The special guest of Business Week Online on Mar. 28 was Betty Sinnock, one of the authors of the best-selling The Beardstown Ladies' Common-Sense Guide to Investing: How We Beat the Stock Market--and How You Can, Too (Hyperion, 1995, $19.95).
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OnlineHost: Good evening and welcome! Tonight Business Week Online presents a special conference on AOL, Interview With the Author, with a special guest--Betty Sinnock (BettyBPW), one of "The Beardstown Ladies" whose book tells how a small-town Illinois investment club outperformed the Wall Street pros.
The book, published by Hyperion, is No. 2 on the new Business Week Best-Seller List. It includes recipes for the ladies' favorite dishes as well as for investment success. Betty Sinnock, a trust officer with the Havana National Bank in Havana, Ill., is a co-author of the book and one of 15 members of the group.
With Betty Sinnock on stage is Pam Black (Pambw), a Business Week staff editor who writes for the magazine's Personal Business section. The moderator of tonight's discussion is Jack Dierdorff (JackBW), consulting editor of BW Online. And now on to your questions about how Betty Sinnock and her colleagues did twice as well as the market averages.
JackBW: Good evening to all of you on AOL. And hi to you, Betty Sinnock and Pam Black.
BettyBPW: Hello, Jack and Pam. Thanks for the intro.
Pambw: Hi, Jack. Hi, Betty.
JackBW: I'll throw out the first ball. Betty, how did you and your friends get started with this investment club? And when?
BettyBPW: We wanted to learn as much as we could about all investments so we could manage our own money more effectively.
JackBW: Pam wants to ask you the next question, Betty.
Pambw: Betty, what is the best way to set up an investment club?
BettyBPW: Contact NAIC at 810 583-6242. They have all kinds of help.
JackBW: What's the NAIC, Betty?
BettyBPW: National Association of Investors Corporations.
JackBW: RandyW127 wants to know something about your results.
Question: Betty, how are you doing in the market year-to-date, and what is your favorite company?
BettyBPW: I don't have year-to-date at the moment, but we are around 23% a year overall. Wolverine Worldwide is our current favorite.
Pambw: The market has been rising dramatically since you wrote your book. How are your investments responding, and do you think this is a good time to buy stocks?
BettyBPW: Several stocks have reached new highs. Do your homework, be selective, and good stocks exist. Some are now priced too high.
JackBW: Walsh4Pre has a question about your risk. Have you been on the safe side, Betty?
Question: I'm playing with penny stocks right now trying to build up enough quickly to really do something with. Is there a less risky strategy to make money quickly?
BettyBPW: We are quite conservative. We don't try to time the market. We buy to hold.
Question: ToriK888 asks if you had $10,000 to invest, where would you put it if you couldn't afford to lose it? Must investing always be a gamble?
BettyBPW: Put it in Treasuries for safety. It is risk vs. reward. Higher returns are more risky.
Pambw: How and when do you take profits from your portfolio?
BettyBPW: When we think a stock's growth has plateaued or won't be growing.
JackBW: SamuelB38 is curious about your asset allocation.
Question: Congrats on the book. What's your mix (stocks/bonds/cash), and what do you like in stocks?
BettyBPW: In the club, we purchase only stocks. Personally, we include bonds, Treasuries, mutual funds, and CDs.
Pambw: Why do you stick with growth stocks, Betty?
BettyBPW: We follow NAIC's principles and look for companies with a history of growth and expectations of more growth.
JackBW: Max Metro asks about your homework.
Question: What special research on the market did the women do?
BettyBPW: We use Value Line as a resource and NAIC's stock-study tools.
JackBW: Betty, everybody may know this already. But, how many are there in your club? And what's the average age and typical occupation?
BettyBPW: We have 15 partners. The average age is 68. Occupations vary--florist, realtor, trust officer, insurance agent, retired bankers, etc.
Pambw: Betty, were all these women knowledgeable about investing when they joined?
BettyBPW: Only one. The rest of us knew little to nothing.
JackBW: I think that's what makes your success so intriguing--along with your recipes!
BettyBPW: Have you tried the recipes?
