Q. I've owned Motorola Inc. shares for five years. I've been happy with them for a while, but I remember when they weren't so hot and worry if this could happen again. What do you think? - K.C., via the Internet
A. Performance lately has been sharp as a razor. Sales of the ultraslim, upscale Razr cell phone handset helped profits more than triple to $1.75 billion in the most recent quarter. New Razr-style models also appear promising.
Motorola says its global share of the rapidly growing cell phone market has risen to 18.6 percent, compared with 13.3 percent about a year ago. That ranks second behind No. 1 Nokia Corp.'s share of more than 30 percent. Cell phones represent half of Motorola sales, with additional income from infrastructure for wireless and cable networks.
Shares of Motorola (MOT) are up 44 percent this year, following gains of 37 percent last year and 62 percent in 2003. Investors must be realistic about intense competition in the cell phone industry that led to its stock declining 42 percent in 2002, 26 percent in 2001, and 59 percent in 2000.
No maker of cell phones has been infallible because the telecommunications industry and phone styles have unpredictable cycles. For example, sales of Rokr, the combination phone and digital music player Motorola introduced in partnership with Apple Computer Inc., are disappointing. In addition, Motorola's profit per handset lags behind some competitors.
Nonetheless, Ed Zander, a Sun Microsystems Inc. veteran who became chief executive in 2004, has Motorola focused on meeting the challenges of a volatile high-tech business of more than 100 competing manufacturers.
The balance sheet was improved by spinning off its Freescale Semiconductor Inc. chipmaking division, and JPMorgan Chase & Co. reportedly is seeking a buyer for the automotive electronics unit. The company recently received a contract to provide low-priced $30 cell phones to developing countries such as India, Nigeria, Bangladesh, Yemen and Kenya.
Motorola, which assembles some handsets in India, is eliminating 1,900 jobs at 29 U.S. and foreign locations in its supply chain. Total workforce remains at 68,000 because of added engineering and marketing positions. The impact of the Sprint purchase of Nextel Communications, Motorola's largest customer, will be monitored closely.
Its stock receives a solid consensus "buy" recommendation from Wall Street analysts, according to Thomson Financial, consisting of 12 "strong buys," 16 "buys" and nine "holds."
Earnings are expected to grow 30 percent this year, versus 21 percent forecast for the communication equipment industry, according to Thomson Financial. Next year's projected 13 percent rise compares to 23 percent expected industrywide. The predicted five-year annualized increase of 12 percent compares to 15 percent expected for its peers.
Sad note: Geoffrey Frost, the former Nike Inc. executive who as Motorola's chief marketing officer launched hip campaigns such as "Hello Moto," recently passed away.
Q. What's the better choice as an investment, Barnes & Noble Inc. or Borders Group Inc.? - K.T., via the Internet
A. Barnes & Noble stock is having a better year, but the prospects of book retailers aren't a real page-turner.
Although it's a steady business even in a weak economy, the industry's low profit margins preclude dramatic results. These are conservative investments in companies that count every penny to keep balance sheets healthy.
This year even the impressive sales magic of J.K. Rowlings' "Harry Potter and the Half-Blood Prince" hasn't been enough to erase some investor concerns. In their most recent quarters, Barnes & Noble earned $327,000 as costs of a new distribution center took their toll, and Borders posted a loss of $14.1 million due to store remodeling expenses.
Though both firms sell online, most of their business depends on brick-and-mortar stores. They face strong online competition, and even publishers are selling some books directly over the Internet. Increasing numbers of customers are willing to wait to buy books used.
Emphasizing the domestic book market, the nation's largest bookseller, Barnes & Noble (BKS), has seen its shares rise 25 percent this year after a 36 percent gain last year.
This operator of nearly 700 Barnes & Noble bookstores and more than 150 mall-based B. Dalton Bookseller stores gained cash by selling its majority stake in the GameStop video-game retailer, though that gave up some growth potential. It owns online site www.barnesandnoble.com.
Shares of Borders (BGP), which places greater emphasis on international business and music sales than B&N does, are down 18 percent in 2005 following a 16 percent rise in 2004. It operates more than 500 Borders book and music stores, more than 600 Waldenbooks stores primarily in malls, and 33 Books etc. stores in the United Kingdom.
The megastore atmosphere of coffee shops and soft chairs dominates and, in fact, B&N has become the nation's second-largest coffee house. As a result, mall-based B. Dalton and Waldenbooks units have lagged.
Consensus Wall Street recommendation among analysts on shares of both B&N and Borders is a "hold," the single "buy" recommendation being given to B&N, according to Thomson Financial.
For B&N, that consists of one "buy," six "holds," one "sell" and one "strong sell." It compares to Borders' eight "holds," one "sell" and one "strong sell."
B&N earnings are expected to decline 0.5 percent in its fiscal year that ends in January, while the Borders forecast is for a 15 percent decline. The industrywide forecast is for a 13 percent increase.
Next year's projection for B&N is a 9 percent rise compared to 12 percent forecast for Borders. The industrywide expectation is 16 percent. The five-year annualized forecast for both of these booksellers and their peers is around 14 percent.
Q. I own shares of Janus Enterprise Fund. Should I be worried about it? - J.T., via the Internet
A. It has had some dark days. Like a number of Janus funds, it was hammered in the bear market because it owned too many volatile technology, telecommunications and media stocks.
But Jonathan Coleman, portfolio manager the past 3 1/2 years, has made it more moderate, value-conscious and diversified.
