The Online Investment Program
by Karen Finley
Welcome to The Online Investment Program. This column was created as a tool to help you attain your financial goals. Money has often been a vehicle to realizing many dreams whether it is starting a part-time business, developing a relaxing hobby, or attaining that special dream home. Most people have fantasized about having that nest-egg to bring these dreams to life. The Online Investment Program represents that stepping stone to attaining the lifestyle that is rightfully yours. It educates you, the average consumer, about trading electronically in the stock market. Many individual investors are trading at home these days and want total, virtually instantaneous, control of what stocks they buy and/or sell. But how do you get started and know what stocks to invest in?
Each month we will profile a business on the rise. We will also give you the opportunity to ask questions about the ever-changing frontier of trading electronically. Stocks of some of well-known companies are often so expensive that the average individual investor is unable to comfortably afford purchasing a sufficient number of shares. We'll help you explore other, more affordable choices. Many investors pay particular attention to companies that have just gone public.
Initial Public Offerings.
When a business is ready to expand, it may decide to allow the general public an opportunity to purchase its stocks. This is called an IPO or Initial Public Offering. For example, a new entry in the world of public offerings is 1-800-FLOWERS. COM INC. It's ticker or trading symbol is (flws).
1-800-FLOWERS.COM, Inc. is the leading e-commerce supplier of flowers and gifts. It offers more than 1,500 varieties of fresh-cut and seasonal flowers, floral arrangements, gift baskets, gourmet foods, garden accessories, and home furnishings. Customers are given the choice of purchasing products on-line, calling toll-free, or visiting retail stores. The Internet is the company's fastest growing sales channel. By March 28, 1999, online revenues were at $30 million which represented an increase over the same period in the previous fiscal year. 1-800-FLOWERS.COM, Inc.'s objective is to continue being the leading e-commerce provider of floral products for the home and garden. The company intends to meet this objective by:
- extending the company brand from flowers and gifts to home products
- strengthening customer relationships through enhanced features and user-friendly tools on its website
- continuing to upgrade its technology infrastructure, and
- improving its fulfillment capabilities
O.K. We've had an exciting month. Now, let's review.
Two very different companies went public this past June that focus on our everyday needs. They are Skechers U.S.A., Inc. (sky) and Dr.Koop.Com, Inc. (koop).
Skechers U.S.A., Inc. designs contemporary/casual footwear. Management believes that Skechers' strategy of offering a balanced variety of quality basic footwear and seasonal fashions with trend-setting styles at competitive prices gives Skechers its fundamental customer appeal. Skechers' footwear is fundamentally targeted to the active, youthful lifestyle of the 12-25 year old age group. The company strives to develop a collection of basic and fashionable goods across a wide variety of styles, while still maintaining a diversified base and controlling the growth of its distribution channel. Skechers sells its line internationally in over 120 countries and has major international distributors. The company has realized rapid growth since its inception. From 1997 to 1998, Skechers has experienced a 102.7% increase in net sales and earnings.
DrKoop.Com, Inc. (koop) is an Internet-based consumer health network which consists of a consumer-focused interactive website that provides users with comprehensive healthcare information. The site allows its users to make decisions about managing their personal healthcare with understandable, relevant, and timely information. One of its founders is former U.S. Surgeon General, Dr. C. Everett Koop. Real-time medical news and information are provided by established sources such as Dartmouth Medical School, Reuters, the National Institute of Health, Multum Interactive Inc., and the American Cancer Society. The website offers a directory which rates over 650 other health-oriented websites. The site's support groups allow users to:
- exchange information
- gather news, and
- attain knowledge in a secure anonymous, on-line environment
Support groups are hosted by selected mediators with experience both in the health topic and online forum moderating. The company launched its website in July 1998. By February 1999, it had attracted over 2.6 million users.
Proven Track Record
Many investors would like to examine companies with an established performance record with the market. Well let's take a look at Hot Topic (hott) and Polycom, Inc. (plcm). Hot Topic belongs to the textile-apparel clothing industry. It is a mall based specialty retailer of music-licensed and music influenced apparel, accessories, and gift items for young men and women primarily between the ages of 12 and 22. The latest quarterly returns showed an 80% increase in revenue and 50% one year revenue growth.
Polycom, Inc. finds its home in the processing systems and/or products industry. It develops, manufactures, and markets audio, video, and data conferencing products that facilitate meetings at a distance. It showed a 108% increase in the latest quarterly returns. It also boasts of a 122% increase in one year revenue growth. Both companies show a strong performance track record for investment consideration.
What are people saying about online investing?
