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Top 100 Companies

Our Annual Survey

by Amy Rauch Neilson

Editor's note: The most recent bear market's grip has been painful. Although long-term investors are urged by experts like Phil Keating to "turn off the TVs and get a life" (January 2003 issue), who among us can honestly say we're not affected by the continuing stream of red on electronic ticker tapes? NAIC has seen the market downturn take its toll on investment clubs as their ranks continue to dwindle. Yet many of the investment clubs that responded to this year's Top 100 Survey -- such as the Tao Janes, Monday Morning Money Makers and J.B. Smart Investors -- are finding ways to persevere by dedicating themselves to the educational opportunities that investment clubs provide and by looking for bargains.

Top 100 listing. Background information on the survey is available below.

Second 100 listing.

Index of Top 200 Companies.

A list of newcomers to the Top 100 and Second 100.

A list detailing the survey's biggest annual advancers since 1984.

Our thanks to all the clubs that responded to the survey and to those that agreed to share their stories.

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Leslie Dumont has been down this road before, along with the 14 other members of the Wall Street Women's Mutual Investment Club in Juneau, Alaska. The club got its start in 1987, just months before the October crash of that year. Back then, what the club didn't know actually made the bear market, well, more bearable. "When we started, we were pretty ignorant of the market situation," Leslie says. "Since we were just getting organized, we didn't have any money in the market. It's been the other downturns along the way that have gotten us."

Downturns like the current bear market. "Definitely, we get discouraged," Leslie says. "But we keep going because we say to each other: 'Hey, this is $30 a month that we're investing. And we're going to learn something with that $30 a month, no matter what.'"

Club members' frustration doesn't last long. All they have to do is take a look at their portfolio, valued at $106,000, and they feel a whole lot better. "When we hit $100,000, we were pretty excited," Leslie says. "Overall, we feel we've done pretty well. We've made some good decisions."

Those good decisions include holdings in club favorites like Microsoft and Starbucks Corporation, ranked Nos. 6 and 25, respectively, in this year's Top 100 Survey. Hands down, Microsoft is the club's favorite -- at a cost basis of just five bucks.

Members have sacrificed a few Microsoft shares here and there for the overall good of the club. The club recently used proceeds from the sale of shares to buy laptop computers for all the members. That may seem a bit extravagant at first, until you consider that the club is an hour and a half from the nearest NAIC chapter in Anchorage -- by plane. "That flight runs about $400," Leslie says. "It's not something we can afford to do. So we've had to learn on our own."

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Wall Street Women's Mutual Investment Club

Back when the club got started, members felt pretty isolated from the latest company news. "We could buy a stock and not know for a week that there was a recent problem with the company," Leslie says. "With the Internet and computers, things have really changed. Now we can stay up to date and do our research very easily."

Members bring their laptops to monthly meetings and set up around a table. "Now at our meetings, when one of us has an idea for a company, we can download the information for the Stock Selection Guide right then," Leslie says. "Within a minute, everyone is looking at the same information. It's greatly reduced the amount of preparation that we have to do before the meetings."

It's that kind of up-to-date information that keeps the club abreast of the latest news on its 16 holdings, which include other Top 100 favorites like Intel (No. 5), Merck (11), Walt Disney (26) and Best Buy (99). Members may be partial to some of the companies, but they won't hesitate if it's time to sell a stock. "We're not that attached to our holdings," Leslie says. "They come and they go."

With 15 years of investing under their belts, club members aren't afraid to ride out the bear market -- and they have plenty of confidence to do some bargain hunting along the way. "No matter what the economy is doing," Leslie says, "we've never stopping investing -- ever."

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Fairway Investment Club, Cape Carteret, N.C. Pictured from left: Clyde Lynn, Bill Horner, Jack Little, Hilton Peel, David Freshwater, Delma Morris, Bill Ball, Jim Hamilton, Larry Herman, Thurman Upchurch, Bill Brogdon, Dave Barker, Walter Jennfeldt, Al Linden, Steve Malay and Billy Mills.

Fairway Investment Club

A club doesn't have to be in a remote area of Alaska to reap the benefits of technology. Indeed, computers play an important role in the stock study of many NAIC investment clubs, like the Fairway Investment Club of Cape Carteret, N.C. The 19 members of the club, founded in 1991, have moved from the manual version of the SSG in the club's early days to the computerized version.