Shares of the $1.7 billion Janus Enterprise Fund (JAENX) are up 18 percent the past 12 months to rank in the top one-third of mid-cap growth funds. Its three-year annualized return of 21 percent puts it in the top one-fifth of its peers.
Due to past problems, the five-year annualized decline of 5 percent ranks in the lowest one-fifth of its category.
"Coleman looks for growing, quality companies with dominant market positions," said Gareth Lyons, analyst with Morningstar Inc. in Chicago. "Mid-cap stocks are more volatile than stocks of more mature companies, so an investor's time horizon should be five to 10 years."
Portfolio turnover, once as high as 100 percent annually, is now about 35 percent. The largest position in any one stock won't exceed 3 percent of total assets, and riskier holdings have been unloaded.
Lyons considers this fund suitable to be a "supporting player" in an individual's portfolio, though the lowering of its risks makes it less likely to lead in growth stock rallies.
About 17 percent of Janus Enterprise Fund's assets are in health care, with business services, technology hardware and financial services other major concentrations. Its largest holdings were recently EOG Resources, Celgene, Nextel Partners, Lamar Advertising, Kinder Morgan, T. Rowe Price Group, Dean Foods, Advanced Micro Devices, Ball and Fisher Scientific International.
This "no-load" (no sales charge) fund requires a $2,500 minimum initial investment and has a low annual expense ratio of 1.03 percent.
Q. I'm not wild about the performance of my T. Rowe Price Diversified Small Cap Growth Fund. What do you think? - K.R., via the Internet
A: While investment diversity is a good idea, owning more than 300 stocks as this fund does may dilute its best ideas. Rarely does one stock name represent more than 1 percent of its total portfolio.
The fund hasn't stood out in any market and hasn't delivered less volatility or more value than its peers.
The $82 million T. Rowe Price Diversified Small Cap Growth Fund (PRDSX) is up 15 percent over the past 12 months to rank in the upper 17 percent of small growth funds. Its three-year annualized return of about 19 percent puts it at the midpoint of its peers.
"Seeing as how it is aiming for stability and has so many risk controls, it should be doing better," said Karen Wallace, analyst with Morningstar Inc. in Chicago. "As a result, we'd recommend either T. Rowe Price New Horizons Fund (PRNHX) or an index fund tied to the Russell 2000 Growth Index over this fund."
Small Cap Growth Fund portfolio managers John Laporte, Donald Peters and Paul Wojcik, all on board since 2000, are committed to its small-growth investing style.
More than 20 percent of its assets are in health care and another 17 percent in business services. Consumer services and technology hardware are other significant concentrations. Largest holdings are Advisory Board Co.; Corporate Executive Board Co.; SkyWest Inc., Computer Programs & Systems; Nextel Partners "A"; Avid Technology; Respironics Inc.; UTI Worldwide Inc.; Station Casinos Inc.; and Protein Design Labs Inc.
The "no-load" (no sales charge) T. Rowe Price Diversified Small Cap Growth Fund requires a $2,500 minimum initial investment and has an annual expense ratio of 1.25 percent.
Q. Can I keep making contributions to my individual retirement account after I retire? - K.P., via the Internet
A. You can continue to contribute to your traditional IRA so long as you receive some sort of earned income in retirement, such as from consulting or part-time work. But you can no longer make contributions to that traditional IRA as of the year you turn 70 1/2.
"With a Roth IRA, on the other hand, you can continue to make contributions at any age, so long as you have earned income," said Beverly DeVeny, IRA technical consultant for Ed Slott's IRA Advisor newsletter in Rockville Centre, N.Y.
In addition, while you must start withdrawing from a traditional IRA at age 70 1/2, a Roth IRA owner never has to take withdrawals. That's why some individuals opt to convert their traditional IRAs to non-deductible Roth IRAs that permit tax-free distributions.
"Most of the time when you run the numbers it makes sense to convert to a Roth IRA, but you do have to pay tax on the amount that you convert," DeVeny said. "So consider the conversion question in the context of how it affects the taxability of your Social Security income and whether you'll lose deductions and credits."
Q. I've heard about TreasuryDirect. How does it work? - R.S., via the Internet
A. TreasuryDirect (www.treasurydirect.gov) is the government's online system for buying and holding government securities such as Treasury bills, notes, bonds, savings bonds and TIPS (Treasury inflation-protected securities).
You can open the account without buying anything initially. You need a Social Security number; a driver's license or state ID; a checking or savings account with account and routing numbers; your e-mail address, and a Web browser that supports 128-bit encryption.
"You can actually link to several accounts and choose which to debit or credit when a security is redeemed or matures," explained Steve Meyerhardt, spokesman for the Bureau of the Public Debt in Washington. "There's no charge for maintaining the account, but if you want to sell marketable securities before maturity there's a $45 fee."
It's possible to set up your TreasuryDirect account so you reinvest when your securities mature, Meyerhardt said. With savings bonds, you can also set up sub-accounts for children or other relatives.
Additional information on AIM Leisure Fund: A reader recently asked about his AIM Leisure Fund no-load Investor Class shares, and it was noted in the column that those shares originally sold by Invesco are closed to new investors. AIM Investments adds that AIM Leisure Fund's more recent A, B, C and R shares are open to new investors.
Editor's Note: Andrew Leckey answers questions for Bull & Bear readers only through the column. Address inquiries to Andrew Leckey, #184, 369-B Third St., San Rafael, Calif. 94901-3581, or by e-mail at andrewinv@aol.com.
