Investment club Bull’s Eye Society Event : Saving and Investing your money

On the 18th of August I read on the website UitinVlaanderen that the investment club Bull’s Eye Society hosted an event for the occasion of its 10^th  birthday. The club invited Sven Sterckx, chairman of the Belgian League for Investors (VFB) to talk about “Saving and Investing your money”. As I was available that evening, I drove to Dendermonde to attend this event with three questions in mind :

• How does an investment club operate and what investing strategy do they apply?
• What is the knowledge of people about investing in an investment club?
• What is the opinion of the chairman of the VFB about investing and saving money?

The Investment Club Bull’s Eye Society

The evening was opened by Sven Kosack, secretary of the Investment club Bull’s Eye Society. In a little speech, he recounted the history of the club. The investment club exists 10 years since 1^st July 2007 and started at that time with 6 members. The club has grown in the meantime to 30 members. One of the first stocks purchased in 2007 were UCB and Fagron. The club has three principles

• Being accessible and affordable to everybody thanks to the low initial investment amount of only 200 Euro and then a monthly savings target of 25 Euro
• Being democratic because each member has an equal vote
• Being entertaining as it is a club where people talk about investing money and discuss investment ideas while drinking a glass and having fun

During the 2008 stock crash the investment club learned a hard lesson when they sold losing positions. Some of them prematurely. When the stocks recovered strongly from the crisis, they realized that investing in quality stocks pays off in the long run. This was the first KEY LESSON! They learned that a crisis this was an opportunity to buy EXTRA strong stocks.

In 2010 the Greece crisis hit the stock market but the investment club did not sell this time. On the contrary; they purchased ADDITIONAL stocks when the markets were starting to recover. This was the second KEY LESSON. That year, they achieved the best performance of all Flemish investment club with a negative return-on-investment of -5,4% (laughter) and received a 1500 Euro price of the VFB organization. Now the club has a good stock portfolio and a strong cash position. When a strong market correction occurs, they can make new additional investments. They are prepared with a shortlist of candidates to purchase.

Here’s the link to the Investment Club’s Website. Here’s a link to a Youtube channel where you can find some old videos.

Saving and Investing by Sven Sterckx, Chairman of the VFB

Sven’s presentation consists of two parts, a macro-economic outlook and the topic “saving/investing your money”.

In order to stress the negative impacts of government interventions in the markets, Sven started with an analogy…in the 50’s and 60’s there was an oversupply of butter and milk prices collapsed. So much so, that farmers were in dire straits and threatened to go bankrupt in droves. It was then that government decided to intervene by setting minimum milk prices. Farmers readily agreed since they could now produce unlimited quantities at a set price…. So much so, that butter clogged the market, and the government didn’t know how to deal with this oversupply in production. It was a proverbial mountain of butter that the government intervention had created. Now we can conclude that price manipulation does not work and the problem becomes bigger. Today the situation is similar as central banks are putting interest rates to zero and they add more money in the system. There is seven times more money created to support the system but who knows what will happen and what the consequences will be? Normally bad companies with large debts go bankrupt but today they can get easy access to no cost loans so they survive on the stock market.

What is the objective of low interest rates? Is it to stimulate economic growth? Look at Japan. We know now that it does not work. Structural growth is the combination of demographic growth and technology growth. Japan has a shrinking and aging population. India on the other hand has a population pyramid with the majority of young people. India has everything for strong economic growth from a demographic perspective. Belgium also has a problem! Soon the baby boomers go on pension and the working class is amongst the lowest in Europe.

So why do Central Banks lower and/or keep interest rates low? When we look at the US debt, we just blew through the last debt ceiling that was agreed. Where is the end of increasing debt? Other examples are Belgium and Spain where the government debt keeps on increasing. The only good member in class is Germany.

If you want to read a good book, Sven recommends “This time is different” by Carmen M. Reinhart. The book is available for purchase at discounted price through our Amazon affiliate program  if you want to read it.

Now there are only 5 ways to eliminate debt. Number 1 is debt restructuring. An example is the great depression for countries such as Iceland and Argentina. Their government went bankrupt and now they can loan at low interest rates. Number 2 is hyperinflation. You decrease the value of money so that the debt becomes lower Number three is to cut your own expenses. This is definitely not the case for Belgium…(laughter in the room) Number 4 is economic growth. Today in Belgium this will be below 2%.

