Michigan Tech College of Business Newsblog

The Husky Investment Tournament hosted by the College of Business at Michigan Technological University this spring drew high school business students from across the country and world to compete for a cash prize and scholarships toward a Michigan Tech education. 

Students Prabhnoor Singh, Tijil Gupta, and Amol Singh Cheema of Amity International School in Noida, Uttar Pradesh, India, came in first place at the conclusion of trading on April 16.

“The tournament really helped us to get real-world trading experience while competing with other people,” the team, who worked together remotely due to the COVID-19 pandemic, said.

Their teacher, Virendra Verma, taught the eleventh-graders the basics of stock market investing and reached out to the College of Business for a platform to complement their existing high school curriculum and help further develop their investment skills.

The competition utilizes a virtual stock-trading tool and college student- and faculty-led video modules to help high school educators lead engaging conversations and lessons of their own. Teams of three to four students receive $1,000,000 in virtual US dollars to build a portfolio. The group with the highest-valued portfolio earns $1,000 in prize money and all students who actively participate are awarded a scholarship to attend Michigan Tech.

As a result of increased interest, this semester, the competition expanded to include international participants. 

The Husky Investment Tournament is embedded in high school economics, business, and personal finance classes. Since its launch in September 2019, 917 students from across California, Florida, Georgia, Illinois, Maryland, Michigan, Minnesota, Virginia, and Wisconsin have participated in the Husky Investment Tournament.

High school educators or administrators wishing to sign teams up for a future competition should visit mtu.edu/business-tournament.

About the College of Business
The Michigan Tech College of Business offers undergraduate majors in accounting, construction management, economics, engineering management, finance, management, management information systems, and marketing, as well as a general business option. Graduate degrees include the TechMBA®, a Master of  Engineering Management, a Master of Science in Accounting, and a Master of Science in Applied Natural Resource Economics.

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.