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Archive for Sunday, June 30, 2002

The Motley Fool

June 30, 2002

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Name That Company

I began in 1910 as the Shwayder Trunk Manufacturing Co. of Colorado. In 1941, I introduced a new "Streamlite" line that was tapered and looked like leather and also featured the name of a shaggy Biblical figure. In 1969 I launched the revolutionary hard-sided Saturn, the first polypropylene case supported by injection-molded shells. My Oyster became the fastest-selling item of its kind of all time. I acquired the Lark brand in 1984 and American Tourister in 1993. In the '90s, I ventured into footwear and clothing. My fiscal 2001 sales topped $750 million. I provide world-proof solutions for travelers' needs. Who am I? (Answer: Samsonite)

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, and your Trivia entries to Fool@fool.com.

Great investors: Phil Fisher

One of the world's seminal investment thinkers is Philip Fisher, author of the classic "Common Stocks, Uncommon Profits" (Wiley, $19.95). Here are the eight points of his investment philosophy:

1. Buy stock in companies with disciplined plans for achieving dramatic long-term growth in both profits and revenues. These firms must also have inherent qualities that make it difficult for new entrants into that business to share in such growth.

2. Aim to find such companies when they are out of favor when market conditions are not favorable or the financial community does not properly perceive the true worth of such companies.

3. Hold the stocks you buy until there has been either a fundamental change in the company's nature or it has grown to a point where it will no longer be growing at a faster rate than the economy as a whole. Don't sell your most attractive stocks for short-term reasons.

4. If your primary investment goal is long-term appreciation of capital, then de-emphasize the importance of dividends.

5. Recognize that mistakes are an inherent cost of investing. Recognize them as soon as possible, understand their causes, and learn from them so they're not repeated. A willingness to take small losses in some stocks while letting profits grow bigger and bigger in your more promising stocks is a sign of good investment management. Don't just take profits for the satisfaction of taking them.

6. Realize that there are a relatively small number of truly outstanding companies. Concentrate your money in the most desirable opportunities. Holding more than 20 companies is unmanageable (and "a sign of financial incompetence"). Aim for 10 or 12.

7. Have more knowledge than others, and apply your judgment after thoroughly evaluating specific situations. You should also have the moral courage to act against the crowd when your judgment tells you that you are right.

8. One of the basic rules of life also applies to successful investing success is highly dependent upon a combination of hard work, intelligence and honesty.

Worthless stock

Can I claim a tax loss on worthless stock without selling any shares? K.B., via e-mail

Yes, but determining whether your stock qualifies as "worthless" according to IRS rules can take time. It's often simpler to close out your position in the shares by selling. If it's difficult or not worth it to sell through your broker, you can sell the shares to a friend (or cousin, aunt or uncle) for pennies. (But not to a spouse, siblings, parents, grandparents or lineal descendants.) Here's one way to do it:

1. Get the actual stock certificates from your broker. 2. Formally sell the shares to the purchaser, with a check for payment and a bill of sale. 3. Sign over the stock certificate (on its back) to the purchaser. Have the signatures verified by your banker and/or a local stockbroker. 4. Send the certificate to the stock transfer agent. Explain that the shares have been sold, and ask them to cancel the old shares and issue a new certificate to the new owner.

Some brokerages will buy all your shares for a penny. They do it to help out their customers and because over time, some shares may actually be worth more than the penny paid for them. For tax info and tips, visit www.irs.gov and www.fool.com/taxes.

Can I use one 529 plan account to save money for the college expenses of two grandchildren? If one doesn't go to college, can the fund be transferred to the other child? J. Burnstein, Hallandale Beach, Fla.

You'll need to have a separate account for each child, but if need be, you can re-assign a fund to immediate family, including cousins, step-relatives and in-laws. Learn more at www.savingforcollege.com and www.fool.com/csc/csc.htm.

Young, dumb and in love

I was young, dumb and in love in 1989 when my girlfriend informed me that the bank she worked for was the target of a buyout. To prove my love and fiscal prowess, I immediately tapped my meager savings and purchased 453 shares at $6 1/2 each. Her prediction came true, but instead of acquiring the entire bank, Wells Fargo bought out only the California branches, leaving the Arizona branches to wither away, along with the bank's stock. In November 1991, the bank ceased public trading at 4 cents per share, and my girlfriend broke up with me, leaving me two years older and $3,000 poorer, but vastly wiser in ways of love and investing. Michael F. Belcher, Oceanside, Calif.

The Fool Responds: Rumors can tempt us to invest in companies, but many rumors never come true. Focus on facts and on each company's financial health, prospects for growth and competitive advantages. Don't let this experience deter you; there are other fish, stocks and girlfriends in the sea.

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