The Palm Beach Post from West Palm Beach, Florida on December 4, 1997 · Page 47
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The Palm Beach Post from West Palm Beach, Florida · Page 47

West Palm Beach, Florida
Issue Date:
Thursday, December 4, 1997
Page 47
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'10D THE PALM BEACH POST THURSDAY. DECEMBER 4, 197 THUR S DAY WKSSSSa e e IVlotie V Fool Our Mission: To Inform, to Amuse, and to Help You Make Money Value Peg LimnmminmnEnLJ Full-Price vs. Discount Brokers The Nutty Mouse I invested in Euro Disney after reading about it in a magazine. Unfortunately, the French didn't go for Mickey. The company struggled, was partly bought ( by a Saudi prince, and became a penny stock. Mv Si When dining out your choice of restaurants ranges from Bob's Burger Pit to Chez Maurice. At Bob's, your meal is handed to you in a bag, along with change for your fiver. At Chez Maurice, your napkin is fluffed onto your lap, and the bill bears a remarkable resemblance to your mortgage payment You have a similar choice with bro such as Charles Schwab and Fidelity. They're the local steakhouses of the brokerage industry, charging roughly $30 to $120 per trade. The deeper discount brokers like Ameri-trade and ETRADE, the Burger Pits of brokering, charge as little as $8 per trade. Full-service brokerages offer everything from stocks and bonds to biggest mistake was buying what I couldn't easily follow across the Atlantic. It sounds like a tale of woe, but it was a good lesson. Joan Hennessey, Miller Place, N.Y. The Fool Responds: There are many international marketing snafu stories, such as when GM had trouble selling the Nova in Latin America ("No va" means "no go" in Spanish). We avoid foreign stocks because it's hard to get sufficient information on them, and currency exchanges can wreak havoc with earnings. Besides, there are plenty of great American companies with substantial global reach. International diversification is overrated. The United States has the safest markets in the world as safe as markets can be, that is. annuities and insurance. As their brokers profit largely from kerages, from the full-service broker to the increasingly popular discount or deep-discount broker. Advocates of full-price (er, full- commissions, they re sometimes motivated to encourage a lot of buying and selling, which isn't in S A service) brokers assert that jr.- ' Do you have an embarrassing lesson learned the hard way? Boil it down to 100 words (or less) and send it to The Motley Fool co My Dumbest Investment. Got one that worked? Submit to My you get what you pay for. Full-service brokerages like Merrill Lynch and Smith your best interest Other times they might just Smartest Investment. If we print yours, you'll win a Fool's cap! QIs there an easy way to find out if a big company is overvalued or undervalued? Sally Duncan, Austin, Texas A Try using the YPEG, a year-ahead priceearnings-to-growth rate ratio. It's a nifty way to find an approximate fair value for larger, more established companies. Let's calculate a YPEG for Sears, for example. Take next year's earnings per share estimate oi $3.74 and multiply it by the expected five-year annual growth rate of 15 percent This gives you a YPEG fair value of $56.10. With Sears currently trading around $47 per-share, this yardstick suggests that it's undervalued. , The YPEG is one of many valuation measures in a Fool's toolbox, but never the only one. And it doesn't work for small, young companies, as their future earnings are less predictable. You can get earnings estimates and growth rates at your library, in First Call or Zacks publications. On line, our Web site at offers earnings estimates, and growth rates can be found at QWhy do I sometimes hear people chuckling about tulips when they're discussing investing? Attison Barnes, Washington, D.C. AWhile the Pilgrims were settling down in Massachusetts, people in Holland were bidding higher and high-erprices for tulip bulbs. This great "tulipmania" episode of the mid-1600s is one of the first documented cases of a speculative investing frenzy. Incredibly, people were taking out loans on their homes in order to buy bulbs they didn't intend to plant but only to resell. Prices soared to the modern-day equivalent of tens of thousands of dollars per bulb. Eventually, the proverbial bubble burst, wiping out many investors. The easiest way for a Fool to avoid "tulip-mania" is to avoid borrowing money to invest Name That Company Barney offer, above all else, advice. Their teams of research