Securing Future like Grace Croner did

[Lily]

Here is what is in Chicago Tribune today:

http://www.chicagotribune.com/news/local/northnorthwest/ct-met-lake-forest-donation-0304-20100304,0,2424456.story

Soem excerpts are as follows:

Quote
****
Woman who lived frugally donates $7 million to alma mater. Groner's estate, which stemmed from a $180 stock purchase she made in 1935, was worth $7 million.
....

It was early in her time there that she made a decision that would secure her financial future. In 1935, she bought three $60 shares of specially issued Abbott stock and never sold them. The shares split many times over the next seven decades, Marlatt said, and Groner reinvested the dividends. Long before she died, her initial outlay had become a fortune.

Groner never wed or had children — the sister of one prospective groom blocked the marriage, Marlatt said — but with her gregarious personality she had plenty of friends. She remained connected to Lake Forest College, too, attending football games and cultural events on campus and donating $180,000 for a scholarship program.

 But Groner was interested in doing more, so two years ago she set up a foundation to receive her estate. Stephen Schutt, Lake Forest's president, knew of the plan for the past year, but had no idea how large the gift would be until after Groner passed away Jan. 19.

The foundation's millions should generate more than $300,000 a year for the college, enabling dozens more students to travel and pursue internships.

****
Unquote

My question to knowledgeable Americans would be: is it true that $7 millions grew up from the three shares bought in 1935 for $180?

Or this is more in the story that has not being said?

[kievstar]

Lilly,

She had preferred shares but Abbot labs is a 30 billion dollar company and very proftiable.  Back in 1930's she probably had a very high percentage of the companys stock.  Company was small back than.  My research paper in college was on comparing Abbot to Baxter.  I made an investment in Abbot about 20 years ago for 1,000 usd.  It pays more than that per year in divided now and worth more than 20 times. 


http://www.abbott.com/global/url/content/en_US/10.30:30/general_content/General_Content_00069.htm

[myrddin]

Unquote

My question to knowledgeable Americans would be: is it true that $7 millions grew up from the three shares bought in 1935 for $180?

Or this is more in the story that has not being said?

It's true.

But some things to keep in mind: it took 75 years, Abbott is a very successful company with tremendous growth in many of those decades, $180 in 1935 was not a small amount of money (it would be about $2,800 in modern dollars), and she didn't take any money out while it was growing.

Weddings and children might have eaten into that 7 million long before it got that big.

[viking]

Lily

Take Microsoft for example. In 1986 it did its initial public offereing for $21. After all the splits, one share is now worth 288 shares. Today that one share purchased in 1986 is worth about $8,000. If you had bought 1,000 shares for $21,000 back then, you would have about $8 million in the bank now. And thats only over 23 years, not 75.

[tfcrew]

Then someone may wonder why Wall St had to get 'bailed out'.. 

[Chicagoguy]

It is interesting to me that you are reading the Chicago Tribune 

[Lily]

Chicagoguy, I found the article on yahoo main page. Then I made a search in google, and the above page was the first that I found.

Does the newspaper has some special meaning among the Americans?

Last but not least, I was a student in this city and walked between Ukrainian Village and Loop every day

[Jumper]

Lily - I saw that on Yahoo news as well, pretty cool.
and she donated it to be used for students for foreign study..   

I was in Ukrainian village today!!!!!!!!
 (and the loop )

[Gylden]

Crooks, swindlers and politicians are resposible for the crisis, not companies such as Abbot. In as far as the current crisis, depending on your fiscal abilities, it can be a fantastic opportunity for investment.
 

[Lily]

What are the fiscal abilities?

[Lily]

I was in Ukrainian village today!!!!!!!!
 (and the loop )

My area was between Walton, Damen and Chicago avenues...shopped at Edmar

[Gylden]

Lily,
Fiscal abilities, what I mean is if you have some available cash and some basic knowledge/interest in investing. There has been a period now, in which good solid companies have been devalued more than they deserve to be, thus creating opportunity for investment.

[Lily]

Thanks! How do you determine whether a company has been valued less than it deserves to be?

[Gylden]

Good question, difficult to answer, but it is part of the ability to be able to read through all of the financial reports for the various companies, along with being in touch with some general principals and trends. There is plenty of reading material on the subject.

[Lily]

two years ago she set up a foundation to receive her estate. 

Guys, could you probably comment for me this sentence? Was Croner unable to receive her own estate without establishing an entity? or did I misunderstand something?

[Shostakovich]

The foundation was probably necessary to disperse the funds.

Were in Chicago?  Where did you study?

Lake Forest - It's a pretty nice place. 

[Lily]

Shosty, answered in PM.

[Turboguy]

Thanks! How do you determine whether a company has been valued less than it deserves to be?

That is something wise people have thought long and hard about for ages. There is no secret formula.  Yahoo finance has a tool that lets you compare PE's across an industry or industries but picking good stocks goes beyond that. 

I have a feeling doing what she did will be harder in the future.  Technology moves so much faster these days and product life cycles are so short buying a few shares of one stock and holding them for 60 years is less likely to work.  Companies that were among those people thought would always be successful and secure such as AT&T and Kodak have shown the fallacy of that.  Still over the years stocks have been a good investment and it is possible to buy some shares in a new company that will make you rich.  Looking at penny stocks specifically with that idea in mind is more likely to make you poor.

