The results from
All-America Student Analyst Competition
give credence to the mantra that we always have to see both sides
of a trade, and revealed the plethora of ways that traders can make
money amidst the risk and chaos of the stock market.
Just under 700 undergraduate and graduate students participated in
competition, representing 34 colleges and universities. Each
student was given $100,000 of virtual money and space on a
dedicated server designed to replicate real market trading. The
trades needed to be made between September 10, 2012 and January 31,
2013. In order to judge the winners, six investment factors were
considered: net benchmark outperformance, volatility, balance sheet
impact, net exposure impact, long alpha, and short alpha.
As Ben Baris, the
writer who covered the competition, told Minyanville, "One of the
interesting things I saw from the results is that there were so
many different approaches that student took to produce solid
The overall winner, Daniel McAllister, an MBA candidate at the
University of San Diego, acknowledging the nature of the short-term
competition and his busy schedule, used a proprietary algorithm.
did not release data for total return, McAllister's portfolio did
have an average daily net benchmark outperformance of 0.28%. The
overall runner-up, a University of Virginia undergraduate named
Mahbod Matthew Olfat, focused on macro data and used triple
to trade in and out of sectors. His average daily net benchmark
outperformance was 0.32%. (See the full table of winners
, and net benchmark outperformance results
We asked Olfat why he chose this approach. "I'm no expert in
business valuation," he told us via email. "Plus, that approach
forces too much exposure to random change; one bad product or
corporate scandal is enough to kill an entire portfolio. By
investing in entire industries, you're increasing your sample size,
and so variance (read 'risk') goes down."
Olfat accepts that trading on the stock market is an inherently
risky undertaking, but as he said, "I was just able to avoid the
type of risk that I didn't want: risk from unpredictable corporate
Of the 690 competitors, 141 had benchmark outperformance with their
portfolios; 215 were approximately zero for outperformance; and 344
underperformed the benchmark. The Technology, Media &
Telecommunications sector was most popular amongst competitors,
with the five most traded tickers being
Two hundred students held a position in Apple at some point during
the competition, making it the most heavily traded stock. Despite
this, fewer than 20 students shorted Apple for its 23% drop during
the duration of the competition.
One of the students who did short Apple was Simeon Iheagwam, who
also finished first place in the tech sector. His strategy was to
identify companies with strong positions in their respective
markets or with strong growth potential. At first, he actively
managed his portfolio, but after a few weeks, he stepped back and
watched his portfolio's performance based on his initial assumption
about his chosen companies.
When he described it to Minyanville, his reason for shorting Apple
was simple: "My decision to short Apple was based on public
information or announcements that led me to believe that the stock
price was going to decline."
To get his win in the coveted tech sector, Iheagwam also was
successful playing Facebook. "Their stock was trading far below the
IPO price and I was aware that there was an announcement looming
around acquisition or organic growth, thus I felt strongly that
there was going to be a surge in the stock price on the
anticipation of the announcement." Sure enough, there was.
Iheagwam's success speaks volumes about understanding the value of
short selling to the professional trader -- yet overall, less than
30% of students in the competition even attempted a short sale. As
Baris explained, "The fact that fewer than 30% of participants
attempted a short position may speak to the lack of attention it is
given in finance curriculums."
I can personally relate: As a novice trader myself, I have yet to
engage in a short sale, or even consider one for that matter. But
as Iheagwam illustrated, the short sale is a useful tool in any
The competition's results also shed light on another major trend in
financial education: specialization. Many students are encouraged
to learn a particular sector so well that trading stocks in the
category becomes second nature. As nine of the top 100 students
were from University of Texas at Austin, Baris told us, "I spoke to
the professor in charge there, Kelly Kamm, and that's something
they preach there: Get specific early."
Thinking this way, it makes sense that Tech, Media &
Telecommunications was the most traded sector amongst the students;
young people have more specific knowledge in that field, in
general, than in health care, basic materials, capital goods,
energy, financials, or consumer goods. The generation that grew up
as the Internet developed may prove to be most adept at
understanding Tech, Media & Telecommunications stocks.
In any case, the results from the All-America Student Analyst
Competition were encouraging, for the future of trading and for the
individuals involved; the successful students generated strong
returns not with ego or hubris, but by simply following the markets
they found before them.
Daniel McAllister is finishing his MBA at USD while working full
time as an consultant for the privately held technology company
AXmentor. Mahbod Matthew Olfat is interning this summer on Wall
Street at Morgan Stanley Fixed Income, and has plans to return to
school and receive his master's and PhD degrees. Simeon Iheagwam
has plans to work as a buy-side analyst before making the leap into
starting his own investment fund.
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Editor's Note: In the first edition of this story, Mahbod Matthew
Molfat's name was given as Matthrew Molfat. Also, the specific
location of his internship, Morgan Stanley, has been included.