analysts study industries and companies, recommending what should be bought or sold. In exchange for this advice, investors pay hefty commissions. It's hard to determine commissions charged by full-service brokerages, as they don't publish rate schedules. It's safe to say, though, that commissions run up to 5 percent or more of the value of a trade. For example, it might cost about $280 to buy or sell $8,000 of stock. At the other end of the spectrum, offering little in the way of advice and research, are discount brokers toss your money into a mutual fund and forget about it Discount brokerages have a narrower range of services, such as no-load mutual funds. Many also feature on-line computer trading, for which the lowest commissions are charged. Discounters compensate their brokers mainly with salaries, not commissions, making their money through high-volume trading. Assess what services you need from a broker and how much you're willing to spend. If you're a do-it-yourself investor, get thee to a discount broker. You'll probably save enough for a meal at Chez Maurice. Launched in 1894, I've employed many bean-counters. Since my founder felt that my quality alone would generate sales, I never advertised until 1970, when competi tion became more intense. My founder was one sweet guy, establishing an orphanage and school, funded by me. Even today, the school controls most of my shares. Peo ple go nuts for my stuff, paying roughly $4 billion each year for it During World War II, my products were even used as currency. My stock has crunched ahead over 350 percent in the last 10 years. Who am I? Last Week's Trivia Answer Not many companies have grown as quickly as I did. Born in 1986, I'm already the largest chain of superstores for my product category, raking in more than $6 billion annually. I sell everything from safes to blotters. Despite my name, I don't sell any equipment for trains. Earlier this year, the Federal Trade Commission used a staple remover on me, crumpling my hopes of doubling my number of stores to 1,100. My stock price hasn't been too stationary, appreciating nearly 10-fold in the past nine years. Who am I? (Answer Office Depot) Know the answer? Send it to us with Foolish Trivia on the top and you'll be entered into a drawing for a nifty prize! Don't know the answer? See next week's column. Got a question for the Fool? Send it in see Write to Us Write to Us! Send questions for Ask the Fool, Dumbest (or Smartest) Investments (up to 100 words), and your Trivia entries to or via regular mail co The Palm Beach Post, P.O. Box 24696, West Palm Beach, FL 33416. attn: The Motley Fool. We want to hear from you! Copyright 1997 The Motley FoolDistributed by Universal Press Syndicate (WS7 Travel Agency Insurance Agency (DO EEZZ mM "Travel with someone you trust" AIRLINE TICKETS CRUISES TOURS AMTRAK CAR and HOTEL RESERVATIONS AUTO -HOME 'FLOOD RV BOAT MOTORCYCLE LIFE -LONG TERM HEALTHCARE ENJOY FINE CONTINENTAL CUISINE IN OUR ELEGANT DINING ROOMS COMPLETE DINNER Are you a member of AAA? Call today for your money saving member benefits! You're paying how much for insurance? Call AAA today for a Free money saving quote. Services mtmrn "mm GOOD ALL EVENING YOITRE INVITED, JOIN IN THE FUN The Marine Industries Association of Palm Beach County Presents the Holiday Boat Parade of the Palm Beaches Saturday December 6, 1997 at 6:30pm Norwegian Salmon Chicken Marsala Veal Francaise The Parade begins at Peanut Island, proceeds along Singer Island, through Lake Worth Lagoon, past Munyon Island, the designated "Boaters Viewing Area". Up the Intracoastal Waterway, past PGA Blvd, Donald Ross Road, then north to Jonathan's Landing where it will end. Wo Mr 4c, c.ePti, ALL DINNERS INCLUDE BREAD & BUTTER, SOUP OR SALAD, VEG. & POTATO, COFFEE OR TEA & YOUR CHOICE OF DESSERT. VIEWING LOCATIONS WITH PUBLIC ACCESS Sailfish Marina Restaurant, The Buccaneer, The Crab Pot. Panama Hattie's, The Waterway Cafe Riviera Beach Marina New Port Cove Marina Lake Park Marina Phil Foster Park Keisey Park, Lake Park Juno Beach Park Bert Winters Park Blue Heron Bridge Parker Bridge P.G.A. Bridge Donald Ross Bridge CASH ONLY. MUST PRESENT AD WHEN ORDERING. NOT VALID WITH ANY OTHER PROMOTION OR CREDIT CARDS. EXP. 122097. CALL THE MARINE INDUSTRIES ASSOCIATION FOR ADDITIONAL INFO 624-9092 Exercise For Your Mind 1., --mm ifrl-.ill.,.nnl,ml,rri,H.rlff ,,, , , m - r , , , , n , , , . , , - ,. ,, Get thought-provoking news and commentary home delivered by calling 820-466.5 or 800-654-123

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