Category: Competitions

Thank you for participating in the Husky Investment Tournament! This week is your final week for trading, which will close at 11:59 p.m. on Friday, April 16. The winning team will be determined by their final portfolio value at the time of the completion of the tournament. We will announce the winning team on Monday, April 19. 

We hope you have enjoyed learning and interacting with us as much as we have with you.

Once the competition is over it would make sense to calculate your portfolio return. The portfolio return is calculated by taking the ending portfolio value divided by the beginning value and converted into a percentage to yield the total portfolio return. Annually, the market has returned between 6-8 percent. How do you compare? Was your stock picking better than what the market would have returned? Our competition was only seven weeks long (35 days) compared to the 250 trading days there are in a year. Doing some math we can convert the 7 percent return to our time period of 35 days. 

7% return over 250 days = 0.028% per day

0.028% * 35 days in competition = 0.98% return

If we take the $1 million we started with and use the simple interest formula for the 0.98% return we find that it calculates out to $1,009,800.

FV = $1,000,000 * (1.0098) ^1 = $1,009,800

So all of the teams that finish above that amount “beat the market.” 

However, the portfolio return formula fails to take a very important factor into account—risk. 

We have encouraged teams to pursue risk in order to win the competition—here is the reason why. As you can see, the total portfolio return does not take the amount of risk that you pursued into account while calculating your percentage return. Because of this, teams may have found it lucrative to pursue a higher level of risk in order to achieve a higher potential return.

While this strategy works well in a trading competition, where there is nothing to lose and everything to gain from pursuing risk, we would not want you to leave the Husky Investment Tournament thinking this is the best strategy for investing for retirement, or that this is how portfolio returns are measured in industry. In the real world, portfolio returns are risk-adjusted or adjusted to show how much extra return you generated per unit of risk. This comparison shifts the question from “how much money did you make me?” to “how much did you risk to make me this money?”
In this week’s video, Dean Johnson, dean of the MTU College of Business, introduces risk-adjusted return metrics and how investors use them to measure their investment results.

Welcome to week six of the Husky Investment Tournament!

When you think of investing, what comes to mind? Most people when asked this question will resort to talking about stocks and bonds. However, it is important to note that there are different vehicles you can use to invest. Most people call these other types alternative investments.

Starting first with real estate. Real estate investing has been around longer than the financial markets we see today. A few strategies include buying and holding for price appreciation, renting the property out to tenants, and flipping houses. Real estate also offers an investor a tangible product, unlike the financial markets.

Next, we can move on to hedge funds. Hedge funds offer high-net-worth investors an avenue to take more risk than typically seen by a mutual fund. Most hedge funds have unique strategies and offer only little insight into their practices. To invest with a hedge fund an investor needs to have an income over 200k or a net worth of at least a million.

Another alternative investment is precious metals. Gold comes to mind first and investors are attracted to the stability of these metals. They are typically used to hedge against inflation. Most of the metals have been around for many years and moving into the future they should continue to be an investment option.

The three investment types above are most commonly talked about when referencing alternative investments. Collectibles and Cryptocurrency could also be grouped into this bucket of investments. It is important to note that the best type of investing is when you are diversified. Don’t put all your eggs in one basket, and take advantage of some of these alternative investments.

In this week’s video, Jun Min, professor of marketing in the Michigan Tech College of Business, illustrates what economic moats are and why they are important in business and in influencing the stock market.

Welcome to week five of the Husky Investment Tournament!

So what techniques are used when it comes to picking stocks? A great place to start is calculating some well-known ratios and see how the companies compare against each other. There are four main types of ratios that are used in practice.

Liquidity ratios indicate the financial strength of a company, and its ability to meet short-term liabilities. If a company is unable to meet its short-term obligations it is not going to be seen as a good investment. A common liquidity ratio is the current ratio. This ratio is found by taking the current assets and dividing them by the current liabilities. In this ratio, a higher number is seen as better.

Solvency ratios indicate the long-term financial viability of a company. A common ratio used in this type of ratio is the debt to equity ratio. This ratio is found by taking the total liabilities of a company and dividing them by the total amount of equity. High amounts of debt will raise some red flags.

Activity ratios tell us how the company is doing when it comes to running its operations. Looking at inventory turnover is a common activity ratio. Inventory turnover is calculated as the cost of goods sold divided by the average inventory. A high inventory turnover would indicate that the company is showing efficiency in selling its inventory.

Profitability ratios indicate whether the company is able to turn a profit in its operations. A common ratio used is the net profit margin. This is calculated by taking the net income and dividing it by the sales. A higher profit margin means that the company is able to retain more money.

It is important to note that all of these ratios are different depending on the industry that you are talking about. The airline industry may have a lot more debt than the retail stores. That is why it is important to make sure that when you’re comparing two companies that they are in the same industry. In this week’s video, Applied Portfolio Management Program alumnus and current MTU student David Golus discusses ratios in further detail. 

Welcome to week four of the Husky Investment Tournament!

When you think of investing what comes to mind? Is it finding the next Facebook? The S&P 500? Tesla? Amazon? While all of the above have their time and place, let’s talk about the different types of investing this week.

Three distinct types of investing have been talked about throughout the financial world. Fundamental investing is the type that comes to mind most people. The people that follow this type of investing look deep into a company and its financials to determine whether they should invest. Next, is technical investing. The people that participate in this type of investing will focus on forecasting trends that happen in stock prices. They spend a large portion of their time reading charts. Lastly, we have quantitative investing. Under this type of investing high-frequency algorithms are developed and implemented. This type of investing drives a lot of our current stock market today. 

Referencing back to our week two post, what style of investing do the Reddit traders fit? Very good question. There could probably be an argument that they are following a technical strategy because they are exploiting trends in the stock price movements. However, in my opinion, I would place these traders in their own bucket. They have their own unique type of investing based on a forum from the internet. In this week’s video, Trevor Salata discusses the different types of investing in further detail. 

Welcome to week three of the Husky Investment Tournament!

The third round of stimulus checks were just approved this past week. The bill came out to a total of $1.9 trillion dollars. Some of you may question why the government is willingly giving us cash. The reason is purely economic. The point of the checks is to have citizens spend the money when it is received and “stimulate” the economy. An issue that has come up with these checks is that many Americans are taking their checks and putting the money aside. This action defeats the purpose of the “stimulus” checks. Hopefully, enough Americans spend their checks and the economy sees an increase in activity. The stock market should mirror the increase.

Better economy = higher stock prices = lower unemployment = economic recovery from the pandemic

It is good in theory, but it will be interesting to see how the economy reacts going forward. Many of the major stock market indexes are reaching all-time highs and hope is on the horizon for all Americans. However, is the economy really in a better place than before COVID-19? Or is our economy artificially propped up from three rounds of stimulus, and near-zero percent interest rates? 

For this week’s video, Laura Connolly, an assistant professor of economics at Michigan Tech, discusses economic indicators and how investors can use them to gauge their investment decisions. Please note, the rates and indicators in this video are from October 2019; however, the information surrounding how to read and interpret these ratios is relevant.