Q: Why haven't my ConocoPhillips shares done better this year? They had been great. -- R.M., via the Internet
A: A Oil and gas price movements are the overriding consideration for this company, one of the nation's largest oil companies and refiners.
It also must cope with oil-producing nations that can extract better contracts from it than before energy prices began their dramatic run.
ConocoPhillips, the result of the 2002 merger of Conoco and Phillips, owns a 20 percent equity stake in Russia's Lukoil, giving it access to significant hydrocarbon reserves but also political risk.
Meanwhile, it is in talks with Iraq about possible projects, perhaps in partnership with Lukoil. In China it is battling a windfall tax on oil sales, while in Venezuela the government's national oil company has taken over as operator of its projects.
ConocoPhillips earned a record $15.55 billion last year, yet it must constantly battle larger competitors. Earnings were up 8 percent in the first quarter, thanks mostly to the sale of assets.
Shares of ConocoPhillips (COP) are down 3 percent this year. Maybe they need a breather since, as you noted, they rose 24 percent last year, 34 percent in 2005, 32 percent in 2004 and 35 percent in 2003, when adjusted for stock splits.
The quarterly dividend was boosted to 41 cents a share from 36 cents, and the company intends to repurchase as much as $4 billion of its common stock this year. Warren Buffett's Berkshire Hathaway has taken a 1 percent stake in the company.
With the world oil market still volatile enough to indicate high prices, the consensus analyst rating on ConocoPhillips shares is "buy," according to Thomson Financial. That consists of six "strong buys," five "buys," eight "holds" and one "underperform."
Regarding global warming, the firm intends to increase spending on alternative energy research to $150 million this year. It was the first major U.S. oil company to call for a federal greenhouse-gases-emission cap. It is believed across-the-board federal regulations would be more advantageous to energy companies than a patchwork of state laws.
ConocoPhillips earnings are expected to decline 16 percent this year, versus the 8 percent drop predicted for the major integrated oil and gas industry. Next year's earnings are expected to be flat, versus a roughly 2 percent gain projected industrywide. The five-year annualized growth rate of 9 percent compares with 8 percent for its peers.
Chief Executive James Mulva, who received a $1.5 million salary last year, also pulled in about $30 million from exercising previously awarded stock options and stock awards.
Q: Is Baron Growth Fund worth my investment? --C.R., via the Internet
A: Portfolio manager Ron Baron, a proven stock-picker, likes young, inexpensive, undiscovered companies he can hold for a long time.
Technology stocks are not his bag, because he doesn't think their product cycles last long enough to become the long-term holdings he favors. He has shown a preference for casino and gaming stocks.
The Baron Growth Fund (BGRFX) is up 10 percent over the past 12 months and its three-year annualized return is 14 percent. Both results rank in the top one-fourth of small growth funds.
The fund, which was closed for a year before being reopened to new investment in August, is not the pure small growth fund some investors might be seeking. To cope with its larger asset base, it has increased its number of stocks and added more mid-cap stocks.
"We don't recommend Baron Growth Fund because the $6 billion asset size makes it difficult for its small- and mid-cap manager to maintain success of the past, though those who already own it should probably stick with it," said Kerry O'Boyle, analyst with Morningstar Inc. in Chicago. "For those who do own it, you can use it to balance your larger-cap holdings."
Baron, who looks for stocks that he thinks can double in price during the next five years, has run this fund since its inception in 1994 and also manages Baron Asset Fund. He emphasizes firms with quality management and keeps in contact with the executives of companies whose stock he owns.
Nearly one-third of the fund's portfolio is in consumer services, and almost one-fourth is in financial services. Top holdings were recently Jefferies Group, CB Richard Ellis Group, Four Seasons Hotel, Dick's Sporting Goods, Amerigroup, Arch Capital Group Ltd., First Marblehead, Station Casinos, Manor Care and Edwards Lifesciences.
This "no-load" (no sales charge) fund requires a $2,000 minimum initial investment and has an annual expense ratio of 1.31 percent.
Baron settled charges of stock-price manipulation with the Securities and Exchange Commission in 2003. He neither admitted nor denied wrongdoing.
Q: I am interested in laddering my bonds and certificates of deposit. How do I go about doing this? --D.F., via the Internet
A: The ladder, a concept often used by financial planners, involves building a portfolio of bonds and/or CDs that typically mature one year after the other. This insulates you from interest rate fluctuations and permits you to take advantage of positive rate moves when possible.
You would have a portfolio of short-, mid- and long-term instruments. As a result, your money is not locked in just one lump-sum instrument for a prolonged period. You can protect your portfolio and have better control of your cash flow.
For example, if you purchase instruments coming due in two, three, four and five years, you can move to benefit from higher rates when your shortest-term investment comes due.
"First decision is the length of the ladder, and, while we typically do a 10-year ladder, you could do any length you want," said Harold Evensky, a certified financial planner with Evensky & Katz in Coral Gables, Fla., noting that CDs may not offer as may different durations as bonds do. "You must also decide the nature of the investments, such as whether they will be tax-exempt municipals, and what the quality of the bonds will be."
Andrew Leckey is a Tribune Media Services columnist. E-mail him at email@example.com.