Market Mavens

Business students at Gonzaga University have been among the best teams in an annual stock-market investment competition among colleges.

This year, their investment strategy is simple: Stay out of the market, at least for now.

Professor Bud Barnes’ students are one of 20 teams that get $50,000 each from D.A. Davidson & Co. to invest in the market over a year. They’re keeping their eye on around 25 companies and are ready to invest when they see signs the recession is bottoming out. For now, though, Barnes says, “I don’t think we’re anywhere near seeing how bad this economy can be.”

It’s possible that the team may choose not to invest at all, and see if they can win simply by not losing money.

D.A. Davidson has sponsored the competition for 23 years. Teams invest over the course of a year, and business programs get to keep a portion of any profits they realize above 5 percent.

Eastern Washington University finished second last year, ahead of GU, and is competing again this year, along with teams from Washington State University and the University of Idaho. In all, 20 teams from regional colleges will compete to see which can show the best returns by August 2009.

The reluctance of the GU team to get into the market has more to do with the short time frame of the contest than members’ feelings about the long-term prospects of investments. With less than a year to show a profit, it’s a terrible time to invest.

But “long-term, it’s a great time to buy,” said Kevin Barnes, a GU student and no relation to the professor.

That’s a sentiment echoed by the other five team members. “I wish I had some money,” one said.

The team members began researching companies over the summer, studying their performance and a host of other factors to select those to consider for the final portfolio, which will be selected in mid-December.

“They go through just tons of financial data,” said Bud Barnes.

During a class last week, members of the team gave presentations on the companies they’re tracking. Johnny Dittmer gave a presentation on Wal-Mart, displaying company information from a Web site onto a screen at the front of the classroom.

“If you look at Wal-Mart over the past year, it’s really weathered the storm pretty well,” he said. “While the market was really dropping, Wal-Mart stayed pretty steady.”

Students discussed gas prices and passenger loads in relation to Southwest Airlines, the role of Bank of America in buying out Merrill Lynch, the “commercial paper” held by GE, the acquisition of a sunflower-seed company by Pepsico, and the details of a new Humvee contract won by Lockheed Martin.

Kiel Smith noted that Amazon.com’s share price had sunk to a low point. “I think they might need to be scrapped” from the team’s portfolio, he said.

Barnes urged caution.

“I wouldn’t be so quick to jettison Amazon,” he said. “Keep them on your tickle sheet. I think there’s a reason to watch that company.”

Barnes said the team may be ready to start investing sometime in the new year, but he wants to see signs the market has reached bottom and is ready to rebound.

“I would be inclined to say this market has not bottomed,” he said. “If anything, it’s trending down.”

So for now, he’s telling his students: “Keep your horses at the starting gate.”