"Until about five years ago, I was the only one with a computer," says club member Thurman Upchurch. "We've gradually evolved from there. Now all the members but one are using the Stock Prospector, Investor's Toolkit and Stock Analyst Plus! software. We're very aggressive in using the NAIC software to study our stocks."

Club members are dedicated to using the SSG to evaluate stocks. "We are avid users of the Stock Selection Guide," Thurman says. "That's what we rely on."

The computer, Thurman says, just makes the process easier. "At one time we were doing everything manually," he says. "It's awkward for the members and it's a lot of work. With the number of members who have software now, it's a lot easier. We're doing a much better job of evaluating our stocks now that we have the software."

Members have used the SSG to select some of the club's favorite holdings like AFLAC (No. 7 in the Top 100), Abbott Labs (34), Amgen (15) and Staples (76). The club's portfolio is now valued at $144,000.

While club members continue to invest $25 each in bull and bear markets alike, the stock market's recent struggle has lent an air of caution to the club's proceedings. "Our attitude has changed a little bit in this bear market," Thurman says. "We're a little bit more cautious."

The club steered away from dot.coms amid the tech frenzy, though it did buy shares in both Cisco and Oracle. "We stuck with fairly conservative stocks, but we were also looking for more growth," Thurman explains. "So we added tech stocks like QUALCOMM to our portfolio, though we sold it when the glitter began to fade some."

That caution has led the club to be more aggressive with stock screening and to move away from technology stocks. "We were afraid there was a bear market coming," Thurman says. "At one point our portfolio was heavier in software companies. Not anymore."

The club has been successful in its cautious approach, with a couple of exceptions. "We bought a few stocks we shouldn't have," Thurman says. "If we had to do it again, we wouldn't have purchased Cisco or Oracle when we did. They're good companies, but we overpaid. We bought at the peak of the bubble; our timing was very bad."

But a cautious approach isn't new territory for the Fairway Investment Club. "We've been a very conservative club from the start," Thurman says.

Club members like to keep close tabs on their holdings. One way they do that is by limiting the number of stocks the club can own. "We limit our membership to 20 members, and we also limit the number of stocks in our portfolio to about 20," Thurman says. "We want to be well-diversified, but on the other hand, we don't want to get overloaded. We don't want to own more stocks than we can keep close tabs on."

"Even though some of us are up in age, we are long-term investors," he says. "Most of us have had experience investing over a long period of time. We're aware of the idiosyncrasies of the stock market and that, with careful selection, there are some very good buys out there. Our job is to identify them."

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TAO Janes Investment Club, Seattle, WA. Pictured from left: Debbie Oatey, Joan Freeman, Jenny Edwards, Julianne Prekaski, Debbie Kwik, Betsy McPhaden, Linda Rhines, Louise Kurabi and Noreen Schedler. Not pictured: Cookie Peterson and Julie Gould.

Tao Janes Investment Club

That, of course, is what every club hopes to do. And every club has its own method for screening out the losers and zeroing in on those "five- or 10-baggers," as investment guru Peter Lynch likes to call them.

The nine members of the Tao Janes Investment Club in Seattle point to Amgen as the stock that answered Lynch's call. Amgen has netted this 6-year-old club a 372 percent return and has been the strongest perfor-mer in the club's $45,000 portfolio.

Other stocks, such as AOL Time Warner, No. 37 in this year's survey, have not served the club so well. Back in November the club decided to sell the stock. It's through careful stock study and screening that the club has scored many more winners in its portfolio, such as club favorites General Electric (No. 2 in the Top 100), Dell Computer (23) and Chico's FAS (49).

When it comes to stock screening, club members take their job quite seriously. In fact, the bear market has only inspired members to find those diamonds in the rough.

"We have been doing a lot more in-depth analysis since the bear market hit," says club member Jenny Edwards. In this club, current holdings must stand up to the same criteria as new considerations. "Our portfolio review format calls for us to go through and evaluate a stock as if we've never owned it before," Jenny says. "When we're looking at a company we already own, we pose the question, 'Would we buy this stock again?'"

During the year club members conduct four stock study meetings, using NAIC tools like the SSG and Stock Analyst software. "We used to ask just one member to present a stock, but now we team up," Jenny says. "That way we're able to do a more in-depth presentation on a particular company or sector."

