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Catalysts

THE MOTLEY FOOL
Ask the Fool

Published: July 22, 2021

Q: What are company "catalysts" that some investing articles refer to? -- F.S., Summit Township, Michigan
A: They're events or developments that can give a stock's value a big push -- up or down. Even the expectation of a catalyst can affect a stock. Examples of catalysts include a surprisingly good (or bad) earnings report, a company's entry into a big new market, new regulations that help (or hurt) business, the approval (or rejection) of a company's new drug, the launch of a promising new product, an acquisition of another company, a legal victory or a housing boom.
Investors will often buy into a company based on expectations of one or more catalysts. For example, a company may be expected to open locations in China soon, or perhaps a restaurant chain will soon start serving breakfasts as well as lunch and dinner. It can be helpful when evaluating a company to learn about any catalysts that could eventually make shares surge.
Q: Are there any lists of the companies that best serve all their stakeholders, such as employees and investors? -- R.N., Lewiston, Maine
A: The "Forbes Just 100," compiled annually with partner JUST Capital, polls thousands of people and ranks more than 900 major companies on how well they serve five groups of stakeholders: employees, communities, customers, shareholders and the environment. The top 12 companies in the 2021 list are: Microsoft, Nvidia, Apple, Intel, Alphabet, JPMorgan Chase, Salesforce.com, AT&T, Cisco Systems, Adobe, International Business Machines (IBM) and Bank of America. The top 100 in the list were found to have an average of 56% higher total shareholder return over the past five years, use 123% more green energy, and pay their median workers 18% more, among other things.
Fool's School
You May Need Professional Advice
According to the 2021 Retirement Confidence Survey, only 29% of respondents felt "very confident" that they would have enough money on which to live comfortably throughout their retirement. That's troubling.
Many of those folks would do well to consult a financial professional for help with saving, investing and planning for their retirement. There's a good chance that you'd benefit from professional advice, too -- even if you're still relatively young.
There are important financial issues to consider and deal with throughout our lives, especially around key life events, such as marriages, divorces, purchases of homes, the birth of children, paying for college, the death of parents, and so on. A good adviser can help you prepare for or deal with such events in ways that can minimize headaches and save you money. They can also help you save and invest effectively for retirement, deal with retirement accounts when you change jobs, avoid or minimize estate taxes, advise you on insurance you may need -- such as disability, long-term care and umbrella -- and maximize your ability to care for those who depend on you, such as children or elderly parents.
See? That's a lot to deal with, and most of us don't know enough to make smart decisions about all those issues. There's no shame in seeking professional help from a good adviser. You don't want to fork over a meaningful percentage of your assets for guidance, but if you're charged a flat fee of several hundred dollars (or more), there's a good chance the cost will be more than offset by the savings.
We favor fee-only advisers, as opposed to those who collect commissions for selling you financial products. You can find a fee-only personal financial adviser near you at NAPFA.org or a certified financial planner near you at LetsMakeAPlan.org. At sites such as SEC.gov/check-your-investment-professional and CFP.net/verify-a-cfp-professional, you can check many advisers' records, verifying credentials and looking for red flags such as disciplinary actions.
A good adviser can lead to a lot of peace of mind.
My Dumbest Investment
Waiting in Vain
My dumbest investment move has been holding onto a loss, hoping it will turn into a gain. -- M.E., online
The Fool responds: That's a common blunder, and it can be a costly one. Imagine that you've invested in the Two-Legged Chair Company (ticker: OOOPS), with 100 shares bought at $60 each. You invested a total of $6,000, and now those shares are worth a total of $2,000. Ouch! You're down $4,000. You haven't technically lost that, though, if you're still holding on to the shares; instead, you have an unrealized "paper loss." But hanging on in the hope that those shares will rebound enough to get you back to breakeven can be a big mistake.
If a holding drops significantly, it's worth looking into why it did so. Sometimes it's merely because the overall market is down. Other times, the company may be facing a temporary or long-lasting problem. If its problem is a lasting one, why hang on? It's not that likely to recover.
Instead, you could sell -- realizing the $4,000 loss -- and move the remaining $2,000 into another stock. Reinvest that money in a company that you do have a lot of confidence in, that is performing much better than your loser stock, and that has a much brighter future. You'll be more likely to make up that lost $4,000 in this new holding than in the old one.
Foolish Trivia
Name That Company
I trace my roots back to 1976, when my founder opened a flower shop in Manhattan, New York. Within a decade, he had 13 more. In 1986, he changed my phone number -- and my name. I went digital early, debuting on CompuServe and AOL in the early 1990s, and launching my own website in 1995. Today, I'm based in Carle Place, New York, with a recent market value of over $2.1 billion. I encompass many businesses, such as Cheryl's Cookies, FruitBouquets.com, Harry & David, Moose Munch, PersonalizationMall.com, Shari's Berries, Simply Chocolate, Stock Yards, The Popcorn Factory and Wolferman's Bakery. Who am I?
Last Week's Trivia Answer
I trace my roots back to the 1827 charter of the South Carolina Canal and Rail Road. A railway I acquired in 1916 built the world's longest railroad bridge across Lake Pontchartrain in Louisiana in 1883. I fully dieselized my fleet by 1953. Today, headquartered near the world's largest naval base and NATO's North American headquarters, I feature some 19,500 route miles in 22 states and the District of Columbia. Serving every major eastern seaport, I boast "the most extensive intermodal network in the East." I'm now the product of a 1982 merger between several railroads. Who am I? (Answer: Norfolk Southern)
The Motley Fool Take
A Digital Advertising Specialist
The Trade Desk (Nasdaq: TTD) is in the digital ad business, offering a platform through which "ad buyers can create, manage and optimize digital advertising campaigns across ad formats and devices." It's been having a great run, with its shares rising more than fourteenfold over the past four years. They've fallen recently, though, presenting an attractive entry point for long-term, risk-tolerant investors.
The company has been a rather consistent performer, with its revenue rising more than 300% and its net income increasing by over 1,100% over the past four years. Even in 2020 -- when digital advertising took a temporary hit as uncertainties surrounding COVID-19 led some ad buyers to reduce spending or even pause their campaigns -- The Trade Desk saw its revenue increase 26% year over year. And as the year ended, its momentum picked up sharply. "Those brands spending more than $1 million on our platform in 2020 more than doubled from a year ago," The Trade Desk said in its fourth-quarter 2020 earnings call.
While shares of The Trade Desk have risen sharply in recent years, the company has plenty of room for long-term growth. Its launch of operations in India bodes well for that, as does its just-debuted "Solimar" platform. Those buying and holding Trade Desk shares for many years may be very happy they did. (The Motley Fool owns shares of and has recommended The Trade Desk.)
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