The Daily Telegraph - Saturday - Money
‘Bet big, hope for the best’: how to win Fantasy Fund Manager
Diversification is for fools: this was the message from the winner of last week’s £100 Fantasy Fund Manager prize.
Peter Cowell, 41, from Surrey, had just five stocks in his portfolio, the minimum allowed, arguing that any more risked dragging down his returns and crushing his chance to win the £10,000 grand prize.
“I would have owned only one stock if it was within the game rules. I played a similar fantasy fund game a few years ago and the winner had just one company. In games like these you have to take concentrated bets and hope for the best. You don’t want to diversify away your gains,” he said.
Mr Cowell, an actuary, was in third place in the competition after he turned £116,200 into £122,600, an impressive 6pc gain, in the week beginning Jan 11.
Currently, he is betting that stocks in the food and drink sector will propel him into first place.
He owns Mitchells & Butlers, Diageo, JD Wetherspoon, Whitbread and Greggs. All are 20pc positions.
“I’m all in on the eat-out theme. Previously I owned some travel firms. The vaccine rollout is going well but there is more and more negative travel news as they discover new variants of the virus. I think the British economy could get going before travel returns to normal,” he said.
But Mr Cowell is not wedded to the food and drink sector and is always ready to change if he spies an opportunity. For example, he used to own insurance stocks, an area he knows well through his work.
“I thought that Brexit would be good for insurance businesses thanks to new regulations British companies would need to navigate to do business with the
EU. Just Group issued a positive trading statement and its shares jumped 20pc. I sold it though, as I thought they had gone too high,” he said.
He added that he was ready to sell his current stocks if they performed well. “I am always prepared to take profits and change my investment approach. I change my mind quite a lot but I think that is good for this game as no one company or sector can keep performing well,” he said.
Mr Cowell is not looking to buy companies that could be acquired by rivals, one of the standout themes in this season of Fantasy Fund Manager.
Three of the 10 best stocks to have owned since the competition began on Nov 23 owe their place on the list to takeover bids. Signature Aviation, Entain and Calisen have all received takeover approaches in the past two months, which caused their shares to jump. Although an approach for Entain, the British gambling group, from an American firm, MGM Resorts, has fallen through, investors have been quick to reward the business for the interest and its shares are still about 30pc to the good over the game period.
Another winning theme for fantasy fund managers has been resource companies, with miners Ferrexpo, Glencore, Antofagasta and Evraz all among the top-performing stocks.
Investors have bet on a global economic recovery as the vaccine rollout gathers pace and the Chinese economy keeps growing.
Russ Mould of AJ Bell, the fund shop, said natural resources firms also acted as a hedge against inflation as commodity prices tended to rise when inflation increased, which protected profit margins.
“Inflation expectations are on the rise ahead of economies reopening against the backdrop of interest rates at record lows, which should support the prices of raw materials – and shares in the companies that produce them,” he said. In his real- life portfolio, Mr Cowell takes a more conservative approach to investing and prefers low- cost tracker funds to picking his own stocks.
“I’m no expert stock picker and prefer a low-risk approach. Diversification is key with real money – especially if you want to put it away for a long time,” he said.
“You could beat the stock market over three months perhaps, but in the longer term trackers are the best place to park your cash. My biggest investment is a global stocks passive fund.”