Club discussions can become pretty intense as members decide where to allocate the $50 to $100 a month that each person contributes. "We may discuss the state of the world and use that to come up with ideas for new stocks," Jenny says. For example, the group recently discussed the effect of a war on industries such as steel.

That additional stock study gives them an extra dose of confidence in this market. "Now when we get a little bit nervous, all of that extra study has helped us to have a better understanding of what we're doing," Jenny says. "That helps a lot."

If there's one thing this club is very good at, it's communication. Jenny, a professional writer and editor, writes and designs a monthly club newsletter that functions as meeting minutes. "Minutes just seemed boring," she says. "I had a lot of experience writing newsletters for different companies, and it just seemed to be a better way to share the information."

What started out as a two-page flyer is now an eight-page newsletter that includes coverage of industry and company reports, such as a recent discussion of the weight-loss industry, any of the club's stocks that appear in the news and the treasurer's report. It also serves as a sounding board for members as the club struggles to stay motivated in a tough market. The December newsletter contained words of inspiration from Thomas O'Hara, NAIC's chairman emeritus.

For now the club may ride out the bear market by staying in its comfort zone, adding to favorite holdings like Amgen. "We've already gone back and purchased additional shares of Amgen about three or four times," Jenny says.

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Dollars & Sense Investment Club, Lincoln, NE. Pictured front row from left: Cheryl Bomberger, Linda Thelen and Shirley Horstman. Back row from left: Sue Eckerson, Debbie Hendricks, Joan Frederick, Rita Ricaurte, Kathy Bennetch, Steve Hendricks, Liz Gray and Bill Looye. Not pictured: Connie Goos, Bud Gray and Larry Thelen.

Dollars & Sense Investment Club

Dedication to the NAIC stock study tools seems to be key in making wise choices. "We always use the Stock Selection Guide," says Debbie Hendricks, a member of the Dollars & Sense Investment Club in Lincoln, Neb. "We use those numbers to discuss the stocks we're interested in buying every month. Without the Stock Selection Guide, we won't buy the stock."

Members of the 7-year-old club may initially gather ideas for stocks from their everyday lives, such as club favorites like Johnson & Johnson (No. 9 in the Top 100), Harley-Davidson (12) and Walgreen (13). But those "gut instincts" won't turn into stock purchases without the proper study.

"We look at products we use and companies we're familiar with," Debbie says. "But we want to know more than just what the company does. We look at the numbers and other factors, like management."

The club's decisions aren't limited to the numbers on the SSG. While club members are pleased with the low level of debt that Walgreen carries, they also love the stores. "Walgreen is a company built on its own capital," Debbie says. "It's also our kind of store. They're in our neighborhoods, and they're the kinds of stores we use."

The idea for Harley-Davidson came much the same way. "One of our members is very, very knowledgeable about Harley products and the company," Debbie says. "We knew from her presentation that Harley products are in great demand, with motorcycles having to be special-ordered -- you usually can't go in and purchase one off the showroom floor. And with Harley scheduled to celebrate its 100th anniversary this year, we anticipated that the demand would rise even more."

Club members will also re-evaluate holdings when their experiences aren't so favorable. Such has been the case with Home Depot, which comes in at No. 4 on the survey. "Some of our members have been disappointed with the service they've been receiving at our local Home Depot as of late," Debbie says. "We may not continue to hold it. Our club has been doing more research into Lowe's."

Amid a bear market, members tend to want to operate in their comfort zone by adding to their portfolio's proven holdings with the $30 each member contributes monthly. "We've done well, even though it hasn't been a good market," Debbie says of the club's $32,000 portfolio. "We find ourselves falling back on the standbys more often than looking at new companies to purchase."

"It's about maintaining a certain level of comfort," Debbie says. "Even investing in stocks for some of us is a scary thing. Right now we may be more comfortable with the companies that have been consistently good for us. We may go back and buy more shares of Walgreen."

It's about a comfort level, but it's also about the bottom line for this club: education. "We remind ourselves that the primary reason we started this club was to educate ourselves and to have a good time doing it," Debbie says. "Many of the club's 15 members had never invested before. Now many of them are investing individually as well."

