Do grannies know best despite a fiscal slip-up?

CHICAGO -- Betty Sinnock brought together the 16 women who founded the Beardstown Business and Professional Women's Investment Club in 1983. It turns out, though, that Sinnock may have made her greatest contribution to the Beardstown Ladies, as the famous stock-picking group became known, with an embarrassing accounting error more than a decade later.

Remember that 23.4 percent annual return the ladies thought they had received on their investments from 1984-93? It was heralded as trouncing the Wall Street pros in the club's 1995 best seller, The Beardstown Ladies' Common Sense Investment Guide and in four subsequent financial advice books.

Well, the return would actually have been a modest 9.1 percent but for Sinnock's mistaken data entries. The grandmothers from the rural Illinois town of 6,200 whom publicists called among "the great investment minds of our generation" would have been just another investment club falling unimpressively short of the 14.9 percent annual return for the Standard & Poor's 500 for that decade. The ladies might then have missed out on book royalties, exciting travel, television appearances, the thrill of turning their obscure hometown into a tourist stop -- and the fringe benefit of amusing marriage proposals. (Maxine Thomas, 77 years old, has 37 so far.) True, the club had achieved some prominence before Sinnock's slip- up; it was spotlighted on CBS This Morning in 1991, for example. But the ladies became national celebrities with the Common Sense guide. The book, which spent nearly three months on The New York Times best- seller list, was subtitled, How We Beat the Stock Market -- And How You Can, Too. Others also would have missed out if the group had not become so famous. The long bull market is the biggest factor in the growth of investment clubs, to more than 34,000 today from fewer than 13,000 in 1994, but the Beardstown Ladies are undoubtedly second, said Robert O'Hara, vice president of development for the National Association of Investors Corp. Based in Madison Heights, Mich., the NAIC, a clearinghouse for investment clubs, has long used the ladies as a stellar example of a club. Indeed, people love the ladies, who now number 14 and average more than 70 years of age, for their folksy manner and their message that average people can make money by researching stocks and investing steadily, and learn about the world and enjoy their friends at the same time. "A lot of our investors are saying that how well the ladies did is not the point," O'Hara said. "The point is that the ladies invested all those years and have done well for themselves, as have those who followed their example." Moreover, thanks to improving performance since 1993, the annual return for the club's 14 full years has climbed to 15.3 percent, according to a Price Waterhouse audit. That compares with 17.2 percent for the S&P 500 in that period. Still, Hyperion, the publishing arm of Walt Disney that has sold 1 million Beardstown books and just shipped 133,000 copies of the latest, The Beardstown Ladies' Pocketbook Guide to Picking Stocks, must be holding its breath. The trouble started last month when a Chicago magazine article delved into a disclaimer on the copyright page of a 1996 reprinting of the Common Sense guide. The disclaimer suggested that the ladies' track record might have been inflated by an incredible bookkeeping tactic: the dues put into buying stocks -- $25 from each member each month -- were not being subtracted in calculating the club's returns. The disclaimer had been inserted by Seth Godin Productions, a Irvington, N.Y., company that had assembled the books from interviews, its own research and papers from the ladies. Things got muddier when Sinnock, 66, told The Wall Street Journal, also last month, that she did not think dues had been mixed with returns but was not sure. That is when Price Waterhouse was brought in to provide an independent audit of the club. That review led to the announcement last week that the disclaimer was mistaken. The returns were indeed inflated, the Beardstown Ladies acknowledged, but only because Sinnock got befuddled by the NAIC computer program. Apparently, none of the outsiders involved in assembling the materials for the books "authored" for the ladies by Seth Godin Productions had questioned the figures. "We are terribly sorry for the error," Sinnock said. "The ladies were very concerned that the public would think we had purposely misrepresented the results in any of our books." There seems little chance of that. Although some investment advisers say the Beardstown legend has contributed to dangerous overconfidence in the long-soaring stock market, it is hard to find investors who say unkind words about the ladies. "I think they just made an honest mistake," said Frances Coe, vice president of Women Investing Now, a club in suburban Chicago. "I really don't think they were doing it to sell books or anything like that." Nevertheless, the ladies may face exile to the heap of the ho-hum. "You'd suspect sales won't be as strong going forward," said Marshall Loeb, the author of several financial advice books. Hyperion is expressing vague corporate confidence that demand will remain strong, promising to send out correction slips for books already out and to include correct data in "all future printings." Seth Godin, president of the company that assembled the books, added that the Beardstown message is not about beating index funds but about coming out ahead of doing nothing at all. The ladies' next book, he said, will be a guide to estate planning. Judging from the warm reception for the four ladies who were featured speakers on March 14 at a fund-raiser in Oak Park, Ill., the Beardstown members will be out of the spotlight only if they leave on their own. The audience loved the cheerful shtick that accompanies their anyone-can-do-it message. "From birth to 18, you need good parents," Thomas advised. "From 18 to 30, you need good looks and from 30 to 50 a good personality. But after 50, you'd better have some good investments." Elsie Scheer, one of three members in their 80s, told listeners she was "looking after the hereafter" -- as in "I go upstairs, I go downstairs, I go to the basement and I ask, `What am I here after?' " And it is hard to go too wrong with the investing tactics they described here. "We look at Value Line and we want to see 5 to 10 years of growth," said Carol McCombs, who is Scheer's daughter. The ladies -- who have a $350,000 portfolio, far larger than the NAIC average of $90,000 -- also spread their risks among different sectors. No one at the fund-raiser asked about the inflated claims, although some conceded privately that they were curious. When asked what she would have said if the subject had come up, McCombs answered: "We're not worried about the numbers. We are just interested in getting people to save and invest."

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