ASK THE FOOL

Covered banks

Q: Are bank accounts insured? If so, how?

A: They’re insured by the Federal Deposit Insurance Corp. (FDIC), which was created in 1933 after a rash of bank failures.

The FDIC insures checking, savings and money-market accounts, and CDs for up to $250,000 per depositor at each bank or savings and loan for each account ownership category. Some institutions offer further coverage, and some don’t offer FDIC protection at all, so be sure to check.

Note that FDIC coverage doesn’t extend to stocks, bonds, mutual funds, life-insurance policies, annuities and some other things your financial institution might offer. For those, ask what kinds of protections may be provided. You can learn more at FDIC.gov.

Q: Can a consumer credit- counseling organization really help me get out of debt?

A: It might, but tread carefully, as some can hurt more than help.

A good consumer credit- counseling service may review your credit report with you and offer free guidance. If necessary, it might negotiate with your creditors for lower interest rates for you, and (typically for a fee) create a debt management plan with scheduled payments. You may be making payments to the counseling service, which then pays creditors. That can work well — but only if you follow through on the plan. It’s not a magic bullet.

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Research any credit-counseling outfit before engaging it. You can vet services at the Better Business Bureau (BBB.org), and you can look up service providers certified by the National Foundation for Credit Counseling at NFCC.org (or call the NFCC at 800-388-2227).

The Federal Trade Commission also offers valuable tips and warnings about credit counselors at Consumer. FTC.gov.

MY DUMBEST INVESTMENT

Good money after bad

Dear Fool: My dumbest investments came from following advice from others without doing my own homework first.

I saw some interviews with Magnum Hunter Resources’ CEO Gary Evans, listened to its conference calls and felt comfortable buying shares, as its market value was far below the value of its assets. I watched my $10,000 investment losing ground as the stock price entered a trading range.

One week, the stock broke out of range, and I quickly sold my shares for a $2,000 loss. Then I made a tragic mistake, playing day trader. I bought and sold repeatedly, as the shares fluctuated within a certain range, and made some money. Then the stock plunged. I ended up riding a $20,000 investment into the company’s bankruptcy.

I’m still in shock over how I got sucked in and threw good money after bad.

The Fool responds: It sounds like you were engaging in technical trading, focusing on stock-price patterns instead of studying and keeping up with the health and prospects of the company.

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Magnum Hunter took on lots of debt to make money in the shale energy boom, buying land and competitors. But energy prices fell, and the company filed for bankruptcy protection in 2015. After exiting bankruptcy in 2016, it took on a new name in 2017, Blue Ridge Mountain Resources, and in 2019, merged with Eclipse Resources, becoming Montage Resources.

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THE MOTLEY FOOL TAKE

A champion yield

Hanesbrands’ (NYSE: HBI) socks and underwear business has been challenged lately, with many large retailers promoting their own in-house brands over those of Hanesbrands. Despite a recent rally, the company’s stock is still well below the multiyear high it reached in 2015 — presenting an attractive opportunity for income-focused, long-term investors.

The company’s core innerwear business has been suffering from sales declines, and overall growth has been sluggish. Last year, the loss of an exclusive deal with Target and the bankruptcy of Sears Holdings added to the pessimism surrounding the stock. Don’t count out Hanesbrands yet, though, as it has a slew of strong apparel brands around the world — featuring names such as Hanes, Champion, Bonds, Maidenform, DIM, Bali, Playtex, Bras N Things, Nur Die/Nur Der, Alternative, L’eggs, JMS/Just My Size, Lovable, Wonderbra, Berlei and Gear for Sports.

Hanesbrands has been on an acquisition spree in recent years, which has put the brakes on dividend growth, as management opted to pay down debt that was used to fund the new businesses that it added. That won’t last forever, though, and management has stated that returning cash to shareholders remains one of its top long-term capital allocation priorities, so future dividend growth is likely.

With a price-to-earnings (P/E) ratio recently in the low teens and a dividend that recently yielded 3.4%, Hanesbrands should appeal to both value-seeking and income-seeking investors.