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4M (Monday Morning Money Makers) Investment Club, Ottawa, IL. Pictured seated from left: Dorothy Bettasso, Caroline Campaigne, Ruth Lockwood, Dr. Angela Benavides, Patty Godfrey, Linda Cechowicz and Phyllis Palmer. Standing from left: Phyllis Walsh, Peg McGrath, Judy Christiansen, Debby Reagan, Kay Jevitz (retired), Bonnie McGrogan and Judy Wrobel. Not pictured: Dee Anderson, Dr. Susan O'Neal and Nancy Reinhardt.

Monday Morning Money Makers

Lots of clubs share that goal with the Dollars & Sense Investment Club. "Education has always been our biggest goal," says Debby Reagan, a member of the Monday Morning Money Makers (4M) in Ottawa, Ill. "During tough market times like these, we feel we're learning in every aspect."

When the 16-member club formed in 1984, most of the members were pretty green to the stock market. "While some of our members had some experience with investing, some didn't have much at all," Debby recalls. "We figured an investment club would be a way for us to learn more."

To keep it interesting, members have found a variety of ways to receive a stock market education. They bring in expert guest speakers, spend a day at the Chicago Board of Trade, even attend annual meetings of Chicago-based companies in their portfolio, such as Sara Lee. Sara Lee made the Second 100 listing, coming in at No. 154.

The club is also committed to its stock study, using what club members refer to as "marriages." Each member is assigned specific stocks for two to three years and is responsible for keeping the club up to date on news regarding those holdings. In July and December the club sits down to scrutinize the holdings that make up its $198,000 portfolio. "That's a very intense time, a time when we're devoted to making any changes and cleaning out our portfolio," says club member Judy Wrobel.

That's the method they've used to find their way into club favorites like Pfizer (No. 1 in the Top 100), Cisco (3) and Microsoft. "We were able to get in on the ground floor with those companies, and we've been extremely successful," Judy says.

Though club members follow their assigned stocks individually, they also conduct much of the club's stock study together. "We have stock study groups that meet during the month," Judy says. "The study group may start out with six or seven stock ideas, but by using the Stock Selection Guide they'll be able to whittle it down to the ones they'll present at the next meeting."

Like many clubs, the Monday Morning Money Makers found themselves a little heavy in tech stocks when the bottom fell out of that sector. "We had jumped on the bandwagon," Debby says. "We've used the last two years as an opportunity to diversify our portfolio."

That's where their hard work and dedication to a stock market education paid off. "Our goal has been education, and because of all we've learned, we now know how to prepare ourselves," Judy says. "We came out of the tech disaster and knew that we needed to diversify. That will help us to weather the storms in the future."

Other lessons come not through formal educational efforts, but instead through a time-tested method: experience. The club had three years under its belt when the market crash of 1987 approached. And it was just months after the crash that Judy decided to join the club.

"I remember that time; it was really interesting," Judy says. "I'd sit around the table at club meetings and listen to the conversations. There was a lot of talk about drug companies in particular.

"Everyone decided that the best thing to do would be to wait it through, have patience and continue to invest. Now that the market is once again struggling, we go back to the club's original members for advice on how to get through it."

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J.B. Smart Investors, Akron, Ohio. Pictured are bottom row, left to right: Jon Bucciarelli, Marci Bucciarelli, Perry Bartholet and Julie Bartholet. Second row: Bob Shelestovich (with grandson, Kyle), Sandy Shelestovich, Jill Bahry, Dan Bahry, Wendy Rosen and Amanda Rosen. Top row: Dan Rosen, Michelle Codispoti, Bob Rosen, Cynthia Rosen, Mike Shelestovich, Wendy Shelestovich and Kim Matisak. Not pictured: Don Jones, Eleanor Jones and Gladys Jones.

J.B. Smart Investors

Members of the Monday Morning Money Makers can count themselves lucky in that regard. When the most recent bear market hit, the 15 members of J.B. Smart Investors in Akron, Ohio, had only one another to turn to. That wouldn't have been so bad if they'd had some experience. But as brand-new investors who formed a club just as the market headed south in 2000, that was no easy task.

"Our club started just at the end of that long bull run," says club member Cynthia Rosen. "The stocks that we purchased then have taken a serious tumble, along with those that we have been purchasing as the downward slide continued."

Club members turned to more experienced investors through articles in Better Investing. "At the start of the downslide, I shared the story of an article I read some time ago," Cynthia says. "It was about a club that lived through the longest-running bear market in history and continued faithfully with their investment strategy of investing every month, regardless of the status of the market. When the upswing finally came, their portfolio grew to more than $1 million."

