formulas to determine the best mutual funds for investment. The Treynor Ratio is one formula that can measure a mutual fund’s performance.

This TradingSim article will provide an overview of the ratio and then explain how investors can use the ratio to measure the top 10 mutual funds.

What is the Treynor Ratio?

The Treynor Ratio is a reward-to-volatility formula. The ratio measures an investment’s performance per unit of risk.

In the Treynor formula, beta is measured in risk. Beta is the measure of a stock’s volatility in relation to a benchmark like the S&P 500. The ratio calculates beta and the returns on risk-free returns.

With the Treynor formula, The S&P 500 usually has a beta of one. Stable stocks have a beta below one. Volatile stocks have a beta over one.

In the Treynor Ratio, the formula is: (Ri-Rf)/B, where:

Ri=return of investment

Rf= risk-free rate. That’s typically the yield on short-term Treasury bills.

B-= the beta of the portfolio.

Beta is considered to be measured against a key benchmark. It’s measured with the return that could be earned on a risk-free asset like the Treasury bill in the reward-to-volatility ratio. The risk-free rate is subtracted from the portfolio’s return of investment. The result of that equation is divided by the portfolio’s beta. A higher Traynor ratio means that there is a better return.

The S&P500 and the Dow Jones 30, since 1970’s — The S&P 500 and the Dow Jones 30, since 1970s

What do the numbers in a Treynor ratio mean?

A high Treynor Ratio means an investment has added value related to its risk. In addition to that result, a negative Treynor Ratio means the mutual fund performed worse than a risk-free asset.

Who created the Treynor Ratio?

Jack Treynor was the economist who created the method. He was one of the first economists to discover the capital asset pricing model (CAPM). That CAPM model codified investment return risks that became the basis for the Treynor Ratio.

How can investors use the Treynor formula?

Matt Ahren is a financial advisor with Integrity Advisory in Overland Park, Kansas. He notes how the Treynor Ratio is used to justify risks in investments.

“I manage the portfolios for our firm, so if I am reviewing an individual fund then I first look at the fund’s beta to see how much market risk that manager is taking,” said Ahrens.

Aherns inspects a mutual fund’s Treynor formula to see if a portfolio’s performance justifies its risk.

“Then I look at the Treynor ratio to see how much return am I getting per unit of risk. Basically, am I getting bang for my buck?” said Aherns.

What is the Treynor Ratio’s legacy?

Robert Merton knew Treynor well. He is a Nobel Prize-winning economist at the Massachusetts Institute of Technology. Merton credits Treynor with bringing more mathematical analysis to finance.

“It wasn’t that he just did a particular theory,” he said. “He was very creative and also was a leader in bringing the quantitative finance science to finance practice. That was his bridge.”

Bruce I. Jacobs is a principal of Jacob Levy Equity Management. He also credits Treynor for bringing mathematical formulas to better analyze stocks and mutual funds.

“Jack had incredible insights about the markets and models and helped bring quantitative finance into practical application,” said Jacobs.

How Treynor Ratio is vital to analyzing risk

MIT finance professor Andrew Lo also praised the Treynor Ratio and CAPM. He also credits the Treynor Ratio with acknowledging the importance of beta when analyzing a stock.

“In part, it acknowledges that there’s a trade-off between risk and return and CAPM quantified what the trade-off is. That relationship is what gave rise to the notion of beta,” said Lo.

In addition, Lo also noted that the beta of a mutual fund can be crucial to measuring a mutual fund’s risk.

“So, when we talk about the beta of a stock, that comes out of that framework. When we do discounted cash flow analysis, we’re using some kind of cost of capital. CAPM is the tool we use to calculate that cost of capital,” added Lo.

Treynor Ratio builds on work of Sharpe Ratio

The Treynor formula builds on the work of fellow economist William Sharpe. Lo noted that the capital asset pricing model championed by economists is vital to the mutual fund industry.

“CAPM is also the basis of the mutual-fund industry, particularly for passive investing. You ought to just buy and hold the market, and you’ll do just fine,” said Lo.

“Vanguard[ a large mutual fund corporation] and all of the index funds out there came about because of the contributions of Sharpe, Treynor, and others made in finding the capital asset price model. The multi-trillion-dollar passive-index business — we can thank Sharpe and Treynor for that wonderful gift,” added Lo.

Michael B. Miller, CEO of Northstar Risk, also noted the importance of the Treynor Ratio in evaluating the performance of mutual fund portfolios. While he’s critical of the method, he still praises the Treynor ratio as effective.

