Peachtree Securities, Inc

Case 3: Peachtree Securities, IncExecutive Summary

Peachtree Securities, Inc. is a 20-year-old regional brokerage house located in Atlanta, GA. Jack Taylor, the firm’s founder and president, has found prosperity by providing quality personal brokerage services to small investors. A recent trend of the firm’s customers is a shift from individual stocks and bonds to mutual funds. Although the number of customers is increasing, the transactions per customer is decreasing, causing sales figures to lag. With the belief that this trend will continue, Taylor has expanded the services his firm offers to include trust and portfolio management. The main customers of trusts for the firm are retirees. They are interested in bonds and high-yield stocks that produce high current income instead of capital gains. The stocks of choice for the firm are in electric utilities. With the cost of research increasing, Taylor decided to hire a security analyst. He hired Laura Donahue in January 1993. Her first task was to conduct a seminar for a group of Peachtree customers on stock investments; she was to include how various securities effect portfolio management. Donahue began by asking herself a few questions that she thought would help the customers understand the stock valuation process and their effects on portfolios1.

Case 3: Peachtree Securities, Inc. (A)

The Atlanta regional brokerage firm, Peachtree Securities, Inc., has expanded its services to include trusts and portfolio management. To meet the needs of providing these new services, the firm has hired a security analyst Laura Donahue. She was tasked with presenting a seminar to the firm’s trust customers on securities and their effects on portfolio management. For the firm, electric utility companies are a popular investment for high yield stocks. To begin this assignment, Donahue selected the electric utility company TECO to analyze its riskiness and required rate of return on equity.

The return on a 1-year T-Bond is...