In This Issue:
How to Keep Fees Fair for Investment Club Members
by Doug Gerlach,
President, ICLUBcentral Inc.
Rob, from the Blue Shirt Investment Club in Saratoga Springs, N.Y., writes: "In our club we have one partner leaving and a new partner entering. When we amend our partnership agreement with the county, we are required to pay a filing fee of $25. It is our intent to charge this fee to the incoming and outgoing members, and prorate it appropriately. However, when it's time to pay the fee and show it as an expense, myICLUB.com wants to charge it to all members either by equal dollar amounts or by percentage ownership of the group."
Rob's question is "What would be the appropriate way to handle this situation?" Accounting for fees of all sorts in an investment club seems like a fairly straightforward question, but it has several components and actually raises some slightly complex issues.
Before I get into the details, though, it's important to recognize that the club's partnership agreement should clearly spell out how expenses are allocated among partners as well as who bears the costs related to a member withdrawal. It isn't up to the club treasurer to decide how to enter these transactions in the books and it shouldn't be a matter that's put to a club vote each time it comes up, for reasons of both fairness and best practices procedures. If your agreement doesn't include these details, your club should address these items the next time you amend the document.
Let's start with the easiest part of the question: charging a fee to a withdrawing member. Both myICLUB.com and Club Accounting 3 allow for charging a withdrawal fee for a departing partner, which can be entered either as a percentage of the withdrawal or as a straight dollar amount. ...
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Researching Industries in Stock Prospector
Using ICLUBcentral's Stock Prospector screening software, it's easy to find all the companies in a particular industry group, or in a selection of different but related industries.
When you build your query, select "Industry" in the Report Item column. Then, in the Criteria column, right-click and choose "Select from Industry List" from the popup menu. This presents the entire list of industries available in the database. Select one of them — for instance "Apparel Stores" — and the program adds the equals sign so that the line looks like this:
Industry = 'APPAREL STORES'
If you check the Display running totals checkbox and click the Pre-Screen button, you should see somewhere near 51 companies that meet the criteria. Click the OK button, then modify the report items to display items such as profit margins or growth rates that are appropriate for your search. Finally, click the "Run Query" button (the one with the horse image) to display the resulting companies.
If you want to extend your screen to include other related industries, such as "Footwear & Accessories," we'll have to get more advanced. Return to the "Define Screening Criteria" window and click the Pro Mode checkbox at the top of the window, and you'll see a new column appear on the left side of the table labeled "And/Or." On the second line, select "Or," then select "Industry" as the Report Item and right-click to select "Footwear & Accessories" from the Industry popup list in the Criteria field. Click the Pre-screen button and you should now see 75 records selected. Click OK and run the query to see the results.
You can continue to add additional industries using the "Or" button.
Another advanced tip is related to one of the ways that Stock Prospector helps you to analyze industry averages. The program uses the "Exchange" field to create a record in the database for each industry group, identified in the Exchange field by "INDUS." These Industry Average records also show up in the above searches along with all the other companies in an industry. To eliminate them, we need to use another function of the Define Screening Criteria window, the ability to nest criteria.
When the Pro Mode box is checked, you will see two additional columns appear in the table labeled with left and right parentheses. On the first line of the query (Industry = 'Apparel Stores'), click in the cell under the left parenthesis and a left parenthesis appears. At the end of the "Industry = 'Footwear & Accessories'" line, click in the cell to enable the right parenthesis.
On the next line, select "And Not" from the And/Or column, then select "Exchange" as the Report Item. Right-click in the Criteria column, and click "Select from Exchange list." Double-click "INDUS" from the list. The criteria should now look like this:
( Industry = 'APPAREL STORES'
OR Industry = 'FOOTWEAR & ACCESSORIES' )
AND NOT Exchange = 'INDUS'
Click Pre-screen and the total records selected is now 73 (75 less the two Industry Average records).
You can use this technique to add criteria, such as using the "And" operator to remove all companies with negative earnings per share or that fall below or above a particular annual revenue figure.
As long as the number of companies in the screen is fewer than 100, the first three lines of the report will include the minimum, average, and maximum values for each appropriate Report Item for all companies on that report. You can think of these values as modified industry averages, either for your own customized group of similar industries or as averages for the "best of the best" companies in a single industry or group of industries.
