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How would you invest $50,000?
Would you invest in the international stock market? Bonds? Blended mutual funds?
The Auburn University Investment Club received $50,000 in October from investment bank Sterne Agee and turned a 10.1 percent profit in the annual Sterne Agee Student Fund Investment Competition. The firm moderated the competition.
Of the $5,049.63 profit, Sterne Agee will retain half and donate the remainder ($2,525) to the college’s Finance Department.
“They (Sterne Agee) want the schools to have students manage a purely equity based portfolio with real funds in order to give students that are members of the AU Investment Club a real life portfolio management experience,” said Finance Club President Juan Castano, a senior from Winter Park, Fla.
Castano said the 10.1 percent gain surpassed the club’s goal of 8 percent set at the beginning of the event and was pleased to “remain in the black during the entire year.”
“It is precisely this experience that has been the best application to all of the careers of the members. Having the Investment Club as part of one's résumé has been an incredible boost to many members of the club. “It is definitely one of the focal points of many of my interviews without a doubt. Employers want to see that interviewees have actual experience managing and being responsible for real money as opposed to fake digital money like the ones available at many of the online brokerage houses.”
Other club members participating included Chief Operating Officer Rigby Coleman, Chief Financial Research Officer Zach Stevens, Senior Communications Officer Taylor Schupp, Senior M&A Officer Howard Park, Senior IPO Officer Joseph Ashley, Senior Quantitative Officer and Industry Group Director for Industrials/Materials and Metals Reagan Jager, Senior Research Director Andrew Hudspeth, Industry Group Director for Energy and Utilities Jeff Mitchell, Industry Group Director for Financial Services Brittany Palmer, and Industry Group Director for Consumer Goods Peter Lund.
How did the group turn $50,000 into $55,049.63?
“In the beginning, we started off with safe investments in fear of the sequester and the fiscal cliff. Then we made more risky investments,” Castano explained. After a Christmas holiday trip to Spain, Castano pitched the idea of investing 25 percent into Latin American stocks. The plan worked.
“The Latin American stock strategy really came to fruition because of how well the worldwide emerging markets have been performing since the beginning of last fall,” Castano said. “Many of the markets like China or Brazil though have been incredibly overbought and have become overheated. The short- and long-term growth for many of the Latin and Central American nations has been building up consistently.
“In Mexico we focused on targeting the financial, infrastructure and newly privatized airports. We bought stakes in a couple of these as well as an engineering/infrastructure firm as well as in one of the most well established European banking franchises that focuses solely on the Mexican market.
“Elsewhere, we also focused on the well capitalized banks of nations that have been consistently increasing their exposure and need of the financial services industry. We saw the best opportunities in both Peru and Chile. Other industry sectors that we were also keeping an eye on were the media, energy, consumer staples and consumer discretionary sectors.”
Castano said the team learned lessons in risk management and “consistently being on top of hedging of certain investments.”
“There is no sure-fire way of ever being completely covered when it comes to risk with the stock market,” Castano said. “I think that another lesson would be the importance of keeping an eye on the natural risk that every beta heavy stock can bring. Even though few of the industry group sectors within the club collaborated with each other, the consistent theme for the stocks that many would pitch would be heavily focused on high risk.
“Given that this is understandable since the competition only lasts for eight months and we are consistently looking for a quick turnaround in our return on investment, however, I think that lessening that during the beginning of the competition would have definitely saved some of our headaches that we had later on.”
For further information on the AUIC, contact Castano at email@example.com, Faculty Advisor for the Financial Management Association Dr. Marlin Jensen at firstname.lastname@example.org, or Rigby Coleman, who will be club president next year, at email@example.com.