Corning shareholders benefit from company’s wise warning

Corning (NYSE: GLW) has gotten a bad rap recently. Hit by rumblings of a falloff in LCD TV demand, Corning’s stock price has slumped nearly 25 percent over the summer, returning to levels from early 2006.

In its most recent earnings report, though, management continued arguing that things aren’t nearly so bad. LCD TV sales were up 30 percent in the first half of the year, boding well for the supplier of glass that goes into these sets.

Corning defended shareholder interests in another way recently. Its management warned investors that a Canadian outfit is trying to get folks to sell their shares at below-market prices by way of a “mini tender.” The company tries to dupe unwary investors by mailing them official-looking documents offering to buy their shares for less than market price (roughly 5 percent less than they’d get by simply asking their brokerage to sell their shares).

But while an obviously dumb proposition, the offer is hardly an anomaly. In fact, we’ve been warning investors about such duplicitous “bargains” for years. Mini tenders have been offered recently for shares of AMD, Boeing, ConocoPhillips and Marathon Oil, among others.

Kudos to Corning for helping to warn the unwary. As for the rest of us, it’s time to wise up – let’s quit falling for mini tenders, and help put an end to these schemes.

Ask the Fool

Q: What are the advantages and disadvantages of I Bonds? – J.J., Portland, Maine

A: I Bonds are savings bonds offered by the federal government, with interest payments adjusted to keep up with inflation. They’re attractive because of their limited risk (the U.S. government isn’t likely to leave town overnight), tax advantages (you’re taxed on their interest only when you cash them in), small investment amounts (as little as $50), and protection against inflation. Interest can even be taken entirely tax-free, if it’s used for educational expenses.

On the downside, you’ll lose some moolah if you cash out early (within five years), and over the long haul, money tends to grow much faster in stocks than in bonds. In fact, long-term money can grow twice as rapidly in stocks. According to Ibbotson Associates, between 1925 and 2004, stocks grew at an annual average rate of more than 10 percent, while bonds grew at between about 4 and 5 percent.

I Bonds can protect your money, but they’re not likely to make you rich. Learn more about bonds at www.bondsonline.com and www.investinginbonds.com. Note that some corporations, such as Sallie Mae, Fannie Mae, HSBC and Protective Life, have also issued inflation-adjusted bonds.

Q: How can I find out if my former employer is covered by the Pension Benefit Guaranty Corp.? – P.S., Seattle

A: The Pension Benefit Guaranty Corp. is a federal agency that protects pension benefits in private traditional pension plans (but not defined contribution plans, such as 401(k)s). Note that if it takes over your employer’s pension plan, you may receive reduced benefits, as it doesn’t cover health and wellness benefits, for example. Learn more at www.pbgc.gov or by calling (202) 326-4000.

My dumbest investment

In the early 2000s, I was the King of Traders (sarcasm intended), making great returns by frequent trading. Two sweet little stocks caught my eye, and I began to invest in WorldCom and Corning. The downturn in the market seemed a great opportunity to buy more of these stocks, and I did, focusing mostly on WorldCom. As a result, my loss in WorldCom wiped out the entire profit I had made trading in one year. Also, being gun shy after the WorldCom loss, I didn’t load up on Corning at $2, missing its run to the high $20s. I now keep my trading activities separate from my investments and only use a small sum. I regard trading as a recreational hobby. – Rob, online

The Fool Responds: You were right to view a falling market as an opportunity to find good stocks on sale. But WorldCom just wasn’t a good stock. You would have done well to diversify your investments more, not putting such a big chunk of your wealth in WorldCom. Viewing frequent trading as a hobby and not as responsible investing is very smart.