Investment Clubs: The vital how-to’s (Part 2)

Marketplace Staff May 4, 2007
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Investment Clubs: The vital how-to’s (Part 2)

Marketplace Staff May 4, 2007
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TESS VIGELAND:
This is Marketplace Money from American Public Media. I’m Tess Vigeland.

Back now to our series about investment clubs. We’re following three of them in Seattle, San Jose, and Fairfax, Va as they figure out what stocks to buy, sell and hold throughout the year. It’s been a little more than three months since our last trip to San Jose, Calif. This club meets once a month at an Italian joint called Frankie, Johnny & Luigi’s, which means it’s time to make us hungry again.

WAITRESS: Bistro steak salad?

MARTHA ALDERSON:
Yes, that’s right.

ALAN SMITH: I’ll take the chicken salad.

KATHY TEGTMEIER:
I’d like the bistro steak salad with the vinaigrette.

MARVIN KOHN:
I’ll have the chicken and . . .

VIGELAND:
The late-April meeting found just four club members in attendance in the order that they ordered Martha Alderson, Alan Smith, Kathy Tegtmeier and Marvin Kohn. And while they waited for lunch to arrive, Marvin brought up a less than appetizing potential investment.

KOHN:
Did you see the interesting article on waste management? I went to Value Line and looked at the environmental industry, but it’s strange, if, you know,, waste management, as they described it, comes out to be a buy. So this is something we could maul over. They are making hay on the fact that they own a lot of the dumps.

VIGELAND:
They decided to do a little more research before making any decisions on investing in the company. So I asked them how the club’s done since our last visit.

KOHN:
I’m happy.

SMITH:
Me, too.

ALDERSON:
Same here.

TEGTMEIER:
I did a little evaluation on my own personal portfolio. I’m currently at an all-time high, so.

ALDERSON:
Congratulations.

SMITH:
Me, too, made it my all-time today.

ALDERSON:
Ah, with the Dow.

SMITH:
Well, the Dow . . . 13,000 now. It’s 13,808.

VIGELAND:
What does that mean to you?

TEGTMEIER:
I think we use it as a general indicator. It’s not that we own the Dow, but we do own a . . . number of large companies.

ALDERSON:
For me, whenever it’s breaking new highs, it almost actually, for me, presents kind of a cautionary note, so I’m kind of expecting there to be a pullback perhaps if not now some time in the next two or three months. We’ve had a really, really strong run for five years. It’s getting a little long in the legs.

VIGELAND:
Did any of you, as a club, do anything in reaction to the biggest point drop we’ve seen recently, which was after the crash in Shanghai and Alan Greenspan over in Asia talking about a possible recession, did that affect your…

SMITH:
Yeah, we had a nice meal here, and pontificated, and chewed the cud a little bit.

ALDERSON:
This is Martha. My recollection was that the China blip happened pretty close to a meeting. And I think one of the things we talked about was because the US market’s dropped a little bit, too, we started looking at our, do we wanna buy more of anything else list?

VIGELAND:
Is there anything that you can pinpoint in terms of the, the three months since the last time I talked to you that has affected your buying and selling? Any, anything macro or has it really been based upon your – the individual stocks that the club holds?

SMITH:
It’s pretty much that.

TEGTMEIER:
One of the things, this is Kathy. One of the things that I’ve been realizing these last few months as the market’s gone up, I’m able to identify good growth companies, but the prices are going a little higher now. So I’m not as easily buying stocks.

SMITH:
. . . problems actually. Well, we’ve ended up with more cash than we’d like quite often. It’s actually finding companies that we identify as being worth buying that’s being very difficult.

ALDERSON:
This is Martha. We feel like the price is a little high. They’re just a little too expensive and we don’t wanna pay that just yet.

VIGELAND:
In January, the club’s net worth was just over $21,000. By the meeting in April, they had $29,782. All but $4,000 of that invested in the market. So they have some money to play with while they reviewed their current holdings. If memory serves, you had a wryly automotive back in January.

KOHN:
We will still do.

TEGTMEIER:
Yeah.

VIGELAND:
Still do. Have you hold on to that for quite a while?

ALDERSON:
Kind of our first ones, the December quarter, their profits, earnings per share growth was zero percent, but then the most recent quarter that ended in March, 20 percent so they’re back on track.

TEGTMEIER:
I think that’s one of our oldest stocks now possibly.

KOHN:
We’ve bought O’Railey back October 24 of ’02. We have almost crippled our investment. We bought it for roughly $1,370 and it’s now, as of Friday, $3,480.

ALDERSON:
Well, that’s typical for, for us. So you find a good company and you just let it grow.

VIGELAND:
Have you bought any new companies this year?

KOHN:
Yes.

TEGTMEIER:
Yeah. TierOne, it’s a bank.

KOHN:
It’s a bank.

VIGELAND:
Have you sold anything this year?

TEGTMEIER:
Yes, we just sold Corporate Executive Board.

ALDERSON:
Yeah, their guidance for the coming year was lower than what we wanted in the way of growth rates.

TEGTMEIER:
Yep.

VIGELAND:
Sounds like at this point, at the end of April, you are fairly happy with your holdings, you’re not going to buy or sell after this meeting?

SMITH:
The flag was raised.

ALDERSON:
Kathy has a problem with Chico’s CHS. It’s struggling trying to do good growth.

KOHN:
You got a nice run on Chico’s.

TEGTMEIER:
Well, compound annual return was 27.

ALDERSON:
And so that’s a little high because we bought them less than a year ago.

KOHN:
Yeah.

ALDERSON:
So that was about nine months ago.

WAITRESS: Any coffee or dessert anyone? Refills on your drinks?

VIGELAND:
No dessert, no refills and no decision on Chico’s, the women’s clothing store. That and whether to put some money into garbage will be decided at the next meeting. And so we move on, next week, a checking with the Seattle club at the pub.

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