BI > MAY 2004

A Lesson in Long-Term Investing

Miami High School Teachers Rediscover Two-Decade Holding

NAIC members are a hardy lot, always looking for opportunities to share their knowledge of investing with others. It's particularly gratifying to learn about this knowledge being transferred to our next generation. Mike Bacsa, a former director of NAIC's Southeast Florida Chapter and of the Computer Group Advisory Board (he and his wife, Elaine, received NAIC's Distinguished Service in Investment Education Award in 2001), and colleague Stan Yanowitz submitted the following article about their efforts at Miami Sunset Senior High School. If you're a long-term investor, this story has to put a smile on your face. Think of the impact this lesson has on a 16-year-old.

One of NAIC's most powerful messages is that small amounts of money, invested over a long time, can produce handsome gains for patient investors. High-quality growth companies are the key. This article's example is particularly dramatic for young people who have many decades to enjoy the magic of compounding.

From Mike Bacsa:

It was this past January when we heard the great news. Winter recess had just finished, and everybody at Miami Sunset Senior had returned to their regular class schedules. There were still some holiday decorations around the school to remind us all of our two-week break.

It was now time to get back to business, however. My Marketing and Entrepreneurship classes were starting their unit on investing, which included a stock portfolio project that would be entered in a competition at the Miami Dade County Fair and Exposition. That's when Stan Yanowitz handed me the envelope that caused all the excitement.

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Funding the Future at Miami Sunset Senior. Above: Front row, left to right: Richard Nellhause, Marianne Curtis and Jehremi Clavareza. Back row: Chris Mitchell and Berto Oliva (DECA president).

Stan and I are teachers and sponsors of the DECA Club, a national association of marketing students that provides the framework and incentives to help students prepare for the business world. In November 1984, students of Marlene Magness, who was the DECA sponsor at that time, won 35 shares of PepsiCo in a competition. At the time the shares were selling for $45. Throughout the years, the dividend checks were sent to the school and the funds were deposited in the club's account.

Fast-forward nearly 20 years later. Stan came into my room before school and handed me an envelope. When I opened it, I saw a dividend check for $100 for 630 shares of Pepsi stock. I contacted the transfer agent, Bank of New York, which verified the existence of the club account opened with the 35 shares on Nov. 17, 1984.

No additional money was added to the account over the next two decades, but the stock split 3-for-1 in May 1985 and again in September 1990. In May 1996 the stock split 2-for-1, resulting in the current 630 shares held for Miami Sunset Senior DECA.

There's more: In 1997 PepsiCo spun off Pizza Hut, Taco Bell and Kentucky Fried Chicken, creating a new company known as Tricon Global (now Yum! Brands). As Pepsi shareholders we received 63 shares of the new company. The company split its stock 2-for-1 in June 2002, resulting in the present holding of 126 shares.

The initial investment in PepsiCo in 1984 was $1,575 and as of Feb. 24, 2004, was worth more than $37,000, an impressive annualized return of 17.8 percent. And that doesn't even include the dividends.

Finding good-quality companies and holding them for the long term as a way to accumulate wealth "really does work," says student Berto Oliva. Steve Tearle, another teacher at the school, said: "This was a terrific way to demonstrate the value of long-term investing to the students, and to a lot of teachers . . . some of whom suddenly became interested in investing as well."

I'm excited about starting a new student investment club with the proceeds from these recently rediscovered stocks. The money will be reinvested or, when needed, used to help needy students at Miami Sunset Senior High.

The initial investment amount won't be spent. It will remain in the club's account as a way to ensure the club's future for generations of new students to learn about investing and investment clubs.

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Stan Yanowitz (left) and Mike Bacsa.

I feel very fortunate to have learned about investing the NAIC way and to have been mentored by Phil Keating, CFA -- the Computer Group Advisory Board's honorary chairman -- and Pat Miller, who unselfishly shared their years of investment knowledge and experiences with me.

I also feel blessed to have worked with a first-class group of professionals as a director of the Computer Group. During my tenure with the group, my wife and partner, Elaine, and I chaired and ran the Youth Investment Program at CompuFest for several years.

I'd also like to credit Miami Sunset Senior High's principal, Dr. Daniel Tosado, and Stan for their encouragement and support of investment education. Dr. Tosado is very supportive of the efforts to educate students about the business world and what it takes to be successful. He's also an investor who understands the importance of educating students about investing for the long term as a way to accumulate wealth.

Jeff is director of educational development for BetterInvesting. Readers interested in sharing their experiences and stories about young investors are invited to contact Jeffery Fox at BetterInvesting or at jefff@better-investing.org