Motorola rings up good news
Motorola (NYSE: MOT) is enjoying a surprisingly bright outlook. This might be the start of a new era in Motorola’s long history – powered by Google’s Android phones.
Recent third-quarter earnings per share of 1 cent put Motorola in the black by the skin of its teeth – a huge improvement over the year-ago period’s $0.18 loss per share. Sales rolled in at $5.4 billion, some 27 percent lower than last year. Management is bullish about the future, though.
Verizon will be selling the Motorola Droid handset, which might be Motorola’s first real hit since the early days of the RAZR phone. (The Motorola Cliq is offered by T-Mobile, but T-Mobile has a relatively small subscriber base.) The Droid features a camera with flash and a slide-out keyboard and has been generating some positive buzz.
Motorola would not have come close to positive earnings without an aggressive cost-savings program. The savings are running ahead of plan by $100 million this year for a total cost reduction of $1.9 billion. If those iPhone-challenging Droids hit the ground running with some traction, that low-cost operating model should pave the way for some nice, juicy earnings in coming quarters. That is, until Motorola spins out the handset division into a separate company.
Ask the Fool
Q: Do any mutual funds mirror Berkshire Hathaway’s investment style? – D.G., online
A: Be careful. Some people erroneously think of Warren Buffett’s company as a kind of mutual fund, since he owns stock in a bunch of companies, such as Wells Fargo, Kraft, Nike and ConocoPhillips. It’s true that we can buy and sell the same stocks Buffett does, but we can’t do so at the same time, as his moves are only revealed via occasional required filings with the Securities and Exchange Commission. More important, Buffett’s company is much more than its stocks. He owns dozens of entire companies, such as See’s Candies, Fruit of the Loom, Benjamin Moore, Dairy Queen and GEICO, and those can’t be duplicated. The company is also heavily involved in insurance.
That said, Buffett’s style is to seek out good values in great companies, and there are some fund managers out there with similar orientations, such as those who run the Fairholme (FAIRX) and Sequoia (SEQUX) funds. You might also just buy stock in Berkshire Hathaway itself, as we have at The Motley Fool.
Q: I want to move my Smith Barney account (with around 20 stocks) to a discount brokerage so that I can trade stocks inexpensively. Will I be able to simply have my portfolio transferred to the new brokerage en masse? Or will I have to sell everything, taking a hit on each transaction, and start from scratch with the new account? – B.N., Charleston, S.C.
A: Fear not – some simple paperwork will have your holdings transferred to the new brokerage without selling them and generating any capital gains.
My dumbest investment
I thought I was a pretty good investor. I’ve always done well with stocks that I’ve researched. But last year I listened to my neighbor and a guy I met at the races. The stocks they recommended were CHEAP, so I bought 500,000 shares of one and 200,000 shares of the other, and lost more than 80 percent of my investment. I learned to stay with what I do best. I do all my homework on The Motley Fool and Scottrade Web sites. To date with these two tools (even during the market’s fall), I am up over 25 percent on my total portfolio. – R.F. Hass, Houston
The Fool Responds: Those must have been penny stocks, notorious for being volatile. They often end up hyped up by some profiteer before they crash. Investors are often lured by the idea of owning, say, 500,000 shares, and they may think that a 2-cent share is so cheap that it can only go up. Wrong. It can become a 1-cent stock, or worse. Remember that a $200 stock can still be cheap and can double. Avoid those pennies.