Underappreciated Stocks November 15, 1999January 28, 2017 I have always been a sucker for end-of-the-year specials, which are those doggy stocks that have done so poorly — arf! arf! — that investors sell them around this time of year to take their losses and be done with them. Investors use those losses to cancel out gains they may have taken during the year on other stocks (and, if their losses exceed their gains, up to $3,000 in ordinary income, with any extra carried forward). This is called tax-selling. It can lead to some rational irrational behavior. Say you paid $29 for a stock that’s now $6 but worth $9. Selling at $6 to take the loss could save you so much in taxes it makes sense to sell. So it can be rational to sell for $6 something worth $9. But to the rest of us, a stock worth $9 that’s selling for $6 represents a bargain. And it can become more of a bargain when disgusted tax-sellers, instructing their brokers to sell before year-end, regardless of the price, drive it down under $5, say — at which point many brokerages will no longer count it as “marginable,” making it harder for some customers to buy and putting pressure on some who already own it to sell. So now you may have tax-selling pressure and margin pressure and the stock is $3. Which makes more miserable owners see it as a tax-selling candidate — including those who paid “just” $6 for it — and they sell, too. So now the stock is two. Of course, what often happens with these dogs is that they’re not worth $9 after all, or even $2 — they’re worth zero, and ultimately attain it. Still, for the scavengers among you, and for those constantly urging me to suggest something more thrilling than an index fund or Treasury Direct . . . some way that you, too, can have horrible losses like mine to complain about at cocktail parties . . . I am tempted to tell you about a couple of dogs. I am tempted . . . but I won’t do it, lest (a) you buy them, drive their prices up, and leave me open to accusations of trying to hype stocks I own; or (b) you buy them, they go to zero, and you hate me. I know you say you won’t hate me, but you would hate me. I would hate me, too. So you will have to find your own dogs, take your own gambles, and watch as many of them really do go to zero. The fun is when you have one that bounces back. This used to be part of what was called “The January Effect.” In January, tax-selling pressure would end and quite a few people would reestablish their positions in those dogs, bidding their prices back up. (Tax-sellers have to wait 31 days before buying back their shares for the tax-loss to be valid.) Not to mention all the new IRA and Keogh money that can now be tossed into the market for a new year, and the flood of year-end bonus money. Once The January Effect became famous, long ago, some people began selling their dogs earlier, buying back their shares in December rather than January, in anticipation of the snap-back. So that muddied the January effect a bit. It’s not the sure thing it once was; and in truth it never was a sure thing, just a little odds-tilter. A bad surprise around Y2K — which few including me now expect (which is why it would be a bad surprise) — could muddy this January further. But — for all the impossible-to-value wild high-fliers out there — I expect there are quite a few old-fashioned underappreciated stocks to be had as well, beaten down by bad news exaggerated by tax-selling. If you have some speculative funds and enjoy this kind of thing, go look for some. Or wait — here’s a way it might work to use actual names! The following six stocks are pretty doggy. But two of them I am short, meaning I hope (and believe) they have further to fall. Two of them I am long, meaning I hope (and pray) they will bounce back. And two of them I do not have an interest in either way. I won’t tell you which are which, lest I be accused to promoting my positions or wind up with you hating me. But they sure are doggy stocks! Clayton Homes (CMH), U.S. Floral (ROSI), Iomega (IOM), Criimi Mae (CMM), CompUSA (CPU) and Ultralife Batteries (ULBI). Remember: I am NOT recommending you buy or short any of these. If you do look into one and decide it’s going lower and it does — more power to you. I hope it’s one of the two I’m short. And if you decide another is going higher and it does — more power to you for that, too. I hope it’s one of the two I’m long. As for the two I have no interest in either way, I hope — well, what do I hope? I guess I hope they just prove very boring. Shorting stocks is a very bad life choice for almost everybody; and buying doggy stocks is almost as risky. So this is more for fun than anything else. In fact, if you want to play the game without losing any actual money (oh, if they had only offered this option to me when I was your age!), do this: Send me an e-mail at myvastfortune@aol.com (not my regular account, please!) that looks like this (feel free to cut-and-paste): I WOULD GUESS You own these two stocks: [XXX, XXX] You’re short these two: [XXX, XXX] You have no position in these two: [XXX, XXX] I think these (if any) will be significantly higher in six months or a year: [ . . . . . ] And these (if any) will be significantly lower: [ . . . . . ] Indeed, set up a hypothetical portfolio on one of the Internet services and “invest” $100,000 any way you want in some or all these symbols. (E.g., if you short $20,000 worth of one of them, that would leave you with $80,000 to go long one or more of the rest.) Include these allocations in your e-mail. We can then check in six months or a year to see how smart you were, and how smart you were in figuring out how dumb I am. (You’ll be the one reporting in with your vast success; but I’ll have a copy at myvastfortune@aol.com just to make sure no one is tempted to exaggerate.) There may even be a prize. And by doing it hypothetically this way, I will be the only one who loses real, actual money. With your real, actual money — and only the portion you will NOT need in the next few years, and that you feel comfortable committing to the stock market — either buy index funds, or do a lot of real, actual homework. Tomorrow: A Stock That’s Surely Going to Zero
Sorry! November 12, 1999March 25, 2012 Oh, the guilt. The dog (I’m not sure whose; we don’t have one) ate my homework. Barring more canine mischief, Underappreciated Stocks will run on Monday. Sorry.
