Students show off savvy in stock simulation game

By Dan Nakaso
Advertiser Staff Writer

Jian Wen Zhu left China 18 months ago, dyed his hair orange and gave himself the nickname "Brian" after one of the Backstreet Boys. All he knew about the stock market back then was "buy low, sell high."

Hawaii Baptist Academy team won in the moderate investment category of the stock simulation game. From left, Christy Lau, Terri Akisada and Rex Lee invested in three companies, with help from teacher Larah Aguinaldo. Cory Lum 8 The Honolulu Advertiser

Together, they studied the intricacies of the stock market, found imaginary wealth among the collapse of Enron and placed first in one of four student categories — for aggressive investment.

"They go from that communist background to a capitalist society," said Lyle Hendricks, a former Farrington High School social studies teacher who coordinates the game. "Isn't it great?"

Some 209 teams competed this semester in Hawai'i's fourth Stock Market Simulation game, far more than in the three previous semesters. The winners came from Stevenson Intermediate (elementary division), Farrington High School (conservative investing), Hawaii Baptist Academy (moderate investing) and McKinley (aggressive investing).

For 10 weeks, each team managed imaginary $100,000 investment portfolios, based on whether they had conservative, moderate or aggressive philosophies. The finalists were chosen from teams whose stocks outperformed the S&P 500 index and whose bonds did better than the 10-year treasury note.

Last year the winners were decided according to who made the most money. This year, they had to have the best mix of stocks and/or bonds.

"I was impressed that these portfolios were so diversified," said Rob Saracco, first vice president and senior financial adviser with Merrill Lynch, who gave workshops on the games to Hawai'i teachers and judged the entries. "In other words, we didn't want the students to throw everything into one stock, get lucky and have a huge return. We're trying to teach diversification. And we thought we better practice what we preach."

"Yes," Saracco said, "that can be a problem."

Teacher Malcolm Yasuda was sold on the benefits of the game — sharpening computer skills, teamwork and learning firsthand about the stock market — after entering eight math club students this semester.

Of course two of his students — Yat Ho Chik and John Otaguro, both 14-year-old, eighth-graders — ended up winning the elementary-school division. And each gets $100 worth of mutual funds.

Yat, who also emigrated from Hong Kong two years ago, learned quickly that he could make money by "short selling" technology stocks, which were falling. Yat's father taught him how to assume the risk of "short selling" stocks he didn't own, in return for being able to buy them later at a better price.

In other words, Yat would only make money if the stocks continued to go down. Dell Computer Corp. single-handedly earned them $30,000.

While the three other Stevenson teams were buying and selling and losing money all over the stock market, Yat and John ended up making more than $5,000 and winning their category.

At first "Leo" and "Brian" at McKinley bought low-priced stocks that seemed to be rising. They were one of Gwen Maeda's 20 beginning accounting teams that competed in the aggressive category.

Then the boys started following the news much more thoroughly. And as energy giant Enron began to unravel, the boys began pouring more than $102,000 into one of its competitors, Calpine Corp.

"I thought somebody had to be doing well," Brian said.

They also saw a television commercial advertising a new rate plan for Nextel and figured that more people would buy Nextel phones. That investment earned them an easy $2,000.

They soon learned that the more research they did, the better their portfolio performed. "They were in the (computer) lab quite a bit, just the two of them huddled together," Maeda said.

At one point, Leo and Brian had made more than 40 transactions (each costing $25) and earned more than $68,000 on their initial $100,000 investment.

A sudden nosedive in technology stocks brought them down to their final balance of $139,598.

That was far too much action for Terri Akisada, 18, and 17-year-olds Rex Lee and Christy Lau of Hawaii Baptist Academy, who won in the moderate investment category.

They invested in just three companies and made only eight transactions. "It cost too much to buy and sell," Lau said.

They picked Longs Drug Stores Inc. because it was an established company in Hawai'i where people buy everything from slippers to beer. The girls picked Gap Inc. because that's where they shop.

And they made their most money when they bet that Hershey Foods Corp. stock would jump around Valentine's Day.

Then in the days that followed, the stock fell. "You know how candy goes on sale for half price after Valentine's Day?" Christy said. "That's what happened."

Even though they won and each team member gets a $100 mutual fund investment, they don't plan to invest in the stock market for real.

"It's too scary," Akisada said.

Winning for the McKinley team only heightened Leo and Brian's interest.

"But in real life," Brian said, "even if I had $100,000 I wouldn't invest it all."

The next game will be held during the fall semester. For details call the Center for Economic Education at 956-7709 or visit the Hawaii SMS Web site or the national SMS Web site.

Reach Dan Nakaso at 525-8085 or dnakaso@honoluluadvertiser.com.