Kids get stock market timing right

One 7th grade team at Washington Middle School finished second in the state-wide spring Stock Market Game investing competition. If the contest period had been a little longer, they wouldn't have done nearly as well.

David Thomas

Thirteen-year-old David Thomas said the fact the competition was for only 10 weeks influenced the team's selection of stocks. He said they were looking for stocks with a good chance for short-term gains.

They picked well.

Two of their stocks had stock-splits during the time the team held them. A stock-split doesn't increase the value of the stock. But, it usually comes at a time when interest in the stock is high and the price-per-share is rising.

The spring Stock Market Game ran from Feb. 6-April 13. Teams all over the state get $100,000 in imaginary money for their investing. During the 10-week period, the Washington Middle School team' stock portfolio increased to $131,981.25, a nearly 32 per cent increase.

Only a team from Belton (Mo.) High School did better among 1,000 teams competing.

(If you are interested in learning more, visit http://cas.umkc.edu/mcee.)

The Washington team's success had a lot to do with the timing of the contest period.

The two stocks in their portfolio that did very well were Eagle Materials Inc. and Titanium Metals Corp. Eagle had a 3-for-1 stock split and Titanium a 2-for-1 split.

Eagle is a producer of cement and other construction materials. Titanium Metals produces a variety of metals used in durable-good production.

Companies that deal with commodities have done well in recent years as commodity prices have soared.

But, commodity prices often fluctuate widely. And, about the time the Stock Market Game ended, the commodity prices started down…sharply.

In the second week in May, commodity prices declined the most in the last 25 years.

Eagle Materials' stock closed on April 13, the last day of the contest, at $71.41. On May 22, it closed at $48.89

Titanium Metals' stock closed on April 13 at $54.31. On May 22, it closed at $32.52.

In a St. Louis Post-Dispatch article during the market downturn, Ed Yardeni, an investment strategist from Akron, Ohio, was quoted as saying, "When the fever breaks, you can always see some pretty nasty sell-offs."

Most of the kids on the Washington team had little or no experience in investing or the stock market before this semester. David Thomas was the only one who had competed previously in the Stock Market Game.

"That was in 5th grade and we didn't do very well," he said.

David Smith

Twelve-year-old Daniel Smith said he had no investing experience. He said he didn't have any savings account either. And, he admitted, "I'm not a big risk-taker."

Twelve-year-old Taran Parker said his mother has established a savings account for him. But, when asked if she might allow stock investing, he said, "Not a chance."

Thirteen-year-old Logan Wabiszewski said he did a little reading in advance about investing. He added, "Then, the father of a classmate came to class to tell us more." The guest speaker was from the investment firm of A.G. Edwards.

Taran Parker

Logan said he'd probably consider investing with his own money when he gets older.

"I'd probably invest in companies making food products. I'd invest in companies that make sweet things because kids like sweets," he said.

One of the things the team considered during the Stock Market Games period was whether to buy any other stock. Under the rules, teams can sell one stock and buy another if they see a better opportunity.

Logan Wabiszewski

The Washington team also kept some of the original $100,000 in reserve to use in case of an investment opportunity later in the contest period.

Taran Parker said, "We went back and forth about that. But, we finally didn't and stayed with the stocks we had."

The debate got more serious later in the contest period when the Washington team wanted to try for first place in the state.

But, David Thomas said, "We decided that we were too far behind the first place team to catch them." He said they also considered a switch might cause them to lose money.