Underappreciated Vegetables November 11, 1999February 13, 2017 What vegetable isn’t underappreciated, when you think about it? Yes, people will ooh and ahh over a terrific tomato — oh, those perfect New Jersey tomatoes in August, or the amazing beefsteak tomatoes you get at the Palm (not that you will often find me at the Palm, but when you do, I will be the guy who ordered the tomato). But tomatoes are ringers, being, as they are, members of the fruit group as well as the vegetable group. (This is what makes ketchup the indispensable food: a fruit, a vegetable, and a condiment.) Fruits are adored. The apple of his eye, a real peach, a plum of an appointment, the fruits of their labor — fruit has long had an outstanding P.R. firm. And the tomato has ridden the coattails of that good will. (In the old days: “She’s some tomato!”) But tomatoes aside, who ever really gives vegetables their due? “He’s as dumb as an eggplant,” is the kind of imagery you get with a vegetable. Mr. Potato Head. Punch-drunk boxers with “cauliflower ears.” Children shoving spinach to the other side of their plates. Presidents eschewing broccoli. When was the last time you saw someone looking admiringly at a carrot (other than a horse)? So I think after 949 of these daily columns it is about time — considerably past time — to say a few good things about beets. Well, and artichokes and potatoes and all the rest of them, really, but you don’t have all morning, and I’m not getting paid for this, so let me just point out: 1. Artichokes are the ideal appetizer if you’re having a nice dinner because they take a long time to eat. (If you really like someone, dinner should be artichokes and lobster. If you really don’t: consommé and boneless filet of sole.) Nor do artichokes require melted butter, let alone that awful heavy sauce some people feel compelled to drown them in. They’re awesome just boiling (40 minutes or so) in their own juices. Be careful not to eat the chokes and kill yourself. 2. Potatoes saved the Irish and the Irish — and I don’t say this just because Charles is Irish — saved civilization. Seriously. You can read it in a book: How the Irish Saved Civilization . So it doesn’t take a Ph.D. in logic to make the connection. Potatoes saved civilization. 3. Beets are a kick-ass vegetable. A single beet has enough red dye in it — not fake dye, natural beet dye — to paint a large house. People don’t realize this, because there is so little demand for red houses, but it’s true. (Or is not true, but, if you have ever boiled beets, seems true.) And they taste good! People don’t realize that, either, but grab hold of a jar of borscht at your supermarket — the kind “made from real beets, not from concentrate” — and I say, move over Tropicana! Just work up a sweat, grab a bottle of borscht from the fridge, shake it up and swig it down. Forget the sour cream, and certainly forget heating it up, although that can be good too. Just chill, shake, and swig. Shake, rattle, and roll. Tomorrow: Underappreciated Stocks
This Week November 10, 1999February 13, 2017 Monday I told you about iPING for reminders and wake-up calls and such. I don’t know why, but currently you can only set up reminders as far out as “monthly.” Why not annually, for birthdays? I assume they’ll add that, but in the meantime: “JustBirthdays.com [writes my great friend Joe, who created it] is the easiest of ALL the birthday reminder services. It’s the only one that lets you type the year instead of having to choose it from a drop down list (of 100 year choices). It requires half as much time to enter a birthday reminder as the other services. It gives more reminder choices. In short, it’s the BEST!” Just how Joe is going to compete with all the giants who could do this with a billion dollar market cap tied behind their backs, I don’t know. But a