The Motley Fool: Every Sunday, useful tips on investing
Q: How can I know exactly which stocks my mutual fund has invested in?
A: Funds don’t reveal what they buy and sell each day, but they do generally publish monthly or quarterly lists of their holdings. You’ll find these reports on the fund company’s website. You can also click over to Morningstar.com to look up all kinds of information on various funds.
Remember, though, that while a fund may have many shares of a company as of the end of last quarter, it might have sold off most of them by the time you’re reading the quarterly report.
Also, some fund managers engage in “window dressing,” loading their funds near the end of a quarter with hot stocks that have soared recently, so that they’ll look smart.
Q: Do I have to buy 100 shares at a time of any stock?
A: Most brokerages don’t restrict how many shares of stock you can buy. You can buy 13, or 72, or even just one share. Pay attention to what percentage of your investment is going to commissions, though.
If you’re buying 10 shares of a $40 stock for $400, but are paying a $25 commission to your broker, then that represents more than 6 percent of your investment, which is too costly. (25 divided by 400 is 0.0625, or 6.25 percent.)
Aim to pay 2 percent or less in commissions. If you buy $1,250 of stock in a company and pay a $25 commission, that’s just 2 percent.
Many brokerages these days charge commissions of $10 or lower per trade. With a $400 investment, an $8 commission would be just 2 percent.
Dear Fool: My dumbest investment was buying TTM Technologies without a stop-loss order on it. I ended up down 59 percent.
The Fool responds: TTM Technologies is a top maker of printed circuit boards, and it has seen its stock surge and plunge over the past year.
Its fans like its diverse customer base and how it offers customers rapid one-stop manufacturing. Doubters don’t like its debt load or cyclical volatility.
It can make sense to place stop-loss orders on stocks, which will trigger an automatic sale if the stock falls by a set percentage.
While a stop-loss order can prevent a big loss, it can also prevent a big gain, kicking you out of a solid stock just because it had a temporary hiccup. (Though remember, you can always buy back into the stock later.)
With a forward price-to-earnings (P/E) ratio near 8, well below its five-year average of 33, the stock seems appealingly valued.
Stock in U.S. aluminum giant Alcoa (NYSE: AA) gained 24 percent in 2013, and the stock has more room to run. (That 24 percent actually underperformed the S&P 500, which gained about 32 percent in 2013.)
Aluminum producers have suffered lately from low aluminum prices, but there are reasons to be optimistic about Alcoa’s future.
Our global economic slowdown did depress demand, but it also created a production deficit that should widen over the coming years. The rebounding auto industry also bodes well for Alcoa.
Meanwhile, Alcoa is branching out into specialty markets that offer higher profit margins and should drive future earnings.
Alcoa is grabbing opportunities such as producing lightweight alloys for airplanes, and it recently snagged a $110 million contract from Airbus. It’s also looking at the housing industry, where new window products can boost energy efficiency.
Alcoa’s value-add businesses now account for 57 percent of total revenues and 79 percent of after-tax operating profits. It’s looking to add more than $2 billion in new revenues to its business, though a good part of its plan comes from firming prices in the marketplace.
With a forward-looking price-to-earnings (P/E) ratio well below its five-year average and a 1.2 percent dividend yield, Alcoa seems likely to reward long-term shareholders.