Banking & Finance

YSU Student Investment Portfolio Surpasses $1M

Share on Facebook0Tweet about this on TwitterShare on Google+0Share on LinkedIn56Pin on Pinterest0Email this to someone

YOUNGSTOWN, Ohio — In seven years, the Student Investment Fund at Youngstown State University has seen the portfolio managed grow to more than $1 million from $250,000.

The fund itself was created in 2008 with an initial portfolio of $250,000 that the YSU Foundation provided. The foundation gave 10 students, all enrolled in the Williamson College of Business Administration, full responsibility for choosing and managing the equities bought and sold.

The profits their investments earn are returned to the foundation to fund scholarships and other activities related to academics, notes Paul McFadden, executive director of the YSU Foundation.

The students’ stewardship this past academic year outperformed the Standard & Poor’s 500 Index, 15.7% to 13.69%, and its portfolio beta (a measure of risk) was 0.8923, less volatile than the market as a whole. Market volatility is, by definition, 1.00. So the student portfolio enjoyed a higher rate of return than the market and with less risk.

The value of the portfolio in fiscal 2014 grew by $134,685 with the unrealized appreciation of shares managed and dividends earned, says the Student Investment Fund annual report.

The number of students – and interest – in the Student Investment Fund grew to 35 last year, say the advisers to the group, Jill McCullough and Peter Chen, both on the faculty of the accounting and finance department.

At the luncheon held May 1 on campus for the outgoing officers to report their performance to 15 directors of the YSU Foundation, the president, Ryan Foht, related how his participation has led to a job after graduation with Treloar & Heisel Inc., New Castle, Pa., a financial services group that serves the dental profession.

Foht also related how he and 17 fellows of the student-managed fund this spring visited New York City to participate in the Quinnipiac G.A.M.E.
Forum. At the weekend forum, they met with their counterparts from other universities across the
country to discuss investment strategies, equities to invest in and avoid, and meet market strategists f
rom firms such as Goldman Sachs, B of A Merrill Lynch Global Research, and TD Ameritrade as well as financial reporters from CNBC and Bloomberg News.

Profits from the students’ investments funded half their expenses. The 18 paid the other half, McFadden noted.

The route to success of the Student Investment Fund was not one of uninterrupted success with no hitches and setbacks, McCullough said afterward. She had to recruit the first executive board in 2008, she recalled.

The first large positions were purchased between February and September of 2008, during the first half of the Great Recession. “The student investors involved with the portfolio experienced a hard lesson in the difficulties of the market,” the annual report states dryly. “By March of 2009 [the recession officially ended that June], the S&P 500 was down 56% from its peak of Oct. 9, 2007. … A 56% loss requires a nearly 70% increase to regain original lost capital. … The fund did not recover loss of investment until December 2010.”

Regardless, from the beginning, the students followed and stuck to the Buffett-Hagstrom Model, named after Warren Buffett, the chairman of Berkshire Hathaway Inc., as his investment strategies were explained by author Robert Hagstrom.

The students meet every Tuesday during the school year to discuss their research. From time to time, the most serious make a PowerPoint presentation on which stock(s) to buy and which to sell. The group then votes to accept the recommendation – majority rules – and then McCullough instructs Farmers Trust Co. to execute the purchase or sale.

Enthusiasm for the Student Investment Fund has grown, McCullough said, and should the number of students who regularly attend the weekly meetings get much larger, discussions could border on unwieldy.

Gifts to the student-run portfolio of the YSU Foundation helped its growth, including $550,000, plus an alumnus who gave 593 shares of (John) Deere & Co. During 2004, they fell in 2.02% value, to $88.47 from $90.26, but still produced $1,423 in dividends, the second-highest single source of income in the portfolio.

At $52,463, Deere was also the second-most valuable block of share in the portfolio at Dec. 31, behind only the Walt Disney Co., with 599 shares worth $56,420.

The Student Investment Fund bought no new stocks in 2014 but sold two, McDonald’s Corp. and Syntel Inc., which reduced its holdings to 33 equities. The students don’t see the fast-food restaurant chain as having potential for much growth, the club’s vice president, Mike Giambattista explained, and were insufficiently familiar with Syntel, a software developer based in Troy, Mich. The engineering major who advocated Syntel has since graduated.

In keeping with the Buffett philosophy, the students emphasized to the YSU Foundation directors, they maintain the diverse mix of industrials ($211,365 or 22.8%), consumer staples ($200,017 or 21.6%), discretionary consumer products ($306,473 or 33%) financial providers ($136,071, or 14.7%) with a smattering of materials, information technology and energy, the last including a driller in the shale plays in the United States.

The president-elect, Simon Rafidi, says going forward the student fund will adopt a more
organized and systematic approach, promising it will review and analyze “every stock in the portfolio every semester.” To that end, the responsibilities of each officer will be set forth in a formal job description.

Pictured: Ryan Foht, president of the Student Investment Fund club, reports the fund’s performance to Thomas J. Cavalier, club adviser Jill McCullough and Theodore Schmidt. Cavalier and Schmidt are members of the YSU Foundation board.

Published by The Business Journal, Youngstown, Ohio.