The Share Challenge: Student team puts experts in the shade

The leader in the Independent Share Challenge is the student team from Moat Community College, Leicester, who continue to blow away the others and further widen their lead. Seven months into the competition, the gulf between the 16-year-olds and their closest challenger, the fund manager Sean O'Flanagan, stands at 20 per cent, and they are 42 per cent ahead of the struggling Lexar Investment Club.

The students' portfolio is down by just under five per cent since January. They continue to lag the broader market, where the FTSE All Share's one per cent gain is the best performer.

"There's an expectation that flat markets like this one provide good opportunities for active decision-takers to out- perform the indexes," says James Bevan, chief investment officer of Abbey, which is sponsoring the competition. "But short-term price movements are very difficult to predict. In the long run, shares tend to oscillate around a notion of fair value, and it's those investors who delve beyond the day-to-day price movements and look for fundamental growth who stand to come out winning."

That might console Mr O'Flanagan, but will do little to erase his 24 per cent loss so far. He plunged further into the red last month after one of his core shares, Morse Holdings, an IT hardware and services provider, announced plans to acquire a rival, Diagonal. The market took a dim view of the deal and the share price nose-dived, taking it down 34 per cent since January.

Despite the gloom, Mr O'Flanagan remains committed to his portfolio. The underlying companies are still fundamentally strong, he says, blaming recent losses on investor anxiety and the market's summertime inertia. "Investors seem unwilling to look forward now. It will be interesting to see what happens when traders return to their desks in September," he says.

Mr Bevan agrees with his City colleague. The fund manager's portfolio has been hit hard recently, but he has a longer-term strategy that could yet bear fruit. "Sean's portfolio is inherently risky," he says. "But he has selected shares with clear growth credentials that have been adversely affected by the market's caution towards growth stories, in particular in the IT sector. If a pro-growth mood returns, Sean's shares could motor ahead."

Despite Lexar's last place, the investment club from Surrey is on the mend after a miserable spring. New holdings in Intertek Group, the product testing company, and Scottish and Southern Energy, an electricity provider, have posted small profits in recent weeks.

Lexar have done well to cut a number of losing shares, but have much ground to make up. Among the most painful was a stubborn investment in Bookham Technologies, the optical fibre group, which finally ended when Lexar sold at 40p in July, 76 per cent below the 164p purchase price.

lAbbey Sharedealing is sponsoring the Independent Share Challenge. Statistics from Digital Look, which gives free information to amateur investors. Visit www.digitallook.com.