JackBW: I haven't yet. Pam?
Pambw: No, but I'm curious, especially about those market muffins that are guaranteed to rise.
JackBW: What's your favorite, Betty?
BettyBPW: My favorite is Ann's coconut cake! Stock market muffins are easy and delicious!
Pambw: How do you keep your spirits up when the market sags?
BettyBPW: We look at it as a paper loss and a buying opportunity.
JackBW: Ireferee has the next question.
Question: What do you attribute your success to--studying, luck, or just keeping after it till you get it right. (P.S. This is from someone in Ashland, Ill. It's great to see a success story so close to home.)
BettyBPW: Using common sense and doing our homework pays off. Hello, Ashland!
JackBW: Zadies wants to know your thoughts on a specific stock sector. We know you can't recommend specific stocks.
Question: What's your current recommendation for utilities?
BettyBPW: I'm going to study utilities. We are currently studying computer software/hardware and cellular telephone companies.
JackBW: How about the way you vote on buy/sell decisions?
Question: How many ladies decide when a stock has hit its plateau and when to pull out?
BettyBPW: A quorum of two-thirds, and a simple majority rules. If the stock committee's rationale is good enough, we usually have a unanimous vote.
JackBW: For latecomers, the book is The Beardstown Ladies' Common-Sense Investment Guide. It's published by Hyperion, it's available in bookstores, and it's No. 2 on the brand-new Business Week Best-Sellers list.
Pambw: Betty, what's the tax status of the club, and how are earnings taxed?
BettyBPW: We are a partnership. Taxes are passed through to the partners, who include them on their personal returns.
Pambw: Is that better than corporate status--and why?
BettyBPW: We think it is preferred for investment clubs. Corporations have to file and pay taxes. We don't want to pay taxes twice! Anyway, it is easier and cheaper to set up a partnership.
JackBW: Lizard212 has aa provocative query.
Question: Betty, do you think women have investment concerns that are different from men's?
BettyBPW: I think women take more time to study and use common sense in making investment decisions.
Pambw: What was your best year for returns--and why?
BettyBPW: 1991 showed a 59.5% return on stocks we held on the New York Stock Exchange. We were holding excellent stocks at that time and still have many of them today.
JackBW: Several people have asked about starting a similar club.
Question: Do you need a lot of money to start an investor's club?
BettyBPW: No. We think this is the great idea for having a club. You can pool small amounts of money with others and get into the market. You do not have to be wealthy.
JackBW: Another member of the audience wants to know if you invest overseas.
Question: Betty, do you have any piece of your portfolio in foreign markets? Which ones?
BettyBPW: We have two foreign stocks we purchased as ADRs--Glaxo (a British drug stock) and Cifra (Mexico's answer to Wal-Mart). We also have several American stocks that are doing international business.
Pambw: Betty, when picking stocks, what kind of growth and price do you look for?
BettyBPW: We like to find companies that are growing at an annual rate of 15% and preferably cost $25 or less per share because we like to buy in lots of 100 shares.
JackBW: Myrons Son asks this one.
Question: Betty, what's the best way for a beginner to get started in investing?
BettyBPW: Contact NAIC. If there is an NAIC council in your area, plan on attending their meetings and meet other investors. NAIC has a low-cost dividend reinvestment program that can be used by individuals who would like to get started with little money.
JackBW: ONEWIRED has one from a high-tech viewpoint--not surprising here on AOL.
Question: Do you use any technical software, and what are you looking at right now?
BettyBPW: We use NAIC's tool kit and SSGPlus when studying stocks to buy. I also use Value Line screening software.
Pambw: What is the current value of your portfolio?
BettyBPW: About $122,000.
JackBW: Betty, someone wants to follow up on your common-sense advice. Do you mean how companies affect daily life, or what? Can you be a bit more specific?
BettyBPW: We look at companies that come into our area and seem to have good employee relations. They also have a lot of customers! We often use their products and like them. With that in mind, we go to Value Line and see how their timeliness and safety is rated, how much debt they have, their financial strength, and whether they have a history of growth.
Pambw: Two questions--do you have a minimum or maximum number of stocks you like to own? And what do you mean by timeliness?
