Well what I've noticed is that some people are spreading their risk across multiple asset classes and sectors, which for your personal portfolio is great if you're looking to minimise downside risk, but for this sort of competition isn't entirely appropriate. You want risk in this sort of competition. I'd suggest splitting your portfolio into 3 risk classes - low - medium - high and start with equal weightings. Each month you will be given an additional R100k, so you then have a choice to play with your weightings or look at getting into other companies. Don't just buy because you can - cash can be king. I'd also suggest holding on to cash to allow you flexibility to manage downside risk. Towards the latter end of the competition you might need to hedge your downside exposure to certain asset classes, sectors, and/or companies, and this is possible, but you need the liquidity to do so, and in this competition that only comes from cash. Or you might want to dump some money into a higher risk stock and go for broke.
I'd suggest that if you want to learn from this experience, then don't look at penny-stocks, as much as I've stated that you want risk. They are simply too volatile and illiquid an asset, and they're almost impossible for a noob investor to make an informed decision about. Stick with the medium-large cap companies, check their recent SENS announcements, check the latest news about the company, find some research by various asset managers and sell-side participants, look for when they announce results, look for when they go ex-div, look at their div yield, look at their past performance but importantly, use this as an indicator, not as a decision-making criteria. Look at the kinds of volumes traded. Try to understand why their price moves.
Let's take a good example - Calgro M3 Holdings. They recently moved from the AltX to the main board and have had considerable success, even though other property developers have struggled. Why? Well check the news and see their affiliation with government. Look at their potential contracts moving forward. Look at the management team. Look at why they are listed - they're simply diversifying their investor-base - they don't actually need the additional capital. So they are heavily liquid; are well supported; showing great growth; can protect themselves in the event of sudden negative economic impacts; and they're in a market that is somewhat protected from macro external property market moves, as they have a niche with government.
But this poses its own risks. Can their growth be supported for a long period of time? Well that depends on the sector but I say no. They are heavily exposed to one part of the market - government. So there is demand risk. They are approaching all-time highs. Will they trade through this price point? Possibly, but other developers in a similar position often struggle to trade through these resistance levels. But then again, the last time they broke through their all-time high, they shot up like a bullet. They've also recently broken through their 570 resistance level and traded above there for the last day or two, so 570 might in fact become the new support level for this stock.
Look into these risk factors and you begin to build your own risk model. Use this to begin to understand price movements, understand the range within which the stock trades, and you begin to understand where a good entry point into the stock is (i.e. price). You can also begin to gauge the potential of the stock moving forward with this data. You can then transpose what you've learnt on to other asset classes and companies and begin to make informed investment/trading decisions. Remember that you're only in this for a few months, so you're not necessarily trading, but you're also not necessarily investing for the long term either.
Oh and to patrick, I wouldn't suggest adding a sell option, as the competition started as a no-sell option and investment choices were made on that basis. Perhaps next round that can be introduced.
