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From Dollars to Doughnuts

"This could be another Krispy Kreme story," said one member, in reference to the confection maker based in Winston-Salem, North Carolina, which defied everyone with stock in fried dough that rose faster than yeasty bread. The women explained that a broker they knew had strongly advised them against Krispy Kreme. The company has long operated from a classic deco storefront on the main drag in Spartanburg. After decades in business, Krispy Kreme went public in 2000. The Piggy Bank Investments Club heeded the stay-away advice of the broker, who was simply parroting the widespread skepticism the food stock drew in the IPO market of tech darlings at the time. To the surprise of many, the IPO actually became one of the biggest high-fliers of the year. It doubled within a few weeks, and soon issued a two-for-one split. The success of Krispy Kreme irked the Piggy Bank members. Here was a local company—now with a stock market value of $2 billion—making good, and they hadn't even cashed in on it. "That's our biggest miss," said one member. Since then, the women are far more leery about heeding brokers' advice and underestimating local companies.

Georgia Anderson went upstairs to pull up Extended Stay's earnings information off the Internet and the group moved on to their next prospective stock, Pixar. Susan Jackson presented it. "You remember Pixar? They're the ones that have the animated films Toy Story and A Bug's Life. They're getting ready to bring out one called Monsters Inc."

"Who did Shrek? That's the number-one movie."

"Dreamworks," offered someone else. "You can't buy stock in them, though."

"Pixar is down a little bit, not a whole lot, but it's gone down for the last five days," Jackson continued. "It's at 39.5. Its 52-week range is 25 to 46, give or take. Its P/E (profits to earnings ratio) is 33. I'll pass it around the chart. Of course, this is the one we should have bought. They've gone up 40 percent this year. Here we go again, have we missed this boat?" She read a news story on how the company raised its earnings forecast ahead of the release of Monsters Inc. The women thought it over.

"It's a gamble if Monsters is gonna be a great hit or not," Jackson concluded.

"Maybe what we ought to be doing is just looking at reviews of Monsters?"

"I know when Toy Story came out, I remember going to the movies with my daughter, and the line for Toy Story was out the building."

"Carol should have her boys evaluate Monsters."

"But if we wait for it to come out in November, we've missed it."

"That type of movie, I don't think you can go wrong with it."

The meeting was nearing a climax. The group needed to decide whether they were going to move ahead and buy a stock. Verizon, Merck, Pixar, and Extended Stay America were in the spotlight. Someone reminded the group that Piggy Bank owned Extended Stay in the past. Everyone started chatting about the price of the stock when the club bought it. No one recalled exactly how much the club made on it, but everyone figured they came out ahead. The conversation drifted a bit, then it was back to business.

"I think we oughta buy Extended Stay. I'm afraid this'll be another Krispy Kreme," said Bobbi Duncan. "I don't want that to happen again. We bought it before and we made money on it."

They ran through the pros: It's a local company, the stock is cheap; Bill Gates bought into it. With all the layoffs, maybe companies are bringing in more temporary workers. Con-struction workers stay there, and that sector is doing well. It's a member of the Midcap 400.

At that point, Mary Olejnik appeared after her son's Eagle Scout meeting. Warm greetings abounded. "I think I'd like a glass of wine," she said. Everybody laughed.

"We're contemplating buying Extended Stay," Jackson said.

"Again?" Olejnik asked from the kitchen. "Has it done anything since Bill Gates bought it?" She then mentioned the new Extended Stay headquarters that George Dean Johnson is building downtown. Everyone stopped to listen.

"I can tell you, the new building is going to be the Taj Mahal," Olejnik said.

"Is it really?" the others asked.

"It is absolutely gorgeous. They told the architects they wanted it to reflect the history of Spartanburg. And it has elements of Pine Street School, and two other old buildings downtown. It has five stories, three big fountains."

"Now I'm not sure I wanna buy the stock, if he's spending all that money on a corporate headquarters," said Jackson.

Olejnik chimed in again. "They're building more than they have been for a long time," she said. "Construction and men in the dog house are their bread and butter."

"When the economy gets worse, you'll have more men in the dog house," said Bobbi Duncan.

"There's a possibility that this could be a long, bad stretch like we had in the '70s," said Georgia Anderson. "There were people who got so sick of it that they got out of the market and never went back. There are a lot of amateurs who were investing who are getting weeded out in this kind of market."

"I hope it's not us," said Olejnik. "So many people— especially the young people who became tech millionaires—made the mistake of thinking that paper money was real. And it wasn't. When it was artificial to start with, the bubble had to burst. There are just some horror stories of people who were living beyond their inflated paper means, and now they're living on the poverty level."

"Well, what do you want to do?" Jackson said. "Should we sit and watch things? I'd be more than happy to watch Extended Stay. It's probably not gonna do much. We could wait it out for a couple of months."

"Well, we've been invited to a little gala at George's (George Dean Johnson's) house. I'll be chatting him up," said Olejnik.

"I'm wondering if we should buy a little bit," Jackson said.

"We could buy a little bit," another agreed.

The motion was made to buy about $3,200 worth of the Extended Stay stock.

It was the end of the evening and the women went home, with another successful meeting under their belt. They illustrate how the stock market can be what you make of it. For the Piggy Bank Investments Club, it's a bit of a social scene, a chance to hear about companies and perhaps grow their money. Chow down on some good eats. Over time, they learn more about how to come out ahead, and how to be careful with their money.

They didn't get in over their heads, they didn't push it, and they didn't day trade. They usually picked good stocks, and they had a hard time figuring out when to sell them. But even when times were tough, they hung in there and kept their money in the market. They weren't too greedy. They used whatever they could to make their stock-picking decisions, including research into how a store chain was doing, whether a movie released by a publicly traded company was successful, or how plans to build a company's headquarters were coming along.

They bought what they knew. They were not inclined to sell a stock right away on short-term bad news, which can be devastating for portfolios. Unlike hundreds of thousands of individual Americans who have machine-gun trigger fingers with their stocks, clubs like Piggy Bank were supported by their well-fed groups of regulars. They were more than likely to wait for the bounce back. Wall Street professionals, looking over their shoulders for the next freight-train wreck in the stock market, could use some of that kind of confidence and restraint.

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