Share Challenge: The professional lags in the last leg of the race

Jamie Felix reports on the latest in The Independent's share-dealing competition

There are just four months to go in our Share Challenge Competition, and all three teams are pulling out the stops. Now in its third season, the Independent Share Challenge pits a group of 16-year-old students and an amateur investment club against one of the City's top stock experts in a 12-month share race to see who can rack up the most gains. The team with the largest profits at the end of the contest will take home a cash prize of £2,000, sponsored by Abbey Sharedealers, the low-cost broker. Readers can also join in and battle it out for cash prizes through our monthly Reader Challenge (see below).

After nearly eight months of trading, the Fairer Shares Investment Club leads the pack, with a profit of 3.5 per cent. Hot on their tail are the students from Moat Community College, with a profit of 2 per cent. Trailing in a distant third place is James Bevan, chief investment officer at Abbey, with an overall loss of 6.5 per cent. None of the teams has managed to outperform the market, up 3.6 per cent since the contest began last March.

"It has been a tremendous battle but we're learning a lot," says Paul Dolman-Darrall, chairman of the Fairer Shares Club. The members, who met while working in the IT department at John Lewis in London's Oxford Street, have used the contest to try out their special technical stock screening system, which they believe can scrounge out winning shares based on a variety of financial performance criteria.

Initially, the club's system, which is based largely on the teachings of stock market guru Jim Slater, helped pick some impressive performers, including JKX Oil, a volatile oil exploration company based in the Ukraine that yielded an 18 per cent profit in just over 10 weeks. But it has also thrown out some hefty losers, including internet provider PlusNet, which plummeted more than 30 per cent in one month.

With the team determined to hold onto their slim lead, the Fairer Shares have ditched their screening system, selling off their racier shares and stocking up on defensive companies, including blue-chip property giant Land Securities and utilities provider Scottish & Southern Energy.

As amateur investors, the team believes the key to learning about shares is staying flexible and adjusting to changing market conditions. "Given the uncertainty in the market, we swapped our portfolio from growth shares to what some may call 'boring' companies," says Dolman-Darrall. "The shares we hold today might not move upwards very quickly but when the market has a little wobble - as it has been prone to do recently - we hopefully won't go down."

Meanwhile the 16-year-olds from Moat Community College in Leicester have also switched strategies in a bid to close the gap on the leaders. They have started trading quickly in and out of a range of high street shares, including supermarket chain Sainsbury and bakery group Greggs, in the hopes of picking up small profits in the shares' short-term price movements.

Yet the team's day-trading techniques are not winning big. Despite months of buying and selling, the students' portfolio is up just 2 per cent - and that is before taking into account any trading costs they would have otherwise been charged in a real-world broker account outside the competition.

"The pupils are not researching the business news for important trends and are basing their choices on recent company performance alone," admits Claire Jackson, the team's business studies teacher.

As a result, the team is often catching the tail-end of positive announcements that have already been factored into the stock price once they buy in.

On closer inspection, the bulk of the student's profits actually boils down to a handful of shares they researched thoroughly and held for longer periods of time. These include clothing retailer Marks & Spencer, which the pupils recently sold for a 17 per cent profit after nearly seven months.

As the clock ticks down, no one is feeling the pressure more than fund expert James Bevan of Abbey, who trails the leading club by 10 per cent. "We think the fund manager has basically blown it; we don't think he can close that gap in such a short time," says Dolman-Darrall of the Fairer Shares.

Bevan is more confident. "I am comfortable that the underlying prospects for the companies I have selected are strong, and in due course the markets should move to reflect the prospect of good news," says Bevan.

While some of the fund manager's shares are bearing fruit, others - including metals company Rio Tinto and software maker Sage Group - are posting losses that more than wipe out Bevan's gains.

You can track the competition online and join in the fun with your own fantasy stock portfolio. Log on to www.bullbearings.co.uk/independent for more information.

Abbey Sharedealers provides low-cost brokering services for private investors and investment clubs. For more information visit www.abbeysharedealing.com or call 0800 389 2324

Looking for the latest stock-market tips? For up-to-the-minute market information on all your favourite shares log on to www.digitallook.com.

Join the Share Challenge and win £100

* This month's £100 cash prize winner of the Save & Spend Reader Investment Challenge is Mrs Kirby Gaynor of West Lulworth, Dorset. Despite a stubborn market, Mrs Gaynor managed to earn an eye-popping profit of 15 per cent in just four weeks.

* The amateur investor's top performers included energy company Premier Oil, up 30 per cent, and copper miner Antofagasta, up 17 per cent.

* Now it's your chance to compete against the Share Challenge teams and other readers with your own virtual share portfolio. Save & Spend has teamed up with Abbey Sharedealing, the virtual trading website Bullbearings and the online investment portal DigitalLook to offer monthly rounds of the Reader Challenge with £100 cash prizes to the readers who can rack up the most profits in four weeks of trading.

* The contest is free and the game is played with 'virtual' cash. It's a great way to learn more about investing - and to have a go at winning real cash prizes!

* Don't miss your chance to take part in round six of the contest. Log on to www.bullbearings.co.uk/independent and register to play before Friday 3 November. Choose the five shares you think will increase the most over the next four weeks.

* We'll announce the winner on Saturday 9 December, and launch the next round with another £100 cash prize. Keep checking in for real-time price updates and to see if your stocks are winning at www.bullbearings.co.uk/independent.