Students Master Stock Market

The next time you want some stock advice, you might call up this little investment club in Lyndhurst. The members have grown accustomed to earning double what the market indexes are returning. Never mind that none of them is even old enough to drive a car. Eleven eighth-grade students from Hawken Middle School are beaming over the club`s third consecutive season as a top finisher in Ohio`s Stock Market Game competition among school investment clubs statewide. The 13- and 14-year-olds placed No. 2 statewide in the game. The competition among about 100 middle schools requires each group to invest a hypothetical $100,000. The winner is the group that gets the best return over 10 weeks. As a reward for posting a 12.7 percent return from Oct. 4 through Dec. 10 - they turned their $100,000 into $112,743 - the Hawken \"investors\" were treated to a day on Wall Street Monday. The club`s 10-week performance works out to an annualized return of 66 percent and compares with a 5 percent return for the Standard & Poor`s 500 over the same period (or 26 percent annualized). Even the growth-oriented Nasdaq 500 managed only a 9.6 percent return during that time (or 50 percent annualized). Volunteer club adviser Carol Clark Macklis, a chartered financial analyst with BioEnterprise Corp. in Cleveland, said she started a personal-finance program at Hawken four years ago to teach the children about the importance of saving money and avoiding debt. The investment club and Stock Market Game are offshoots of that. Macklis said some adults don`t believe children can understand much about money, but she said her students embraced basic investing concepts soon after their club formed when they were in the fifth grade. She said they were eager to learn about something that matters so much and regularly give up their free time to meet after school each week. \"They love it. They just love it,\" she said. And they`re good at it: In three of the club`s four years, it has been among Ohio`s top finalists, said Rob Rude of the University of Cincinnati Economics Center for Education & Research, who is the Stock Market Game coordinator for Ohio. \"It`s very difficult to achieve that time after time,\" Rude said. \"That`s why it`s very impressive.\" What`s remarkable and inspiring isn`t just that the teenagers can post short-term investment returns that most of us would love to have. These kids actually understand this Wall Street stuff. \"We look at stocks that are undervalued because they`ve been beaten down by things that we don`t think are fair,\" said Drew Macklis, 14, of Bentleyville, leader of the club and the adviser`s son. Girish Pendse, 14, of Solon, said club members looked for short-term opportunities for growth, even though that`s riskier as a long-term strategy. And the group looked at companies such as pharmaceutical firms that had a new product that could bolster sales or revolutionize their industry. Ben Hare, 14, of Cleveland Heights, said one of the group`s favorite stock from last fall was Smith Micro Software, which develops wireless communication software products. \"That technology is growing huge with all of the new laptops and cell phones,\" he said. \"Plus, it had a low P/E [price-to-earnings ratio] and was low-cost.\" Chris Morris, 14, of Chagrin Falls, said he and most of the students have been in the same investment club for four years, but initially they didn`t really work as a team. They used to simply divide the imaginary $100,000, and each would make his investment decisions separately. It wasn`t until they started discussing investments and making decisions as a group that they started performing well. Dana Lee, 14, of Concord Township, said the group often picked companies that are popular with consumers, such as Urban Outfitters, Starbucks, Apple (because of its iPod) and Claire`s. (She said the g