Fund Rules & Restrictions
The fund invests in U.S. companies (and ADRs) with market capitalizations of $1 billion or more. The fund is 100% equity and is value-style. The students follow a top-down approach, starting with an economic forecast, followed by an industry analysis and company analysis. Each company is thoroughly analyzed by comparing the following ratios to industry averages: price/earnings, price to sales, price to book, price to cash flow, price earnings growth, net profit margin, EPS growth, return on assets, and return on equity. Emphasis is placed on low P/E, low P/B, and high dividend yields.
As value investors, the students look for mispricings in the market with the anticipation of a market correction. Next, they look at current company news, earnings reports, analyst ratings, and the price of the stock relative to its 52-week high. They vote on whether or not to purchase the stock.
Current holdings are closely monitored and ratios are compared to the industry averages on a weekly basis. At any given time, the fund has between 30-40 holdings. The students use Wharton Research Data Services (WRDS) along with Yahoo Finance for valuation purposes.