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February 12, 2003 - ICLUBcentral News

NAIC Software News February 12, 2003


Barb's Tips: NAIC Stock Prospector - How to Screen by Industry
By Barbara DalMaso, ICLUBcentral

When looking for companies to study, it is often very helpful to start by looking at industries of interest. Here is how to search when using NAIC Stock Prospector (Version 2.1 or later). You will be using icons on the startup screen for the 3 main steps of this search: Define, Report, Query.

Define Criteria
(Here you choose a specific industry as your only criteria.)

Clear list if previously used.
Under Report item header, click dropdown arrow to see a list of all criteria. Type ‘I’ and select ‘Industry’.
Under Criteria header, right-click on the cell to call a window of choices. Left-click to select an industry from the list. Double-click on your choice of industry to place it in the criteria list.
Click ‘Pre-screen’ and ‘OK’.

Select Report Items
(Select items that give the information you want to see in the company report.)

Clear list if previously used.
Choose items from pre-defined reports (PDR) or user-defined reports (UR) or select items from item groups (IG).
Optional: Click ‘Set Weights’ to change importance rankings for items in a customized list. Click ‘OK’.

Run Query
(The query result will be a grid of company data.)

For easier viewing:

  • Drag upward the top edge of the company data list or click ‘Grid’ icon on the toolbar.
  • Right-click on a data column to lock it.
  • Header titles may be expanded by dragging the edges.

(Optional) Export Company Files
Decide which companies you wish to study in your analysis program.

There are two ways to move the files for analysis.
You may right-click on a company name in the data grid to open it in NAIC Classic (V1.02 or later) or Stock Analyst PLUS! (V2.5)
Otherwise, for Stock Analyst PLUS!, click the ‘Identify’ icon in the toolbar. Highlight the files you wish to export. Check the boxes ‘Export in long format’ and ‘Have SA+ Import’. Click ‘Start Import’. This will send the files to SA+ for your analysis. Within SA+, click ‘Load Company’ to view the SSG files and perform your analysis.

Investment Club Taxes: Figuring Capital Gains
By Joe Pulizzi, ICLUBcentral

You'd be surprised the amount of questions I have from investment club members about capital gains. Even though some find this easy to understand, it is worth discussing during tax season.

There are a couple things you should know about capital gains (unfortunately, my club didn't have any). The first is, do you have any? Some clubs are up each year, some are down - but many of those gains or losses are on paper only. Gains or losses on paper are called Unrealized Gains or Losses. You will see a big difference between a realized gain and an unrealized one. Once you understand this difference, you can move on to capital gains.

A capital gain is any profit from the sale of an investment, most likely a stock held by the investment club. All capital gains are taxed by the government (yippee!). Capital gains can be split into short-term capital gains and long-term capital gains. Short-term gains are profits from stocks your club has held less than a year. For example, if you bought DELL in January, 2002 and sold in June, 2002 for a $100 profit, that would be considered a short-term capital gain.

Long-term capital gains come from stock sold that your club has held for more than a year. If your club has held Microsoft since 1995 and you sold in 2002 for a 50% profit, that would be considered a long-term capital gain.

The reason to differentiate the two is because of taxes. Short-term capital gains are taxed at a much higher rate. This rate depends upon which tax bracket you are in personally. Long-term capital gains are taxed at a much lower rate. The difference between your short- and long-term capital gains is usually around 10%.

If your club is having trouble with any kind of tax situation, be sure not to hesitate in calling a professional tax advisor or accountant.

Find great stocks with NAIC Stock Prospector

NAIC's official stock screening software, NAIC Stock Prospector mines the Online Premium Services (OPS) datafiles to find great stocks for potential investment.

Introductory price of just $49 lasts til March 1. Order at 1-877-275-6242, ext 0, or buy it online.  More information and demo copies available at the ICLUBcentral website.

Investment Club Therapist: Creating a Club Policy Statement
By Doug Gerlach

Dear Doug:

I have convinced members of our club that we should adopt objectives for our portfolio growth and criteria for the selection of stocks, and now I'm looking for recommendations for specific guidelines we should use. FYI, the members feel that if they fill out a Stock Selection Guide, then that is all they need to purchase a stock. I am trying to help them realize that they must decide what is a reasonable growth rate to expect in selecting a stock. I need help!

- Lonely Voice in the Club

Dear Lonely:

The Stock Selection Guide is a great tool, but there's much more to it than simply "filling it out" – and there's more to making an informed decision about buying a stock than plotting data on the SSG. The SSG is a great aid to judgment, but it requires that you do interpret historical trends and then make informed decisions about a company's future growth, P/E ratios and prices. If your club members aren't studying a stock's financial statements, annual reports, recent news and SEC filings before buying a stock, then you're making decisions without having enough information.

It sounds like you're on the right track by pushing your club toward adopting guidelines for your portfolio. Way too many investment clubs think it's enough to simply buy stocks that they hope will rise in price, without thinking about portfolio diversification or the quality and fundamentals of stocks that they consider for purchase. Without these guidelines in place, your club will soon find itself lost, off course, directionless, adrift, astray… (well, you get the picture). While hikers have GPS units to help keep them on the right path, there's no such electronic device that will do the same for clubs – but a low-tech option will work just as well.

Mutual fund and pension fund managers almost always have an investment policy statement that outlines the basic criteria they can use for investing in any stock and for the overall portfolio. Clubs can follow suit by crafting their own investment policy statement.

Your investment policy statement should include the criteria that your club will consider before buying a stock. The most basic factors that you can consider for your statement are how you plan to diversify your portfolio by industry and company size, basic criteria for stock fundamentals (that the company must be profitable with a five-year operating history, for instance), the valuation and risk/reward ratio for a stock (that the stock's Relative Value is near 100% with an upside/downside ratio on the SSG of greater than 3 to 1), and the total return goal for stocks that you purchase (typically 15% a year).

Your policy statement can change over time, and it doesn't have to be a complicated document. The mere act of creating guidelines can help educate your club members about the process of investing in stocks, so you should set aside time at a few meetings to agree on specific criteria. The process of articulating your club's goals in detail will help keep your club on track in the untamed stock market wilderness.

- Doug

For more information, Investment Clubs for Dummies includes examples and guidelines for creating your club's own investment policy statement.

Doug Gerlach, author of several popular investing books and websites, serves in his spare time as Secretary of NAIC's Computer Group Advisory Board. To ask Doug an investing question yourself, just write to!

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