Tulane finance students Alexandra Thurber, left, Dori Brown, Anthony Elia, Arnab Dasgupta, and Tray McCurdy comb through financial reports of companies that many retail investors haven't heard of and analysts don't follow for their successful mutual fund.
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NEW ORLEANS -- With all of the stock market ups and downs over the past decade, the average investor might wonder who's watching over his mutual funds.
In the case of the Burkenroad Fund, it's a group of students at Tulane University's Freeman school of business. They spend hours combing through the financial reports of companies that most retail investors haven't heard of and few analysts follow.
According to Burkenroad's prospectus, the no-load version of the fund, which started Dec. 31, 2001, had returned 11.9 percent since inception through March 31. The fund, managed by banker Hancock Holding Co. of Biloxi, Miss., has assets of about $70 million. The fund licenses its name from the university, but it is managed independently.
The Russell 2000 index, a benchmark barometer of small-cap and mid-cap companies, returned an overall 7.5 percent over the same time.
In the recessionary year of 2008, when many 401(k) plans lost much of their value, the Burkenroad fund had a loss of just under 25 percent, compared with 33.8 percent for the Russell 2000. But both rebounded the following year. For the three years ending March 31, the Burkenroad fund returned 10.72 percent, compared with 8.6 percent for the Russell 2000.
Peter Ricchiuti, who teaches the stock analysis course, said he picks most of the companies, and students come up with others. He said the Burkenroad fund's reliance on student reports is unique, although other business schools put their students to the task of researching investments for university endowments.
About 200 students over the current school year have been evaluating 40 companies across the South. Considering the region, it's not surprising that 15 of the companies have some sort of involvement in the petroleum industry. The others include regional banks and insurance, consumer goods, processors of chickens and eggs, and retail companies.
Their final analyses, known as Burkenroad Reports, are available to the public.
"At the Freeman school, we do our due diligence and take a more long-term look at investing," said Anthony Elia, 25, a finance student from Pasadena, Calif.
The companies generally are in the $100 million to $1.5 billion market-capitalization range and are in Texas, Louisiana, Mississippi, Alabama, Georgia, or Florida.
The group looks for profitable companies, and those that don't have many financial analysts following them.
"One of the things is that we can clearly understand what they do," Mr. Ricchiuti said. "No wild high-tech companies. Just meat-and-potato companies."
Mr. Elia first reported on oil field services company Key Energy Inc. and now heads a team of students studying Carbo Ceramics Inc., an oil field services company, and consumer services specialist Rollins Inc.
In keeping with standard investment house rules, the students are forbidden from investing personally in companies they have researched. They can buy the Burkenroad Fund.
What would the student stock-pickers tell a potential investor?
"I suggest you find a company whose products and values you like and stick with it," said Tray McCurdy, 24, a finance student from Baltimore.