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Investment club seeks good businesses at bargain prices

Esper Nemi, 21

Occupation

Finance major at Schulich School of Business, York University

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The (club's) portfolio

Currently out of the market

The investment club

The York Finance Club is open to students of York University. For many years the club invested in equities by pooling money from members at the beginning of the school year and liquidating positions at year-end.

"However, we recognized various problems with this model," says Esper Nemi, the club's president. There was "an inability to adequately diversify, relatively large commission fees, short-time horizons, and difficulty raising capital." (The club maintained its educational activities but did not have a portfolio this past year.)

The club is now in discussions with the university administration "to set up an endowment fund for continuous investment." If successful, the York Finance Club will be able to invest with a long-term horizon.

Investment style

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"We primarily utilize value and GARP [growth at a reasonable price] strategies in order to [outperform] the S&P/TSX composite," Mr. Nemi says. "We ensure a constant presence in all 10 industry sectors, while taking an active underweight or overweight position within them."

"Our investments primarily focus on Canadian equities and fixed-income vehicles, with the balance in U.S. equities. That being said, fundamental analysis is utilized as the basis for all investment decisions."

Best move

In the previous school year, the club purchased shares in Deere & Co. on the basis of "strong upward price strength, discounted valuation and a robust agricultural market," scoring an annualized gain greater than 100 per cent.

Worst move

In 2011, the club lost an annualized 40 per cent on the Claymore Gold Bullion exchange-traded fund. The ETF was purchased on the expectation that haven demand would recover following a pullback in gold prices.

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Advice

"We would emphasize the importance of conducting due diligence . … We believe it is important to understand industry dynamics and the competitive advantages of each firm, and we like to follow good businesses in order to buy them at discounted valuations."

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