Stock Rover Interns Engage in High-Stakes Portfolio Performance Contest
As a way to test their investing acumen, three college students – including myself – pitted ourselves against each other in a stock portfolio performance contest at Stock Rover. This competition, which ran for eight weeks, allowed us to demonstrate our knowledge and skills as investors by creating and managing hypothetical portfolios.
The Contest Rules
Each of the participating interns had access to $1 million in hypothetical funds, which we were required to invest in various stocks. The rules of the contest were straightforward: each participant had to purchase at least five different stocks, with a minimum investment of 95% in the market. Our goal was to create the portfolio with the highest Risk Adjusted Return (RAT) by the end of the eight-week period.
The Reward
Winning the stock contest would come with significant bragging rights and a $50 gift card to Starbucks, which some might view as an enticing incentive. Although I personally prefer Dunkin’ Donuts over Starbucks, the prospect of savoring a Frappuccino after winning was certainly appealing.
My Portfolio Strategy
Given my short time horizon for this contest, I decided to take on more risk by investing in stocks with high potential for growth. To identify these stocks, I utilized Stock Rover’s powerful screening tools and created a list of companies that met the following criteria:
- Stocks priced close to $1
- High trading volume
- Significant declines over the past few weeks
These characteristics indicated potential for extreme volatility, which could either lead to substantial gains or significant losses.
The Importance of Risk
Investing always involves a level of risk. In this case, my strategy hinged on finding stocks with high upside potential, but it also increased the likelihood of experiencing considerable losses. The age-old adage "high reward comes with high risk" accurately describes this approach. It’s crucial to understand that while a bold strategy may yield substantial profits, it can equally result in devastating losses.
Investing Decisions
My portfolio consisted of several stocks I believed would rebound quickly due to their low prices and high trading volume. These stocks included A123 Systems (A123), which represented nearly 50% of my portfolio’s value at the start of the contest. Although its fundamentals were unimpressive, with F ratings from Morningstar and a three-year decline of 97%, I was encouraged by its price movements over the two weeks preceding the contest.
Why A123 Systems?
Upon examining A123’s stock performance in the days leading up to the contest, I observed an oscillating pattern with significant differences between peaks and troughs. This volatility led me to believe that A123 might be nearing or at the trough of its cycle. Focusing on the prospect of a substantial short-term rebound, I chose to overlook its poor fundamentals and invested $500,000 in this stock.
The Bounce…and Then the Crash
Initially, my strategy seemed successful as A123 appreciated by 48% within about a month into the contest, placing me ahead of my fellow interns. However, just two weeks before the end of the competition, A123 sank 21% off its starting value. My initial bounce had quickly turned into a deep trough.
Holding On
Despite this setback and the potential for further losses, I still held onto hope that A123 might experience another cyclical rebound as the contest was coming to an end. However, in all honesty, it’s unlikely that I would be able to indulge in a Frappuccino from Starbucks after the contest.
Disclaimer
It’s worth noting that while I occasionally enjoy Boston Kreme donuts from Dunkin’ Donuts, I have no financial relationship with either Dunkin’ Donuts or any other company mentioned in this post.