We hope that you enjoy these tips and are getting the most out of your Stock Prospector software. If you're not yet using the program, download a free demo today from the ICLUB.com website.
Learn more about Stock Prospector....
Join the World for an NYSE Webinar
You’re invited to attend a webinar led by Lawrence Leibowitz, COO of the New York Stock Exchange, at 9 a.m. EDT on Oct. 7. Leibowitz will discuss the pending merger of Duetsche Boerse and NYSE Euronext (ticker: NYX) as part of the World Federation of Investors Corporation's annual meeting, which is being hosted by the Warsaw Stock Exchange in Poland. NAIC/BetterInvesting, the WFIC, Polish Investors Association and Warsaw Stock Exchanges are co-hosts of the event.
The webinar will include a 15-minute presentation followed by 15 minutes for questions and answers. Participants are requested to submit their questions in advance to Adam Ritt at adamr@betterinvesting.org.
To register for this webinar, go to: https://www2.gotomeeting.com/register/678890402.
Are We Re-Entering a Recession?
Reprinted from the October 2011 Issue of the Investor Advisory Service
The headlines in popular media suggest that the U.S. economy has re-entered recessionary territory. The volatility of the stock market may seem to suggest a similar possibility. The only problem with this story is that the actual economic indicators tell a different tale.
Consumer spending makes up about 70% of the U.S. economy and seems to be doing well. Retail sales grew solidly in July, up 8.5% over the past year. In the most recent report, sales for May and June were revised somewhat higher than the original figures. Surveys of consumer sentiment point to despair, but we follow what people do with their money rather than what they tell a pollster. The fact is, they are still out spending even as they wring their hands over the economy.
Taking a cue from the consumer sector, manufacturing also appears to be growing steadily. The Purchasing Managers Survey from the Institute for Supply Management showed a continuing expansion in August rather than the slight contraction that had been forecasted. Overall, manufacturing output was up in July at the highest growth rate of the year. In fact, so far in 2011, April was the only month in which manufacturing output fell. The services sector seems to be doing even better.
With the importance of consumers to the economy, it is hard to experience a vigorous rate of growth without growth in jobs. Employment was dead flat in August. Zero jobs were created, a grim statistic. Employment in the government sector continues to decline. Private payrolls were up modestly, but would have been up 62,000 employees without the temporary loss of 45,000 jobs due to a strike at Verizon. While this number is completely unsatisfactory, it is within the range of recent months. With the economy growing so modestly, many employers find that they don't need additional employees to keep up their own company's growth.
There's also an interesting employment statistic that comes out weekly, the "initial jobless claims" report. This gives a very rapid snapshot of filings for state unemployment insurance. Jobless claims have been very stable, week after week, for several months.
The statistics paint a picture of an economy that is growing at a very modest rate, but growing nonetheless. Second-quarter gross domestic product grew at an annualized rate of just 1%. Slow and unsatisfying growth is still much different than a recession.
Volatility in the stock market has been greatly increased by global economic events. Japan is still dealing with the aftermath of the tragic earthquake and tsunami in the spring. Europe is experiencing a slowdown in industrial production, with France and Italy joining already-troubled Spain and Greece in manufacturing contraction. Germany is growing modestly, in a manner fairly similar to what we in the U.S. are experiencing. Many economies in Europe are faced with a triple whammy of high government debt, low economic growth, and an aging population that expects costly services. We like to recommend companies that sell products globally, and would further add a desire to target emerging markets in Asia and Latin America with less emphasis on Europe.
The market may very well remain volatile in the near-term as occasional positives about modest improvement in the economy help a little, while concerns over the European debt situation and occasional negative economic blips here cause the market to give a little back. We don't believe that the precursors exist for the feared "double-dip" recession, but clearly the odds of one are higher than they were six months ago, when economic indicators appeared stronger.
We focus the bulk of our attention on companies that create much of their own growth, rather than needing a significant lift from the overall economy. We can't control what happens in the economy or market in the short-term, but we can choose to be in companies that are less exposed to areas of weakness.
For more economic insights and stock recommendations, subscribe to the Investor Advisory Service today!
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