The Share Challenge: Students give the expert a run for his money

The student team from Leicester continue to charge ahead of the professionals in our fantasy portfolio competition, leaving in their wake the Lexar investment club and our expert fund manager, Sean O'Flanagan, who have trailed the teenagers since the competition began with a nominal £5,000 for each team nearly two months ago.

The elders' grumblings of "beginners' luck" and "market blips" have given way to an acceptance that the youngsters have so far shown them a clean pair of heels.

The pupils from the Moat School have notched up profits of 3 per cent, versus the 0.2 per cent sideways performance of the City expert, and the 8.8 per cent loss of the investment club. The FTSE All Share index is up 3.6 per cent over the same period.

"We feel great that we are beating the professional fund manager and the investment club, but this is not a lottery - we know what we are doing," says Bilaal, 16, of the Moat team. "We are learning more about how the stock market works. We listen to the news and keep on top of takeover bids, which helps us pick our stocks."

The team's best performer is Brit Insurance, a speciality insurer which announced record profits last week, beating analysts' expectations. The students, who bought the shares several weeks ago, watched their investment rocket 11 per cent. HMV Media is performing well, up seven per cent since the boys bought the share after the Grammy music awards.

Claire Jackson, the team's business studies teacher said: "The boys are taking this very seriously. They spend their lunch hours looking up stock prices. They have started a competition between themselves so they can learn more."

Abbey Stockbrokers has said it will donate £2,000 to sponsor shareholder visits to the companies for the competitors. "The boys can't wait," says Ms Jackson.

Mr O'Flanagan is a buy-and-hold disciple who co-manages the Unicorn Free Spirit Fund, one of the top-performing funds in the UK All Companies sector. He maintains faith in his crop of lesser-known stocks, which he believes represent undervalued, long-term growth opportunities.

He is unfazed by his portfolio's meagre performance, blaming the broader market's inertia and anxious investors taking profits. "I am a little disappointed," he says, "but I am confident they will prove themselves. The new year reporting season has been positive and I think the market is pausing for breath."

Mr O'Flanagan's portfolio has been dragged down by losses in Harvey Nash, the recruiting firm, which has dropped six per cent per cent in the past month. But he says he is optimistic about the company's earnings report early next month. "Results from the recruitment industry have been very encouraging, which bodes well for Nash," he says.

Mr O'Flanagan says he is impressed with the students' strategy, but warns that, in a real-world scenario, their high portfolio turnover rate would incur costly dealing charges that can eat away at profits.

The Lexar investment club continues to drown under losses from Bookham Technologies, the telecom component maker that is down more than 25 per cent since the team purchased the share in February. This stock is largely responsible for Lexar's nine per cent portfolio decline.

Gerry De Lacey, the club's chief stock analyst, says the club was bullish on Bookham because the share passed the club's sophisticated stock selection system. "Perhaps we're over-egging the custard with our complex techniques," Mr De Lacey says. "The students have come in with a fresh perspective, a benefit in today's market."

Mr De Lacey says despite the set-backs, Lexar is confident. "We think our monitoring and selection process will beat the market in the long term. Whether it's good enough to catch the students, we'll see. Give us a little more time."