Booth Students Win National Hedge Fund Trading Strategies Competition

Published on November 13, 2009

Booth students took home first prize for their long-short strategies in the 2009 Alpha Challenge, an investing contest that pitted teams from a dozen business schools.

“The win shows Chicago Booth has a strong group of students focused on investment management who have both the technical skills and the communication skills needed to be successful in the industry,” said Michael Melby, a first-year student in the Full-Time MBA Program and a member of the winning team.

On the first-place team, Melby joined first-year students Patricio Danziger and Sandhya Jagannath. The November 13 contest was organized by University of North Carolina Kenan-Flagler Business School. This was the first time Booth won the event, which brought the team $6,000. UNC took second, winning $3,000, and Columbia University placed third, winning $1,000.

Students were given a week before the competition to pick one stock to go long and one stock to go short within the industry group of renewable energy. Teams then justified their recommendations before a panel of judges consisting of hedge fund managers, institutional portfolio managers, and equity research analysts.

For its long candidate, the Booth team picked Waterfurnace Renewable Energy, a leading manufacturer of geothermal heat pumps for residential and commercial heating, ventilation, and air conditioning markets. Armed with information from company management and suppliers, the Booth team “highlighted why the company was well-positioned to capitalize on a global trend to substitute traditional heating and air conditioners with geothermal units,” Melby said.

One other team also picked Waterfurnace, he said.

For its short candidate, the Booth team picked LDK Solar,a leading manufacturer of solar wafers. The team “defended the investment thesis well” by highlighting and justifying reasons for taking a short position, Melby said. Danziger said it helped that the Booth team has “a passion for this industry” of renewable energy. “We worked hard to understand the drivers of the businesses, spoke to management and distributors of the companies, and performed valuation models,” he said.

The investment of time and energy into researching the companies allowed the team to support its ideas well and answer tough questions from the judges, team members said.

                                                                                                                — Mary Sue Penn