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Archive for Sunday, December 9, 2001

The Motley Fool

December 9, 2001

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Last week's question and answer

One of my founders was born in 1834, and I trace my roots back to Benz & Co., founded in 1883. Today, after a 1998 merger, I'm based in Stuttgart, Germany, and Auburn Hills, Mich. I employ some 400,000 people and sell my wares in just about every country on Earth. My brands include Jeep, Freightliner, Sterling, Mercedes-Benz and Orion. I sell more than 4 million units each year. I have stakes in Hyundai Motor and Mitsubishi Motors. I have about a billion shares outstanding. Who am I? (Answer: DaimlerChrysler AG)

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.

Inventory control

Fashion is a fickle business. When products are selling crisply, as they are at Lands' End (NYSE: LE), everything looks great. When they're not, as with the Gap currently, everything looks lousy.

Since 1998, when profits plunged, Lands' End has slashed prices to reduce excess inventory. It also brought in new management, including past executive and current CEO David Dyer, who streamlined management and cut out business lines that weren't turning profits.

The results have been good. Through the first nine months of this year, Lands' End generated $973 million in sales, up 24 percent from the same period in 1997. At the same time, the company's asset base has grown just 12 percent, which means the company is efficiently turning its assets into sales.

Lands' End has a better handle on its inventory. This is critical for a retailer, since inventory is often the biggest asset category. Four years ago, the company had $321 million in inventory, representing 62 percent of total assets. Today, inventory has dropped to $294 million just 51 percent of total assets.

Inventory levels must fluctuate with expected demand and economic conditions, but at least at this point better inventory management has made the company less expensive to run on a day-to-day basis. Lands' End's stock isn't a screaming bargain right now, but you might want to keep an eye on it.

Construction close

This might be called my smartest dumb investment. Several years ago, as a neophyte investor, I was ready to make my first stock purchase. But what to buy? Then I remembered that my brother-in-law, a construction worker, had told me about his latest job, working on the new corporate headquarters of Oracle. I thought, "Well, if Oracle's building fancy new headquarters, they must be doing all right." So based on this reasoning I bought some Oracle. Should I find out where my brother-in-law is working now? George Bentley, La Puente, Calif.

The Fool Responds: Oracle's stock has been volatile, but if you bought in four or more years ago and hung on, you've likely done well. It's smart to gather clues about companies, such as whether they're expanding their properties or work force. That should just be the beginning of your research, though. Evaluate annual reports, perhaps talk to employees, and check out the companies' competitors, too.

Foolanthrophy 101

The Motley Fool is raising money for five unusual charities in our fifth annual charity drive. Nominated by our readers online, they're truly "Foolanthropic." Please meet some wonderful organizations:

America's Second Harvest (800-771-2303, www.secondharvest.org) feeds 26 million Americans annually through food banks and food-rescue programs. It also operates Community Kitchens, where underemployed people learning food-service job skills prepare meals for the hungry.

Ashoka (703-527-8300, ext. 256; www.ashoka.org) finds practical visionaries with world-changing ideas and offers them a modest living stipend for three years, freeing them to work full-time implementing their innovative solutions. Ashoka's social entrepreneurs have, for example, brought electricity to millions in rural Brazil, revolutionized India's elementary school curriculum and preserved endangered grassland in South Africa.

Grameen Foundation USA (202-628-3560, www.gfusa.org) supports programs that give loans to the poorest of the poor in the United States and elsewhere so that they can start small businesses, such as making crafts or selling food. Only a few dollars can transform lives. Repayment rates often top 97 percent, and the money is re-lent over and over again.

Heifer International (800-422-0474, www.heifer.org) gives economic survival to struggling people on five continents via animals and plants. Recipients give their animals' first female offspring to other needy people. In Asia, water buffalo cultivate the land and provide milk to drink and sell, while U.S. inner-city youth are trained to raise fish to sell to restaurants.

Lifewater International (888-543-3426, www.lifewater.org) trains people worldwide to drill and maintain wells for themselves, donating materials and the volunteered time of geologists and other professionals. More than a billion people don't have adequate access to safe drinking water and good sanitation.

Learn more about these fascinating organizations at www.Fool.com/Foolanthropy /drive.htm or via their Web addresses and phone numbers above. You also can send checks made out to any of the charities above to us at: Foolanthropy, c/o The Motley Fool, 123 N. Pitt St., Alexandria, VA 22314. We'll forward the checks.

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