Student Stock Pickers Manage Millions for TVA

College students at 24 universities across the Valley are actively managing $12 million as part of TVA’s Investment Challenge Program. The program, which started in 1998, has yielded $16 million in investment returns, which are now being compounded as part of $4 billion in trusts that will help finance TVA’s transition to cleaner forms of generation.

The $12 million ICP collegiate fund is split equally among participating schools as students from each university actively manage a $500,000 portfolio. The ICP serves as a “real-world” experience and often leads to paid internships and gainful employment for participants. Their goal is to outperform the S&P 500 Total Return Index.

“The Investment Challenge Program is a win-win for TVA and the community,” said Vice President Tammy Wilson, TVA’s chief risk officer and treasurer. “Not only are we investing in our Powerful Partnerships strategic priority, the returns these students are making year-over-year are going to help offset the retirement of our non-nuclear assets.

“You can’t overstate the power of compounding interest, and their efforts will continue to help us maintain affordable rates for our customers as we move to equip our legacy fossil sites like Johnsonville and Colbert with new generation technology.”

Decades of Dividends

Pavel Begun (pictured left) is a co-principal at 3G Capital Management LLC, a private investment partnership that actively manages $100 million worth of assets for clients in both the U.S. and Europe. Originally from Minsk, Belarus, Pavel applied with the U.S. Information Agency and received a scholarship to study finance at Western Kentucky University in 1999.

Begun was one of the early participants of the ICP.

“I loved learning in a real-life collaboration environment,” Begun said. “It’s not like most classes you take at school. This happens with real-life dollars, which makes the transition from a student to the workplace much easier.

“Because of the program, I was already familiar with the way the structure works inside an investment firm, and I had no trouble transitioning. It gave me the upper hand.”

Today, Begun is still using the tools he learned at Western. He’s a value investor who analyzes balance sheets and cashflows of undervalued businesses across the globe. His long-term investment strategy is similar to Warren Buffett’s, as the two are constantly looking to buy industry leaders with little debt and at a single digit multiple of earnings.

Begun says he not only looks for great companies selling at P/E ratios of less than 10, but businesses that are capable of growing earning for years to come.

“Listen. If you want to learn how to ride a bike, you can spend a month reading books on bike-riding and that’s not going to help you get one step closer,” Begun said. “If you get on a bike, you’ll be riding in 60 minutes. It’s the same way with this program. If students do this, they’ll learn the basics in one semester.”

Training Wheels

Maren Egging (pictured left) a is triple-major sophomore who is studying banking finance, risk-management finance and real-estate at Ole Miss. She’s one of the students managing the health-care sector of the Ole Miss Investment Challenge fund.

Egging considers herself a value investor too. She likes researching health care because as a young girl she always thought she wanted to be a doctor. Today she’s hoping to be a private-equity analyst.

She credits the hand-on experience she’s received with the ICP as on the key factors that landed her a paid internship this summer where she’ll be working as an investment analyst for Principal Financial.

“I like data and really telling a story by the numbers,” Egging said. “I really like the idea of working for a fund. That’s pretty exciting for me.”

But no matter how many charts and balance sheets Egging studies, the stock market can be unpredictable — and not all of her team’s picks have been winners. Last month, Egging’s team sold a stock for a loss and diversified their portfolio to ensure the Ole Miss fund of 48 total holdings wasn’t overweighted in the health-care sector.

“I learned you really have to look at what makes a company special and what sets them apart from their competitors,” Egging said. “I feel I’m way ahead of the curve because I’ve learned things with the TVA fund that are now coming up in class.”

Win, lose or break-even, Wilson says that’s the point.

“Whether these students pursue a career in finance, the skills they are learning are going to be invaluable in aiding in their investment acumen. That’s something they can use for their resume or to manage their personal finances for the rest of their lives.”  

Last year, the student stock pickers banked a 25% rate of return for 2021.

ICP teams have collectively outperformed the S&P 500 total return of 8.56% by 53 basis points each year since the program's inception, which is an excess cumulative return of 80%.

In short: the program is working.