National Association of Investors Corp (NAIC) The leading non-profit organization for investment club members. Members have access to a wide variety of investment products and services. Regional NAIC councils host investing fairs and seminars. Membership has exploded in the last few years, from 6000 clubs in 1989 to 23,000 today, with new clubs forming at the rate of a thousand a month. The Web site is geared toward members, but there is much useful information for non-members. You don't have to be a member of an investment club to use their methods, forms, etc.
NAIC Mailing List For members to discuss club operations and general investing.
Join the NAIC (National Association of Investors Council) to get their monthly magazine, Better Investing. $39/year. This magazine will give you lots of investing tips. Available worldwide. As a member, you can qualify to purchase individual stocks directly from companies on their Stock Purchase Plan. Also, join the NAIC Computer Club to obtain a subscription of their BITS magazine. This magazine reviews 200 selected stocks.
NAIC PHILOSOPHY
invest regularly, regardless of the market outlook
reinvest all earnings, to take advantage of compounding
invest in growth companies
diversify to reduce risk
PUTTING THE PHILOSOPHY TO WORK
The Stock Selection Guide & Report (SSG) is the major tool offered by NAIC to guide your stock selection process. The SSG gives you an organized, consistent way to review the financial history and record of a particular stock. Then,using your judgment you can make an informed investment decision.
The Stock Selection Guide was first developed in the 1950's, during the early years of the National Association of Investors Corporation (which began with four investment clubs in Michigan in 1951). Over the past forty-five years, the SSG has proved to be a very effective tool in helping individuals to make better investing decisions when considering stocks for purchase. Amateurs and professionals alike use the SSG to assist them in investing profitably in the stock market, including over 4,000,000 past and current members of NAIC.
Companies that have performed exceptionally well over the past five or ten years can be expected to continue to perform well over the next five years. This means that it is possible to quantify (to some degree) the success or failure of a company's management. If a company has grown revenues and earnings consistently at an annual average rate of, say, 14% over the past ten years, and the same management team is in place at the company, then we can reasonably expect similar growth in the future.
The second goal is simply to determine a reasonable or fair price to
pay for a stock with such prospects. This method of stock selection is ideally suited for investors with a long-term, "buy and hold" philosophy who are seeking stocks that will return an average of 15% a year on initial investment. Price appreciation and dividend yield are taken into account in determining the stock's potential return on investment, and quantified on the form.
The two-sided form, seems overwhelming at first but with some effort its not that difficult.
The SSG is not designed to be a "crystal ball" to allow the user to predict the future. What is required is for the investor to apply his or her own judgement several times before reaching a decision regarding the suitability for purchase of the stock.
The SSG is but one tool in any investor's toolbox. Used properly, it can help an investor build a secure financial future. NAIC has produced several other paper forms that assist its members in making investment decisions. These include the Stock Comparison Guide, Challenge Tree, Portfolio Management Guide and Portfolio Evaluation Review Technique.
The Role of Judgement
Two investors can complete an analysis of the same stock, using the same data, and their conclusions might be so different that an outside observer would not recognize that the same company was being analyzed. Why? Because stock selection is highly dependent on the opinions of the person completing the form. There are many opportunities for investors to apply their own judgement, making decisions about the company's prospects that affect the final outcome. The SSG form is not a substitute for doing research on a stock; it is merely a tool that narrows the focus on some of the most important aspects of successful companies. In addition, each investor will have different goals that the stock must reach to be a candidate for purchase, which can affect the outcome of the analysis.
Even when using software to facilate analysis according to these principles,an investor must always use his or her experience and knowledge in determining a reasonable expectation of a stock's future performance. The keys to successful stock selection are to understand the conclusions of your analysis, and to learn to apply your own best judgement to those areas which demand input.
HOW THE SSG IS ORGANIZED
Each Stock Selection Guide & Report consists of four pages, two for the Stock Selection Guide and two for the Report. The Guide helps you to learn facts about a company's past and present and form a
judgment as to its likely value in the future. The Report is the interpretive section of the SSG&R. A summary list lets you assign a good, average, or poor rating to each of the findings.
The Stock Selection Guide contains these sections.
1. Visual Analysis of Sales, Earnings and Price
2. Evaluating Management
3. Price-Earnings History
4. Evaluating Risk and Reward
5. 5-Year Potential
The Report contains these sections.
1. What does the visual analysis show?
2. Does the company pass the three management tests?
3. What is the price range likely to be for the next five years?
4. How does the stock meet the three safety tests of price?
5. What are the investment characteristics of the company?
6. What are the characteristics of the company's major industry?
7. What about the business cycle?
8. What about the stock market and yields on bonds?
Resources To Help Complete SSG's
Investorama - excellent on-line tutorial-check out all the other resources. You'll learn a lot here.
wow! Franco's jSSG is something to see. Its one of those things that makes you say, "now how did he do that!" Its a Java based SSG viewer. Put in your numbers and the SSG is done. Also a Geocities featured homesteader!
