Vail Resorts could be a black diamond in the rough

The Motley Fool’s Take

Summer might not seem like the best time to think about investing in a ski resort operator, but Vail Resorts offers potential shareholders a tantalizing opportunity. The company has an impressive portfolio of 40 ski properties in the United States, Canada and Australia, having made serial acquisitions to increase its exposure to key regions such as the North East.

As you’d expect, Vail derives much of its revenue from the sale of lift tickets and season passes, as well as equipment rentals, ski and snowboard lessons, restaurants, and resorts. on-site retail operations. In her previous role as chief marketing officer, new CEO Kirsten Lynch helped bolster season pass sales, with the famed Epic Pass becoming increasingly valuable as Vail acquisitions broadened the range of stations that holders pass can visit. Season ticket sales cushion the blow of bad weather, making the business a more reliable generator of revenue and profit.

Vail’s stock has done well in 2021. Still, worries about an economic slowdown and the lingering effects of the pandemic on travel have seen shares fall more than 30% in 2022. With a dividend yield recently higher than 3.6%, Vail Resorts stock offers revenue and growth. potential. This could well be a rough black diamond for investors. (The Motley Fool owns stock and recommended Vail Resorts.)

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ask the fool

From HY in Norwalk, Connecticut: If I want to invest in certain stocks, is there a better day, week or month to buy them?

The madman responds: It’s a market-driven mindset that won’t serve you well.

For best results, do the following: when you’re ready, you can simply start investing regular amounts in a low-cost, broad-market index fund, like the one that tracks the S&P 500. the market is doing – just keep going to invest, preferably for many years.

If you want more control over things and aim for above-average returns, learn to study and evaluate companies and their stocks, and aim to buy into healthy, growing companies when their stocks seem undervalued or reasonably priced. valued. (Undervalued stocks give you a margin of safety.) Then plan to hang in there for years, while they still have promising growth prospects. Whenever you find a great company selling at a good or good price, that’s the best time to buy.

And by the way, when the overall stock market has fallen sharply, as it has recently, it will be much easier to find great bargains.

From TS to Elyria, Ohio: What are “balanced” mutual funds?

The madman responds: Many mutual funds invest primarily in stocks, and other mutual funds focus primarily on bonds. Balanced mutual funds, sometimes called multi-asset or mixed funds, offer a mix of stocks and bonds, spread out according to a specific allocation.

These funds can therefore be a little more stable than single-purpose funds; ideally, they generate both income (from bond interest and some stock dividends) and growth (from stocks). Many fund families offer balanced funds, with different combinations of assets.

school of fools

Most of the stocks you buy have come on the exchange through the initial public offering process. (Other ways include direct deals and SPACs, or special purpose acquisition companies.)

Here’s a simplified IPO example: Imagine that Scruffy’s Chicken Shack is a small, growing private company. However, he wants to grow faster, which means he needs to hire more workers, build more shacks, and invest money in marketing. All of this requires more money than he has on hand.

Scruffy’s can get more money in several ways. He could borrow money from a bank. It could issue bonds, promising to repay bondholders with interest. He might find wealthy people or companies willing to invest in it. Or it could “go public”, usually by issuing shares that will trade in the market via an IPO.

The IPO process typically requires hiring one or more investment banks, which underwrite the stock and bond offerings. The bankers will investigate Scruffy’s business. If they believe the company is worth, say, around $500 million, they might recommend (depending on the needs of the company) that it sell 20% of its business in stock, issuing $4 million shares at a price of $25 per share to raise $100 million.

After the announcement of Scruffy’s IPO, if there is great interest, the bank might increase the opening price. A lack of interest could result in the price dropping – or Scruffy’s might even decide to postpone or cancel the offer.

The investment bank will typically retain around 7% for its services, with Scruffy getting the rest of the proceeds from the IPO. After this point, investors will buy and sell Scruffy’s Chicken Shack shares to each other in the open market, usually through brokerage houses. Scruffy’s won’t get any more proceeds from those 4 million shares – it got its money when it issued them.

Once it becomes a public company, Scruffy’s will be required to file its quarterly results and financial statements with the Securities and Exchange Commission and have its reports regularly audited.

My dumbest investment

From RZ, online: I have three main blunders: I bought shares of General Electric at $39.75 per share and the average cost was reduced to a loss of over $60,000. I sold 1,550 shares of Microsoft at $35 apiece – they are now at $266. I bought Amazon.com at $306 per share and sold at $550 because you shouldn’t be able to make money that fast.

I set myself a new rule: if a stock drops 20%, I sell. If it goes to 100%, I sell half of it and let the rest roll.

The madman responds: Your new rule may prevent you from losing large sums, but it may also limit your winnings. Many big names fell more than 20%, only to rebound later and continue to grow. Shares of Starbucks, for example, fell more than 80% between 2006 and 2008, in single digits (on an allocation-adjusted basis). They were recently at $79 per share – and that’s after a 37% decline from their high of last summer.

Consider making your new ruler a little less rigid. If a stock falls 20%, find out why it fell. If the business is still healthy and successful, consider hanging on. If you have lost faith, sell. If an investment doubles and you expect further growth, consider selling a small portion of it – or, if you’re aiming for maximum gains, none at all.

At a minimum, research and think before acting on your rule.

Who am I?

I was founded in 2002 as a pioneer in video streaming devices. In 2007, my founder took a job at Netflix, and I became a unit there. Netflix quickly turned me into a separate company, retaining partial ownership. In 2008, I launched the first device to stream Netflix. Today, I’m the leading TV streaming platform (in streaming hours) in North America. Last quarter, I had 61 million active accounts, streaming nearly 21 billion hours of content. I also have my own channel now. My name means “six” in Japanese, as I am my founder’s sixth company. Who am I?

Don’t remember last week’s question? Find it here.

Answer to last week’s quiz: Zwilling JA Henckels

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About Geraldine Higgins

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