The Search Continues
by Phil Weiss
TOWACO, NJ (Aug. 3, 1998) -- Those with a short-term focus on the market are probably happy to see July end. The last couple of weeks saw the market drift downward. We're actually kind of happy about it, though. After all, today we added $2,000 of new savings to our portfolio, and we'd like to get it invested at lower prices. Last month, we wrote about our search for the next C-K:
When we add a new pharmaceutical company to the portfolio, hopefully soon, we wouldn't be unhappy to see it trading down a bit. Rob Landley wrote eloquently about this in his report ten days ago: I Can't Wait for the Bear Market. Why not cheer for stocks to go on sale when you plan to be a buyer? That thinking has us rooting down the whole pharmaceuticals group -- come on, people, these stocks are overvalued!
If you haven't had a chance to check out our message folder discussions about these stocks, you really should. A number of Fools have been hard at work crunching numbers and researching the potential candidates. We even got a great post from "Donald Duck" last night, working through the numbers on a dozen leaders in the pharmaceuticals industry. Fantastic work. This is just ongoing proof, day after day, that Fools can research stocks and build a long-term savings plan without any assistance (or obstruction) from the Wise.
Let's see how our stocks did last week. We were down for the week, but our portfolio did squeeze past the S&P 500.
Cash-King Last This Change AmEx $107.06 $110.38 + 3.1% Gap Inc. $58.69 $59.63 + 2.1% Intel $83.06 $84.38 + 1.6% Cisco $97.75 $95.75 - 2.0% Pfizer $112.50 $109.81 - 2.4% Microsoft $113.81 $109.94 - 3.4% Coca-Cola $83.44 $80.50 - 3.5% T Rowe $37.63 $35.50 - 5.7% Fool Four Last This Change GM $71.06 $72.38 + 1.9% Exxon $70.38 $70.25 - 0.2% Chevron $83.00 $82.63 - 0.4% Kodak $84.75 $83.88 - 1.0% S&P 500 1141 1121 - 1.8% Total C-K $23,413 $23,114 - 1.3%
We'll kick off the news this week with American Express Co. (NYSE: AXP). Our financial services company was our leading gainer of the week after reporting second quarter earnings of $1.24 per share. That was two cents per share better than expected. This was also a double-digit gain over last year. The company said that the good news should continue. Last Monday, the Drip Portfolio Report covered the AmEx earnings report.
In other news, AmEx announced that Richard A. McGinn, chairman and CEO of Fool Portfolio holding Lucent Technologies (NYSE: LU), has been elected to the company's Board of Directors.
But there's more...
AmEx also announced a "significant" investment in the new Proton smart card venture. According to the president of American Express Europe, a mass-market rollout of smart card products remains a few years away. But we're always happy to see our companies looking toward the future. Smart cards are plastic cards containing a microchip instead of a magnetic stripe, giving the card greater memory and enabling it to perform more functions.
Finally, American Express also announced that it plans to offer investment advisory services in Japan by the end of this year. AmEx card members there are viewed as potential "core targets."
Intel Corp. (Nasdaq: INTC) edged ahead as the outlook for this stock in 1999 is improving. During the week, more of Intel's plans for the StrongARM chips that it acquired from Digital came to light. Our company is moving full speed ahead in its quest to sell and develop electronic devices based on this chip (for more info, you can click on this link -- Intel dives into new chip line. Intel has also been working diligently with hardware and software vendors to optimize its products for its next generation chip -- Merced. Intel's goal is to make this chip, as well as the recently released Xeon, a viable platform for high-end corporate or "enterprise" computing.
Intel also announced that it is cutting prices on its Pentium II, Celeron, and Xeon processors by up to 31%. The purpose of these price cuts is to enable the company to offer Pentium II chips at price points across the PC market. An Intel spokesman said, "Continued strong acceptance of Pentium II processor enables Intel to aggressively ramp these products into higher volume price points."
For an interesting perspective on the FTC's lawsuit against Intel, you can check out the article at this link: Intel and the FTC, in which the editors of Red Herring urge Intel's Craig Barrett to stick up for his company's intellectual property rights.
On Tuesday, Cisco Systems (Nasdaq: CSCO) shrugged off the recent telecommunications mega-mergers, saying it will stick to its smaller growth-by-acquisition program. True to its word, that same day the company signed a definitive agreement to acquire publicly held Summa Four Inc. (Nasdaq: SUMA), a leading provider of programmable switches. Between 1.0 and 1.4 million shares of Cisco's stock will be exchanged for the outstanding shares of Summa Four. It is anticipated that the cost of the acquisition will be approximately $116 million.
