Gonzaga Wealth Management Students Gain Epic Returns

(above) Students in Professor Bud Barnes' current wealth management class receive the check recently on behalf of the 2017-18 class, which won the award. Michael Jackson, branch manager for D.A. Davidson’s Spokane office and a Gonzaga alumnus, presents the check to Barnes. GU photo

By Matthew Kincanon (’19)
Gonzaga News Service
SPOKANE, Wash. — Students in Gonzaga University School of Business Administration Professor Clarence “Bud” Barnes’ wealth management class have realized some epic returns. Barnes’ class won the Fred Dickson Memorial Award as the top-performing portfolio in D.A. Davidson & Co. Student Investment Program after earning returns of 50.4 percent, D.A. Davidson announced. 

The 11 students in the 2017-18 program year delivered returns far above the 19.7 percent for the S&P 500 index and the highest one-year return among the 20 competing programs. The second highest returns for the program year came from the University of Idaho with gains of 36 percent; the remaining schools achieved returns of 29 percent or below. Gonzaga is the first two-time winner of the Fred Dickson Memorial Award.

“This is off-the-charts incredible,” said Barnes, a professor of economics and former dean. “I can’t believe that we have had such a great year in investments. This was just a great selection of companies.”

Students in the three-semester “Portfolio Management” course researched companies to decide where to invest the $50,000 provided from D.A. Davidson. They invested in a dozen companies — Alibaba, Amazon, Apple, Berkshire Hathaway, Boeing, Disney, Facebook, JP Morgan, Microsoft, Netflix, Nike and Primerica — to parlay their initial investment into more than $75,000 by the end of the competition last spring.

For their efforts, the Gonzaga program has earned a $2,000 cash award and an invitation and expense-paid trip for five participants to an upcoming D.A. Davidson company event. Since the program’s inception in 1997, Gonzaga has earned a cumulative profit-sharing contribution of $64,641, including $11,357 this year.

“The portfolio class is an educational experience for students seeking careers assisting other people in managing their wealth or in managing their own wealth,” Barnes said.

For the program, D.A. Davidson provides student teams from senior-level investment courses at 20 Western and Midwestern colleges and universities with $50,000 to invest in the stock market, for a total $1 million commitment annually.

Johannes Fourie, a first-year finance graduate student at Gonzaga who was in the course, said Barnes advised students on investment matters including companies’ debt, revenue growth, relationships with competitors, balance and other key factors. Once the students decided on their weighted investments, Barnes assigned companies to monitor.

Fourie explained how the students decided on the amounts to invest in each company.

“For example, if I suggested a 10-percent weight of our $50,000 in Amazon and another teammate suggested a 20-percent weight, then it averages out to 15 percent of the $50,000 (or $7,500),” Fourie said. “So we each created a portfolio with our own weights and found the average across the whole class for each stock.”

Fourie said that it was amazing that they received high returns on stable stocks because riskier ones tend to have the higher returns. He added that the group was lucky because of how well the market was doing at the time, but remains amazed at the margin by which they beat the market.

Throughout the year, Fourie had been watching the returns rate and was surprised that they had reached 28 percent midway through the Spring semester and continued to check the rate toward the end of the semester.

“I kept checking and rechecking, doing my own calculations because I was like ‘Wow, this seems way too high, I can’t even believe how well we’re doing right now,’” he said.

GU also exceeded above the S&P 500 index in the 3- and 5-year returns as well with 23.6 percent and 18.1 percent, respectively, compared to the index’s 16.1 percent and 14.5 percent.

In a world of high-frequency trading, Fourie said Barnes taught the class to choose stable companies and stick with them until they had a sense a company had become toxic — whether through one event or a combination of factors.

“There’s such a fear for people when it comes to the stock market and I think this class showed to a lot of people that entered it that it’s at your fingertips and it’s a great way to make money and accomplish your financial goals,” Fourie said.

“We continue to be impressed by Dr. Barnes and Gonzaga’s approach, which brings together the individual rigor of each student analyzing a stock idea to pitch to the class with a team-based approach to determining allocation levels with portfolio risk considerations in mind,” said Michael Jackson, financial advisor and branch manager for D.A. Davidson’s Spokane office (as well as a Gonzaga alumnus).