It's Act I Scene II of the Motley Fool Investment Club. Last time, we introduced the club and covered the inaugural meeting. Now we bring you the highlights of the second meeting, where the mists began to clear and our club continued to take shape.
But first of all, an apology. In our last feature I said that ProShare's manual for investment clubs was free. In fact this is not the case, as some Fools were quick to point out. Unbeknownst to us TMF Essex paid the necessary £28 from his own account and we were blissfully unaware of this cost. In my opinion I still think it is worth the money as it does help in two potentially tricky areas, the constitution and the club's accounts.
On with our second meeting. Unfortunately our chairman, TMF Essex, was in the process of moving house and was unable to attend. Our editor, TMF Sorted, filled his shoes very capably. TMF Eagle, honourary secretary, was shark fishing (so he claims) in Australia and so TMF Popper, who modestly describes himself as Media Relations Wizard, plugged that gap. In addition, we were honoured by a rare visit to the office by TMF Nigel who was able to give us some useful information about the workings of his other investment club, which is primarily based on mechanical strategies.
We've had some changes to the membership since our last review. Currently, we are 18 strong. Given the company's rate of expansion we don't anticipate the two remaining spots will remain unfilled for long. As the initial subscription is £50 and the first monthly installments of £25 will be due on October 1, we anticipate that we'll be flush with cash (possibly as much as £1,350) at the next meeting and ready to take the plunge with our first stock.
But it hasn't all been plain sailing. At the first meeting a deadline of September 15 was set for the initial contributions of £50. On the day before the deadline cheques were thin on the ground. Perhaps the Fools were just managing their cash flow efficiently? It was only by issuing the ultimate threat of withdrawing biscuit privileges for the offenders at the next meeting that I was able to collect two-thirds of the money. Some of the excuses for non-payment were plausible, and even highly creative, so I'll probably let them off.
Most of the second meeting covered our broad investment strategy. We expect that we'll build up a portfolio of ten stocks or less and put in about £1,000 each time. With our current membership numbers this will mean a purchase roughly every two months until mid-2001.
It was decided that there would be no limit to the number of investment proposals we would consider at each meeting. Each proposer will be asked to briefly summarise their reasons for putting forward a stock. Following this, other members will have their two pence worth. Voting will take place by e-mail after the meeting to allow all members to take part. This will also enable us to do our own homework on the proposed stocks. This is slightly unusual for an investment club, but we felt it was more appropriate as otherwise our remote Fools would rarely be able to vote at all. No doubt we will fine-tune the voting process in the months to come, perhaps drawing up a shortlist of proposals at the end of each meeting. But, for the moment, it's a free-for-all.
We have only set one limitation on stock recommendations: that any stock we purchase must be able to have its own message board on the Fool site. This means that it must have a share price of over 50p (curse those penny stocks) and a minimum market capitalisation of £30m. Everyone agreed we should practise what we preach and follow our Foolish principles. Whether we would sell if an investment drops below these limits remains to be seen. Of course we can avoid this dilemma by following TMF Essex's excellent suggestion of only buying stocks that go up.
For the moment, we will probably concentrate on UK stocks, as this is most relevant for the majority of UK Fools. In future we may consider US or European stocks, and show what steps need to taken when making such purchases.
That wraps up the second instalment. You can find the full minutes of the meeting below. Please post any comments/questions on this feature or TMFIC to the Investment Clubs message board.
Minutes of the Second Meeting of the Motley Fool Investment Club
Acting Chairman: TMF Sorted
Taking the Minutes: TMF Popper
Date: Wednesday 1st September
Time: 1pm
Location: Room 6, 79 Baker St
Present: TMF Googly, TMF Nigel, TMF Sorted, TMF Tiger, TMF Popper, TMF Berlin, Ewan, Karsten, TMF Purr, TMF Fool UK (Who are these British Fools?)
AGENDA
Selection of bank
The nominations were: Lloyds TSB and Barclays.
TMF Tiger explained that both banks offered a similar service, being a society-type account. Interest rates were negligible but any surplus funds could earn interest within a broking account. Charges were only payable if several withdrawals were made in a month, but this was considered unlikely. Two signatories would be required on every cheque. The three officers would be the named signatories on the account.
Lloyds TSB was elected with seven votes and two abstentions. TMF Fool UK noted his approval of the decision on the basis that the winner had the best performing share price. It was then pointed out that this probably meant that their services tended to be more expensive!
Selection of broker
TMF Grow has not been able to feed back on this yet. The consensus is that the choice of broker will be largely determined by the lump sums we invest and the kind of investments we make. It was decided that an Internet-based brokerage service was preferable. Various potential brokers were discussed but it was decided that we would wait for TMF Grow's suggestions and decide at the next meeting.
Application to join ProShare and signing of Constitution to be a part of our gang, er, club.
We need everyone's address to register with ProShare. Can members who have yet to provide home addresses, please e-mail them to TMF Tiger.
Public announcement of trades
The standard Motley Fool guidelines will be adopted. These state that no trades are made within five days of any comment on the site by an owner of the share (i.e. all investment club members). Trades will be announced on the site as part of the monthly feature covering the minutes.
Payments into the investment club account
TMF Tiger will send account details to all members, who will set up monthly payments of £25 by standing order for the 1st of each month, starting on 1st October. Cheques are to be submitted with the initial £50, payable to the same account by Wednesday 15th September, or else there'll be big trouble and much stamping of feet.
Investment policy
The only limitation will be that any trade should not incur more than 1% in charges. In practice, this will probably mean that the club will trade at most once every couple of months (i.e. with a minimum of around £1,000).
The account will be a nominee account. Therefore we will need to consider potential commissions on the disposal of investments, as well as the original purchase.
The maximum number of companies within our portfolio is expected to be around ten but would not be set in stone.
The named trader will be TMF Tiger; the rogue trader (deputy) will be TMF Eagle.
Buying decisions will be valid if a simple majority of members who vote do so in favour of the trade. Voting will take place by e-mail, following each meeting. Non-voters will be assumed to be abstentions. Voting deadlines are set at seven days after the minutes of the meeting are sent round. Minutes of each meeting will include summaries of arguments in favour of particular stock acquisitions.
Dividends will be reinvested.
Members will have sort out their own taxes although TMF Tiger, as Treasurer, will provide the required information relating to dividends and capital gains for each tax year.
Members will suggest companies to invest in when they like. The only stipulation is that the company should be capable of having its own board on the site. This means a minimum share price of 50p and a minimum market capitalisation of £30m. First suggestions are to be made at the next meeting. Get working, Fools!
Should we enter for the ProShare Investment Award?
No, on the basis that one part of the competition is looking for the maximum one-year gain -- which is not in accordance with the Foolish philosophy of investing for the long term.
Invite speakers?
This will be done (more likely not done) on an ad hoc basis. Given the amount of discussion that took place this month on investment strategy, we suspect there just won't be enough time!
Other business: bikkies
Nominations for biscuits at the next meeting: Jaffa Cakes, Ginger biscuits and Plain Chocolate Hob-Nobs.
After an initial split vote, Plain Chocolate Hob-Nobs were the victors, with TMF Nigel making the casting vote flamboyantly.
Fool USA