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Top 100 Stories

DIVERSITY: The Key to Learning and Earning

by Candis King

Each year Better Investing receives thousands of responses to its annual survey of investment club holdings. The information is used to compile the Top 100 and Second 100 listings of the most popular stocks held by investment clubs and their members(Top 100 Companies)(Second 100 Companies). Each year there is a different theme that pops up out of the responses, and this year that theme seems to be an emphasis on the fourth pillar of NAIC investing: diversification.

There are four tenets to NAIC's investing principles:

• Invest in growing companies.
• Invest regularly.
• Reinvest all dividends and capital gains.
• Diversify.

Judging from this year's responses to the annual quest to determine the most popular stocks held by clubs, investors from the islands of Alabama to the islands of Hawaii are taking the fourth tenet to heart -- and expanding its meaning.

Island Group Investment Club, Ono Island, Ala. In its first year of operation, the club's six-stock portfolio tops $11,000. Members pictured are (sitting left to right): Linda Ricks, Judith Williams and Loraine DeRoy. Standing: Kristie Blount and Fran Drake.

We normally think of diversification as meaning the presence of stocks in a portfolio that represent different industries and sizes of companies. The members of clubs responding to our latest survey diversify in other ways, too. They include:

• Diversifying club membership by education levels, occupation, age, background and relationships.
• Diversifying by purpose, whether it be having fun, learning about investing or using the club as an outreach tool to help others.
• Diversifying by goals.
• Diversifying by size of membership.
• Diversifying the resources used to educate members.

Island Group Investment Club

Typical of many new clubs participating in this year's survey is the Island Group Investment Club of Ono Island, Ala. It's a 1-year-old club that has grown to more than $11,000 in value, with two of the Top 5 stocks in its portfolio of six stocks: General Electric and Home Depot. The club is very active despite having only six members. "We can all fit in one car," says club member Loraine DeRoy.

Catching the Big One. Loraine DeRoy, member of the Island Group Investment Club mentioned earlier in this feature, shared this photo as part of her club's response to the Top 100 survey. In it she proudly shows a red snapper worth smiling about. BI editors felt this presented a delightful way to end this report. If readers will permit an editorial comment, whether fishing for red snappers or growth stocks, success often comes to folks who know what they're doing and who apply a good measure of patience and discipline to the process. A little good luck is always a welcomed addition as well. We wish our readers well in their search for the big ones that may lie in this year's Top 100 survey.

Members all have adult children and hail from different occupations. One of the members is a school counselor, one is enrolled in college studying hospitality management, one is a former cattlewoman, one has achieved master gardener certification, one is starting a custom-designed accent furniture business, and one helped manage her husband's business.

When members want to study a company, they decide on the sector to study, then use Value Line in the local library and complete the research together. The club bought the "wonderful NAIC program with the wizard" (NAIC Classic software), Loraine says, which makes completing the Stock Selection Guide (SSG) very easy.

The club has had the benefit of some good help along the way. Their stockbroker pointed them to the NAIC Web Site when they first started out. Through the site, the club hooked up with local Chapter Director Bobbie Rooker, "who got us totally on track and made it so simple," Loraine says. The club also had support from Chapter Director Pat Brewer, "who drove 30 miles one way to get us started with the accounting." In addition, club members have attended classes taught by Maurice Johnson, who shares his NAIC knowledge and experiences as part of the chapter's educational program. "The classes are all great. They make it easy to start and run a club," Loraine says.

The club has a charitable purpose as well as an educational purpose. In December the club donated half of its dues to the the local United Way to help with medical expenses of children who fall between the cracks when parents lose medical insurance but aren't poor enough to qualify for Medicaid. The club also adopted a family for Christmas, providing gifts and necessities to the family.

The best part of the club, Loraine says, has been the learning. "Our sons and daughters are so proud of us, as well as our husbands, because now we can talk stocks. The money's not the big thing. We want to learn. We've worked together and learned so much. It's been fun. And we're just getting started."

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Investors 2000 Plus, Richmond, Va. Members of this 9-year-old club have been recognized for their efforts in helping to educate children, including inviting their own children to club meetings. Pictured are (seated, left to right): Avis Anderson, Carolyn Robinson, Barbara Holloway, Janet Lacy, Adrienne Whitaker and Byron Rawlinson. Standing: Jackie Smith-Mason, Felicia Johnson, Max Williams, Barbara Jefferson and Carol Brewer. Not pictured: Marcia Johnson.

