How to beat other readers to the £20,000 top prize in our Fantasy Fund Manager game
All you have to do is choose five or more shares that will rise the most over the next three months. We share our stock-picking secrets …
TRY to make as much money as you can in three months and never mind how much risk you take? It doesn’t sound like Questor’s usual “get rich slow” approach. What’s going on?
Today we break from our usual routine to introduce The Daily Telegraph’s new
stock-picking game, Fantasy Fund Manager – and to offer competitors some tips on how to win. In a risk-reward structure normally unknown in the stock market, readers have the chance to win £20,000 without having to risk any money. All they have to do is pick a selection of FTSE 350 stocks that in the three months from next week beat all rivals. Full details of the contest are available at telegraph.co.uk/ fantasy-fund. But now on to Questor’s tips for how to pick stocks for these unusual circumstances.
What are the possible approaches? A couple spring to mind.
First, you could try to anticipate a big, fundamental shift in the market. Will “value” stocks finally come back into fashion? Could a more rapid than expected post-pandemic burst of economic activity spur investors to overlook the debts that some of these companies have and look instead at their tendency to harmonise with the economic cycle?
In such circumstances the likes of British Airways, WPP and the banks could shine – and in view of how much pain their share prices have endured so far, it wouldn’t be too much to hope that they might double or more if sentiment changed enough. A few “doublers” could be enough to secure victory over your rival fantasy fund managers.
Questor has to admit to some hesitation about putting everything on the timing of a shift in the market’s mood, however. Better perhaps to look at underlying trends in the economy and business.
Technology’s latest surge is the most obvious. Businesses and employees alike had to find new ways to continue to work when lockdowns were imposed and a host of tech companies have profited by providing the answers. Some of the changes will not be reversed when the epidemic passes.
The difficulty for pickers of tech stocks is that many have performed strongly already. Also, the dynamics of the industry encourage the emergence of a small elite of dominant companies
– Amazon, Google etc – and they are already so large that their values are unlikely to double quickly. What we want are tomorrow’s Googles.
Questor has tipped a few potential names, admittedly largely American ones, in the past thanks to our discussions with technology fund managers. Readers may not have the opportunity to talk to these managers directly but can get access to the thinking of professional investors in other ways. If you read the fact sheets or annual reports of investment trusts you may be surprised by how open the managers are about their reasons for holding their stocks. If you think they make a particularly convincing case for a certain stock, why not add it to your fantasy fund?
For the purposes of our game, with its restriction to British companies, the most obvious trust to research is Herald, which has heavy exposure to London-listed tech stocks. The manager, Katie Potts, is hugely experienced. The trust’s website lists all of its 300 or so holdings, some of which are biotech firms, another promising area.
Or think more broadly about how Covid-19 will change life for good. Will we keep cycling and walking more and buy more bikes and trainers? Perhaps some trends that are just getting under way won’t yet be reflected in share prices.
One of the benefits of building a portfolio without spending any actual money is that there is no need to worry about protecting against losses by large-scale diversification. The rules of the game require you to hold at least five stocks but if you find five that you really believe in why not leave it at that? Of course if you are lucky enough to find 10 or 20 of what the professionals call “high-conviction” ideas, feel free to include them all.
Whatever you choose for your fantasy portfolio, good luck and happy stock picking.
Which one stock would Questor pick for the game? We will plump for Whitbread: a very well run business laid low by the epidemic and ready to spring back.