Investment clubs: Building friendships, portfolios over coffee

TRAVERSE CITY – The Women's Investment Club (WIC) began 21 years ago with a group of seven friends who knew enough about the stock market to know they wanted to learn more. They each put $250 into a kitty and began meeting in each other's homes.

Great for socializing, not so great for the club's portfolio, recalled Trish Fiebing, a current member and the last of the original group. Since that time, the club has grown, and so has its portfolio. Now, you'll find them the third Monday of every month at the Horizon Shine Café in the lower level of Horizon Books, making motions to buy or sell or hold, and sharing information about stocks with fellow members.

"The intention of the group is to learn, it isn't really to make money," Fiebing said. The club's primary investment objective is "aggressive appreciation" as opposed to "aggressive income." And after two decades of studying the market, they have a lot of smart decisions invested in a solid portfolio valued at over $144,000.

Kathryn Shaw, one of the club's founding members, even published a book based on the club's experience called "Investment Clubs: A Team Approach to the Stock Market" in 1992. Shaw has since moved out West and left the club. While some of the information is outdated, the basics of forming and operating an investment club are still relevant and the personality of the club she wrote about some 15 years ago is remarkably similar to the one today.

Barb Bensley of A.G. Edwards has been the club's broker since it organized. In the beginning there wasn't a lot of money, Bensley recalled, but there was a lot of learning about how the stock market worked and how to invest at a time when it was unusual for women to do so. Today it's a much different story, and the investment discussions at the table on a recent Monday night showed it.

The meeting's agenda included a monthly portfolio evaluation report, updates on current holdings, the status of micro-lending possibilities for the club, and presentation of a general stock study guide.

The WIC has a diversified portfolio with both conservative and aggressive stocks, explained Bensley, balanced among several sectors, including consumer discretionary, industrials and information technology. Sector diversification is key to the club's learning, Bensley added, as all stocks react differently to the market and the various phases of the economy.

The WIC owns stock in 23 companies, from Federal Express to Textron, Hewlett Packard to Lowe's. The club was one of the early investors in Traverse City State Bank when it was founded in 2000-an "excellent move" on the club's part, Fiebing said.

The club operates as a limited partnership and has a maximum membership of 20, with 18 presently. Though its slate of officers changes every two years, Fiebing said changes to the membership are rare.

Every month, members contribute $25 that is used to purchase units of a whole company share. In other words, the club owns the shares and an individual member owns so many units of that share. The longer a member has been in the club, the more units she owns.

With their money, the women also bring knowledge, perhaps about a current stock the club holds, a company they should consider investing in, and sometimes a recommendation to sell. At its April meeting, the club passed a motion to buy 50 more shares in a technology stock, and to raise the price objective of two other stocks.

The Club's most recent portfolio Boost was the 2006 purchase of Odyssey Marine Exploration (AMEX: OMR) stock. Odyssey is the deep-ocean shipwreck exploration company that recovered more than 500,000 silver coins from the Colonial-period shipwreck (site code-named "Black Swan") in an undisclosed Atlantic Ocean location.

They paid $4 a share for the stock in January of '06 and it's now worth $8 a share.

When it comes to buying, the club has no maximum dollar figure on stock purchases. A personal connection or experience with a product often leads them to stock purchases. Chico's, a women's clothier and Panera Bread, are two such examples.

WIC also looks at price-to-earnings ratios and studies Value Line and Standard & Poor's reports, a host of Internet resources and financial periodicals. It keeps a "watch list" of companies to keep an eye on, and stocks being considered for selling.

"We don't always buy because of dividends, but it's meaningful," said Fiebing.

Traverse City has one publicly-traded company, Aurora Oil & Gas Corp., but the club has not purchased its stock. It does, however, own Textron stock (locally, Cone Drive).

As a club "we decided to look at local companies and see what we could attach ourselves to," Fiebing said. "The (Textron) stock has done very well for us."

Another investment club with some history in town is Evergreen Investors, which will celebrate its 25th anniversary in February. The club currently has seven members-all women-but men are allowed. The club has had 45 members since its first investment in 1983, but members come and go and now membership is generally between seven and 10.

The club started as a study group of the American Association of University Women and eventually developed into its own entity with its main purpose education and learning how to invest.

"On paper we don't make a lot of profit, but we have more winners than losers and that's what counts," said Kathy Nolan of Traverse City, the last of the original group. She recalled the club's first stock purchase back in '83. She went to the library, got the Value Line book and it opened up to Pfizer.

"That's how we bought our first stock and it's the stock that has made the most money for the club. We've used some of the money to invest elsewhere," she said, adding that the club owns stock in 16 different companies.

Nolan said the "buy and hold" club generally buys stocks twice a year and right now is trying to buy stock in a bank. The club looks at company management, whether it's involved in any lawsuits, and familiarity with its products. Like the WIC, it has its own broker and invests on the unit system.

If you are wondering about joining an established club or starting your own, one option is BetterInvesting, a national organization offering investment education since 1951. The northern Michigan chapter reportedly has between 75-100 clubs throughout the 496- and 497- zip code area, according to chapter VP Herb Lemcool. More information available at www.betterinvesting.org.

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