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UWA Business School
The University of Western Australia Commerce student Nathan Howe has won first place in the 2010 J.P. Morgan Portfolio Competition. After spending eight weeks trading his way through the stock market, Nathan beat 7,206 students from 39 universities across Australia to win the overall competition.

Nathan enjoyed attending the Awards Ceremony at the Sydney offices of J.P. Morgan on 9 June. There, he received $4,500 in prize money and had the opportunity to meet with experienced traders and discuss possible careers in sales, trading or research.

Nathan wasn't the only UWA winner. Commerce and Economics student Jason Skinner finished in ninth place overall, whilst Matthew Della Bosca achieved third place in the practice round and Krassen Ratchev was the week three quiz winner.

So how did they do it?

Each student was given a simulated share trading account with a virtual balance of $200,000, which was used to trade companies in the ASX300. An additional $50,000 was available to be borrowed to invest. Each week there was also a quiz question related to events in the market or individual companies, with winning entrants receiving an invitation to the Awards Ceremony in Sydney.

Nathan's approach wasn't for the faint-hearted. He explains, ‘My strategy involved creating a very high risk portfolio. This involves buying as few stocks as possible, investing in small companies with volatile prices, borrowing as much as was allowed and preferably investing in a single industry.'

Unfortunately for Nathan, he chose the energy industry. So when stock prices crashed with the announcement of the proposed Resource Super Profits Tax, and the European debt markets caused further turmoil, the value of his portfolio plummeted.

In contrast, Jason held his place in the top ten, because he had invested in stocks that would not be sensitive to systematic risk. His hardest decision was whether or not to risk selling shares when they were making a substantial profit.

Yet Jason was still surprised. ‘I learnt how volatile the share market could be in response to a shock announcement, and was surprised how many areas in the economy were affected. I also learnt that it is important to research and analyse each company you invest in because every company is subject to different risks.'

Luckily for Nathan, he had done his research. In addition to majoring in Corporate Finance and Investment Finance, he delivered a presentation on competition rules and strategy to fellow students. Nathan also spent time with Winthrop Professor Ray da Silva Rosa discussing portfolio allocation.

So Nathan continued to buy as prices fell and in the final days, he explains, ‘surged past the leaders who had cashed in their shares.' At the end of the eight weeks Nathan finished with $258,249 from the initial $200,000. Over the same period the ASX300 fell by 5.1%.

Does this mean that the students will now invest their own money in the stock market?

Nathan's answer is a qualified yes. ‘For a student who has never traded before, [the J.P. Morgan Competition] is an excellent stepping stone to personally investing in the share market. However, there are big differences between trading a simulated account where there is nothing to lose and actually risking your savings or the wealth of an investor or client.'

This hasn't deterred the students, with Jason planning to begin investing in the stock market before embarking on a career as a stock broker.

Meanwhile, Nathan is interested in the process of floating a company onto the ASX. He says, ‘I would like to start in a graduate role in research, where I can learn about companies in-depth first, before moving onto the trading floor.'

It's a risky business, but a challenge for which these students are more than ready.

Media Reference
Heather Merritt
Director, External Relations
UWA Business School
T: +618 6488 8171
E: [email protected]

Verity Chia
Communications Officer
UWA Business School
E: [email protected]