friend is a friend, and he’s never forgotten my birthday. (Paul Johns: You might want to check out mobile.msn.com as well. It has some features, such as hourly news and stock prices, that iPing doesn’t offer.) Yesterday we lived light on the land with Dorothy, the financial success who’d just as soon wash her own clothes. (One of the randomly rotating quotes you see here each morning comes from Herbert Hoover’s Treasury Secretary Ogden Mills. When someone suggested you could live comfortably on $50,000 a year — a huge sum back then — he replied: “On $50,000 a year you can’t even keep clean.”) Today, following a faintly similar theme . . . Lorraine Baldwin: “Thought you might be interested in a success story. In 1987, professors at University of the Pacific in Stockton, California, hit upon the idea of sending cheap solar cookers to sunny third world countries. They’re made of cardboard covered with aluminum foil, fold up, cost $2.00 to manufacture, and last quite awhile if they do not get wet. The people from here go to these countries and teach the women how to teach other women to use them. The thing that really hit me was that, previously, the women had to walk up to six hours a day to find wood to cook their meals. And the supply of wood is always dwindling. If you are interested in finding out more about these cookers, and the work this organization is doing, the address is Solar Cookers, Intl., 1919 21st St., Sacramento, Ca. 95814. ” And if you and I don’t have to worry about stuff like that (there will be electricity on January 1, 2000, there will be electricity on January 1, 2000) — because we live in the information age, not the Sahara — well, here’s an economical wood-saving tip from the other end of the spectrum: the $2,000 Enyclopedia Britannica, and then some, for free — Britannica.com. Tomorrow: Underappreciated Vegetables Friday: Underappreciated Stocks What a week!
How Dorothy Cleans Her Clothes November 9, 1999January 28, 2017 Not long ago I instructed you guys to wear T-shirts. “There are two strong economic reasons for this,” I wrote. “First, you will save considerably on dry-cleaning.” Dorothy Mallonee: “Tell me you DON’T dry clean your dress shirts! You’re absolutely right, dry cleaning is not good for them. In fact, it’s not good for any fabric and it’s certainly not good for the environment. Cotton dress shirts should be washed. The same is true for silk shirts and virtually all sweaters. Most items that are labeled DRY CLEAN ONLY are so labeled primarily to protect the manufacturer. “I hand wash lots of stuff. Most people seem to find hand washing tedious, but, frankly, I find it no big bother. It takes me less time than it’d take me to go to the cleaners. You just soak, say, your sweater, in the bathroom sink with 2 cents worth of Woolite for 3 minutes, squeeze the water out, roll it in a towel and step on the rolled-up bundle a couple times (to extract more water) then lay it flat to dry. I even have a little rack covered with a plastic mesh I can lay stuff like this on to make it dry faster. “My stuff lasts longer, smells better, gets cleaner (do you know how infrequently most dry cleaners change their solvent? don’t ask!), and is easier on the environment. And, every time I do it I think how proud you’d be of me for being so thrifty!” Just before you dismiss Dorothy as a bag lady who somehow gained access to the Internet, I should tell you that back when I was shorting Amazon and warning you not to do it because it’s really, really risky, Dorothy went my warning one better — and bought it. Amazon proceeded to triple or quintuple or something and she made (I’m guessing) seven billion dollars. So you see? You don’t have to be a bag lady to live light on the land. From now on, I’m not sending my shirts to the dry-cleaner; I’m sending them to Dorothy.
