Investment clubs return for share in Baghdad bounce

Investors who took a financial pounding are still hanging back, but a new class of buyer is doing well on the stock market revival

Once a hallmark of the bullish 1990s, the UK investment club movement dwindled when the dismal bear market dampened the returns and spirits of many groups. Disillusioned, many clubs threw in the towel and cashed out, divvying up the leftovers or suspending activity until the future looked brighter.

But as the stock market gingerly claws its way back up, a new crop of clubbers is popping up, prowling the market for cheap stocks before the bargains run out. The Frocks & Stocks Investment Club, whose seven members live and work in Greater London, is among the new generation of enthusiasts. The all-women club has relished the recovery in equities, watching their young portfolio of UK stocks bounce up.

None of the women had personal investing experience, but they are wise enough to know the post-Iraq jumpstart to stock prices was encouraging, especially for first-timers with money to spend and no bitter losses to recover. Romy Jenkins, 57, the club's chairwoman, says: "We watched the market pop up after the war was over, but we missed out on the early gains. That was our cue to get in. We figure investors who lost are still nervous, but many solid companies remain undervalued. That's good news for fresh investors like ourselves."

Unlike most investment clubs, which start with friends or colleagues, the Frocks first met at an investment-club seminar organised by the Aurora Women's Network in London this year. They exchanged contact details and organised their meeting shortly thereafter.

For Cheryl Goldenberg, 54, a life coach from Essex, any anxiety about investing with strangers vanished at that meeting. "There's a real mix of ages and professional backgrounds," she says. "Everyone has a perspective to contribute. We're all novices, so there's a feeling we're in this together. It's very exciting."

The ages of members range from 27 to 57 and include women in business, academia and government. For now, they limit their portfolio to large-cap shares, although they intend to look at smaller companies when they are more confident in their stock-picking ability.

The women have assigned themselves each an industry sector to research and monitor. They aim to add at least one share to their portfolio each month. Ms Jenkins, a confessed shopaholic, embraces her role as the Frocks' retail-share analyst. "I do a lot of hands-on research," she says.

At their last meeting, she made the case for the fashion retailer French Connection (Stock Exchange code FCCN), which she believes shows potential. She distributes a one-page analysis crammed with the company's performance ratios, broker estimates and balance-sheet items. Members debate the merits and risks before voting to buy. The shares have since jumped nearly 5 per cent.

Sue Kennedy, 31, a photographer from Harlow, north-west Essex, is keen for the Frocks to invest more defensively, away from fickle high street stocks. She pitches the case for the food conglomerate Associated British Foods (ABF). "It has some strong brands, including Allinson's and Kingsmill breads," she says. "It's trading at a lower price-earnings ratio than similar food processors, so it's looking comparatively cheap."

The group discuss ABF's virtue in their portfolio and bat around questions: What is the dividend yield? Where will growth come from? What are the analysts saying? The Frocks are not yet convinced and decide to watch the stock until their next meeting. The Frocks will consider only shares they believe hold sway with consumers as well as investment experts. "French Connection is hot with younger and older women," Ms Jenkins says. "That is unique on the high street. Some analysts say the same about Marks & Spencer, but I don't think M&S has got it right just yet. French Connection is better-positioned."

Having an all-female membership gives the Frocks an advantage. "Compared with male investors, women are more consistent, more persistent, less emotional, and better able to stay the course," Jonathan Strong of America's National Association of Investment Clubs, says. Research by the financial website Digital Look found British women have consistently proven better equity investors than men, who continue to put money into a handful of riskier stocks rather than a diversified port- folio that can weather stormy market conditions.

The most recent Digital Look data shows female portfolios were down only 4 per cent for the 11 months to end-November 2002, compared with 19 per cent for men. The FTSE 100 index was down 20 per cent in the same period."Sure, we want to make money, but we realise that the get-rich-quick days are over," Ms Jenkins says. "Our primary goal is to learn how to invest responsibly. That takes time, and we're in no rush to make uneducated investments that might discourage us."

Terry Bond is a director of Proshare, the UK Government and City-backed lobbyist for private investors and investment clubs, and author of The Company Of Successful Investors, on how to start and run an investment club. He says: "You stand a much better chance of winning in the long run if you ignore the market's movements and stick to selecting shares you reckon will go up, not because Mr Bush sneezes or the price of gold plummets, but because the companies concerned are good businesses that are making reasonable returns for shareholders."

We will be following the Frocks' progress to see how they manage the market's pitfalls and opportunities.

INVESTMENT CLUBS

* The first investment club in the UK was set up in the Fifties, but most clubs were formed in the Nineties, spurred by new online trading and the roaring bull market. There are more than 10,000 clubs registered in the UK, Proshare says.

* Tough market conditions drove many clubs out of business last year, but there are signs numbers are on the rise again. More than 100 new clubs have formed in the UK since January.

* Most clubs (85 per cent) are made up of friends or work colleagues; others are formed with relatives, neighbours and sports club members.

* Forty per cent of clubs hold their meetings at the pub; others meet at home, work or in a sports club.

* The average club has 12 members. Investment clubs should limit themselves to 20.

* The most common monthly amount contributed to an investment club is £25.

*There are clubs made up of firemen, teachers, housewives, sheep and poultry farmers, taxi-drivers and students. Thirty per cent of club investors work in education, medical or public sector jobs.

* Overall, 25 per cent of UK club members are women.

INFORMATION

* Proshare is the best source for information on starting an investment club. The Proshare Investment Club Start-up Kit (£29.50) shows everhow to register your club to setting up a trading account. Phone Proshare at 020 7220 1750 or visit www.proshare.org, which lists stockbrokers who cater for investment clubs;

* Equity Education, a website for the London Stock Exchange, offers a free investment club guide when you register. Visit www.equityeducation.com;

* The Aurora Women's Network runs investment-club seminars in London. The next is at 6.30 pm on 21 July, at Bloomberg, 39 Finsbury Square, London EC2. Visit www.network.auroravoice.com or call 020 7908 8002;

* The TD Waterhouse Investor Centre is a great resource for investors who live or work in Central London. Visitors can browse the finance library and attend free investing seminars. Investment representatives will answer questions and help you get trading. Open Monday to Friday, 8am-6pm, at 71 High Holborn, London, WC1. Call 0845 601 6205 or visit www.tdwaterhouse.co.uk