Here at the Fool, we have long lamented that investments are turned over too often -- generating excess commissions.
Well, turns out Morgan Stanley agreed to pay $50 million to settle charges that its brokers received "soft-dollar" payments to steer investors to certain funds. These are fees above and beyond standard commissions that should have been disclosed to investors.
This mutual fund scandal is no laughing matter, and we don't like it one bit. In fact, Rex Moore broke down the moreserious aspects just today. But are we really surprised at brokers shilling products for extra pay? Say it ain't so! What's next, the National Institute for Automotive Service Excellence (ASE) busting used-car dealers for pushing undercoating and extended warranties?
In today's Motley Fool Take:
- XM Radio Gets Direct
- Shameless Plug: Motley Fool Hidden Gems
- Putnam OK, For Now
- Quote of Note
- Two Biotechs Up on Drugs
- Discussion Board of the Day: TiVo
- More Fool News
- And Finally...
XM Radio Gets Direct
XM Satellite Radio
XM Direct is a universal tuner that can be connected to any satellite-ready radio through a digital adapter made and sold by third parties. XM's "open operating system" allows any third party to develop a wide variety of adapter cables for the automobile radio aftermarket and the original equipment manufacturer (OEM) market, increasing XM's potential customer reach without increasing its costs.
XM already has a portable satellite radio adapter for the car, as well as, of course, satellite radio models, but "with XM Direct and smart digital adapters, automobile dealerships and retailers can now satisfy customers who want to listen to XM through their in-dash stereo, regardless of vehicle or car stereo brand," according to Dan Murphy, Senior VP of product marketing and distribution at XM.
Murphy has one of the more important jobs at the company, working to widen the reach of a new brand and service while competing against an extremely similar product offered by Sirius Satellite Radio
Through XM Direct, third parties have already created adapters allowing XM to work with Mini and BMW models, attacking Sirius's existing factory agreement with BMW.
XM has taken a clear lead over Sirius in the early going, surpassing 1 million subscribers this month to Sirius' 150,000. Both companies are naturally losing money as they build services and market aggressively, but with a duopoly granted by the government (it only sold two licenses for satellite radio), the eventual winner of this race should possess an attractive business model of recurring, growing revenue and steady costs.
Shameless Plug: Motley Fool Hidden Gems
The only thing harder to find than a hidden gem is a great small-cap investment newsletter. The good news is that if you find one, you've found the other. That is, so long as you found the newsletter, not the gem. Rather than put up with any more of this doublespeak, why not take a free trial of Motley Fool Hidden Gems? It's Tom Gardner's baby -- and each month he fills it with two terrific small-cap stock ideas.
Putnam OK, For Now
Another $7 billion flowed out of Putnam mutual funds last week, meaning investors have yanked out some $21 billion since the company was implicated in the market-timing scandal last month. A total of $168 billion remains under management.
Thus far, there has been sufficient liquidity to handle the outflow without any increase in portfolio transactions costs, according to an SEC filing from Putnam parent Marsh & McLennan
Putnam is hanging in a delicate balance right now, doing whatever it can to stem the outflows -- even running full-page advertisements in major newspapers vowing that its integrity will "never again be compromised."
What should you do if you have money tied up in Putnam, or any of the funds under suspicion (Janus
Quote of Note
"I think that outflows, in a sense, have a tendency to have a momentum factor attached to them." -- Dan McNeela, Morningstar fund analyst
Two Biotechs Up on Drugs
American Pharma sells more than 100 different drugs, most of them injectible generics targeting cancer and anti-infective markets. After gaining last week on speculation, today the stock is up another 10% on news the company received U.S. Food and Drug Administration (FDA) approval for Piperacillin, the generic equivalent of Wyeth's
Wyeth discontinued production of Pipracil in 2002, causing hospitals and doctors to switch to Wyeth's newer Zosyn, which has broader anti-infective applications. American Pharma's Piperacillin will give hospitals the choice of returning to a Pipracil bio-equivalent drug that, American claims, can be a more suitable and targeted treatment. Combination antibiotics such as Zosyn can raise concerns about increasing bacterial resistance.
Zosyn, with $257 million in 2002 sales, should top $350 million in 2003. American Pharma expects to be the sole provider of generic Pipracil for some time, taking a piece of Zosyn's sales. For a company with $300 million in annual revenue, it could see considerable gains from the drug next year.
Piperacillen is the sixth Abbreviated New Drug Application (ANDA) the company has had approved this year. It has about four dozen others in development, and approval -- when it comes -- is much quicker for generics than for novel drugs, making American Pharma a company worth watching.
Amgen's novel drug
The world's largest biotech company also had good news, sharing on Sunday that phase III trials of its cinacalcet HCI were successful and that the drug, a treatment for illness associated with chronic kidney disease, received priority review status from the FDA. As The Motley Fool reported on Friday, the drug was expected to have a positive review and the news is significant for Amgen.
In separate but related news, Amgen announced study results suggesting its blockbuster drug Aranesp may be administered once monthly to patients with chronic kidney disease and anemia. Administering a drug less frequently is an obvious plus for a patient, less expensive for hospitals, and can improve a drug's competitive position -- in Amgen's case, relative to competitors like Johnson & Johnson
Amgen's stock is richly priced for a reason, but investors with patience may wait for buying opportunities, such as were available early this year. Half of successful investing is buying at a price that affords market-beating success.
Discussion Board of the Day: TiVo
Do you own a TiVo or any other personal video recorder? What do you think of the genre's prospects? What will it take for TiVo to achieve profitability? All this and more -- in the TiVo discussion board. Only on Fool.com.
More Fool News
- Toys "R" Us Drops Kids
- Is Piracy Good for Netflix?
- ExxonMobil Fined Billions
- As the World Earns
- CNET's Rocking Plans
For a list of all our stories from today, see Today's Headlines.
Today on Fool.com, Mathew Emmert revisits a steamy real estate market in Housing Still Frenzied. Meanwhile, LouAnn Lofton is on the Hip-Hop Investing beat and shows you how Pacific Sunwear is one surfwear retailer that gets it.
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