Investment
Club Warriors
Live to Fight Again
by Andrew Leckey
Successful Investing
They've
seen fire and they've seen rain, and they don't intend to have
their basic investment philosophy altered by the horrific terrorist
attack of Sept. 11, 2001.
Investment club warriors
with decades of experience behind them hurt just like the rest
of us these days, but most have only toughened their financial
stance. Staunch believers in the future of the country and the
market, they're holding onto their existing shares while buying
famous-name stocks at what they consider to be discount prices.
With the Dow Jones
industrial average down 15.8 percent and the Nasdaq composite
index down 30.7 percent in the third quarter, many club portfolios
have taken a beating. But veteran members have learned from experience
that steady gains can be made over the long haul if they avoid
paying too much for share in the first place.
"The whole market
looks like a bargain, and I'm about to buy some more stock in
Walt Disney (DIS) today," said Quentin Sampson, a
71-year-old retired accountant and founder of the 30-member Traders
Investment Club in Joliet, IL. "On the morning of Sept.
12, I sent out e-mails to everyone telling them not to sell,
advising them purchases should be made with new money."
Sampson's is a "family"
investment club begun in 1988. Two of his infant great-grandchildren
recently became club members as soon as they received Social
Security numbers. Teaching youngsters about investing is a major
emphasis. The club supplements actual meetings of the entire
family with phone calls and e-mails. Sticking with blue-chips
such as Exxon Mobil (XOM), this year's return of Traders
Investment Club portfolio was positive before the third quarter
pushed it negative. It's now considering Walgreen (WAG)
and Wal-Mart Stores (WMT) because prices appear attractive.
"When the market
is down, we keep investing in good stocks that will double in
value in five years," said Billy Williams, 65, a retired
civil engineer in Jonesborough, GA, whose Best Buy Investment
Club has 34 members. "We have 21 stocks and a portfolio
review each month when we decide if we want to buy, hold or sell."
Initially formed through
Williams' Sunday School class, the club has expanded beyond those
roots. After posting 20 percent gains for several years, its
portfolio declined 5 percent last year and is up just a tad this
year. The inopportune purchase of high-tech firms is to blame,
but the future is deemed bright. Club holdings include Home
Depot (HD), Intel (INTC), Stryker (SYK), Microsoft
(MSFT), Cisco Systems (CSC), EMC (EMC) and
Pfizer (PFE).
That's not to say investment
clubs aren't grappling with some knotty issues.
As its name implies, The Mothers & Daughters Investment Club is comprised of women. But while McDonald has two daughters in the club and another woman has three daughters on board, such family ties aren't a prerequisite. The portfolio this year has been flat, not bad considering the tumble many stocks have taken. Its largest holdings are Wolverine World Wide (WWW) and Biomet (BMET).
"We had such a bull market going for a while that it almost didn't matter what we bought, and we also hadn't set up criteria for when to sell a stock after it had a good run," said McDonald. "It's a painful process, but we're learning to operate in this new environment."
The National Association of Investors Corp. (877-275-6242) was created in 1951 and has 34,000 investment clubs nationwide, with another 18 associations in other countries. It creates clubs and helps investors be teaching fundamental stock analysis.
It's easy to start a club. All you need is several people interested in meeting, pooling some money and researching investment decisions. Club dues are $40 annually, with $14 for each member, which includes a subscription to Better Investing magazine for each member and a guide and mutual fund handbook for the club.
"We teach members to invest regularly, to understand the magic of compounding and reinvesting earnings and to select securities that will grow more rapidly than the economy," explained Ken Janke, president and chief executive of the NAIC in Madison Heights, MI, as well as a member of the 20-member Mutual Investment Club of Detroit. "My club has lived through enough market breaks that they're no longer a concern to us."
Yet, from now on, more attention will be paid to fundamentals of companies and their price/earnings ratios, Janke believes. The organization was concerned that many younger NAIC clubs got too caught up in rapidly growing high-tech stocks last year, and stocks such as Intel and Cisco were indeed hit hard. But other top holdings by clubs also include non-tech leaders Coca-Cola (COKE), General Electric (GE) and Pfizer (PFE). And, even in the most traumatic of times, there will be bargains awaiting.
Editor's Note: Andrew Leckey's column, "Successful Investing" appears regularly in the Bull & Bear Financial Report. Learn how to become a successful investor. Attend NAIC's Better Investing Expo 2001, October 26-27 at the Cobo Center, Detroit, Michigan. Meet directly with investment representatives from more than 150 public companies. Investment experts and financial analysts discuss strategies for the rest of 2001 and beyond. Learn how to start and maintain an investment program by yourself or with an investment club. For FREE admission call 1-877-275-6242. For an NAIC Investor's Information Kit write NAIC, P.O. Box 220, Royal Oak, MI 48068. Visit the Web site at www.better-investing.org.
