For the past year, investor Charles Martin has offered business students at the University of California, Irvine, a real world lesson in making judgments “in an environment of uncertainty.”
Most are passing with flying colors. A couple are below the curve.
Last June, Martin, a retired venture capitalist, gave six teams of 25 students $1.8 million of his own money to invest in stocks. It’s the fourth year Martin has sponsored the investing exercise at UCI’s Paul Merage School of Business.
“There’s no substitute for using real money with these circumstances,” Martin said.
So far, four teams have profitable, even eye-catching returns of 39%, 29%, 22% and 17%. Two teams are in the red with losses of 30% and 8%.
The teams are made up of four to six second-year graduate students. Each team is given $300,000 to make four to six investments in stocks.
The top five teams get scholarships: $12,000 for the best team, $10,000 for second place, $8,000 for third, $6,000 for fourth and $4,000 for fifth.
Investing strategies are left to the teams, according to Martin.
“The market will tell you if you made a good decision or not,” he said.
The competition helps mold students in two areas, according to Martin.
Students learn to recognize the characteristics of good businesses and about teamwork, he said.
Martin teaches his students investing principles that he has applied in his 40-year career.
Stocks are screened for basics such as valuation and earnings. Then there are things not easily measured.
Companies that are innovative leaders are ideal candidates, according to Martin.
Corona-based energy drink maker Hansen Natural Corp. has been a hit for Martin’s students.
“It had the ideal qualities,” he said.
Hansen, led by Orange County’s Rodney Sacks and Hilton Schlosberg, was going nowhere for years.
Then Sacks and Schlosberg tapped the market for energy drinks fueled by the twentysomething crowd.
“Hansen’s drink Monster was a great brand,” he said. “It was obvious that was on a roll.”
In 2005, Hansen’s stock went from under $5 a share to about $20.
Other successes for Martin’s students have been Pennsylvania’s NutriSystem Inc., India’s Infosys Technology Ltd. and Apple Inc. of Cupertino.
Investing Style
Martin describes his own investing principles as a cross between Warren Buffett and a venture capitalist.
“I’ve been very fortunate in this business,” he said.
Seventy-year-old Martin is chairman and chief executive of Mont Pelerin Capital LLC, a firm that manages two hedge funds.
Martin’s professional background covers venture capital, private equity and leveraged buyouts. He’s served on 46 boards of public and private companies throughout his career.
On the Investment Advisory Board for the Regents of the University of California, Martin helps look after $70 billion in investments.
Martin’s class of 2007 is set to finish its competition Friday, graduation day. At that time, their stocks are set to be sold with proceeds funding next year’s derby.
The class of 2008 is set to manage $1.5 million of Martin’s money. n