BettyBPW: We like to have a minimum of 15 stocks so that every partner has at least one to follow. Today we have 25 in our portfolio. Value Line ranks stocks 1, 2, 3, 4, or 5 for timeliness. 1 is best. It is their evaluation of how well the stock is set to perform in the next 12 months.
JackBW: Pbhpjh has the next question--which you may have partially answered already.
Question: The investment club I helped get started has had a lot of difficulty keeping interest level high enough. Did your club have that difficulty? Any advice?
BettyBPW: Make sure every partner participates by serving on the stock selection committee once a year and follows at least one stock. We also pass our officers' positions around each year with the exception of the financial partner.
JackBW: Can you answer this, Betty, without giving away secrets?
Question: ToriK888 asks please define what a "small" amount of money is for one person in an investment club.
BettyBPW: When we started, we each gave $100 for expenses and to get in the market quickly. Since then, we have given $25 each month, and we consider this our tuition for learning. We use what we learn in the club to make our personal investment choices.
Pambw: Do members ever fall down on the job when tracking or researching a stock?
BettyBPW: We try to put those members together with members who have more expertise in finding good stocks. They have become much better since we were recognized as an All-Star club, and they felt responsible to make better choices.
JackBW: JaPaRo wants to know why an investment club would be the way to go.
Question: What are the advantages of an investors' club over other forms of investing, e.g. mutual funds, etc.?
BettyBPW: We like the investment club because we are pooling the partners' knowledge and sharing the work of finding good stocks. We think this helps us make better decisions even if it is investing in a mutual fund.
JackBW: Betty, a counterpart in Wisconsin asks the next one.
Question: Betty, I am from BPW in WI, and we also started an investment club. We have not had the success you had, but we are still investing. What stocks are you currently looking at?
JackBW: BPW is Business & Professional Women, right?
BettyBPW: Yes, it is.
BettyBPW: Stocks listed in the book as of September, 1994. Since then, we have bought three stocks--Heilig-Meyer (a furniture maker), Coca-Cola, and Walgreen.«MDNM» The last two have hit new highs.
Pambw: What kinds of price-earnings ratios do you look for?
BettyBPW: We do not want current p-e ratio to be higher than the average p-e ratio for the last five years. This is one of the benchmarks that NAIC recommends, and we stick to it! It was their idea that we listened to when we started our investment club.
JackBW: PBurgesse asks about brokers. How do you make your trades?
Question: What is the best way to pick a broker, and what is an acceptable fee from them?
BettyBPW: We use a full-service broker who gives us a discount. We would encourage clubs to check with more than one broker to see if they are willing to work with a club and what their commission cost would be. The second club I'm in uses a discount broker, but the commission cost is not much less than our full-service broker's fees. Also make sure the broker understands and agrees with the NAIC principles!
JackBW: Betty and Pam, we're out of time. But I want to ask you, Betty, with one best-seller out there, are you planning a sequel?
BettyBPW: Yes. We have signed a contract for a new book--a Common-Sense Guide to Retirement Plans.
JackBW: We'll look forward to it.
BettyBPW: Thank you.
JackBW: Thanks, Betty, and thank you, Pam.
BettyBPW: It has been my pleasure.
Pambw: Thanks so much for coming on board, Betty, and thanks, Jack.
JackBW: Thanks again to you all.
OnlineHost: Thanks to Betty Sinnock of "The Beardstown Ladies," Pam Black, and the Business Week team for this lively conference. If you'd like to keep talking, we invite you to move over to the BW Online Chat Room. Or you can post your comments or questions in the BW Online Message Boards (try the board named Editorials, Opinions & Books).
Transcripts of all BW Online conferences are available soon after the event (look under Special Events, Talk, or Search BW). While you're at it, explore all the features of BW Online (keyword: BW), especially the Business Bookshelf (select What's New on the opening screen). The transcript of this conference will also be available in the Business Bookshelf. And mark your calendars for a conference with BW editors or newsmakers every Sunday at 9pm ET in the Globe.
Thanks again, and good night!
Copyright 1995 McGraw-Hill, Inc. All rights reserved.
