Parents of college-bound students are constantly being hit with the news that the cost of higher education is rising faster than the rate of inflation. So how are colleges doing?

You would think that universities would have the best minds working on their investments. Perhaps yet another testament to the unpredictability and volatility of the current market environment, it was recently announced that the Harvard Endowment Fund, the largest endowment of all universities, lost $8 billion during the first few months of the school year.

Stockpickr.com tracks the endowment funds of major universities, including Harvard Management Company, an investment arm of the Harvard University's Endowment Fund. Although the endowment has recently taken a hit along with most mutual funds and hedge funds, it had reported an average annual return of 21% from 1990 to 2005.

One of the stocks recently purchased by Harvard is Foundry Networks (FDRY), which produces and sells switching and routing products for landline and wireless local area networks and wide area networks. The stock was recently downgraded from buy to hold by TheStreet.com Ratings. Brocade (BRCD) had agreed to buy Foundry for $3 billion in July during the summer but announced in late October that it would cut the amount to $2.6 billion. Foundry has a fairly high P/E ratio of 36 and a PEG ratio of 1.68, both of which are much higher than the industry average.

Foundry is also owned by the ProFunds UltraSmall Cap Investors Fund, managed by Elisa Petit. The fund aims to achieve returns of twice the daily performance of the Russell 2000 index and has at least 80% of its assets in equity securities contained in the index. The fund also owns Alexion Pharmaceuticals (ALXN), with a forward P/E of 39 and a PEG of 2.7; Empire District Electric (EDE), with a P/E of 17 and a PEG of 2.14; and Myriad Genetics (MYGN), which has a P/E of 43 and a PEG of 1.65. Myriad Genetics is one of the few stocks that is up for the year, by more than 30%, and is rated buy by TheStreet.com Ratings.

Another new Harvard holding is Corn Products International (CPO), which produces and sells food ingredients and industrial products that come from milling and processing of corn. Although TheStreet.com Ratings lowered its rating from buy to hold recently, it stated that the company's strengths include "its impressive record of earnings per share growth, compelling growth in net income and robust revenue growth." The stock has a fairly low P/E ratio of 8 but a somewhat high ratio of 2.91.

Corn Products shows up in the Stockpickr portfolio of the Franklin Balance Sheet Investment Advisors Fund, which has a Morningstar rating of three stars and is managed by Bruce Baughman. The fund had an average annual return of 1.76 % over the last five years, outperforming other funds in its category and the S&P 500. Other stocks it owns include Prudential Financial (PRU), with a P/E of 9 and a low PEG of 0.4; StanCorp Financial Group (SFG), with a P/E of 8 and a PEG of 0.64; and Norfolk Southern (NSC).

For more ideas, check out the Harvard Management Company portfolio at Stockpickr.com.

Posted on Dec. 8, 2008