Today was the last day of the semester for my Economics Reporting class, which I teach every fall. As the final project in the class, each of the students has to “buy” a $10,000 stock portfolio of at least five stocks at the beginning of the semester and track it throughout the entire time period, occasionally writing updates about the economic indicators or other factors affecting their stocks.
The performance of the portfolio does not determine the student’s grade; how well they can explain why their stocks performed the way they did does determine their grade. However, I do like to give some presents to the top performers.
This year, I had a student, Linda Shen, who produced a 23% return in her portfolio in a time period of just short of three months. Annualized, this is about a 100 percent return. Her portfolio was helped by Google and focusing on Asian bird flu stocks such as Gilead and Chion. Linda, who interned last summer at Reuters and will likely intern in summer 2006 at Bloomberg, received a $50 gift certificate to a local brewpub for kicking our butts.
The second- and third-place finishers received a copy of the Wall Street Journal Guide to Understanding Money and Investing. Twelve out of 14 students in the class finished with their portfolios in the black, and a majority of them outperformed the overall market during our time period — Sept. 20 to Dec. 8.
As for my portfolio, it finished in dead last. I lost 13 percent during the semester, led by a disastrous pick of Martha Stewart Living Omnimedia and an insurance company, James River Group, hit hard by hurricane expenses.
One of the lessons I hope my students learn from this is to be careful when writing about stocks and avoid the temptation of giving advice to readers. But this project also gets them reading about their stocks, looking at economics indicators such as the CPI and consumer confidence to see how they affect stock prices, and following the market more closely than they have in the past.