Berkshire Hathaway just held its annual meeting, and our Fool in Omaha was Whitney Tilson. Be sure to check out his report today to find out what Buffett and Munger said about investing, accounting shenanigans, love -- yes, love -- and success.
Our annual Stocks for Mom special rolled out today, with Matt Richey recommending Microsoft for his mother. Come back every day this week to get another stock idea for Mom -- and for yourself.
And stick with Fool.com all week to gain some insight from Burton Malkiel, the author of the investment classic A Random Walk Down Wall Street. We'll share a portion of this exclusive interview with the Princeton professor of economics each day.
In today's Motley Fool Take:
- Diller Buys LendingTree
- Motley Fool Stock Advisor
- Barron's: Bull Is Back!
- Quote of Note
- Savings Bonds Look Good
- Discussion Board of the Day: Marvel
- Quick Takes: Dividend-tax relief, Cox Communications, more
- And Finally...
Diller Buys LendingTree
Barry Diller's Web e-commerce empire USA Interactive
That makes a lot of people happy today, especially members of the Motley Fool Community. LendingTree was a May 2002 selection of The Motley Fool Select, a later addition to the now-closed Rule Breaker Portfolio (an investing strategy born and still thriving in Fooldom), and the subject of Jeff Fischer's (TMF Jeff) analysis in February that the stock looked cheap at $12.50. Nice, Jeff!
Assuming the deal goes through, USA Interactive adds a new prize to its bevy of hot Web businesses, including personals service Match.com, Ticketmaster, Hotels.com
LendingTree shareholders may wonder whether to hold or sell on account of the merger. Regardless of how highly attractive you find USA Interactive's business arsenal, the stock's valuation reflects high expectations for performance. Shares are currently valued at about 48 times 2002 free cash flow of $398 million, using a share count including the rest of Expedia and Hotels.com that it's buying. The company recently reported $432 million in free cash flow for Q1, which was about 10% higher than its total for all of 2002, but management cautioned that it does not expect that growth to continue for the rest of the year.
The company owns and is buying solid businesses, but the valuation assumes just too much growth and alleged synergy. Further research may just confirm that there are better post-merger places for your money.
Motley Fool Stock Advisor
If you're interested in advice that's geared toward average investors instead of rich hotshots, check out David and Tom Gardner's newsletter, Motley Fool Stock Advisor. Each issue features a Tom and David tête-à-tête, during which they explain their stock ideas. Since inception a year ago, David's whipping Tom with a 35.26% total average return vs. Tom's 16.3%. They're both whipping the market, which is -0.30% as measured by the S&P.
Barron's : Bull Is Back!
The cover story of today's weekly Barron's newspaper proclaims, "The Bull Is Back!"
Apparently, it is -- in one form or another.
Barron's semi-annual survey of money managers found them much more bullish about equities than they have been in the last few years, with 60% falling into the "very bullish" and "bullish" camps. Collectively, the 145 money managers surveyed expect the Dow to rise about 10% by year-end.
Meanwhile, some managers expect the opposite for the high-riding bond market: "[Bonds] may well be in the final innings of a powerful bull market, and could burn latecomers badly," the article suggested. (The Fool has written about the risk of bonds.)
But the article didn't display strong arguments for either a rising stock market or a falling bond market. Nearly 70% of the managers suggest stocks are a "buy" at current valuations, while 59% expect the economy to revive following the war, but additional reasoning was slight.
One argument given for a stronger stock market was that we're 1.5 years from the presidential election, and election years are typically strong for stocks. But that's hardly something to hang your hat on. Nor are the money managers' market projections.
Nobody can accurately predict the stock market, although you have a 50/50 chance of being right. Given 50/50 odds, bullishness from 60% of money managers is hardly worth noting, especially when you consider the dismal performance of the managers' recent stock picks and pans.
The fund managers 11 stock picks in October 2001 were down 38% during the next 12 months, while their 10 pans were up 2.6%. Their 15 picks in May 2002 were down 15%, while their 14 pans were flat the next 12 months. Finally, their 15 stock picks in October 2002 lost 2.3%, while their 14 pans gained 5.6% the following six months. In 1999 and 2000, they did much better.
