(MONEY Magazine) – It's a blustery mid-June evening in Columbus, Ohio, and homemaker Essie Cannon is on the phone with four of her five sons--Peter, 41; Robert, 39; Stephen, 36; and Phillip, 33--calling in from various locations in California. As with most family gatherings, even via long-distance conference call, you might expect the conversation to center around grandchildren and spouses.

Not today. This Saturday, Essie and her boys are talking price/earning ratios, Value Line beta rankings and projected sales. In fact, the only person mentioned was Bill Gates and his headaches with the Justice Department's antitrust suit.

Welcome to the midyear meeting of the Yes We Cannon investment club. Determined to jump-start her children's commitment to long-term equity investing, Essie convinced her husband Wallace and four of their sons to start a family investment group in January 1992. The investment club idea wasn't new to the Cannons. Wallace, a retired electrical engineer and a longtime member of the National Association of Investors Corporation (NAIC), had started a club, the Tres Eta, back in '61 with five friends. In the mid-1980s, the club's portfolio--which included IBM, Xerox, Intel and Merck--hit its all-time high of just over $300,000.

So when Essie raised the subject of a family club, Wallace wasn't hard to convince. "The knowledge I've gained from my success at investing was something I've always wanted to share with the boys," he admits. Having devoted his life to educating his children, he says helping them learn how to invest their hard-earned money wisely is like putting "a bit of icing on the cake."

The couple's oldest son, Reginald, wasn't interested in the club, but Peter, who was already investing on his own, and his three younger brothers signed on. "We were all aware of Dad's success with Tres Eta," says Stephen, whose wife Alison is also a member of the family club. "Developing our own group was a good way for us to take advantage of investment opportunities that we couldn't do as individuals."

Although they may not have known it, the Cannons were ahead of the curve. Since they launched Yes We Cannon, the number of clubs registered with the NAIC, a 47-year-old nonprofit organization, has skyrocketed--from 8,267 in 1992 to 37,038 as of May. All together, NAIC member clubs invest $48 million a month, contributing to portfolios that are worth $175 billion. "People who were afraid to invest started clubs as a way to learn about the market," explains Jo Ann Linck, an NAIC national board member, "and boost their confidence to invest on their own."

A HOT TIP IN THE '50s

Though Wallace credits his investment acumen to the NAIC stock-evaluation system, it was really a hot tip from a buddy back in the mid-1950s that piqued his interest in the market. "He suggested I buy a couple of hundred shares of Taylor Devices, a small manufacturer in New York," recalls Wallace. He still laughs at the idea that he could have bought hundreds of shares of anything back then--he had just landed his first engineering job at Bell Aircraft in Buffalo, where he would help develop the first fighter jet ejector-seat system. But he did have enough cash to pick up a few shares. Not long after, Taylor Devices secured a government contract, and the stock took off.

The Cannons sold their shares for a tidy profit after leaving Buffalo in 1959, when Wallace was offered a job at North American Aviation in Columbus. Two years later, Wallace, two other engineers, a dentist and a couple of construction workers registered Tres Eta with the NAIC. "Following NAIC's recommendations, we looked for stocks that would double in three to five years," explains Wallace, who has served as Tres Eta's treasurer for 37 years. That required club members to research the companies. "It's sure not easy to get everyone committed to do that," he adds--especially in the days before cheap calculators and home computers eased the grunt work.

For more than 20 years, each member of Tres Eta contributed $25 a month; in the early 1980s, contributions went up to $50, which Wallace jokingly refers to as his "smoking and gambling money." (Not that he was inclined to do either, Essie would quickly point out.) Wallace and three of the original members--all retired--still contribute to the portfolio, now worth approximately $150,000.

A STOCK-PICKING DREAM TEAM

While many investment club members struggle with deciphering financial reports and learning how to make decisions as a team, Essie and Wallace raised a potential all-star lineup of stock pickers. From the time their children were young, the Cannons always put a premium on quality education. "I lived in the public schools when my boys were youngsters," says Essie, who dedicated herself to raising a family after graduating from Marquette University as a Spanish major.

The boys honed their competitive spirit in track-and-field events--Robert went on to compete in the triple jump at the '88 Olympic Summer Games in Seoul--and learned the value of teamwork as Boy Scouts. Their newspaper routes provided a grounding in business. "That's when they learned to manage money," says Wallace.

