by Tom Gardner
Alexandria, VA (July 13, 1998) -- The Cash-King Portfolio showed no signs of a lingering hangover from the 4th of July weekend. All but two of our holdings whistled and banged in the night sky last week. Only our most defensive holdings -- the oil stocks in the Fool-4 grouping -- failed to blaze in the starry night.
The All Stars of the Week were Pfizer and Intel, which blasted up 9.7% and 9%, respectively. Pfizer is now sitting a few dollars from its richest valuation ever after an eye-catching earnings announcement, which I'll discuss below. And Intel snapped back in the face of strong dissent from Merrill Lynch's Magic-Eight-Ball Analyst, Tom Kurlak -- whose $60 short-term price target for Intel is now more 25% out of reach.
With Pfizer and Intel leading the charge this week, we now find ourselves pleasingly beating the S&P 500 since our launch in early February. Less than six months in, the Cash-King portfolio is up 18.99% versus S&P 500 gains of 16.28%. These figures don't account for another strong day today -- check today's numbers on the Web by scrolling down, and on AOL by clicking Today's Numbers at the bottom right of the screen.
Blow the kazoos, because we're finally fully invested and beating the market. We will be adding $2,000 in new savings to the portfolio, every six months. The first installment will arrive on August 3rd. And I have to say that from our present perch, we're feeling very good about the long-term financial standing of this portfolio relative to the many alternatives (credit card debt, passbook savings accounts, managed equity funds, ostrich farms, full-priced brokering, penny stocks, gold coins, day-trading seminars, Wisdom, the list goes on).
We happen to believe that Cash-King investing is easier than investing in mutual funds, that it will prove more rewarding financially, and we hope it'll bring a few intellectual benefits over the years to those of you who follow along with our daily reports. Call it Foolish ego, but working together with you, we expect millions of Americans to learn from Cash-King investing over the next ten years -- via this portfolio and our two active message folders on the Web.
Should we not aim so high?
After all, the Cash-King approach now has us holding a diversified, 12-stock, market-beating portfolio that cost less than $100 in commissions to establish. It includes mostly mass-market, name-brand businesses, whose individual merits can be measured in two hours of work, tops. Further, the model has two pieces of supporting evidence -- the Simpleton and MoneyHeavy portfolios covered in the First Step of Cash-King Investing. And, finally, we don't expect to see much in the way of commissions or capital gains taxes for a long, long while here.
It's convenient, it's efficient, it's accountable -- dare we name it Foolish?
Sure, because that's pretty much what The Motley Fool stands for. We're all helping to drive a revolution in consumer finance here, which is going to have dramatic consequences over the next few and twenty years. Together, we're driving down the reliance on expensive short-term debt, putting together methodical plans for saving, focusing on long-term investment in superior business, and benefiting enormously from an ongoing mass conversation on the subject of money.
I see it every day from thousands of Fools in our message folders.
And all this is occurring while select members of the Wise persist in calling the online medium a den of hype and thievery (all the while, constructing their own Web sites!). In the words of George Bernard Shaw, "They say, what they say." Let me continue to extend an invite to them, though. They're always welcome to stop by our folders any time and see for themselves, and learn from you:
Okay, let's take a look at the portfolio's performance for the week, stock by stock:
Cash-King Last This Change Pfizer $107.50 $118.00 + 9.7% Intel $73.19 $79.75 + 9.0% T Rowe $37.63 $40.06 + 6.5% Microsoft $107.19 $113.13 + 5.5% AmEx $111.63 $116.81 + 4.6% Gap Inc. $63.56 $66.38 + 4.4% Coca-Cola $85.25 $87.19 + 2.3% Cisco $92.56 $92.88 + 0.3%
Fool Four Last This Change GM $68.88 $71.19 + 3.4% Kodak $73.31 $73.56 + 0.3% Exxon $72.88 $71.75 - 1.6% Chevron $85.13 $81.88 - 3.8% S&P 500 1133 1146 + 1.1% Total C-K $22,870 $23,797 + 4.1%
Pfizer (NYSE: PFE) announced 2nd-quarter earnings that ran a few pennies above estimates. The company benefited from an estimate-stomping $411 million in sales from its male impotency treatment, Viagra. Not overlooked by the investing community, that figure includes just $2 million of international sales. The future looks very bright for this drug. But Pfizer is much more than Viagra, which accounted for just 11% of the company's total sales for the quarter. Let's take a look at the earnings box:
2Q 1998 2Q 1997 Sales $3.6 bil. $2.9 bil. Earnings $628 mil. $457 mil. EPS $0.47 $0.35
Take a breath -- there are some numbers oncoming.
