Small Number Nets Big Return

Small numbers can be misleading. Although only three members strong, the Mutual Fun Investment Club of Miami has a system for picking stocks that works. The members use toolkits and stock selection guides, sift through prospectuses, and monitor company news before making their picks. Like most investors, the group decides to buy, sell, or hold only after reviewing a company’s financials and management team to determine fiscal health.

The members’ stock selection and analysis have netted them a 14% gain since the club’s inception in 2001. By comparison, the S&P 500 posted a paltry 1% gain from January 2001 through August 2006. Mutual Fun’s portfolio holds 11 stocks valued at more than $16,000 and representing various industry sectors. The club members, all nurses at South Miami Hospital, made initial investments of $250 and pay monthly dues that are used to buy more stocks.

Taking advantage of the market downturn in 2001, Mutual Fun capitalized on the opportunity to purchase high-performance stocks such as Aflac (NYSE: AFL) and PepsiCo (NYSE: PEP) at near 52-week low prices. “Buying in the stock market is no different from buying goods in Nordstrom or Bloomingdale’s,” says club treasurer Carolyn Cofer. “You wait for quality merchandise to go on sale in order to get the best bang for your buck.”

The members picked some stocks because of their familiarity with the companies, for example, ExxonMobil (NYSE: XOM), which was purchased at $39. To reduce the members’ learning curve, they invested in companies with business operations and products they recognized. “We’re unhappy about the price of gas, but we have invested in a company where we’re really making dividends,” says Pamela Angelo, club president. The members pay lower commissions by purchasing most of their stocks through dividend reimbursement.

Adding growth companies such as Starbucks (NASDAQ: SBUX) and CVS (NYSE: CVS), and stable performers such as Johnson & Johnson (NYSE: JNJ) and Altria (NYSE: MO) (formerly Philip Morris), have helped the group preserve a balanced portfolio. In September 2003, the club’s portfolio value rose above its cost basis, or started making a profit, and continued making gains despite a 23% loss with Fannie Mae (NYSE: FNM). The company’s stock values plummeted amid news reports of accounting irregularities. “Initially, we felt that Fannie Mae was a good company going through bad times, as opposed to a good company whose fundamentals had deteriorated,” says Angelo.

Next year, the club will focus on growing its membership as well as its portfolio. Mutual Fun plans to increase holdings of each stock and add several new members to help monitor them. Cofer says it takes about one hour per week per stock to watch their investments. Monthly dues are now $75, and new member criteria have been developed to help identify and attract those with compatible personalities, investment goals, and especially long-term commitment. “We want members who realize that this is not a get-rich-quick scheme,” says Cofer. “It takes time for your money to grow.”


Altria 11.6%
ExxonMobil 11.5%