MONEYWISE
Investment Clubhouse
A Sunny Outlook On Investing
Rainy Day investment club has flourished by sticking to strict investment principles
By Vikki Conwell
Rainy Day investment club has weathered storms that might have sent other clubs running for cover. For starters, when it was first established, it rained every time the members met. Fortunately, that didn't dampen their determination to save.

Founded by 17 family members and friends who shared a common goal of saving money for retirement, the club has operated since 1995. It has survived the ups and downs of the stock market by relying on extensive stock analysis and keeping a diversified portfolio, which helps shelter the club from major losses. "We have tried to pick companies that are not so volatile," says Jeffery Stewart, club president. "The companies that are strongest within their industries are the ones that can weather the storms best and climb out quickly."

Staying true to their philosophy of long-term investing in companies with great value, steady growth, and strong earnings potential, Rainy Day has built a balanced portfolio that covers a wide range of industries. The club, which has members in Pennsylvania and New Jersey, tries to invest in at least one of the top three performers in each industry to help thwart a loss if the overall market takes a downturn.

That strategy paid off in 2002 when two of the club's technology stocks, Safeguard Scientific and ADC Telecommunications, suffered heavy losses. The club recorded its lowest rate of return ever, 1.94%, but it was able to avoid a loss because those stocks represented only about 4% of its portfolio.

At this writing, Rainy Day's investment portfolio stood at around $32,400, and the club tries to keep about $200 in petty cash. The club's rate of return for 2003 was 9.45%, and it has earned an average rate of return of 6.74% since it was founded.

Rainy Day has a 60- to 90-day stock referral and research process that includes scouring through financial resources such as Value Line, Morningstar, Standard & Poor's, and The Motley Fool. And the club has created its own worksheets to summarize a company's history, financials, competitive position, and current and future business plans. The stock referral form is what members use to introduce a particular company to club members for potential investment purposes. The stock research form helps club members create a more detailed overview of a company, using its performance ratios and other financial data from the last three years of a company's history. "[Using the worksheets is] a way for us to keep in touch with how any company is doing, both financially and managerially," says Stewart, a project manager with Prospective Technology Inc., an environmental engineering firm based in Columbia, Maryland.

Like most investment clubs, Rainy Day has had members leave over the years. Stewart is proud to say that every member who left the club was given a positive return on their investment. Current membership stands at 12, and members range in age from their 20s to their 60s. Dues are $50 a month and there's a monthly National Association of Investors Corp. membership fee. The club collects petty cash dues of $25 annually, which are used for purchasing software and administrative items and to offset costs for the group's annual anniversary dinner in November. "Many clubs are formed by people in the same age range or in the same environment, but we have a cross section of people in different industries and of different ages," says Stewart. "The diverse viewpoints tend to help us [select solid investments.]"

The club has already added an educational component to ensure that every member has at least a minimum level of understanding about investing. Future plans include increasing membership and pursuing investments in African American-owned companies.

Rainy Day Investment Club Top 5 Holdings
Aqua America Inc. (NYSE: WTR) 18.57%
Aflac Inc. (NYSE: AFL) 17.09%
Washington Real Estate Investment Trust (NYSE: WRE) 13.52%
Intel Corp. (Nasdaq: INTC) 10.50%
Paychex (Nasdaq: PAYX) 9.90%