Vying for First in a Volatile Market

The Cutler Center Finance Lab

The last three months have been some of the most tumultuous in the history of the stock market.

After the Dow Jones and S&P 500 reached soaring highs in February, the coronavirus outbreak upended the market, sending many stocks plummeting to relatively meager levels.

Simultaneously, Babson College’s Stephen D. Cutler Center for Investments and Finance was preparing to host its Stock Picking Competition as part of its 20th anniversary celebrations. During this competition, students and alumni would go head to head, investing fictitious money based on the current market in order to vie for real cash prizes.

A stock competition veteran, James Cheng ’20 felt he was in the perfect spot to take on this learning opportunity in real time before heading off to work for Wells Fargo Investment Portfolio after earning his degree in May. 

Highs and Lows

A rapid shift between strong and weak markets presents a greater possibility for a high return on investment. Cheng’s competition strategy was to take full advantage of that opportunity.

“There isn’t a downside if you lose a lot of money, you can pile on a lot more risk,” he said. “That’s what it ends up taking to win the game.”

With more than 80 students competing for the highest return, those risks would prove to be necessary. Cheng said he put himself in the best position to succeed by allocating a few hours each week for research.

“We’re definitely in something of a downtown or recession,” he said. “Even in those times, not all stocks are losers, there’s always some winners.”

Patrick Gregory, senior lecturer and managing director of the Cutler Center, said the competition offered a chance to engage students outside the classroom. The volatile market made the experience that much more valuable.

“It forced the students to consider the impact that COVID-19—and the measures taken to contain it—would have on industries and companies they were considering for investment,” he said.

Great Experiences, for a Great Learning Environment

In the second-to-last week of the competition, Cheng woke up to an email from program manager Leslie Romiza to find out he was in first place. Though he worked to maintain his position, late market movement in the final week led to a second-place finish.

“Odds of me winning anything out of 82 people are pretty slim,” Cheng said. “In this kind of environment, it’s really hard to say which way things are going.”

His winning stocks were Papa John’s Int’l., Advanced Micro Devices, and Direxion Daily Gold Miners.

“Pizza is recession proof. … (And) gold is king in this kind of environment,” he said.

“We obviously had no idea of the environment that we would be running this competition in,” Romiza said. “It turned out to be very timely and provided both students and alumni an opportunity to closely follow what was going on in a risk-free way.”

Cheng’s advice to students keen on a career in trading and finance is to invest in yourself by keeping a pulse on the economy.

And, to use the resources the College makes available.

“Babson offers a lot of great experiences,” Cheng said, mentioning the Babson College Fund and Babson Trading Competition, where some winners go on to the Babson Trading Team. “That creates a great environment for learning.”

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