That story inspired the club's members. "When we opened our online brokerage account, we titled our portfolio On Our Way to Millions," Cynthia says. While that may be an ambitious goal for a club's portfolio that's currently valued at $8,700, club members are confident that their persistence will pay off.

In fact, they're busy taking advantage of the bargains that the sour market has left in its wake. "We keep reminding ourselves that this is the 'after-Christmas sale,' and we want to grab up as many bargains as we can," Cynthia says. "We spend every cent every month."

While a bull market is much more fun, Cynthia believes the bear market has given the club the kind of insight and experience it will need for the long term. "I don't know that anything gives us confidence in this market other than the history of eventual recovery, but if we are to have a well-rounded education in investing, we also have to know how to invest in a tough market," Cynthia says. "It's easy to invest when everything is going up."

Each member contributes $25 monthly, investing in Top 100 favorites like Lowe's (No. 16) and Bed Bath & Beyond (22). Members are also quite pleased with the club's most recent purchase, Starbucks. "Starbucks was recommended by our youngest member, 10-year-old Amanda," Cynthia says. "Her Aunt Kim bought her a cappuccino, which she loved, and so she took a Value Line sheet and entered all the data herself and presented the stock at the meeting."

The club struggles with a topic of endless debate for novice and seasoned investors alike: selling. "We spent one meeting looking at Lucent Technologies (not one of the club's holdings) and the nose-dive the stock took," Cynthia says. "We have learned that even the pros make the mistake of holding on to a stock too long, especially when it has been a winner for such a long time.

"We laughingly agree not to fall in love with our stocks. We have limited our holdings to 20 stocks and have adopted the policy of challenging a poor-performing stock with a new stock that we feel will outperform it."

Even if the club falls short of its million-dollar goal, members will count their experience as a success. "Our biggest success is what we have learned," Cynthia says. "Most of our members had never purchased a stock, had no idea what a P/E ratio was and had no clue how to evaluate a stock."

Members know how to look for a stock, determine the company's industry, sector and size, and complete an SSG for presentation. "We are very comfortable reading Value Line sheets now and are using the Web to obtain financial information on the companies we own and are studying," Cynthia says.

"Had we only been experiencing a bull market, I don't think we would have worked as hard at our club's education," she says. "We are getting an education we never could have gotten otherwise. And I feel we'll be better-educated investors no matter what the financial-economic arena."

Club members have also learned to rely on their individual knowledge of companies and products. "With the vast age span we have, we have the benefit of 81 years of exposure to companies and products," Cynthia says. "Through the eyes of Gladys, our oldest member at 81, we see what has stood the test of time and continues to do so. Through the eyes of Amanda, we see new upcoming trends -- especially in the world of adolescence and what is 'really cool.'

"The two generations in between provide us with about as much exposure to different products and services as we need to decide if something is a fad or a product or service that is here to stay. Add to that the bond we have as family, and we feel we have blessings beyond what we could have ever hoped for."

About the Top 100 Survey

This issue features Better Investing's 20th annual Top 100 Survey of Investment Clubs. Companies are ranked by the total number of investment clubs estimated to hold their common stock. Companies appearing in the Top 100 listing will constitute 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.

In her report on the survey tabulation, Sally Janke, head of the survey processing team, said the clubs reported holding shares in 2,372 companies. The average portfolio size was $71,598, down about 14 percent from the average of $83,433 in last year's survey.

NAIC mailed surveys to all of its 28,472 active clubs on Dec. 2-3, 2002, and 2,059 complete portfolios were received by the deadline for a response rate of 7.2 percent. Additional replies were received but not included in the survey tabulation because they lacked necessary information or bore postmarks after the Jan. 10 deadline. Both the number of clubs participating in the survey and shares owned were down from the previous year, most likely reflecting the down market and decline in NAIC membership over the past year.

Results shown in the listings are thus based on 2,059 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 13.83. 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: Garlic Ladies Investment Club, Gilroy, Calif. (garlic capital of the world); Invest Hers, Duluth, Minn.; Centsible Investment Club, Cherry Hill, N.J.; Single Malt Scotch Investment Club, Oroville, Calif.; Dividend Dollies, Buffalo, Wyo.; and MOMS (Making Our Millions) Investment Club, King of Prussia, Pa.