Investment Clubs: San Jose summary

San Jose skyline

TEXT OF STORY

Tess Vigeland: Back now to our series about investment clubs. We're following three of them -- in Seattle, San Jose and Fairfax, Virginia -- as they figure out what stocks to buy, sell and hold throughout the year.


We're back in San Jose for a final Italian lunch at Frankie, Johnny and Luigi's. Club member Marvin Kohn shared the news he'd just heard on his way to the restaurant.

Marvin Kohn: Did you guys hear the radio just a few minutes ago? The market is up 350. 350.

Kathy Tegtmeier: Roller coaster ride.

Kohn: I've spent a lot of time with stop losses.

Tegtmeier: They're scary right now because you end up selling really good companies in this kind of bouncy market.

Kohn: But remember, if you sell at a profit, you can buy it back tomorrow.

Tegtmeier: Yeah, but it may have gone up tomorrow.

Kohn: It's true.

A stop loss order tells your broker to sell a stock when it reaches a certain price.

Even seasoned investors like the San Jose club members are having a tough time reading the market's tea leaves. Martha Alderson reviewed some of their current holdings for the group.

Martha Alderson: We still own Brown and Brown. We still own East West Bankcorp. We still own Facenol. We sold Genlite and we sold Garmin. We still own O'Reilly. We still own Options Express, Teva and Walgreens.

I was surprised to hear that they retained Brown and Brown, an insurance brokerage. Last time we visited back in July, they were giving serious thought to selling their shares.

Four months later, club member Kathy Tegtmeier was still mulling that possibility.

Tegtmeier: I listened to the Brown and Brown conference call that they had in October. And they're talking about the current market being the most difficult they've had in 15 years. So Brown and Brown is struggling. We bought it at about $15.50 a share in 2003. Now the price per share is $24.44.

Alderson: It's gotten over 10 percent return.

Tegtmeier: But the retail market for insurance right now has been dropping, so the profits have been dropping.

Kohn: Consider getting out?

Tegtmeier: It's one of our financial stocks.

Kohn: I'm scared of financial stocks right now.

Alderson: The financial sector is making me nervous.

Yeah, the banking sector is making a lot of people nervous and because of that the club also decided to take a second look at one of its more recent investments: East West Bank.

Tegtmeier: East West Bankcorp we bought in July. It doesn't have subprime mortgages, but they're getting hit because they're in a banking business. Do we think that over the long term -- two years from now -- is it going to be terrific or is there someplace else we can put our money?

Kohn: I think we can probably put our money better. The big thing that I'm seeing is this: all of the financial companies are being painted with the same tarbrush.

So the debate for the group was whether to get rid of both financial sector stocks, East West Bank and Brown and Brown.

In the end they decided to keep watching the insurance company, but dump the bank -- at a loss.

They more than made up for that loss, though, with a huge stock sale at a previous meeting. Martha outlined the group's decision to cash in on GPS-maker Garmin International.

Alderson: We bought Garmin on June 23 of 2005 for $21 a share. At our last meeting it was around $110 and we actually sold it I think at about $124.

Tegtmeier: One of our better choices! We're not that brilliant all the time -- trust me.

And it's a special challenge to be brilliant in a wild market like this year's. I asked for some perspective from these veteran investors.

Alderson: This is Martha. I'm reminded of the Chinese proverb, curse, whatever it is, "may you live in interesting times." It's been a very interesting year. It's been very bouncy. People are like 'oh my gosh I gotta get in! I gotta get in! Oh no, it's gonna drop! Oh no, oh no!" There's a constant battle of fear and greed.

Tegtmeier: This is Kathy. Part of what we're doing is we're watching individual companies and we're not watching the whole market. And so we've got some companies that in this bouncy environment have done very, very well. And this club was founded in 2000. We've seen exciting markets.

Kohn: My wife gives me a hard time about my not getting too upset about our portfolio going up, going down, going sideways. You just gotta live with the ups and downs. I guess I'm the senior guy here so I'm the old philosopher in the corner.

Wise words, indeed.


Our thanks to the San Jose club for letting us join their fun this year, same with Seattle and Virginia.

We'll return with some new clubs next year as they navigate Wall Street '08.

About the author

Tess Vigeland is the host of Marketplace Money, where she takes a deep dive into why we do what we do with our money.

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