Taking Stock

Danny Metzger-Traber ’11 has a flashbulb memory of where he was the September morning in 2008 when Lehman Brothers imploded in spectacular fashion, and the financial crisis began in earnest. “I was in a campus information session with Morgan Stanley,” he recalled recently. “The Morgan Stanley guys were coming in and out of the room on their cell phones, freaking out.”

Metzger-Traber is co-chair of the Student Investment Committee (SIC). In a nearly empty lecture hall after one of the group’s weekly meetings, he said, “Our formative years in this club were during the financial crisis.”

“We started the fall of 2007,” added his other half, Evan Caplan ’11, “and the market peaked in October.” The two economics majors can tell you the order in which Wall Street’s investment banks failed (Bear Stearns, Merrill, Lehman, AIG); when the S&P 500 bottomed out (March 2009); and how Libya’s crisis will affect the SIC’s $14,000 stake in Exxon Mobil (got a minute?).

The group of nearly 40 members independently manages $330,000 of the College’s $860 million investment pool, a sum grown from seed money set aside 24 years ago by the Board of Trustees. In 1987, economics professor and adviser Michael Claudon asked the board’s investment subcommittee for $100,000. The idea was to give the nascent SIC enough money to feel lousy if they lost it, relieved if they made a fair return, and ecstatic if they engineered something great.

Despite its revolving officers and not-for-credit workload, the SIC routinely beats the S&P 500, often unnervingly so. They’ve made $55,000 since this time last year, and when the College’s latest endowment figures showed an investment return of 14 percent this fiscal year to date, those gains were led by the SIC’s 27 percent return during the same period. “We like to make sure we beat all the other Middlebury money managers,” Metzger-Traber said, laughing.

The SIC has a three-prong mission—manage its portfolio, educate the quants of tomorrow, and network like gangbusters. Divided into subgroups like energy, tech, health care, and emerging markets, the groups meet to research new investments and vet existing positions and then present their findings along with a recommendation to buy, sell, or hold. To pick stocks, explained Metzger-Traber, “We find a good story, gather the financials to back it up, and then see what everyone else thinks.”

The SIC is a pure democracy, and anyone who shows up—including a kibitzing journalist—is asked to vote. “The reason we perform so well is that all our members help make the decisions,” Caplan said. “We’re not traders. We’re investors. Some of the positions have been in there longer than we’ve been at Middlebury.”

On a recent Wednesday night, the emerging markets group presented its findings. The recommendation, delivered with the kind of gravity befitting a corporate war room, was to sell $16,000 worth of shares in a Brazilian energy distributor. The company’s fundamentals were off, and its leadership undergoing an unpredictable upheaval. Also, its annual filings were in Portuguese, which no one could read. “The former chair of the group was a native speaker,” said Metzger-Traber. “Evan and I tried to learn a little over the summer. It was tough.” The recommendation to sell was approved, with one dissenting vote.

I asked the pair what it was like to stand in front of a room full of fellow undergrads, some of the College’s sharpest analytical minds, and propose spending so much of someone else’s money. “It’s a pretty friendly group,” Metzger-Traber said. “You’re not going to get destroyed up here.”

“The first time, it was scary,” Caplan admitted. “But it’s exciting. It’s real money.”

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  1. Interesting note, the company and the fact that can be taken as a case study. Obviously, a successful group who can organize themselves and especially what the place of investment research. I liked the post, it is really encouraging.

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