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 …

The Daily Telegraph - Business - - Business - RICHARD EVANS

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.

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