BUY TOP STOCKS DIRECTLY FROM THE COMPANY--AND SAVE BIG ON EVERY TRADE
(MONEY Magazine) – Imagine pulling into a Mobil station to fill your tank, check the oil--and pick up a few shares of Mobil stock. The idea isn't as outlandish as it seems. True, you can't buy stock at the gas pump--yet. But you can now bypass brokers and duck their hefty commissions, simply by purchasing shares directly from Mobil and more than 100 other U.S. and foreign companies--including such familiar names as British Telecommunications, Exxon and Home Depot (for a complete listing of companies that sell shares directly to the general public, see the table on the next two pages). Better still, new companies are launching direct-purchase plans every week, spurred on by SEC rulings that encourage companies to set up such programs. By this time next year, at least 400 companies will be selling their stock directly to the public, according to author Charles Carlson, who wrote No-Load Stocks (McGraw-Hill, $16.95) to boost the idea of buying stocks without a middleman.
The advantage is obvious: It costs less. Seven companies charge nothing at all when you buy or sell; most collect modest transaction fees of $5 to $10 plus 3[cents] to 12[cents] a share. Say, for example, you want to buy 100 shares of Cadbury Schweppes, recently trading at $33.75. The company will charge you $5 plus 12[cents] a share, or a total of $17 (Schweppes also charges an annual administrative fee of $15). In contrast, you'd pay $36 to $50 at a typical discount broker and as much as $90 or so at a full-service firm.
And when trading with the company, you can make small investments that just wouldn't be practical using a broker. Many companies require only $250 to $1,000 for your first purchase and as little as $50 after that (the company will give you fractional shares if your investment doesn't cover an even number of them). The minimum commission at a broker--even a discounter--would consume more than half of such a tiny investment.
Moreover, many companies offer mutual-fund-style convenience. For example, 77 allow you to have money taken from your bank account at regular intervals to purchase additional shares. You can receive dividends in the form of additional stock. Also, 45 firms permit you to sell your shares by telephone (others require written instructions to sell). And about a dozen allow you to put your shares into an Individual Retirement Account.
What's in it for the company? Plenty. For one thing, direct-purchase programs attract individual investors who otherwise might not buy the stock. Further, these individuals tend to be the buy-and-hold investors that corporate executives like because--unlike many professional traders--they don't dump their shares at the first hint of bad news. What's more, every new stockholder is a potential customer. "Think about it," says Carlson. "If you own shares of Nike, you're more likely to purchase their sneakers instead of Reebok's. Same goes with the computer, phone service or the brand of shampoo you use."
Our comprehensive table gives the vital statistics on all 103 companies selling shares directly as of Nov. 1. The table tells you what the company charges when you buy and sell shares and whether it offers such features as automatic investing and telephone redemptions. And to help you identify the most promising investments, we provide ratings of the stocks from three sources: Carlson, who ranks the companies on the basis of financial strength plus growth and consistency of earnings; Value Line, which ranks companies on "timeliness," or how they are expected to perform in the next 12 months, based on their recent earnings record; and Standard & Poor's, which bases its ratings on analysts' appraisals of earnings, dividends and other financial fundamentals.