This article was written by Stockpickr member Ira Krakow.
Boston College has a long and illustrious football tradition. It includes Doug Flutie's 1984 "Miracle in Miami," and the school is where NFL All-Pros such as Matt Hasselbeck (Seattle Seahawks) and Dan Koppen (New England Patriots) got their start. But B.C. doesn't just shine on the football field. It is financial superstar and former manager of the
Fidelity Magellan Fund
Peter Lynch's (undergraduate) alma mater and it's the home of the thriving Boston College Investment Club.
25 Years of 'Going Long' in the Stock Market
The B.C. Investment Club was founded in 1983 by William Doty, a junior economics major at the B.C. Carroll School of Management. Doty raised the club's $15,000 of initial
capital from interested donors. Now 25 years later, the club is B.C.'s largest student group, with about 500 members, and it runs an investment portfolio of approximately $360,000. Over the years, the club's portfolio has become part of B.C.'s
endowment and it has received $90,000 in public donations. The rest of the increase in capital has come from the investment skills of the undergraduate investors, who (according to the club's Web site) have consistently outperformed their
So how does the B.C. Investment Club work?
The club's portfolio consists of one
fund held at an E*Trade account. It is managed by a student executive committee, and Professor Harold Petersen, of B.C. Carroll's Department of Economics, serves as the club's faculty adviser.
The club's overall strategy, according to a recent student presentation, is "to combine top-down economic analysis with bottom-up stock selection. The top-down approach identifies countries, sectors and industries that may benefit from observed micro and macro trends. We will then look for individual companies with
growth potential that may not be recognized by the market at large, using a bottom-up stock selection process."
The portfolio currently holds 41
securities, many of which have been held for 10 years or more. Some examples, with their original purchase dates and share prices, include:
- Microsoft (MSFT) - Get Report: Dec. 6, 1994, at $4.61
- General Electric (GE) - Get Report: Nov. 5, 1997 at $23.17
- Caterpillar (CAT) - Get Report: Feb. 14, 1995 at $13.31
A few of the stocks the club bought in 2006, include:
- Apple (AAPL) - Get Report at $75.24
- Bank of America (BAC) - Get Report at $54.22
- Cheesecake Factory (CAKE) - Get Report at $36.29
- Bed Bath & Beyond (BBBY) - Get Report at $36.39
- Network Appliances (NTAP) - Get Report at $35.62
Monday Night Finance
The B.C. Investment Club members are divided into
analyst teams covering different industries so as to systematically review the portfolio and come up with new ideas. These teams research stocks throughout the week. Then on Monday nights they meet to present (or "pitch") their best investment recommendations.
The buy/sell pitches last about 15 to 20 minutes and are followed by a question-and-answer session. After each meeting, the club members have 24 hours to vote on each pitch. Via an online poll set up through freepolls.com, members decide whether they want to buy, sell or pursue further information.
Monday 7 p.m., November 5.
Lured by the pizza and soda, paid for by the $15 annual student dues, about 125 members attended Monday, Nov. 5's club meeting. Club President Scott Atha got the ball rolling by reviewing the previous week's investment performance.
Unfortunately, it was "a rough week," with a loss of $10,255 (or 2.86%), compared to a 1.5% loss for the S&P 500. The best performers were Microsoft,
Hugoton Royalty Trust
Automatic Data Processing
. The biggest losers were
Atha soon tossed out the idea of selling China Mobile, which was initially pitched as a "short-term trade" and was purchased at $97.10 on Oct. 28, but has lost nearly 10 points since then. Given the anti-long view of the stock in the first place, there seemed to be general agreement among the club members to sell it.
Less Holdings, More Focus
Atha is moving the club to sell some of its smaller holdings, the 10 or so stocks with a position value of $5,000 or less.
"We would like to reduce the number of holdings to 30 or 35 positions to increase the average position size, currently $8,000, to $10,000. Having fewer stocks would make the portfolio easier to manage. Our long-term goal is to manage the portfolio more actively than
we have in the past. Also, with a larger position size, we can take better advantage of price movements. Finally, we want to make the portfolio more growth-oriented, by selling the stocks that trade in a narrow
range. We have some stocks with only a few shares that were bought early in the life of the portfolio. During this semester we will reevaluate whether or not to sell these positions."
Along the lines of Atha's last thought, the club recently debated selling
, Caterpillar, and Microsoft -- all bought more than 10 years ago. Atha said, "We voted to sell Anheuser-Busch and Caterpillar, in keeping with the club's move into growth stocks, while keeping Microsoft because its growth potential fits into our goal of creating a growth-oriented portfolio."
Stock-Picking and Beyond
: In addition to learning about how to select stocks, the BC Investment Club is a way for students to get a better understanding of broader market events and economic signals. As an example, the club's co-director of research, Steve DeMarco, recently gave a detailed report that covered the
latest rate cut, the
, the rise of
gold, and the potential effect that the
writedowns by the financial companies might have on the club's position in Goldman Sachs.
Other Investment Vehicles:
The club currently only invests in stocks, so to broaden the group's investment horizons, co-director of research Anthony Weldon recently presented the pros and cons of investing in exchange-traded funds (
ETFs). As the chief advantages, Weldon cited
sectors, flexibility to buy and sell during open market hours, tax efficiency and low cost compared to
mutual funds and
Will the B.C. Investment Club expand into ETFs and which "old" stock will they sell next? And why? Stick with the Investment Club Watch and find out.
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