Archive for Sunday, December 1, 2002

The Motley Fool

December 1, 2002

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Name That Company

I was formed in 1867, when my founders bought the Enquirer Job Printing Rooms from The Cincinnati Enquirer. My first offerings included posters printed for theaters and circuses. In 1880 I began producing what I'm known for today :quot; Bicycles, Bees, Mavericks and Hoyles. My flagship product is found in most homes in America, and brings joy to many. It's a snap to use, though it sometimes takes concentration. It's used in war, too, and scared the Viet Cong in the '60s. My best-selling brand has been in continuous production since 1885. I'm a private company. Who am I? (Answer: U.S. Playing Card Co.)

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.

Be thankful for what you have

In this season of thanksgiving, it's appropriate to reflect on all we have, and to realize that even those of us of modest means are still exponentially better off than billions of others on this planet. (To become more hopeful about the state of the world, visit www.Foolanthropy.com and learn about some organizations doing amazing work.)

Reflection about one's finances is also in order. Too many people think their financial condition is hopeless. They assume they're too young, too old, too poor, too risk-averse or too ignorant to invest in stocks. However, as Fool co-founders David and Tom Gardner point out in "You Have More Than You Think: The Foolish Guide to Personal Finance" (Fireside, $14), you might be overlooking some assets. For example:

  • You have brains. Managing your finances takes brains, but you don't have to be a rocket scientist. The brothers explain how we often use things like credit cards and mutual funds without stopping to see how much they're charging us. A little education and comparison could save us thousands.
  • You have time. Even if you're 60 years old, you may well have 20 to 30 years ahead of you, so don't write off investing. And if you're a teen, it's not too early. (Visit www.Fool.com/teens for some guidance, and www.lavamind.com for some fun, educational financial games.) If you plunk $5,000 in an index fund that advances at the market's historical average of about 10 percent per year, in 25 years it will grow to $54,000.
  • You have other people. You're not alone when grappling with financial decisions. The taboo against talking about money is silly. Strike up conversations with friends and family. Your uncle might be a savvy, experienced investor. Your mother-in-law might know a lot about buying homes. Perhaps a co-worker can recommend a terrific financial adviser. (Learn more about advisers at www.fool.com/fa/finadvice.htm.) Learn from others through financial books. Or access online discussion boards, where you can glean money-saving ideas from many people.

Finally, another nifty way to take advantage of several heads being better than one is to form an investment club. Learn more about this at www.better-investing.org.

Wal-Mart still growing

Wal-Mart recently topped its third-quarter performance expectations, with sales up 11.5 percent over the year before to $58.8 billion. Sometimes the impact is lost when we cut off the zeros and replace them with a word, so consider this: In a mere three months, Wal-Mart sold roughly $58,797,000,000 worth of merchandise. That's a lot of stuff! Of that amount, $1.8 billion was profit, up 23 percent.

Sales at stores open more than a year were up 3.5 percent, with Wal-Mart stores growing respectfully and Sam's Club stores continuing to struggle against rival Costco.

With widespread weakness in its sector, Wal-Mart's 3.5 percent growth is indeed below what most have come to expect from the giant. For the first nine months of the year, though, sales at stores open more than a year are up 6.1 percent, which isn't too shabby, given the ugly consumer-spending landscape.

The world's biggest retailer remains cautious about the holiday shopping season. Its forecasted earnings are on the low side, with growth expected to be between 3 percent and 5 percent. Still, sales and net income are substantially ahead of the first nine months of fiscal 2001, so Wal-Mart may still bring home a festive fiscal 2002.

With a price-to-earnings ratio near 32, shares are not a screaming bargain, but they're not grossly overvalued, either. A drop in price could be a nice opportunity.

Both dumb and smart

My smartest and dumbest investments are with the same stock. I bought 1,000 shares of communications chip-maker Broadcom at $32 per share and watched it zoom to $275. When it started to fall, I put in a "stop loss" order to sell 500 shares if it fell to $250. It did, and the shares were sold. That was my smartest investment. My dumbest is that I still have the other 500 shares, worth around $20 each. :quot; R.T., via e-mail

The Fool Responds: The smart far outweighs the dumb, since you made quite a profit. To avoid losing any money, some investors routinely sell a portion of their stock in a company as soon as they can lock in a gain and recoup their initial investment. Then whatever shares remain will represent gravy. This does make some sense, but it limits the total gain potential, too. You can also minimize losses by following your holdings closely, developing a deep understanding of their businesses, financial condition and competitive environment.

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