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Spokane, Washington  Est. May 19, 1883
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Motley Fool: Taxes and accounting

Intuit should be able to maintain momentum, especially in a more favorable economic environment.  (Courtesy photo)
Intuit should be able to maintain momentum, especially in a more favorable economic environment. (Courtesy photo)

Intuit is best known for its market-leading tax preparation software TurboTax and accounting software QuickBooks. Meanwhile, Intuit is working to deepen its customer relationships by expanding its offerings.

For instance, it provides payroll and payment processing software to small businesses with its QuickBooks platform, and it connects consumers with loans, insurance and credit cards through Credit Karma. Intuit also offers “live” versions of its tax preparation software (TurboTax Live) and accounting software (QuickBooks Live), which allow users to instantly connect with financial professionals.

That strategy continued to pay off in the quarter that ended Jan. 31, with revenue increasing 14% year over year to $3 billion, while net income per share climbed 71%. Those results are particularly impressive because Credit Karma revenue dropped 16%, due in part to rising interest rates. Management offered bullish projections, expecting revenue to grow 8% to 9% in the third quarter, and announced a 15% dividend increase. Its dividend recently yielded 0.8%.

Intuit should be able to maintain its momentum, especially in a more favorable economic environment. (The Motley Fool owns shares of and has recommended Intuit.)

Ask the Fool

Q. What’s the “index effect” in the stock market? – R.J., Greensburg, Pennsylvania

A. First, understand that companies are routinely added to or removed from various indexes – sometimes because they merge with or are acquired by another company, or because they grow too big or small for the index they’re in.

The index effect refers to a change in the price of a stock after it’s added to, or removed from, a major stock index. If a company is added to the S&P 500 index of 500 of America’s biggest companies, its stock price seems likely to rise. After all, there are trillions of dollars invested in index funds. So when that stock is added to the index, all those funds tracking the index will be buying shares; you might expect that kind of demand to push up the stock price, at least for a while. (The reverse would be true for stocks removed.)

Interestingly, though, while the index effect has topped 7% in the past, it has nearly disappeared over the past decade; it’s now well below 1%.

Q. How can I invest in Taco Bell? – P.C., Ashland, Kentucky

A. Technically, you can’t, because Taco Bell belongs to parent company Yum! Brands – which also owns KFC, Pizza Hut and the Habit Burger Grill.

You could invest in Yum! Brands, though. Lots of companies are actually subsidiaries of other companies. For example, PepsiCo owns Quaker Oats, Lay’s and Gatorade, while Restaurant Brands International owns Burger King, Popeyes and Tim Hortons. Nestle owns Purina and Gerber; owns Zappos and Whole Foods; and a company called Stellantis is home to the Chrysler, Jeep and Maserati brands.

My dumbest investment

My worst investing move was buying shares of General Motors in the late 2000s. I figured it was too big to fail, as they say, and snapped up some shares after they’d fallen quite a bit. – T.C., online

The Fool responds: General Motors’ history has had a lot of ups and downs since its founding in 1908. The company weathered many boom and bust economic periods and even profited during the Great Depression, gaining market share. For many years, it was the world’s largest automaker, by far – though it lost the No. 1 title to Toyota Motor Corp. in 2009. Some see its stock today as appealingly priced, with a price-to-earnings (P/E) ratio recently in the mid-single digits, big sales of trucks and promising electric vehicle initiatives.

However, the “down” periods have caused big trouble for many investors. In 2009, after trying hard to stay afloat, and despite accepting billions in government loans, GM filed for bankruptcy protection. It emerged (as is common in bankruptcies) a newly reorganized company with new shares of stock – and holders of its old shares lost their entire stakes.

GM was indeed seen as too big to fail by many, and that’s why the government stepped in to help it survive. But ensuring a company’s survival doesn’t mean doing well by all its shareholders. It’s generally best to steer clear of companies facing any meaningful risk of bankruptcy.

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