The process of portfolio management is a forward looking exercise as these investments are undertaken to earn returns in the future. Thus, historical returns can prove to be a starting point in estimating the returns of the individual stocks, but the estimated return should be adjusted for future events and expectations.
There are several models that are used to anticipate the future returns of the stock. Two of the most popular ones include Gordon’s Dividend Discount Model and Capital Asset Pricing Model. In this report, the former model has been used since each of the four stocks are dividend paying stocks and are stable companies with long operating history.