Richard Morrison, Financial Post
Published: Saturday, November 08, 2008
Doug O'Brien, the leader in the Financial Post Stock Market Challenge contest, has slowed his trading pace and now holds only one stock at a time, selling once the trend begins to move against him.
"I'm way ahead of the game," he said. "There's no sense in giving it away, so I'm being a bit conservative."
The 65-year-old retired insurance sales manager from St. Hyacinthe, Que., who plays as risingstar, has turned his $100,000 in play money into $878,000, adjusting his trading patterns to the level of volatility in the market.
"If the market goes the other way, you have to go the other way," he said, citing Agrium Inc. (AGU/TSX) as an example. The fertilizer maker reported excellent results on Wednesday, yet its shares slid simply because the market was falling.
The contest, which ends in mid-January, awards $25,000 to the top investor (fewer than 25 trades) and the top trader (25 or more trades), with $15,000 for second place and $10,000 for third in each category.
Other players have inquired if Mr. O'Brien might be willing to manage their money since he's achieved a 778% return over just 54 trading days. Although he has an MBA and probably would not have to do much to meet the legal requirements of a portfolio manager, he said right now, it's not in his plans.
"But who knows? Once we're through with this contest, I'll be open to any ideas."
After 2,480 trades, Mr. O'Brien is nearly $500,000 ahead of the second overall contestant and top investor, 30-year-old Melissa Moore, a Torontobased registered nurse who plays as lexiwins.
Ms. Moore, however, has made just 14 trades to achieve her $383,000, for a 283% gain.
"My strategy so far is simple: Look for a volatile stock with huge recent losses and high volume and bet everything on it, with the hopes that it will go up in the future," she said.
"It's a gamble, and I could have just as likely ended up at the very bottom, but I think that in order to win this contest as an investor, you have to take big risks in volatile stocks. I just happened to luck out with National City and its preferred shares," she said, referring to Cleveland, Ohio-based financial holding company National City Corp. (NCC/NYSE). Its common shares have suffered along with those of other U. S. banks, but its preferreds have risen to US$22.68 from US$8 in just three weeks.
The second-place trader behind Mr. O'Brien is Kirby Walker of Victoria, B. C., who plays as zack16. He had turned his $100,000 into $269,000 through 356 trades, for a 169% gain, good for eighth place overall.
Mr. Walker, the co-founder of West Coast Monuments, said starting his own company has taught him the fundamentals of business finance and to trust his instincts about risk.
"The whole current market situation is very reminiscent of the dot.combubble, with a broader scope," he said. At the beginning of the contest, Mr. Walker shorted many banking and finance stocks -- a lucrative strategy. Three weeks in, Mr. Walker said, he began to notice markets had become guided more by emotion than common sense, and he adjusted his trading to take advantage of it.
"Instead of trading on fundamentals, I was betting on people's emotions. I was buying and selling stocks for just a few minutes, hours, or maybe for a day, and then flipping them."
Mr. Walker said he made only two trades this week: a quick flip of Mercator Minerals Ltd. (ML/TSX), and a longer term buy of 5Nplus Inc. (VNP/TSX).
"At the time of writing, VNP is the only stock I plan on holding onto for the remainder of the contest as the fundamentals of this stock are overwhelmingly positive."
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