Favorite pans? The money managers "overwhelmingly" voted eBay
Think about it. There are at least several dozen companies trading right now that will end up bankrupt in the next few years, meaning they'll lose 100% of their value. We believe those dozens of stocks are a tad more overvalued than the three great brands the money managers overwhelmingly panned.
Someone isn't putting much time or thought into their research. So, neither should you.
Quote of Note
"Never miss a good chance to shut up." -- Will Rogers
Savings Bonds Look Good
Last week, the Treasury Department announced the new rates for I Bonds and Serries EE savings bonds. Compared to what you can get from other fixed-income investments these days, the rates on U.S. savings bonds are looking very attractive. Plus, they offer additional benefits over money markets, certificates of deposit, and their ilk.
Let's take a look at the options offered by good old Uncle Sam:
I Bonds: The "I" stands for "inflation," because the return on an I Bond is a combination of a fixed rate (established at the time of purchase) and a floating rate that is adjusted every six months based on the Consumer Price Index for all Urban users (CPI-U).
For I Bonds purchased from May to October 2003, the annualized rate will be 4.66%.
Series EE Bonds: The interest rate on EE savings bonds is 90% of the average yields for the preceding six months on five-year Treasury securities. The rate is adjusted every six months. EE bonds are purchased at half their face value (e.g., you pay $50 for a $100 bond) but are guaranteed to reach face value in 17 years -- a 4.24% annual return.
Series EE savings bonds issued on or after May 1, 1997 will earn an annualized 2.66% from May through October 2003.
Savings bonds have some other noteworthy characteristics:
They're issued by the U.S. government, which makes them the safest investments in the world.
They're exempt from state and local taxes. Also, earnings are tax-deferred, and can be tax-free if used for qualified higher-education expenses.
They can be purchased commission-free at treasurydirect.gov.
- Investing in savings bonds doesn't require large sums of money. They can be bought in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000.
Though savings bonds are very safe, they're not very liquid. They can't be redeemed for 12 months (up from six months as of last January), and there's a penalty worth three months of interest if redeemed within five years. If you are looking for an easily accessible, safe investment, visit our Short-Term Savings Center, which features special Fool-only rates on CDs and money markets.
There's a lot more to learn about savings bonds before you invest, so make sure you do your homework. Start by visiting the horse's mouth: www.savingsbonds.gov.
And if you're not sure whether savings bonds have a place in your portfolio, consider our upcoming online seminar, Perfect Your Portfolio: Asset Allocation for Long-Term Wealth.
Discussion Board of the Day: Marvel
Did you duke it out with the opening weekend crowds to check out X2: X-Men United, or will you wait it out? Which films are you looking forward to this summer? Renting any of last year's blockbusters? All this and more -- in the Marvel discussion board. Only on Fool.com.
One man's junk may be another man's treasure, but Berkshire Hathaway
Much of the attention on Capitol Hill has now turned to tax-relief and stimulus proposals. The Wall Street Journal says the Senate Finance Committee package probably will not include any of the dividend-tax relief sought by President Bush. Though his supporters are "reluctant to deprive Mr. Bush of one of his top domestic priorities," it appears they will lower their sights and seek a gradual repeal of the tax instead.
In local news, "The G-B's" have signed to play Friday night at the County Amphitheater as part of the Sawdust Festival. Mayor Hilda Berg says the fact the band -- which imitates the music of the popular Bee Gees -- agreed to play here "is validation of our status as an entertainment hot spot."
Today on Fool.com:
- For updated stories throughout the day, bookmark our ever-changing News page.
- Rick Munarriz asks, will Apple save the music industry?
- Reggie Santiago explores the financial wrinkles of going under the knife.
- McDonald's Smells Good: David Gardner will take the combo: a premier brand and turnaround CEO.
- After scandal upon scandal, analysts are taking it on the chin.
- Cedar Fair Thrills: The world's tallest, fastest roller coaster promises to take investors along for the ride.
- The summer movie season starts early as X-Men mark the spot.
- In Fool's School, a short history of fair disclosure.
Bob Bobala, Robert Brokamp, Mathew Emmert, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Reggie Santiago, Dayana Yochim