Cat more successful than professional human investors

Orlando is the cat’s whiskers of stock picking

Mark King, The Observer
The Observer’s panel of stock-picking professionals has been undone in our 2012 investment challenge by a ginger feline called Orlando who spent time paw-ing over the FT.

The Observer portfolio challenge pitted professionals Justin Urquhart Stewart of wealth managers Seven Investment Management, Paul Kavanagh of stockbrokers Killick & Co, and Schroders fund manager Andy Brough against students from John Warner School in Hoddesdon, Hertfordshire—and Orlando.

Each team invested a notional £5,000 in five companies from the FTSE All-Share index at the start of the year. After every three months, they could exchange any stocks, replacing them with others from the index.

By the end of September the professionals had generated £497 of profit compared with £292 managed by Orlando. But an unexpected turnaround in the final quarter has resulted in the cat’s portfolio increasing by an average of 4.2% to end the year at £5,542.60, compared with the professionals’ £5,176.60.

While the professionals used their decades of investment knowledge and traditional stock-picking methods, the cat selected stocks by throwing his favourite toy mouse on a grid of numbers allocated to different companies.

The challenge raised the question of whether the professionals, with their decades of knowledge, could outperform novice students of finance—or whether a random selection of stocks chosen by Orlando could perform just as well as experienced investors.

The result indicates that the “random walk hypothesis”, popularised in economist Burton Malkiel’s book A Random Walk Down Wall Street, is perhaps truer than we thought. Burkiel’s book explores the idea that share prices move completely at random, making stock markets entirely unpredictable.

“It’s time to crack open the Whiskas,” said a good-humoured Justin Urquhart-Stewart. “The cat’s got talent.” To celebrate his success, Orlando’s owner, former Cash editor Jill Insley, has bought him a red collar.

A spokeswoman for Orlando said he was not available to give an interview because of a claws in his contract