Business Students Slam Dunk
This Year's Big East Challenge
ost university seniors take along resumes when they go to job interviews, but a group of market-savvy UConn students will now also get to show potential employers an investment portfolio worth about $427,000.
The portfolio belongs to the UConn student portfolio management team that slam dunked this year's Tucker Anthony Big East Stock Challenge contest, winning $30,000 for the university's athletic fund.
"We had a blast," team member Jeff Stock, a junior majoring in actuarial science, says of the contest. "We're going to compete again next year with the same goal in mind."
For the past three years Tucker-Anthony, a Boston-based brokerage firm, has sponsored an annual contest involving portfolio management teams from all 13 Big East schools. Each team is given an imaginary $250,000 to manage in a "pure stock" portfolio, and tries to out-perform the others for scholarship prize money that accumulates by $50 with every three-point basket made by a Big East player during the basketball season.
Despite the market's volatile whipsawing during the four-month long contest, UConn's team rode the crest of the technology sector, achieving a stunning 71.98 percent total return for its portfolio.
"We not only beat Villanova, our closest competitor, by a gross return of more than 35 percent," exulted team advisor, David Fricke, a lecturer and Ph.D. candidate in the School of Business Administration's finance department, "we also beat the S&P 500 and NASDAQ's by a factor of more than 18 times.
"I'm amazed at the mind-set these students put on display throughout the contest," he continued. "Peter Lynch (the well-known former portfolio manager for Fidelity Investment Fund) used to say, 'invest in what you know.' Well these students know the Internet, and they came in with companies that I had never heard about but were real winners."
On March 10, some of the team members went to New York City on an expenses-paid trip, that included a visit to the floor of the New York Stock Exchange and tickets to the Big East men's basketball championships semi-final game, where they were honored with a check presentation ceremony during half time."Congratulations are due to the entire team," says Thomas O'Brien, head of the Department of Finance, who accompanied the team on the trip.
Initial portfolios were priced on Oct. 29, and the teams could trade as often as they wanted throughout the contest, but were charged full commission and fees for each transaction, Fricke explains.
Fricke and Stock credit the team's "buy and hold" strategy that helped fashion their jump into the lead in mid-December - a lead that never eroded, despite a one-day breath-stopping market plunge - for seeing them through to victory.
"When they (the team) started, they put together an aggressive, diversified portfolio," Fricke says. "But after one month, they sold their blue chip stocks that were not performing and went after high-tech industrial products. It vaulted them into first place." The team's top five holdings included Internet Capital Group Inc., Digital Lightwave, Siebel Systems Inc., Scient Corp., and CMG Information Services.
"We concentrated on high tech stocks with high market caps," agrees Stock. "Most of our picks had extremely high growth, great earnings, good product lines, and momentum."
The team did so well that by the first week of January they had a commanding 40 percentage point lead over the competition, prompting a call by some team members to cash out and ride out the remainder of the contest - allowable under contest rules.
This triggered a fierce debate that split the team. One faction argued that given the team's significant lead, they should cash out or at the very least move to safer stocks. But other members countered that with cash earning only about 5 percent annualized, the team should remain confident with its picks and stay the course.
On Jan. 7, technology stocks - including many of those held by the team - took a deep dive on the market, only to recover much of their loss the following day.
"It made us all nervous," admits Stock, noting that all of the team's tech stocks tumbled between 10 and 15 points after the contest ended on Feb. 18. "You can get badly burned," he says. "That's a lesson we all learned in this contest."