EDGEWATER – If there’s one thing Edgewater’s investment club makes clear, it’s that they are not in it for the money. The club, made up of 17 members, is instead focused on learning about the stock market and bonding over their discoveries.
A social connection is what first brought Dave Strahl, the club’s current president, to the group.
“I also wanted to learn about investing, and I think the beauty of the club is you don’t have to come in as an experienced investor; we all learn from each other as we discuss various stocks and make a collective, wise decision,” he said.
Members of the Investors Club. From left, Preston Scroggin, member; Vern Tepe, treasurer; Bill Murphy, secretary; Bill Rowland, member; Don Gaylord, financial advisor; Dave Strahl, president. (Photo by Mason Souza/Sun Day)
Investment experience varies among members. Some are fledgling investors, looking for a new hobby. Others, like member Bill Rowland, have decades of experience.
“If you’re a more experienced trader or if you’re a novice trader, you’re going to learn something. And it’s that ability to expand that’s going to help you,” Vern Tepe, treasurer, said. “I picked up some tips at the club that I’ve gone and bought the stock and done pretty well on it.”
The personalities in the club vary just as much. A certain camaraderie showed through during a sit-down with the group, coming across in deep laughs and good-hearted jokes made mostly at Strahl’s expense.
With the guidance of Don Gaylord, a financial advisor with Edward Jones, the group invests in stocks as a partnership. Every month, two members will present a stock to the group and recommend if the group should buy, sell, or do nothing with it. After a secret ballot, the club makes its move.
The Investment Club deals exclusively with stocks. Members pitch in a minimum of $25 each month, and the club pools their resources to purchase stocks. That $25 works as an investment in the club itself.
Money made off stocks goes back into the club to fund further investments or other operations’ costs.
I sat down with the Investors Club to gain some insight into investing. Along the way, we discussed investing dos and don’ts, the current state of the market, and why you should never try to catch a falling knife.
Sun Day: What are some tips you have for first-time investors or those with little experience?
Dave Strahl, club president: I would say I’ve learned a lot in this club. First of all, I’ve learned that all kinds of people buy stock: old people, young people, smart people, dumb people, and so I shouldn’t be intimidated as an individual investor to take the leap and try to buy stock. The other thing I’ve learned is there are a lot of smart people at our table.
Don Gaylord, financial Advisor: It’s nice to get a feel, to buy a stock and see what it does. But at the beginning, if you know nothing about it, definitely get some help from somebody.
Sun Day: What are some misconceptions a novice may have about trading?
Don: I think the misconception is that you can just throw a dart and pick a stock. It’s not the late ’90s anymore; you have to pick good stocks. For the first-time investor, it’s hard to tell them to go out and buy an individual stock because then your one stock is basically what you have, versus a mutual fund is a basket full of investments, and so one stock isn’t going to beat up the whole portfolio.
Dave: I think it’s interesting to invest in companies that you care about, that you have an interest in, assuming you’re not a professional investor.
Bill Rowland, member: One of the important things to note as a new investor is that every time you buy a stock, someone’s selling it to you: this is a zero-sum game. So if I’m buying a stock from Don, he’s selling it for a reason. Be aware of that. Now also be aware when you’re a rookie that he’s smarter than me and he’s selling it, but I’m buying.
Preston Scroggin, member: People buy for different reasons: some buy for income, some buy for gain, so there’s different reasons to buy a stock. Difference of age has a lot to do with what stocks you buy – if you can hold for the long run or you’re going in for the short run.
Dave: And the long run for a Del Webb resident is six to 12 months?
(Group laughs.)
Preston: You never know, Dave.
Sun Day: You mentioned researching stocks. What exactly goes into researching a company when it comes to their stocks?
Preston: There are reports out by Standard and Poors, AG Edwards, and a lot of other companies, which you can go online [to find].
Don: Or Edward Jones.
Preston: Oh, and Edward Jones.
(Group laughs.)
Don: AG Edwards doesn’t exist anymore.
Preston: Anyhow, what I’m saying is, there are a lot of companies now that do research on these stocks, and this is one of the things about investing today. In the old days, there were not as many companies as there are today and there was not as much in the media about different stocks as there is today.
