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Soon after Harold Flowers, an engineer at the NASA Johnson Space Center in Houston, gathered a group of co-workers and formed the Fortune Builders Investment Club in 1995 in Webster, Texas, he realized the key to picking high-performing stocks lay in the research tools. Most clubs, especially new ones, use software provided by the National Association of Investors Corp. (NAIC) in Royal Oak, Michigan, but after much trial and error, the Fortune Builders felt the NAIC’s methods didn’t suit their needs.
Since the club’s initial membership consisted of engineers from NASA, Flowers, 38, spearheaded an effort to develop The Stock Guide Search Tool, now available at www.ooh-wee.com (there is a $149 fee per year to use the tool). By developing their own stock research tool, the club can evaluate stocks by specific criteria to enhance the performance of its portfolio.
With the help of the Fortune Builders’ Website, which uses Market Guide, a provider of financial research information to power the tool’s search functions, “we’re able to look at each stock differently,” says Flowers. “We can make sure [to choose] companies that have 25% less long-term debt vs. [their competitors], and we can check to see whether a company’s price-to-earnings ratio is less than its growth rate. We can also make sure that the company’s projected earnings are greater than in prior years.”
The search tool categorizes stocks by price (from $5 to $80 and above), as well as by sectors such as energy and healthcare. Flowers, who is co-founder and treasurer of the club, says other research methods they used were often too time consuming or noneffective. The Fortune Builders say their tool is comprehensive and easy to use (it offers a tutorial for first-time users); but remember, investment clubs must find a system for stock research that fits the profile of their membership.
Now with 17 members that include friends and family of the original engineers who made up the group, the club is following the conservative investment philosophies of Warren Buffet, Peter Lynch, and Benjamin Graham. Members join the club by contributing $885 a year — a $500 initial payment and then $35 in monthly dues for the next 11 months. The club set its initial dues based on the decision to discontinue collections once the pool reaches $100,000. “Our goal was not to have to put money in the club forever,” Flowers says. “It was to teach people how to invest and make money off their money.”
As of July 17, the club’s portfolio was valued at $84,744, including $34,953 in cash to buy additional stock. Since inception, Fortune Builders has paid out cash distributions of only $21,000, which Flowers attributes mostly to members cashing out their holdings. The club’s annual returns have been stable at around 11%.
The club’s holdings include Multex.com Inc. (Nasdaq: MLTX), software maker Novell Inc. (Nasdaq: NOVL), video game company Acclaim Entertainment (Nasdaq: AKLM), Host Marriott (NYSE: HMT), and Oracle (Nasdaq: ORCL). Like many other clubs, Fortune Builders was affected by the market’s downturn. In 2001 and
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