From September 14 through December 8 of last year, the Dow and the S&P 500—the nation’s two major investment benchmarks—rose by 8 and 9.5 percent respectively. But these solid gains paled by comparison to the returns posted by a group of BMCC Business Management students. Investing $100,000 in a carefully researched and constructed portfolio, they made 19.3 percent on their money during the same period. That translates into a profit of $19,300.
The downside was that the earnings were on paper only. No money actually changed hands, nor were real profits accrued. But the performance of the portfolio—and of the nine companies in it—was no work of fiction.
This exercise in team-based investment management was part of the coursework in Finance 230—“Essentials of Financial Management”—taught by professor Shirley Zaragoza.
Building analytical skills
“Finance 230 is designed to survey the principles and practices followed in the financial organization and operation of a corporation,” Zaragoza says. “In that sense the focus is more on corporate than on personal finance, although there is some overlap.”
The practical goal of the course, she adds, “is to equip the students with the basic analytical tools they’ll need to pursue careers as financial advisors, investment managers or securities analysts.”
To provide her students with a hands-on experience in financial analysis and an opportunity to test out the principles they’d learned in class, she assigned them to work together to construct a portfolio and monitor it over the course of the fall semester.
Each student researched companies, read their financial statements to gauge their fiscal health and risk levels, and then presented their recommendation to the group.
“Everyone had to make a convincing case for adding their company to the portfolio,” says Justin Lee Serioux, a second-year financial management major who tracked the portfolio and provided regular updates.
“Before I took Prof. Zaragoza’s class, I didn’t know how to evaluate a company or use its financial statements as a basis for an investment decision. I feel a lot more confident now.”
Every stock a winner
According to classmate Asad Khan, the portfolio comprised a broadly diversified mix of industries. “Tiffany was the top performer, followed by SanDisk and Research in Motion, which makes the Blackberry Smart Phone,” he says.
“The important thing is that every stock in our portfolio rose in value. In other words, investing in any one of these companies would have given us a higher return than a savings account or bank-issued CD.” The 19.3 percent return, he adds, “compares very favorably with the hot shots of Wall Street!”
While the gains were only on paper, no one is complaining. “We all agreed that the results validated our ideas about analyzing companies and choosing stocks,” says Serioux. “This wasn’t just an academic exercise, but an opportunity to put investment and financial management concepts to work. It was a challenging experience—and, in the end, an extremely satisfying one.”