We've got stocks for everyone here at the Fool -- small caps, large caps, mid caps, growth stocks, value stocks, dividend payers, you name it. But today, we've even got 5 Stocks for Your Bundle of Joy, or, as Tim Beyers puts it, stocks that will help you overcome the financial burden of parenthood. After all, once you have kids, there's no turning back. But you might be able to invest in the new companies you get to know.

In today's Motley Fool Take:

An $8 Billion Problem

By

Bill Mann (TMF Otter)



For all of the ranting I do over the ridiculousness of the "decrease in earnings" arguments regarding expensing employee stock options, it would be disingenuous of me not to start out this article by noting the following: What we're talking about here are accounting, not economic, changes. General Motors(NYSE: GM) is not going to lose money based on an accounting change. Its cash flow will still be similar, if not identical, regardless of this issue.

But GM isn't all that excited about having to wipe away 14% of its reported earnings per share, either. So the company has come up with a plan to counteract the impact to its reported earnings should a proposed accounting rule go into effect as expected.

Here's the deal. When you read a company's earnings per share, that share count contains a number of different things: Actual shares, options that are in the money, and potential dilution from warrants and bonds with a stock conversion element, known as "convertible bonds." What has not been included to date is dilution due to what are actually stock-bond hybrids, so-called "contingent convertible bonds." Unlike convertibles, which have an embedded option to convert at a preset strike on the price of the bonds, contingent convertibles can be converted only when the company's stock price exceeds the conversion price of the bond for a predetermined period of time.

One of the attractive things about "CoCo" debt is the very fact that it avoids impacting diluted-share counts. But this seems very likely to change, and for a company struggling in a market beset by overcapacity and economic losses, even the appearance of a decrease to the bottom line is tough to swallow. So GM announced yesterday that it had come up with a plan to dull the impact of an accounting change for CoCos: GM will waive the right to convert to stock (the conversion is at GM's option) on at least the principal amount and use cash instead of stock as the instrument of conversion. This would apply to its nearly $8 billion of CoCos.

Other companies that have large amounts of CoCos include Merrill Lynch(NYSE: MER) and Lear Corporation(NYSE: LEA).

GM relied heavily on CoCos this past year when it raised money to fund its cratering pension fund. At the time, I noted that GM's pension liabilities far exceeded the implied value of the company and that the debt GM raised wasn't going to capital projects but to fund its obligations to retiring and retired workers. Which it absolutely should do, of course -- they are obligations. But in an environment where the Big Three -- GM, Ford(NYSE: F), and DaimlerChrysler(NYSE: DCX) -- are offering thousands of dollars of incentives to bleed down their massive inventories, real economic profits continue to be scarce. Of the list of things that GM is facing, this CoCo issue should barely be considered. But because of its outsized impact on earnings, unfortunately it is front and center.

Hey, two takes on GM in one day! Take a look at Rick Munarriz's Car Buyer's Market. Also, Brian Gorman looks across the pond in Toyota Stays Practical.

Bill Mann owns none of the companies mentioned in this report.

Shameless Plug: Motley Fool Income Investor

You've, of course, heard that 2004 is the Year of the Monkey, but we bet you didn't know it's also the Year of the Dividend. Now that you do, why don't you celebrate by taking a free trial of Motley Fool Income Investor right now and find those dividend-paying companies to round out your portfolio. It's one party you don't want to miss.

Microsoft Wants Your Thoughts

By

Tim Goh

Yesterday Microsoft(Nasdaq: MSFT) announced its pioneer attempt at blog services with the launch of a beta Web log service in Japan. The service will be free and has a nifty feature allowing authors to access and update blogs with their cell phones. Japan, where 90% of households have Internet access and close to 90% of handphones are Internet-enabled, would make an ideal testing ground for Microsoft.

Blogs are pages where users can publish their thoughts online, aided by a host site that automates most of the process. They have long evolved from teenagers whining about their love life to a useful tool for corporate communication. One of the forerunners of this was id Software programmer John Carmack, who used a ".plan" file to update users of his progress when developing the PC game Quake. Soon many developers followed his lead.

Indeed, blogs and their uses have become a significant part of today's business landscape. A recent example would be how Sun Microsystems(Nasdaq: SUNW) President Jonathan Schwarz created headlines by pondering an IBM acquisition of Novell and hypothesizing in his blog's Aug. 1 entry, "Whoever owns Novell controls the OS on which IBM's future depends." The next day, Novell's price spiked up by 6.3% temporarily as the media and investors pounced on the speculation.

By introducing blog services, Microsoft has entered a new front in its battle with Google, which got a head start by acquiring the Blogger platform last year. The two already have competing Web-based e-mail services and are about to lock horns over search technology. Later this year Microsoft plans to premiere MSN NewsBot and MSN BlogBot, tools for searching news and blogs, respectively (bet you didn't figure that one out).

When it comes to Internet technologies, Microsoft has always been late to the party, but it does make a spectacular entrance eventually. Its competition with Google for eyeballs will definitely be one to keep tabs on. With so much attention being paid to blog services, a penny for someone's thoughts may not be enough anymore.

Want to read more about Google? Try:

Fool contributor Tim Goh does not own any stake in the companies mentioned.

