News & Events

UI Business Students Win Krause Challenge Investment Competition

The University of Iowa has won the 2005 Krause Challenge investment competition with an 18.77 percent return on its investment portfolio to beat Iowa State University, the University of Northern Iowa and Drake University.

The UI's investments also beat the annual Dow Jones industrial average of 4.53 percent and S&P 500 of 8.04 percent. After tabulating the results from August 2004 to March 2005, the universities increased portfolios and placed as follows:

1st - University of Iowa, 18.77 percent to $118,137.99

2nd - Iowa State University, 15.45 percent to $160,117.17

3rd - Drake University, 6.50 percent to $188,850.07

4th - University of Northern Iowa, .59 percent to $99,933.22

Throughout the past academic year, students ran stock models and made forecasts. The University of Iowa students demonstrated their ability to make better investment choices.

"Our basic approach is to buy and to hold long-term value," said Dr. Todd Houge, assistant professor of finance, University of Iowa. "We typically trade only at the end of each semester once students have completed a detailed analysis of their companies and delivered formal investment recommendations to our advisory board of professionals."

The University of Iowa's best performing stocks were MGM Mirage (MGM), ConocoPhillips (COP) and Omnicom Group (OMC). MGM Mirage owns and operates casino resorts in the United States including the Bellagio, MGM Grand Las Vegas among others, which showed a 71.31 percent gain.

The University of Iowa's security analysis course, which includes the Krause Fund, exposes students to applied equity valuation and portfolio management techniques employed by Wall Street professionals. Students are expected to analyze company financial statements and understand the economic fundamentals that drive the stock. The class aims to develop an ability to understand how an economic event might impact the market price of a firm's stock, knowledge of how to apply several valuation models and an ability to comprehend investment analyst recommendations.

With 30-40 students each semester, the University of Iowa students work in one of 12 teams. Each team covers a different economic sector such as energy, technology, consumer cyclicals, industrials, transportation, among others, so the end result is a diversified portfolio.

"Our investment charter requires us to maintain at least a 95 percent investment in equities at all times. The students' investment recommendations follow a top-down approach that begins with a fundamental analysis of the economy and industry," said Houge. "Based on this analysis, groups select companies that are expected to perform best within the near-term economic outlook. Our trade decisions are based on long-term valuation models."

"The Krause Fund provides students with a forum, blending academic rigor with real-world portfolio management experience," Houge added. "The educational benefit of our course would be greatly diminished without the Krause Fund portfolio behind our students' investment recommendations. The security analysis course is so highly regarded that a number of employers specifically recruit students who have completed the course."

"We congratulate the University of Iowa finance students for their excellent evaluations and stock picks," said W.A. Krause, chairman of Kum & Go. "They were able to outperform many Wall Street professionals based on the Dow Jones industrial average and the S&P 500."

The University of Iowa takes the Krause Challenge trophy from the 2004 winner - Iowa State University. Drake University continues to lead the pack for overall highest current portfolio value of $188,850.07 since the inception of the Krause Challenge in 1998.

"We believe this program is a valuable learning experience for finance students in Iowa," stated Krause. "Each class must work closely together to achieve the best results for their portfolio."

To view the University of Iowa's winning portfolio picks, visit: tippie.uiowa.edu/krause.

In 1998, W.A. Krause, chairman of Kum & Go, endowed $100,000 each to the University of Iowa, Iowa State University, the University of Northern Iowa and Drake University. The Krause Challenge exposes students in select finance classes to investment strategies and portfolio management experience, spotlights Iowa-based companies and encourages students to pursue careers within the state.

Twenty-five percent of each school's fund equity must be held in Iowa-based companies or companies with a significant presence in Iowa. All annual returns are deposited directly back into each school's fund.


Return to top of page