Double your money every five years: The Real Deal Investment Club looks for stocks that have strong growth potential. (Investment Clubhouse).

When Larry Holman and two friends started The Real Deal Investment Club in 1995, he drew on his 15 years of experience investing in the market to come up with the club's investment strategy: Only choose stocks that would double in three to five years. Holman figured that strategy would enable the club to achieve double-digit returns in its first few years.

He was right. Since its inception, the club has achieved a 37% return on its investments. However, 2002 was a tough year, as Real Deal posted a -7.1% return from Jan. 1 to Nov. 27 when the club's portfolio had $44,270 in stocks and $1,858 in cash. Holman says the group keeps its cash reserves relatively low because, "We feel that we can make mom money if we stay invested." Members pay $50 in dues monthly and a $1,000 investment to join. The group, which now has nine members in North and South Carolina, has only had to buy out two members because of financial difficulties. The club rotates its meetings among members' homes. Its goals are to (1) gain knowledge in the stock market, (2) improve investment opportunities for families and future generations, and (3) become independently wealthy.

Holman says the group's criteria for selecting stocks is fairly simple: "We invest in companies we know and believe in, then we sit tight and let them [the investments] grow." He explains that the group made a slight adjustment to its investment strategy during the market's downturn by buying dividend-paying stocks. These stocks regularly pay a portion of their profits to stockholders. Real Deal intends to reinvest the money it receives from dividends when the market pulls out of its slump.

Holman admits that the strategy hasn't worked perfectly. Real Deal has never sold any of its holdings, even those that have taken a major beating over the last few years such as Cisco Systems (Nasdaq: CSCO). The club also purchased stock for LTV Corp (NYSE:LTV), a well-known steel manufacturer now in bankruptcy, but it believes LTV has been a historically stable company that will see better days.

"A lot of clubs panic and they sell," says Holman. "But because we buy with the intention of doubling our investment in three to five years, we didn't have to. If a stock is losing value and you believe in it then you buy some more." In the meantime, the president of the Beaufort County Chamber of Commerce says that the club won't buy any more LTV stock until the company emerges from bankruptcy. Some of the club's larger holdings that have fared well include Harley-Davidson (NYSE: HDI) and Viacom (NYSE: VIA).

The club also has a policy of staying away from mutual funds, which Holman says has helped them keep more of their portfolio's gains. Mutual funds have arguably taken the biggest hit since the downturn of the economy and Holman reasons, "[With mutual funds] you don't know what the manager is buying or selling and the costs involved are always 1[%] or 2% [more] than what they say they are," he says. "Then there are all kinds of fees. By owning individual stocks we have total control."

Holman says the biggest lesson learned from belonging to an investment club is the necessity of growing the investments and the club slowly. He believes a smaller club makes for a better experience and intends to keep the membership at or less than 11. "We want to make sure that each person and their personalities fit in with our thinking," says Holman. "Learning and making money are our main objectives, but we want to keep the club social."

Membership meetings, which are held quarterly, include dinner and discussion of the club's agenda. "The camaraderie we have is good," says Holman.

The Real Deal's
Top Five Holdings

                      Exchange/     Portfolio
Company                Symbol       Weighting

Harley-Davidson      NYSE: HDI         26.56%
Viacom               NYSE:VIA           7.33
Cisco Systems        Nasdaq: CSCO       6.70
Sysco                NYSE: SYY          6.65
Dollar Tree Stores   Nasdaq: DLTR       6.49

* AS OF NOV. 27, 2002.