A Search For Stock Answers
It's Saturday, Apr. 24, not quite two hours past sunup on Florida's St. Augustine Beach. The sun's heat is intense, but it's nothing next to the concentration on the faces of investors gathering in the Sea Breeze Room of the Holiday Inn. They're staking out seats for a daylong $85 seminar hosted by Value Line, and none of them wants to miss a thing--something seminar leader Chuck Jambe soon learns.
A genial guy wearing a black suit, silver tie, and fresh sunburn, Jambe is barely into a discussion of Value Line's stock-screening software ($995 a year for the 5,771-stock version) when the crowd starts sounding off. "Chuck, excuse me, what does `computer-based rankings' mean?" demands a man in a clerical collar. Another investor wants to know if earnings updates are done weekly. "Will all this work on a Macintosh?" asks a third.
The 100 or so students here today, about one-fourth of them women and most of them born well before the Truman Administration, come for lots of reasons. Many hope to exchange stock tips. Some, such as Charlottesville (Va.) real estate broker Bill Jones, have broader goals. He is thinking of getting Value Line software to do "a better job with what I have." Indeed, Tom Crangle, an engineer from Chattanooga, and his wife, Pamper Garner, a customer-service consultant, give the software's stock-screening capabilities credit for helping them choose America Online and make 40% a year on their investment portfolio since 1995.
What am I doing here? After using Value Line's software for 18 months, I suspect it would tell me more--and tell it faster--if I were smarter about it. But my ears also are open for investment strategies. Last fall, 857 investors seeking similar knowledge attended 10 Value Line seminars around the U.S. The firm is far from alone in this market: Tax lawyers, accountants, and outfits such as A.G. Edwards and Fidelity Investments hold seminars aimed mostly at landing clients. And Successful Money Management Seminars, a unit of Minneapolis insurer ReliaStar Financial, offers classes through 2,100 financial advisers in hopes of converting students to customers.
Plenty of classes are given by more disinterested parties. Jeremy Siegel, the Wharton School professor whose book, Stocks for the Long Run, may be the bull market's signal text, teaches a seven-week course on the economy and financial markets. He lectures via satellite-linked learning centers--for $3,000.
But you don't have to shell out three grand to get sound advice. The Internet offers many low-cost and free tutorials. If I want to satisfy my curiosity about technical analysis--the study of the market's internal trends and their telltale signs--I'll dig into a promising and free short course at DecisionPoint.com. It's run by self-taught analyst Carl Swenlin, a Redlands (Calif.) retired U.S. Air Force officer who developed a following at AOL, where he began publishing in 1992. Also taking advantage of the Internet is Dow Jones, publisher of The Wall Street Journal. Its Dow Jones University delivers six courses at $49 each over the Net. One course on technical analysis is led by noted technician John Murphy, but Kenneth Twining, the program's editor and general manager, says the most popular one is the basic, starter course.
For mutual-fund investors, Morningstar plans to offer classes in New York, Chicago, and possibly San Francisco this fall. Meanwhile, the not-for-profit American Association of Individual Investors runs seminars covering funds, stocks, portfolio management, estate planning, and more. But today, I was to be a student of the Value Line method. Most of the morning at the Holiday Inn is devoted to basics of the software, such as how to perform simple searches for stocks. Jambe, a former A.G. Edwards broker, shows the crowd how to search for issues that Value Line rates as timely and safe. The screen spits out Home Depot, Microsoft, Wal-Mart Stores, and Walgreen. "What does that tell you?" asks Jambe. "Damn good buys," one guy calls out from a sea of nodding heads.
There's so much hunger for answers that the session runs late, cutting into the hour set aside for sandwiches and iced tea. After the break comes a session on pinpointing hot stocks, led by Value Line technology analyst Rick Plummer. "What's the most important thing in picking a stock? Anybody know?" he asks. "Earnings!" a chorus responds. "Yes, very good," says Plummer, who then heads down a trail of computer screens, pointing out pitfalls along the way.
NEW RULES. One, he notes, is relying too heavily on outmoded rules of thumb, such as the old tip about making sure companies you invest in have plenty of working capital. That can be measured by what's called the "current ratio," which is current assets divided by current liabilities. "How many of you were taught that a current ratio had to be 2-to-1 or higher?" Plummer asks. Hands shoot up across the room. "I was, too. Well, you can throw that out the window. Because of computerization and better inventory management, things have changed. Lots of companies get by with negative working capital. Eight of the Dow 30" are doing so now.
Plummer reminds his audience to take investment ideas yielded by computer screening software as the starting point for further research, not as final picks. But he also knows what the crowd wants, and sprinkles his talk with views on stocks. He likes Safeguard Scientifics--ticker symbol SFE, he tells a woman who asks. It's a venture-capital operation that is now focusing on the Internet. Net stocks, he says, are risky, but for AOL he has nothing but kind words. Pamper Garner, keenly aware of hubby Tom's big bet on AOL and of how quiet he gets at home whenever its price sinks, says nothing. But she reaches around and gives Tom a pat.
Data-storage giant EMC is another Plummer favorite, and he recounts how he bought a bunch when it dipped recently to 97 a share (it's now around 118). Bill Jones, the Charlottesville real estate man, leans over to me and whispers: "It's a bit of a conflict, isn't it, if he's buying the stock and writing a report about it?" Good question, and soon a voice pipes up to challenge Plummer. "If I have something to say about a company, I have to tell the subscribers first," he says. "You're going to get the information before I use it."
There are other grumbles as well. Hans-Curt Over, a Boca Raton (Fla.) condominium developer who favors shares in such big companies as DaimlerChrysler, Coca-Cola, and Walt Disney, thinks the discussion is superficial. "What is going to be the hot stock of the next six months?" he asks. "No one who knows that is going to be sitting here."
Despite such complaints, the back-and-forth at the Holiday Inn remains civil. But Jambe recalls that one time in San Diego, two investors nearly came to blows. This time, what everybody wants is knowledge. More than 30 stay in the Sea Breeze Room for a seminar on stock options--even though the beach is beckoning on this spring day.