The Smartest Stock Pickers in Cyberspace

Thirty-eight grown men and women -- a dozen software engineers, some doctors and lawyers, a symphony-orchestra trumpet player, an aspiring screenwriter -- call Mary Peterson "mother." The Cincinnati economics professor isn't related to any of them -- she hasn't met most of them -- but she works hard to keep them united as a family. That's because she is a founder of the Gurus, perhaps the most exclusive investment club in cyberspace.

Forget the Beardstown Ladies, the homespun stock-picking sorority that's captured the imagination of Middle America. Forget the Motley Fools, America Online's answer to "Wall Street Week." The Gurus offer a glimpse of the future of personal investing: savvy professionals using the Net to develop their own information and insights to beat the Dow.

"We came together as a group to grow financially and intellectually in the field of investing," says Peterson. "It's not just about exchanging stock tips."

The Gurus began when Peterson (petermp@ucunix.san.uc.edu), 60, and "Chief Guru" Gary Funck, 45, president of Intrepid Technology, Inc., a software company in Mountain View, California, encouraged a diverse collection of players from different industries -- semiconductors, biotech, banking -- to talk stocks in an intimate electronic cocktail party. Eighteen months later, the party's rolling. Current membership includes 38 people (33 men and 5 women), with a heavy representation from Silicon Valley. Members must be nominated by a current Guru and pass a rigorous vetting process run by Peterson and Funck.

"We're always looking for new expertise," says Peterson, "whether it's someone from a specific industry or with a particular trading style. Each member has to be able to contribute. After all, the goal is to make money in the market."

That the Gurus seem to do. Member portfolios are as narrowly targeted as 3 stocks and as widely diversified as 200 stocks. The values range from $25,000 to several million dollars.

"Almost everyone in the group has an advanced degree -- a masters, an MD, a PhD -- and their insights into specific industries are second to none," says Kosta Vlahadamis, a 33-year-old Guru who's associate dean of business and law at the American College in London. "Last year my portfolio was up 65%, much of it due to Guru stock picks."

Most Gurus have demanding, full-time careers. But they still manage to spend one to six hours a day on the Net answering an average of 50 Guru e-mails, reviewing past stock selections, researching future picks.

The Gurus don't just swap information; they also share investment strategies. The group is divided between investors driven by company fundamentals (margins, growth rates, price/earnings ratios) and technical analysts who focus on quantitative trends. Fully one-quarter of the members create their own software algorithms to chart the market.

Mudit Wahal, 27, a software engineer at Cisco Systems, has developed a computer model to predict when a stock has reached its peak. Unlike most Gurus, he shares his insights with the outside world. He publishes his analysis on a Web page that's getting about 20,000 hits per day.

How can budding investors create their own online investment communities? Mary Peterson offers four suggestions:

Keep the membership exclusive.

Sure it's elitist. But Peterson says strict membership conditions let you shut out "the noise, novices, and hucksterism" of life on the Net.

Encourage diversity.

The most creative insights, Peterson says, often come from the most intense disagreements. "We're so diverse in terms of our ages, interests, and portfolio goals that I can't imagine there's any one stock that would appeal to the entire group."

Recruit great communicators.

The Net is no place for wallflowers. Among the Gurus, Funck plays the role of "policeman" to pressure slackers and lurkers to change their ways or resign. Peterson requires that all members circulate detailed biographies: "People shouldn't think that they can stand behind the Internet and remain anonymous."

Develop offline relationships.

The Gurus don't just swap investment wisdom. They share phone numbers and addresses, offer support when members get sick, and hold an annual picnic in Golden Gate Park. "We relate to each other at the human level," Peterson says.

The result is trust, friendship -- and fast action. Guru Bill Splaine, 56, a buyer for Hewlett-Packard, recently logged onto the Net in the middle of the night. He was about to invest in a company with a hot new fax-and-messaging technology. Did his fellow Gurus have any reactions? He woke up to find dozens of replies, including one from Christina Young, 31, a software engineer with in-depth knowledge of the technology that fascinated Splaine. She challenged his enthusiasm, made the case for an alternative technology, even recommended a different stock.