MBA Finance Society

The Cass MBA finance society’s fantasy share trading game runs from late February till late July.
As a member of the Cass MBA finance society I was fully committed to entering this competition when it started 2 weeks ago.
The time horizon is short. Just over 5 months and with the markets at 2 year highs future good news has been priced into the valuation of most of the stocks.
So I needed a strategy. I’ve £100,000 to play with. Bullbearings.com is the website we are using to track our progress.

A) What stocks, UK stocks only.
B) Economic data and short term outlook on the UK and global environment
C) What price should I buy or sell at.

I’ve picked a broad range of stocks and invested about £65,000 of the £100,000 and will invest about £95,000 in total, leaving £5,000 for any good punts.
I’m mostly focusing on large cap stocks because of the liquidity they provide.
I’ve invested in:
1) BG group, results were good recently and as the economy improves demand for gas will rise.
2) Debenhams: Very attractive dividend yield, possible expansion. And once the weather picks up I expect people to hit the shops for new summer clothes.
3) Kingspan: Good results, outlook stabilising. Low debt to equity ratio
4) Ladbrooks: Ok results, expensive on P/E but I expect people to gamble into the world cup.
5) WPP: Good results ,with world cup and improving economies global advertising spend will pick up
6) SAB Miller: If people go to the pub they will be buying some of SAB products and if people cannot afford to go to the boozer for the world cup they will buy booze in the supermarket.
7) Royal Bank of Scotland: Largest holding, good results, biggest restructuring play in Europe, I will buy on dips.


The economic outlook: Things are improving but there are dangers of a double dip. It is clear that central banks cannot just exit the quantitative easing initiatives they set up. The US economy is picking up, but has been no big employment gains, this maybe down to the fact it has been very cold etc. We need to see better employment numbers. House prices are still falling in certain locations.
Interest rates are very low and will most likely to continue to do so. An interest rate shock would be a disaster. Cutting the supply of funds now would certainly set the globe up for a double dip.
Inflation is still not threatening even though hundreds of billions have been pumped into the economies.
Italy will be next after Greece for Hedge funds to target. The strength of the euro should begin to slip against sterling and the dollar. The fringe European countries will lag France and Germany in growth keeping the euro under pressure.

Some serious unknown factors that threaten us all:
1) The loan books of the Chinese banks?
2) India, is it growing too fast?
3) Billions in commercial property loans are up for revaluation in the next 2 years. Who will refinance them?
4) Will government bond issues crowd out corporate bond new issues?
5) The US economy, can Obama push through medical reform in a weak economy and will we see a fundamental shift in consumer’s consumption. Will they buy less and save more?


I’ve not set a share price target for any of these stocks, but with the old “sell in May and go away and the World Cup coming up I expect some sectors to have less news flow. I’ve a 10-15% downside limit but on the upside I’m not restricting myself.

One area I may add is in consumer electronics, before the last World Cup Dixons had a spike in TV sales and now with HDTV I’m expecting them to have a similar spike in sales.
The commodities are in vogue now but I will stay out of these until I see a good investment opportunity.