Tuesday, February 17, 1998
Glendale, CA (Feb. 17, 1998) -- Today the Cash-King Portfolio's Foolish Baton is passed across the country from New Jersey to California, as I write my initial daily report. For those of you who don't know where Glendale is, it's about ten miles north of Los Angeles, at the SE tip of the San Fernando Valley. Glendale was given to the U.S. by the Spanish as part of their first land grant in California, back in 1784.
But you're not here for a geography lesson... you're tuning in to talk turkey about our investments! For starters, an introduction: Although many of you do know me as CashKingAl from our web Cash-King message board, Im sure that Im a new "virtual" face to most. Here's a look at my personal profile on the Web (Click here for Al's Profile) -- my personal quote pretty much says it all about my take on life. Can someone please put time back on my side!
Ok, Im looking forward to our four-day week together. As always, we start our week with a review of the stocks in the Cash-King Portfolio. I'll take credit for suggesting that we do this, for the following reasons:
1. Most of The Fool's online portfolios dedicate a portion of each report to summing up that days action. But that doesnt work for your four managers here. We all have full-time jobs away from this feature! (We believe this speaks volumes about the limited amount of time many of you have to focus on your investments.)
2. For a portfolio dedicated to patience, perserverance, cost controls and quality, worrying about up-to-the-minute coverage of the businesses we own doesn't make much sense to us. Mind you, there would be something cool about running around our respective cities, dialing in hourly reports via cellular. But coolness does typically wear off. We're banking our future on substance, instead.
3. Given that we do love to write and talk about business every day, a weekly look back at the performance of our holdings makes for a nice compromise.
Without further delay, then, let's look back at the performance and news for our four investments: Microsoft, Intel, Pfizer and T. Rowe Price.
Microsoft lost $3/8 last week, closing out Friday at $157 1/2. It's funny to think that as insignificant as the move was, it marked a $452 million decline in the value of the business. That slim $3/8 cut off of Microsoft is equal to 1.5x the value of the latest small-cap addition to The Fool Portfolio, 3Dfx Interactive. We don't draw conclusions from those numbers -- it's just kinda interesting to think on.
Ok, what was up with the business?
When it comes to researching Microsoft, the company can be both the least co-operative and the most co-operative of public companies. Microsoft is the only company I know that will answer almost nothing if you call them directly at (800) 285-7772. Instead, they turn you over to their investor Web site at www.microsoft.com/msft. Heaven help you if you lack an Internet connection.
Now, as you can access that web site, you should know that Microsoft provides probably the best online coverage of their business of any company on the planet. Almost any information a Cash-King investor is looking for, except for analyst estimates, is readily available. And naturally, anything numerical can be downloaded into Excel format and most documents can be downloaded neatly into Word. It's extraordinarily detailed.
Our quick check of the site this weekend turned up the following about the days gone by:
a. Ongoing coverage of the lawsuit with the Department of Justice (DOJ)
b. Talk of the stock split going into effect on February 23rd.
Phils long-term analysis of the DOJ troubles last week struck me as quite an accurate read. The worst that can happen is that the company eventually gets broken up into two or more components. If so, it's highly likely that all or most of the pieces would be Cash-Kings themselves -- making for spinoff shares that we'd be happy to hold onto.
What are the particulars for now? In the near term, Mr. Softy has agreed to allow computer manufacturers to hide the Internet Explorer icon from the desktop, if they so desire. For example, if Compaq doesn't want its buyers to see that IE icon upon boot-up, they have the power to block it. Of course, users would still be free to use IE, but they'd have to create their own desktop shortcut, their own icon.
That's pretty trivial and we expect the larger manufacturers to provide the IE icon up-front.
The more important case, one that continues today, has the DOJ attempting to restrain Microsoft from further integrating Internet Explorer into their operating system. Referenced last week (and I hope you checked it out if you own shares of MSFT) Bill Gates' January 26 Letter to Shareholders and Employees offered this: "We also expect that most computer makers will install Windows 98, with full Internet functionality, when it becomes available later this year." In that it will create a better experience for computer users, we expect as much, too.
As for the oncoming stock split, Phil tackled that last week. We consider it a non-event.
Added to the portfolio on Friday, Intel promptly fell $15/16 from our purchase price. An inauspicious start to an investment we're thoroughly enthused about. If you're interested in the company or own shares, their investor address is www.intc.com. A quick trip there revealed the following to us:
a. Intel has successfully completed its merger with Chips and Technologies. This acquisition is aimed at advancing capabilities for graphics and visual computing in mobile personal computers.
b. Intel was featured in both Time and Business Week in December. Time features Intels CEO Andy Grove as Man of the Year.
c. Many people have Intel warrants that must be exercised by March 13. A whole series of questions and answers on these warrants is available.
That's all for ole INTC last week.
The investing section of Pfizers Website, at www.pfizer.com/pfizerinc/investing/investingfrm.html, contains quite a bit of research material but not the recent press releases. I clicked around and found no news from the company last week, so I'll simply reference our active Pfizer message folder, and our Pfizer Buy Report for those who haven't seen it, while mentioning that the company's stock rose just short of $3 last week, closing at $83 5/8.
T. Rowe Price
Unfortunately, in terms of investor information, T. Rowe Price's web site is pretty bleak. They offer a wealth of information about how to invest in their funds, but nary a word is available about investing in the company itself. It would appear that the company feels an understandable conflict on this point. Unless I'm not reading carefully, TROW stock has markedly outperformed every one of T Rowe's mutual fund products over the past five years -- many of which have outperformed the S&P 500.
With no news on the site, we turned to other sources. Last week marked the release of data on mutual-fund inflows for the month of January. The results? New money into stock mutual funds came in at $18.5 billion in January, 1998 -- down from $28.9 billion in January, 1997. Steve Norwitz, spokesman for T. Rowe Price, was quoted as saying "...we had that lull in the equity market in the early part of January and then the market was strong." It would appear that the in-flow news caused the $3 downdraft on Friday, but the stock did close the week up $5/8 to $66 1/8.
Assuming that I still have a job after today's report (please tell me I punched out no more than two typos), I'll be back tomorrow to answer some of the questions posted to our Cash-King message folder. In the meantime, do be sure to... Fool on!
Al Levit ([email protected])
Day Month Year History C-K +0.09% 0.03% 0.03% 0.03% S&P: +0.26% 2.15% 2.15% 2.15% NASDAQ: -0.41% 3.06% 3.06% 3.06% Rec'd # Security In At Now Change 2/3/98 22 Pfizer 82.30 84.50 2.67% 2/13/98 22 Intel 84.67 84.69 0.02% 2/6/98 28 T. Rowe Pr 67.35 66.75 -0.89% 2/3/98 12 Microsoft 156.54 154.31 -1.42% Rec'd # Security In At Value Change 2/3/98 22 Pfizer 1810.58 1859.00 $48.42 2/13/98 22 Intel 1862.83 1863.13 $0.30 2/3/98 12 Microsoft 1878.45 1851.75 -$26.70 2/6/98 28 T. Rowe Pr 1885.70 1869.00 -$16.70 CASH $12562.83 TOTAL $20005.71 *The year for the S&P and Nasdaq will be as of 02/03/98