“The ratio is motivated by two important concepts First, you should care about risk-adjusted returns, not absolute returns,” said Miller.

“Second, in a well-diversified portfolio, you should worry more about the macroeconomic factors that could impact your portfolio and less about the risk from individual securities,” added Miller.

What is the difference between the Sharpe ratio and Treynor Ratio?

The Treynor formula builds on a previous measurement of the Sharpe Ratio. Both formulas can be beneficial to an investor to assess mutual fund investments. William Sharpe created the formula to help investors understand the risk of an investment in relation to its return.

The Sharpe Ratio is similar to the Traynor Ratio because they both assess risks of portfolios. While both formulas have similarities, there are differences between the two ratios.

The Treynor Ratio assesses a systemic risk of a portfolio against a benchmark like the S&P 500. However, the Sharpe Ratio measures the performance of a portfolio based on the overall total risk of a portfolio.

William Sharpe creator of Sharpe ratio, a counter to Treynor Ratio

What is the Sharpe Ratio formula?

The Sharpe Ratio equation is:

(Rp – Rf)/σ , where:

Rp= return on portfolio

Rf= risk-free rate

σ =standard deviation on the return of the portfolio

The Sharpe Ratio subtracts the risk-free rate of return from a portfolio’s return. The result is divided by the investment’s return’s standard deviation. A standard deviation measures the investment risk in a mutual fund. It’s applied to an investment’s annual rate of return to calculate risk.

The higher the Sharpe ratio, the better for a mutual fund. A Sharpe Ratio of 1 and over is considered good for a mutual fund. A negative Sharpe Ratio means the expected return may be negative. The negative quotient could also mean that the portfolio’s return is worse than the risk-free rate.

Which is better to measure mutual funds, the Sharpe Ratio or Treynor Ratio?

Both formulas can effectively measure the performance of a mutual fund. However, there are two differences between the measurements. The Sharpe Ratio can be applied to all portfolios that are in specific sectors.

In specific sectors, specific mutual funds may have unsystematic risk as to the best measure of risk. In that case, the Sharpe Ratio may be the better formula because it measures overall risk.

However, with the Treynor Ratio, there is a difference. The Treynor Ratio measures systematic risk. Unsystematic risk is not a factor with diversified mutual funds.

Because of that, the Treynor Ratio can measure systematic risk. The Treynor Ratio can be a better metric to evaluate the performance of a well-diversified mutual fund portfolio.

What are the downsides to the Treynor ratio?

While the Treynor Ratio can be an effective measure of a portfolio’s performance, it’s not perfect. Some financial experts say that the metric has a downside.

S. Michael Sury is a lecturer in finance at the University of Texas at Austin and studies the Treynor index. He noted that the Treynor formula isn’t perfect. Sury because it only looks at past performance.

“Treynor ratio does have some drawbacks. Importantly, by definition, it is a backward-looking ratio. Thus, it tends to be more useful for its evaluative – rather than its predictive – power,” said Sury.

Some financial experts like Aherns believe that a mathematical analysis may not be the best way to analyze stocks for beginning traders.

“The trap do-it-yourselfers fall into is being unable to decipher where outperformance is coming from,” said Ahrens.

In addition, Aherns also noted that taking on more risk may benefit them more than using the Treynor formula to calculate risk.

“A manager may be performing well versus their peers just because they are taking on more market risk,” said Ahern.

Is the Treynor Ratio helpful to investors?

While many financial advisors use the Treynor Ratio, there are financial managers that aren’t fans of the formula.

Paul Ruedi of Ruedi Wealth Management doesn’t believe that the Treynor formula is best for the average investor. He believes that two factors are more crucial to evaluate mutual funds.

“At the end of the day, over 90 percent of an investor’s lifetime return is a result of two things. The first is their allocation to equities versus fixed-income,” said Ruedi.

“And second to that, but probably just as important – or maybe even more important – how they behave when the portion of their portfolio that is invested in the great companies of the U.S. and the world is temporarily down 30 percent or 50 percent,” added Ruedi.

In addition to that, Ruedi also believes that the Treynor ratio return is not an accurate measurement of a mutual fund’s return.

“Nobody goes into the grocery store with their Treynor ratio return, they go into the grocery store with their actual return,” said Ruedi.

