Pay for stockbrokers, CEOs; dumbest investment; taking stock of Las Vegas Sands.
Ask The Fool
Payday for brokers
Q: How are stockbrokers paid?
A: They’re generally paid by salary, commissions on sales or a mix of both, depending on the company they work for.
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Those who depend heavily on commissions can end up actively (and needlessly) generating trades in your account. That’s called “churning,” and it can cost you. We’d rather see brokers paid flat salaries, with bonuses for results that outperform the market averages.
Learn more at sec.gov/investor/brokers.htm.
CEO pay defies gravity
“What goes up must come down.”
Yet CEO pay doesn’t appear to be subject to the same laws of physics that govern the rest of the rational world.
In fiscal 2010, total realized compensation of CEOs in the S&P 500 rose by a median 36.5 percent.
GMI, the leading independent provider of corporate-governance ratings and research, has released its ninth annual CEO Pay Survey, noting also that extra perks awarded to S&P 500 leaders rose 11 percent in 2010.
This increase in CEO pay at least partially relates to the stock market’s 15 percent gain in 2010, but investors bidding up stocks over a short period doesn’t reflect true long-term corporate performance at specific companies.
GMI pointed out that CEO pay among companies in the Russell 3000 index, which reflects the overall stock market, rose 27 percent in 2010. Clearly, CEOs tend to come out way ahead of everybody else.
My dumbest investment
Dear Fool: One of my dumbest investments was a health-care company that ended up trading for close to a dollar per share.
I learned several lessons: Beware of companies with only one hit product; beware especially of bullish CEOs projecting future profits and hoping for new acquisitions because the one-hit product just isn’t happening; be careful with the health-care industry.
The Fool responds: Those are good lessons. The health-care industry actually has a lot going for it, because the world’s population is growing and getting older and will need more medical attention.
But it’s also true that companies with only one product can be particularly risky, as that product can be eclipsed by a competitor’s offering.
Biotechnology companies can be especially risky, since they spend a lot of time and money developing treatments that might or might not make it to market — and even then they may not sell well.
The Motley Fool take
Las Vegas Sands shines on
The Chinese region of Macau has been helping Las Vegas Sands (NYSE: LVS) and other casino companies multiply their profits.
Sands’ Macau casino-revenue growth dropped some, to 42 percent, in 2011, but its overall prospects seem bright. The company was near bankruptcy three years ago but has just initiated a dividend of $1 per share.
Thriving Asian destinations such as Macau and Singapore contributed most of Sands’ revenue, with Macau’s fourth-quarter casino revenue rising 20 percent over year-ago levels and Singapore’s 44 percent. Even Las Vegas, which has been fairly stagnant, delivered a 9 percent increase.
Increasing disposable income of urban Chinese people and better tourism facilities are expected to continue nourishing the gambling market in Macau. Sands has captured almost a fifth of Macau’s gaming market already, and in April it opens its largest resort development there, Sands Cotai Central.
It also plans to build a 4,000-room theme casino in Macau with separate towers for the masses and high rollers.
Sands has a distinct edge over its competitors there, as it already owns the land and is merely awaiting the Chinese government’s permission to start construction.
Sands also aims to expand in Singapore and to markets such as Japan, Korea, Taiwan, Vietnam and India.
The stock may be a gamble, but it’s a promising one over the long term.