Archive for Sunday, November 5, 2000

Motley Fool

November 5, 2000


Name that company

I came to life in 1851 as a four-page publication. Adolph Ochs bought me in 1896 when I was financially ailing. He beefed up my writing staff and added a book review section and magazine. A photograph graced my front page for the first time in 1910. When Ochs died in 1935, his son-in-law Arthur Sulzberger took over. I published my first Sunday crossword puzzle in 1942. I went public in 1967. I own Golf Digest and Golf World magazines, eight television stations and two radio stations. I also own 17 daily newspapers, including the Boston Globe. My daily circulation tops 1 million. Who am I? (Answer: The New York Times)

Know the answer? Send it to us with Foolish Trivia on the top and you'll be entered into a drawing for a nifty prize! The address is Motley Fool, Box 19529, Alexandria, Va. 22320-0529. Send questions for Ask the Fool, Dumbest (or Smartest) Investments (up to 100 words), and your Trivia entries to

Unrealized gains

Q:What are "unrealized gains"? Laurie DeVecca, via e-mail

A:Think about your portfolio. When you've sold various holdings, you've realized gains and losses. If you bought Peter's Pipedreams Inc. (ticker: HOPE) at $25 per share and then sold it a few years later at $45, you had a realized gain of about $20 per share.

Meanwhile, perhaps you bought shares of International Alphabet Corp. (ticker: ABCDE) at $66 per share, and they're now trading at $96. If you haven't sold any shares, you've got an unrealized gain of $30 per share. This is also called a "paper profit." It's your profit in theory, but since you haven't actually sold the holding, you haven't actually realized the gain.

Q:What's the difference between "fixed income" mutual funds and "equity income" mutual funds? J. M., Tulsa, Okla.

A:Fixed income funds focus on bonds. Bonds are sometimes referred to as "fixed income" investments because when you buy a bond, it has a fixed interest rate and you know exactly what kind of income it will offer you.

Equity income funds, meanwhile, focus on stocks that pay relatively high dividends, aiming to provide investors with regular streams of income. This is different from growth funds, which invest in companies whose stock is expected to advance, regardless of whether the companies even pay a dividend. Many fast-growing companies don't pay any dividends. They usually need to funnel most of their income into fueling their growth, instead.

Mutual funds that focus on income are generally best suited to those who need regular infusions of cash, such as retirees. However, even retirees might remain invested in growth funds, simply selling off a portion each year to generate income.

Noodling Nokia

With more than 30 percent of the worldwide wireless phone market, operating margins for its handset division in the 20 percent range, and net margins better than 10 percent, Finnish company Nokia is the clear leader in a fast-growing industry.

The company has grown sales at a 27 percent compound annual growth rate over the last five years and will sell more than 200 million phones this year in more than 130 countries. What's more, its manufacturing efficiency and close contact with customers enable it to perform when competitors stumble. Ericsson's mobile phone unit isn't profitable and Motorola, once the world's leading wireless phone vendor, has lost significant market share to Nokia.

Nokia's future looks bright, especially with the world's two hottest industries colliding: the Internet and wireless communication. Nokia, its competitors and the carriers they serve plan to offer wireless consumers faster Internet connections and richer services. Soon, they say, you'll be able to do many of the same things you do on a PC on your wireless phone.

It sounds exciting and could be huge. Nokia is in a nice position to capitalize on that growth, but it's worth asking some obvious questions: Will consumers really want these services? How much will they pay for them? What applications do people really want, other than a handy phone with a clear signal and long-lasting battery? Wireless companies, investment bankers and many investors are betting we'll want it all. If you agree, Nokia might merit closer inspection.

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