Two years ago, the Wharton Trading Group (WTG) did not exist. Focusing on trading strategies in a variety of commodities markets, the Wharton Commodity Group (WCG) had a small membership base and closely followed a narrow segment of the financial markets. Since, we’ve rebranded and evolved into a platform that attracts those that seek a way of thinking – a broad skillset useful for understanding business models, analyzing competitive landscapes, and identifying market dislocations in fundamentally misunderstood companies. Rather than exclusively having guest speakers and sending teams to competitions, we’ve built out an educational one-stop-shop that assumes no prior knowledge and trains our members to analyze businesses in a range of sectors – an important ability regardless of post-graduation aspirations.
While we operate under the name “Wharton Trading Group,” we are ever-evolving and are pushing towards a direction with an even broader appeal. Under our educational function, we have a variety of growing investing teams: Technology, Media, and Telecom (TMT); Industrials & Cleantech; Special Situations; Consumer Retail; Energy; and Global Macro. Each of these teams is led by one to two Portfolio Managers (PMs) and has roughly eight to 12 members. We also have a larger Development Team for those that are less experienced and desire an outlet to grow and later join one of the main investing teams.
Along with serving as Co-President, I am the PM for the Technology, Media, and Telecom team. This is by far my favorite part of WTG. Each week, we take a deep dive into a different tech company in the sector. So far we’ve looked at Dice Holdings, Interactive Corp, MIPS Technologies, and Blucora, among others. Everyone works together and reads relevant material: 10-K filings, sell-side analyst reports, consumer reviews, and other sources of information. With different strengths and weaknesses, the team collaborates to build an understanding about the industry dynamics, financial standing, and sources of risk for the company in question. Central to this process is a passion for tech. MIPS Technologies, for example, is a small-cap company that licenses low-power processor architecture for networking and mobile applications (significant IP). MIPS competes with ARM and in some cases, Intel, in the mobile computing market. With declining license revenues, MIPS has put itself up for sale – potential suitors include strategic buyers (ARM, Intel), patent troll companies, and large customers. To determine the price a buyer would pay, an understanding of the strategic implications of a sell to each class of suitors is important. A solid grasp of the competitive landscape, industry dynamics, and nature of product is essential to analyze this tech situation. For Blucora, we looked at the company’s recent acquisition of TaxACT – a high-growth tax software solution that could dethrone incumbents like Intuit and H&R Block as well as their core search business, Infospace. Dice Holdings is a job-board website that we identified as a business model in secular decline – challenged by more progressive models with superior technology platforms. We’ve had a chance to do a lot of interesting work at the intersection of tech and investing.
With multiple sector teams, and extensive collaboration within each unit, there is a strong value proposition and significant leverage for our members. As a member of the TMT group, I can learn from my teammates about areas I’m less familiar with in a hands-on fashion as well as gain exposure to other industries when the other teams present their work and ideas. Experienced upper-classman hold lecture-like sessions and workshops to help members sharpen their skills. Best of all, there is a strong sense of camaraderie within each team as the time commitment and mutual passion breeds connection between members. On the TMT team, seven of our 10 members are in the M&T Program. Over all the investing teams, more than 20 M&Ts are involved. A desire to understand the technical details of a product/service offering is important in understanding a business, a skill near and dear to the M&T background.
I’m very excited for the work that the TMT team continues to produce during the year. We may take a step back and work on industry reports (Semis, Mobile, Wireless, Internet Media, Storage) or continue to look at individual names. Members have researched Zynga, VMWare, Sprint, Facebook, Microsoft, Amazon, and others – we may dig deeper into these companies. Regardless of wherever we go next, I’m looking forward to the continued growth and evolution of our club and teams. As Warren Buffet once said, “I get to do what I like to do every single day of the year,” and I couldn’t be more thankful for that opportunity.
Feel free to check out the WTG Investing Letter, Volume 1: http://pennwtg.files.wordpress.com/2011/09/the-wtg-investment-letter-volume-i.pdf