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Archive for Sunday, August 5, 2001

The Motley Fool

August 5, 2001

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Name that company

Last week's trivia answer: My CEO is a Fireman, and I'm named after a South African antelope. Based in Massachusetts, I rake in nearly $3 billion per year in revenues. Allen Iverson is helping me urge consumers to defy convention. Venus Williams has had a relationship with me since she was 11. I've recently signed a deal to exclusively supply, market and sell NFL licensed apparel for all 32 teams for 10 years. Three of my specialty brands include Rockport, Ralph Lauren and Greg Norman. Who am I? (Answer: Reebok)


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 Fool@fool.com.

Avoiding losses

Q: How can I avoid investing in stocks that plunge in value? A.P., Bay Point, Calif.

A: Remember that behind every stock there's an actual company. Don't think of a stock as just a price that goes up and down instead get to know the company. Look for high-quality firms with growing sales and earnings, solid returns on investment and reasonable or compelling stock prices.

List and consider all the risks involved. You usually can find a long list of risks faced by a company in its annual "10-K" filing. (Head to www.10Kwizard.com or www.freeEdgar.com to look up financial reports of public companies.)

Once you buy, keep tabs on the company. Aim to review each of your holdings at least quarterly, when earnings are reported. See what trends are continuing or taking shape.

Is growth keeping pace or faltering?

Are any new risks looming on the horizon?

Is the company still one of your best prospects?

Q: Within my IRA, can I shift money invested in mutual funds into other mutual funds or individual stocks? R.R., Pinehurst, N.C.

A: If your IRA is maintained by a brokerage, you should be able to shift around your investments from one mutual fund to another, or to and from individual stocks. You won't have to pay taxes on any gains, but you probably will have to pay your brokerage the applicable commissions for the transactions.

If your IRA is with a mutual fund family, you probably can switch between its own funds with minimal or no charge. You might pay steeper fees to switch to certain funds, and may not be permitted to invest in individual stocks at all. If so, you might consider transferring your IRA to a brokerage.

Smart bikers

When I lost my job in 1994, I took my vested portion of my company's retirement plan of $3,800 and bought 135 shares of Harley-Davidson stock. In 1997, I took $2,700 of my 401(k) distribution and bought another 50 shares. Today, after two splits, I now have 740 shares worth more than $35,000! (By the way, we happen to own a Harley.) Conclusion: Bikers are smarter than we've been portrayed to be. Mona A., via e-mail

The Fool Responds: You've been smart on several counts. First, you focused on a company and industry that you know and that interests you. Second, you focused on a high-quality company with a lot of velocity. Shares of Harley-Davidson have blasted ahead some 1,900 percent during the last decade, and its return on equity is north of 25 percent. You also hung on for the long term. Many people sell after a few months or years, settling for a certain return and missing out on subsequent price appreciation.

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