Pfizer's second quarter marked sales growth of 25%, earnings growth of 38%, and growth in earnings per share of 34%. Simultaneously, Pfizer inched its gross margins up to 83.9% from 82.5%, and its net margins to 17.3% from 15.7%. Spending on research & development for the quarter increased 25%, to $574 million, in line with sales growth.
Pfizer's report exceeded our expectations, showed improvement in our critical Cash-King measures, and we believe confirms our approach to the markets. We'll get a better look at the financial strength of the quarter when the company releases its balance sheet in late July. Click here now though pfor management's comments and pfor the company's 2nd Quarter income statement: Pfizer's 2nd Quarter Earnings Report.
Pfizer is now up more than p43% pfor us since our purchase in Pfebruary. Given Pfizer's perpformance in 1998, we're considering renaming a lot of stupf around here now. The Motley Pfool, The Cash-King Portpfolio, pfree registration to our message boards, the word Pfriday, and the number pfour -- to name a pfew.
We're just considering it!
To close out this past week's news, I'm actually going to dust over T. Rowe Price's extraordinary newsless streak of recent gains; I'm going to ignore Microsoft's battle with the Department of Justice; I'm going to skip past Intel's Xeon chip; I'm going to overlook today's successful offering of Coca-Cola Beverages Plc on the London Stock Exchange; and I'm not going to mention The New York Times' excellent ongoing coverage of the General Motors Strike.
Instead, I submit for your perusal an article by Karen Arenson in today's New York Times regarding a pair of Buffett investors who, upon their departure into the next life, have bequeathed hundreds of millions of dollars to educational institutions. There's a lesson, or a few, in here somewhere. The article is entitled "A Lifetime of Patient Investing" (July 13, 1998). If you don't want to read it online, pick up today's paper edition. I recommend it.
Tom Gardner, Fool
Day Month Year History C-K +0.74% 5.10% 19.86% 19.86% S&P: +0.08% 2.77% 16.37% 16.37% NASDAQ: +1.16% 3.74% 18.91% 18.91% Cash-King Stocks Rec'd # Security In At Now Change 2/3/98 24 Microsoft 78.27 117.56 50.20% 2/3/98 22 Pfizer 82.30 119.25 44.90% 5/1/98 37 Gap Inc. 51.09 65.50 28.21% 2/27/98 27 Coca-Cola 69.11 86.88 25.71% 2/6/98 56 T. Rowe Pr 33.67 41.63 23.61% 5/26/98 18 American E 104.07 116.50 11.95% 6/23/98 23 Cisco Syst 86.35 94.19 9.08% 2/13/98 22 Intel 84.67 82.38 -2.72% Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Eastman Ko 63.15 73.13 15.80% 3/12/98 20 Exxon 64.34 70.50 9.58% 3/12/98 15 Chevron 83.34 80.88 -2.96% 3/12/98 17 General Mo 72.41 68.88 -4.88% Cash-King Stocks Rec'd # Security In At Value Change 5/26/98 18 American E 1873.20 2097.00 $223.80 2/3/98 24 Microsoft 1878.45 2821.50 $943.05 2/3/98 22 Pfizer 1810.58 2623.50 $812.92 5/1/98 37 Gap Inc. 1890.33 2423.50 $533.17 2/27/98 27 Coca-Cola 1865.89 2345.63 $479.74 2/6/98 56 T. Rowe Pr 1885.70 2331.00 $445.30 6/23/98 23 Cisco Syst 1985.95 2166.31 $180.36 2/13/98 22 Intel 1862.83 1812.25 -$50.58 Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 15 Chevron 1250.14 1213.13 -$37.02 3/12/98 20 Eastman Ko 1262.95 1462.50 $199.55 3/12/98 20 Exxon 1286.70 1410.00 $123.30 3/12/98 17 General Mo 1230.89 1170.88 -$60.02 CASH $94.76 TOTAL $23971.95 *The year for the S&P and Nasdaq will be as of 02/03/98