Investor Clubs Pool Money, Brainpower
The National Assn. of Investors Corp. was founded in 1951 to promote individual ownership of stocks through investment clubs. The club concept: Small investors pool their money and smarts to build a diversified portfolio of stocks for long-term profit--or so they hope, anyway.
The average club today has 20 members and owns 12 stocks. The average member invests $34 a month toward stock purchases, though in some clubs the monthly investment runs $100 or higher.
To pick stocks, many clubs divide members into teams. Each team must periodically recommend a new stock to buy based on members’ research. Clubs generally meet monthly to hash out new recommendations and decide whether to hold or sell stocks already in the portfolio.
The NAIC says its members come from all age groups and walks of life. Many members have investments outside the club but say they learn a lot through the give-and-take of club discussions. “You really come to understand the thought processes that people use in making an investment,” says Sam Dulberg, a “70-plus”-year-old member of the West Los Angeles Investment Club.
Jerry Stember, head of the West L.A. club, says the group has built a $250,000 portfolio in eight years--and beaten market benchmarks consistently--with such stocks as Merck, Philip Morris, Hong Kong Telecom, Circus Circus and Wal-Mart.
Traditionally NAIC clubs have favored classic growth stocks--for a simple reason, Stember says: By definition, the clubs are long-term investors, not traders.
So members seek out companies that show a strong likelihood of posting rising sales and earnings over time, rather than cyclical companies whose businesses fall in and out of favor with economic swings.
But Stember says the image of clubs as mere buy-and-holders is wrong. If a company’s growth rate begins to decline, members are quick to spot it, he says, and they have no fear of selling and moving on to a better stock. The West L.A. club, for example, recently dumped Waste Management because of perceived poor growth prospects.
Likewise, Stember says, his club is already pondering its options should the time come that stocks overall lose their luster compared to other investments. “We have asked ourselves, are there other things we could do with our money if the market is no longer the place to be?”
For more information on NAIC or the names of clubs in your area, write NAIC at 1515 E. Eleven Mile Road, Royal Oak, Mich. 48067. Or call (313)-543-0612.
The Stocks They Love: Investment Club Stars
Here are the stocks now most heavily owned among 8,425 local investment clubs nationwide.
No. of clubs Value of shares Stock holding stock held (millions) McDonald’s 3,597 $64.12 Wal-Mart 3,593 127.50 AFLAC Inc. 2,421 105.60 Waste Management 2,254 54.34 Pepsico 2,044 43.86 AT&T; 1,744 49.70 Merck 1,532 65.61 Philip Morris 1,448 52.28 Abbott Labs 1,393 47.42 General Electric 1,364 48.61
Dollar value calculated as of Dec. 31, 1991. Source: National Assn. of Investors Corp.
