Virginia Tech's $5 Million 'SEED' Scores With Brazilian Stocks
01/09/08 - 03:13 PM EST
Jonas Elmerraji
Beating the S&P
Students manage SEED's portfolio from April to April with a particular goal in mind: Beat the S&P 500 by 100 basis points
(1%). To this point, they've done that and more: SEED's portfolio is up about 4.5% since April 2007, while the S&P is down more than 5% over that same period.
Throughout the 12-month period, the group votes on student analyst presentations to decide which stocks to add to (or remove from) the portfolio. So then, what have they been adding to lock in such nice gains over the S&P?
SEED's Top Five
While the stock market may be giving us a rough ride domestically, growth is still a reality in emerging markets like the BRIC countries (see "'BRIC' ETF Investing: An Introduction"). Many of SEED's top performers are foreign companies listed in the U.S. as ADRs (SEED is only allowed to invest in domestically-traded securities ).
In fact, of the group's top five performing holdings, three (Petroleo Brasileiro(PBR Quote - Cramer on PBR - Stock Picks), Vale(RIO Quote - Cramer on RIO - Stock Picks) and Companhia de Saneamento Basico(SBS Quote - Cramer on SBS - Stock Picks)) are headquartered in Brazil (the "B" in BRIC):
1. Navteq (NVT Quote - Cramer on NVT - Stock Picks)
2. Petroleo Brasileiro S.A.
3. Vale
4. Nokia (NOK Quote - Cramer on NOK - Stock Picks)
5. Companhia de Saneamento Basico
What other emerging market stocks does SEED like? The group also has positions in India's Tata Motors Limited (TTM Quote - Cramer on TTM - Stock Picks), China's Yanzhou Coal Mining Co. (YZC Quote - Cramer on YZC - Stock Picks) and Mexico's Cemex (CX Quote - Cramer on CX - Stock Picks).
As market uncertainty continues to linger over American markets, SEED has shown that the emerging markets are a good place for investors to place a bet. But before you go "all in" overseas, the risk of international investing should also be considered (see "A Guide to International Investing").
While most of the group's current top performers are based abroad, their biggest positions remain here at home with companies like Aetna (AET Quote - Cramer on AET - Stock Picks), Cisco(CSCO Quote - Cramer on CSCO - Stock Picks), Intel (INTC Quote - Cramer on INTC - Stock Picks), ConocoPhillips (COP Quote - Cramer on COP - Stock Picks) and SEED's current top-performer, Navteq.
The Road Ahead
At present, SEED can't short stocks, nor can it invest in derivatives . Because of this, the group has been looking into making a presentation to the Virginia Tech endowment that would give it the ability to invest in derivatives as a hedging strategy.
On the whole, Ahearn and Berman say that they're bearish on the current market, but nevertheless, both seem confident that the lessons learned at SEED will prepare them to make money in the future (both Ahearn and Berman have secured jobs in capital markets and investment banking after they graduate).
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