Kudos to the Salt Lake Investment Club, a group of 16 amateur investors who all are employed at the local office of the Federal Deposit Insurance Corp. (FDIC), for being named the top investment club in America for 2000 by the National Association of Investors.
During a year when most stocks got hammered, especially dot-com and high-tech issues, the SLIC racked up a whopping 88 percent gain during the contest's 12-month tracking period that ended last year.
NAIC holds an annual contest for its members in which Value Line Inc., a 70-year-old securities analyst firm best know for its Value Line Investment Survey, tracks the performance of the nation's investment clubs against the Dow Jones industrial average, the Standard & Poors 500 and the other clubs in all 50 states.
But the survey does not simply reward stock pickers. Clubs are required to have a five-year history of performance on a given company in its portfolio, and it also looks at such things as the length of time the club has been investing and the consistency of its long-term performance.
"Our goal is a doubling every five years," said Ross Meredith, club president and a bank examiner for the FDIC (for conflict of interest reasons, the club doesn't buy stocks in FDIC-insured financial institutions).
Ross and the others launched their club six years ago by making small investments in "value" stocks — issues believed to be priced below what the members' research showed them to be worth.
Obviously, that was not a great approach in the late '90s when momentum investing — putting more money into stocks already moving up — was all the rage, as Internet start-ups that had never made a dime in profits saw their stocks soar to absurd heights.
"We largely avoided the dot-com thing and, believe me, it was hard. We took some heat for it," said Meredith. Club members had been reading about all the new millionaires being made while their group plodded along with stocks that the "smart money" was ignoring, and a few of them wanted to join the party.
"But along about March of last year, there was a big change, and the market decided value stocks were not so bad after all," said Meredith. "Quite a few of our holdings rose after that, and a lot of those new millionaires are now broke."
No, the SLIC members are not millionaires. Their modest portfolio is worth about $40,000. But most members, including Meredith, also invest in equities outside the club.
"I kind of believe in the idea that when you combine everyone's thinking you get better decisions, but I sometimes have other ideas (stocks he'd like to buy) that they don't like, so I buy them myself."
Member investments amount vary, but club rules mandate that no member can own more than 20 percent of the portfolio and each member has an equal vote on what stocks the club buys. Meetings are irregular because the members travel a lot for the FDIC, but they try to get together once a month and, of course, they exchange a lot of e-mails.
The club uses NAIC software that monitors the performance of the portfolio and, no, you can't be a day trader and still be an NAIC member.
The club's best holdings, said Meredith, include Aflac, the "quacking duck" insurance company; Johnson & Johnson, the health products giant; and computer chip maker Intel. They also own high-tech firm LSI Logic; InvaCare, which manufactures wheelchairs; and OM Group, which makes chemical powders used in various consumer products.
Other SLIC holdings include Albertson's (NOT a winner of late); Wendy's (the burger chain); and Volt Information Sciences, a temp agency that specializes in placing technical workers.
The club's only Utah-based stock is MityLite, the maker of lightweight furniture — although OM Group has a plant in St. George if that counts.
Worst loser? Safeskin, a manufacturer of rubber gloves. They lost 65 percent of their investment on that turkey.
SLIC isn't admitting any new members, but for information on starting an investment club of your own, call the NAIC toll-free at 1-877-ASK-NAIC (275-6242).
E-MAIL: max@desnews.com