ASK THE FOOL
Stock price matters
Does a company's stock price matter much to it?
M.S., Westport, Conn.
Never miss a local story.
It does, but perhaps not how you expect. Companies collect their money when they first sell their shares to the public (via an initial public offering, or IPO). Then those shares are traded between investors in the stock market.
When you buy shares of Clorox through your brokerage, you're buying them from an investor who wants to sell them. It's like baseball cards: The companies that print them get their money when the cards are sold, and after that, they're traded between owners, with their value rising or falling.
If Clorox's stock price falls significantly, so will its total market value. A competitor might look into buying the company, whether Clorox likes that or not. Also, low prices limit a company's flexibility. When Clorox's price is high, if it tries to buy another company with its stock, the acquisition will require fewer shares. And if Clorox wants to issue a few more new shares to generate more money, it will get more for each share when the price is high.
How can I track my portfolio online?
T.L., Tracyton, Wash.
Your brokerage's website is a good place to start. But many online services, such as Yahoo! Finance and AOL, also offer portfolio tracking. At such sites you can enter the various stocks and funds you own, the prices at which you bought them and the purchase dates. From then on, you can check in at any time to see the latest value of your individual holdings, as well as your overall portfolio.
You can even track stocks on your watch list by adding them to a fictional online portfolio.
A German immigrant established me in Pottsville, Pa., in 1829, and I'm America's oldest brewery. When the last of the big-name brewers in America became foreign-owned in the past few years, I became America's largest brewery that makes all its beer domestically. I got by during Prohibition by making near beer and by opening an ice cream and dairy plant that remained open until 1985. My name stems from the German word for youth. My main brewery features a bar called the Rathskeller. I'm run by a fifth-generation owner now. Who am I?
Last week’s trivia answer: MetLife
MY DUMBEST INVESTMENT
In the late 1990s, when AMF Bowling had an initial public offering, I bought 100 shares at $19 for my wife. I watched it rise to $31 per share and decided to hang on. Well, they became worthless.
Roy, Richmond, Va.
The Fool responds: People get excited when companies issue fresh shares via an IPO, but many IPOs end up disappointing their investors. That's because insiders tend to get the shares at their initial, relatively low price, while others can snap up shares only after they've been bid up. Many IPO shares surge in their first days, but then fall by the end of the year. It's often best to wait and watch while you learn more.
In this case, it would have been worth researching bowling, where league memberships had been falling, boding poorly for AMF Bowling's future. Sadly, league memberships have still been falling, and the number of U.S. bowling centers dropped from close to 5,500 in 1998 to a bit more than 4,000 in 2012.
Bowling isn't doomed, but it's a challenging industry for companies and investors. AMF Bowling is now part of Bowlmor AMF.
THE FOOL SCHOOL
You may have a regular, taxable brokerage account and a tax-advantaged account or two, such as an IRA or 401(k). But did you know that you can save a lot of money by parking certain investments in certain kinds of accounts?
With taxable bonds and bond funds, you'll do well to invest in them through a tax-deferred or tax-free account. That's because their interest payments to you are taxed as ordinary income, which means your tax hit could be 25 percent or even more. In a traditional IRA or 401(k), the tax will be delayed until withdrawal in retirement, when you may be in a lower bracket. In a Roth IRA or Roth 401(k), your entire withdrawal is likely to be tax-free.
If you're someone who trades in and out of stocks frequently, consider doing so in a tax-deferred or tax-free retirement account. Otherwise, your gains will be short-term ones, taxable at your ordinary income rate.
Gains on stocks you've held for more than a year are considered long-term, with a capital gains rate for most of us currently at 15 percent. (Regardless of tax considerations, think twice before trading frequently. Studies suggest that frequent traders fare worse than long-term investors.) Stocks that you think might soar can do so tax-free in a Roth IRA.
Municipal bonds, which pay you tax-free income, are perfect residents of regular, taxable investment accounts. Individual stocks that you own and that you plan to hang on to for a long time are also good candidates for your regular, taxable accounts. They'll tend to qualify for the preferable long-term capital gains tax rate, and you control when you sell them and realize the gains.
Less in your control are managed stock mutual funds, which distribute taxable dividends and capital gains each year. Still, even among these you can choose more tax-efficient ones. At Morningstar.com, for example, you can check out a fund's tax efficiency.
THE FOOL TAKE
Much more than a search engine
Google (Nasdaq: GOOG) (Nasdaq: GOOGL) is a long-term buy-and-hold stock for two simple reasons – the company controls 58 percent of the world's Internet searches, and its mobile operating system Android dominates 85 percent of the mobile market. (With Android, the company is trouncing Apple's smartphone sales volume on a global level.)
Google knows how to leverage those strengths. For example, it offers many products for free (Gmail, YouTube, etc.), which funnel users back to its real moneymakers – search and display advertising.
But Google's long-term ambitions go far beyond advertising. It spends more on research and development than almost any other tech giant -- about 13 percent of its revenue. It has also invested in a wide range of businesses, such as driverless cars, artificial intelligence, military robots, biotechnology and smart homes. Some of these efforts might not pan out, but each piece of the puzzle offers us a glimpse at Google's dreams of ubiquitous computing.
Between fiscal 2005 and 2013, Google's annual revenue soared 875 percent. If Google continues to leverage its core strengths to expand into other markets, its top line will keep rising over the next few decades. Google's business is much larger than a simple search engine. Its stock is appealingly priced, too. (The Motley Fool recommends and owns shares of Google.)