This post is the first in a new column that will track Brunonian-influenced stocks.
Investing in today’s recession-battered, tech-saturated market can be difficult. New wealth management tools targeted at millennials have become ubiquitous on the Internet, while the old debate between the skeptical academics and the Wall Street elite over the value of financial advisors continues. But what if there were an alternative way to construct a portfolio of equities? A middle ground between the broad, diversified index fund approach recommended by academics like 2013’s Nobel Prize winner Eugene Fama and the expert-picked stock selection of Wall Street’s traditional financial advisors and hedge funds?
There are precedents, mainly in the world of mutual funds and ETFs. Some recent companies have encouraged everyday investors to purchase equities grouped into ‘concepts’ – asset classes they predict will take off in the market, i.e ‘solar energy’ – that have made investing easier while leading to predictions that the system will eventually render exchange-traded funds obsolete. But this approach still requires a substantial amount of luck and economic know-how – if investors cannot reliably predict the future directions of individual stocks, will they really be more capable at predicting the directions of asset classes?
What if there were a broader, more intangible set of criteria for equity selection? Criteria based not around a predicted trend in the market but around the inherent value of companies rooted in innovative intellectual practices and reliable leadership? Hey, those values are deliberately cultivated at Brown! Brunonians, after being selected for their curiosity, creativity, and diversity – all traits of rapidly increasing value in today’s knowledge economy – are then educated in a tradition of via the New Curriculum. Unsurprisingly, Brown alumni also have a long history of success in the business world, creating and helming components of some of the most widely traded companies in the world.
Brown Bearish, a new weekly column on Blog, will follow a portfolio of equities purchased from several of these companies and examine their performance in light of both in-firm developments and broader market trends.
Specific criteria for a publicly-traded company’s eligibility for the portfolio include:
- founded or co-founded by an alumnus of Brown
- currently run by one or more alumni of Brown in the roles of CEO, CFO, COO or CTO
- previously run by a Brown alumnus who was particularly instrumental to the company’s success and/or integral to its vision
- founder and/or current CEO of a major subsidiary of a firm is a Brown alumnus
- possesses one or more Brown alumni as shareholding board members
- has had an unusually large number of Brown alumni instrumental in major company projects and/or operating at relatively high levels within the organization
All these qualifications ensure that a firm included in the portfolio is at least partially influenced by the leadership of one or more Brown alumni, and those values of creativity and specialization cultivated at the University. Brown Bearish will examine whether companies guided by these principles can achieve reliable long-term growth across a variety of industries, consistent with the buy-and-hold strategy of a diversified portfolio.
Apple (AAPL) – Andy Hertzfeld ’75, John Sculley ‘61 – member of development team behind original Mac and Mac OS, president from 1983 to 1993 (respectively) – technology, media, and telecommunications
Interesting fact? Carl Icahn recently claimed that much of the company’s growth potential has yet to be priced in.
Dr. Pepper Snapple Group (DPS) – Tom Scott ’90 and Tom First ’89 – founders of Nantucket Nectars, subsidiary of Dr. Pepper Snapple – retail (food and beverage)
Interesting fact? Take ENGN 9.