The witching hour is upon us, and in celebration of one of our favorite holidays (Fools love tricks and treats), our Smarties are handing out stock advice in place of Bottle Caps. Don't Snicker... it's important to know which companies look like Duds and which look Red Hot. Check it out, Now or Later. Hopefully, it'll lead to a Payday.
In today's Motley Fool Take:
- Disney's Triple Play
- Discussion Board of the Day: Major League Baseball
- Kellogg Milks Q3
- Quote of Note
- Sony Snaps Back
- Shameless Plug: More Frightening Than Halloween
- 'Tis the Season to Avoid Funds?
- Quick Takes: EchoStar , US Airways , Pfizer, Wal-Mart, more
- And Finally...
Disney's Triple Play
The Anaheim Angels won it all last night. If you ask the unlikely World Series victors what they plan to do next, don't be surprised if the answer is, "We're going to Disneyland."
The park itself is just a three-mile hike from the stadium in which the team came out on top during last night's seventh and decisive game. The Angels are also owned by Disney
First pitch. Disney announces it wants to shed its athletic teams. It loves ESPN, but in taking an active ownership role with the Angels and hockey's Mighty Ducks, it has discovered it's much easier to be the broadcaster of all sports than the master of specific participants. If you believe in the "Buy Low, Sell High" mantra, cashing out of the World Series champions now couldn't come at a better time.
Second pitch. Baseball is America's past pastime. With football proving to be the real ratings monster, the baseball field has truly become a diamond in the rough. The apathy is real. By sporting two wildcard teams in the unlikely title matchup, ratings were off by 24%, relative to last year's series through the first six games. So why is Disney smiling?
All seven games aired on rival Fox
Third pitch. With tourism sluggish at the company's theme parks, particularly California Adventure in Anaheim, you can't beat the attention Disney garnered from the games. Early in the series, San Francisco Giants' manager Dusty Baker said his children kept asking to go back to Disneyland. While Dusty's batboy son Darren ran for home plate in Game 5, going home is probably the last thing on his mind right now.
There's no doubt Disney will find a way to use this Cinderella story to market its ailing resorts and turn its foul balls into home runs.
What did you think of the World Series? What about the future of baseball? Are the Montreal Expos going to become a traveling team next season? There's more to the Fool than stocks and Barry Bonds. All this and more -- in the Major League Baseball discussion board. Only on Fool.com.
The maker of Frosted Flakes, Pop Tarts, and Apple Jacks saw total sales decline about 2% to $2.14 billion as a result of fewer shipping days compared to the year-before quarter. Kellogg said that on a "comparable" basis, sales improved 7%. So investors can better detect how the company's core operations are performing, the company tries to weed out the impact of its Keebler purchase and the effects of both switching to 13-week quarters and changing the way it accounts for amortization in reporting "comparable" numbers.
Comparable sales in the domestic cereal market -- the bulk of Kellogg's business -- improved 6%, crucial growth for the company. Keebler and the other snack-food lines in its stable didn't relax, either, returning comparable growth of 5%.
Kellogg continues to integrate Keebler and has been on a cost-cutting and cost-saving spree over the last year. As a result, operating costs shrunk as a percentage of sales to around 26%, and the operating margin improved to 19.4% from the year ago's 15.8%. Gross margins improved, well, marginally.
The company generates solid operating cash and free cash flow. While it has used this moolah to pay off long-term debt in the past, it chose to buy back shares this quarter, in an effort to offset share dilution associated with stock options. Kellogg has also considered investing in its pension funds. Neither option is particularly wasteful, but the company shouldn't lose sight of its debt load after buying Keebler.
For a big, established company like Kellogg, these results are commendable. Shares aren't exactly a bargain at the moment, but investors looking for safety and slow, predictable growth might consider a spoonful of this cereal.
"Red serpents, fiery forms, and yelling hags,
Fit company for mad adventurers."
-- Philip Freneau (1752-1832), American poet
Things are on the rebound for Sony
Most of the good news this quarter is attributable to the electronics and gaming divisions. Sales of the popular PlayStation 2 helped spur a 500% profit increase in that segment. Demand for computers and digital cameras jumped, keying a turnaround in the electronics division.
