The Share Challenge: Pupils still the masters as fund manager languishes

Five months to go, and it's a tight race in the Share Challenge, says Jamie Felix
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The Independent Online

Seven months into this year's Share Challenge competition, and the girls from Moat Community College in Leicester are proving yet again that even the most amateur investors can tackle the City suits and win.

The pupils are the only team that has managed to turn a profit, with a 2.5 per cent gain since the competition began in February. In second place is the Bucket & Spade investment club, down 2.7 per cent, and treading at the back is stock expert Colin McLean, head of SVM Asset Management, with a loss of 11 per cent. All the teams have yet to catch the FTSE All Share index, which has advanced 6.8 per cent over the same period.

The teams know there is still time to battle it out and take home the £2,000 cash prize, sponsored by Abbey Stockbrokers. But the clock is ticking, and the rivals are stepping up trading activity in hope of banking shorter-term gains and clawing their way into the lead.

The Bucket & Spade Club from Bournemouth are working hard to revive their spirits and catch the leaders. "We've had a bit of a clean-out with our competition portfolio," says David Lawrence, the club's chairman. "Initially we focused on shares with longer-term potential, like those we invest in through our club, but we need to achieve shorter-term growth if we want to win. The school pupils have had the Midas touch, and the fund manager has really turned himself around, so we need to work harder if we plan to win," he says.

So the team has sold solid but stagnant performers such as Tesco (still held in their club portfolio) and stocked up on more volatile shares they hope can deliver big results fast. Aquarius Platinum, the mining firm, and WPP, the advertising agency, are among new picks, yet both have so far proved disappointing, posting losses of 1 and 4 per cent respectively.

The team has, ironically, fared better with its more defensive plays, including Kelda, the Yorkshire-based water utility, which has surged 13 per cent, and BAE Systems, the aerospace and defence giant, which has increased 8 per cent since the club bought five weeks ago.

The group has also started meeting more frequently, Lawrence says. Like many investment clubs, the Bucket & Spaders have experienced lulls in their enthusiasm, especially during quiet periods in the market or when their portfolio performance has slipped.

That's when the social aspects of clubbing together become most important, Lawrence says. "Summer can be quite quiet for us, so this year we replaced our August meeting with a barbeque and invited partners and children. Between the burgers and sausages we actually had a good discussion on strategy and did quite a bit of work."

The club's portfolio has just hit an all-time high unit value of 120p (unit value measures profit based on an initial value of 100p), and they plan another social event after Christmas, to coincide with the end of the competition, which "could be a celebration or a wake," Lawrence says.

Meanwhile, McLean, whose SVM UK Opportunities Fund is one of the most successful in its asset class, is undeterred by his 11 per cent loss so far. He hopes his performance serves as a lesson about the importance of diversification rather than an example of poor stock-picking. "Good diversification can be achieved with 25 stocks, but not with five, as per the competition's rules. Even the most successful focused fund managers usually hold a concentration of 30-40 shares," he explains. "Most of my losses in the Share Challenge have stemmed from just two stocks - Oriel and First Calgary - which, in a normal portfolio scenario, would have much smaller implications on overall performance."

The stock expert remains upbeat and is determined to recover his losses and take back the lead. McLean has picked up the pace of his trades, banking small profits while flushing out weaker performers. His entire current crop of shares is on the rise, including Fun Technologies, a gaming firm McLean held earlier in the competition and sold at a good profit.

"The company has made a lot of progress this year. It focuses on skill gaming and fantasy competitions, which is different from other gaming businesses such as gambling or sports betting. Skill gaming attracts a large female audience and is considered more acceptable than gambling, allowing Fun to develop partnerships with eBay, Virgin and AOL. I believe the company has real potential, and that skill gaming will enjoy a boost from global competition in the future."

McLean's hard work is paying off. Just two months ago, the fund manager was down more than 25 per cent; since then, he's recovered his losses to a more manageable 11 per cent. "When you're dealing with such a limited portfolio, active, smart stock-picking is crucial," he says.

As the pro rushes to make up his losses, the front-running students are taking a more strategic approach, favouring oil shares they think will benefit from the longer-term outlook for higher oil prices. BP and Tullow Oil are two of their top performers, up 14 and 12 per cent respectively.

McLean's recovery has the student team worried, says Claire Jackson, their teacher. "He's worked out how to play the share game and they know he's going to be more of a threat now," she says. Oh, the irony.

There are still five months left before the end of the competition and anything can happen. One thing's for sure: when it comes to investing in stocks, anyone can win.

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