D.A. Davidson & Co. Provides Finance Club with Golden Opportunity
Through a unique program developed by D.A. Davidson & Co., students in the Finance Club at Utah State University have the opportunity to select and manage a real dollar investment portfolio.
The goal of this program is to provide students who have been exposed to financial theory with a real world investment experience. According to Alan Stephens, a finance professor and the head of the Business Administration Department, the company’s philosophy works.
"Our classes provide students with the technical knowledge they need to succeed, but there’s no substitute for committing money to the market," Stephens said. "Until our students actually purchase stocks with someone else’s money, they will never understand that level of responsibility."
D.A. Davidson is an investment firm based in Great Falls, Mont. Several decades ago the firm's chairman, Ian B. Davidson, who is impassioned about educational pursuits, envisioned developing a program that would help students in the states his firm serves gain real-world investment experience. The program started with several universities in Montana and has grown to include 18 schools.
Utah State University became involved in Davidson's Student Investment Fund three years ago, Stephens said. Each September the company provides the participating universities with $50,000 to invest during a one-year period. At Utah State, members of the Finance Club research individual companies and analyze current economic conditions before making investment recommendations. The students attempt to maximize their profit by applying investment theories and current strategies to actual market transactions.
If a Student Investment Fund loses money, D.A. Davidson makes up the deficit. When the funds make money, the firm splits the profits with the participating universities. Rex Thornton, a senior vice president and the manager of Davidson’s branch office in Salt Lake City, joked that most of the firm's clients would like to get that kind of a deal. During the recent bear market, very few investors, student or otherwise, have wanted to discuss their portfolios. This year, however, with bull market rampaging on Wall Street, many of the schools participating in the D.A. Davidson Challenge realized a profit, he said
Thornton was at Utah State recently to present the Business Administration Department with the Finance Club's share of the profit. The department will use the $3,104 to establish a scholarship. Most of the participating schools elect to endow a scholarship fund or use their proceeds to build their own portfolio account. Utah State ranked in the top third of the schools participating in last year's Challenge.
"Utah State’s students used a very realistic model and ran a well-diversified portfolio," Thornton said.
The top schools were heavily invested in technology stocks. The risk they took paid off in last year's market, but Thornton pointed out that, over the long haul, diversifying typically maximizes investment gains. Thornton said he believes the D.A. Davidson program helps students become more intelligent investors.
Stephens said that last year's successful competition and Thornton’s recent campus visit have kindled a lot of interest in the current portfolio. Approximately 20 new finance club members have entered this year’s challenge.
"The firm provides Utah State's finance students with real world experience and helps them build their resumes," Stephens said. "They are learning about risk tolerance, investment costs and theory versus practice. Being invested in the market when it is fluctuating so dramatically has the added benefit of providing students with first-hand experience employing different investment strategies during various market stages."
While he was on campus, Thornton also shared the benefit of his firm’s long-range market analysis with professor Austin Kwan's securities class. He outlined the pluses and minuses Davidson’s analysts see acting on the financial markets in the foreseeable future, and he discussed the benefit of owning dividend paying stocks.
Class member John Webster said Thornton’s discussion made him realize that most investors can earn a higher rate of return from dividends than they can at today's low interest rates.
Thornton also discussed the options open to students who earn a finance degree, and he commented on the current employment outlook. Thornton said this year's finance graduates will find more opportunities available in their chosen fields.
Professor Kwan said he was pleased a financial expert recognized the value of Utah State's program. "The students will reap the benefit of Thornton’s discussion on the economy and his investment ideas long into the future," Kwan said.