Cougars Turn Portfolio Into Gold

A stock portfolio managed by two Washington State University classes last year earned an eye-popping 71 percent rate of return.

The performance was the best ever recorded in a 12-year-old program sponsored by the Great Falls, Mont., -based D.A. Davidson & Co. brokerage firm.

And, Chairman Ian Davidson noted, the students managed their portfolio the right way, trading only a few stocks during their tenure.

“That’s how people build wealth,” he said.

The previous best performance - 58 percent - was turned in during the 1994-1995 year by University of Idaho students.

The rules are fairly simple.

D.A. Davidson provides a $50,000 grant to participating schools. Students invest the funds, paying commissions for any trades just as they would in the real world.

Their returns are also trimmed 5 percent to account for interest the money would otherwise have earned in the money market.

At the end of the year, the school splits any profits with D.A. Davidson. The company eats any losses.

For WSU, the students’ investment acumen resulted in a check for $16,468.

Idaho, which placed second this year, received $2,241.

Davidson said the program has never netted a loss for his company.

“I just can’t say enough about how successful it’s been,” he said.

The WSU classes one fall, one spring - were led by Assistant Professor Rick Sias. They inherited the stocks purchased by the preceeding year’s class, which had the option of selling off the portfolio or passing the stocks along to the next class.

Among the stocks held were Sears, Cisco Systems, and Amgen. After selling off Microsoft, Fluor and General Electric, the students added Intel, Merck & Co. and Dell Computers.

Sias said Nike, Food Lion and Zircon were big movers for the portfolio.

“It was really the spring portfolio that did so well,” he said.

Sias said he organizes his students in groups, each one charged with monitoring one stock already in the portfolio. They also weigh possible replacements.

The groups meet three times each semester to talk about their stocks and their reasons for holding on or selling. If there has been significant movement in the price, students have to explain why.

Sias said those presentations are the best part of the class.

“We are learning to understand why the market and our stocks’ prices move, and what affect market expectations, interest rates, and current events have on the stock market,” said Dan Gibbons, a senior from Spokane.

He said this year’s class is also learning that stock analysis does not foretell the future.

So far this year, Sias said, returns on the portfolio have been modest. The fall class bought stock in smaller, riskier companies, he said.

The WSU students are mentored by Merilee Frets, a Davidson broker in Spokane and a former Cougar herself.

Besides initiating the university’s involvement, Frets monitors the student portfolio for potential trouble during the summer months.

She also provides research and analysis available through Davidson that students otherwise could not access.

Next year, Gonzaga University will be added to the program.

, DataTimes