Business students take trophy and cash in stock market competition
April 30, 2001
Several Austin Peay State University students were able to play the stock market with someone else's money for three years. Their third-place finish in the TVA-sponsored contest netted APSU's department of finance, management and marketing $5,000 and a trophy.
"The Standard and Poor's Market Index was down nine percent and we were down one percent, so we did 8 percent better than average," said Dr. Chuck Richards, professor of finance. "Nineteen schools competed and only two earned a positive amount. We were essentially even in a market that was terrible."
Before the market went into a tailspin in the past year, the students were making money for the portfolio.
In March 1998, TVA allocated approximately $2 million to create the investment challenge as part its plan to diversify the financial management of its Nuclear Decommissioning Fund. TVA provided $100,000 to 20 colleges and universities in its seven-state service area and challenged them to manage the portfolio.
Under the guidance of Richards and Dr. Mike Phillips, professor of finance, juniors and seniors in finance classes designed a long-term strategy and actively managed the funds. They also provided performance reports to the TVA. Over the past three years, the portfolio passed from Richards' classes to Phillips' classes each semester, with six different classes of students managing it over that time.
At the beginning three years ago, Richards picked three companies in each of 15 industries, and student groups within each class presented reasons why one investment was better than another.
"We would look at a company and see what its stock was selling for and how it had done in the past," said Kathy Glapa, a senior from Clarksville. "As a group we chose the best pick among the three companies in each category."
Several industries are listed on the classroom chalkboard. In the restaurant category, students looked into Papa John's, Cracker Barrel and McDonald's. Each student group also made predictions about how they thought the stock of each company would perform, though disagreements were not uncommon. "There was usually a divergence of opinion in the class," Richards said.
Each group then would make their pitch to Richards, and he picked the company, basing his decision on the group that offered the best analysis. The exercise taught students more about investing than any textbook could.
"I learned what to look for in value of stocks," said Jason Klopf, a senior from Bay City, Mich. "Before this class, it would have been a guessing game for me. I learned to look for earnings dividends and how the stock performed, not only in the past year, but the past five years, so I could see if the stocks were growing."
Ayesha Maycock, a senior from Barbados, said the exercise helped her better understand stock market reports. "Now I know what NASDAQ means and I know what the arrows mean and dividend yield and price-to- earnings ratio. As a future investor, this taught me what to look for."
Deanna Jackson, a senior from Clarksville, said she learned to look at the big picture. "One of the things we stressed is long-term investing. You need to watch what's going on, but if you're in it for the long haul or for a retirement investment, you can't look at it day-to-day."
Richards agreed, saying, "That's why they won, because they looked long term. They picked companies from a broad list. They didn't see just one sector of the market."
Justin Patel, a senior from Clarksville, said he has started an investment plan and after graduation will put more money into it. "I've had an IRA and stock portfolio, but it's more diversified now and a lot safer."