Investors 2000 Plus

Investors 2000 Plus of Richmond, Va., is a 9-year-old club that has grown at an annualized rate of more than 19 percent to a $50,000-plus portfolio. One-third of the club's portfolio is in Intel, the No. 1 stock in BI's Top 100.

"It didn't start out that way," says member Carolyn W. Robinson. "Our last purchase of Intel was in 1998, and since then there have been a few splits. We have seen no reason to pull back, but we won't buy anymore." The club looks at stocks to study based on products they use and are familiar with.

The club began with a philosophy of diversification of stocks by industry but also wanted to make sure everyone agreed with that philosophy. Each member agreed that they had to go into the experience with a team attitude and that they couldn't be intimidated by the amount they had to learn. The club's motto is "Working Together to Build a Strong Financial Future."

Members of the coed club range in age from 34 to 50 and include bankers, accountants, marketers, attorneys and a real estate agent. SSGs are done manually.

Investors 2000 Plus has had a wealth of experiences, from surviving seven weeks of the CBS MarketWatch Contest and appearing on the CBS Early Show with Bryant Gumbell to being featured in a local commercial and winning the Coalition of Black Investors (COBI) Club of the Year Award. The CBS MarketWatch Contest "was so different from NAIC investing," Carolyn says. "It was a lot of fun and we learned a lot, but there are huge differences in style. We were using margin, short selling and charting, things we wouldn't do in real life. It was just minute by minute. I was literally afraid to go to the bathroom for fear that I might miss some important piece of news that would affect my stocks. It was worth it though, to be interviewed by Bryant Gumbell."

Winning the Coalition of Black Investors Award (COBI) was a little less taxing but even more fulfilling. COBI's mission is to educate and encourage community involvement in educating people about financial issues. Investors 2000 Plus won the award for its program of educating children, called the 2nd Generation Program. The program is a joint effort of all club members in which they share the responsibility of educating children to have an understanding of financial matters.

Parents who are members of Investors 2000 Plus are encouraged to bring their children to the monthly club meetings to teach the youngsters about saving and investing. A special meeting conducted by the club each quarter is devoted to educating the children. The young visitors are divided into two age groups, 4 to 7 and 13 to 16.

The program for ages 4 to 7 includes a cash register with play money, which the children get to use to grocery shop. When one young man realized that he had to pay for all the candy he had chosen with his money, he suddenly decided he didn't need all the candy after all. The program for the 13- to 16-year-olds teaches them how to study and track stocks. Earlier this year two children in the 2nd Generation Program were selected as winners in the COBI Essay Contest.

In addition to the 2nd Generation Program, members have conducted workshops to teach others how to start their own investment clubs. Members have been speakers at Sister to Sister conferences, which draw more than 2,000 people. The club has also shared its financial success by making donations to the local Salvation Army, the Boys and Girls Club and local United Way Agencies.

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Bulls, Bears and Babes, Honolulu, Hawaii. Members try to maintain a balance between fun and learning, and they place a high priority on supporting one another. Members are: Coe Atherton, Suzie Childs, Kathy Christensen, Gloria Del Rosario, Mary Fiedler, Pat Ho, Saskia Ishii, Lani Lam, Carri Morgan, Lissa Schiff, Tina Semenza and Nancy Taylor.

Bulls, Bears and Babes

Members of the Bulls, Bears and Babes club of Honolulu, Hawaii, are as diverse in background as the United Nations. Many of the members are transplants to Hawaii, having moved there for various reasons, joining with those members who were Kamaainas (Hawaiian for "local"). Members are Asian, Caucasian and Hapa (Hawaiian for mixture). They range in age from early 40s to late 50s and are teachers, accountants, nurses, administrators, lawyers, business owners, museum fund-raisers and dedicated volunteers.

The Bulls, Bears and Babes try to maintain a balance between fun and learning. They have had many financial people talk to the club over the years. Their broker, Ethan Abbott, stresses diversification and provides charts and reports showing the ways their portfolio can be looked at in terms of diversification.

"At first we weren't smart enough to diversify -- we had a lot of tech stocks," says member Tina Semenza. "But we found out that it is important to diversify the portfolio."

The ladies of the club have known each other for years, and all were docents at the school their children attended. Even though they had known each other for many years before starting the club, they wanted to become better acquainted. One previous activity was the "Sunshine Chair," in which one person was chosen and all other members wrote one nice thing about her. Each member got to have a chance to sit in the Sunshine Chair. What a day brightener to have so many nice things said about you all at once!

Members also played a game in which each one had to tell one lie and two truths about themselves and have the other members guess which was which.

