The Adirondack Cup, sponsored by Adirondack Research and Management Inc., is for New York and New England students at participating institutions to create a hypothetical small cap portfolio for six months. The portfolio with the best return on investment (ROI) wins the Adirondack Cup. Saunders' Financial Management Association (FMA) earned third place in the stock-picking challenge. Since the competition began, in October, a lot changed, especially within the stock market.
Saunders was one of only three teams to maintain positive earnings after the onset of the Coronavirus (COVID-19) pandemic, finishing 18 percentage points above the Russell 2000 Index. Saunders FMA was able to remain flexible and make the most out of the situation. FMA President Nick Renzoni answered a few questions about the season, giving insight into how the team earned third place.
Q: What were some of the main turning points in the season?
A: "The Adirondack Cup allows teams to pick a collection of stocks in October. The teams must keep their shares until midway through the competition. In January, teams have the option to replace one, several or all at market value. Our group chose to replace two of our original picks, which did not immediately make an impact on our portfolio. We had a month of substantial market gain until COVID-19 hit and had tumultuous effects on the market."
Q: How did COVID-19 change the competition?
A: "COVID-19 hit it all US equity markets hard and affected FMA's $250,000+ portfolio and our Adirondack portfolio with severe drawbacks in gains. Our team moved from being up 35% ROI to being down -17% in a matter of three weeks. However, we were outperforming by 18% compared to the benchmark Russell 2000 Index, which was down -35% at the bottom of the pandemic markets. Other Adirondack teams were suffering losses of -40% or more."
Q: What will you take from this experience and apply to next year's season?
A: "Our Adirondack team and the entire FMA club are very happy with the outcome of third place, considering how volatile the last two months have been. We ended up finishing in the green with 1.37% ROI, while the Russell 2000 benchmark continued to suffer at -16.90%. Our strategy was spot on from last October as we concluded that the stock markets bull run would falter sometime in 2020. We had no idea it would be due to the unseen virus.
"We always build upon experiences from previous years and make decisions from lessons learned for the upcoming competition. We don't know what the 2020-21 competition year has in store, but our team is dedicated to picking stocks that we know are fundamentally stable and will have excellent performance even when the rest of the market is down."
The Adirondack Cup competition is part of the experiential learning offered at Saunders. According to Professor Hao Zhang, the FMA advisor, "The goal of the Adirondack Cup competition is to give real-life investment experience to finance students interested in pursuing a career in finance industries." Through experiences like this, Saunders students gain knowledge that will help them with their future endeavors.