Walking into the Gallagher Business School one cannot help but notice a slick new LCD ticker streaming the real-time stock-quotes of a portfolio I have been helping to manage for the school.
My first-semester back, determined to complete my degree & learn as much about the intricacies of business as humanly possible; I joined a club. ‘The Finance Club,’ how fitting. Unsure of what was in store, but hoping to meet like-minded individuals, I took a seat.
The D.A. Davidson $50K Portfolio had been a class taught by a local advisor for nearly a decade before I arrived. The professor had recently relocated & so the portfolio migrated into the stewardship of the Finance Club.
For many weeks we discussed, debated, researched, analyzed, and determined which parameters should be emphasized. Finally a strategy was unanimously agreed upon and the portfolio was set.
There was some political influence in our selections.
EXP: Eagle Materials, a building materials play on the infamous ‘Trump Wall.’
Marijuana legalization was spreading like wildfire. With a presence in the industry, combined with a respectable dividend & healthy financials, PM: Phillip Morris fit the bill nicely.
Of course how could we ignore the $160T gorilla in the room that is Interest Rates? Minneapolis Fed chairman Neel Kashkari even visited the University that semester and gave a speech. Look, for as long as I have been trading, betting on the Fed to make a move has been like betting on the Atlanta Falcons to win the Superbowl: It’s a lock, definitely, going to happen… ummm maybe…not.: ‘Rates Unchanged.’
Still, coming off the lowest levels in history, unless we are going to break finance & go full-on NIRP like our European friends; Interest rates had one place to go and that’s up.
To capitalize on rising rates, FITB: Fifth-Third Bancorp, a regional bank was added to the portfolio.
Legacy positions: AAPL, GILD, UNH, JBHT, and IPGP were all assessed & deemed solid securities that should remain as bedrocks.
With our large-cap diversified carefully crafted portfolio of 10 stocks we competed against 19 rival universities & the market itself.
In the one-year period 8/31/2016 – 8/31/2017, I’m proud to say that our portfolio nearly doubled the S&P, delivering a 30% total return! Not only was this performance incredible, due to the construction methodology: a portfolio beta of 0.42 & sharpe ratio of 4.36 meant that Risk-Adjusted returns were off the chart.
Superior returns through solid companies while taking on a low level of risk. Certain investment principles hold timeless.
Our efforts were recognized by D.A. Davidson with the Fred-Dickson memorial award. Today several gentlemen from D.A. Davidson delivered the school an award of $8,000. The class has been reinstated with an excellent instructor at the helm and today we were privileged to learn and converse with a vivid pair of equity analysts from D.A. Davidsons Seattle branch who radiated knowledge & professionalism.
I’m thankful for this experience & hope that ticker scrolls bright for the rest of my days.
Note the 1 Year Annualized Sharpe Ratio of 4.36: Incredible Risk-Adjusted Returns!
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