Ask the Fool
Who’s buying?
<strong>Q:</strong> When lots of investors sell a stock, its price drops. I get that. But who is buying all those shares? <strong>— P.L., Santa Barbara, Calif.</strong>
<strong>A:</strong> There’s generally a buyer for every share that’s sold. You can think of the stock market as an auction, where stocks trade at prices buyers are willing to pay and sellers are willing to take.
So, if the Free Range Onion Company (Ticker: BULBZ) is implicated in an accounting scandal, many investors might decide to sell, but many buyers, thinking the stock now is worth a lot less, only might buy at that much lower price. A company could be facing terrible troubles, but at some point, its shares will be low enough some investors think they’re a bargain.
<strong>Q:</strong> I bought some shares of Rite Aid a few years ago for about $100 each. They now are trading below $10 per share. I don’t want to sell them for such a loss. Will the stock ever recover? <strong>— F.E., Springfield, Mo.</strong>
<strong>A:</strong> Try not to think about your purchase price, how much you’ve lost or how the stock has behaved in the past. What matters most in this situation is what you expect of the stock from this point on.
Rite Aid has been struggling for years, and its future is uncertain. If you think it will rebound significantly, hang on to your shares. If you think it will grow in value slowly, you might sell and invest in a company that’s growing more quickly. If you think it will stagnate or fall further, it’s smart to sell — and move the proceeds into a stock you do believe in. You should be invested in only your best ideas.
Fool’s School
Save money by shopping smarter
Shopping is a favorite pastime for many, but it’s also a way to spend more money than you need to, slowing your progress toward your financial goals. Here are some ways to shop smarter:
• Buy only what you need. Stop shopping for entertainment, to alleviate boredom or to cheer yourself up. There are less costly ways to achieve those results.
• Take only as much money as you need to the store. If your wallet is full, there’s a good chance you’ll spend more than you initially intended.
• Leave your credit card at home, if possible. Studies show people tend to spend more when charging purchases.
• If you can spend responsibly with credit cards, then use ones that offer cash back, rewards or discounts at the retailers you frequent most often.
• Seek discounts and use coupons. Wait for items on your list to go on sale. Clip coupons for your grocery shopping. When shopping online, do a quick search for the retailer’s name and “coupon” — you often will end up with a coupon you can use when checking out that will give you a better price or free shipping. Sites such as RetailMeNot.com and Coupons.com offer hundreds of coupon codes and printable coupons.
• Sleep on it. Often, if you wait a day or two before buying something you want, the urge to have it will pass. Another trick when shopping online is to put what you want in your shopping cart and then close the window; there’s a good chance the company will contact you and offer you a deal.
• Don’t shop when you’re hungry. Not only is that likely to make you buy many more groceries than you need but it also has been shown to make people buy more in general.
Get money-saving tips and guidance on credit cards, banking, loans and more at TheAscent.com.
Foolish Trivia
Name that company
I trace my roots back to the 1874 founding of a machine shop in Milwaukee. I began by making metal parts for baby carriages. Within a few decades, I was the world’s largest maker of bicycle parts. By 1910, I also was North America’s largest maker of automobile frames, supplying Ford, Cadillac, Oldsmobile and more. In 1921, I launched the world’s first fully automated automobile frame assembly plant. I was innovative in fusing glass to steel and patented a glass-lined water heater in 1936. Today, I’m a global water technology leader, offering water heaters, boilers and water purification equipment. Who am I?
<strong>Last week’s trivia answer</strong>
I trace my roots back to 1964, when a couple incorporated the Musket Corporation and spent $5,000 to lease a vacant gas station. In 1972, I opened my first Country Store, pairing a convenience store with self-serve gas. In 1981, I launched my first interstate travel stop. Today, based in Oklahoma City, I boast more than 490 locations in 41 states, serving truckers and drivers 24 hours per day. I offer everything from snacks to roadside assistance. I employ more than 25,000 people and am privately owned. My companies include Gemini, Trillium and Speedco. Who am I? (Answer: Love’s Travel Stops & Country Stores)
The Motley Fool Take
Vertex pharmaceuticals
Investing in biotech stocks can be quite risky, with the potential for clinical failures, regulatory setbacks and new competitors. But for risk-tolerant long-term investors, Vertex Pharmaceuticals (Nasdaq: VRTX) is worth a look.
The company dominates the cystic fibrosis market with its three approved drugs — Kalydeco, Orkambi and Symdeko. Those drugs allow Vertex to treat about 39,000 patients.
Meanwhile, Vertex is hoping to earn U.S. Food and Drug Administration approval in March 2020 for its VX-445 triple-drug combination, which should expand the addressable CF patient population to 68,000. That would leave only 10 percent of CF patients without a treatment — but Vertex is partnering with CRISPR Therapeutics on gene-editing therapies to help those patients, too.
Vertex also is hoping to move into treating other diseases, with experimental drugs in development targeting rare genetic diseases such as alpha-1 antitrypsin deficiency, beta-thalassemia, Duchenne muscular dystrophy and sickle cell disease.
In addition, Vertex recently spent $950 million to acquire Semma Therapeutics in the hope of scoring what would be its greatest achievement of all — curing Type 1 diabetes. (The Motley Fool has recommended Vertex Pharmaceuticals.)