Every now and then, Baruch College students have the chance to go head-to-head with some of the brightest minds from the nation’s top universities. TAMID at Baruch recently featured a team of three freshman undergraduate students who were selected as winners of the national TAMID stock pitch competition. Amit Agrawal, Rajesh Rao and Jamie Yatcha made a pitch to buy Freeport-McMoRan Inc. with a target price of $39.20 over a one- to two-year time horizon.
“Competitions like these, they really keep you on your toes,” said Agrawal, who was assigned as the group’s leader. “Everything that you read in the news is not material for the stock so, we had to choose the sources, weigh them against what the market is expecting and see how it was relevant. It’s very good practice for us while we are in school to get a taste of the real world.”
The pitches went through two rounds. The first round was on campus, where groups of three to four members competed against one another to advance to the national round. The top team was then selected to submit its stock pitch outline to the national TAMID Group, in which fellow chapter members reviewed and selected the winners. Among the schools that entered the competition were Columbia, Harvard, Maryland, New York University and University of California, Berkeley.
“Since Baruch is not considered a target school for the big financial firms, I believe that competitions like this are significant,” said Agrawal. “Despite being a smaller school with disproportionately lower resources, we have been able to win against target schools with big alumni networks in these industries. I believe that it is good that Baruch has a lot of hidden talent that is coming out.”
After initially searching for companies in the oil and gas sector, the team decided that it was best to avoid the space due to the low and volatile oil prices in the market. The group then looked at a few refineries, which are typically not affected by crude prices. However, with local demand for refined products tapering off, the group found that the risk-to-reward ratio was not good enough to pursue.
The team also looked into commodities such as gold and copper, which have added favorable gains since the beginning of the year. When asked about the decision to pitch Freeport-McMoRan, the team said that the company, which is one of the largest copper producers in the world, is expected to benefit tremendously from rising construction and infrastructure projects. Copper is used for a variety of building elements such as roofs, gutters and wall cladding. The market is expected to receive a further boost from increasing demand for consumer electronics.
A recent complication with the Indonesian government about its Grasberg mine, the third largest copper mine in the world, pushed the company’s share price lower in February as production halted for nearly a month. The sudden stoppage resulted in a supply shock in the markets, sending copper prices higher.
“In the short term, for [commodities], they are pretty volatile … but we are not looking in the short term—not two months, not three months—our focus is more like 1-2 years because once the fiscal measures come into effect of the new administration’s infrastructure policy, [Freeport-McMoRan] will see a lot of demand,” said Agrawal.
Freeport-McMoRan announced that it had resumed producing copper at Grasberg on March 21 and that negotiations between the two parties were still ongoing. The team believes that improving economic conditions and upturns in emerging markets like Brazil’s are signs that copper will be more valuable over the next couple of years. Aside from looking at macro-economic factors, the team also analyzed Freeport-McMoRan’s balance sheets and also conducted valuation testing to arrive at its target price.
“We created a DCF model, and ran a few simulations under certain conditions, like what would happen if their cost of capital goes up or down and what if their growth rates fluctuate. We took conservative estimates and then we made a DCF valuation model,” said Agrawal.
TAMID is an organization at Baruch for students who want to contribute to the Israeli business, tech, economic and entrepreneurial scenes. Through the club, members gain real-world investing experience and work on projects deeply rooted in the economic development of Israel. Currently, the organization has over 1,500 members and 35 chapters in the United States.
“I like the environment because everyone wants to learn. They give it their all for these case competitions and participate really well,” said Agrawal. “It’s a small club, but it’s one of my favorite on campus.”
In the future, Agrawal wants to start his own fund, where he can provide low-cost options for investors. In the meantime, he is exploring different career paths in finance, including those in hedge funds, investment banking and private equity.