Ahead of the Curve

 

With real money, Colby's student investors beat the Dow and NASDAQ

By Gerry Boyle '78
Photography by Fred Field
 

Colby Student Investment Association

Traver Elder ’10 didn’t have good news when she reported to the other members of the Colby Student Investment Association’s performance group recently.

“Things aren’t looking too good for ICICI,” Elder said at a weekly Wednesday-night meeting, referring to the India-based bank in which the club has invested. “The quarterly profits are down twenty-seven percent right now but there is hope of U.K. investment, an infusion of money. So things went up after their talk of that, but right now it’s leveling out.”

The 18 students seated around the conference table in the Diamond Building studied the sobering numbers on their spreadsheets (ICICI shares down 58 percent overall).

Can you give me the two strongest reasons to not get rid of this stock?” asked Josh Jamner ’09.

“Right now I’m hard pressed to find one strong reason to not get rid of this stock, except for the huge loss we took on it,” Elder replied.

That week in late November, the students’ portfolio, established last spring through a $100,000 gift from Todger Anderson ’67, was down just 17 percent. That’s far better than the performance of the leading indexes for the same period: -42 percent for Standard & Poor’s 500, -37 percent for the Dow, and -42 percent for NASDAQ.
Of course, the Colby students aren’t the only investors caught in the market downturn, but they had some consolation. That week in late November, the students’ portfolio, established last spring through a $100,000 gift from Todger Anderson ’67, was down just 17 percent. That’s far better than the performance of the leading indexes for the same period: -42 percent for Standard & Poor’s 500, -37 percent for the Dow, and -42 percent for NASDAQ.

“It’s always fun investing when the market is making twenty- or thirty-percent returns,” said government major Alexandra Clegg ’09, who heads the club’s performance group. “You really don’t have to put much thought into it. But having to come in at a time like this …”

Years in the planning stages, the club began investing last April and enjoyed a few heady months before the bear market took hold. But the tight ship that the organization runs has served it well in bad times, as well as good.

“You definitely have to have a much bigger focus on the downside potential for companies,” said John Roberts ’09, an economics and mathematics double major, and the association’s chief executive officer.

And focus they do.

With about 50 active members, the club’s three working groups—performance, trading, and research—meet weekly and report to the whole group twice a month. Performance follows stocks held by the club, while research considers new acquisitions. Education sessions are held regularly to introduce new club members to the ways of financial markets.  “We assume you don’t know anything,” said Roberts.

But that doesn’t last long. Reports at the November performance meeting included analysts’ predictions, economic implications of political events, assessment of companies’ earnings, liquidity, and debt loads.

“It’s been really cool to see where the club was at this time last year versus where it is today and how much progress we’ve made as a group,” said Clegg, who was mulling job offers with consulting firms in November.“Just raising the level of our analysis. I think that’s what motivated the alum who donated the money in the first place. Actually creating an educational group where you could come in and learn.”

research, research, researchWith Randy Nelson, the Douglas Professor of Economics and Finance, serving as their advisor, students manage the fund themselves, buying and selling on three allotted trading days each semester. That restriction keeps administrative time and costs at a minimum but can be irksome in a fast-changing market. “We missed out on a huge opportunity with Apple,” Roberts said. “We pitched it [to the club] at a hundred and fourteen dollars a share. We bought it at one-eighty.”

Bear or bull market, the lessons are invaluable preparation for a career in finance, members say. In fact, by mid-November, all of the seniors in the group had job offers. And other students were gearing up for prime internships.

“That’s one of our goals,” said Lokesh Todi ’09, who will go to work in Boston for Analysis Group, a national consulting firm, after graduation. “Getting people placed into good internships. It does show that people from Colby are really smart and do well at their internships and their jobs.”

Roberts, who accepted a job offer from Barclays Bank in New York, where he interned last summer, said helping to manage the club portfolio has taught him skills he’ll soon put to use.

“The fundamentals are very similar,” he said.  “Looking at the financials of a company and what makes the company strong and sound. Those types of characteristics are very applicable to a really wide range of financial services jobs.”

All three students said interviewers were very interested in the workings of the investment club.

“People were very surprised that we were able to raise a hundred thousand dollars, and it’s all student run,” Roberts said.

The fact that investment decisions have real consequences has driven student interest and involvement, the students said.
And do students get to keep the profits, should there be any?

“Unfortunately not,” Todi said, laughing. Any profit, he said, goes directly into the College’s endowment fund. “But it’s real money and it’s our responsibility. Now people are looking into earnings calls and actually listening to them. It’s a real skill.”

To hear NPR's All Things Considered interview with Alexandra Clegg '09, click here. (Dec. 10, 2008)

 
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Comments

  • On December 10, 2008, Rod wrote:
    This is a very interesting avenue to investing. How did you get started? Could someone contact me regarding the process?
  • On December 11, 2008, Colby alum wrote:
    Congratulations also to the '08 graduates whose hardwork started the Association.
  • On December 11, 2008, Shirley E. DeKine wrote:
    Have you considered buying any CitiBank stock????