Things are getting lean in the Northeast, and we're not just talking about on Wall Street. Frito-Lay potato-chip maker PepsiCo
For starch addicts, that's no small potatoes. Northerners can expect about five less chips per bag. But perhaps Pepsi's trying to help us help ourselves. A new survey finds 31% of Americans are obese. Yikes. Now if Pepsi could only fatten up the markets....
The Motley Fool 50 chose Snackwells over Fritos and dropped 1.5% today.
In today's Motley Fool Take:
- Bond Fund Overtakes Index Fund
- Quote of Note
- Abbott's Dose of Good News
- Shameless Plug: Manage Your Debt
- Sara Lee's Cookin'
- Discussion Board of the Day: Drip Investing Companies
- Quick Takes: Winn-Dixie, SunTrust , Gemstar-TV Guide , more
- And Finally...
The Motley Fool has long championed index funds as a terrific way for most people to invest in the stock market. Index funds became so popular over the past years that the Vanguard 500 Index fund (based on the S&P 500 index of 500 premiere American companies) became the biggest mutual fund in America, taking the title away from Fidelity's Magellan Fund. Now Vanguard has been surpassed.
Blame the economy and the stock market's long bearish season. The largest mutual fund is now the Pimco Total Return fund, which focuses on government bonds and is managed by Bill Gross.
As of the end of September, Pimco sported $64.6 billion in assets, compared to $62.8 billion for the Vanguard 500. This shift at the top reflects widespread shifts in the market. According USA Today, "Investors poured $88.6 billion into bond funds through August, according to the Investment Company Institute, the funds' trade group... The ICI says investors yanked $77 billion from stock funds since June."
It happens all the time. When the stock market sinks, investors flee stocks, heading for bonds. That is the right move for some investors, but it's wrong for many. When stocks are at record lows, that's often a good time to invest in them.
According to Jeremy Siegel's seminal Stocks for the Long Run, between 1946 and 2001, the average annual return for stocks was 11.6%, compared to 4.9% and 5.5%, respectively, for short- and long-term government bonds. He also points out that stocks outperform bonds in 82.4% of all 10-year holding periods between 1871 and 2001. (It's 95.4% for all 20-year holding periods, and 100% for all 30-year periods.) Of course, it all depends on which 10- or 20- or 30-year period you're investing in. Over the past 15 years, for example, bonds have returned an annual average of 11%, compared to about 9% for the S&P 500 (still solid numbers, in both cases).
Before you join the throng rushing to bonds, learn more about them. As interest rates rise, bond prices fall -- not an unlikely scenario in the coming years. Meanwhile, to learn more about the increasingly influential Pimco manager Bill Gross, read this interview, this article, or this book, Bill Gross on Investing.
"When I'm in airports and crowds and foreign countries, I try to imagine the differences in the genetic codes of people. And I'm stunned at how few differences there would be." -- J. Craig Venter, molecular biologist and former executive at Celera Genomics
Sales were up 3.8% to $4.341 billion and, excluding charges from both this quarter and the previous year's, net income grew 9.6% to $752 million. Counting those charges, net income improved 14% to $720 million. Abbott's earnings per share hit estimates on the nose at $0.48 ($0.46 including charges).
Abbott also announced some restructuring plans. About 2,000 employees, or 3% of its workforce, will lose their jobs, and 10 facilities will close. It expects to take a $100 million to $125 million charge in its fourth quarter to reflect this, and hopes to gain cost savings from the moves of around $80 million to $100 million a year once the changes are complete. At the same time, it said it will invest more than $450 million in capital over the next few years to boost its manufacturing capabilities.
All eyes are on Abbott's expected blockbuster, D2E7 (not to be confused with adorable Star Wars robot R2D2). The rheumatoid arthritis treatment is a monoclonal antibody drug, a fast-growing segment of pharmaceuticals. D2E7 targets the autoimmune factors in the body that cause the severe joint inflammation and deterioration found with rheumatoid arthritis, deactivating the chemical signals before they have a chance to do harm.
