Normally, when you meet a group of students at a bar, you don’t expect them to be the sole managers of close to $4.8 million and to be damn good at it too.
The Ohio University Student Equity Management Group is given money by the university to strategically invest in the stock market. The 21-member group, not including interns, is comprised mainly of finance and economics majors.
The students gather in their Copeland Hall office, for about 20 to 30 hours per week, pouring over finance reports while simultaneously listening to CNBC and making fun of each other for falling asleep in class.
“I wish I didn’t have to go to classes,” said Grant Hesser, a senior studying finance accounting. “What happens when you learn something in class, is that you get an A, great. Then you move on to the next test.
“What’s cool with Equity is if you come up with a really good idea and it’s brilliant, and it gets bought ... you can see $100,000 or $200,000 of real ... money put into your idea. That is worth so much more to me than an ‘A’ on a test. To see real money go to work and to be able to come into the office on a daily basis and see your stock going up, you are like ‘Holy shit, I was right.’ ”
The group began in late 2001. In March of the following year, the Ohio University Foundation, which helps fundraise for the university, gave Equity its first $100,000.
In its first fiscal year, the group took that money and outperformed the S&P 500 — a stock market index of 500 large companies — by 1.43 percent. Since then, the group has beaten the market for all but two years of its existence — 2005 and 2012.
This year, the group is already performing 0.18 percent above the market, according to Equity data.
To do this, the group takes a top down approach, Hesser said. Members look at the whole U.S. economy. They look at what will happen this coming year, and select a sector they think is poised to perform higher than the rest of the economy. Then, they drill down even further.
“From there, we take that sector and break it down into industry,” Hesser said. “From there, you split it down again into companies.”
The group spends weeks researching which companies they’ll choose to pitch to Equity’s board members, who ultimately choose which stock to buy.
Price histories, capital expansion, income statements, even The Old Farmer’s Almanac get analyzed, and ultimately compiled into a report. Every Sunday, the reports generated that week are presented to the entire group.
“Winnebago. It’s a Winnabangin’ stock,” read a report at one of the group’s recent meetings.
The line got a good laugh, but then it was down to business. These presentations are where the analysts’ time and effort are really put to the test.
If things go well, the five members of the executive board will consider buying the stock at a separate meeting. The stock will be acquired if university officials approve. If not, it’s back to the drawing board with another company, another couple weeks of research and another presentation to give at a Sunday meeting.
“Our mentality has always been ‘we’re not going to be smarter than you; we’re not going to be quicker than you ... we’re just going to outwork you,’ ” Hesser said.
It’s this mentality the group is trying to capitalize on in the coming years, he said.
“Clearly they are unique,” Stephen Golding, vice president of Finance and Administration, said in an email. “They are probably a model program in higher education nationally, from my perspective.”
In 2011, the university gave the group more money to invest. Over its 13 years, Equity has generated approximately $300,000 in capital gains, which goes back to the OU Foundation, and received about $40,000 in dividend payments, which supports scholarships, research grants and other initiatives of the Foundation, according to the group’s website.
“We have (alumni) working on Wall Street, we have people working in corporate finance, we have people that have even gone into consulting or IT,” said Emily Tedford, a junior studying finance and management information systems and an executive board member for the group.
Last year’s seniors all graduated with jobs in the banking and finance industry, except one, who is now studying to get his doctorate in economics from Duke University, she said.
“He isn’t exactly slacking off,” Tedford said.
Going forward, the group wants to continue investing and growing their portfolios, but they also have a bigger goal.
“We want to become the best nationally recognized program for students to become a financial anything,” Hesser said. “We can be the group that gets talked about on NPR and gets in a Planet Money story.”
@SethPArcher
sa587812@ohio.edu