The boys' efforts--and their parents'--paid off. Peter, who has an M.B.A. and a law degree, worked on Wall Street for six years before cashing in his personal portfolio to launch a Fast Signs franchise in Santa Monica, Calif. Robert is a procurement administrator for Toyota. Stephen is a financial reporting department supervisor at Warner Bros. Phillip, who also holds an M.B.A., makes his living as a senior systems instructor at Oracle.

As accomplished as they are, the three youngest brothers had never dabbled in the market until Essie set Yes We Cannon in motion. All three had contributed to their respective 401(k) and stock plans at their jobs but, as Phillip says with a touch of resignation, "It isn't easy finding money to put away when you're first starting out and paying back school loans."

Since 1992, each club member has contributed $20 a month. "We didn't want to hurt anyone financially," says Essie, who adds that anyone who wishes to contribute more is free to do so. Robert, who is the current treasurer, prepares quarterly reports that reflect the assets of the club and a prorated accounting of each member's contribution.

"For the first two years, we just collected the money and studied the market," says Robert, whose wife Karen is also a member. Like many NAIC clubs, Yes We Cannon is a by-the-book investors group. No decisions are made without scrutinizing annual reports, Websites and industry newsletters. Despite his experience, Wallace prefers to take a back seat when it comes to giving advice, but he does insist that members do their homework before making recommendations. "Dad encourages us to look behind the numbers provided by Standard & Poor's company evaluations and Value Line stock analysis sheets," says Phillip, the club's president. "We analyze a prospective company's sales, customer service performance and management, which all contribute to the stock's performance." And following the NAIC philosophy, every member has an equal say. Wallace's recommendations aren't right because he's Dad; they are right because his research makes his case.

The club bought its first stocks on Dec. 28, 1993: Blockbuster and Biomet. "We were all familiar with Blockbuster and thought its management team was doing very well," explains Phillip. Within a year, however, the video-rental chain was acquired by Viacom, and their investment began to tank. After selling off some of their converted stock in June 1997, the Cannons watched Viacom start to rebound; the club's remaining shares climbed 36% during the first six months of this year.

The Biomet stock continues to be a solid performer, having increased 131% over the past 4 1/2 years. "Mom made a solid case about the graying of the world population and how this medical supply company would benefit by offering products used in things like hip replacements," says Phillip.

All together, Yes We Cannon has invested $11,670; the value of the portfolio through mid-June is $18,200. Growth stocks dominate the holdings. As of June, the club held shares of Amgen, Biomet, Home Depot, Microsoft, Nike, Oracle, Parametric Technology, Ross Stores, Viacom and Wendy's. So far, the biggest winner is Home Depot, which has gone up 164% since the club purchased it in October 1995.

Each member must track and report on at least one stock that is already in the portfolio. This includes monitoring the company's position in its industry and any changes that might affect the stock price, whether it be a new product, new management or a pending acquisition. To keep expenses to a minimum, the Cannons use discount broker Quick & Reilly. "Since we're doing all of the analysis and tracking, we don't need a full-service broker," explains Phillip. The club is beginning to evaluate the potential savings of online trading.

Even with the coffers virtually depleted after a five-year buying spree, the June 15 call still lasts 90 minutes. The agenda: reports on the club's holdings and--a favorite Cannon activity--dissecting the numbers.

Whatever heated discussions occur usually concern which figures are correct--especially when someone quotes sources other than Value Line. "Because we all have an affinity for numbers, there's sometimes a kind of paralysis by analysis when making trading decisions," explains Phillip. "That's when I say, 'Let's put it to a vote.'"

The six years of number crunching is finally paying off at the individual level. "We have learned quite a bit about evaluating companies and stocks," says Phillip. "The experience has given me the confidence to begin building my own small portfolio." Stephen and Robert, however, have not yet decided to take the plunge.

While the club has no immediate plans for cashing in their holdings, Essie views the portfolio as a rainy-day fund for her children. "Should any of them need $1,000 for something that may come up, they won't have to turn to a bank." And with some of the brothers starting families--Robert and Karen have a five-year-old boy, Alex; Stephen and Alison have a six-month-old girl, Nicole--everyone agrees that the portfolio could be tapped for important short-term needs. For instance, says Stephen, "We may need to borrow money from the club to put a down payment on a house."

If they follow their parents' lead, the brothers and their spouses may one day travel together using the club's assets. Since the mid-'80s, Essie and Wallace, together with the other members of Tres Eta, have dipped into the club's coffers to pay for group vacations to Europe, the Caribbean and Alaska. Not a bad dividend for years of smart investing.