ASK THE FOOL

Insider Sales

Q: When an officer, director or owner of a company sells thousands or millions of shares, who are the buyers? For example, on each of many days in January, Gateway founder Ted Waite sold around 200,000 shares. – Don S., Kearney, Neb.

A: The shares are sold in the market, where for every seller there’s usually a buyer. The catch is that if there are many more shares for sale than there are interested buyers, the price will drop – until it reaches a point at which buyers will buy.

Those 200,000 shares might seem like an awful lot to us, but remember that in the course of a typical trading day, many major companies can experience a high volume of trading. In recent months, about 3 million shares of Gateway have been bought and sold each day. By contrast, Microsoft’s average volume tops 65 million shares, and The Washington Post Company’s is just 15,000 or so.

It can be smart to examine insider purchases and sales for companies that interest you. Some occasional selling is routine for many insiders, but if an executive is unloading a large portion of his shares, that can be a red flag. When insiders buy, though, it’s hard to take that as anything but a bullish sign.

Q: What’s the best place to find a list of stock symbols? — G.J., Kailua Kona, Hawaii

A: One easy place to look is on your computer. Click over to many major financial Web sites, such as http://finance.yahoo.com or http://quote.fool.com. Near the box where you’d enter a company’s ticker symbol, you’ll usually find a link titled something like “Symbol Lookup” or “Ticker Search.” The Internet has made many tasks very easy.

FOOL’S SCHOOL

Fun With Budgets

Approach budgeting as a game and you may find it actually fun instead of mind-numbingly boring.

A budget is all about tracking and reporting your sources and uses of income. It answers two important questions: “Where’s my money coming from?” and “Where’s it all going?”

Before you get started, and in order to make the process more suspenseful, first jot down how much you think you’re spending on food, entertainment, travel, clothing, charity, investing, etc. Then record how much you want or need to spend on each category.

Next, gather information. Take one to three months and record all your financial inflows and outflows. Save every single receipt. If you don’t normally ask for or keep receipts, do so during this period. Also, carry a small notebook in which you record cash transactions. If you spend a few dollars on coffee each morning, jot down each time you do so. If you do some odd jobs for a few extra dollars now and then, record that too.

After the information-collecting period, sit down with all your records: a big bunch of receipts, your checkbook, your pay stubs, credit card statements that accompanied your bills, and that little notebook. Also grab some paper, a pencil and a calculator.

List all the inflows and outflows. Group them into categories and total the amounts. For example, list all your eating-out expenses and all your supermarket expenses. Then lump them together into a “Food” category. Calculate what percentage of your income is spent on food. (Calculator hint: Divide the amount spent on an item by your total expenses to get the percentage. For example, $1,200 divided by $32,000 is 0.04, or 4 percent.)

Finally, step back and see what you have. You should be looking at a fascinating detailed record of your cash management. Compare your actual expenses with your initial estimates and see how close or far off you were. Assess whether you’re saving and investing as much as you want to. See what changes you need to make in order to meet your goals.

Making budgeting a game can help you win in life.

MY DUMBEST INVESTMENT

Eclipsed by the Sun

My dumbest investment was AstroPower, a solar energy company. It had no earnings, and I had no knowledge of anything in its financial statements. I just felt that solar power is great. I bought some shares at $30, ignorantly. I then bought more at $8. I sold last year at 50 cents per share. Lessons learned: Look for value through earnings or cash flow and don’t believe hype. – Ellis Clarkson, Santa Cruz, Calif.

The Fool Responds: Ouch. Your mistake wasn’t in focusing on solar power, but in investing without any research. Even in hot industries, not all companies are equally promising. A year ago at www.fool.com, we noted that just four companies account for more than 50 percent of the market for solar cells: Sharp, Kyocera (NYSE: KYO), BP Solar, a division of BP p.l.c. (NYSE: BP), and Shell Solar, a division of Royal Dutch Petroleum (NYSE: RD). We also pointed to Evergreen Solar (Nasdaq: ESLR) as a possible long-term winner. It has roughly tripled since then. Another way to profit from solar power is to install it, perhaps via solar water heaters.

FOOLISH TRIVIA

Based in a New York town that bears my name, I’m a diversified technology company. I use my expertise in specialty glass, ceramic materials, polymers and the manipulation of the properties of light to develop, engineer and commercialize significant innovative products for the telecommunications, flat panel display, environmental, semiconductor and life sciences industries. I pioneered Pyrex and ceramics for automotive catalytic converters. There’s a good chance you have some of my wares in your cupboard. I employ about 26,000 people and rake in more than $4 billion annually. Who am I?

Last Week’s Trivia Answer: Based in New York and headed by Sumner Redstone, I’m a leading global media company that has just spun off another major media company, CBS. My brands include MTV, VH1, Nickelodeon, TV Land, Spike TV, Noggin, Logo, Country Music Television, Comedy Central, BET and Paramount Pictures, while CBS businesses include the major television network, as well as UPN, Showtime, King World, CBS Radio, Simon & Schuster, Paramount amusement parks, and what used to be my billboard advertising business. I’m buying the movie studio DreamWorks SKG. My stock ticker symbol looks like a road in Italy. Who am I? (Answer: Viacom)

THE MOTLEY FOOL TAKE

Steely Investments

When times get tough, the companies that last in an industry are the ones that are well-run and well-positioned for the long haul. In the steel sector, steel maker and scrap-metal recycler Nucor (NYSE: NUE) is definitely one of those.

In its recently reported fourth quarter, Nucor’s sales were up 4 percent and earnings per share were up about 3 percent on flat net income. Profits for all of 2005 were $1.3 billion, up more than 15 percent from 2004.

What makes Nucor special isn’t just that it has better profit margins or returns on capital than other American operators or even Korea’s POSCO. It has a strong position in higher value-added markets such as structural steel (used in commercial construction) and plate. It also invests in new technology, including, for instance, a casting technology to directly produce sheet steel in desired shapes and sizes.

So as long as it’s able to hold steady, there should be value in Nucor stock for long-term investors.

Also worth a look is Steel Dynamics (Nasdaq: STLD), which sports strong free cash flow and return on invested capital. Its “flat roll” operations are geared more toward high-quality specialty products, where it can gain market share. The company has been working on a new production process for rails that should allow it to seek business from Class 1 railroad operators like Union Pacific, CSX and the like.