That’s right, boys & girls! The Stache is BACK! With so many questions posed by the team, and so many great answers from the moustached one, we had to split up his interview into two parts.
Before you get started, check out Part 1 of our Interview with the Stache.
Again, we have to post the obligatory reminder that none of the stocks mentioned are endorsements or recommendations to buy from the Stache, Sneaky Falcon Enterprises LLC, or the Six Pack Investment Club. Full Disclaimer here.
Last time, we got into the inner workings of investment clubs, kicking out members, fun facts, and lessons learned. Today, we’ll shift gears, and focus more on the strategy that the Six Pack Investment Club has employed to navigate the turbulent waters of the stock market over the last three decades. But first, a history lesson.
Let’s jump back in, shall we? What was it like to be in an investment club nearly 30 years ago?
30 years ago, in order to bring a stock idea to the club, we would have to go to a library, and look up the stock in Value Line (a monthly periodical that provided one page summaries of each company trading on the major exchanges). We would then fill out a “Stock Selection Guide” by hand, including manually plotting graphs of the sales, EPS, etc. Based on the analysis you got a buy, hold or sell recommendation.
You would have to look up in a newspaper to see how a stock performed on a given day. Trading commissions were $35 – $40 per trade, so making a purchase had to take into consideration this cost (remember the price of stocks were much lower back then, so the commission was a larger percentage of the purchase.)
We’re a member of the National Association of Investing Corporation (NAIC), and they provided access to purchase stocks with (Dividend Reinvestment Plans (DRIPS) which allowed us to build shares by reinvesting dividends without commissions.
Lastly, we actually had to hold the paper stock certificates ourselves in a bank’s safety deposit box, and had to physically mail them in to sell them. My how times have changed, for the better I would say. But despite all the changes in the mechanics of running an investment club, the basic principles of investing still apply.
In brief, what would you say your investment strategy has been? Has it changed over the last 30 years?
The club doesn’t necessarily have just one strategy, per se. We look at Value, Growth, and Contrarian picks so we don’t constrain ourselves to one strategy, however we are always paying attention to diversification and balance in our portfolio. In 30 years, we have never invested in a penny stock or an IPO. We do tend to be heavier in large and mega sized companies, but we also have medium and small companies in our mix.
The strategy has not changed as the club aged; our 89 year old member is just as risk tolerant as the 25 year old, which I find amazing.
The only time we employed a different strategy was during the 2008 downturn. As I mentioned previously, we employed stop losses on all our larger holdings so as to avoid large losses. The club has mixed emotions looking back on this. Some think that this technique saved our ass, while some think that we tried to time the market and may have lost out on some potential returns.
The key thing was we didn’t just sit on the large sums of cash that were generated. We tried to invest it back into the market quickly.
Did you ever seek council from investment advisors, professional brokers, etc., or is your portfolio entirely driven by your members?
We never had our own financial advisor or professional broker, however for a number of years we had a professional financial advisor as a club member. He was always careful to not push his ideas or advice that he was giving his clients. He had access to some professional tools and subscriptions that were valuable in providing us information, but he was treated and acted as any other member would.
This member eventually left the club for fear that someone might view his membership as a conflict of interest.
What are your thoughts on dividend versus growth stocks? On dividend earnings, do you reinvest in that stock, or do you pocket the change for another investment?
In the early years we were heavier into dividend stocks, but over time we have included growth stocks. It is nice however when we review the Treasurer’s report to see $700 -$1K of dividends each month.
We used to employ dividend reinvestment, but now the dividends go into our brokerage fund account for future investments.
How many stocks or funds are in your portfolio at any given time? Do you keep a limit on the number of positions you hold?
We currently own 22 different stocks. It isn’t a by-law or anything, but we like to keep around 20 stocks. My advice is to keep a number of stocks that members can keep track of. We assign 2 -3 stocks to each member to watch and report if there is some significant news about them.
Do you invest in mutual funds of any kind, or only single stock investments?
We have always been a stock investment club, so no mutual funds. However, we do own an ETF.
What are your thoughts on diversification?
We have very good diversification by sector. It is something that we pay attention to. From our own experience, quite simply, diversification minimizes risk.
Do you diversify in markets outside of the US, or just by sector?
We do invest in individual stocks that are non-US companies, and several of our current holdings are foreign based companies. Also, it is worth mentioning that many of our holdings have a significant exposure to the international economy. Pepsi, Procter & Gamble, and Boeing, just to name a few, all generate a portion of their revenues from foreign customers.
Compare your investment strategy to a single variety of beer. Ours is most similar to …
This was probably the hardest question that you have asked in this interview.
Here are some examples to get you started.
- Malt Liquor – everyone you’re with agrees it’s a risky proposition up front and you’re left hating yourself for the next few days.
- IC Light – nobody will admit to liking it, and it’s definitely not good, but dammit if it isn’t refreshing.
- A hoppy sour beer – trying to be fancy, but we really don’t know what the fuck we’re doing or how we got here.
I would have to say that we are like a traditional lager. Yuengling Lager is a good analogy. Although we are far from the longest running club, we have a long history not unlike Yuengling brewery. Secondly, we are both founded and based in Pennsylvania. We have multi-generations involved, where the recipe of success is handed down.
We’re not fancy, but full of good taste.
What do you plan on doing with your newly found internet fame?
I hope through my exposure on your much viewed website to build my personal brand (i.e. “Most Interesting Man in the Burgh” or “Cash In On The Stache”) and then monetize my celebrity.
P.S. – I’m available for large corporate gatherings and exclusive interviews for everything from Bloomberg’s Business Week to Jim Cramer’s Mad Money!
Thanks for the opportunity to share some of my stories with your readers.
In closing, I leave you with some words from Warren Buffet and considering one of the Club’s longest holdings, advice from The Six Pack Investment Club…
Once again, we can’t thank the Stache enough for participating and answering all of our questions, especially the ridiculous ones.
If you have questions for the Stache (or want to book him for an appearance at your own investment club meeting, co-worker’s retirement party, or bar mitzvah) leave a comment!