| OCR Text |
Show E2 At What Price? Q How muchdifference does it make whether | buy stock of a greal companyat afair price or alan oy: lued price? As long as it goes up. won't I still make money in the long run? LE iz The Salt LakeTribuneBUSINESS Sunday, June 20, 1999 The Motle y Fool My Dumbest Investment Karaoke Inc. (ticker: HYMN). which we'll say is trading at afair price of $10 per share. IF is expected to grow at 12 percent per sear forthe next 10 years, we can estimate that if will be at $31 per hare then It you buy it at $10 per share your total gain over the decade wall be 210 percent. However. if you haveto cough up$15 per share for it it will return only a total of 107 percent on its way to SAL. That's about 7 5 percent per year Worse sull would be buying Wat $20 per share. Sure, you'd dake money, but your total gain Marksof Great Companies thrownout the window, 1 purchased 1.000 shares In this space, we've discussed of Citicorpat $10 7/8 and 1,000 shares of Chase manyaspects of evaluating com- Manhattan at $11 1/2. Thesestocks turned around panies. honing in on measures almost immediately and [sold them in the $17 to $18 range, making a quick profit. Had | hung onto sanddollars. I've never gotten over the stupidity of selling too soon. — truth about investing, ~ ‘The Fool Responds: Ouch! You were right to look for smart invest- panies arestill strong andstill likely to grow. Many people take the your portfolio. Here are money and run after a modest gain. when hangingon for decades would some marks ofgreat Significant products orser. Is ttre that the stock mar ket will soon beopen longer "S$ R.. Charleston. S¢ I looks that way. The Nasdaq may add a tour hour session trom 6 pam. to 10 pan. (New York tine) beganming this summer. The New York Stock Exchangeis considering adding early momingandevening rad ing sessions. It doesn't make much differenceto us Fools, though. As infrequent traders and long-term investors. a market openfewer hours wouldsuit us just as well vices. Look for a company that’s selling its customers something they really needor really want Pharmaceutical companies, for example, manufacture products that people will buy whether warts such as Merck, Pfizer and Eli Lilly, have declinedfairly sharplythis year. Sometimesprice drops represent opportunities... A majorinvestor concer is shat the government might expand aoy- erageofprescription drugsto + against its competitors to ents. While this would add millions of new Medicare recipi- each dollarof sales. users, many % Lots of potential. See what the company’s growth prospects are. Is it expanding abroad?Is it comingout fear dere profitability for drug companies, as the govern- ment would likely pay lower with exciting new products or ser- prices. country by storm? Is it trouncing its competition? Afinal consideration when quali- about this issue, consider the husi- ¢ Before becomingtooconcerned vices?Are its offeringstaking the ness model of pharmaceutical firms. The manufacturing cost of a drugis usually only a small por- fying companiesfor further research is how well you know the company andindustry, and how muchyou'd enjoy keeping up with its developments. A company might have enormouspotential, butif tion ofits price. Activities such’ as research and development (R&D). marketing and other functions tend to be much more expensive, Pfizer, for example, spent 16.5 peregnt of 1998 sales on drug costs. com: reading about it puts youto sleep, they're flush with funds or strapped. Firms like Ben & Jerry’s the drug industry, including stal- Ppany’s gross, operating and net profit margins up ing the most value outof of work to do. I'm known for my eponymousflagship product, but myline of snack brandsis just as impressive. It includesTostitos, Cheetos, Doritos, Cracker Jack, Lay's, Ruffles, Fritos, WOW!fat-free chips, Funyuns, Sun Chips, Smartfood popcom and Rold Gold pretzels. | recently acquired world O.J. leader Tropicana, as well. In order to make mybusiness less capitalintensive and moreprofitable, | spun off my restaurants (KFC, Pizza Hut and Taco Bell), and I'm cutting loose my bottling businesses, too. I'm bubbling with excitement over my Almost all of the major stocks in ® Consistent, reliable earnings and sales growth — and robust see which one is wring- people don’t yet know a company’s name,thenit still has a fot Name That Company sporadically, like cars. few surprises, Stack your com- % Powerful brands. Think of names wellknownin the United States. or better yet, aroundthe world. Brands like McDonald’. Gucci. Campbell Soup and IBMfit the bill. If most