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Tulane Students Pick Stocks for Real

Hancock Horizon Burkenroad fund uses classroom analysis

No fewer than 40 analysts track Google's every move. But not one covers Cal-Maine Foods, the country's largest distributor of eggs. The Jackson, Miss., company's stock tripled in 2007 on the surging price of its star product. With a relatively small—but growing—market value of about $660 million, Cal-Maine may not be on Wall Street's radar yet, but it's closely followed by a handful of enthusiastic business students at Tulane University. "We're talking shell eggs—something everybody needs and everybody uses—but nobody really knows about the company," says Jason Dresner, 21, a graduating senior majoring in finance and economics who, along with three other students, gave Cal-Maine an "outperform" rating in November.

Dresner is one of 200 student analysts at Tulane who track small, often little-known companies of the Deep South. Led by Peter Ricchiuti, assistant dean of the Freeman School of Business, these undergraduates and M.B.A. students produce the Burkenroad Reports. In 2000, a Mississippi bank planning to launch a mutual fund focused on small, regional companies approached Ricchiuti. "We were looking for something unique and decided to incorporate some of the research Peter's students were producing into the process," says David Lundgren Jr., manager of what is now the Hancock Horizon Burkenroad fund. Lundgren estimates that 30 to 40 percent of the $25 million fund's holdings stem from students' analysis: "Their reports are as good as most sell-side research," he says. On average over the past five years, the fund has gained a cool 18 percent.

"Meat and potatoes." The Burkenroad analysts, who work in a trading room outfitted with a wall-to-wall ticker, follow 40 "stocks under rocks," says Ricchiuti: companies that typically have market values below $500 million and get little attention from Wall Street. All are headquartered in Alabama, Florida, Georgia, Louisiana, Mississippi, or Texas. They include Reddy Ice Holdings, a Dallas-based ice distributor; Sally Beauty Holdings of Denton, Texas; and plenty of energy companies. These are "meat-and-potatoes companies," Ricchiuti says. "We want small but profitable companies with understandable business models. That's where the opportunity is."

Students sometimes use the experience as a springboard to careers in stock analysis or money management. Burkenroadies spend long hours digging through financial statements, and they also log plenty of face time with company executives and make site visits. That could mean touring a chicken processing plant in Mississippi or taking a helicopter out to an offshore oil rig in the Gulf of Mexico. "Being able to interpret financial statements and boil companies down to nuts and bolts is a huge boost for that first job and lets you hit the ground running," says Abe Topham, 27, an M.B.A. student who completed Ricchiuti's class last year and now serves as associate director of research overseeing "written deliverables." Spoken like a true analyst.

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