One disappointment came from the entertainment and film segment. Thanks to movies such as Men in Black II, Mr. Deeds, and xXx, revenue increased 27%. Profit actually fell 55%, however, because of the huge advertising expenditures needed to promote the flicks.
Company-wide, sales rose only slightly, as most of the earnings came from cost-cutting and restructuring. You can expect that trend to continue; CEO Nobuyuki Idei raised the full-year earnings target by $240 million, while lowering sales projections by $800 million. Saying he's "concerned that consumer confidence may deteriorate even further," Idei will continue the restructuring, while keeping a watchful eye on spending.
Sony's results are typical of many well-run companies these days. While earnings may be on the rise, it remains to be seen if such growth is sustainable.
The bear market and corporate scandals have many fearing retirement, with their savings and investments depleting daily. Our Rule Your Retirement online seminar can help! By accounting for all your unexpected costs -- including insurance, emergencies, and market dips -- we'll make sure you have enough left over for all the fun and folly of your retirement. Classes start Nov. 14. Sign up today!
Mutual funds have a nasty habit. Once or twice a year (usually in December), they distribute the capital gains they've been storing up for months. Shareholders of the fund receive the distributions, which are usually reinvested in the fund.
That sounds great, except those distributions don't increase the investors' net worth or the value of the investment. On the day of distribution, the net asset value (NAV) of the fund drops proportionate to the value of the distribution. So while shareholders who reinvest distributions will end up with more shares, the value of the investment stays the same. And here's the real kicker: Shareholders will have to pay taxes on those distributions.
Also, the distributions are made to all shareholders, regardless of how long someone has been invested. Send your money to a mutual fund right before the distributions, and you'll have to pay taxes on growth you never saw. Which is why, at this time of year, most investors are advised to stay away from mutual funds. But not this year.
A capital gain is the result of an appreciating asset, and, with the stock market in the midst of a long, hairy bear market, appreciating assets have been hard to come by. Plus, any gains that do exist can be offset by losses, which are legion.
But what about bond funds, which have done very well these last few years? Morningstar fund analyst Brian Lund doesn't think it's a big concern. "Turnover at bond funds tends to be much lower than at stock funds," says Lund. "A manager with a 10-year Treasury note from 1999 yielding 6% is probably pretty happy with that paper, at this moment. If he sells it for the high price, what's he going to do with the money? Reinvest in a Treasury at 4%?"
So what's an investor to do? Here are some ideas:
If you have a fund that is valued below your cost basis, you could sell your mutual fund for a loss, then buy back a similar fund. That way, you can claim the capital loss on your tax return but still be invested. While you can't do this with stocks without violating the "wash sale" rules, you can do this with mutual funds as long as you don't buy back the same fund or a fund that is substantially the same. (This presumes that the funds you sell and buy are no-load funds; otherwise, the tax savings probably won't be worthwhile.)
Call the mutual fund company before you invest and find out when distributions will be made. Distributions aren't just made in December, so always call the fund company before you invest.
- You can avoid all these tax shenanigans by keeping mutual funds in Individual Retirement Arrangements (or "Accounts," depending on which IRS document you read).
announced it's laying off nearly 500 pilots in continued desperate attempts to stay afloat. Meanwhile, while UAL Corp.'s
According to a Reuters report, Pfizer
The Wall Street Journal (subscription required, free trial available to Fools) reports that, "Increasing use of diesel fuel in Europe has resulted in a gasoline surplus, boosting exports and stabilizing prices in the U.S. despite a volatile market." Thanks, Europe!
The Journal also reported today that if America continues to experience slow growth, the Fed should trim interest rates in the next few months. If a cut happens, it's likely to be a half-percent, instead of the quarter-percent cuts we've seen more of recently. The Fed's short-term interest rate is currently at 1.75%, with little left to cut.
Today on Fool.com: Zeke Ashton puts a price on quality and integrity.... Selena Maranjian uses behavioral economics and the sniper case to argue we should examine our choices rationally.... In Fool's School, invest in real estate, the easy way!... Our Fool Community discusses Apple's valuation.... And the Post of the Day: Berkshire Hathaway.
Bob Bobala, Robert Brokamp, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Jackie Ross, Reggie Santiago, Dayana Yochim