While the Treynor Ratio may not be for every investor, the Treynor formula could be a good option for measuring risk. In the rest of the article, I will analyze comparisons of 10 mutual funds. I will look at their financial statistics to compare the Treynor Ratios of the assets.

Comparison: Fidelity Advisor Series Growth Opportunities Fund vs. Morgan Stanley Insight Fund Class A

Fidelity Advisor Series Growth Opportunities Fund ( FAOFX) is a mutual fund that tracks growth stocks. The mutual fund has tech holdings like Tesla (NASDAQ:TSLA) and Uber (NASDAQ:UBER). Because of those stocks, Fidelity Advisor Series Growth Opportunity Fund had a high 1-year annual return of 12.55%.

Tesla stock rises after reopening factory

Tesla stock helps Fidelity Advisor Series Growth Opportunities Fund increase its annual return. The corporation’s controversial founder, Elon Musk is famous for his comments. Musk gets as much attention for his tweets as much as his company’s electric cars.

Musk defied California’s shelter-in-place orders to increase production at Uber’s Fremont factory. He recently tweeted about resisting the order on Twitter.

“Tesla is restarting production today against Alameda County rules. I will be on the line with everyone else. If anyone is arrested, I ask that it only be me,” tweeted Musk.

Tesla stock jumped 4% after the factory recently reopened after gaining county approval.

With that boost to its production and bottom line, Tesla’s HR head, Laurie Shelby, touted the re-opening of the factory.

“We have local support to get back to full production at the factory starting this upcoming week. We’re excited to continue to get back to work,” said Shelby.

The growth of Tesla stock helped Fidelity Growth Opportunities Fund have a strong annual return.

What’s the Treynor Ratio of Fidelity Growth Opportunities Fund?

I will explain the Treynor Ratio of the fund with a risk-free rate of 0.16%. This risk-free rate I chose is based on the yield of the one-year Treasury rate as of May 6.

The average annual return on the Fidelity Growth Opportunities Fund is 12.55%. Once that is calculated, the risk-free rate of 0.16% is subtracted from the return. After that, the result is divided by the beta. The beta, in this case, will be 1.1, the current benchmark of the S&P 500.

With those statistics, the Treynor formula would be:

12.55%-0.16%/1.1=0.01.

With that equation, The Treynor index would be 0.01. The quotient is below 1, which could potentially be a low number for potential investors. However, in comparison to other similar figures in the 0-1 range, the Treynor formula can vary in its risk-to-reward quotient.

As a result, the risk is increased with this portfolio if compared with other mutual funds. However, I will now examine the Treynor Ratio comparison to the Morgan Stanley Insight Fund Class A.

Morgan Stanley Insight Fund Class A

As a potential investment, Morgan Stanley Insight Fund Class A(NYSE: CPOAX) is a mutual fund that has a high annual return of 19.37%. Along with the high annual return, the risk-free rate is 0.16%. The beta will be 1 in this example.

With that risk-free rate, the Treynor formula would be:

Ri-Rf/B

19.37%-0.16%/1=0.19.

Spotify stock helps Morgan Stanley fund

With well-performing holdings, the Morgan Stanley fund has less risk. Spotify(NASDAQ: SPOT) is a holding that has helped Morgan Stanley’s Insight Fund Class A grow. The streaming company’s Q1 revenue increased to $1.90 billion because of many people being quarantined.

With many people sheltering in place, Spotify noted that the number of paid subscribers climbed to 130 million.

Because may people are at home, Spotify has been a background soundtrack.

In the quarantine era, Spotify listeners are more devoted to the service. “Listening time around activities like cooking, doing chores, family time, and relaxing at home have each been up double digits over the past few weeks,” noted Spotify in a statement.

Joe Rogan signing sends Spotify stock soaring

In addition to a positive earnings report, Spotify’s stock surged by 8% . That jump came after popular and controversial podcaster Joe Rogan moved his program to the streaming service.

After Joe Rogan joined the streaming service, Spotify spoke about the acquisition in a statement.

“The Joe Rogan Experience, one of the most popular podcasts in the world, is coming to Spotify via a multi-year exclusive licensing deal. The talk series has long been the most-searched-for podcast on Spotify and is the leading show on practically every other podcasting platform,” said Spotify.

With this new addition to its podcast stable, Spotify has become a holding that helped lessen the risk of the Morgan Stanley Insight Fund Class A.

Which Treynor Ratio is higher: Fidelity or Morgan Stanley?

