Booth Team Wins Stock Picking Contest

by John A. Byrne on

Against a slate of MBA teams from 15 highly prominent business schools, the University of Chicago’s Booth School of Business left Friday (Nov. 15) with the championship trophy of the annual investment manager competition called the Alpha Challenge.

Booth finished ahead of a team from Yale University’s School of Management and the University of Virginia’s Darden School of Business, which finished second and third, respectively in what is billed as “one of the world’s premier stock pitching competitions.”

Alpha Challenge bragging rights were earned after three-person MBA teams competed against each other in presenting one long and one short investment recommendation from a predefined universe of stocks. Each team had to defend its analysis on Nov. 15th in front of a panel of judges who included hedge fund managers, institutional portfolio managers and equity research analysts.

THE BOOTH TEAM SHUTOUT FINANCE RIVALS WHARTON AND COLUMBIA

This year’s competition, the ninth annual challenge, was hosted by the University of North Carolina’s Kenan-Flagler Business School. The Booth team won over heavy competition from a bevy of U.S. schools including the University of Pennsylvania’s Wharton School, Columbia Business School, Northwestern University’s Kellogg School of Management, and Dartmouth College’s Tuck School of Business.

Past contests also featured a few non-U.S. schools, such as INSEAD and London Business School, but this year it was an all U.S. challenge. Last year, an MBA team from London won the performance award which is given to a school based on the positions selected by students during the previous year’s competition.

This is the second time in five years that first place was captured by Chicago Booth and the first time in four years that Wharton failed to place among the top three teams. The Booth win unseated Duke University’s Fuqua School which had earned first place in the past two years of the competition.

 EACH TEAM ASSUMES IT REPRESENTS A BILLION-DOLLAR FUND

The teams select stocks from a specific industry and exclude companies in which trading is not considered sufficiently liquid. From the list of available stocks, students must make one, and only one, buy recommendation as well as one, and only one, sell recommendation. The investment horizon is twelve months and the students are told to assume they represent a $1 billion fund. Following all of the presentations, the judges assign a rank of 1 (best) through 3 (worst) to each team.

Kyle Akin, a first-year MBA at Booth who had worked for a hedge fund before starting his MBA, and the winning team recommended  a short on GenGorp  and a long on Digital Globe Inc.  Akin first applied for the competition through Chicago Booth by pitching a stock in his application. He found out about a month ago that he’d been selected.

Less than two weeks before the competition, participants received the list of transportation industry stocks from which they could choose. They had one week to do research and analysis, and put together their pitches. Akin put about 25 hours of preparation into the presentation, but there wasn’t much he could do to prepare outside of research.

‘THEY PUT YOU IN THE HOT SEAT’

Akin said he was glad he chose to participate, especially since participants could interview with judges — a new feature of this year’s event. Like many of the event’s participants, Akin hopes to have a career in investment management.

“I feel like I’ve been tested,” he said. “They put you in the hot seat.”

Typically, the first place team receives a $5,000 award, second place gets $3,000, and third place is awarded $1,000.

Competition judges this year included well-recognized portfolio managers, such as Richard Chilton and Steve Yachtman, and investment professionals from a variety of firms, including William Blair & Company, Fidelity Asset Management, American Century, and T. Rowe Price.

Teams were fielded by:

1.    Carnegie Mellon University, Tepper School of Business
2.    Columbia University, Columbia Business School
3.    Cornell University, Johnson School of Management
4.    Dartmouth College, Tuck School of Business
5.    Duke University, Fuqua School of Business
6.    Massachusetts Institute of Technology, MIT Sloan School of Management
7.    New York University, Leonard N. Stern School of Business
8.    Northwestern University, Kellogg School of Management
9.    University of California Berkeley, Haas School of Business
10.    University of Chicago, Booth School of Business
11.    University of North Carolina, Kenan-Flagler Business School
12.    University of Michigan, Ross School of Business
13.    University of Pennsylvania, The Wharton School
14.    University of Virginia, Darden School of Business
15.    Yale University, Yale School of Management

The event featured a keynote address from Bruce Johnstone, managing director and senior marketing investment strategist for Fidelity Investments.

 

  • Norbert Weiner

    Go Yale!

  • uhuh12345

    Columbia won the Darden Investing Challenge that happened the same weekend and beat out 15 other schools (almost an identical roster).

  • reality check

    It’s interesting how in Booth’s Digitalglobe pitch they used an implied 25-30x REVENUE multiple on information services to drive the stock price in future. They projected ~100% returns in a year! Their lofty recommendations were well received by the judges who were mostly long-only oriented investors, but it’s concerning that they were awarded more points for showmanship rather than quality of analysis. Furthermore, let’s not forget that Booth’s long pitch was well over 10 minutes, and they only devoted 4-5 minutes to the short. They built such a case for the long that the judges weren’t able to really grasp the short case and couldn’t pick it apart as they did for every other team.

  • Mr Alpha

    After you adjust for DGI’s Geo-eye acquisition and realize your 25-30x revenue number is silly, you should share your thoughtful stock anlysis with Julian Robertson.

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