D2E7 is special because it's the first fully human monoclonal antibody. That means it appears virtually indistinguishable from antibodies already present in the body, and therefore limits toxicity even more than other monoclonal antibody drugs. Versus other drugs on the market, D2E7 only needs to be injected once every two weeks, which is a big advantage.
Abbott has recently expanded its testing of D2E7 to include juvenile rheumatoid arthritis and Crohn's disease. The company also said it's starting a compassionate-use study, giving rheumatoid arthritis sufferers access to the drug through their doctors. Clinical trials have been solid, and FDA approval is expected by early next year.
The market for monoclonal antibody drugs could grow to $12.1 billion a year by 2010, according to market consultancy group Datamonitor, so Abbott could benefit substantially once D2E7 is approved. With a 2.38% dividend yield and shares off a 52-week high by about 43%, this is one drug company investors should consider.
Credit can be your best friend or your worst enemy. And you know what they say.... Don't turn your back on your enemies. Friends may come and go, but enemies accumulate. So it's time to address that big elephant in the closet -- your credit. We've got your back! Visit our new Motley Fool Credit Center, and learn how to make credit work for you.
Any baker will tell you that dough rises in the oven. Back in August, when Sara Lee
But it seems the company behind Hanes undies was covering something. Thanks to margin-pumping efficiency, Sara Lee now sees September quarter earnings coming in closer to $0.35 a share. At least.
While sales rose by about 7%, operating profits surged by 20%. Sara Lee has been able to reduce its operating costs, while shifting sales to higher-margin products. The turnaround process has been two years in the making. By focusing on core brands and shedding unwanted subsidiaries, Sara Lee's strategy is finally paying off. And it's about time.
While Sara Lee's a household name, the stock has been a market laggard over the years. The stock has merely doubled over the past 10 years, and it would have to climb 50% higher to hit the same levels at which it peaked back in 1998. Then again, maybe "merely doubled" is a bit harsh. Fellow supermarket stockers such as Heinz
With the 2003 fiscal first quarter kicking off with such a bang, the company is also hiking its expectations for the entire year. Sara Lee now hopes to earn between $1.54 and $1.60 a share, implying that it thinks more than the first quarter will surprise analysts.
So, let Sara Lee turn up the heat on its cost-cutting efforts. It will only make the dough rise higher.
Sara Lee is one of the hundreds of stocks that investors can buy and sell through dividend reinvestment plans. Drips for short, the programs offer a great way to build a diversified portfolio with little in terms of start-up money. Is Sara Lee worth Dripping into? How many other companies offer Drips? All this and more -- in the Drip Investing Companies discussion board. Only on Fool.com.
Democratic leaders sent a letter to President Bush today calling for the removal of SEC Chairman Harvey Pitt. Senate Majority Leader Tom Daschle (D-S.D.) and House Minority Leader Dick Gephardt (D-Mo.) say Pitt is "giving the accounting industry a veto over who will head" a new oversight board. Pitt has been under intense criticism for other perceived conflicts of interest, such as private meetings with executives of companies under investigation by the SEC.
The 10-day-old West Coast port lockout finally came to an end after President Bush invoked the rarely used Taft-Hartley Act to impose an 80-day cooling-off period. Reports indicate it could take up to seven weeks to clear the backlog from the affected 29 ports.
Investors did not react kindly to news that Akzo Nobel
In earnings news: Winn-Dixie
In local news, Mrs. Higgins' 7th grade class returned from its field trip to Washington, D.C., yesterday. "It was boring," moaned Sally Tabor. "A bunch of us brought extra money to buy clothes at the National Mall, but was it was just grass and monuments!"
Today on Fool.com: Has Rick Munarriz found the next dot-com miracle?... Rule Maker is still negative on tech stocks. How low can they go?... Save money at home, in Fool's School.... And the Fool Community discusses paying off debt.
Bob Bobala, Robert Brokamp, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Jackie Ross, Reggie Santiago, Dayana Yochim