Georgetown University’s Newspaper of Record since 1920

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Georgetown University’s Newspaper of Record since 1920

The Hoya

Georgetown University’s Newspaper of Record since 1920

The Hoya

Paragamian: How College Students Can Profit From Being the Market

How does this sound: 140 free burritos with chips and a drink to be shared with anyone you like in 2011? It might require some extra appearances at Yates, but I wouldn’t complain about the offer. Or how about 140 free Starbucks coffees? This essentially could have been yours if you had made wise stock market investments with your money at the start of last year.

Let’s say that at the beginning of 2010 you could have put away $1,000 to invest — certainly not a small chunk of change but not an outrageous amount either. If you had used that money to buy shares of Chipotle Mexican Grill (CMG), you would have made a profit of about $1,400, as your investment would have grown to be worth approximately $2,400. Figuring that a burrito with chips and a drink cost about $10, you would have made enough money for 140 such meals. If you had used that $1,000 to invest in Starbucks Corporation (SBUX), you could have earned about $400, as the company’s price per share rose approximately 40 percent in 2010. Supposing that a tall Caffe Latte costs about $2.85, you would have earned enough money for 140 of those drinks.

We, as college students, represent an important demographic. According to the most recent numbers from the National Center for Education Statistics, there were 18.2 million students enrolled in degree-granting institutions in the fall of 2007. Although most of us do not have much money to blow, we all have certain needs that have to be met, and we share a lot of the same desires.

Ask yourself the following question: How do I spend my time and money? Odds are that many of us would provide responses that are very much alike. If our money gets spent on the same things, then the sellers of these things will likely rake in a lot of money. With 18.2 million of us, the total expenditures covering our needs and desires are quite substantial. By thinking about the above question — how do I spend my time and money? — you could identify top performing stock market companies. Starbucks and Chipotle are two great examples of such companies. Here’s an example of a common need: Many of us rely on caffeinated beverages to wake up and stay up. Starbucks provides high-quality caffeinated beverages, and though many people whine about their expensive prices, customers continue to flock to their stores. It also doesn’t hurt that their product contains caffeine, which is addictive. Now here’s a desire: a quick, reasonably priced, tasty meal. After eating at O’Donovan Hall for 10 meals straight, getting tired of having Easy Mac twice a day, or desperately rummaging through an empty refrigerator, many students turn to restaurants like Chipotle for refuge.

It is important to recognize that merely answering the suggested question is not enough.  Before making an investment, you need to do some homework to see if the company is likely to be profitable and sustainable for at least some amount of time (depending on how long you plan on holding your investment). In the case of Chipotle, the company has 1,000 stores nationwide and has plans to open over 100 additional stores in 2011 and many more in the years to come.  Starbucks has more than 16,000 stores worldwide and is set to open more than one new store per day in 2011. Furthermore, both companies are scalable, meaning that they can easily replicate their stores across the country or the globe. Thus, both companies seem to be profitable and sustainable in the long run.

Though just responding to the posed question is not sufficient, it is a great starting point.  In the coming months, I will try to identify other ideas and companies that will make you as fat and happy as Chipotle and Starbucks would have a year ago. In the meantime, think about the basic question: How do I spend my time and money?

Matt Paragamian is a sophomore in the College. He can be reached at [email protected]. MoneyMojo appears every other Monday.

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