Four Union Graduate College students are bullish about their chances to win the Adirondack Cap.
The master’s in business administration students are one of 18 teams from colleges across the Northeast participating the competition, where they have to manage a pretend stock portfolio that starts at $1 million. The Guilderland-based Adirondack Small Cap Mutual Fund sponsors the contest.
Students “buy” stocks of five small cap companies, which are defined as firms that have a market capitalization — a measure of the company’s value — of less than $3 billion.
The Union Graduate College team got off to a hot start and topped the standings for four weeks in a row, leading by as much as 13 percentage points.
The team slipped to second when another team saw one of their companies get acquired, causing its stock to shoot up 40 percent, according to Matt Reiner, a principal in Adirondack Small Cap Mutual Fund and co-manager of the fund.
Steve Gonick, also a principal, said that demonstrates the volatility of the market. “That really shows how challenging it is to pick small companies,” he said.
The teams are only allowed to change their portfolio twice during the competition — on Dec. 15 and Feb. 15. According to Reiner, the rule was implemented because otherwise it would become more like day trading.
“They have to live with the mistakes that they do, just like the pros,” he said.
There are about 5,000 companies that are under $3 billion in market capitalization, according to Reiner. One example would be the margarine company Smart Balance.
Ruth Faust of Allentown, Pa., said it is difficult to pick stocks. “It’s really deciding which one do we think will benefit us in the long run,” she said. “You had to look at the six-month performance. You have to really consider a lot of things.”
Bryan Polovina of Bethlehem, N.Y., said he is learning that the stock market can perform well even if the overall economy is not that strong.
“It shows you can actually create a profit during tough times and it also teaches you about risk and return,” he said. “Obviously if you want to have a higher return, there may be a higher risk associated with it.”
He added it was difficult to reach agreement on the team, which also includes exchange student Marc Werner and Edwin Liang. “It’s really rewarding because we all feel like we participated in the decision-making,” Polovina said.
The students could not disclose which stocks are in their portfolio because they did not want to tip off the other teams. All Reiner would say is that they are fast food and transportation companies.
Faust said it’s important to keep a diversified portfolio, so they have one stock from different sectors like health care and food.
In addition, the students have to decide what percentage of the portfolio to allocate to different stocks.
Gonick said the goal of the competition is for students to have a better understanding of how the economy and the financial markets work. Students also get their foot in the door of the financial sector, which can lead to other opportunities.
“We’re helping them to get internships and hopefully helping them get into the job market through this.”
Faust said she’s interested in the marketing aspect. One of the companies in the team’s portfolio has just completely revamped its marketing scheme, which is helping its stock price. She plans to go to Albany Law School to focus on corporate law, including product development and intellectual property rights.
Polovina is more interested in the financial aspect and plans to intern for a venture capital firm.
The competition runs through April 6. The winning team receives bragging rights. All teams will be invited to a mixer at Adirondack Funds offices, where Reiner said he and his fellow co-manager Greg Roeder will host a dinner for the teams and ask the winners the secret to their success.
Bela Musits, dean of the School of Management, said the competition helps provide a “real world experience” for students and allows them to network with professionals in the field.
The other participating schools are the University at Binghamton, Clarkson University, Hofstra University, Ithaca College, Siena College, Simon School at the University of Rochester, Skidmore College, St. John Fisher College, St. Lawrence University, SUNY Brockport, SUNY Geneseo, SUNY Plattsburgh, Stony Brook University, the University at Albany, University at Buffalo (with an undergraduate and a graduate team) and Wesleyan University.
To view the team standings, visit www.adirondackfunds.com/AdirondackCupStandings.pdf.