How 3 Teams Of Students Are Managing $10,000 Portfolios
The Peeptrade University Challenge has now been underway for two weeks, so we thought we’d catch up on how a few of the teams are managing their $10,000 portfolios.
The five-member Dartmouth team, in first place as of Monday, took a little bit of a different approach than some of the other teams. They’ve modeled their portfolio off the 2013 white paper “Quality Minus Junk,” which seeks to establish a quality measure of stocks by comparing their profitability, volatility and growth.
“We played off each other’s strengths and looked at stuff that we were interested in or wanted to learn more about,” said team member Muyambi Muyambi. “We were curious about what methodologies out there could help us that seem unique and different. And this paper provides that.”
They also used the Peeptrade platform to look at analyst ratings, and are investing in stocks in the tech and financial sectors based on how they rank on the sell side.
Muyambi said the Dartmouth team is only interested in the S&P 500. Of the 12 stocks in their portfolio, four were chosen based on analyst recommendations, and eight came from the white paper methodology.
“We were lucky,” he said.
The biggest challenge, Muyambi said, will be the volatility and using a strategy the team is still figuring out.
“We have to try and refine that process and understand that better. This is the first time we’re applying this, and we’re still learning how to apply it.”
You can see Dartmouth’s performance against the S&P 500 below, or check out their portfolio here.
The University of Chicago
Like most of the other teams in the competition, the team from the University of Chicago has split their portfolio into a couple of components.
About half of their portfolio is in the SPDR S&P 500 ETF Trust (NYSE: SPY), which team member Eric Tian said they hope will help minimize their tracking error.
Their main strategy, however, involves trading commodities. Specifically commodity equities related to the energy sector as well as crude oil futures.
“We made an agreement to trade crude oil equities, or a company that’s related to crude oil,” said Tian.
Tian said they went that route in part because one team member is very familiar with the crude market. However, they also like the volatility it offers.
The hunt for volatility is also why they’ve invested in some penny stocks, which they hope will help them outperform the market.
Finally, Tian said they plan on placing several holiday trades, specifically related to Thanksgiving. This includes buying Amazon.com, Inc. (NASDAQ: AMZN) leading up to Black Friday.
“It’s our assumption that online shopping stocks will go up,” he said.
The University of Chicago team is composed of six students, all of whom are getting their master’s in financial mathematics. Tian said roles have been divided amongst the team, with some members solely responsible for backtesting, others for market research, and others for trading.
You can see the Chicago team’s performance against the S&P 500 below or view their portfolio here.
The 8-person team from UNC has a more “stock agnostic” strategy, according to Luv Sodha, a first-year MBA candidate with a focus on corporate finance. They’ve decided on a more broad sector allocation strategy.
“We won’t be diving into individual equities because we believe that would generate additional risks, and the returns would not make up for that,” he said.
Sodha said they want to lean more on the conservative side for the challenge to minimize their tracking error. They’ll focus on the index ETFs for each sector, and will go overweight the sectors with potential for growth -- which they’ll use EBITDA to help determine. Two members of the team have been assigned to each sector.
The Peeptrade University Challenge standings as of Monday.
Sodha said the thing he’s most excited about is the chance to put some of what they’re learning into action in actual portfolios with real money on the line.
“We believe the challenge is a great way for us to solidify some of the concepts we’ve been learning about in class,” he said. “As a team we’re learning how to manage portfolios and apply some of the concepts we’re learning in class. Oftentimes it’s hard to keep track of concepts you learn about, like tracking error. It’s easy to talk about it and not so easy to put it into actual practice.”
So far they’ve made 10 trades, and you can see their portfolio’s performance against the S&P 500 below or see their portfolio here.
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