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I N V E S T I N G B A S I C S Wednesday, December 13, 2000 benjamin.rogers@enron.com _________________________________________________________________ Sponsored By: Scottrade Scottrade: $7 Trades, 120+ offices, personal brokers, FREE REAL TIME Quotes & charts. Check out our financial services: CDs, Bonds, Mutual Funds, no setup fees on IRAs. Apply now! http://www.lnksrv.com/m.asp?i=3D242974 ASK THE FOOL This weekly e-mail offers answers to questions that perplex most beginning and intermediate investors and throws in an investing-related lesson, as well. Enjoy! -- Q. Tell me about this firm I've heard of, Kleiner Perkins Caufield & Byers. Does it underwrite initial public offerings (IPOs)? -- A. It's one of the top venture capital firms, based in Silicon Valley. Its partners pool their money and invest in fledgling companies, specializing in computer-related technology and life sciences firms. Venture capitalists typically enter the scene well before a company gets to the IPO stage. They pony up a lot of money to help the firm grow, usually in exchange for a large percentage of the company. They offer guidance, as well. The expectation is that once the company grows to a certain point, it will go public and the venture capitalists can cash out, making a very tidy profit. Kleiner Perkins has funded many companies, such as Amazon.com and Netscape, in their infancy. -- Q. What's a company's "payout ratio"? -- A. It's the percentage of net income the firm pays out to shareholders as a dividend. If Buzzy's Broccoli Beer (ticker: BROCB) pays $1.00 per year in dividends and earns $4.00 per share, its payout ratio is 25 percent. This shows what the company is doing with its money. If much of its earnings are being returned to shareholders, then little is being reinvested in operations. That can be OK, as sometimes reinvested earnings would return less than shareholders could get investing the payout on their own. Got some questions of your own for the Fool? Head to our Help area or post your question on the Ask a Foolish Question discussion board. http://www.fool.com/m.asp?i=3D242975 http://www.fool.com/m.asp?i=3D242976 _________________________________________________________________ INVESTING BASICS - MARKS OF GREAT COMPANIES In this space, we've discussed many aspects of evaluating companies, honing in on measures such as earnings yield, return on assets and so on. It's vital, though, to also evaluate the big picture, to make sure that the company you're looking at is a first-class operation and one you'd be proud to own in your portfolio. Here are some marks of great companies. *Powerful brands.* Think of names well known in the United States, or better yet, around the world. Brands like McDonald's, Gucci, Campbell Soup, and IBM fit the bill. If most people don't yet know a company's name, then it still has a lot of work to do. *Significant products or services.* Look for a company that's selling its customers something they really need or really want. Pharmaceutical companies, for example manufacture products that people will buy whether they're flush with funds or strapped. Firms like Ben & Jerry's and Starbucks offer consumers things they love. We often look for products that people buy over and over, like cheeseburgers and shampoo, instead of items bought only sporadically, like cars. *Consistent, reliable earnings and sales growth -- and robust margins.* Track how sales and earnings have increased over past years. An upward-sloping line suggests that management is planning and executing well, encountering few surprises. Stack your company's gross, operating and net profit margins up against its competitors to see which one is wringing the most value out of each dollar of sales. *Lots of potential.* See what the company's growth prospects are. Is it expanding abroad? Is it coming out with exciting new products or services? Are its offerings taking the country by storm? Is it trouncing its competition? A final consideration when qualifying companies for further research is how well you know the company and industry, and how much you'd enjoy keeping up with its developments. A company might have enormous potential, but if reading about it puts you to sleep, it might not be the best addition to your portfolio. _________________________________________________________________ IN THE SPOTLIGHT -- If you haven't jumped into some of our discussion boards, you're doing yourself a disservice. Here's the main gate -- give it a whirl! http://www.fool.com/m.asp?i=3D242977 -- Have some concerns and reservations about discussion/message boards? Let us put them to rest. http://www.fool.com/m.asp?i=3D242978 -- Why is it best to buy and hold stocks for the long term? Our series of articles offers some thoughts on the subject. http://www.fool.com/m.asp?i=3D242979 _________________________________________________________________ A NOTE FROM THE AUTHOR=01( I hope you're finding this product useful. The content originally appeared as part of our nationally syndicated newspaper feature (which I also prepare). Consider giving your local editor a jingle and suggesting that they think about carrying the Fool. http://www.fool.com/m.asp?i=3D242980 Selena Maranjian http://www.fool.com/m.asp?i=3D242981 _________________________________________________________________ My Portfolio: http://www.fool.com/m.asp?i=3D242982 My Discussion Boards: http://www.fool.com/m.asp?i=3D242983 My Fool: http://www.fool.com/m.asp?i=3D242984 Fool.com Home: http://www.fool.com/m.asp?i=3D242985 My E-Mail Settings: http://www.fool.com/m.asp?i=3D242986 Sponsored By: Scottrade Scottrade: $7 Trades, 120+ offices, personal brokers, FREE REAL TIME Quotes & charts. Check out our financial services: CDs, Bonds, Mutual Funds, no setup fees on IRAs. Apply now! http://www.lnksrv.com/m.asp?i=3D242987 ARE YOU ENROLLED IN WIRELESS 201? Don't miss the sequel to the best-selling report on Soapbox.com http://www.lnksrv.com/m.asp?i=3D242988 FREE BOOK FOR FOOLS ONLY! Investor's Business Daily will send you a free copy of 24 Essential Lessons for Investment Success when you sign up for a free trial subscription of their newspaper. http://www.lnksrv.com/m.asp?i=3D242989 BECOME A FOOL! Get a FREE Investing Guide and more... http://www.fool.com/m.asp?i=3D242990 FOOL DIRECT E-MAIL SERVICES Need to change your address or unsubscribe? You can also temporarily suspend mail delivery. Click here: http://www.fool.com/community/freemail/freemaillogin.asp?email=3Dbenjamin.r= ogers @enron.com Have ideas about how we can improve the Fool Direct or new e-mail products you'd like to see? Try our discussion board: http://www.fool.com/m.asp?i=3D242991 ____________________________________________________ © Copyright 2000, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. MsgId:=20 msg-13776-2000-12-13_14-24-24-5186495_5_Plain_MessageAddress.msg-14:25:09(1= 2-1 3-2000) X-Version: mailer-sender-master,v 1.84 X-Version: mailer-sender-daemon,v 1.84 Message-Recipient: benjamin.rogers@enron.com
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