The Virtue of Value (Buy and Hold)/ Fundamental-Based Investing

For the past two months, groups in my Principles of Investment class at Georgetown University have been competing to see who can garner the best returns via MarketWatch's  Virtual Stock Exchange. Each group started with $1,000,000 and had to hold  at least 5 different securities at any one time. My group finished 2nd out of 29, following the philosophy of Value Investing while keeping the two month investment horizon in mind. It is interesting to note the results of the competition in comparison to the number of trades each group made:

Current Rank
Nickname
Net Worth

Total Return
Transactions last 40 days
1
MOB
$1,233,875.58
 
+23.39%
25
2
Well Endowed
$1,143,910.49
 
+14.39%
1
3
BGLY Inc.
$1,123,086.08
 
+12.31%
3
4
BOGLE INVESTORS
$1,116,365.57
 
+11.64%
10
5
Kensington
$1,113,869.63
 
+11.39%
92
6
Hootie and the Brofish
$1,112,858.46
 
+11.29%
2
7
The Sassy Cassies
$1,107,289.20
 
+10.73%
48
8
TheMadBernies
$1,100,841.61
 
+10.08%
0
9
Short Term Capital Management
$1,100,239.95
 
+10.02%
1
10
KAFG Capital Management
$1,090,608.33
 
+9.06%
0
11
Deelo
$1,084,498.75
 
+8.45%
20
12
USA USA USA
$1,082,701.37
 
+8.27%
0
13
MOSA Investments
$1,082,317.46
 
+8.23%
48
14
ABG Investments
$1,080,045.00
 
+8.00%
3
15
GGIC
$1,075,794.05
 
+7.58%
8
16
Ponz
$1,071,411.01
 
+7.14%
0
17
Asset Allocation
$1,054,759.65
 
+5.48%
8
18
Hoya Capital
$1,045,594.17
 
+4.56%
2
19
InvestingFisher
$1,038,008.25
 
+3.80%
0
20
Abusement Park
$1,036,896.26
 
+3.69%
6
21
Investomaniacs
$1,036,304.97
 
+3.63%
11
22
Euthenia Group Fund
$1,033,045.10
 
+3.30%
1
23
NOOOOOO
$1,029,806.34
 
+2.98%
1
24
CASSELANDERSONZHOU
$1,025,777.90
 
+2.58%
1
25
Even a Caveman Can Do It
$1,020,891.50
 
+2.09%
8
26
Bernie Madoffs Wife
$1,011,298.13
 
+1.13%
197
27
Prestige Worldwide
$1,001,211.36
 
+0.12%
2
28
Ooops LLC
$1,000,000.00
 
+0.00%
0
29
Matt
$946,870.15
 
-5.31%
0

While these numbers or any conclusions drawn from them can certainly not be considered scientific or statistically valid, the groups that rank higher for the most part have fewer trades overall as compared to the groups that did poorest (i.e. Bernie Madoffs Wife with 197 trades).

A portfolio of companies that satisfy sound fundamental analysis seems to perform better than a portfolio of companies being day-traded off of technical indicators. While the day-trader has the high chance of essentially "freaking out" every time their shares take a dip during the day and sells it off, the investor taking a "Buy and Hold" view does not lose out to daily changes in price by suddenly selling that could be affected by any number of macro-economic factors with potentially little to no influence on the future value of the company. Instead, the "Buy and Hold" investor is able to hold on and reap the value of long term gains. Fundamental analysis links directly to the industry, operations, management, and performance of the company at hand, while technical indicators as a whole seem to work on the premise of the "self-fulfilling prophecy"- enough traders follow the technical indicators and associated chartology that the technical theories seem to have value. 

Our group looked for companies with great fundamentals and upcoming events that could prove catalytic for the stock price because of our two month investment horizon (such as MetLife's purchase of the Alico unit of AIG for $15.5 billion). We would have most likely ranked first if it were not for a very risky yet impressive maneuver group MOB pulled the day before the assignment was due: selling every single share they owned, putting all their money into Pier 1 Imports, and banking on the fact that certain analysts believed they would announce better than expected earning results the next day. Pretty clutch.