Don: Sometimes analysts will say stuff that’s really contradictory to what the data is, but you have to make sure you’re researching someone that has a reputation for being right.
Sun Day: So the recommendations differ, but the hard numbers are always the same?
Preston: That’s why it’s such an advantage to have Don.
Dave (to Bill): Tell them what your great line you used a couple of months ago about catching a falling knife or something.
Bill: We were talking about Exelon, and I think there was a recommendation that the club buy Exelon. And I said, ‘You know, their stock’s gone from $40 to about $35 in a pretty short period of time. It may look like a great buy, but I’ve learned you never try to catch a falling knife.’
Sun Day: That’s a good analogy.
Bill: And you know since I’ve said that, it’s gone down another 10 percent.
Sun Day: How would you encourage seniors who are on a fixed income to invest?
Don: When I get a client and we’re planning their retirement, they’re 60 years old, let’s say, we have to plan not just to get them to retirement, but we’ve to got plan to get them into retirement and hopefully to live to age 90.
We’re looking for a nice, steady increase, but we’re not looking to try to get 10, 12 percent a year, because when the market goes down, we’re going to lose a lot more too.
Dave: I think it’s also important to make the distinction that our club doesn’t invest as a senior citizen. I think that we’re far more aggressive in our club; we take a whole lot more risk as an investment club.
Sun Day: Given the economic state that we’re in now, as well as events like the J.P. Morgan Chase scandal, how has that affected public perception of the stock market, and have you seen people reluctant to join the club?
Bill: I see almost a point where there’s disdain of the retail investor by Wall Street. When you look at the popular companies, the popular stocks that are sitting out there, Google at $600 for one share. A round lot is 100 shares. If you want to buy a round lot of stocks, you buy 100 shares. Google is $600 for one. Apple is $560 for one.
It’s tough for the retail investor, for the man on the street, to buy 100 shares of Apple. So that I see as part of the disdain for the retail investor, and there are shenanigans going on, and we all know there are shenanigans going on.
Dave: And retail investors are not privy to that inside information.
Bill: And the debacle with Facebook is just one more instance of shenanigans going on.
Sun Day: So people feel not only excluded because it’s so expensive to get in, but also like the money at the top levels is being tampered with, or is being gambled on?
Don: Bad news sells, good news doesn’t. The retail investor is not getting the full story all the time. They’re going to talk a lot about J.P. Morgan losing $3 billion, but something we talked about at the club the other day is that’s $3 billion of a half-trillion dollar portfolio. It’s less than one percent of that portfolio that got hit. So $3 billion is a huge number, especially to retail investors, but if it’s that small of a portion of the actual portfolio, is it bad? Yes. Is it as bad as I think the news makes it? No. But the problem is, it’s hard for retail investors to decipher what’s real and what’s not.
Sun Day: Because a common person will see $3 billion is lost and they’ll think…
Don: J.P. Morgan’s going out of business! It’s still the strongest bank in the United States.
Bill: They made $5.6 billion in the last three months’ profit.
Don: The Eurozone is actually a bigger deal than what’s going on with Facebook, than what’s going on with J.P. Morgan. They hear something about Greece and the market drops. I think two weeks ago, the market was up, I think, 80 points, the Dow was up 80 points, and then something in Greece came out about 2 o’clock and it went down 36 [points].
Sun Day: Are there some companies that come to mind as blue chip stocks, when you think about the past few years, that have been reliable?
Don: I like Apple. We have a buy opinion on Apple, the S&P has a buy opinion on Apple, so it is a good stock. But like Bill Rowland mentioned, sometimes people like to buy in 100 share lots, and they don’t feel like they can. My clients that are buying Apple might be only buying 10 shares. We talk about this all the time in the club, a 10 percent return is a 10 percent return.
Dave: In a volatile market like we’ve seen over the last several years, I think our club has tended to look at stocks that pay a dividend, and, in fact, the increases that we had year over year, at least last year, were mostly attributable to the dividends, not to the stock price appreciation.
Don: People can get very emotional when they do their trading. With the market like today, down 166 points, they can be freaking out and going to cash, thinking the world’s coming to an end. In ’08, I spent most of the year talking people out of getting out of the market. And because they stayed in and stayed invested, they’re doing fine now because the market’s recovered.
