Finance graduate students learn real-world investment lessons through pandemic

Aug. 21, 2020

The opportunity for hands-on, real-world application in a student-run investment fund was one of the reasons Kanan Rajbhara applied for the Master of Finance (MFin) program at Wilfrid Laurier University’s Lazaridis School of Business and Economics.

“I read about the Laurier Graduate Student Investment Fund (LGSIF) on the university’s website and was interested to be able to contribute to the Fund as it could give me an opportunity to sharpen my skills under the guidance of professors,” said Rajbhara, who is currently one of three student Portfolio Managers for LGSIF.

The LGSIF, known anecdotally to students as the Fund, is a real, value-oriented investment fund on small cap stocks monitored by faculty members Tony Tang and Chris Kerlow. In 2016, six Lazaridis MFin students came up with the idea to create the Fund in order to gain hands-on experience in making investment decisions and managing a fund with real money.

Tang, who is a Finance professor and Director of the MFin program and Kerlow, an instructor in the Lazaridis School and seasoned professional money manager, advise and oversee the students and, ultimately, provide approval over Fund transactions.

Up to 20 students are selected each year to fill the roles of Portfolio Manager, Equity Analyst and Risk Analyst. The Fund currently has three teams each comprised of one student Portfolio Manager and two student Equity Analysts. The teams are responsible for screening, researching and pitching stocks to Fund members and supervisors.

At monthly meetings, each team has 10 minutes to pitch a stock followed by 20 minutes of scrutiny from peer teams and supervisors.

Through her experience as Portfolio Manager of LGSIF, Rajbhara says “I think it has given me the confidence to walk into an interview and tell them that I know where to look to get specific information and what conclusion can be drawn.”

“In preparing pitch decks, research reports, and intensive discussions to arrive at investment decisions, students involved in the Laurier Graduate Student Investment Fund will stand out to employers,” said Tang.

As Portfolio Manager (PM), Rajbhara works closely with Equity Analysts (EAs) in LGSIF, such as Andre Bodo, to coordinate and determine deadlines and to distribute workload.

Bodo is a student in the Double Degree MFin and Master of Business Administration program offered at Laurier’s downtown Toronto location in the Vantage Venues facility on the 27th floor at 150 King Street West.

“While LGSIF is an incredible amount of additional work to balance on top of classes, CFA studies and other responsibilities in life, it gave me a chance to learn more about investing, about myself, and about my peers,” said Bodo.

“In my opinion, an MFin student must join LGSIF at some point during their graduate studies if they are serious about investing and capital markets.” 

Bodo also believes his Double Degree, which will yield two degrees in both the highly specialized master’s degree in finance and the more general and broad-based MBA that helps set managers apart, are assets to his ability to succeed as a student investor in LGSIF.

“An MBA education is highly applicable to equity analysis and portfolio management as it provides a backdrop for the 'art' side of investing, and the tools for effectively managing a team,” he said.

In LGSIF, the students discuss at length a company brought forward by the Equity Analysts and draw conclusions based on research presented by the students. As Portfolio Manager, Rajbhara prepares and presents stock pitches including firm analysis, industry analysis, relative valuation models, and discounted cash flow valuation models, along with a sector update. Rajbhara’s role is to decide the number of shares to recommend buying and continually watch the movement of the stocks in the portfolio to make required adjustments.

“As part of the in-depth due diligence, we curate an appropriate peer group and perform a relative valuation, as well as forecast company future cash flows and implement DCF model for valuation. Based on a margin of safety and our expectations regarding the company's future, we decide what course of action to recommend for the stock. If the decision is to buy or include the stock in our watchlist, we continually update our investment thesis; as new facts come to light, our thesis evolves,” said Bodo.

Recently, Rajbhara along with other PMs, decided to purchase share in Truelieve Cannabis Corporation – a medical marijuana company in the United States that was recommended by Bodo. While the cannabis industry has seen big price volatilities and might not typically be considered a fit to the mandate of the Fund, Rajbhara and her team, which also included student Equity Analyst Xiao Tan, worked hard to prove that the company was indeed a value stock for the Fund. Through extensive due diligence, the team felt confident in its recommendation.

The team was approved by LGSIF faculty advisors Tang and Kerlow to buy shares in Truelieve in December 2019 after pitching the idea the month prior. However, soon after the investment decision was made, a research company published a report alleging Truelieve of misleading investors and also other violations of laws. A dozen class action lawsuits were quickly filed against the company. Faculty advisor Tang called for a halt to the investment decision and asked the team to investigate further, leaving the company on LGSIF’s stock watchlist.

A few months later, the U.S. border closed and numerous companies across the world were closing down or shifting operations due to the pandemic. Investors sold stocks in panic and the stock market derailed with major U.S. market indices dropping over 30 per cent in one month.

As part of the LGSIF’s typical operations, the team continued to evaluate and review stocks on the watchlist. Upon reviewing evidences surrounding the class action lawsuits and assessing additional information on the company’s operations under the pandemic, the team convinced Tang that the risk from the lawsuits was relatively low and the company was on track to meet its store expansion and sales growth targets. As a result, shares of Truelieve were purchased and added into the Fund’s holding.

“Covid-19 has changed the process of analyzing industry and the way we used to screen the stock. Increasing uncertainty in the market has made it extremely tricky to decide on the demand of product. Covid-19 has also brought a revolution in world economy, shift in production and trade war among countries,” said Rajbhara.

"We were able to grasp the importance of new information that needs to be updated, especially when there are any major changes in the company's governance or economic conditions of the country," said Rajbhara.

Rajbhara graduated from Veer Narmad Gujarat University in India in 2014 with a Bachelor of Business Administration specializing in Finance. After completing her CFA level II, she wanted more detailed knowledge and practical market experience and chose the Lazaridis Master of Finance program in downtown Toronto, which is offered over a period of 18 months, with classes during evenings and weekends for working professionals.

Originally from the city of Surat in the state of Gujarat in India, Rajbhara wants to work as an Equity Analyst or Portfolio Manager after graduation and eventually hopes to own a wealth management company managing billions of dollars. 

Bodo has a Masters of Applied Science in Mechanical and Mechatronics Engineering as well as an undergraduate degree from the University of Waterloo. After taking Finance Professor Ben Amoako-Adu’s investment management course as an elective during his studies at the University of Waterloo, he became fascinated in finance and says he read every book and article that he could find.

“I became enthralled by the stories of legendary hedge fund managers and investors of our time and past and was inspired to achieve their level of success in finance,” he said.  “My pursuit for knowledge in this field thus took off; I subsequently completed Corporate Finance and Computational Finance graduate courses at Laurier and the University of Waterloo, respectively.

“I believe that the completion of a Masters of Finance will not only fill gaps in my knowledge, but will help the industry formally recognize me as a highly qualified person in this field; where I hope to find employment and gain relevant experience towards achieving my goals.”

For students looking for practical, hands-on, real-world experience investing, the Laurier Graduate Student Investment Fund is open to Laurier students in a graduate program in finance or business. For more information about the Master of Finance degree or the Fund, please connect with us here.