They started using the NAIC methodology after a friend brought it to their attention. Now the club reads Better Investing diligently and when studying a stock, club members break up into groups of two or three to research it using NAIC software.

The club's portfolio has grown to more than $34,000 since its inception in 1997. Clearly, the investment sun is shining on the Bulls, Bears and Babes of Hawaii and their portfolio.

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Women Investors of Muscatine, Iowa. Members had plenty of fun posing for this club photo, which makes no secret of one of its portfolio holdings -- Krispy Kreme Doughnuts. It may not be their most profitable, members report, but it is their best tasting stock. Pictured are (sitting and kneeling, from left): Cyndy Kauffman, Carolyn Lemaster, Pat Mundell and Barb Fick. Standing, front: Cindy Allchin, Carolyn Ohlendorf, Lucille Kennedy, Carol Reed and Frances Morgan. Standing, back: June Rochholz, Kathy Trosen, Karen Butler, Bea Bellman, Karen Luedtke, Marcy Clausen and Jan Noll.

Women Investors of Muscatine

The Women Investors of Muscatine, Iowa, is one of the most educationally oriented clubs I have ever come across. Early this month the Women Investors of Muscatine will be holding its 11th Annual Investment Seminar at the Bandag Learning Center in Muscatine. This is a single investment club putting on a seminar for the clubs in the area, not a chapter, as is usually the case.

LABAC Investors, Roanoke, Va. LA for lawyers, BA for bankers and AC for accountants helped give this club its name 48 years ago. Now with a $400,000 portfolio, the club classifies its 14-stock portfolio into growth and income, growth, and aggressive growth stocks. Largest holding in each category respectively is GE, American Home Products and Intel, all among this year's Top 200. Pictured are (seated from left): Courtney King, Murray Stoller and Leo Waterman. Second row: Larry Moore, Richard Snedegar and David Beckner. Third row: Hunter McKendree, Donald Jones, Reginal Hutcherson and Rowland Wampler. Top row: Harry Garman, Winfred Hart, William Gearhart and Richard Conway. Not pictured: Charles Simmons.

Historically, 20 to 75 people attend, representing about 13 to15 clubs in the Muscatine area. This year's seminar will feature a financial personality from a local television station speaking about financial issues as well as speakers from investor relations departments of different companies.

The club was started with diversity, education and diversification in mind, says member Jan Noll, whom I've known for a few years. The club has teachers, secretaries, customer service representatives, retirees (the oldest in the club is 86) and clerks. Diversity of background was desirable because members felt that everyone would bring something new to their club, whether it be new ideas or new perspectives.

Three or four widows initially came to the club to become better informed about financial matters. The club provided a vehicle for learning and a support group while they made money together and helped others in their learning quest. The club has a long-term focus and accepts only one or two new members a year. It helps new members get started by using NAIC Classic software to teach the principles of NAIC stock study.

The club's portfolio has benefited from its focus on education since its beginning in January 1986. The portfolio has gained more than 10.2 percent annually growing to $166,841. The club has three of the Top Five stocks in its portfolio: Cisco (1.3 percent of portfolio), Pfizer (29.4 percent) and Wal-Mart (23.5 percent).

The club also has Krispy Kreme Doughnuts, and while it may not be their most profitable purchase so far, it has been their best-tasting. All the members agree: "Try 'em! You'll love 'em!" (see photo) [A personal note from writer -- NAIC CompuFest attendees would agree, too.]

The club tries to focus on purchasing stocks that have factories and plants in Muscatine, such as HON, ConAgra and Heinz. The club believes it's pretty well diversified, although it doesn't have any oil stocks and has one member who wants the club to get out of exclusively blue chip stocks, says Jan Noll. The rest of the portfolio contains stock in AT&T, AT&T Wireless, Abbott Labs, Citigroup, Coca-Cola, MCI Group Com, McDonald's, Pharmacia, State Street Corp., Walgreen Co. and WorldCom.

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Milk Money Investment Club, Richmond, Va. Members sponsor a Fall Fashion Show to share information about investing, show off fashions of a local designer and raise money for student scholarships. Pictured in designer fashions are members (top of stairs, from left): Monica Charity James, Gwendolyn Fowlkes Harvey, Saadia Washington, Lucia Battle Watkins, India Watkins, Cassandra Reynolds, Audrey Thompson, Mischelle Daniel and LaJune Fowlkes. Standing in front (from left): Paulette Battle, Gwendolyn Fowlkes and Magnolia Charity McFarland. Not pictured: Jasmine Cosby and Faye Bartholomew.

