Ask the Fool: I know the market goes up and down because of the buying and selling of stocks, but... Little guy can still score

A: Many buyers and sellers are individual investors like us, placing small trade orders through our brokers. Then there are the institutional investors, such as mutual funds, pension funds, banks and insurance companies. These big guns can account for two-thirds of the activity in the market on a given day.

Stock prices fluctuate due to supply and demand. If a stock is in great demand, its price will rise. If it falls out of favor, there will be a lot of sellers, and the price will keep falling until it hits levels at which others will buy.

One way small investors can take advantage of big investors is to discover a small gem and invest in it early. When institutions eventually start buying (they often can't get too involved with very small companies), they'll drive its price up.

A: If you read financial reports, you'll see many companies taking "one-time" charges. These are meant to reflect costs a company is bearing that it usually doesn't bear - such as for closing plants, downsizing or writing off bad investments.

The company will often choose to remove the charge from earnings results, as if the expenses didn't really happen, ostensibly to more accurately reflect operating performance.

Ironically, many companies report "one-time" or "extraordinary" charges fairly frequently. When this is the case, such costs probably shouldn't be so readily dismissed.

My dumbest investment: Years ago I had some money to invest. I asked my broker about low-risk investments and put most of my money in utilities that paid good dividends. But I wanted a stock that was less conservative, too. I wanted to buy Minnetonka, a local company. It had recently come out with a new product, Soft Soap, that I really liked and thought would grow well. The broker talked me out of Minnetonka - which was later bought by Procter & Gamble for many times more than I would have paid for it. Instead, I bought his recommended oil-well company that I eventually sold for a penny per share.

Now I rely on my own research, I follow NAIC guidelines (from www.better-investing.org ), and use The Motley Fool and their discussion boards for recommendations. It's all serving me well.

Foolish trivia: The largest oil refiner in North America, I'm a Fortune 500 company based in San Antonio with roughly 22,000 employees and assets valued at $31.5 billion. I sport 9,150 miles of pipeline, 94 terminal facilities and four crude oil storage facilities. I also have approximately 4,700 retail sites branded with my own name or one of the following names: Diamond Shamrock, Ultramar, Beacon and Total.

I take in about $70 billion annually and can refine 3.3 million barrels per day. I offer conventional gasoline, jet fuel, kerosene, home heating oil, asphalt, propane, sulfur and more.

Answer to last week's trivia: I was officially formed in 1925, but one of my founders' tractors was used by the Allies in World War I. I'm the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines, with annual sales topping $30 billion. I offer more than 300 products, and about half my sales are generated outside America. My quarterly dividend has grown nearly 1,000 percent over the last decade.

The Motley Fool take: Investors in RV maker Winnebago (NYSE: WGO) might be asking themselves whether they should hang on or bail out. This is a well-run company with several appealing operating characteristics.

Still, it's trading near its 52-week lows as investors fret over whether consumers will continue to shell out money for big-ticket items like RVs.

Results in the company's fiscal fourth quarter reflect the end of the most recent boom in RV sales. Revenue fell 18 percent and deliveries of units dropped about 17 percent as buyers shifted to less expensive products within the company's fleet. Still, despite a nasty sales decline, margins fell off only slightly. As a result, the profit damage was contained to a 19 percent drop.

Even though earnings were down for the fiscal year, cash flow was actually higher as improvements in working capital efficiency offset the net income decline. Operating cash flow grew by about 19 percent over last year, with free cash flow growing by about 24 percent. Putting some of this cash to work, the company pays a dividend and is repurchasing shares.

Concerns about consumer demand, high energy prices, the housing market and interest rates are reasonable. Nevertheless, this is a high-quality company with a history of solid performance. The stock seems to be more or less fairly priced, but paying a fair price for a very good company often works out over the long haul.

If you're a savvy reader, you don't blindly accept much of what you read. Think critically about not just words, but numbers. They're not always what they seem.

Speed of growth: Whoa Nellie Brake Co. (ticker: HALTT) might earn a record $5 per share in 2005. If it earns $5.01 in 2006, $5.02 in 2007 and $5.03 in 2008, each of those will also be record earnings, but they'll represent meager growth. You need to examine how quickly a company's earnings are growing.

Actual revenue: Imagine Meteorite Insurance Inc. (ticker: HEDSUP), which reports that its revenues advanced 200 percent over the past year. That's more telling than "record growth" and would intrigue most investors. Check to see what the actual revenue numbers are, though.

Perhaps Meteorite has been struggling and took in only $200,000 in 2004. Two hundred percent growth would put it at $600,000 in 2005. That's still mighty tiny.

Context: It's important to consider companies in the proper context. A behemoth such as Wal-Mart can't double earnings as quickly as a small upstart can. It's usually easier to double $5 million than $50 billion. As companies grow larger, expect their growth rates to slow down. They can't triple each year forever.

Annualized growth rate: When a company (or mutual fund) takes its total return over a number of years and annualizes it, it's telling you how much it roughly earned, on average, per year. This is generally handy - but check what period of growth is covered.

For example, if Monster Genetics (ticker: FSTEIN) increased its earnings from $0.12 per share in one year to $0.37 five years later, its annualized growth is about 25 percent. If One-Legged Chair Co. (ticker: WOOPS) doubled its earnings in three months, its annualized rate would be more like 1,500 percent.

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