So we can conclude that economic growth and cutting expenses won’t work. Number 5 is a financial repression like in the years 50 to 70’s. Interest rates fall below inflation and you get a currency war as a side effect. In 2014 the ECB launched their Bazooka of low interest rates. So this should lead to inflation. We already see a salary inflation happening, especially in the IT sector. Oil prices…today crude oil should be around 75 – 80$ to be break-even midterm. But there’s an oversupply as the US keeps on increasing productivity. But one day this will end…

Globalization has also ended as salaries in China are today higher than in Mexico. This is what Trump doesn’t like as the majority of products and/or components for US market are produced more and more in Mexico. So inflation will increase.

Now how to invest in a period of financial repression? Well…first conclusion is that putting your money on a savings account costs YOU money. Bonds also cost money. Stocks are the best asset class to invest in and this is the ONLY one. There is NO alternative (TINA). However there are always short term issues. Will the trust in the high valued stock market remain? Who knows? Sven also expects a stock market correction to the means and fair value price again. When interest rates would increase too rapidly, this would definitely have a negative impact on the stock market.

So…invest in the stock market but search for the correctly valued companies.

Up to part two.

When Sven became Chairman of VFB at the end of 2015, the speculation tax became effective. A devastating tax for small companies working in Biotech. Unfortunately now we have another increasing tax on stock transactions and the size of your portfolio….This type of politics and taxes is going the same way as with the taxes on capital. Once invented, they just simply keep increasing….

The capital outflow has already started in Belgium. Portugal and other countries attract high income people with low tax schemes. Wealthy people look for legal certainty and trust in a government.

The organization VFB has three objectives. The first one is to inform investors. This is done with conferences, congresses about financial planning, company events and analyst reports. Gert de Mesure writes around 50 reports which become available at the VFB website. There is the free Excelco software which can be used. The investment club Bull’s Eye Society can use this as they are member of the VFB. The second goal is to educate.

The second objective is to educate investors. There are events organized by local regions in Flanders such as Trefpunt Gent, Kortrijk and others. You can learn from analyst presentations and follow courses.

The third objective is to network. Here you have the investment clubs throughout Belgium where you can share ideas, bounce your investment strategies against other people’s opinions. The main goal of an investment club is to avoid tunnel vision and only focus on what you want to know.

Now the VFB will also concentrate on a NEW objective. There is 264,16 billion euro on Savings accounts in Belgium and this is increasing every day….and all those people lose money every day due to a high inflation and low interest rates. People fear the stock market as they don’t know much about it so they shy away from it. However they should invest in the right companies at the right price.

Sven compared recently the costs of TAK23 products and the average yearly cost of the different vendors was 3,6%. You need already an 8% return on the stock market before making any profit… The costs of active managed funds is also too high today…a correction will be required in the future to lower the price for consumers.

Actually investing is like gardening. You plant a seed in the ground and wait until it grows and grows so you can harvest. You give it time and everything needed. It’s no guarantee tough… as there are several variables such as the weather and the amount of water and potential diseases or animals attacking your plants. A farmer takes risk every year and has no guarantee on a good harvest.

So what is good advice for (beginner) investors?

1. Spread in time and put money aside consistently. Don’t buy more stocks as you can follow
2. Be disciplined and consistent
3. Be patient. Buy at the correct price
4. Only invest in what you know

In Belgium NN Investment partners did a study. There are only 15% investors and only 5% are investing in stocks. 22% are potential investors on which VFB will focus to inform and educate. 63% are not investing because they do not have the capability, nor interest or knowledge to do so.

Read the following book “Fast Thinking and Slow” of Daniel Kahneman. The book is available at discounted price through our Amazon affiliate program for purchase if you want to read it. 

It talks about the 2 systems of a human brain. Here’s an infographic of what the author describes in his book. Humans do not want to save money or invest as they rather spend the money on something fun.

So we can conclude with the following three key requirements for investing:

1. Pay yourself first : monthly, fixed transaction towards an investment account
2. Be frugal. Live below your means!
3. Invest systematically

Today you can copy and execute an investment strategy which will make you slowly rich if you understand the 8^th world wonder of Einstein… End.