The Milk Money Club

The Milk Money Club of Richmond, Va., got its name because the members knew that while they wanted to invest, they didn't have much more than milk money available, yet they wanted to do it right. They wanted to diversify in terms of goals, purpose and members.

Club member Gwendolyn Fowlkes Harvey explains that the club was a family-inspired group. Several of the women in the club are married to guys who are members of a 20-year-old, all-male investment club. The Milk Money Club is composed of 11 women, six of whom are family and five of whom are friends. Some women in the club are mothers, some are older than 70, and two are nieces under 30. About half the women in the club have children. One thing that's the same for all the members is their philosophy: Invest for the long term.

"We feel that having a club that has diverse personalities in it is a strength and helps us work together," Gwendolyn says. "Some of our members are more social and some are more talented in money areas. We pool our strengths and capabilities. Everyone has a role in the club and feels comfortable. All the parts work together."

The club's portfolio has grown to $6,960 in the three years it's been in existence. The club has three of the Top Five stocks: Oracle, Pfizer and Cisco. Other stocks in the portfolio include Coach, Deere & Co., Disney, Philip Morris, Sara Lee, OpenTV and Capital One. "We are not avoiding small companies; we want to stick to things we already know about," Gwendolyn says. To keep track of the stocks, the club uses a computer.

To learn the NAIC philosophy and method for analyzing stocks, the club watched NAIC tapes and attended workshops. After learning how to invest, they wanted to share the philosophy with others. Members like social activities and decided that a hook would be a fashion show featuring a local designer. They had a broker and handouts at the fashion show while the women modeled the designer's clothes (see photo above). The money raised by the program was used to create college scholarships, with one scholarship being awarded so far.

"Members of the club look at putting aside money for children," Gwendolyn says. "Different people in the club have different goals, but the important thing is that they are striving for and accomplishing their goals as a family."

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Foxy Ladies Investment Club, Santa Cruz, Calif. Members have something in common with the Santa Cruz Beach Boardwalk's famous roller coaster. They know the thrill of the ascent and the stomach clutching of the descent. Pictured are (sitting from left): Lillia Domench, Rose Caton and June Smith. Standing: Sandy Thompson, Carolyn Murray, Carolyn Greene, Viline West, Bev Ainsworth, Sally Hewitt, Sue Brown and Shirlee Huch. Not pictured: Chris Cummings and Jan Sharer.

Foxy Ladies Investment Club

One of the reasons NAIC has "diversify" as its fourth pillar in the rules for successful investing is to prevent us from being bitten too hard when the "Rule of Five" fairy comes to visit our portfolio. (For every five stocks purchased, three will perform about as expected, one will outperform your wildest dreams of greed and avarice, and one will provide a very unpleasant surprise.) The Foxy Ladies Investment Club portfolio includes four of the Top Five stocks: Cisco, General Electric, Home Depot and Pfizer. It also has Enron.

"Enron absolutely devastated us; we own 17 shares," says Carolyn Murray, financial partner of the Foxy Ladies. "We feel comfortable with our portfolio on the whole, but it makes us be a bit more cautious. We will go back and reinvest in what we already own."

Besides the Top Five stocks and Enron, the club owns shares in Schwab, E Digital, Harley-Davidson, Oracle, Plantronics and Texas Instruments. Total portfolio value is more than $20,000.

"We live in the heart of Silicon Valley. Our members' children work at Oracle and Texas Instruments and are familiar with Plantronics and Cisco. We started to diversify our holdings when we realized we were too heavy in tech. We were surprised to learn that Harley-Davidson is a stock in the recreation industry. Home Depot is the first stock we purchased."

The 3-year-old club was started when members met at the Santa Cruz Newcomers Club. The club membership consists of people ranging in age from 48 to 83, with the majority in their 60s. They are already teaching another club, Invest-Hers Investment Club, how to invest.

Club members use Value Line, available in the local library, to select a stock and to conduct a computerized SSG. The club studied NAIC methods and conducts extensive research by reading periodicals such as Money, Better Investing, Wall Street Journal and Forbes, all of which are available in their local library.

In addition to researching and investing in stocks, the club also holds a fund-raiser for a local hospice by hosting a golf tournament.

Wealthy Women Wannabees

When the Wealthy Women Wannabees of Cherry Hill, N.J., started their club in 2000, they wanted to make sure members made a commitment of time and effort. The club jointly developed a mission statement and a personal pledge that all members signed:

"I, as a member, agree to contribute on a regular basis both a financial investment and an investment of time. I recognize that the success of our club depends on each member making a personal commitment to our club membership."

