Media monitors: the Ujamaa Investment Club relies on news events to sharpen their understanding of the financial markets.In November 1992, Food Lion Food Lion LLC is an American grocery store company headquartered in Salisbury, North Carolina that operates approximately 1,300 supermarkets in 11 Southeast and Mid-Atlantic states under the Food Lion, Harveys, Bloom, Bottom Dollar, and Reid's nameplates. , the grocery store chain, became the subject of a national media investigation regarding unsanitary un·san·i·tar·y adj. Not sanitary. practices and labor law labor law, legislation dealing with human beings in their capacity as workers or wage earners. The Industrial Revolution, by introducing the machine and factory production, greatly expanded the class of workers dependent on wages as their source of income. violations. An ABC News
ABC News is a division of American television and radio network ABC, owned by The Walt Disney Company. Its current president is David Westin. report accused the company of selling outdated food, cheese gnawed by rats, and spoiled meat washed in bleach to kill the odor. In the days prior to and following the television broadcast, the price of Food Lion's stock plummeted--the company lost $1.5 billion in market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. in five days of trading. For the month of November, the company reported that its sales fell 9.5% and its stock price dropped 20%. As Food Lion was being hammered by all of the negative media attention, members of the Durham, North Carolina-based Ujamaa Ujamaa was the concept that formed the basis of Julius Nyerere's social and economic development policies in Tanzania just after it gained independence from Britain in 1964. Investment Club watched with interest. The 13-member club, which had just established itself in February 1992 with contributions of $50 per month, had made its first investments in companies that included McDonald's, AFLAC AFLAC American Family Life Assurance Company AFLAC American Family Life Assurance Company of Columbus AFLAC Apologies For Lack of Audi Content (Audi listservs) , and Food Lion. But by keeping abreast of the situation, Ujamaa was able to unload the stock before its plummeting value could negatively impact the club's portfolio. Within 18 months, Food Lion sales dropped $4.6 billion, costing the company an estimated $233 million in profits. "When you're investing, you're not supposed to let short-term changes in the market cause you to react," says Bertha ber·tha n. A wide deep collar, often of lace, that covers the shoulders of a dress. [French berthe, after Bertha (died 783), Carolingian queen as the wife of Pepin the Short.] Jones, the club's financial partner and co-founder who works as director of client services at North Carolina Central University History NCCU was chartered in 1909 and opened in 1910 as the National Religious Training School and Chautauqua under the leadership of President James E. Shepard. . "But in this particular case, it was more than just a fluctuation--it was widespread." Watching as media events greatly affected the performance of a stock helped the club develop sound stock analysis, evaluation and tracking practices, and strict operating procedures and policies. Each partner was assigned stocks to research, track, and report on monthly, while a rotating committee was charged with providing quarterly portfolio reviews and annual audits. The club established a philosophy of investing in growth companies with a proven track record. The goal was to outperform Standard & Poor's 500. Club members made a point of using the collective knowledge of its partners, many of whom work in the technology sector with companies such as IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) and Glaxo. Their industry insight about new product development coupled with stock selection guides and ratings, forecasting, and comparative data helped the club make sound investment decisions. Between 1994 and 2000, the club's portfolio grew at an average rate of 30%. Companies such as AFLAC, Microsoft, Intel, and Cisco became staples within the club's portfolio. Then, as the stock market declined from 2000 through 2002, the club's portfolio dropped 51.9% because more than 70% of its holdings were in hard-hit technology stocks such as Intel, Microsoft, and Nortel. "We dropped in value, but we weren't wiped out," says Jones. Ujamaa reduced its holdings in over-represented industries; sold weaker-performing stocks; and diversified into the restaurant, retail, medical services, and education sectors. The adjustments helped the club weather the recession and a decline in membership from 13 to eight. By the third quarter of 2005, Ujamaa's portfolio was worth $169,000, with a 13.78% compounded rate of return over 12 years. "We focus on investing in quality stocks and diversify across different sectors. We have beaten the S&P 500 over the last 12 years." says Don Browne Don Browne is the president of Telemundo, an American Spanish-language television network based in Hialeah, Florida.[1] • • , a software engineer and president of the club. The club will continue to educate its members on various investment topics. Through education, Ujamaa's partners hope to grow and improve individually and collectively. AT A GLANCE Ujamaa Investment Club Founded in 1992 in Durham, NC Members: 8 Stocks: 12 Portfolio value: $105,000 Unit value: $48.01 TOP 5 PICKS Starbucks Corp. 14.75% Lowe's Cos. 13.45% AFLAC Inc. 13.11% Timberland Co. 12.83% Bed, Bath & Beyond 9.42% |
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