Investing in a Future

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Starting an investment club was always something Aaron Zimmerman had thought of attempting going into college. Never did he think it would happen. However, during his freshmen year, he joined a fraternity. This opened up a realm to new connections and like-minded people who were either willing to learn how to invest or had prior investing experience. Zimmerman remember looking around for the business majors in his fraternity. Initially, there were five people (himself included) who showed interest. They had a meeting to discuss the goals of club, gauge interest, and discuss costs. After their initial meeting, that number dwindled down to three. These three members, [Zimmerman], Adam Miller, and Jack (Frost) Cohen, would end up being the leaders of the investment club, later named Frost Investments.

It was the end of the first semester freshmen year when they  officially decided to embark on a lifelong investing journey. Frost Investments opened a brokerage account and bank account. They filed pages of tedious paperwork. Two of them had investing experience, while the other did not. They were all skeptical of what lay ahead. Before the first trade was made, they met together, with each bringing a list of favorite companies. The list was narrowed down to about 10, from the initial list of 20. From there, pitches were made about why each company was good or bad. The list further narrowed down to five. There were five orders in and at the end of February 2014, the first trade went through. It took Frost Investments some time to layer into other quality companies. At the time, the market was doing quite well and the three feared the move was over. But, at the end of April, most of their money had been invested. They were locked in and were ecstatic with our portfolio. By the end of June, they were up nearly 10%. By the end of September, FI dropped from it’s perch and were only up 6%. However, by the end of December, they made a major move higher and ended the year up 21%. Not so bad for a bunch of college kids.

While their stocks were moving up and down, the investment club met approximately twice per month. At these meetings, it was often discussed which companies to keep an eye on, whether the portfolio would withstand a market pullback, and look at major trends going on in the marketplace. Zimmerman was always astounded (in a good way) with some of the ideas presented. Some of them ended up being the biggest winners. Overall, Frost Investments got a lot out of these meetings: learning valuable information about the stock market, but also getting to know each other in a unique way.

One distinct memory that will not be forgotten for some time was when one of the companies got a bid to be acquired. They were ecstatic by the offer and thought there was some real potential for this corporation to go even higher. So, FI sold half of our position to lock in some gains, as a precaution and let the other half ride. Unfortunately, the company was in the oil and gas exploration business. This business has fallen off precipitously with the decline in oil. Who would have known, right? FI saw the combined entity fall by over 50% from the peak. All of their gains were washed away. This example served as a fantastic learning experience.

Soon after this incident, it was decided it would be best to write a review of FI’s financial year: what worked and what went wrong. All of the members really liked this idea. The document was drafted and presented at one of the first meetings in 2015. This set the tone for the year and beyond for the expectations of the club. Everyone soon realized what needed to be done. FI repositioned their portfolio based on our failures of 2014. Several big winners and big losers were sold off. FI developed a strategy where only two or three companies would stay in the portfolio for an extended time (called core holdings). Frost Investments is currently riding high and hoping to prove themselves as the next big things on Wall Street.

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