There are 18 people in Healy 103, and all of them are annoyed with the Greeks.
“If you guys have Greek friends, kill them. My best friend is Greek, and I want to kill him,” Graham Robertson (COL ’12) says in a joking manner.
It may sound like a gathering of ancient Persians, but in fact it’s a meeting of the Georgetown Collegiate Investors, and Robertson is their CEO.
For the past week, they have been anxiously watching the stock market wobble over speculation about Greece, which is facing a severe debt crisis. On this night, the major concern is whether or not the country will leave the Eurozone, the economic and monetary union of states that adopted the euro as their official currency.
This is how the Georgetown Collegiate Investors spend their Wednesday nights. They analyze their holdings, pinpoint rising companies and struggle to understand what global events mean for the American markets. They look like college students, but they talk like partners in an investing firm.
In fact, they are both. Georgetown Collegiate Investors, LLC, is the nation’s largest student investing firm, with over 240 members and $100,000 to work with. They are entirely separate from the university, filing their own taxes and investing their own money. And for the past few years, they have been growing.
That’s an impressive statistic, especially considering the fact that the United States has been in a recession since the collapse of Lehman Brothers in September 2008, the first semester of college for this year’s seniors.
Perhaps more impressive, though, is the fact that their returns on average beat the S&P 500 index. In every man’s language, that means that a group of college students is beating the market average for making money.
Unlike day traders, who focus on buying and selling stock in the same day for a profit, GCI is a long-term investment firm, looking to make a profit over a four-year window. This gives them the opportunity to ride out the peaks and falls of the daily market without worrying about losing it all at once.
“The one thing that really determines how you look at investment is time horizon,” Robertson said. “Absolutely, if you’re a day trader, you’re in the market saying ‘ … Greece is in trouble, sell, sell, sell.’ But we’re interested in that four-year horizon.”
Statistically, stocks generally trend up two years out of three. To GCI, that means that intelligent investing in stable companies should provide a positive return after four years.
Looking past that horizon and focusing on the recession or the financial crisis in Greece, though, can be a recipe for disaster.
“I don’t know if you’ve heard this, but ‘in the long run, we’re all dead,’ is a common phrase that economists will use,” he said.
If that sounds ominous, it isn’t meant to be. The quote actually comes from John Maynard Keynes, an economist who was active during the Great Depression. He wrote the phrase to counter his contemporaries, many of whom were reluctant to focus on short-term gains. Keynes’s point, and the goal of GCI investors, is to capitalize on smaller windows of time rather than trying to strategize around something as long as a recession.
Keeping that in mind, the GCI investment strategy is really fairly simple: invest in stable and profitable American equities on a four-year horizon. The challenge for partners is to find those qualities in the market today.
For that, GCI and investment tycoon Warren Buffet share the same mantra. As Buffet has said, “Do a lot of reading.”
“We look deep into a company’s balance sheets and compare key financial ratios with those of competing firms,” said Caspian Tavallali (SFS ’14), GCI’s secretary of the board. “We also concentrate on learning about the company’s management and understanding their impact on the company.”
With that knowledge, partners then pitch stocks to the investing body, and the rest of the group votes in a majority rules system. Once the money is invested, the partners keep up with the activities of the company and constantly reevaluate the company’s standing.
Take, for example, Apple, Inc.
“Following the unfortunate death of [former Apple CEO Steve Jobs], we have had to reassess Apple, one of our oldest and best-performing holdings, so as to evaluate whether the incumbent Mr. Cook will continue pushing Apple’s innovative culture forward,” Tavallali wrote in an email.
The business plan is fairly fluid, allowing new members to cycle in and take the initiative to research opportunities on their own. Some investors do so right away. Others invest their money and don’t show up to meetings at all. Individually, their experience pales in comparison to their competition in the rest of the market. Together, though, they have plenty.
According to GCI leaders, the key to their success may actually be the fact that they are amateurs.
“Our inexperience is actually an asset, because it allows us to look at things in a different way than the rest of the market,” Robertson said.
That is the message that they preach to their partners.
“Looking for things that the market doesn’t see should be our goal,” Chief Risk Officer Christina Taranenko (COL ’13) told the small dedicated group that gathered Wednesday night.
That strategy isn’t a novel idea, but it is working, in large part because the members of GCI are after more than just money. According to Robertson, most members join because they want to better understand the stock market, which means that as they expand their knowledge, they get a chance to look outside the box.
Christian Crosby (MSB ’13) can attest to the benefits. When he began investing with GCI, he knew a little about the markets, but probably not enough to excel on his own. His investment, as he saw it, was an educational one.
“It seemed like a great opportunity to learn about markets and investing with a good group of people that were genuinely interested in the markets and teaching others about them,” he said.
With that peer schooling, he has since been able to take on much more initiative in the firm.
“GCI has taught me the skills necessary to make sense of the market, manage a large portfolio, manage a group of analysts (I’m currently our healthcare sector head) and successfully pitch a stock to a large group,” Crosby wrote in an email.
With a constantly changing membership and a flexible strategy, GCI is unique among stock market funds. The fresh-minded group has set about finding paths around hurdles like Greece, for example, that other investors may be blind to either by habit or knowledge.
That is the company’s real draw to potential investors, according to Robertson.
“The reason that students invest with GCI is that you believe that our 240 partners collectively know more than the rest of the market. And so you’re trusting us,” he said.