Crow River Investment Club

Meeting Minutes of March 11, 2008



Diane Windingland called the meeting of the Crow River Investment Club to order at 6:30 pm on March 11, 2008.


Lynn Ostrem

Present w/pay

Marion Marshall

Present w/pay

Carole Ripplinger

Present w/pay

Sheryl Sostarich

Present w/pay

Craig Block

Present w/pay

Diane Windingland

Present w/pay

Kim Windingland

Present w/pay

Mike Trisler

Present w/pay

Dan Vitez

Present w/pay

Eric Chlan

Present w/pay

Beth Silverwater

Present w/pay

Steve Smith

Present w/pay

Ron Thorson

Present w/pay

Deantha Menon

Present w/pay

Gary Quernemoen

Present w/pay




Secretary’s Report

The minutes of the February 19, 2008 meeting were approved as posted.


Treasurer’s Report

Carole made a dues deposit totaling $470 and wrote a check to Lynn for $2.62 for postage, office supplies for income taxes. We received interest income of $ .02, leaving an ending bank balance of $1,252.02.


We received dividend income of $18.60 and made an expense adjustment of $ .02, leaving an ending brokerage account balance of $994.22.


Unfinished Business

Based on a poll conducted by Ron, a social event for members, spouses, and friends will be held at a local restaurant on Saturday, November 1, 2008.


New Business--None


New Stock Presentations

General Electric by Lynn  Owning General Electric is a lot like buying a mutual fund, its subdivisions are so large that its growth estimate is stated as a multiple of GDP. In 2007, revenues rose 14% while earnings grew 16%. Major changes to its business model were the divestiture of its plastics division and sale of its private label credit card business. General Electric holds a triple-A credit rating from Standard & Poor’s. Lynn chose judgments on the SSG as follows: 10% sales growth, 10% EPS growth, average P/E of 19 and projected total return of 17.7%. Lynn recommends a buy.


PetMed Express by Steve  PetMed Express offers a convenient way to buy medications for your pet. Although sales and earnings are growing at double-digit rates, the stock remains a low price stock. We voted not to add PetMed Express to our club portfolio as it would not add diversity to our portfolio.


CVS Corporation by Eric CVS Corporation is a direct competitor to Walgreen. Sales and earnings have spiked in the most recent quarter due to the acquisition of Caremark Corporation. Eric questioned the incentive compensation program for executive officers tied to earnings rather than return on capital.


Walgreen Update by Steve Walgreen benefits from the strategic location of its retail stores and has a very expense conscious management team. Both Walgreen and CVS face competitive pressure from Wal-Mart. Deantha pointed out that Walgreen is a Midwest based company and has a more favorable image than CVS in the Upper Midwest. The club members didn’t feel there was a compelling reason to sell Walgreen and replace it with CVS Corporation.


Portfolio Managers Reports

Ron showed us his graphical analysis of portfolio diversification. He recommended that we reclassify Walgreen as a consumer staples stock and FactSet Research as an industrials stock. The club would likely benefit from diversifying into energy, technology, basic materials, and telecommunications.


Quarterly Stock Capsules (condensed from the written reports)

Portfolio Recovery Associates did not meet our aggressive targets, posting 17% revenue growth and a  -1.4% earnings per share growth in the fourth quarter of 2007. Productivity, measured by cash collections per hour paid, ended at $135.77 for the full year 2007 compared to $146.03 for the full year 2006. Higher borrowing costs and increased leverage reduced earnings per share by 9 cents in the fourth quarter. Deantha recommends changing judgments on the SSG as follows: 13% sales growth, 13% EPS growth, high P/E of 19, low P/E of 10.5, use the average low price for the last 5 years of $25.30.


PetSmart is performing below our expectations, posting 13% sales growth and 7% earnings per share growth in the fourth quarter of 2007. While the services revenues continued to sizzle, growing at 27 percent, this is not enough to offset the anemic sales of core products. Dan recommends selling our position and using the proceeds to diversify into a higher growth sector.


Lowe’s reported another dismal fourth quarter with flat sales and a 30% decline in earnings per share. Lowe’s earnings are expected to remain depressed until Q1 of 2009. Lowe’s is reeling from a weak housing market, falling home prices, and a tight credit market. However, Lowe’s has been able to hold its market share throughout the economic slowdown. Lowe’s has suspended its shares repurchase program to pay down debt, build new stores, and pay dividends. Gary recommends changing judgments on the SSG as follows: 8% sales growth, 8% EPS growth, high P/E of 22.4, low P/E of 12, use the forecast low price. Gary recommends a hold.


Portfolio Activity

After a motion was made and seconded, we voted to buy an initial stake of $500 in General Electric and liquidate our holding in PetSmart.


Lynn gave a comprehensive presentation on Adding Judgment to the Stock Selection Guide. She showed us how to use the Preferred Procedure to calculate earnings estimates. She showed us where to find average P/E and how to calculate projected total return.


Assignments for the April meeting:

1. Diane will give a new stock presentation on Companhia Vale do Rio Doce (NYSE: RIO).

2. Quarterly stock reports are due for FactSet (Craig) and Walgreen (Steve). Quarterly stock reports are to be posted to the message board no later than 2 days before the April meeting.

3. Carole will buy $500 of General Electric and sell our holding in PetSmart.

4. Gary will give an overview of the Energy sector and describe the metrics for analyzing an energy company.

5. Gary and Mike will each give new stock presentations on an energy company.



The meeting was adjourned at 8:45 pm.


Sheryl A Sostarich, Secretary


The next meeting will be at Lynn’s in St. Michael on Tuesday, April 8, 2008.