Missing Conference Calls November 8, 1999February 13, 2017 Here’s another one: iPING.com. If you’re one of those crazy people who pay $1.50 for a wake-up call once in a while, it would save you that. You can even set it up to wake you with the morning’s headlines or — please tell me you won’t do this — your horoscope. If you’re one of those befuddled people like me who get lost in thought and forget to call in for scheduled conference calls, it will call YOU a few minutes beforehand to remind you. Forget anniversaries? Not any more. It will even call you on your cell phone or page you. Want to invite 17 people to a meeting simultaneously? Or remind THEM all to call in for the conference call? Free! Check it out: iPING. Tomorrow: How Dorothy Cleans Her Clothes
No Thank You, Paine Webber November 5, 1999February 13, 2017 John R: “Thanks for the Mutual Fund Cost Calculator. After some personal consideration and also checking with your ‘dump this fund’ section, I called my broker at Paine Webber asking him to close one of my mutual funds and send me the money. Of course he wanted to know why, what did I plan to do instead, etc., etc. I told him to look up the alternative fund I am considering. (I am dumping Putnam Fund for Growth and Income in favor of Vanguard’s Tax Managed Fund.) “He is suggesting that he could close my current fund and transfer that money to open the new one that I would like to get. In other words, keeping him in the loop. It seems simple enough that I could do it myself. Why would he want to keep my measly account this way if I now will invest in a no-load, low tax, low fee mutual fund? Would there be any fees going to him or Paine Webber for this service?” Hope the switch serves you well over the years, John. It sure looks as if you would have been better off if Paine Webber had recommended a lower-cost fund in the first place — your fund did less than half as well last year as the four low-cost funds our calculator compares it with. But selling you the low-cost funds, Paine Webber wouldn’t have made nearly as much money. As to your broker’s interest in staying in the loop, brokers believe the game in the future is “controlling assets.” They want to keep yours under their roof — if only to lend you money against them one day.
Photo ID Visas; AOL & BOL November 4, 1999February 13, 2017 Richard Stacey: “You’re right about the cadence of groups of three in English, which is why Churchill’s original ‘blood, sweat, toil and tears’ is so frequently quoted without the toil. It reminds me that I heard that not all languages follow this pattern, and that some school children in one of these places, on hearing the story of Goldilocks and the three bears, said ‘please miss, what happened to fourth bear?'” Fair enough. There is also the SAT nature of the thing, where the other three — blood, sweat and tears — are all liquids, and toil clearly does not fit, and where, additionally, it would appear to be redundant with “sweat.” Why can’t the English teach their children how to speak? But seriously, is it me, or is the scoring of the SATs getting easier? I have this friend who just got 760 on his math boards, another who got 780 on her verbals. Are kids today smarter than we were? Or did you get 800 on both? Martin dellaValle: “Re the credit card with the owner’s picture on it — don’t count on its being a great deterrent. On a previous job, my boss constantly gave me his credit card to go buy office supplies and other stuff with The card had his picture on it, and he and I look nothing alike. But I never encountered a single problem using it and signing my name or his name or just scribble whatever came to mind. NOBODY EVER PAID ATTENTION. Which I find pretty frightening.” Frightening — except that your liability with a stolen card is ordinarily minimal, and the thing is, you have such an honest face that, even though it didn’t look like your boss’s, the clerk could tell at a glance you’d never do anything shady. Craig: “I must know why you are still using AOL. There are so many better services. And for people like me on a ghetto budget, there are several free ISPs (for example, http://go.freei.net/www/ and http://www.netzero.com/). It also works to just keep switching around and taking advantage of all the 30-day trials.” Well, if you must know, there are several factors, prime among them: I am lazy and I am stupid. On top of that, having been frugal for my first few decades, I don’t have to worry much about the $22 a month. I like the fact that my address is easy for people to deal with — everyone knows AOL. And I like the way other AOL users can see the strange fonts and colors I use. And I guess I feel that even if they have some outages or whatever, they will always be around, and continually improve their capabilities. But if I had a little more time — and need — to experiment (if I were, that is, young and smart and poor), I would definitely consider a switch. I figure this will all be different soon anyway, what with DSL or cable hook-ups. And here’s an idea for AOL competitors: Quick! Register the name BOL. That way, your ad campaign could be, “Everyone’s switching to Better On-Line because it’s . . . better. And cheaper! And all you have to do to change your address is change a single letter. We’ve pre-reserved your AOL names for BOL and won’t let anyone else have them. If people don’t find you at your old address, don’t worry — they’ll know where to look. BOL.”
