BEARDSTOWN, ILL — THE small farming community of Beardstown, Ill. -- population 6,200 -- might seem an unlikely place to go for investment advice. But people are flocking here to consult with 16 ladies who beat the stock market using a homespun approach and small-town common sense.
The Beardstown Ladies' Investment Club has produced an average annual return of 23 percent since it was founded in 1983. That's twice the return of the Standard & Poor's 500 and shames the best efforts of most professional money managers.
They started by each contributing $100. Every month they added $25 and met at Hardee's fast-food restaurant to study their options. Their portfolio is now worth more than $90,000. (Women investors, Page 8.)
Their book, ''The Beardstown Ladies' Common-Sense Investment Guide,'' is No. 2 on the ''advice, how-to'' category of the New York Times bestseller list. ''We didn't set out to be famous,'' says charter member Shirley Gross. ''We just set out to learn.'' Club members refer to their monthly $25 contributions as ''tuition.''
Across the country, there are some 11,000 investment clubs. But this group of retirees, widows, and professional women -- whose average age is 68 -- is ranked among the Top 10.
Many of the women have lived their entire lives in Beardstown. During a recent get-together in the glassed-off room at Hardee's, these mostly gray-haired grandmas confessed to knowing little to nothing about investing when they started.
Betty Sinnock remembers when she thought a portfolio was nothing more than a briefcase. And Sylvia Gaushell wasn't even allowed to write checks when her husband was alive.
Some of their early efforts at investing were spurned by brokers biased against women. When Ms. Gross wanted to invest in the 1970s, she couldn't find a broker who would accept her as a client. ''They didn't want to be bothered with an old lady,'' she recalls. ''Now this was 21 years ago,'' she points out. ''I wasn't that old then. More than 20 years later, I'm still going.'' Today, people ask Gross for advice.
These small-town ladies once thought that investing in the stock market was only for rich people. ''But we found out that you don't have to have that much money to invest,'' says Maxine Thomas, a retired bank teller. ''If you just save so much a month and invest it, you'll be surprised at the way it builds up.''
The Beardstown Ladies' secret to success is doing their homework and following a recipe, they say. ''We've learned that investing is as easy as making an apple pie,'' says Helen Kramer.
Each of the club members follows at least one of the stocks in their portfolio, noting price movement and important developments at the monthly meetings.
When it comes to buying decisions, the Beardstown Ladies are more likely to look at the world around them than turn to investment gurus. Life in small-town America can provide some hot investment tips, the club members have discovered.
When Gross had trouble finding a parking spot at the local Wal-Mart and saw the overflowing shopping carts jamming the store's aisles, she recommended the group look into purchasing Wal-Mart stock.
One of the club's most profitable stocks has been Wolverine Worldwide, a Michigan-based maker of work boots and casual shoes. Since farmers have been wearing Wolverine boots for years, many club members were familiar with the product. They reasoned that Wolverine was well-positioned to take advantage of the fact that women are now wearing practical shoes to work. The club's return on its investment in Wolverine stock has been 184 percent.
''Although we do our homework, we have fun while we're doing it,'' Ms. Thomas says. At one meeting, Doris Edwards, who follows Hershey Foods for the club, brought the company's new Hugs candy product so everyone could taste it.
A serious top 10 list
Once a company passes the common-sense test, the club conducts a rigorous examination of the stock based on basic investment criteria.
Their book includes a Top 10 list of reasons for investing in a stock, ''with apologies to David Letterman, who is on too late for us to watch.'' This Top 10 list is no joke, however. No. 5 stipulates that a stock's beta -- a measurement of its risk and volatility -- ''falls between .90 and 1.10'' and No. 9 calls for an ''upside-down ratio'' of at least 3 to 1.
These ladies love to laugh and make frequent jokes about their new celebrity status. But they get serious when it comes to the business of investing.
The group has already signed a contract for another book on ''Successful Retirement.'' Meanwhile, they are having a great time sharing their success, and they have inspired five other investment clubs to start up in Beardstown. ''We've had so many people tell us they have always been afraid of the stock market,'' says Margaret Houchins, a club member who owns a flower and gift shop on Beardstown's own Wall Street. ''But they figure if we can do it, they can do it. And that's really our message.''