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The secret behind successful investing

Students in the APM class get a first-class education in investing.

Tuesday, April 3, 2007

Without fail, Catherine Shenoy voices one axiom to her students each and every semester: Successful investing is hard work. Rather than simply pontificating, though, Shenoy proves the realism behind that axiom in her Applied Portfolio Management (APM) class.

"Students hear a lot of the sound bites on CNBC, and they hear short pieces about what investing is like," says Shenoy, assistant professor in finance. "But investing is really hard."

Shenoy and her guest lecturers in the APM class attempt to inculcate the discipline and hustle required in successful investing.

The hard-work culture is instilled immediately. About a month before the start of classes Shenoy allots significant assignments to students, due the first day of class. Once classes commence and students hand in that first assignment, she gives them another hefty project, due one week later. Students recognize at once the devotion it takes to become successful.

In 2005 the APM portfolio generated a 34% return. The students followed that up with a 23% performance in 2006. Both years crushed the returns of the S&P 500 and NASDAQ.

These outsized gains would not be possible without the guidance of Shenoy, APM alumni and other industry contacts. In the last three years alone the APM class has hosted 21 CEOs, 13 CFOs and 13 fund managers. Many of these contacts were made possible by alums of APM.

Like all funds, APM has certain biases when it comes to equity investments. Shenoy and her students prefer smaller and local companies, but the APM portfolio holds substantial interests in China companies as well. Moreover, they work hard to identify value within stocks that have been beaten down for unnecessary reasons. That process involves digging into the details of a company and spotting what others fail to see.

"Our philosophy is that fundamental business models - whether good or bad - ultimately show through in the price on the stock market," Shenoy says.

Regardless, Shenoy understands there are more ways than one to become successful as an investor. In her opinion, students must find the style that matches their personality and attitude towards risk. For that reason, Shenoy brings in speakers that invest in various ways, exposing students to multiple styles and opinions.

As she often does, Shenoy is sure to point out that no matter what investing style students ultimately choose, there is one common link: hard work precedes success.

After completing the APM class, that axiom is one students know first hand.