Loose Ends November 3, 1999January 29, 2017 Monday I reminded you about the Fidelity Charitable Gift Fund. Tom Schaefer: “Yes, I took advantage of this fund a few years ago with some stock that had appreciated from 2 cents to $36. I am thoroughly glad I did so. The most delightful part is that my account has been growing faster than I give it away — a very pleasant surprise. But a word of warning: It was not as tax-free as I had expected. California treats donations of appreciated securities as a tax preference item, subject to AMT — so I ended up paying the same state tax (9.375%) as if I had sold it myself. Still, a great bargain.” Another word of warning, or at least of realism: The money Fidelity invests for you can go down as well as up, unless you choose the money market option. And generally, Fidelity’s gift funds have trailed their “benchmarks” by a pretty good margin, in part because of the annual costs that are incurred. Still, I think Fidelity’s Charitable Gift Fund is a very good thing. Tuesday, I encouraged everyone to vote. And said that if you failed to, you were either too young, not a citizen, or embarrassed. Several of you wrote in to advise of a fourth option — that you were in prison. I had actually considered that, but decided it would trip up the cadence of the thing and rationalized that if you were a felon, you were probably embarrassed. (There is a reason things seem to come in threes rather than fours — blood, sweat and tears. It’s the cadence of the thing. Like sneezes.) I also mentioned that quite a few otherwise upstanding types eschew registering lest they be called for jury duty. Several of you wrote to say this is not only shabby, it generally doesn’t work — jurors in many (most? all?) states now come from drivers’ license rolls in addition or instead. And speaking of jury duty . . . Russell Turpin: “Your column reminds me of something. When last I was called to jury duty, it was to resolve a $300 dispute between a renter and landlord. The craziness here is that 12 people were diverted from their other work for a day in order to do this. If you put even a low value on their labor, along with the costs of jury processing, several thousands additional dollars were burned to help resolve a petty dispute. I can understand why many people become disaffected with their civic duty when it attends to such picayune matters. “The Constitution guarantees right to jury trial in civil cases that exceed $20. In 1789, when that was penned, this was a significant amount, a month or two of wages. Today, it is less than half a day’s labor at the lowest pay. We should amend the Constitution to normalize this value to minimum wage, or some other sensible factor. Let’s offer jury trials for amounts over $10,000, and let judges settle smaller disputes. Jury duty would become less frequent, and the matters that then require citizens’ attention more important. Jurors would not be made to feel that their civic duty was a joke. And we would not be caught up in economic idiocy of burning $100 to decide the disposition of $1.” I doubt many $300 cases involve 12-person juries. But I sure agree with the overall premise. And I bring to your attention a potentially wonderful web-based solution, or at least partial solution, to the litigation mess, albeit not for the kind of cases you describe: cybersettle.com. But Russell continues: “OK, enough of civic duty. I have a real question. Because I am a CMGI shareholder, I have been afforded the opportunity to purchase some new Internet companies in their IPOs. I bought ENGA at $17, and it is now $38. I bought NAVI at $14, and it is now $53. Don’t get too jealous: I am limited to 100 shares of these offerings. This is great money to me, but not a vast fortune. My friends tend to flip these IPOs. It goes against my investment instinct, and dislike of taxes, to flip any stock I own. On the other hand, I have not studied these issues and have no idea what their prospects might be. I tend to follow news on them, now that I have skin in the game, but I have no idea how to value these Internet equities. The $64 Question: What strategy should I use to determine how long to hold these high-falutin’ stocks? My current thought is to hold them forever, watch four of them go down to zero, and hope that the fifth is the home run. I would welcome alternative suggestions.” I’d go with your friends: Flip ’em. And here’s a final loose end for Wednesday: In the market for a mortgage? Check out this new site: OnLoan.com.
Vote! November 2, 1999February 13, 2017 Are you registered to vote today? If not, choose one: [ ] I am not an American citizen. [ ] I am too young to vote. [ ] I am embarrassed. Sorry: there are no other choices. Seriously. People have laid down their lives to win the right to vote. Yet some of my friends don’t register for fear the might be called to jury duty? Don’t leave democracy up to someone else. That person might not be as nice as you. It’s an old, old notion, but ultimately true: If we take our freedom and prosperity for granted, we will surely lose them. Register! In some states, you can do it right on the spot, I think. Click here and select your state to find out how to register. Even if it’s too late to be eligible to vote today, taking care of this now, while you think of it, will give you a head start on next year. Vote! If you have no idea whom you favor in an off-year like this, check the editorial page of a newspaper you respect. Or just vote straight Democrat (he grinned).