est Investment. Got one that worked Submit to My Smartest Investment. I] we print yours. you ll wava Fool cap! Pharming It Out and executing well, encountering companies. Motley Fool clo My Dumb- The Fool Take over, like cheeseburgers and shampoo, instead ofitems bought only gests that managementis planning operation and one you'd be proud to ownin yield much more enormous profits. Patience can be a lucrativevirtue Do you have anembarrassing lesson learnedthe hard way? Boil it downto products that people buy over and toalso evaluate the big picture. to ments among overly beaten-down stocks. That's the mark of a value investor, But before selling. always ask yourself whether the com- ithe a difference. way to the bank. offer consumers assets and so on. It’s vital, though, makesure that the company you're looking at is afirst-class Jack Hogan, Morganton. N.C. 100 words tor less) and send it to The and Starbucks margins. Track how sales and eamings have increased over past s. An upward-slopingline sug- such as earnings yield. return on them. though, their total value would have beenseveral hundred thou- towhly 4.5 percent annually You can profit without con: suleringthe price. but it does ying telling the truth to the Kingor Queen. The Motley Fooltells the things they love. We often look for In 1990-91, when the big bank stocks weregetting would be just 55 percent, or Q Bes Patience Pays Off Jong run, but there is a differ cence, You'll makeless money if Consider the exampleof Holy In Elizabethan days, Fools were the only people whocould get awaywith and hopes you'll laughall the You're right to think of the pany The Motley Fool? Remember Shakespea Remember “As YouLikeIt”? OurMission: To Inform, to Amuse, and to Help You Make Money Columbus, Ohio you're buying an overvalued com WhatIs This Thing Called it might not be the best addition to paredto 16.8 percent for R&D and 41.1 percent on marketing and your portfolio. administrative expenses. If faced with smaller gross-marLAST WEEK’S TRIVIA ANSWER gins. R&D and marketing expendi tures could be trimmed to majptain profitability levels. Although some | was founded in 1877 and JosephPulitzer and Theodore Roose- velt have written for my flagship product. Eugene Meyer bought me for $825,000 in a bankruptcy auction and tumed me around. His daughter runs metoday. | bought Newsweek magazinein 1961, initiatives might have to be shelved. these companies shoutd beable to adapt to a new business. and ownpart orall of severaltelevision stations, some cable sys- environment tems,the International Herald Tribune, and Stanley Kaplan educational centers, among otherthings. Warren Buffett's Berkshire Hathaway company ownsabout 17 percent of me, and my stock has " Drugstocks have historically traded at price-to-earnings multi- ples significantly above those of advanced more than 140 percentin the last five years. John Philip. Sousa wrote a march for me. Who am I? (Answer: The Washington Post Co.) the Standard & Poor's 500 index because of their strong, consistent earnings growth. Right now. multiDumbest (or Smartest) Investments (up to 100 words), and « ples of many companies are equal yourTriviaentries to Fool @fool.comor via regular mail to or only slightly above the index Know the answer Sendit to us with Foolish Trivia onthe c/o this newspaper, attn: The Motley Fool. Sorry, we can’t If youbelievethese firms wilf.con 1 and you'll beentered into a draw nufty price provide individual financial advice. tinue growing. now is a great time to investigate them Copyright 1999 The Motley Fool/Dist. by Universal Press Syndicate Write to Us! Send questions for Ask the Fool, intemational growth potential. Who am |? Gora questionfor the Fool Send ¢ irin see Write to Us LIBERTY BANK ELLIS ISLAND Get 60 minutes more’ One Year CD whenyou sign up noy o 5.77% APY* Big rate for small investors! Free Weekends nation 355-7411 gnip the necktie, d, IBERTY BANK Give him free time Member FDI All deposit fe Minimum depoatt of #1 There ie ¢ weekends nationwide Weed whackes (500 minutes a month) for Father's D’ 2 Thon ¢ a minute weekdays (at *39°/460 included witiites) Bewareof big ads with lite CD rates. Noone gives you more statewide anytime minutes and included features for #39” a month Guaranteed. CCU Sa Take ¢ minty reside VOU can join! nts Call now! 801-487-1692 Salt Loke City \\ 10 Si Sori Call 1-888-Streams tor details (787. 326 www voicestream.com VOICESTREAM STORES Toylorsville * AUTHORIZED DEALERS A tn =e! eoren trend Tonal Werte 9 06 Kedlacw NCUA Toad tn / ‘ (me . seperiee Nahes (lee ow! . “PRANSWES1 Credit Uni mh * Wnts |
