Take a look at The Motley Fool’s Take
Chewy, an online pet store popular with customers, has a stock that investors are not interested in. In June 2019, the company’s stock price was $22 per share. However, it has recently traded at around $17. The company’s price-to sales (P/S), which measures the value of a stock, was recently at its lowest level ever. It stood at just 0.6%. Chewy is a great investment for long-term.
Profitability is increasing. It has 16 fulfillment centres to support an $11 billion online business. Five of these have been fully automated, resulting in a significant increase in efficiency. Chewy now makes money through advertising via sponsored listings. It could also increase profits as the company grows.
Chewy has a market that extends beyond the retail sector. The company has just opened its very first veterinary hospital and plans to expand into several others by 2024. The company also has developed software that helps third-party clinics run their operations. According to the management, this growth opportunity will expand its market by an additional $11.5 billion.
Chewy’s prospects are not all rosy: it hasn’t experienced customer growth in two years. If it is able to turn this around, its current stock value could be an excellent opportunity. The Motley Fool has shares in Chewy and recommended it.
You Fool!
F.W. F.W. Are interest rates heading lower soon?
The Fool replies: It looks as if it, although no one is sure. Federal Open Market Committee of the Federal Reserve meets eight to ten times per year. It decides any change in America’s short term monetary policy.
In March, the most recent committee meeting, the interest rate was left unchanged. This is mainly because, although inflation has dropped from its recent highs, it still does not reach the 2% annual goal. The consumer price index measured inflation at 3.2%, which is slightly higher than average over the last century.
Many expect that the Committee will reduce interest rates this year, assuming inflation continues to fall. These could begin in June with the goal of a federal funds rate that is between 4.5%-4.75% at the end the year. This would be compared to the current 5.5%-5.5%. The federal funds rate (the interest rate that U.S. bankers use to lend each other overnight) could begin as early as June.
D.F. From D.F. What is tax inversion?
The Fool replies: Tax inversions, also known as corporate inversions, occur when an American company is converted into a subsidiary (in another country that has lower corporate taxes) while the U.S. division of the business remains the main entity. The legal move is designed to reduce the tax burden of the U.S. firm, but has also been criticized as stealing significant revenue from the U.S. Medtronic is a good example. It bought Covidien, an Irish healthcare concern in 2015, and now has its legal headquarters in Ireland.
The Fool’s School
Few of us are able to pick stocks with confidence. Many people find it more logical to invest in stocks through mutual funds, or exchange traded funds, which are close relatives. ETFs are funds that can be traded like stocks, and have no minimum investment.
Actively or passively managed funds are available. Financial professionals actively manage funds, which scour the world of investment options to find the best investments for the fund. They evaluate and choose securities as well as decide when to purchase and sell. The passively managed funds usually track an index and aim to achieve the same returns (less fees), by holding the same securities.
For example, an S&P 500 Index Fund will own most of or all the stocks within the S&P 500, and it should produce a similar rate of return. These index funds require less management work, since they only need to replicate a defined index or group of securities.
The fees and performance of these funds can vary greatly. These are some suggestions for selecting funds.
Fees are important. Passively managed funds have lower fees. The Investment Company Institute reports that the average annual fee (expense ratio) for stock mutual funds was 1.11 percent in 2023, although some were as high as 2%. A 1.11% fee per year will cost $111 on a $10,000 investment. Index funds have low expense ratios, often below 0.2% or even less than 0.1%.
You’re absolutely right if you think index funds are attractive. The best part is that they tend to perform better than their active-managed counterparts. Over the last 15 years, for example, 88% all mutual funds of large companies have underperformed S&P 500. The S&P 500 has a long history of delivering returns that average around 10% per year.
Vanguard S&P 500 ETF is a good option to consider, with a cost ratio of only 0.03%.
My Dumbest Investment
A.W. : When I graduated from college, my most “what was you thinking?” investment occurred. Cold callers from the boiler room contacted my employees and convinced them to buy some stocks. It’s so long ago that I can’t remember the name.
With $700 in my pocket from a real job, I invested it. It took a few of us some time to realize that the tripled (or even more!) return on investment was not real. The promise of a tripling (or more!) of the stock within a year is merely slick marketing and has no real basis. The position was sold for a loss of only 20% and I watched the stock plummet over the following year, to an overall loss of 100%.
My lessons in stock picking came from phone calls and random investors. I also learned that investing is not possible without due diligence, or a strategy.
The Fool replies: You learned some great lessons. It’s important to do so early, as you can lose less than 20%.
Financial Industry Regulatory Authority warns: “Boiler rooms, which are typically run as outbound contact centers, feature high-pressure pitches by promoters who target retail investors to make highly speculative – and often fraudulent – investments. This goes beyond just phone calls. Today’s boiler room also uses more modern methods to reach out to potential investors. These include messaging apps and social networks. Yikes!
What am I?
My roots go back to 1866, when the Anglo Swiss Condensed Milk Company was founded and 1867, when a new baby food product was developed. The merger of the two companies in 1905 led to my formation. I was able to become a major global dairy company during World War I. My recent market value was $270 billion. I am based today in Vevey (Switzerland). About 270,000 employees work for me. I operate in 188 different countries, and have more than 2,000 brand names, including Aero, Carnation Coffee-Mate DiGiorno Gerber Haagen-Dazs KitKat Maggi Perrier Purina One Sanpellegrino. More than $90 billion is earned by me annually. What am I?
Don’t remember last week’s question? You can find it Here is a link to the article.
Answer from last weekScholastica