HOW DO YOU COMPETE in an investment contest when you’re a firm believer that investors can’t consistently beat the market averages? That was my dilemma several years ago.

A school not far from where I taught was given money by an alumnus to endow the St. Louis Area Collegiate Investment Contest. All colleges and universities in the area are invited to participate in the competition, which is held regularly. Each is given a hypothetical $1 million and asked to select 20 value stocks. An outside investment firm oversees the contest. They “invest” $50,000 in each of the 20 stocks. Whoever’s portfolio is worth the most two years later wins $10,000—real dollars, that is.

How do we select the 20 stocks for our entry? When I explain the contest to students, I also discuss the evidence that most investors don’t outperform the market. I suggest we could tape the stock pages of The Wall Street Journal to the wall and literally throw darts at it. Several students like this option.

But instead, I distribute Value Line’s current list of 100 stocks most likely to outperform the stock market over the next year. To focus on value stocks, I take these 100 stocks deemed most likely to outperform, circle the 40 or so companies with the lowest price-earnings ratios and ask students to select stocks from this list.

Value Line Investment Survey, which is often available at larger libraries, evaluates approximately 1,700 stocks. Value Line gives each stock a timeliness rating from one to five, indicating its belief that the stock will outperform the market over the next year. My initial list for the students draws on those stocks rated one for timeliness.

Rating             Number of Stocks    Meaning

1                      100                             Most likely to outperform

2                      300

3                      900

4                      300

5                      100                             Least likely to outperform

Value Line has a full-page analysis of each of these 1,700 stocks. Each stock gets a full review every 13 weeks, which means each week it updates this detailed analysis for about 130 stocks. But each week, all 1,700 stocks are evaluated for timeliness.

Some 30 or 40 years ago, there were a few academic studies indicating that Value Line could outperform the market averages. I have seen no recent independent studies of Value Line. My guess is that any advantage Value Line might have had decades ago no longer exists.

While I don’t believe Value Line will outperform the market, it’s one way to narrow down the list of potential stocks. It’s definitely safer than letting college students throw darts in a classroom.

Six schools entered the first contest. We won, receiving $10,000 and an oversized check. I took the check to our next faculty meeting and bragged about our business students. Most faculty assumed I had superior stock-picking skills, and I did not disabuse them of that view. But in my heart, I firmly believed it was just luck.

Six years later, we won again. If six schools enter each year, we ought to win about every six years. I didn’t point out that obvious fact when I went to the faculty meeting with that oversized check.

The very next year, we won again. Did that indicate we had a winning method? No. If six schools enter, and if the winner is completely random, the chance of this year’s winner winning again next year is one out of six. While my method of picking stocks might be superior, I believe two wins in a row is simply a random occurrence.

Recently, the contest was modified. Instead of starting just once a year, it now starts every semester. The payoff for winning was reduced from $10,000 once a year to $5,000 each semester. The number of participating schools has dropped to just four or five, increasing our odds of winning each contest.

Although I'm now retired, our school continues to follow the above method. Over the years, we have won $35,000. We call it our slush fund. Our department has used that money for additional faculty enrichment opportunities, student awards, end-of-the-year catered dinners for graduates and their families, and a host of other good causes. Perhaps most important, our finance students have learned some important lessons about how the stock market works.

Larry Sayler is the only person with a Wharton MBA who also graduated from Ringling Bros. and Barnum & Bailey’s Clown College. Earlier in his career, he served as CFO for three manufacturing and service organizations. For 16 years before his retirement, Larry taught accounting at a small Christian college in the Midwest. His brother

1. My continued employment as a delivery driver would likely have left me on Social Security Disability (SSDI) by age 55.
2. I was very interested in personal finance, and knew many people in that field who would help me get my foot in the door.
3. I had acquired bookkeeping, payroll, and tax prep skills through my involvement with my local union, though I never pictured myself as the type to sit behind a desk, in a dimly lit office, crunching numbers beneath the glow of one of those green shade banker’s lamps.
4. As a last resort, I could fall back on my truck driving skills, using my commercial drivers license to get a job hauling ‘no-touch’ freight of some sort.
5. Last but not least, I needed a place to live. “Hello, mom and dad, I need my room back”. Sleeping on the twin mattress I gave up 25 years earlier, was not part of my plan.
6. I was determined not to let my occupation as a beer truck driver dictate my future job prospects.

1. Where to live? Living with the folks was never meant to be a long term thing. After three months of that, I signed my first ever apartment lease as a lessee, as opposed to a lessor. That lasted two years, until a very large increase in the rent caused me to buy a duplex, and become a lessor again.
2. Where to work? I continued my work as a delivery driver for three more years. My position as the local union president, and my five paid weeks of vacation actually kept me off of the truck much of the time. That enabled me to tolerate the maladies that would eventually force me out of that job. Having absolutely no desire to spend the balance of my life languishing on SSDI and a minimal IRA balance, I set off on the path to becoming a financial services guy. That did not work out, and if you want more information on that, here’s a link.
3. To make ends meet, I turned to my last resort; driving a truck. Piloting an 18-wheeler was not how I envisioned my remaining working days. And although the freight was ‘no touch’, driving 600 miles every day in a Kenworth tractor is still pretty hard on your vertebrae. But sometimes you have to do what you have to do to survive and to keep your eye on your finish line. My heart goes out to full time drivers, that job is no walk in the park.
4. And what about love? My preference was to be in a relationship, but not any relationship. I wanted a good partner, I wanted to be a good partner as well. What qualities would I look for in a new partner? Independent, established, confident, and nice. Was I asking too much?

For 30 years, Dan Smith was a driver-salesman and local union representative, before building a successful income-tax practice in Toledo, Ohio. He retired in 2022. Dan has two beautiful daughters, two loving sons-in-law and seven grandchildren. He and Chris, the love of his life, have been together for two great decades and counting. Check out Dan's earlier articles.