When University of Arkansas – Fort Smith alumna Emily Carter, ’13, started looking for ideas about how to invest in the stock market, she looked no farther than a copy of Men’s Health magazine.
An article about dieting suggested multi-grain foods weren’t the best options for men who truly wanted to improve their diet and their fitness level. Proteins and fibers, the article claimed, are some of the most important foods to monitor when it comes to assessing a diet.
In Carter’s mind, that translated to farmers and producers of food having to work harder to produce healthy foods. It also meant that a lower supply of those foods would equate to a higher price for those healthy foods.
So Carter’s critical analysis led her to invest in hog futures. Within the course of a semester, her analysis helped her net more than $60,000.
“It was about strategy,” Carter said. “Paying attention to supply and demand … invest well in the beginning and if that doesn’t work, go back and change your strategy.”
One of the university’s little known assets is giving students like Carter the real world experience they need to prepare for a career in managing investment portfolios. For nearly 10 years, business students have had the opportunity to acquire hands-on experience by managing a $100,000 investment account known as the Hembree Fund.
Lawson Hembree said his parents, H.L. and Janelle Hembree, both now deceased, felt strongly that students’ learning about investments shouldn’t be hampered by financial limitations.
“They felt it was important for students to have real-world experience investing rather than just having games that simulate the process,” Hembree said. “If the students’ ambition is to move into the investment world, the first time they make investment decisions won’t have to be with a real client, but with this fund.”
“This moves the classroom experience from theoretical to real-world, hands-on learning,” he said.
Associate Professor of Finance Shanhon (Sharon) Wu oversees the fund and the students who make the decisions about how it is managed.
Getting that real-world experience means that students also feel the earthquakes that hit the financial world. The fund, which grew steadily between 2004 and 2008, lost nearly half of its value when the stock market plunged. For the last five years, due to students’ investment strategies the value has steadily increased and is currently estimated at nearly $110,000, Wu said.
Wu works with students in the FIN 3723 Investments course to teach them the basics of security analysis and portfolio construction. Students spend the semester learning about investment planning, risk and return, securities and securities markets, and provisions and holdings. Consultants from Merrill Lynch and Ellwood Associates regularly make presentations to students to help them analyze stocks.
Students, who are required to complete a Business Finance course as a prerequisite, begin the semester in the Investments course with a heavy dose of trading training, Wu said.
“They initially use simulated accounts, because I don’t want them to jump into trading without training,” she said.
“Ultimately at end of semester, each student is required to give trading recommendations and they will do a presentation in front of the class based on an initial investment of $100,000,” Wu said.
During those presentations, students must recommend investment plans for the coming year including the price at which they would make their purchases, how long they would hold onto their purchases and their plans for selling.
“I review all of these presentations, and if I believe they have done careful research I will go ahead and execute their orders,” Wu said.
Carter, who graduated in December with a double major in accounting and business administration, said her experience in the Spring 2013 course proved invaluable.
“I hadn’t done anything like that before then,” she said. “But it helped me affirm that’s what I want to do … It’s the way my mind works, I guess.”
Throughout the semester, Carter completed virtual stock trading using a phone application called Stock Tracker. She made the decision to pursue an aggressive portfolio investing half of her virtual $100,000 in equities, 5 percent in cash options, 15 percent in bonds and a small portion in futures and options.
She broke down the semester into quarters, starting with an aggressive approach, as Wu suggested, then moving from moderate to conservative. By the end of the semester, Carter’s $60,000 virtual profit was the most successful of the class.
Upon graduation, Carter accepted an accounting position with Southern Star, a regional service provider for Dish Network. While she studies to become a certified public accountant, she also juggles the responsibility of being a unit supply specialist with the Army National Guard. She plans to eventually pursue a master’s degree in investment finance.
“I learned a lot from Dr. Wu’s course,” Carter said. “It helped me confirm that’s what I want to do with my life.”
While Hembree did not have the opportunity to observe Carter’s presentation, he routinely sits in on students’ end-of-semester presentations and is impressed with what he has seen and what the Hembree Fund has enabled students to accomplish.
“It sets us apart,” said College of Business Interim Dean Margaret Tanner. “The Hembree Fund is putting students in the position of an investment researcher.”
Doing so allows students to learn about investment management, buying and selling with a unique level of authenticity.
“There are other ways students can gain this experience,” Tanner said. “Through virtual investing, they can create portfolios with no money, but we don’t have to do that. I believe that because students have the ability to affect real investment decisions, they are likely to take the experience more seriously. This fund has provided a great hands-on learning opportunity for our students.”