It’s no Monopoly game.
“We actually have real money, and there’s real consequences to our decisions,” says Bill Gilbert, member of the student-run Davis Investment Group.
University of Idaho students are playing a high-stakes investment game these days. The extracurricular activity is the brainchild of two generous grocers: A. Darius Davis, UI class of ‘29, and his brother, James, who attended the UI for a year.
The Davises, now deceased, owned the Winn-Dixie chain of supermarkets across the southern United States. In 1988, they donated $100,000 to their alma mater so students could get investment experience. Now, the UI is one of about 35 colleges where students can play the stock market as a group.
The Davises put two conditions on their donation. The University Foundation had to match the money. Also, profits would go toward scholarships once the original $200,000 was doubled.
That happened last fall.
“We’re pretty proud of our 16 percent annual return by a bunch of students,” said Gilbert. The average rate of return among investors is 12 percent.
The value of the Davis holdings last week was $469,247.
It’s impossible to put a value on the experience the students are getting, but it’s clearly high.
Gilbert has snagged an investmentfirm internship every summer during his college years. After graduation this spring he’ll go to work in Boise for Smith-Barney Inc., a Wall Street firm.
Jeffrey Scott was one of the Davis Group’s first portfolio managers back in 1988-89. The former Harrison, Idaho, schoolboy is now portfolio manager for Microsoft, investing Bill Gates’ billions.
“It was most instrumental in getting my first job at Dow Chemical,” Scott said. “I was able to demonstrate I’d taken classwork and applied it to a real world situation.
“It was a big part of my resume.”
Scott credits much of the group’s success to its adviser, business professor Mario Reyes.
Reyes in turn brags about how hard the students work at researching their investments. “I don’t have to push them. They just do it.”
At the group’s weekly meetings, Reyes said, “I usually just sit and listen, and every now and then say, ‘Hey, you can’t do that.’
“I’m basically just there for technical advice. They run the show.”
There are 10 to 20 members. Any student on campus can apply to be a member. But those who simply want to learn to invest their own money always drop out of the group, Reyes said.
“They want a formula for investing, a cookbook. I don’t give it to them.”
There are two portfolio managers. The other members serve as analysts, working in teams of four or five. They research stocks, write investment reports, recommend purchases.
The whole group votes whether to buy or sell. Reyes has veto power, but he’s only exercised that twice.
Portfolio manager Andrea Huggins handles the paperwork.
“I fill out the forms, sending buy or sell orders through the university’s investment department, which forwards them to Merrill Lynch,” Huggins said.
It’s often stressful for students to stand before the group to explain why the stocks they chose are worth investing in. They’re grilled by the others.
Member Eli Meyer will make his first presentation this spring. He bought his first suit for the occasion. A former wildlife major who switched to finance, he was grateful to get accepted into the group.
Every week’s meeting begins with a review of the portfolio.
“Pepsi doesn’t look like it’s doing that well … Intel, Microsoft had a little rally,” Gilbert said at a recent classroom gathering. “Anybody heard about a court ruling involving Staples? That could possibly impact their merger.”
The group had just sold its WalMart stock after pondering the move for a long time. It wasn’t performing well.
Students must follow a few rules, set down by the business department.
They can’t put all of their money in one industry. Nor can they invest in mutual funds, apartment complexes, options or futures. No more than 80 percent of their portfolio can be in stocks. They must keep at least 20 percent in cash and bonds.
“There is a group conservatism,” said Reyes of the students. “If you survey each one individually, they’re more eager to invest.”
That conservatism may have kept the fund from doubling more quickly, considering the bullish stock market of recent years. But given its mission, the Davis Investment Group shines, say alumni who’ve gone on to the financial big time.
“For people who don’t make a living at it, it’s quite an accomplishment that they didn’t lose money,” said Don Dempster, class of ‘90, now president of Berkeley Capital Management Funds.
“It’s great any time you have the opportunity to get out of academia and actually apply what you know to real-world experiences,” he said from his San Francisco office. “The fact is, it’s real money and the decisions they make have ramifications.
“It’s definitely not make-believe.”
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