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Show The Salt Lake Tribune BUSINESS Sunday, June6, 1999 Coo) What Is This Thing Calied The Motley Fool? Remember Shakespeare? TheMotleyFool Worthless Stock Takinga stock loss deduction using the IRS rules for “worthless” stock seems very com plicated. Is there aneasier way? B_P.. Jackson. Miss Remember “As You Like It”? In Elizabethan days, Fools were the only peoplewho could get away with telling the truth to the King gr Queen. The Motley Fooltellsthe truth aboutinvesting, and hopes you'll laughall the wayto the bank. Our Mission: To Inform, to Amuse, and to Help YouMoney (Make Money If you have worthless stock that’s difficult or not worthit tosell through your broker. you can sell it to a friend(or cousin. The Fool School My Dumbest Investment A Glitch in Computer Stocks aunt or uncle) for pennies (but not to a spouse. up. The company was Zitel, which supposedly had invented4 quick fix for the Year 2000 computer glitch. Thestock had closed at $49the day before been my first cluethat it wasina tree fall, When it reached $19. 1 bought more, thinking it would bounceback. Unfortunately, it's now trading for less than $2 per share. My son-in-law tells me to hang onfor thelong haul. but | don’t think [will live long enough to break even Charles. Knapp. Brandon. Fla The Fool Responds: Stocks like Zitel havebeenbid upto lofty heights on excitingstories. It’s true that the Y2K problems are requiringa lot of attention. But people rushedinto Zitel without studying it and without a goodsense of when it might be overvalued. Do you have an embarrassing lesson learnedthe hard way” Boil it downto 100 words (ar less) andsendit to The Motley Fool c/o My Dumbest Investment. Got one that worked” Submit to My Smartest Investment. If we print yours, vou ll win a Fool’ cap! Name That x Company time. someof the shares may Betoaily he wortimore an Few people knew the pennythey paid for then ») Byselling theshares. you have a closed transaction with the stock and can declarea tax loss, Your friend, relative or broker.for a pit- changed it. | own the (Y world’slargest chain of convenience stores. | was founded in 1927, and mystore moniker tance, has just bought a place mat or birdcageliner You'll find more tax information refers to the original at www.fool.com/schooV/taxes/ times.I've What's the “randomwalk” Oras ?— CE. Chicago more than 5,500 outlets in the United States and Canada,serving about 6 million customers daily (gulp!). An additional 12,000 international stores are overseas.| filed for bankruptcy protection in 1990, but have since recovered. A Japanese firm has owned a majority interest in Tt says that a stock’s next move is not predictable and not basedonpast moves. Burton Malkiel discusses it in detail in A Random Walk Down Wall Sireet (WW. Norton & Co. $15.95). me since 1991. | sell gas, but merchan- dise accounts for 75 percent of my $7.3 billion in revenues. Who am I? Know the answer? Send it to us with FoolishTrivia onthe twpandyou'll beentered into a drawingfor a nifty prize! Got a question for the Fool? Send = iin — see Write to Us A Good Tumble you've probably stared at an margin of 41 percent. (Compare calleda statementof operations) results with industry peers. For and scratched your head example, gross margin is 35 perwondering what it’s telling cent for Ben & Jerry's, which has you. Let us help a somewhat different business First, understand model.) that theincome Next, the remaining costs statement summarizes EZ involved in operating the sales and profits overz business such as support staff penodof time. It might cover salaries, utility bills and advertis three months or a year, for exam: ing expenses — are subtracted, ple. It will usually offer informa leaving the operating profit tion for the year-ago period as well, so you can comparethe two EskimoPie's operating profit is $1.8 million. Divide this by revandspot trends. enues, and you geta slim operatLet’s look at Eskimo Pie ing margin of2.8 percent. This Corp.’s incomestatement for reveals the profitabilityof the fiscal 1998. At the top. as company’s principal business. with every incomestatement, (Ben & Jerry's: 4.3 percent.) you'll find net sales (sometimes Finally. after items such as taxes called revenues). For EskimoPie. and interest payments are they're $63.5 million cometo net now statement on, as we Saneu work down income. 