Firm makes investment in students

MOSCOW, Idaho – University of Idaho finance professor Mario Reyes stalks before his class of investor neophytes, firing off pointed questions to students by name.

This session of his securities analysis class focuses on picking stocks, and Reyes wants to know how the 35 class members plan to dig up the information that will tell them when to buy, sell or hold.

“How can we learn about the tools and the techniques and the models so that we can make a report?” Reyes asks.

The attentive students, most with laptops at the ready, are quick to name newsletters, Web sites and financial television shows that offer the analysis that can make the difference between a boom or bust year.

And attentive they better be. Along with students at 18 other schools, they have $50,000 in cash, courtesy of investment firm D.A. Davidson & Co., based in Great Falls, to invest as they see fit on the open market.

While many colleges and even high schools have mock investment programs, the D.A. Davidson money is real.

Each student investment program gets to keep half the profits over 5 percent.

And if the students lose money, Davidson eats the cost.

“The pressure is going to be good,” says Dave Church, 22, a Grangeville senior majoring in marketing and finance. “It’s going to make us work harder.”

“Yeah, it’s good to give us more of a real-life experience,” agrees classmate Pete Schindele, a 22-year-old accounting and finance major from Boise.

The securities analysis class is the first group to get its hands on this year’s $50,000.

The fund will be taken over next semester by Reyes’ portfolio management class.

UI and Washington State University joined the Student Investment Program in 1994.

Investment returns since then vary from year to year. But overall, both programs have seen profits, according to statistics from the Great Falls office.

UI has seen a $42,899 total gain and been able to keep $27,928.

WSU has $62,073 in total gains, and has kept $50,731.

D.A. Davidson & Co. started the investment program in 1985 at Montana State University.

Over the last 19 years, it has grown to include 19 schools that each get $50,000 to invest, bringing the total investment to nearly $1 million per year.

“Whenever we’ve opened an office in a college town, it’s almost a slam-dunk that straight-away we will add that program,” says Tom Richardson, D.A. Davidson vice president and financial consultant in Moscow.

Richardson says his firm commits the money and advising time to the program to pay back the communities where the company operates and to put something back into the educational process.

“It’s important to our business that people understand how to invest, and that it be demythologized,” he says. “So to us, watching young people learn about investing, and hopefully some good ways to invest well, is pretty fundamental to our business.”

Students who get to make and lose cold cash get a high when they turn a profit and are low when they don’t, Richardson says.

“Sometimes, in the theoretical modeling, you can just blithely assume that you bought and sold four times this week, and it didn’t cost you anything,” he says.

Real-world, real-money investment teaches students how to deal with the actual costs of doing business, like broker fees, Richardson adds.

“The students just take it much more seriously,” says WSU finance professor Harry Turtle. “It’s a good place to connect up what goes on in the classroom, from the theory side of things, with applied practice.”

Experience investing on the open market, regardless of a positive or negative return, provides experience future employers find valuable when scanning job applications.

“Managing real money and earning money relative to the S&P 500 and being able to put that on your resume is a very marketable thing to do,” Turtle says, adding student investors should value their losses as much as their gains. “I think sometimes you learn hard lessons too, and you get just as much experience.”

But Richardson says there is still a sting when student investments don’t go as planned.

He relates the story of D.A. Davidson Board Chairman Ian Davidson coming to UI a few years ago to see his beloved University of Montana Grizzlies play the Vandals.

“And he was kind of singing the blues because every program was just sucking swamp water,” Richardson recalls.

Davidson, a famously conservative investor, told Richardson he might want to advise the UI students to invest a little more like him.

“We were showing some significant red ink for the program in those years,” Richardson says with a chuckle.

The D.A. Davidson advisers at the different schools do provide basic advice, Richardson says, “but they don’t follow our party line. They’re totally independent.”

And while they’re new to the investment game, he may snag an idea from the presentations students must make at the end of the semester.

“I see some really interesting ideas and maybe I’ll capture one for use with my clients.”

Some of Reyes’ students already have ideas.

“I imagine I’ll be more conservative,” says Faere Coats, 21, a senior in finance from Boise.

She’s leaning toward established, blue-chip stocks.

“I don’t have the knowledge I need to be more risky, yet. I’ll get there.”

“Exactly,” adds Adam Bertram, a 28-year-old finance major from Salmon, Idaho. “The more educated we become, the more we can control that risk, and control gambles when the opportunity arises.”