State College

Little Lion Fund brings lessons for State High students, returns for local investors

Chief Investment Officer Matthew Beyerle looks over the funds investments. Jennifer Miller teaches a class at State College Area High School called Little Lion Fund, February 17, 2015. Community members invest real money in the fund which started in 2012 and is managed by students in the class.
Chief Investment Officer Matthew Beyerle looks over the funds investments. Jennifer Miller teaches a class at State College Area High School called Little Lion Fund, February 17, 2015. Community members invest real money in the fund which started in 2012 and is managed by students in the class. CDT photo

In the Stocks and Investments 2 class, they call themselves analysts.

And rightfully so.

State College Area High School students who run the Little Lion Fund in the class, in which they buy and sell stocks for 37 local investors, have beaten the S&P 500 index by 2 percentage points since its May 2012 inception. The total money invested in the fund — about $41,600 — has a market value of about $60,000.

Students make decisions to buy or sell stocks based on weekly private votes. Decisions, however, must receive support from two-thirds of the class and get a thumbs-up from investors, only one of whom has ever said no to the class’s call.

“It’s an opportunity for students to have a real-world experience in investing and managing an investment fund in order to prepare students to study finance, accounting, economics and business in college,” said teacher Jennifer Miller, who does not have a vote. “It’s a unique experience for students to manage investors’ money on their behalf. We’re actually looking to add more investors to the fund.”

Students also want to invest in more stocks after they unanimously decided to sell three of the fund’s 17 on Friday.

In a setting where they resembled a fund’s experienced board of directors rather than 16 teenagers debating how to invest thousands of dollars, the students picked apart the fund’s stocks.

The fund a had 70.9 percent return on investment from Priceline and took about a $2,100 gain. The stock was one of the fund’s original investments three years ago and would have had more than a 100 percent return on investment one year ago, when they sold half its shares in the fund.

“It’s easy to buy, but harder to sell, especially when a stock is performing very well,” senior Matthew Beyerle, the fund’s chief investment officer, said. “When we make pitches to buy or sell, we do it based on good fundamentals and valuation.”

They didn’t like Qualcomm’s instability and the stock’s forecasts, so they took home an 11.5 percent return on a $2,401 investment for a $279 gain.

The students also cut 15.6 percent losses with China National, a Chinese state-owned oil and gas company, which cost the fund $372.

Junior Abby Stevenson and senior Joe Kolarik made a pitch to sell the investment in China National, because the Chinese economy had slowed; the net operating income of the company had decreased for three years; and the company invested very little in research and development.

Stevenson was blunt in her pitch.

“There’s flat growth, and the CEO has a poor understanding of the energy sector,” she said. “We’d be lucky if we broke even, so I think this is the right time to sell it.”

Students could invest in two stocks this week, but diligence, they said, is a top priority before making any decisions.

“I’m very thankful to have investors trust us with their money, but there’s a certain sense of accountability for us that comes with that,” senior Cassidy Houtz, the fund’s director of marketing, said. “We need to continue to make good, educated decisions and not make decisions on a whim. A lot of work goes into everything we do.”

The fund holds shares in EOG Resources and may buy more after the company’s quarterly earnings announcement Wednesday.

The potential buy relies on more than the fact that the company is outperforming the rest of the oil and gas sector. Students think EOG Resources management makes sound decisions, like shutting down its least profitable wells early in the oil pullback last year, and technical indicators show the company has steadily grown for five years.

The class may also buy into Exxon Mobil, a company that increases its dividends to investors annually, invests heavily into research and development, and has a low debt-to-equity ratio.

Some decisions, however, aren’t easy.

Students debated investing in Tesla in May 2013, but waited to buy in until after the stock soared. If they sold their shares last week, which they did not consider doing, they would have taken a 17 percent loss.

“We should have got in sooner,” Houtz said. “It was a hard decision, because it is an unstable stock with a lot of potential for growth. We tend to be a safer fund, but I’m glad we did that and that we have Tesla now. It was a good risk to take.”

It’s a risk that students hope will pay off in the long term and rests on Tesla’s development of the Model 3 vehicle and investments in capital expenditures.

“We want to perform well with every investment, but we’re aware that our investors value the educational aspect of this over profits,” fund president Manolo Corichi said. “We know that they probably don’t expect us to be returning profits, but it’s something to be proud of that we are.”

Maybe, if their hard work pays off enough someday, they’ll also call themselves investors.

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