Terry College of Business - Fall 2008 - (Page 46)
terr ymemo Master’s of Business Administration Rising to investment fund challenge By Matt Waldman (AB ’96) an Cahill (MBA ’08) has led an interesting life, to say the least. And the concept of “momentum” has had a lot to do with it — from his nomadic childhood existence, to his stint as a naval officer patrolling Africa and the Persian Gulf, to his tenure at GE where he worked in a wind turbine manufacturing plant. But if you ask Cahill about momentum as a financial theory, he will explain how he and eight of his fellow Terry MBA classmates used momentum to wring profits out of a bear market and win the 2008 Sterne, Agee & Leach Student Investment Fund Challenge. D Led by Cahill (third from left), the Terry team won the 2008 Sterne, Agee & Leach Student Investment Fund Challenge. They were the only team to show a positive return, and they beat the S&P by 16% over the seven-month investment period. Terry’s team of full-time MBA students was the only university contingent in the invitational competition to take the initial $50,000 brokerage account they were given to work with and show a positive return at the end of the contest period. Cahill, who graduated in the spring and has taken a job with Citigroup in New York, served as the team’s portfolio manager. The other team members were Matt Barnett, Drew Green, Scott Hampton, Nick Keller, J.R. Hill, Bradley Martin, Bali Shah, and Ashton Windham. 46 • Fall 2008 “We didn’t all agree on an official strategy, but looking back on it, more often than not, we approached our investments more from a momentum standpoint than a value standpoint,” says Cahill, who notes that the value approach is most often used for long-term investments. The Terry team felt it made more sense to use a momentum strategy based on stock trends to capitalize on the relatively short time span of the seven-month competition. “We would concentrate on a sector or a stock that stood out and was continuing towards that upward trend,” Cahill adds. “There were a couple of sectors that were really hot over the past year: commodities and technology.” When the challenge ended last April, the Terry team finished with a total account value of $52,820, representing a 5.64 percent return on investment. The University of Louisville finished a distant second, with a loss of 8.32 percent. The University of Mississippi, the University of Alabama, and Auburn University posted losses between 9 percent and 31 percent. To put that 5.64 percent return into proper perspective, consider that the S&P 500 stock market index lost 10.5 percent of its value during the same period as the competition. “It was shocking to me how much they not only beat their competition but the broad market in general,” says Terry finance professor Tyler Henry, who served as the team’s faculty advisor in addition to teaching the MBA program’s investments course last fall. Henry says that Cahill, who also won the class portfolio management contest, was captivated by the material from the beginning. “From day one after my first lecture, Dan showed up at my office trying to figure out how a certain type of security worked,” says Henry. “We sat here — drawing on the board, working through it. Ironically, he won the in-class competition using some of the strategies that he came in to talk about that first day.” Cahill, who facilitated a highly collaborative approach with the Terry team, credits both Henry’s course and classmate Nick Keller, a former options trader, for the team’s success. “I didn’t have very much investing experience going into this,” says Cahill. “I learned a lot from class and Nick Keller.” Keller, who is on track to receive his MBA in 2009, serves as the current president of the Terry Investment and Finance Club. He believes Cahill’s leadership style and the team’s approach is something future MBA teams should use as a model. “What I learned from Dan was to take everyone’s suggestions seriously regardless of whether or not you agree with them,” says Keller. “Overall, we were very conservative, which was the name of the game last year when the credit crisis began gaining momentum. A lot of people were unsure of what to do — as were we — and I think the key was keeping a decent amount of cash in our portfolio until we had what we thought was a really great idea.” ■ Terry College oF cHriS taylOr Business
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