With the stock market sliding downward and investors bailing on technology stocks during the past month, members of the University’s Investment Group have watched their stocks take a dive too.
But the experience has provided the group with a valuable lesson in real-world investment decisions.
The Investment Group, composed of approximately 20 members, invests in the stock market each year using $50,000, provided by Portland brokerage firm D.A. Davidson & Co.
Investment decisions are made by the students at weekly meetings after careful analysis of different industries and companies. The group must return the first 5 percent of any earnings from the firm, and then the two parties split the remaining 95 percent.
The group is currently down by 15 percent, a bounce up from their year-low of more than 30 percent.
“It has hit us reasonably hard,” said Professor John Chalmers, the group’s faculty advisor and an assistant professor of finance. “There’s not much you can do about it. It’s a good lesson that [the stock market] doesn’t always go up.”
Chalmers said last year the group had an investment gain of approximately $58,000, and they received a check from D.A. Davidson & Co. for $3,000.
Chalmers, who has been advising the group since it was formed in 1998, said he reviews the group’s reports and oversees the decisions they make.
“My goal is to have the students provide both the initiative and the energy to bring projects to successful conclusion,” Chalmers said.
James Bruce, co-director of the Investment Group, said the groupÕs portfolio, consisting of 11 companies, has bounced back in recent weeks while the market as a whole has recovered slightly.
Bruce and Chalmers said this is because slightly more than half of the group’s portfolio consists of technology stocks. The other half of their holdings are in companies such as American Eagle Outfitters, Inc., Harrah’s Entertainment, Inc. and the Monaco Coach Group Corp., which have not dropped as much.
“The downward trends that have been occurring in the stock market have affected our portfolio in the form of negative trends,” said Lisa Thomas, co-director of the Investment Group. “But it’s been happening to everybody.”
But Thomas said the downturn in the market has opened new opportunities for the group of investors.
“We look at it as a really great time to buy,” Thomas said. “You need to do the research first; it’s a buyers market. Some things may be selling for cheap.”
Thomas said when a stock market makes a correction it can mean a several things, including a loss of the public’s confidence in the future earnings of a company.
The group will be putting out its first annual report this term compiled from Sept. 1999 to Aug. 31, 2000. Thomas said the figures in the report were high because it was put together before the stock market slid downward.
“Within that period, the market saw some really great returns in the stocks we held,” Thomas said, referring to the group’s 18.82 percent total return. Despite the risk involved, their investment beat the returns of the Standard & Poor’s 500.
Although the downturn in the stock market does have the power to affect the ability of universities nationwide to provide student loans, it hasn’t hurt the University of Oregon so far.
Elizabeth Bickford, University director of student financial aid, said a small increase in parent loans this year, from 8.4 million to 8.8 million loans, indicates parents may be turning to loans more than last year because of the market’s dip.In a visit to campus Jan. 12, U.S. Senator Ron Wyden, D-Ore., said he would be working with budget committees in Washington, D.C., to increase funding for student loans.
“We have to work harder for student loans more than ever, because without that educational opportunity, students don’t have the tools that adjust to change in the economy,” Wyden said.