February 11, 2005
Last fall a number of St. John's University students from The
Peter J. Tobin College of Business entered the Barron's
Challenge, a competition requiring participants to establish a
hypothetical portfolio and invest a theoretical $100,000 in various
stocks. Marvin Gagliardotto, an MBA student majoring in Finance
placed 7th out of a field of 1,154 students in the competition.
In the Baron's Challenge, college students and
professors compete in separate divisions to create stock portfolios
that will attain the largest positive gain during the competition's
duration. The competition for the Fall 2004 semester ran from
October 1st through December 15th. Each contestant began with a
portfolio of $100,000 and had the duration of the contest to
increase that account value as much as possible. Contestants were
allowed to make as many as 50 trades, including those used to set
up the initial portfolio. The minimum investment for any one
holding was $5,000 and the maximum was $10,000.
Marvin noted that one of the contest's most challenging aspects
was the relatively short time frame allowed for trading. "This was
a challenge because your rating is solely based on your performance
and your investment rationale must change to adapt to this short
period."
He stressed that given his "short-term" rationale he changed to
a more "market psychology," choosing firms who were in the news
during that period, such as Marsh and McLennon (MMC), AIG, Chiron
Group (CHIR) and Sirius Satellite (SIRI).
"By relying more on current events than fundamentals," Marvin
observed, "I was able to realize quick profits by shorting MMC and
AIG (due to the probe started by the Attorney General), and CHIR
(which announced it could not meet the demand for the flu season),
and make huge gains on SIRI by news which affected its stock price
(through market perception) of them signing Howard Stern,
appointing a new CEO and his purchase of 1.5mm shares." He
added that another important approach was diversification of his
portfolio with a concentration in tech stocks.
In the competition, Marvin was able to increase his portfolio to
$139,377.91, a whopping 39.4% increase, in less than three months.
During the same timeframe, the Dow Jones Industrial Average was up
6.1%, the NASDAQ was up 14%, and the S&P 500 Index - widely
used to compare investment performance - rose 8.2%, which is less
than one quarter of the gains Marvin's portfolio made. In addition
to placing 7th in the student competition, the percentage change
Marvin achieved would have placed him 3rd among the 69 contestants
in the professor's challenge competition. As a St. John's student
at The Tobin College of Business, Marvin represented the only
student from a business school in the New York area (and the entire
Northeast) to place among the top ten finishers.
Marvin entered the competition as a student in Professor K.
Thomas Liaw's Asset Management (FIN 284) class. Dr. Liaw is
Chairman and Professor of Economics and Finance in The Peter J.
Tobin College of Business. "The most important (educational) aspect
of the contest is getting students interested in the stock market,"
Dr. Liaw observed. "It's very important for (students) to know what
kinds of stocks are traded in the marketplace."
Barron's plans to run another competition for the
Spring 2005 semester, and there will surely be more students from
The Tobin College of Business taking aim at the top 10. For more
information on the Barron's Challenge competition, and on
the other top finishers from the Fall 2004 semester, check out the
January 3rd, 2005 issue of Barron's magazine.