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SOURCE: Charleston Gazette
SUPPLIER: IntellX
DATE: 05-25-1999
HEADLINE: SUCCESSFUL INVESTING: Federal Express rapidly gaining from Web
Andrew Leckey
Q. With e-commerce growing at the rate it is now, and a lot of Internet stocks quite expensive and volatile, what's your opinion of Federal Express as a company that should benefit from all of this? - H.K., via the Internet
A. It's absolutely, positively worth considering as another play on the Internet.
This famous delivery company that holds nearly a 50 percent market share in the U.S. package industry is gaining business from increased two-day orders placed for a myriad of products on the Web and also increasing business through its own Web site (www.fedex.com). It handles more than 60 million electronic transmissions daily.
In addition, it recently signed a multiyear agreement to offer delivery services on Netscape Communication Corp.'s Internet portal. This should simplify Internet transactions with streamlined shipping and tracking.
Operating income for FDX Corp., the parent of Federal Express, rose an impressive 59 percent in its recently completed third fiscal quarter, and the company declared a two-for-one stock split. That was thanks in part to an increase in Internet traffic, successful marketing of its high-yield overnight express service and greater efficiency derived from the 1997 purchase of the RPS Inc. small- package ground delivery firm.
The weakest portion of FDX business remains international, suffering losses due to troubled overseas economies. The company derives about 28 percent of its revenue from outside the U.S. Strongest international growth is priority service outbound from Asia, while U.S. outbound priority service is stagnant.
In addition, a number of Wall Street analysts would like to see the company quantify its specific gains from the Internet.
The stock of FDX is currently rated between a "buy" and a "hold" by the Wall Street analysts who cover it, according to the Boston- based First Call Corp. research firm. That includes two "strong buys," two "buys" and 10 "holds."
A 6 percent earnings growth rate is expected for this fiscal year and 17 percent is the projection for next fiscal year. The firm's five-year annualized growth rate is expected to be 12 percent, according to First Call.
RPS was named the 1999 "Parcel Delivery Carrier of the Year" by the National Small Shipments Traffic Conference and Logistics Management and Distribution Report magazine. FDX also owns Roberts Express Inc., the largest surface-expedited carrier in North America, and Viking Freight Inc., a less-than-truckload carrier in the western U.S.
Q. I started investing in mutual funds for my daughter's college education when she was a year old. I started with a few thousand dollars and invested in the Growth Fund of America. I contribute $1,000 more toward shares each month. She's now 10 years old and the account is worth $30,000. Should I continue with this fund or cut back a bit? - M.P., Indianapolis, Ind.
A. First of all, congratulations on your consistent investing with your daughter in mind. This fund, sold exclusively through financial advisers, turned out to be a solid choice for your money, and unless you face additional financial stress that must be addressed, you should probably stick with it.
To put a lid on volatility, Growth Fund of America keeps 10 percent or more of assets in cash and patiently emphasizes the stocks of value-priced companies. A good example is Time Warner, whose stock the fund bought and held through a difficult 1995 and 1996. The stock's eventual turnaround in 1997 and 1998 paid off handsomely.
This $18.6 billion fund gained 33 percent over the past 12 months to rank within the top 2 percent of all large-capitalization stock funds that blend growth and value. Its three-year annualized return of 27 percent placed it in the upper one-third of its peers.
Growth Fund of America's top sectors are broadcasting and publishing; electronic components; and data processing. Its top holdings were recently Time Warner, AT&T, Viacom, Fannie Mae, Comcast, New Corp., Philip Morris, Texas Instruments, Cendent and Applied Materials. It requires a 5.75 percent "load" (initial sales charge) and $1,000 minimum initial investment.
"Cable stocks have particularly paid off the past two years, though this fund has done very well over the long term as well,"observed Kunal Kapoor, equity fund analyst with the Morningstar Mutual Funds investment advisory. "Although it has a 5.75 percent load, that isn't a major problem because most of its investors are in for the long term, and it has a low annual expense ratio of 70 percent."
Leckey answers questions only through the column. Address inquiries to Andrew Leckey, "Successful Investing," 98 Henry St., Department 183, Brooklyn, NY 11201, or by e-mail at success inv@aol.com.
Q. I inherited several railroad bonds with interest coupons attached. They were due in 1981. Would they be any good now? - H.R., Keysville, Va.
A. Those bonds spent a lot of time just gathering dust and no additional interest.
You can redeem the bonds and will likely get paid but you unfortunately won't get any interest beyond the date they matured, which in your case was a very long 18 years ago. Of course, if the railroad has gone out of business, the money may or may not be there to pay the bondholder.
"The bonds will have the transfer agent listed on them, to whom you should write a letter initially to find out about them," explained Robert Beck, a principal with the Edward Jones in St. Louis. "Hold onto the certificate until you find out the procedures to follow, since you don't want to lose it."
Older bonds were issued in unregistered or "bearer" form. The holder of bearer bonds must clip the coupons semiannually and deposit them with the bank. Bonds issued after July 1, 1983, must be registered. With registered bonds, the purchaser's bonds are registered with the bond trustee and certificates are issued to the purchaser. Interest is paid to the address of record.
Registered bonds are now being replaced by book-entry bonds. With these, the purchaser is entered and a master certificate issued to a bond depository, which is responsible for crediting the bank and broker accounts, which in turn credit their clients. The purchaser is not issued a certificate of ownership for safekeeping.
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