The Share Challenge: Old pro goes big on oil for an early lead

The bitter cold temperatures outside have not kept red-hot stock expert Colin McLean, of SVM Asset Management, from taking a healthy lead in this year's Independent Share Challenge. Our three-way stock-picking battle pits a professional fund manager against an amateur investment club and a group of 16-year-old students to see who can rake in the most profits.

Each team has been given a virtual sum of £5,000 to invest in five UK shares, which they may trade up to five times each month. The winning team with the highest portfolio value after 12 months will take home £2,000 from Abbey Sharedealers, the sponsor of the competition.

Two weeks into trading, McLean has already pocketed a profit of 2.4 per cent, or £121, with the Bucket & Spade Investment Club, from Bournemouth, in second place, up 0.5 per cent, or £26. Both teams have done well to outperform the FTSE All-Share Index, down 0.5 per cent over the same time period.

The 16-year old novices from Moat Community College, in Leicester, are already nursing a humbling loss of 4.3 per cent. The girls know they have their work cut out defending their school's winning title in last year's challenge, when their classmates beat the pros and scooped up the £2,000 prize.

They will need to catch frontrunner Colin McLean, head of SVM Asset Management, who has more than 25 years' experience investing in British stocks and shares. The SVM Select Opportunities Fund, one of the stable of equity funds McLean oversees, has increased 36 per cent over the past three years. McLean's portfolio in the competition reflects his style of balancing powerhouse blue-chips with smaller undervalued plays.

Shell Transport, the oil giant, is McLean's top holding at the moment and represents 25 per cent of his portfolio - the maximum allowed for a single share in the competition.

"Shell is one of the big FTSE stocks offering the most potential," says McLean. "The share will continue to benefit from strong oil and metals prices and its weighting will increase in the index when it completes its merger with Royal Dutch."

McLean is bullish on the oil and mining sectors, and the majority of the fund manager's shares have a commodities influence. In addition to Shell, McLean has tucked into Oriel Resources, a small-cap mining company, and Corus Group, the steel conglomerate.

"Many institutional investors are underweight in oil and natural resources, and are likely to add if oil and metals prices remain high," says McLean. "The companies I've chosen also have the potential to add to assets with further exploration."

Fun Technologies, which provides systems for gaming websites, is another of the expert's top picks. Last week was the five-year anniversary of the dot-com bubble bursting, and most technology shares are still far from recovery. But many investors, including McLean, think certain parts of the sector are due a rebound in the coming year. "There is still a lot of potential in Fun," says McLean. "The share has risen far less than similar businesses this year, such as Neteller and Sportingbet, which are both up over 17 per cent."

McLean gives high marks to Fun's management team, which has a successful track record in the industry, and the share should benefit as the company expands into new areas and makes acquisitions, he says.

After McLean scooped up Fun at 190p, the share jumped to 210p - a new high. But the City expert adds a cautious note: "Fun is trading at a premium to next year's expected profits. But the company should continue to grow in the long term." The advice strikes a bitter chord with the student team. Eager to share in McLean's profits, the girls traded into Fun Technology at its peak price of 210p - only to watch the share reverse course. It now hovers between 203p and 206p.

It's a hard lesson for the novices, who have no prior experience, but they are far from alone when it comes to amateur investors who have taken punts on hot stocks - only to watch them die soon after.

Stakes in Next and Manchester United have also proved disappointing. The girls have done well to buy businesses they are familiar with; the strategy is a favourite of stock millionaires such as Peter Lynch and Warren Buffett. But it is just a starting point. Even the most trendy brands make poor investments if the share price is too high and future growth has already been accounted for.

Impatient with their losses, the girls sold out of Next after one week. They still have more than £1,000 in cash to invest,but they used the Next proceeds to buy into McCarthy & Stone, the retirement home builder, which also features in the Bucket & Spade Club's portfolio.

"McCarthy & Stone is based near us and it is a big developer in the Bournemouth area," says David Lawrence, the club's chairman. "We have met a number of residents who live in their properties who speak highly of them. The company is well positioned to take advantage of the demand for more retirement communities as the population ages."

Most of the team's stock picks are based on those they hold as an investment club. The members, diagnostic engineers in the British Telecom office in Bournemouth, formed the club four years ago after they saw an advertisement in the canteen from Proshare Investment Clubs, an organisation that helps amateur investors get together and learn to trade.

"We've been investing ever since. We went through a tough patch when we first started, but we're really on a roll now," says Lawrence. The club recently hit an all-time high when its unit value, a measurement of profitability, hit 117p, which equates to a profit of 17 per cent.

Tesco is one of the club's favourite shares, and is now part of its contest portfolio as well. Despite the supermarket giant's unprecedented growth, the team thinks there is still more to come, particularly in financial services such as insurance and personal loans.

"Tesco is expanding its cheap and simple format to a whole range of new products and services that appeal to consumers. Nowadays, you can pop into the shop or go on the internet, fill out a form, and you have your travel insurance in minutes. We think Tesco's share price will continue to perform well off these new offerings," says Lawrence.

It is still early days in the Share Challenge and anything can happen over the next 12 months. Stay tuned for monthly updates, or log on to Bullbearings.co.uk/independent to track the challengers in real time throughout the year.

Abbey Sharedealing, the discount broker, is sponsoring the Independent Share Challenge. For information on Abbey's low-cost trading fees, or to set up an account, visit www.abbeysharedealing.com or call 0800 389 2324. Data for the game is provided by leading financial website www.digitallook.com.

To find out how to set up and run an investment club and earn while you learn, go to www.proshareclubs.co.uk or phone 0906 802 2222.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Life and Style
love + sex
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
News
people
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Graduate Application Support Analyst

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Reach Volunteering: External Finance Trustee Needed!

    Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

    Christine McCleave: FP&A Analyst

    £36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

    Recruitment Genius: Sales Executive - OTE £40,000

    £15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn