Riding The Highs And Lows

The More Money Investment Club was formed in 1997 by a group of nine friends who have attended the CIAA basketball tournament every year since graduating from college. A conversation about retirement and the future of Social Security prompted the friends to research investment clubs as a way to secure their financial future and bond as a group. “One of our ground rules is that we’re going to have fun,” says Joyce Corbin Cunningham, president of the Durham, North Carolina, investment club.

After establishing bylaws, the club set monthly dues at $50 and agreed to meet every other month to accommodate the members’ busy work and family schedules. Currently, there are 12 membership units (nine individual members and three married couples who make up one membership each). To reach its goal of retirement planning and wealth building, MMIC initially established a philosophy of investing primarily in growth companies, using a medium- to long-term time horizon. It also decided on a maximum purchase price of $100 per share for stocks and limited the club’s portfolio to 10 securities. The club selected stocks based on the spending habits of its members and invested in familiar companies such as Wal-Mart, Pfizer, Bank of America, Duke Energy, Nokia, Krispy Kreme, Cisco Systems, ExxonMobil, and IBM. By the end of 2001, the club’s return on investment had reached 26.8%.

The dot-com bust and the events of 9-11 ignited a downturn in the market, but the club’s diversified portfolio helped it navigate the rough terrain. As tech stocks went belly up, pharmaceutical stocks, Krispy Kreme, and Wal-Mart fared well for the club. But, ultimately, the recession weighed too heavily on the club’s portfolio. By the end of 2002, MMIC’s return on investment had dropped to about -1%. “There was no widespread panic among members,” says Cunningham, a retired project manager with IBM. “We knew that the market could be volatile. But we were in it for the long term.”

Krispy Kreme, a company that helped the club’s portfolio stay afloat, created some challenges over the next few years. The stock soared as high as $50 a share in 2003, but then the company’s accounting practices came under scrutiny by the Securities and Exchange Commission. By spring 2005, Krispy Kreme stock had fallen to $7.90 a share. Markeith Williams, a financial consultant and the club’s investment broker, says MMIC could’ve sold the stock at its peak and received higher returns, but the club was hoping it would go a little higher.

MMIC has matured from its experiences and continues to evolve. Each member is responsible for researching and suggesting a stock. “We wanted everyone to be involved and responsible for making the club successful,” says Cunningham. The club has also developed a buy-sell strategy with market triggers that incorporate competitor analysis and analyst recommendations.

The club’s return on investment has rebounded as members continue to sharpen their investment skills. As of April 2005, the portfolio was valued at $50,000 and has had approximately a 16% return since inception. Williams says that