The past few months have seen some of the most volatile stock market conditions for two decades, with the FTSE 100 falling 30 per cent in just a few weeks during September and October. Such a tough trading environment has proved the ultimate test for the three teams in this year's Independent Share Race – but it has given our professional fund manager, Colin McLean of SVM Asset Management, the chance to show the true value of experience.
Since the competition started back in February, all three teams are nursing a loss. However, while the FTSE All-Share has fallen 30 per cent since February, McLean's portfolio has lost a few percentage points. The students at Leicester's Moat Community College are also outperforming the market, but the Birch Investment Club has now lost more than half of its money.
Colin McLean, SVM Asset Management
After a shaky start, Colin McLean had built up a commanding lead by the summer. He's tended to stick with defensive stocks: energy, tobacco and pharmaceuticals among favourites.
Like most investors, McLean has seen recent losses, but bids on two energy holdings have helped him stay way above the market. Having bought Imperial Energy in July, he sold half of his stake at a 50 per cent profit two months later, after it had won a bid. The price has slipped since, but he's hung on to the remainder of his stake.
The other company to receive a bid was British Energy. Again, McLean has locked in some profits from this position, but has held on to some of the stock, which is still sitting at a discount to the bid price.
McLean is keeping positions in both of Britain's biggest drug companies, which he says are benefiting from a strengthening of the dollar. His final current holding is Unilever, a relatively defensive stock. McLean says he's been attracted to the stock by its new management, which appear to be focused on increasing profitability.
Birch Investment Club
When we last looked at our teams' progress, the Birch Investment Club – a group of employees from the lime producer Singleton Birch – were in third place. Yet with a loss of just 15 per cent, they were not out of the game. They were nursing a nasty loss on Alliance & Leicester, and did well to sell out before its price slumped further. They also sold out of Rentokil at a profit – a stock that has since lost 50 per cent of its value. They then made quick profits on Bradford & Bingley and property firm Capital & Regional.
Their undoing was down to two poor stock picks – HBOS and the Western Canadian Coal Corporation. The team bought HBOS at 275.5p in July, and it's now worth less than 85p. They should perhaps count themselves lucky it's now worth anything.
The Western Canadian Coal Corporation was another bad choice – hit by the drop in commodity prices. These two stocks have lost the portfolio almost 25 per cent of its value.
With three months to go, the club will have its work cut out to get back into contention. But with markets so volatile, it's not impossible.
Moat Community College
Having led at the start, the student team from Leicester had lost around 13 per cent by the summer, and were clinging to second place. The team started to look for companies that would stay profitable in a downturn. As a result, they picked cinema company Cineworld and Easyjet.
These were sensible purchases. But having seen little progress, they sold out of these at a small loss, and focused on oil and gas. Easyjet and Cineworld are now trading higher, and their oil and gas picks have not performed.
The team's portfolio is still only down around 20 per cent since February – a much better performance than the FTSE All Share, and leagues ahead of the investment club.
They have now bought into ITV and taken a small stake in reinsurer Benfield. But the bulk of their money is in property firm Daejan Holdings and JKX oil and gas. They may fare better with defensive stocks.
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