4 accountedfor. 5 weaktomofthe the rom Incame near the i ae ie - io ae at = h Statement Eskimo Piesis $08 costs wil i bebe s Subleacted. from 5te 3 . revenues, leaving different levels oeeee of profit. The item you'll find just andyou get a net profit margin of 1.3 percent. (Ben & Jerry’s: 3 perunder revenues is “cost of goods cent.) The last part of theincome sold” (abbreviated ay COGS and statementis where the company sometimes calledcost of sales). dividesits net income by shares whichrepresents the cost of pro: outstanding, to arrive a ducingthe products or services per share (EPS). sold. For Eskimo Pieit’s $37.4 ‘That's it! opening and closing sig Goose [eke UELe revenues. $26.1 million divided by $63.5 million yields a gross incomestatement (sometimes. and was already at S60. | bought 100 shares. The very next day it dropped to $48, which should have S In the Margins If you're new toinvesting. My son-in-law called me oneday with a hot stock siblings. parents, grandparents or linealdescendants} Here's one way to do it 1 Get the actual stock cenifi cates from your broker 2. Formally sell theshares to thepurchaser. with a check for payment and a bill of sale 3. Signover the stock certifi cate(on its back) to the purchaser. Have thesignatures ver ified by your banker and/or alocal stockbroker 4. Sendthecertificate to the stock transfer agent. Explain that the shares have beensold, andask himorher to cancel the old shares andissue a new certificateto the new owner Somebrokerages will offer you a quicker alternative, buying all yourshares of the stock for a penny.Dae) They doit to helpout their Customers andbecauseover million. Subtract the COGS from revenues, and you'll get a gross profit of $26.1 million. To find the gross profit margin. simply divide the gross profit by LAST WEEK’S TRIVIA ANSWER | began as a small New Jersey payroll processing enterprise. Today I'm one of the biggest independent computing service firmsin the world, with more than 425,000 clients. | Manypeople view falling stock prices as bad news. If you're an investor who's continuing to plow moneyintostocks, though, drops in stock prices can actually be good news — as long as the underlying fundamentals of your companiesare unchanged. Let's assume you've scrounged aroundto save $100 a month and are investingit regularly in the hypothetical company, Fool Cola Inc. At its $25 stock price in March, you wereable to buy four shares. As more people became aware of this amusing and refreshing cola, its stock jumpedupto $30. Your April investment added 3.3 shares to yourportfolio. ($100 divided by $30 equals 3.3.) The next month, lise” advisers advi after the “Wise” of Wall Street warned that all stocks were overpriced, ihe tock plunged downto $20. Your monthly $100 investment purchased five shares investment net you NG shares instead ofthe 3.3 shares a month carlier. If the stock hits $68 per share a decade from now, your cut checks to some 30 million employees last year — perhaps yours were amongthem. An outsourcing pioneer,I've achieved 151 consecutive quarters of record highs in both revenue and earningsper share.In fact, I've never experienced a down year in my 50 years of existence. In 1998,| raked in more than $5 billion. My return on equity tops 20 percent. Who am |? (Answer: Automatic Processing Inc.) Write to Us! Sendquestions for Ask the Fool, Dumb- Mayinvestmentwill ultimately be worth $340, while the April investment will be worth only $224.That's a hefty gain for con tinuing to invest when the “pros” become ws Aslongasthe long-term earnings outlook is unchanged,shorttermdips in your stock’s price est (or Smartest! Investments (up to 100 words), and your Trivia entries to Fool @fool.comorvia regular mail c/o this newspap ; Notice that whenthe stock ¢ Pr price fell in May, your $100 canactually be quite good if you are continuing to invest. Think of atin: The Motley Fool. it as a sale on your stock. 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