DANESE KENON Tom Donahower and Deb Prutzman take part in the Sherman Group investment club's monthly meeting. The club currently has 11 members.

By Frank Bilovsky
Democrat and Chronicle

(Sunday, January 27, 2002) -- Laurie Ditzel says the Sherman Group, an investment club of 11 members ages 27 to 59, has a longstanding motto: Buy high and sell low.

"So we maintain a sense of humor about it," the Fairport resident and Rochester School District teacher says.

The Sherman Group is also maintaining a healthy balance sheet these days. Begun in 1996, the club is showing an overall profit of about 30 percent and a net worth approaching $20,000. Not bad for a club where the monthly contribution is usually $25 per member.

But it was higher two years ago, says president Tom Donahower, owner of Ontario Building Supply, who joined the club soon after it was formed.

"We have had a tough two years," Donahower said, repeating the wail of investors everywhere. "The second and third year we took some nice profits -- and stuck it right back in the tech sector. We were in for growth, took a little more risk."

And they got burned. The Sherman Group was named after one of the founders' dogs. If the members wanted to rename it today, they could call it the Cisco Group or the Corning Group or the Global Crossing Group after some of the dogs they invested in over the last couple of years.

But they've had their share of winners, too. Five of the members are pharmacists and they suggested a biotech company called Myriad Genetics. It was their biggest winner when they sold it last year.

"One of our safer holdings is Home Properties," Donahower says. "It's done well and it pays a nice dividend. We had Paychex for a while and took a nice profit on it.

"One of our newer holdings, which we've done fairly well on, is Univision, the Spanish network in America."

The club's two largest holdings are solid companies -- Pfizer and Home Depot.

Investment clubs have been growing rapidly in this country for the last two decades, according to figures compiled by the National Association of Investors Corp. The number of clubs has doubled every five years since 1980, when there were about 3,600 of them. Today there are more than 36,000.

Demographically, the Sherman Club is smaller than average in membership, monthly contribution and total value. The NAIC reports the average membership is 16, the typical monthly investment is $58 a member, and the average portfolio value is more than $40,000.

The local club's membership is divided almost equally between men and women. Nationally, 54 percent of clubs are all women, 8 percent are all men and 38 percent are mixed.

The Sherman Club's monthly meetings have evolved into social gatherings as well as places to make decisions about what to buy and sell.

"We meet in a different member's house each month and it definitely has become a social thing," says Donahower, 31. "People have beer and coffee and peanuts and pretzels and things like that. We haven't had an argument in a good two years. Now it's more of a fun thing, and we're learning from each other how to get along, as well as about investing."

Past differences of opinion regarded matters such as portfolio diversity and issues about the morality of investing in some companies. Typically, three or four members each are assigned to research a company, then give a presentation about it.

"Once we researched Wal-Mart," Donahower said. "Some people didn't want to buy it because they go into a rural community, drive all the other businesses out and turn around and close the store. Some members thought that wasn't very nice."

The club never bought Wal-Mart. But it has done well enough with the Myriad Genetics, Paychexes and Univisions to more than make up for the Ciscos, Cornings and Global Crossings.

"When we started, we were all bungling idiots," Ditzel remembers. "We've made some serious mistakes. But now we are getting very serious. If a foreigner comes in, they get very confused because we can speak the speak now."