Discussion Board of the Day: Buying and Maintaining a Car

Is it worth it to buy a 2004 automobile given the incentives, or is it better to hold out for the 2005 models? Are you leaning towards domestic or import for your next set of wheels? All this and more -- in the Buying and Maintaining a Car discussion board. Only on Fool.com.

Gap Takes a Spill

By

Alyce Lomax (TMF Lomax)

Despite May's compulsive shopping, June marked the beginning of a decline for many retailers. While many have supposed in recent months that Gap(NYSE: GPS) is gearing up for a comeback, today investors got word that the retailer's same-store sales slipped by 5% in July, a rather nasty surprise despite what has turned out to be a rather slow summer for retail.

That category definitely includes Gap. In addition to its same-store sales slip (Wall Street had expected a 0.9% increase), overall sales fell 3% to $1.0 billion. The retailer also delivered a deep cut to its profit guidance, saying it now expects to earn $0.19 to $0.21 per share, as opposed to the previous expectation for $0.28 per share.

Granted, it looks as though July has proven difficult for many retailers. Ann Taylor(NYSE: ANN), which has been on a veritable tear lately, also reported a slip in same-store sales, but it provided some degree of comfort by upping guidance by a penny. (On the other hand, Chico's(NYSE: CHS) continued to show off its good fashion sense.)

Seeing how specialty apparel retailers that appeal to a more mature female demographic -- such as Ann Taylor and Chico's -- have done well recently, I can see the power of the niche. These are slightly older women with solid pocketbooks and a desire to be fashionable, not trendy. So, with all the cutthroat competition for teens, it makes sense that Gap is trying to evolve from its past as a teenybopper retailer and appeal to a more general audience.

Several initiatives by Motley Fool Stock Advisor pick Gap point to an eagerness to expand the demographics for its self-titled stores as well as its Old Navy and Banana Republic storefronts. A hip new marketing campaign and a stepped-up plus-size line are meant to woo shoppers, some of which may have been disregarding Gap's portfolio of stores. At the moment, though, one might wonder whether Gap is succeeding.

On the other hand, maybe it's simply that so many shoppers shopped till they dropped in the springtime that they're all shopped out. Maybe that's compounded with the fact that high gas and food prices are eating into discretionary income, or people are worried about their credit card debt with interest rates threatening to rise. (Sound familiar? Our Credit Center can help.)

So, there are lots of reasons pocketbooks could be snapping shut right now, many completely circumstantial. However, such a surprising shortfall in sales numbers as well as drastically reduced profit guidance brings back a question Fool Rick Munarriz has asked before: Is Gap really back?

Alyce Lomax does not own shares of any of the companies mentioned. When shopping, she definitely prefers Ann Taylor to Gap.

Quote of Note

"The most incomprehensible thing about the world is that it is at all comprehensible." -- Albert Einstein

Sara Lee Has Indigestion?

By

Tim Beyers

Can Motley Fool Income Investor pick Sara Lee(NYSE: SLE) catch a break? The diversified firm that sells everything from hot dogs to pies to underwear gave investors indigestion when it reported that first-quarter results would be hurt by higher commodity prices. Never mind the big boost in profits posted during the fourth quarter; investors see only trouble ahead, and the shares are already down more than 1% today.

The firm reported that net sales rose 11% for the fourth quarter, to $5.1 billion from $4.6 billion a year ago. Income rose to $0.44 per diluted share, an increase of 19% from the same period a year ago. For all of fiscal 2004, sales were $19.6 billion, up 7% from 2003. Net income for the year was $1.59 per diluted share, up 6% from last year's $1.50. Profits were up in every business unit except for apparel, which declined for a fifth straight quarter. Do you see much bad news here? Yeah, me either.

Unfortunately, it's not the past that concerns investors. The company said higher commodity prices on items such as pork and coffee will take a bite out of first-quarter 2005 profits. Excluding a $0.15-per-share gain for the sale of its European tobacco business, results are forecast to come in at $0.24 to $0.29 a share, well below the consensus estimate of $0.32.

But should investors really be so spooked? After all, Sara Lee says it will boost earnings from $1.59 to between $1.61 and $1.71 per share during 2005 -- and that's after an expected $250 million increase in commodity costs and $80 million more set aside for marketing. Further, free cash flow continues to rise like good dough. After dividends, free cash flow came in at just below $900 million for 2004. That's more than 50% better than last year and more than enough moola to allow Sara Lee to keep hiking its dividend, which at 3.5% already trounces the market's average payout of 1.67%.

Maybe I'm just too optimistic, but I see no reason to pull Sara Lee from the fatty five. I still think the company will continue delivering investors sweet returns on the way to high-carb heaven.

Fool contributor Tim Beyers isn't at all about the carbs. He leaves that to people with more discipline. Tim owns no shares in the companies mentioned, and you can view his Fool profile here.

More on Fool.com Today

In Matt Logan's License to Make Money, Cherokee's CFO shares the strategy that made the apparel maker one of the leaders in licensed brands....Selena Maranjian shares some insightful comments from readers in Out of My Inbox.

In other news:

For a list of all our stories from today, see our Today's Headlines page.