I'm thinking about getting back into tech stocks and buying shares of eBay Inc. What is the outlook for this company?
- S.B., via the Internet
There's plenty of money to be made in online auction sales of everything from fishing rods to cookie jars, from digital cameras to sporting events tickets. It's a business with strong cash flow and no inventory requirements.
The question is how far and fast 9-year-old eBay can continue to expand and how it will fare against an increasing number of competitors such as Amazon and Yahoo.
Its game plan isn't infallible, for it did shut down its unprofitable Japanese auction business. It also has substantial marketing costs.
The share price of eBay (EBAY) has changed little this year after gains of 91 percent last year, 1 percent in 2002 and 103 percent in 2001.
The world's largest Web marketplace has expanded beyond collectibles into larger categories such as motor vehicles, computers and consumer electronics.
It recently raised the fee charged to list the most expensive items on its site by 45 percent and is also relying on more fixed-price merchandise sales.
There are an increasing number of drop-off stores operating under a variety of names that charge a commission to handle eBay auctions.
Meanwhile, eBay is expanding internationally. Its United Kingdom and German units are now contributing nearly one-fourth of company sales.
The $1.5 billion purchase of PayPal in 2002 gave it the top online payment system. It also launched PayPal Europe Ltd. early this year. The company has settled a lawsuit against it by a software company that alleged PayPal had violated a patent governing personalized e-mail links.
It handily beat analyst expectations that it would earn $142.5 million in its fourth quarter and predicts revenue of more than $3 billion for this year, $100 million more than its estimate of a few months ago.
The consensus rating on eBay stock is between a "buy" and a "hold," according to First Call, a Boston research firm. That consists of six "strong buys," 10 "buys," seven "holds" and two "strong sells."
Earnings are expected to increase 43 percent this year, compared with the 15 percent increase forecast for the retail industry.
Next year's expected rise is 36 percent vs. 15 percent projected industry-wide.
The forecast is for a 37 percent five-year annualized growth rate vs. 14 percent expected for its peers.
It recently made a deal with Microsoft Corp.'s MSN Internet service that permits MSN users who personalize their home pages to monitor their eBay activities.
I own shares of two mutual funds that recently announced they are closing to new investors. Should I view this as a positive announcement? What effect will this have on the funds?
- C.W., Geneva, Ill.
Bigger isn't always better. Mutual funds close the door to new investment so they can better cope with the asset size to which they have grown.
Of 11,000 available funds, 3 percent are currently closed to new investors. Funds often give 30-day notice, though in some cases it's done without warning. They usually remain closed about a year.
The positive spin is that fund management is more concerned with capably managing money from current shareholders than with attracting new money. Some popular funds become so unwieldy in size that it becomes difficult to move money around to buy enough stocks, especially if they're in a niche market segment.
"The portfolio manager may think the market is high and frothy, doesn't see much to buy and realizes shareholders don't like stock funds that hold a lot of cash," said Don Cassidy, senior research analyst with Lipper Analytical in Denver.
"Once in a while, however, a fund announces it is closing to get a burst of money from investors who will decide to jump in while they still can."
While many funds don't perform as well immediately after they close, that's probably because hot funds always cool off at some point.
I've owned Pioneer Mid-Cap Value Fund in my retirement account since 1998. What's your opinion of this fund?
- M.G., Bolingbrook, Ill.
No need to wear a seat belt when investing in this fund. It provides a steady ride and few surprises.
The $1.3 billion Pioneer Mid-Cap Value Fund (PCGRX) rose 39 percent over the past 12 months to rank in the top one-third of mid-cap value funds.
The fund's three-year annualized return of 10 percent places it above the mid-point of its peers.
Except for two years of poor returns after he took charge of the fund in early 1997, portfolio manager J. Rodman Wright has a decent track record.
He looks for companies that have fallen out of market favor but have strong fundamentals.
Wright is supervised by John Carey, Pioneer's head of portfolio management and one of the nation's most experienced value managers. This fund used to be small-cap but was retooled into a mid-cap fund in 1998.
"I wouldn't say this fund is a rising star or that it will lead the pack, but it is fairly reliable and I find its consistency very appealing," said Marketa Larsenova, analyst with Morningstar Inc. in Chicago, who also likes the fact that its manager has been in place for a while. "It is for a fairly conservative investor who wants to diversify a portfolio that's tilted toward large-cap stocks."
Expect slightly above-average performance in stock market rallies and decent returns in market downturns, she said.
Nearly 20 percent of Pioneer Mid-Cap Value Fund's assets are in financial-services stocks, with significant concentrations in health care, business services and industrial materials.
Top holdings recently wereFoot Locker, Phelps Dodge, Cigna, American Standard Co., Telephone and Data Systems, CVS, Triad Hospitals, NCR, PMI Group and W.W. Grainger.
This 5.75 percent "load" (sales charge) fund requires a $1,000 minimum initial investment. Its annual expense ratio is 1.3 percent.
Andrew Leckey is a Tribune Media Services columnist. E-mail him at email@example.com.