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Learn to invest with Prospectors Investment Club

Submitted by Jim Cornell • Mar 17, 2019 at 10:30 AM

In 1998, a group of recent retirees decided to form an investment club in order to improve their knowledge of investing and have some fun while learning. They named their club “PICK” after a suggestion from the spouse of a member. PICK stood for Prospectors Investment Club of Kingsport. The club decided to affiliate with the National Association of Investment Clubs, Inc., because they liked NAIC’s philosophy of investing in quality growth companies for the long-term, reinvesting dividends and interest, investing regularly and being diversified.

PICK began life with 12 members and dues of $30 per month. Dues were used primarily to buy stock with a small amount used to pay for membership in NAIC and other expenses. The club’s first priority was to get all the members trained in the NAIC methodology. That took several months, but by July 1999, the club was ready to buy its first stocks. The first purchase was five shares of Johnson Controls.

As the members got comfortable with the computer software they used to study a stock’s growth potential, they began to recruit others to join the club. Over the next 20 years, new members came and older members left.

Today, PICK has a core of nine members, still using the same methodology to select stocks, but using a lot more software tools and websites for their stock studies. Along the way, NAIC changed its name to Better Investing, the name of the organization’s magazine. The focus is still the same – education for individual investors and clubs.

PICK’s goal is identical – education of its members.

PICK meets once a month. At a typical meeting, two members will present a new stock study. Other members will do an in-depth review of several of the club’s existing holdings. Then the members will vote on what changes they want to make in their portfolio, if any. Dues are now $200 per quarter, most of which is credited to a member’s account to purchase stocks. A small amount is used to maintain membership with Better Investing and pay for its club accounting software.

How has PICK done over the past 20 years? A common measure is the percent increase in the S&P 500 index, the value of the top 500 companies in the US as measured by their market capitalization. The percent increase in value includes both stock price increases as well as reinvested dividends and interest. Between June 23, 1999, and January 22, 2019, the Vanguard 500 Index Fund (VFINX) has experienced an Internal Rate of Return of 7.5 percent. PICK has seen an IRR of 8.1 percent in its investments. A majority of professional fund advisors do not beat the S&P 500 index. The Better Investing methodology has helped the PICK amateurs beat the experts!

PICK’s members learn that stock prices will rise and fall, along with the economy and other factors, but that quality companies will rise to the top after storms have passed. The key is finding those quality companies and buying their stock at a fair price, allowing the club an opportunity to achieve significant capital gains over several years.

Currently, the club has a portfolio of 14 stocks (AT&T Inc., Air Lease Corp, Alphabet, Inc, Axos Financial, Inc, Celgene, CVS Health Corp, Dollar General Corp, Dominion Energy, Edwards Life Sciences Corp, Manhatten Associates, Inc, Microchip Technology, Signature Bank, Tractor Supply Co, and Ulta Beauty Inc).

On January 22, the club’s portfolio was worth about 10 percent more than what was paid to buy the stocks. Club members realize that their short-term performance will be up and down; they have their eye on the long-term.

If you are interested in learning more about Better Investing’s educational offering, visit their web site at www.betterinvesting.org. If you would like to learn more about PICK and its local educational effort, send an email to club secretary Jim Cornell at [email protected]

Happy investing!