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Tess Vigeland: Back now to our investment club series.
This year we’re visiting with a club in St. Michael, Minnesota, as they figure out what stocks to buy, sell and hold throughout the year.
Vigeland: Our last visit was on a bone-chilling, snowy night back in February. This time, the sliding door to Lynn Ostrem’s basement living room was flung wide open.
The 15-member Crow River Club has managed to eke out some profits despite the stock market’s abysmal performance over the last few months.
Club member Ron Thorson is on the portfolio management team they created to help diversify their holdings.
Ron Thorson: I actually put our portfolio on Morningstar and we’re up the last three months 11 percent, so we had a very good run the last three months.
Vigeland: OK, what did you do? What are your major changes since February?
Lynn Ostrem: Diversification! One of our goals.
Vigeland: I remember that. So is there a specific sector that you got into recently?
Thorson: Energy. We did get into energy. National Oilwell Varco — that’s in the rig, platform, oil services industry. It’s done really well for us.
Vigeland: So oil at $139 a barrel in some ways is good for you… every way except your gas tank, right?
Thorson: That’s right.
Lynn Ostrem then pointed to a chart that showed the differences in their holdings in February versus today. They’ve battled what she called “style drift,” trying different investing strategies like Rule One and Navellier and now they’re preaching the simple gospel of diversification.
Ostrem: When you were here last, we were heavily weighted in discretionary and financial. We made the conscious decision last fall when it started to tumble to stay with those because we’re long-term investors and we took a hit because we had nothing in industrials, we had nothing in energy, we had nothing in basic materials, which were the hot sectors at the time. All we’ve done, Tess, is rolled some money into those sectors now that we should have been in in the first place.
So they’ve bought into that oil well company that Ron mentioned. Also the tech company Infosys out of India.
At the meeting, they also discussed the pros and cons of buying into another technology company — SAP — and they’re still trying to decide whether to take a bite of Apple, which the day of the meeting was selling at $181 a share.
Diane Windingland started a discussion of some of the club’s research.
Diane Windingland: I thought for the sales growth and the earnings per share growth that really Ron wasn’t too far off. I would’ve maybe gone a little more conservative to 20 percent for each, which also happens to be our club rule for a maximum.
Craig Block: You know my earnings or sales and earnings is more in line with Diane’s — essentially the same. You know, I pulled an article off of Bloomberg today. All the analysts are saying it’s a buy because their new iPhone, but…
Windingland: The price fluctuates so much on this stock. I don’t want to buy too high and I’d rather be conservative.
Block: I don’t want to bet against Steve Jobs, though. There’s a handful of people that are always bringing out winners.
Thorson: And people wanna pay for growth. I mean, this is a growing company and it has three good product lines that have a lot of promise, so…
Ostrem: And based on what we’re looking at, we want to buy below $150.60.
Vigeland: So for you, it would be overpriced right now?
Ostrem: It would be way overpriced.
They also engaged in a spirited discussion about their current holdings in Lowe’s and the luxury handbag retailer Coach, which Kim Windingland pointed out has done quite well for them.
Kim Windingland: I think Lowe’s is gonna be going through a very difficult time the next year.
Ostrem: I don’t want to get rid of our Lowe’s, but I certainly don’t feel bad cutting it back.
Kim Windingland: Just reduce our positions. If the comfort level is not high enough to sell some of Lowe’s and buy $800 in Coach, I could propose amending the motion to buy $600 in Coach.
Ostrem: I would be amenable.
Diane Windingland: All those in favor say aye… Any opposed? One opposed. Well, the ayes have it.
And so the diversification effort continues.
We’ll check back with Crow River in the fall.
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