Although online trading saves investors money and time, you should never take it for granted. Always do your homework before making that decision to buy or sell. Know the risks. A new investor education web page has been designed by the government to inform the average investor. It's located at www.sec.gov/invkhome.htm It includes detailed information and tips on online investing. It also gives some ways to detect fraud both on and off the Internet, and other important information on saving and investing.
Questions & Answers
Q. Why would a stock close at one price and then open at a different price the next day?
A. Stocks will often open at a lower or higher price if a major news event has taken place once the market has closed for the day. Volatile news events can affect certain industries or even particular companies. Negative situations have a tendancy to make investors nervous which leads to the selling or dumping of that particular stock. When positive news is released, the stock prices are often adjusted to meet the new demand of that stock. The popularity of "after hours" trading can also affect the stock price once the traditional market has closed.
Q. I've been hearing a lot about "after-hours trading". How can I get involved?
A. The market normally closes at 4 p.m. weekdays. However, some online services are
taking advantage of the huge demand of individual investors who want to trade after 4 p.m. Datek Online offers extended hours trading from 8 a.m. to 8 p.m. eastern time which is before and after traditional hours with limit orders on Nasdaq stocks only. Discover Brokerage which is the online trading service of Morgan Stanley Dean Witter & Co. and Dreyfus which is a division of Mellon Bank Corp. both offer trading in two hundred stocks on the New York Stock Exchange and Nasdaq from 6 p.m. to 8 p.m. E*trade and Instinet offer after-hours trading which was once available to professional brokers only. Now, online services are rushing to take advantage of the current individual online investing phenomenon.
Q. Some stocks move very fast. How can I protect myself from price volatility?
A. To avoid buying or selling a stock at a price higher or lower than you want, place a limit order rather than a market order. A limit order is a bid to buy or sell a stock at a specific price. A sell limit order can only be executed at the limit price you've selected
or higher which is great for you. A buy limit order can only be executed at the limit price that you've specified or lower. This is still great for you. When you place a market order, you can't control the price at which your order will be filled.
How do you know if you're ready to invest? Do your homework. There are many books that help you prepare.
- The Energy of Money by Maria Nemeth, Ph.d is a book that serves as a spiritual guide to financial and personal fulfillment. Thousands of people have learned how to build a powerful relationship with money and bring their dreams to light. It leaves many readers feeling energized. Dr. Nemeth draws upon years of experience in combining spiritual and practical techniques to develop a formula for releasing financial energy to achieve personal goals and financial wealth. This book provides proven systems of money management through twelve principles. With easy-to-follow exercises and worksheets, Dr. Nemeth walks the reader through a financial process that will assist in attaining those financial dreams. Maria Nemeth, Ph.d is former clinical professor in the Dept. of Psychiatry at the University of California – Davis School of Medicine. She is also a former columnist for the Sacramento Business Journal.
- Great Companies, Great Returns was written by Jim Huguet. Jim's simple strategy "Buy companies, not stocks" is the foundation of the book which focuses on the lasting strength of companies. It is designed for investors who are frustrated with taxes paid on excessive trading. It also places emphasis on investments that generate a handsome return on investment (ROI). This approach helps you identify the best qualities in a company when investing. After working many years with Fortune 500 companies, Huguet used his expertise to research which companies were likely to give the best performance. The twelve characteristics he discovered are the model of his groundbreaking strategy. This book gives valuable investment advice and shows investors how to build a winning portfolio.
Online Trading Centers.
When looking for an on-line service, consider the features that speak to your investing needs. This month, The Online Investment Program looks at E*TRADE. E*TRADE offers its customers the following features:
- Free real-time stock quotes
- Fully–customizable portfolio mgr.
- Personalized market views
- News, charts, and research
- Market commentary
- Trades from $14.95
- Unlimited check writing
- Access to 4,300+ mutual funds
- No-fee IRAs
- Bond trading and research
- Stock alerts
- Access to subscribe to IPOs
- Company profiles
- Earnings estimates
Points to Ponder.
It is in a hopeful manner that this information will encourage collaboration, build teams, and empower you to act. It's about developing a vision and energizing that vision. It is also with sincere optimism that The Online Investment Program will empower and challenge you to create the dedication and discipline needed to attain your financial destiny.
©1999 by Karen Finley. All rights reserved.
Due to the tremendous response to this column, we cannot answer every question, but will try to answer most. This article does not constitute an offer to sell, solicit, or market a stock or business described above in any jurisdiction, nor is it responsible for any action taken based on this column. The Online Investment Program does not offer trading, accounting, or legal advice. The information presented above is based solely on the opinions of the author. Please consult your business and legal advisor before making any major decisions regarding your financial future. Send all questions and comments to [email protected]