A solid investment: College club holds its own against real-world stock indexes

On March 23, the Lafayette College Investment Club was in good company on the webpages of CNN Money, next to articles about a dip in Nike’s stock, a spike in oil prices and Starbucks’ CEO’s stances on America’s political climate.

The article highlighted the longest-running investment club in America’s success over the years.

The group’s advisor, professor of economics Michael Kelly, reached out to the CNN reporter to discuss something that was going on in the markets, chairman of the club Rand Lewis ‘17 said.

But instead the reporter wanted to discuss the club.

The college’s investment club started in 1945 with a $3,000 donation from a war veteran who was educated in finance at Lafayette. Over the years, the money has risen to its current value of $550,000. In the last few years, the club’s portfolio has seen a net increase of approximately $40,000, but the portfolio’s worth is constantly changing, Lewis said.

The reason the Lafayette College Investment Club stood out to the CNN reporter is because it tends to do well compared to major real-world stock indexes, like the S&P 500, Lewis said. The S&P 500 is a stock market index based on 500 of the largest American companies.

“We’ve always done very well compared to the S&P 500, and other indexes as well,” Lewis said. “We have a beta of less than one, which means that if the market goes up by a certain percentage, we may not necessarily go up as much. But if the market goes down, we won’t lose as much either.”

At the beginning of the year, the S&P 500 dropped 8.8 percent from December to January, but the club’s portfolio only dropped 7.8 percent.

“You could say we did better than the S&P 500, because we dropped a percentage less,” co- President of Investment Club Othman Guennoun ‘17 said.

But while their numbers compare to real world stock indexes, their approach is somewhat different.

Every Friday at lunchtime, the members of the club meet over pizza to discuss how to manage their portfolio.

Students can pitch ideas about where to invest, and the whole club votes on approving the pitches. The club’s investment portfolio includes domestic stocks, mutual funds and international investments, as well as an emerging markets exchange traded fund, according to the club’s website.

The students cannot actually complete the trades the club decides to make, because the they are not authorized to do so as non-professionals. Instead, the trades are carried out by the club’s faculty advisors, Lewis said.

Other than that, the professors do not partake in the trading decisions, besides providing educational input and advice, Lewis said.

“The benefit of the club is that it’s completely student-run,” Lewis said. “We decide what we want to present on, and we encourage any ideas to be brought forth.”

“Sometimes our meetings consist of just education pieces, like interview questionnaires, accounting presentations, evaluations, things like that,” Guennoun added.

The club’s main focuses right now are to evaluate stock positions for which they have no cost- basis and to decide whether or not to keep them or sell them, said Lewis and Guennoun , who will both continue their leadership positions in the club for a second year. They are also trying to make more long-term investments to avoid this confusion for future generations of students.

Lewis and Guennoun credit protection from market fluctuation to their diversified portfolio.

“We have positions from different industries and sectors, so I don’t think a huge loss would ever happen because of how diversified the portfolio is,” Guennoun said.

“We try to look for companies that we think represent good investment opportunities,” Lewis said. “We’re trying to figure out if we can combine investing in new companies and becoming a little more short-term with still having that long-term scope in mind.”

About Morgan Sturm

Morgan Sturm '19 is the Managing Editor for The Lafayette. She is a Policy Studies major and Spanish minor.

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