Sophomoric Stock Traders, Literally
PORTLAND, Maine (AP) _ To make a quick killing or lose a bundle in the stock market, check out the high-rollers at Central Aroostook High School.
Judging by its performance in the Stock Market Game, the tiny school in the heart of northern Maine’s potato country has become a breeding ground for aggressive investors who prefer to throw caution to the wind.
In the last statewide competition in which teams from more than 150 schools invested an imaginary $100,000 in the market to try to produce the best return, the three top winners all were from Central Aroostook.
Within a mere 10 weeks, these would-be Wall Street wizards parlayed their initial stakes into profits of $29,011 for the winning team, $27,021 for the runnerup and $20,774 for the third-place finisher.
But the gains were more than offset by the performance of the school’s three other teams, one of which lost a staggering $55,000. The school as a whole ended the latest game with a paper loss of roughly $25,000, says Marc Gendron, the teacher who oversees the competition.
Far from disappointed, Gendron was elated at the outcome.
″We had the three best teams and just about the three worst teams in the entire state. To me that’s a perfect result,″ he said. ″We’re looking for risk, and that carries the opportunity for tremendous return and the chance of tremendous losses.″
At last count, more than 100 Maine school systems take part in the game administered by the Maine Council on Economic Education, a private, non-profit organization that promotes understanding of the role that economics plays in everyday life.
″The Stock Market Game is a way of teaching economics, finance and current events, showing how economics play out in today’s society,″ said Perham L. Amsden, a retired high school and college teacher who coordinates the game statewide.
If Martha Witham’s classes at the Opal Myrick School in East Millinocket are any measure, pupils are never too young to master the fundamentals of investing.
″When you reduce it to terms they understand, like selling marbles or bicycles, they pick it up quite readily,″ said Witham, who uses the game in her third-grade class for gifted students.
Witham says her students aren’t even fazed by short-selling, a potentially lucrative but hazardous strategy in which you sell borrowed stock in hopes of repurchasing it when the price comes down.
″Kids can handle the idea of selling something they don’t have. That doesn’t bother them,″ she said.
Sponsored by the Securities Industry Association, the game is played by 400,000 students in 44 states and Washington. Participation in Maine has risen from 1,200 students in 1985-86 to more than 8,000 in 1990-91, most of them in grades 5 through 12. This spring’s 10-week competition begins Friday.
With the initial $100,000 stake, teams buy and sell shares listed on all major exchanges. Just as in the real market, they can use borrowed funds to buy on margin or take short-selling positions.
Options trading is not yet a part of the mix. ″It’s been talked about, but the sophistication of the computer program hasn’t developed that far,″ Amsden said.
Gendron’s criteria for stock selection include a price below $25 a share, a 52-week high-low range of at least 100 percent and a beta - a measure of a stock’s relative volatility - of more than 1.25.
″Our last rule is that somebody has to have read something about the stock - in other words, research,″ he said.
Of the school’s six teams, three buy stock and three stake out short positions.
″We play to win. You have to take the fliers and you have to take the risk, and that’s the name of the game,″ Gendron said. ″We find the riskiest ones we can get get our hands on.″
While there are no role models for stock brokers in the community, he said many area youngsters come from potato-growing families and are no strangers to risk.
″You can tell which of the kids are the sons and daughters of potato farmers,″ he said. ″You don’t have to explain risk to a potato farmer, they could write a book on it.″
End adv for AMs Wednesday, Feb. 19