Early on the club had implemented a "three absences and you may be out" rule that has helped keep them on track. The club has actually dismissed a few members.

The club followed a path of structure and discipline right from the beginning and followed NAIC's guidelines for regular meetings, club formation, personal commitment and wise investing. "NAIC provides all the tools to have a successful club -- it's whether or not you take advantage of it," says Dale Fox, presiding partner of the club.

"We have always had an educational part of our meeting, for example, learning what SCL (Stock Check List) and SSG meant," Dale says. "Or even, 'What does it mean to have historical sales growth?' and 'What does it mean to buy and hold?'" The education portion of the meeting is from 6:30 to 7:00 p.m., and each member is assigned a month to find a guest speaker for that presentation. In March the club had a Merrill Lynch broker speak about P/E ratios.

The club has attended NAIC chapter classes from three sources: the New Jersey Chapter, the Philadelphia Chapter and the Delaware Valley SSG classes. The club's portfolio has Pfizer as its sole Top Five holding; other holdings are Apollo Group, CDW Computer, Coach, Commerce Bancorp, CVS Corporation, Lincare Holdings, Lowes Companies, Paychex and Stryker. The portfolio has appreciated more than 9 percent since the club's inception.

"We feel we have learned how to spot those companies providing the best growth potential with an acceptable risk," Dale says.

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Northwest Suburban African American Investment Club, Elgin, Ill. The 14 members of this 7-year-old club have built a portfolio approaching the $50,000 level. The club holds all five of the five most popular stocks in this year's Top 100. Pictured are (sitting, from left): Brian Ali, Clark Hallpike, Marvin Edwards, Carl Reed and Randy Hodges. Standing: Bob Johnson, Femi Folaran, Ed Price, Ben Cooper, Bob Gilliam, Eary Isibue, Ron O'Neal and Eric Barnes. Not pictured: Ernest Gibson.

This issue features Better Investing's 19th annual Top 100 Survey of Investment Clubs. The Top 100 companies are found on pages 36 and 37, while the Second 100 listing is on page 38. Companies are ranked by the total number of investment clubs estimated to hold their common stock. An alphabetical list of all 200 companies is on page 40. Companies appearing in the Top 100 listing will comprise the NAIC Top 100 Index over the next 12 months. The performance of this index, along with other benchmark indexes, is covered monthly in BI (see page 10).

In her report on the survey tabulation, Sally Janke, head of the survey processing team, said the clubs reported holding shares in 3,098 companies. The average portfolio size was $83,433, down about 15 percent from the average of $97,842 in last year's survey.

NAIC mailed 34,124 surveys to clubs on Nov. 8, and 3,186 complete portfolios were received by the deadline for a response rate of 9.3 percent. Additional replies were received but not included in the survey tabulation because they lacked necessary information or bore postmarks after the Jan. 11 deadline. Both the number of clubs participating in the survey and shares owned were down from the previous year, perhaps reflecting the decline in NAIC membership over the past year.

Results shown in the listings are thus based on 3,186 portfolios, with figures in the listings extrapolated to represent holdings by all investment clubs belonging to NAIC. The multiplication factor used for the extrapolation was 10.71. The number of clubs holding a particular security and the number of shares they held were multiplied by a factor of three to estimate the total number of that company's shares held both by clubs and by their members in personal portfolios.

Some particularly notable club names that caught the attention of the survey tabulation crew included the following: By Golly You Can, Hebron, Ohio; Dough Kneaders, University Park, Pa.; Vested Virgins, San Francisco, Calif.; Amazing Growth, Davenport, Iowa; Muletown Investors, Columbia, Tenn.; Bolder Money Women, Boulder, Colo.; Seriously Hip, Houston, Texas; Funs For the Future, Allen Park, Mich.; SWAT Team, Port Orchard, Wash.; Chimps With Darts, Bel Air, Md.; Let's Still Be Friends, San Jose, Calif.; Live Stock Investment Group, Roseville, Calif.; Jazz Dollar Club, Golfport, Maine; Ladies Nite Out, Twin Falls, Idaho; and Rich and Thin, San Francisco, Calif.

Candis King has been investing for more than 10 years. She is a former chapter director, a lifetime BetterInvesting member and a frequent contributor to BITS and BetterInvesting Magazine. She lives in Wheaton, Ill., with her husband, Robert, and two children.