In comparison between the Fidelity mutual fund’s 0.01 and Morgan Stanley’s 0.19, the Morgan Stanley Insight Fund Class A has a higher Treynor Ratio.

In that equation, the Treynor Index would be 0.19. Even though they’re both below one, the Morgan Stanley Ratio has a higher Treynor index than the Fidelity mutual fund. Because Morgan Stanley Insight Class Fund A has a higher Treynor ratio, it has less risk than the Fidelity Growth Opportunities Fund.

T. Rowe Price Global Technology Fund vs. Janus Henderson Global Technology

With tech stocks, the T. Rowe Price Global Technolgy Fund ( NASDAQ:PRGTX) and the Janus Henderson Global Technology mutual funds have performed well this year. Though they’re in the same sector, the T. Rowe Price fund has been singularly praised as of the best mutual funds of the decade.

T. Rowe mutual fund a top investment

The T. Rowe Price Global Technology Fund “invests primarily in companies we expect to generate a majority of revenue from development, advancement, and user of technology.” With that mission statement, the fund has an annual return of 12% with its tech holdings like Facebook and Netflix.

Facebook stock part of successful T. Rowe mutual fund

Facebook is a holding that helps the T. Rowe Price fund become a top mutual fund. As part of the fund, Facebook earned $17. 74 billion in its Q1 2020 earnings.

With online shopping growing, Facebook is pushing for more profits with Shops, an upcoming marketplace on the social networking site.

Despite economic volatility, Zuckerberg wants to expand into online shopping to reach more customers.

“I’ve always believed that in times of economic downturn the right thing to do is to keep investing and building the future,” said Zuckerberg.

With Facebook’s Q1 2020 success, “This is really the first very major push that we’re going to be making into that next step around commerce,” said Zuckerberg.

“All these tools are open for business even when your physical storefront can’t be,” added Zuckerberg.

Netflix part of T. Rowe mutual fund growth

In addition to Facebook, Netflix is a strong tech holding in the T. Rowe Price Global Technology Fund. The streaming service has seen a whopping 35% growth in its stock in 2020.

With that success, Netfiix has been a stock that’s helped the T. Rowe mutual fund. Michael Bapis is the managing director of Vios Advisors at Rockefeller Capital Management. He spoke about Netflix’s subscriber growth.

“Demand is off the charts right now, and it’s the integral driver for Netflix. You’re going to have subscriber growth continue to grow. It’s a massive market and people aren’t going to go to the movies. I think they are starting to capitalize on a massive market,” said Bapis.

As Netflix grows, “They’re[ Netflix] going to keep market share at this point because they offer the best product,” added Bapis.

What is the Treynor ratio of T. Rowe Price Global Technology Fund?

With that success, the Treynor ratio of the fund can be calculated, where:

Ri-Rf/B: 12%-0.16%/1=0.12.

In that equation, the Treynor Ratio will be 0.12.

Janus Henderson Global Technology Fund

In contrast to the T. Rowe fund, the Janus Henderson Global Technology Fund(NYSE:JANIX) has a lower annual return. As of May, the Janus mutual fund’s annual year-to-date return is 6.23%. Despite the lower return, the fund has many strong holdings in its portfolio.

Microsoft a strong buy in Janus Henderson Global Technology Fund

As Goldman Sachs analyzes stocks, Microsoft is a strong holding in the Janus mutual fund. Goldman Sachs rated the software giant’s stock as a buy.

“Our partner checks continue to reflect the relative strength in the AWS platform, as incremental demand from customers to accelerate their migration into the cloud,” said Goldman Sachs in a statement.

In its analysis, Goldman Sachs noted that Microsoft can ” provide full virtual-desktop coverage (AWS WorkSpaces), and other work-from-home and business continuity needs.

As a tech stock, Microsoft’s stock rose because of its cloud services. After a positive Q1 2020 earnings report, the software company touted its $35 billion Q1 revenue.

In its earnings report, Microsoft noted that “cloud usage increased, particularly in Microsoft 365, including Teams, Azure, Windows Virtual Desktop, advanced security solutions, and Power Platform, as customers shifted to work and learn from home.”

What is the Treynor Ratio of the Janus Technology Mutual Fund?

As a result of Microsoft’s strong performance, the Janus mutual fund has performed relatively well. With the current statistics, the Treynor formula for the Janus Technology Mutual Fund would be:

Ri-Rf/B, where: 6.23%-0.16%/1.1=0.06.

Which Treynor Ratio is higher: T. Rowe or Janus?

