NYU Students Cut Through the Earnings Noise
10/30/07 - 05:34 PM EDT
Stockpickr Staff
The value fund. The manager of this "bargain"-focused portfolio of stocks also avoids impulsive decisions and uses a steadfast approach to trading.
Value fund manager Marc Albanese puts it like this: "The value fund is not sector
-driven. We don't chase the 'hottest' sector, or even choose sectors to invest in beforehand. Instead, our goal is simply to look for value wherever we can find it. We define value stocks as stocks that are out of favor in Wall Street, but have a solid management team, business and trade at a relative discount to their peers. Using this approach, value plays can be found in every sector. However, if we found that all our positions were in consumer durables, we would reevaluate the portfolio. No matter what the market is doing, there always should be bargains somewhere."
The small-cap fund. According to manager Zach Shannon, the small-cap fund uses industry-standard metrics, such as P/E ratio and discounted cash flow models, to make investment decisions.
Shannon adds, "We look at enterprise value divided by EBITDA multiples for companies with negative earnings, because the P/E is not relevant in that situation. Generally, we use consensus estimates for industry averages. "
The fixed-income fund. Fixed-income manager Ryan Hart considers the entire credit market situation before committing to a particular position. He and his team particularly focus on the yield curve and the international credit situation.
Hart explains that "We felt that the inverted yield curve, which had been prevalent through much of last year and into this year, would steepen as we approached the end of the year as we expected economic growth to slow and the Fed to cut interest rates in response. This turned out to be the right call as we saw a dramatic rally at the front end of the yield curve, benefiting our overweight position to near-maturity Treasuries . However, we did not anticipate the massive 'flight to quality' that we saw over the course of the summer, and overweight positions to mortgage-backed securities detracted from returns ."
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