Tulane Grad Students Practice Real World Investing With Mutual Fund
NEW ORLEANS — With all of the ups and downs of the stock markets over the past decade, the average investor might wonder who's watching over his mutual funds.
In the case of the Burkenroad Fund, it's a group of students at Tulane University's Freeman School of Business who spend hours combing through the financial reports of companies that a lot of retail investors haven't heard of and analysts don't follow – and eventually find many of the stocks the fund buys.
The results over a decade of student involvement aren't anything to sneeze at. According to Burkenroad's prospectus, the no-load version of the fund, which started Dec. 31, 2001, had returned 11.9 percent since inception through March 31, 2011. The fund, managed by Biloxi, Miss.-based banker Hancock Holding Co., has current assets of about $70 million. The fund licenses its name from the university, but is managed independently from the school.
The Russell 2000 index, a benchmark barometer of small- and mid-cap companies, returned an overall 7.5 percent over the same time.
In the recessionary year of 2008, when many 401(k) plans lost much of their value, the Burkenroad fund suffered a loss of just under 25 percent compared to 33.8 percent for the Russell 2000 index. But both rebounded the following year. And for the three years ending March 31, the Burkenroad fund returned 10.72 percent compared to 8.6 percent for the Russell 2000 index.
Peter Ricchiuti, who teaches the stock analysis course, said he picks most of the companies, and students come up with others. He said the Burkenroad fund's reliance on student reports is unique, although other business schools put their students to the task of researching investments for university endowments.
About 200 students over the current school year have been evaluating 40 companies across the South. Considering the region, it's not surprising that 15 of the companies have some sort of involvement in the petroleum industry. The others include regional banks, as well as insurance, consumer goods, chicken- and egg- processing and retail companies.
All of their final analyses – known as Burkenroad Reports – are available to the public.
"At the Freeman school, we do our due diligence and take a more long-term look at investing," said Anthony Elia, a 25-year-old graduate student in finance from Pasadena, Calif.
The companies are generally in the $100 million to $1.5 billion market cap range and located in Texas, Louisiana, Mississippi, Alabama, Georgia, or Florida.
The group looks for profitable companies – and those that don't have many financial analysts following them.
"One of the things is that we can clearly understand what they do," Ricchiuti said. "No wild high-tech companies. Just meat-and-potato companies."
Elia first reported on oilfield services company Key Energy Inc. and now heads a team of students studying Carbo Ceramics Inc., an oilfield services company, and consumer services specialist Rollins Inc.
Alexandra Thurber, a graduate student from Bethesda, Md., first reported on oilfield service company Willbros Group Inc. and now is team leader of a group analyzing egg producer Cal-Maine Foods Inc. and Pool Corp., which provides swimming pool products. She's not sure yet whether she'll be doing the same task for a living.
"My background is in math and this is an extension of that," Thurber, 25, said. "The dynamic nature of the markets is interesting. I think I will wind up working in a financial career, but not necessarily investing."
In keeping with standard investment house rules, the students are forbidden from investing personally in companies they have researched. They can buy the Burkenroad Fund.
These students, from their perspective in life, have grown up around a lot of cynicism concerning investing – the dot-com bust, the scandals of Enron and Tyco International and, last but not least, the collapse of Lehman Brothers and the ensuing retirement savings wipeout of the 2008 financial collapse.
"There's always been some cynicism," said Arnaba Dasqupta, a 29-year-old graduate student with a previous job at a New York hedge firm and who is now hoping for a banking career. "It doesn't have to come from a corporate scandal. It can be management being too optimistic. It's not lying, but it's misleading to investors."
What would the student stock-pickers tell a potential investor?
"I suggest you find a company whose products and values you like and stick with it," said Tray McCurdy, a 24-year-old graduate student in finance from Baltimore.
Elia is against momentum investing – or "jumping on the bandwagon."
"Invest in companies you know and understand," said Dori Brown, a 21-year-old undergraduate student from Houston.
"Don't focus on one aspect of a company," Thurber said. "Look at the entire picture and not just one thing that excites you."
Arnab said that if an investor is not confident of his knowledge, he should seek an adviser who can be trusted.
"Do your own homework," he said. "Investing is a system with a lot of people with a lot of different opinions. The markets owe you nothing."
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ALAN SAYRE 04/22/11 03:18 PM ET Associated Press