Amateur stock pickers find platinum and hope for gold
Investment club ousts college girls from lead in Share Challenge contest. Jamie Felix reports
Saturday 17 December 2005
As the second Share Challenge competition enters its final months, the race is hotting up, with all three teams scrambling to bank profits and trade their way to the top. For the first time this year, the 15-year-old schoolgirls from Leicester have lost their lead to the Bucket & Spade Investment Club, which moved into pole position with its 10.2 per cent increase in portfolio value, versus the 9.2 per cent rise from the students.
However, there is still little holiday cheer for professional asset manager Colin McLean, who continues to languish in third place with losses of 12 per cent. With less than three months to go before the end, McLean has his work cut out if he plans to repair his deficit and catch the amateurs.
The amateur club, whose members are engineers in BT's Bournemouth office, are relishing their move into the top spot and are firmly committed to maintaining their lead and winning the £2,000 cash prize.
Even more impressive, the investment club's 10.2 per cent surge has pushed it ahead of the FTSE AllShare index (up 9.9 per cent), which is the first time a competitor has eclipsed the market intwo years.
The club, which has added 13 per cent to its portfolio value in two months, admits such explosive growth does not come easily. David Lawrence, the head of the investment club, says its performance reflects an overhaul in the team's strategy: "As a club, we generally pursue companies with longer-term anticipated growth. But when we saw the students widening their lead, we knew we needed to adopt a more active plan and we have moved into more volatile shares." The team has bulked up on companies in the natural resources and mining sectors, including Aquarius Platinum, one of its top performers so far, up 26 per cent since September. Even amateur investors have the tools to find hidden gems, explains Lawrence: "I spotted Aquarius in the summer when I was running an internet search for new investments in the mining sector for our club. I liked the look of its charts and forecasts." Other gains have come from holdings in Kelda, Vedanda and Premier Oil.
If there is any fault with the strategy of the pupils from Moat Community College, Leicester, it is that they have been too cautious, banking profits early. They are none too happy losing their top position so late in the game. From day one, the girls have maintained a well-diversified portfolio, which has proved the key to their solid, steady performance month after month. The team banked a clean profit from its shares in Marks & Spencer, which it sold at 415p in early November. Yet the share price has not stopped rising, hitting 460p earlier this week. The girls have now repurchased the share, but had they held on from the beginning, they would now be basking in a 20 per cent gain, rather than a mere 8 per cent.
The City expert Colin McLean, who is chief executive of SVM Asset Management, is plagued by the opposite problem, holding on to certain hard-hit shares for too long in the hope that they would reverse their falls. The Aim-listed gas and oil exploration company First Calgary Petroleum, which was initially among the expert's most promising picks, turned into a serious loss after the company released poor results earlier this year. As the share slumped further, McLean kept piling in.
McLean blames the contest's rules, which limit each team to five shares at any one time, and the short-term pressure to deliver results, for distorting his performance so far.
McLean has since tightened his portfolio with a crop of companies that are narrowing the gulf with the amateurs. Shares in Ashtead Group, an equipment manufacturer, and Crosby Capital Partners, a merchant banker, have both proved juicy earners.
Abbey Sharedealing, the discount broker, is sponsoring the Independent Share Challenge.
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