Company name Morgans Hotel Group Co.
Stock ticker MHGC
Live stock price [stckqut]MHGC[/stckqut]
Confident Investor Rating Poor

The following company description is from Google Finance: http://www.google.com/finance?q=mhgc

Morgans Hotel Group Co., is a fully integrated hospitality company that operates, owns, acquires, develops and redevelops boutique hotels primarily in gateway cities and select resort markets in the United States, Europe and in select international locations, and nightclubs, restaurants, bars and other food and beverage venues in many of the hotels it operates as well as in hotels and casinos operated by MGM Resorts International (MGM) in Las Vegas. At December 31, 2011, the Company operated a portfolio of twelve boutique hotels in New York, Miami, Los Angeles, San Francisco, Boston, and London. In addition, the Company managed a non-Morgans Hotel Group branded hotel in Playa del Carmen, Mexico. In November 2011, it sold the Sanderson and St Martins Lane hotels to Capital Hill Hotels Limited. On November 30. 2011, it purchased a 90% interest in The Light Group.
Confident Investor comments: At this price and at this time, I do not think that a Confident Investor can confidently invest in this stock. It is not possible to confidently invest in a company that is not currently profitable.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

A few days ago, I described the basics of mutual funds. In this article, I will cover the basic types of different mutual funds and how the value of a mutual fund “share” is calculated.

You can buy a mutual fund’s shares in a few different ways. Funds are often described as either “no-load” or “load” funds. The designation depends on whether or not the fund charges a sales commission.

  • Many funds are no-load funds that charge no (or a very low) sales fee or commission. No-load funds are typically sold directly to investors with ads in newspapers, magazines, and the Internet. In this case, you complete all the paperwork yourself.
  • Load funds charge a sales fee or commission for purchases. Some funds charge the fee when you buy shares; others charge when you sell them. Brokerage firms and banks often sell load funds.

You may wish to invest in mutual funds, in addition to individual companies. There are reputable funds in both categories. Because sales charges reduce your return, I recommend that investors purchase no-load funds over load funds whenever possible.

The value of a mutual fund share is calculated on the basis of the value of the assets owned by the fund at the end of every trading day. A share’s value is called the Net Asset Value (NAV). The fund calculates the NAV by adding up the total value of all of the securities it owns, subtracting the expenses of the fund, and then dividing by the number of outstanding fund shares.

Since the value of stocks and bonds owned by the fund changes daily, the fund’s value will also change daily. Therefore, a mutual fund adjusts its price once every trading day to provide investors with the most current NAV. This is different from the price of stocks because:

  • The NAV updates only once at the end of the day as opposed to every second of the day with stocks.
  • The NAV is not directly tied to the whims and moods of the market. However, since the price of a mutual fund is determined by the sum of the value of all of its components, the various market moves (however logical or illogical) of stocks, bonds, and cash that the fund owns are ultimately reflected in the NAV.

While you cannot buy a fraction of a share of a company, you can have a fraction of a mutual fund share. This happens when the amount you invest does not divide evenly by the NAV. If you send the mutual fund company a check, the managers will divide that investment by the current NAV. This results in your number of shares in the fund, even if it is a fraction. This breaks the “share” concept and demonstrates that you are simply pooling your money into a large pool.