GSB students pitted their skills against MBA students from around the world in GNAM's one-of-a-kind Investment Portfolio Competition designed to test their ability to source successful equity investments.
MBA students Raymond Greig, Jomari Swarts and Keitumeste Bolata joined 22 teams from fourteen business schools around the world to compete in the 2016-2017 Global Network for Advanced Management's (GNAM) Investment Portfolio Competition.
Hosted by the Yale School of Management, the event was a unique initiative in which student teams from Global Network schools submitted five investment ideas from the country where they attend school to contend for cash prizes.
"The competition required us to pick five locally listed stocks which were equally weighted and which we believed would produce the best performance over a period of six months," explains Raymond. "One award was given to the best performing portfolio, and another to the best detailed analysis of one of the five stocks chosen."
For the three students, the competition presented an opportunity to test the knowledge they had acquired from their MBA and to work with colleagues from different syndicate groups. They saw it as a "fun way" to test their own understanding and their confidence in their own ability to pick stocks and cope with the competition's requirements, despite the fact that none of them had a background in finance. Raymond points out that it was actually those who lacked this background who gained the most in learning, being pushed out of their comfort zone and tested to, literally, "put their money where their mouth is".
A significant amount of research was concentrated into the limited time available outside the demands of the MBA itself. In addition to time constraints, the team also found that they were challenged to go a little bit against what they were learning on their MBA.
"At the GSB they caution us about making short-term decisions, and yet this is just what the competition demanded: performance over a very brief six-month period. We are taught rather to look at long-term investments that produce true value. So we took a bit of a gamble, adopting an 'all-or-nothing' strategy, selecting a concentrated portfolio rather than a diversified one, so that if the stocks performed well, we would make a killing - but obviously if they didn't, it would be quite disastrous - as it indeed proved to be!"
Team Big Five selected three companies in the gold mining sector, one in the food and one in the technology sector. The subject of their detailed company analysis was Harmony Gold Mining Company.
"Our MBA has equipped us well with the fundamentals to do a thorough analysis of companies," Raymond continues, "But we soon realised that selecting stocks demands in-depth market insight as well as industry-specific knowledge that simply researching analysts' and experts' opinions could not provide. One probably needs the expertise of years, tracking the performance of companies to really get an understanding of the many variables involved in choosing stocks."
Their analytical approach was as thorough as possible, including a company overview, its target market, the technology, strategy and shareholders as well as financials. They then proceeded to conduct a macro-economic analysis, including the demand for gold, US dollar and US Fed interest rates, the South African Rand and even such variables as the impact the US presidential elections would have.
"Contrary to all our research, and the general consensus about the gold price probably going up because it always presents a safe haven for investors in times of uncertainty, most of our predictions were incorrect," he laughs. "We thought Hillary Clinton would be elected president, but when Trump won, the gold price slumped! And that had a domino effect on other predictions."
So although they weren't in the running for the top prizes, all three agree that entering the competition was an invaluable experience.
"We also appreciated how difficult it is to make these calls in such a volatile environment as exists at present," Raymond says, "Despite the intensive research and the in-depth examination of informed analysts' opinions, one still must do one's own homework and make one's own calls, and that turned out to be a great deal more difficult than we realised. At the end of the day, although you think you know what's going to happen, you cannot predict the future!"
26 April 2017
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