Red Can, Blue Chip Halfsies Underpriced Ipos Do You Need A

Ask the Fool Underpriced IPOs How can an IPO be Q“underpriced”? — D.D., Kenosha, Wisconsin Companies traditionally “go Apublic” — introducing their Fool’s School withdrawn for qualifying college My Smartest Investment The Motley Fool Take shares for trading on the public expenses, they’re also free of federal stock market — via initial public taxes. Each plan has one custodian Halfsies Red Can, Blue Chip offerings (IPOs). Do You Need and one beneficiary, though many Here’s how it typically works: a 529 Plan? people can contribute to the account My smartest investment move If you’re looking for steady The company hires an investment for the future student’s benefit. was investing half of my first year’s income from a stock, pop open If you’re saving money for edu- bank (like Goldman Sachs), Every state but Wyoming has one salary. — S.S., online some shares of Coca-Cola (NYSE: cational expenses, you may want which may bring in some other or more 529 savings plans, and you The Fool Responds: That’s a KO). Coca-Cola stock was recently to look into 529 plans, which come sporting a healthy dividend yield of banks.The company and the can choose to save with just about super-smart move, indeed! A com- in two key varieties: prepaid tuition over 3.1%, and that payout has been banks decide how they’ll price any of them — you don’t have to mon rule of thumb is to sock away plans and college savings plans. increased for 59 consecutive years. the shares. Let’s say they’ve use your own state’s. (Compare 10% of your income, but that’s With prepaid tuition plans, you often far too little for those starting Coca-Cola might seem like a risky determined the company is worth plans at SavingforCollege.com: See pay for all or some of the cost to invest later in life. investment, since soda consumption $10 billion and they’re selling what investment options each offers, rates have been declining in recent of college tuition, usually at an Young folks might get away with 10% of it to the public to raise what fees each charges and what years. However, via acquisitions in-state public school, essentially saving only 10% annually, but if $1 billion (less the banks’ fees). other perks or benefits each has.) and internally developed products, locking in today’s lower rates. (If you’re able to save 50% even once, They might, say, sell 100 million The funds in the 529 account can be the company has been expanding its the student decides to attend an out- or a few times — perhaps while shares at $10. used at more than 6,000 U.S. and living with your parents or room- beverage portfolio into fruit juices, of-state or private school, though, On the first day of trading, foreign colleges and universities. mates — it can be an extremely teas, sports drinks, bottled water, you may lose some of the value of coffee and even alcoholic drinks. initial buyers will get their A key advantage of 529 plans powerful financial move. That’s the account.) It’s also refreshed its flagship shares at the offering price. over other education savings because the dollars you invest There’s a separate Private Col- sodas with lower-calorie versions, That raises the expected sum accounts is that they have high earliest have the longest period in lege 529 Plan available, too, with which to grow for you. new flavors, smaller serving sizes, for the company ($1 billion, in contribution limits — often nearly 300 private colleges and Imagine having invested $10,000 and new variants such as Coca- our example). After that, the allowing an account value of Cola Energy and Coca-Cola With universities participating. Note that when you’re 25; it can grow at an shares will be traded on the $300,000, $500,000 or even more. Coffee. These moves, along with 529 prepaid tuition plans are not annual average of 8% over 35 years market, directly between buyers (Read up on tax issues if you want an investment in Monster Bever- guaranteed by the U.S. govern- to be nearly $148,000 when you’re and sellers, without raising any to contribute more than $15,000 in age and the takeover of coffee ment, so look into risks, and see if 60. If that $10,000 is invested at more money for the company. If a single year.) age 40, though, it will only have company Costa Limited, enabled any plans you’re considering are there’s great demand, buyers will You can learn more about 529 20 years to grow, reaching about Coca-Cola to aggressively evolve guaranteed at the state level. and expand its business. be willing to pay more, sending plans and other savings plans $46,600 by age 60. With savings plans, you simply The company’s revenue declined the price up. at CollegeSavings.org and It’s not enough to just be accumulate money in an account 11% in 2020, as the pandemic shut When a company’s shares soar MappingYourFuture.org/saving . saving aggressively; you need over time, where it grows free of to be investing all that money down restaurants and other busi- on its IPO day, that suggests that The Securities and Exchange federal taxes (and often free of state effectively, too. Long-term dollars nesses that served its drinks. This they were underpriced; it could Commission website — SEC.gov year, analysts expect Coca-Cola’s taxes, as well). When funds are are likely to grow fastest in the have set a higher initial price, — offers 529 information, too. stock market, and a low-fee broad- revenue and earnings per share to and that would have generated market index fund, such as one rise 11% and 10%, respectively, more money for the company. that tracks the S&P 500 index, is a as the pandemic eases and busi- nesses reopen. The stock recently *** Name That Company simple and powerful way to build wealth through stocks. Starting seemed reasonably valued, with a Do I need to work for I trace my roots back to San an investment portfolio early can forward-looking price-to-earnings Qa company to buy its make the rest of your financial life (P/E) ratio near 24, and it should Francisco in 2007, a time when be a fairly safe investment for retir- stock? — L.A., Greenwood, hotel rooms were scarce due much easier and less stressful, with South Carolina funds available for down payments ees and others looking for steady to a big conference. Two of my and retirement. growth and income. Not at all. Any of us can co-founders lived there and were Abuy any stock that’s publicly traded — as long as we broke, so they rented out air mat- LAST WEEK’S TRIVIA ANSWER can afford it. You’ll probably tresses in their apartment to three I trace my roots back to 1903, when my namesake bought a strug- need a brokerage account, conference attendees. Today I’m a gling curtain rod company in Ogdensburg, New York. I grew over though. (Learn more about bro- major force in the hospitality arena, with time, in part via dozens of acquisitions. Today I’m based in Atlanta. With a market value recently topping $11.5 billion, I’m a global con- kerages at Broker.Fool.com.) 4 million people having hosted more than sumer brand powerhouse, with some names you might know: Rub- However, if you work for a 800 million guests around the world. I bermaid, Paper Mate, Sharpie, Dymo, EXPO, Parker, Elmer’s, Cole- publicly traded company, you went public via an IPO in late 2020 and man, Marmot, Oster, Sunbeam, FoodSaver, Mr. Coffee, Rubbermaid might be granted shares of was recently valued at nearly $109 billion Commercial Products, Graco, Baby Jogger, NUK, Calphalon, Contigo, stock or stock options, or you First Alert, Mapa, Spontex and Yankee Candle. I also used to own Jos- might be able to buy its shares — more than Marriott International, Hilton tens, the class ring company. Who am I? (Answer: Newell Brands) at a discount. Worldwide, Hyatt Hotels and InterContinental Hotels Group combined. Who am I? Want to Invest? Email us at [email protected], and we’ll Want more information about stocks? send you some tips to start investing. Sorry, we can’t provide Send us an email to [email protected]. Think you know the answer? We’ll announce it in next week’s edition. individual financial advice.