The Motley Fool: The skinny on stocks

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Stocks go up and down

Q: Why do stock prices go up and down from day to day? — KW, Hendersonville, North Carolina

A: Over the long term, a company’s stock price will generally rise or fall with changes in the value of the company’s underlying business. As Netflix, for example, adds more subscribers and makes more money over time, its stock price will rise. From day to day, however, stock prices fluctuate largely based on what investors think the stock is worth. They can react to a variety of developments, such as the company announcing a strong (or weak) quarter; its changing management; being upgraded (or downgraded) by a Wall Street company; it launches new products or services; the company which acquires another company or which is in the process of being acquired; being involved in a scandal; sign (or lose) a big contract; or changes in supply or demand for its offerings.
Sometimes stocks go up (or down) on rumors, or simply on investor enthusiasm – perhaps because many other stocks are up. Aim to be a long-term investor and don’t pay too much attention to short-term moves.

Q: What books will give me a solid understanding of the energy industry and its history? — NO, Kalamazoo, Michigan

A: Try Daniel Yergin’s Pulitzer Prize-winning classic, “The Prize: The Epic Quest for Oil, Money & Power” (Free Press, $24), which was followed by “The Quest: Energy, Security, and the Remaking of the Modern World” (Penguin, $22) and recently, “The New Map: Energy, Climate, and the Clash of Nations” (Penguin, $22).
Also good are “Energy: A Human History” (Simon & Schuster, $22) by Richard Rhodes and “Energy and Civilization: A History” (The MIT Press, $20) by Vaclav Smil.

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Time to refinance?

Interest rates are about to rise soon, so if you’re considering refinancing your mortgage, you might want to act fast.
Refinancing involves getting a new mortgage, which pays off your previous loan and leaves you with new, usually lower, monthly payments to make. As a general rule, when prevailing interest rates are at least one percentage point lower than your current mortgage rate (for example: 4.25% vs. 5.25%), it is worth consider whether refinancing is a good decision for you.
You can refinance through your current lender, which can make the process easier, but you don’t have to. Shop around to see which lender will offer you the best rate.
One option is to take another type of loan. For example, if you have a 30-year mortgage, you can refinance a 15-year mortgage to pay off the loan sooner and pay less total interest. Payments are higher with shorter-term loans, but if interest rates have fallen, they might not be too high for what you were paying.
Refinancing is not free. As you are going to take out a new home loan, there will be closing costs and other fees to pay. Make sure you plan to stay in the house at least long enough to make the total cost of refinancing worth it. For example, if refinancing costs $3,000 and your monthly payments will be $200 lower, divide $3,000 by $200 and you’ll get 15, which means you’ll break even in 15 months. Some people seek a “cash-out” refinance, where they take out a new loan for more than they owe on their home. This gives them extra money, which they may need or want. But be careful with withdrawals, as a larger loan can mean bigger monthly payments – and if the home’s value drops, you could end up owing more than your home is worth, which can make it harder to sell. .
Learn more about mortgages on our partner sites, and

The Motley Fool’s Take

Biotech Promise

Vertex Pharmaceuticals (Nasdaq: VRTX) is a major biotech company, with $7.6 billion in revenue last year, led by its blockbuster Trikafta. Vertex already has a monopoly on treating the underlying cause of cystic fibrosis (CF) and has ample room for growth in the CF market by gaining approvals for younger age groups and obtaining additional repayment agreements.
The company and a partner, CRISPR Therapeutics, plan to seek regulatory approvals for their CTX001 gene-editing therapy for treating blood disorders later this year. CTX001 could add another non-CF blockbuster to Vertex’s lineup.
Vertex is advancing its investigational drug VX-147 into late-stage testing for the treatment of APOL1-mediated renal failure. Chief Operating Officer Stuart Arbuckle said on the company’s fourth quarter conference call that the VX-147 “represents a multi-billion dollar opportunity” for Vertex. And that’s not all: Vertex plans to publish the results of a phase 2 study of VX-548 in the treatment of acute pain soon. The company also has high hopes for its type 1 diabetes program and believes it may have a working cure for the disease along the way.
With a recent relatively low forward price/earnings ratio (P/E) near 16, and its growth prospects in CF and other indications, this stock could be a big winner. (The Motley Fool owns stock and recommended Vertex Pharmaceuticals and CRISPR Therapeutics.)

Distributed by Universal Press Syndicate

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