With the comparison between the two tech mutual funds, 0.12 is greater than 0.06. The T. Rowe Technology Fund has a higher Treynor Ratio than the Janus Technology Mutual Fund.

Vanguard Healthcare Fund

In this COVID-19 era, the Vanguard Healthcare Fund(NYSE:VGHCX)has outperformed other mutual funds. The mutual fund’s annual return was an impressive 17.35% in 2020 so far. Vanguard Healthcare Fund’s returns are doing well because of its healthcare holdings. One holding that is helping the Vanguard Healthcare Fund is Pfizer.

Pfizer COVID-19 vaccine trial gives stock a boost

Pfizer(NYSE:PFE) stock grew 35% despite a declining stock market. The pharmaceutical company is working on a promising vaccine for COVID-19. As Pfizer CEO Albert Boula noted, the company is gathering information for its trials.

“We are collecting data as we speak in real time so we know, we are monitoring the safety of the doses,” said Bourla.

BNT162 is the potential vaccine that is being tested later this year. The corporation hopes to have 360 people in a clinical trial. If this vaccine is successful, Bourla hopes that the treatment will be available by the end of the year.

“If things go well, and we feel that the product is safe and efficacious, and the FDA [Food and Drug Administration] and EMA [European Medicines Agency] and other regulatory agencies feel the same, we will be able to deliver millions of doses in the October time frame,” said Bourla.

Pfizer plans to produce hundreds of millions of the potential COVID-19 vaccine by next year. With Pfizer’s promising vaccine, the Vanguard Healthcare Fund has been a reliable mutual fund for investors.

What is the Treynor Ratio of the Vanguard Health Care Fund?

With a high annual return of 17.35%, the equation would be:

Ri-rf/B, where: 17.35-0.16%/1.1=0.16

In that equation, the Treynor ratio of the Vanguard Health Care Fund is 0.16.

Invesco Health Care Fund Class A

The Invesco Health Care Fund Class A (NYSE:GGHCX) had a well-performing one-year return of 15.61%. The portfolio has outperformed because of Abbott Labs, one of its successful holdings.

Abbott Lab stock rises on COVID-19 antibody tests

Abbott Laboratories (NYSE:ABT) is an Invesco Health Care Fund holding that’s rising in the COVID-19 era. The stock rose 8.6% year-to-date with its antibody tests to detect the virus.

As the coronavirus crisis continues, Abbott is developing antibody tests for the virus. The corporation received Food and Drug Administration approval for more antibody tests for COVID-19.

With this second authorization, Abbott hopes to ship 30 million antibody tests to hospitals and potential patients.

“We wanted to provide hospitals and labs with as many broad and reliable testing options as possible during this pandemic,” said an Abbott spokesperson.

What is the Treynor Ratio of Invesco Health Care Fund Class A?

As Abbott Labs raises the Invesco Health Care Fund’s annual return, the Treynor ratio can be calculated. The formula is:

Ri-rf/B, where:

15.61-0.16/1.1=0.14

In this quotient, the Treynor Ratio is 0.14.

Which Treynor ratio is higher: Vanguard or Invesco?

In this comparison of the healthcare mutual funds, Vanguard’s 0.16 is greater than Invesco’s 0.14. The Vanguard Health Care Fund has a higher Treynor Ratio than Invesco’s Health Care Fund Class A.

JP Morgan Large Cap Growth Fund

The JP Morgan Large Cap Growth Fund( NYSE:OLGAX) is a large-cap mutual fund with a healthy 12% annual yield. The mutual fund has some of the fastest-growing companies in its portfolio.

AMD recession-proof stock in JP Morgan portfolio

AMD(American Micro Devices)(NYSE:AMD) is a holding in the JP Morgan Large Cap Growth Fund that is performing well during the recession. The semiconductor company is performing well as its computing revenue grew.

In AMD’s Q1 2020 earnings report, revenue surged 40% to $1.79 billion. The corporation touted its positive results. Dr. Lisa Su, AMD’s CEO, noted the results in a press release.

“While we expect some uncertainty in the near-term demand environment, our financial foundation is solid and our strong product portfolio positions us well across a diverse set of resilient end markets,” said SU in a statement.

“We remain focused on strong business execution while ensuring the safety of our employees and supporting our customers, partners and communities. Our strategy and long-term growth plans are unchanged,” added Su.

What is the Treynor Ratio of the JP Morgan Large Cap Growth Fund?