Gylden was probably correct that this is a good time in the market.  Last year the opportunities were better but too many were afraid the world was going to end to take advantage. 

Lily, if you have an interest in this kind of thing I would suggest when you get to Canada you subsrive to some financial magazines such as Forbes or Money.  Reading them will give you a much better feel for opportunities.

[Lily]

Thanks for your suggestions guys.   

Turboguy, I do have an interest in finances but it feels like I need some more basic education in the matter. My drawback is however that I am rather weak in math therefore I am learning financial compliance now, and have registered for an anti-money laundering certification exam. I plan to sit for it even before leaving for Canada.
My guess would be that both Forbes and Money are for rather advanced audience, or?

What are the penny stocks? Did Grace bought the penny stocks, or there were no such definition at that time?

Good time in the market - is it because of crisis, or?

Buying shares in new companies - is it not too risky, as they are new and no one knows whether they may be successful in the market? Also, does being a successful company means that the company always pays dividends to their shareholders? Is it possible to be successful and not to pay any dividends?

[Gylden]

Lily,
Remember free advice is worth what you pay for it!
If you are interested I recommend you get some books and read about successes.
Try this link: http://www.buffettsecrets.com/top-five-books.htm

Some companies pay dividends and some don't, some good companies which normally pay dividends, don't pay dividends in tough times to conserve cash, but it doesn't mean they are unstable. Penny stocks are very risky and not generally good investments, maybe a reward for gambling from time to time.
FWIW

[Chicagoguy]

Lily,

The Chicago Tribune used to be a pretty good newspaper but now is trashy. It was never a great paper but surely OK. Not anymore.  And I had read about this woman also. God bless her.

[Shostakovich]

Thanks for your suggestions guys.   

Turboguy, I do have an interest in finances but it feels like I need some more basic education in the matter. My drawback is however that I am rather weak in math therefore I am learning financial compliance now, and have registered for an anti-money laundering certification exam. I plan to sit for it even before leaving for Canada.
My guess would be that both Forbes and Money are for rather advanced audience, or?

What are the penny stocks? Did Grace bought the penny stocks, or there were no such definition at that time?

Good time in the market - is it because of crisis, or?

Buying shares in new companies - is it not too risky, as they are new and no one knows whether they may be successful in the market? Also, does being a successful company means that the company always pays dividends to their shareholders? Is it possible to be successful and not to pay any dividends?

Penny stocks are those with a low valuation.  Typically, those are offered by new ventures but not always.  There is a psychological element to stock pricing.  If a company's value is $1M then they could have 1 stock on the market at $1M or one million stocks on the market at $1.  The pricing depends on the kind of investor they want to attract.  For example, large priced stocks will typically be taken up only by investing institutions.  The advantage here is that the portfolio will be professionally managed and therefore prices will not ride the ups and downs of the stock market, which, more often than not, are determined by emotions rather than facts.  A large share price, however, has the drawback that it will not attract a large pool of investors, so a company with a large share price may have limited potential for growth.

As for current investing - tricky, very tricky these days.  Some say gold is the only safe place for money, but that is not going to grow.  I spoke about this recently with a fellow who is invested in our company and who also manages money for some 'old money' families in the US.  He said the recent upswing in the market was based on the effect of stimulus money and the fact that many people can't get used to a scaled back way of life.  Productivity is limited by debt.  In financial circles they use the term 'Dead cat bounce' to describe this phenomenon.  Eventually the market will diminish again.  But this is only one perspective.  The gov't and financial experts from industry are more upbeat, but they would be.  When the times change, as they are now, there is always money to be made as the sands shift.  A concept to master in these times might be the short sell, when you bet on a company's stock diminishing. 

[Turboguy]

Companies can make money and grow but not pay dividends.  The idea is that they feel both their own and stockholders interests are best served by using the money to grow the company.

Money is not as technical.  It is more about how to manage finances for people and how to invest, spend wisely, etc.   Forbes gets a little more technical and tends to analyze stocks and companies more.  Both are good and both a little different.

Some fortunes are made in penny stocks but a lot of money is lost as well.  Probably more money is made in penny stocks by those selling them than buying them.

The market dropped very low in the financial crisis.  There were some terrific bargains.  Many stocks have now doubled or more but they are still below where they were in good times.  I guess it depends on if you think things will get better or worse as far as if the market right now is a bargain.

[kievstar]

To make a huge return investing in the fortune 500 companies makes no sense.  You need to identify the future Abbots, Microsoft's, etc which are only 100 million or less in revenue currently. For every microsoft there are 1,000 plus duds.

Once a company gets big hard to keep the share price going.  That is why they tend to pay dividends.

My dad took advantage of the crisis and stocked up on high dividends and safe companies.   Than got the 150% share price increase.  Past year was a good time to double your money and get 15% dividends.

[Gylden]

There is a big difference between trading and investing. Although there are many companies whose stock price has increased several hundreds of percent in the last year. It has been a good opportunity. We will see if the cat is dead or not in the near future.