The investment portfolio of Bull’s Eye Society

At the end of the evening, an overview and current state of Investment Club was presented. I won’t reveal the companies in the portfolio as I consider this intellectual property of the Investment Club.

Today the return on the portfolio is 9,4%. This return is calculated without dividend payouts. There are 15 positions with varying returns between -55% to +44%. The diversification is over different sectors. The core portfolio consists of dividend aristocrats which have increasing dividend payouts. Besides the core stocks there are several investments in smaller companies and two ETF’s.

Our reflection on the evening

Time to reflect on the three questions why I drove to Dendermonde to attend this evening. Below you find our own opinion and reflection on what I learned.

Q1. How does an Investment club operate and what investing strategy do they apply?

The strategy of the Investment Club Bull’s Eye Society is good and rock solid. They apply the strategy of investing in qualitative stocks that are part of dividend aristocrats’ listing and/or pay higher dividend. They also invest in growth companies and ETF’s. Their operating model to attract more members and investors to their club is a good business operating model which is reflected in the growth from 6 to 30 members over a period of 10 years. Congratulations for the birthday of 10 years! They want more members in the club as more members means more knowledge and ideas for great investments.

Q2. What is the knowledge of people about investing in an investment club?

Actually I was impressed by the amount of questions and feedback and opinions during the presentation of Sven Sterckx. Also during conversations with several members of the club, it is correct to state that there’s a broad spectrum of investing knowledge within this group. During the meeting there were 3 ladies present which means that by no means investment clubs are a MEN ONLY affair.

So if you are a beginner investor, I could definitely recommend you to be part of this investment club as the barrier to enter in the stock market is low and you pick up and learn from the knowledge that the club members have built up over the years. The learning path will be longer if you need to figure it out on your own…

• What is the opinion of the chairman of the VFB about investing and saving money?

The presentation about the macro-economic outlook was structured and well documented. It is correct to state that today there is NO alternative than to invest in the stock market. The perspective on the oil price was interesting to hear as we share the same opinion. To hear a confirmation on our own thinking about the oil price, is positive.

The globalization continues. Salaries in China are now higher than Mexico. Personally I have seen with my own eyes how Chinese companies have relocated to Africa or other locations in South-East Asia. Western textile companies moved first to Bangladesh, Vietnam and other countries. A battle for foreign direct investments will always exist in the world according to me.

We are glad to hear that the VFB has a new objective to focus on the 22% of the Belgian population that are potential investors. Investing is indeed like gardening. The advice that Sven gave as investment rules are basic golden rules for every investor.

Final conclusion

This was an interesting evening where I learned for the first time about the operating model of an investment club and the portfolio they manage. They have a  strong portfolio of qualitative companies. It was interesting to see that they are still invested in a high dividend paying Business Development Company (BDC) which I threw out of the door to secure my capital gains. Their position in this company is small as mine was 5x bigger. Their portfolio looks well diversified and reflects the bull market of the past years. 

Sven Sterckx explained the core principles which I also explain in my Financial Strategy (step 2). Pay yourself first is a core step you need to apply when you want to invest consistently. I do share the same mission as the VFB to inform and educate as many investors as possible to the stock market. That’s the main reason why I started this blog as I got more and more frustrated about the stupidity of the Belgian population and the behavior of banks. You can read an older blog post here.

Read about collective (stupid) behavior of the Belgian population

I also wrote a blog post once about the wonder of the compound interest. If you are a newbie to investing in the stock market, also read this blog post.

Get the Basics : Understand the Golden Rule of Compound Interest 

I want to end with a final advice for the investment club. Don’t forget to secure your capital gains on time and cut your losses quickly. No need to sell your dividend aristrocats as you should keep them forever if they stay in good health. And keep up the great work!

If you as a reader are an investor who considers to, or is currently investing in the stock market and you don’t have a solid strategy and you want to learn from experienced investors, consider joining an investment club such as Bull’s Eye Society or search one in your neighborhood.

Good luck with your investment strategy and to the Investment club Bull’s Eye Society. Thanks for a great evening and look forward to see you again!

As usual we end with a quote.