When finding the Treynor index of the JP Morgan Large Cap Growth Fund, this is the equation:

Ri-Rf/B, where:

12-0.16%/1.1=0.11

In this case, the Treynor Ratio is 0.11.

Glenmede Quantitative U.S. Large Cap Growth Equity Portfolio

Fidelity’s Glenmede Quantitative U.S. Large Cap Growth Equity Portfolio(NYSE:GTLLX) is another large-cap mutual fund. The fund has large-cap holdings, but has a small one-year return of 1.86%.

Accenture a vital part of Glenmede portfolio

In the Glenmede portfolio, Companies like Accenture (NYSE:ACN) is a valuable holding. Accenture is a technology consulting services company. The corporation has an expected 10% growth rate over the next three years.

Financial analyst Ben Castillo-Bernaus rates Accenture as a buy for investors.

“Accenture remains ‘best in class’ and the recent weakness is an opportunity to gain a position in this IT Services global leader delivering 40% returns on capital,” stated Castillo-Bernaus.

“Accenture has been a pioneer in developing ‘the New’ with 65% of revenues now coming from high growth Digital, Cloud and Security services,” added Castillo-Bernaus.

What is the Treynor Ratio of the Glenmede mutual fund?

In the equation Ri-Rf/B, where:

1.86%-0.16%/1.1=0.02.

The Treynor formula shows the Glenmede mutual fund’s ratio is 0.02.

Which Treynor Ratio is higher: JP Morgan Chase or Glenmede?

When contrasting the JP Morgan Chase and Glenmede’s Treynor indexes, the JP Morgan Chase Large Cap Growth Fund has a higher Treynor Ratio. The Glenmede Quantitative U.S. Large Cap Growth Equity Portfolio has a lower Treynor Ratio, so it may have a lower reward.

State Street Institutional Premier Growth Equity Fund Service Class

The State Street Institutional Premier Growth Equity Fund Service Class mutual fund (NYSE:SSPSX) that features small and medium cap companies. Its annual rate of return is high at 12.80%. United Health is a holding in the portfolio.

United Health a strong holding for State Street

Since healthcare stocks are outperforming, United Health(NYSE:UNH) is a robust part of State Street’s portfolio.

Financial analyst Michael Wiederhorn touted United Health as a buy.

“Overall, UNH produced strong results and seems well-positioned to navigate the COVID pandemic due to a relatively stable top-line, a diversified business mix and a dominant position across its businesses, ” wrote Widerhorn.

What is the Treynor Ratio of the State Street Institutional Premier Growth Equity Fund Service Class?

In the State Street mutual fund equation, where:

Ri-rf/B: 12.80%-0.16/1.1=0.11.

Baron Fifth Avenue Growth Retail Fund

The Baron Fifth Avenue Growth Retail Fund (NYSE:BFTHX) is a mutual fund that invests in large-cap companies. The mutual fund has a hefty 12.70% annual return. One of the Baron Fifth Avenue holdings is the legendary credit card corporation Visa (NYSE:V).

Visa a reliable Baron Fifth Avenue holding as it expands into data

Visa is a strong holding as the credit card company invests in Good Data, a global analytics company.

“With insights from data, we can help sellers, financial institutions and Visa’s extended global business network better understand and meet consumer needs, especially when those needs are changing fast,” said Melissa McSherry, head of Visa’s Data, Security, and Identity products.

Oppenheimer’s Glenn Greene rated Visa a buy because of its recent stabilization in April.

“While the depth/duration of COVID-19 headwinds are hard to handicap we remain confident in V’s intermediate/long-term potential, wrote Greene.

What is the Traynor formula for Baron Fifth Avenue Growth Retail Fund?

In this equation, where Ri-Rf/B, where:

12.70%-0.16%/1.1= 0.11.

Which Treynor Ratio is higher: State Street or Baron Fifth Avenue?

Since both funds have very similar annual returns, the Treynor Ratios of both funds are the same at 0.11. The State Street Institutional Premier Growth Equity Fund Service Class and Baron Fifth Avenue Growth Retail Fund have equal risk-to-reward ratios.

Treynor formulas can be determined by small differences

The Treynor Ratios of mutual funds can be determined by small factors like decimal points. However, the decimal points in a Treynor formula make a big difference in figuring out a mutual fund’s risk-to-reward ratio. TradingSim charts and analysis can help investors find the best mutual funds with the least risk.

How to Calculate the Quick Ratio of a Company