Next up is the third member of our technology troika, Microsoft Corp. (Nasdaq: MSFT). The company issued a press release, A Statement by Microsoft Corporation, in answer to the complaints filed against it by the U.S. Justice Department and State Attorneys General. Our software giant said its Internet strategy is just good, clean, competitive business and called the charges against it "completely groundless." If you want to read Mr. Softy's official response to the Justice Department's case, click on the following link: Microsoft's Response.
Personally, I think that taxpayer dollars could be spent on more meaningful things than the current lawsuits against both Intel and Microsoft.
Windows 98 was launched in Japan on July 25th. According to local market researchers, over 250,000 copies of the Japanese-language version of this operating system software were sold in the first two days after its launch. Windows 95 had sold 200,000 copies in the first four days after its launch. It said that strong sales of Windows 98 may help boost Japan's sluggish personal computer market. This would be good news for both Microsoft and Intel.
Microsoft also made another investment in digital television with an agreement that gives the company a 7.5% equity interest in Thomson Multimedia, the manufacturer of RCA, GE, and Proscan-brand television sets.
Gap Inc. (NYSE: GPS) held a grand opening for its largest Old Navy store in the heart of Chicago's loop on Thursday. 500 free pairs of denim jeans were offered as part of the promotion for the new store. Thirty minutes after the store opened, the jeans were gone and three policemen on horseback were needed to hold back the crowd at the store's front doors. The police were needed because the crowd had jammed the intersection of Washington and State streets, blocking traffic and creating a street festival-type atmosphere.
There was no other significant news related to any of our Cash-King holdings last week.
This is one of the rare occasions that I will mention news related to our Fool 4 holdings. It was good to see that the union strikes by General Motors (NYSE: GM) workers were settled last week. The strikes cost both the company and the workers in the short term. Hopefully, there will be long-term benefits to both sides once business returns to normal.
That's it for tonight -- in our ongoing effort to help you manage your savings for the future, I'll be spending the next two days talking about the usefulness of Cash-King investing for both retirees and children. After that I'm going to discuss some of the ways in which we can hold investments for our kids. Then on Friday I'm going to interview one of our readers -- a report you won't want to miss.
Have a Foolish evening and a great week,
Day Month Year History C-K -0.15% -0.15% 15.40% 15.40% S&P: -0.73% -0.73% 11.10% 11.10% NASDAQ: -1.14% -1.14% 11.99% 11.99% Cash-King Stocks Rec'd # Security In At Now Change 2/3/98 24 Microsoft 78.27 108.38 38.47% 2/3/98 22 Pfizer 82.30 109.69 33.28% 5/1/98 37 Gap Inc. 51.09 60.81 19.03% 2/27/98 27 Coca-Cola 69.11 82.13 18.84% 6/23/98 23 Cisco Syst 86.35 96.44 11.69% 2/6/98 56 T. Rowe Pr 33.67 36.00 6.91% 5/26/98 18 American E 104.07 109.75 5.46% 2/13/98 22 Intel 84.67 84.81 0.16% Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Eastman Ko 63.15 81.63 29.26% 3/12/98 20 Exxon 64.34 68.50 6.47% 3/12/98 17 General Mo 72.41 71.13 -1.77% 3/12/98 15 Chevron 83.34 81.13 -2.66% Cash-King Stocks Rec'd # Security In At Value Change 2/3/98 24 Microsoft 1878.45 2601.00 $722.55 2/3/98 22 Pfizer 1810.58 2413.13 $602.55 5/1/98 37 Gap Inc. 1890.33 2250.06 $359.73 2/27/98 27 Coca-Cola 1865.89 2217.38 $351.49 6/23/98 23 Cisco Syst 1985.95 2218.06 $232.11 2/6/98 56 T. Rowe Pr 1885.70 2016.00 $130.30 5/26/98 18 American E 1873.20 1975.50 $102.30 2/13/98 22 Intel 1862.83 1865.88 $3.05 Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Eastman Ko 1262.95 1632.50 $369.55 3/12/98 20 Exxon 1286.70 1370.00 $83.30 3/12/98 17 General Mo 1230.89 1209.13 -$21.77 3/12/98 15 Chevron 1250.14 1216.88 -$33.27 CASH $94.76 TOTAL $23080.26 *The year for the S&P and Nasdaq will be as of 02/03/98