TodayClubs nurture investment savviness
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Charlene Kruszewski, left, and Kathy Knoth, both of Ross, Pa., look over a stock study guide on a computer as they meet with fellow “Buck-A-Day” investors at the King’s Restaurant in Wexford, March 13. The group began their club several years ago to learn about investing their money.(Heidi Murrin/The Tribune-Review/AP)
CRANBERRY — Mike Berman got the bug about 15 years ago and since then, he’s spent a lot of time helping others catch the fever: organizing and/or joining an investment club.
“I’ve started four clubs, been involved with six, just helped form one a couple weeks ago,” said Berman, 48, of Cranberry. “Sometimes you can lose money in a club, but this also helps you learn about stocks, about investing.”
Berman’s latest venture, the Absolut Club (named after the vodka maker) has three members, including Berman, his neighbor John Bowers and former fellow worker Dennis Pichette. The name was selected after the trio saw an Absolut poster in an Applebee’s restaurant while discussing club formation and figured Absolut’s a premium vodka; this, hopefully, will be a premium investment club.
In late 1999, six friends from Ross and nearby decided they should be investing in what at the time was a booming, high-tech-driven market. But with children in college and other expenses, they determined $30 monthly was all anyone could afford. Thus was formed the Buck-A-Day investment club.
“I joined the club two years ago because I wanted to learn how to invest,” said Charlie McChesney, Mars, Buck-A-Day president. “I’ve learned a lot, we’ve focused on the important aspects of investing.”
“It’s been fun,” said club members Kathy Knoth and Charlene Kruszewski, both of Ross.
Clubs nothing new
Investment clubs — organized groups dedicated to learning about investing, making money and having fun — are nothing new. In 1951, a group of friends in Detroit formed a nonprofit organization called the National Association of Investors Corp., known today as BetterInvesting. The idea was to help novice investors by imparting four commonsense principles:
• Invest in reasonably priced growth companies.
• Reinvest earnings and dividends.
• Maintain a diversified stock portfolio.
• Invest regularly.
“We figure if we go with (invest in) a local company, that makes things really interesting,” said Absolut’s Bowers.
Joining BetterInvesting costs about $80 a year and offers as many or as few investing resources as a member wants, including books, tapes, computer software, magazines, workshops and seminars. Clubs are organized into chapters, with Herman, who serves as a director on the national advisory board for BetterInvesting, estimating more than 150 clubs in the local chapter, which includes all of Pennsylvania east to the Harrisburg area.
The number of BetterInvesting-related clubs peaked in the late 1990s, at well over 35,000, then plunged with the dot-com bust in 2000, and with 9-11 one year later. Today, there are more than 13,000 clubs with 103,000 members. There are 525 clubs in Pennsylvania.
All members sign a formal partnership agreement, and the individual clubs must register with the Internal Revenue Service for tax purposes. Income or losses are passed through to partners and are reported on individual federal tax returns.
Diversity and discipline
“You want as much diversity in your club as possible,” said Brian Bruce, director of the Finance Institute at South Methodist University’s Cox School of Business, Dallas. “If you have just a bunch of people with no knowledge, you tend to sit around and tell stories and recount the day’s business noise. You need serious analysis and discipline.”
Bruce’s undergraduate students handle a $3 million portion of Southern Methodist’s endowment, and delivered a 20.8 percent return above its benchmark percentage during 2006.
For the Buck-A-Day Club, members meet at a local King’s restaurant, have dinner and then pull out the written data and laptop computers. The most recent meeting was slated to review all 12 stocks in the portfolio to see how each fared for 2006. The top five in terms of largest percentage share of the portfolio include Saxonburg-based II-VI Inc., Johnson & Johnson, Pfizer Inc., Kohl’s Corp., Lowe’s Companies Inc. and the Wm. Wrigley Jr. Co.
“Our return since inception is 14.36 percent annualized,” said Patrick Donnelly, Buck-A-Day’s president.
While just getting on its feet, Absolut’s three members are eager to jump into the market, with a local stock, memorialization products maker Matthews International Corp., and Dallas-based pump and valve manufacturer being scrutinized. The latter company is of interest because Herman, a quality engineer, currently is working at its Bridgeville plant.
Club members understand the risks involved with joining a club, that is, there is risk. No one is using the mortgage money or grocery funds to put into the club kitty.
“I think our worst investments were AOL (American OnLine LLC) and Tyco (International Ltd.),” said Buck-A-Day member Knoth.
Despite all the studying and discussion, sometimes picking a winner or shying away from a loser takes a bit of luck.
“We called Lois (Schmidt, of Pine) ‘Goldfinger’ because every stock she brought to us was golden,” said Donnelly, drawing a laugh from his fellow club members. “Until she brought in Enron.”
