Viagra in Costa Rica
Glendale, CA (Aug. 10, 1998) -- This week's review of what happened last week to the individual companies in the Cash-King portfolio must at least pay lip service to the nastiness that was visited on the entire market. That nastiness took our stocks down with it, as you'll see in the table below. I'll be covering how I react to market drops in some detail tomorrow. Let's look at the numbers:
Cash-King Last This Change Gap Inc. $59.63 $62.56 + 4.9% Intel $84.38 $86.69 + 2.7% Cisco $95.75 $96.88 + 1.2% Coca-Cola $80.50 $80.44 + 0.0% T Rowe $35.50 $35.13 - 1.3% Microsoft $109.94 $105.88 - 3.7% Pfizer $109.81 $103.63 - 5.6% AmEx $110.38 $101.13 - 8.4% Fool Four Last This Change Kodak $83.88 $83.56 - 0.4% GM $72.38 $71.06 - 1.8% Exxon $70.25 $66.94 - 4.7% Chevron $82.63 $77.38 - 6.4% S&P 500 1121 1089 - 2.9% Total C-K $23,114 $22,703 - 1.8%
The company that earned our attention last week was Cisco (Nasdaq: CSCO). The company released earnings immediately after Tuesday's downer, which helped stabilize not only its stock but the entire market. No joke. Normally, I would have a lot to say about Cisco, since it released earnings and held a conference call. But Greg Markus of the Boring Portfolio has provided a summary of the conference call, which I recommend for your perusal. (Link: Cisco Conference Call.) I encourage you to drop by the Cash-King Companies message folder and run the C-K numbers on Cisco. They improved with this report.
Sticking with high technology, the next company we'll visit is Microsoft (Nasdaq: MSFT) -- which means, take a seat in the People's Court! There were two legal developments of note this past week. First of all, Mr. Softy tried to place restrictions on the number of its executives that would be available for depositions, and the length of time that the executives would be available. For example, the Department of Justice (DOJ) had asked for two days of depositions from Chairman Bill Gates, but Microsoft wanted to commit only one day of Mr. Gates's time. As is common for Microsoft in Judge Jackson's courtroom, they lost that argument.
In addition, and perhaps far more important, Microsoft is also moving to have the entire DOJ case dismissed. Microsoft believes it has strong arguments to make in favor of dismissal. The DOJ, on the hand, seems equally confident that the trial will proceed. Picture two sumo wrestlers locked up in the center of the ring. I personally expect the software giant to stomach the DOJ across the mat this round.
And finally in technology, there was very little news of note to Cash-King investors about Intel. The stock does continue to move against Merrill Lynch semiconductor analyst Tom Kurlak's target price of $60. In a down market, Intel rose two bucks. We'll keep our eye on the Kurlak call. In the meantime, other securities firms are beginning to raise ratings on the stock, but these are typically tied to short-term considerations.
The other Cash-King companies making news were Gap Inc. (NYSE: GPS), Pfizer (NYSE: PFE) and American Express (NYSE: AXP). Gap reported same-store sales for July 1998 that were 19% higher than the comparable figure for July 1997. Gains at Old Navy were in the low 20% range, and gains at The Gap were in the high teens. Folks, I think this means Gap is going to well outrun earnings expectations for the upcoming quarter.
Over in New York City, there were a couple of items of note for Pfizer, both concerning wonder-drug Viagra. First of all, it's now legal to buy Viagra in Costa Rica. There are still only a handful of countries that have authorized the sale of Viagra, but the list keeps growing all the time. Costa Rica... ahh, what a beautiful country. Should we have a Fool party there some year?
The other news for Viagra is a mild frustration. Viagra is already being copied, and the FTC has now obtained a court order stopping the American Urological Corp. from selling "Vaegra." An FTC spokeswoman said, "These defendants have illegally cashed in on the publicity and popularity surrounding a new medical product, as they've exploited consumers desperate for a cure."
For American Express, the news was not so pleasant. The company held a conference call last Thursday and Chairman Harvey Golub disclosed that "the economic slowdown in Asia was lowering financial results at American Express's card and travel business and would likely delay the company's progress in achieving some of its goals for international operations." Mr. Golub went on to say "that Asia's economic slowdown would likely spread into Latin America and that there was already some impact on Europe and the United States."
Fortunately, the problems cited in the conference call are all short- to intermediate-term in nature. As noted by Goldman Sachs analyst Robert Hottensen Jr., American Express could offset the potential for less billed business by stressing other areas, like small business credit or the American Express Financial Advisors unit, as well as focusing on network alliances and improving domestic and international card share.
Even so, the stock closed down about 7% after the American Express conference call, and lost another 1% the next day. Since the long-term fundamentals of this Cash-King seem to be in place, perhaps this is just the latest stock to join Cisco, Coke (NYSE: KO), Microsoft, and Intel on the list of companies with bad short-term news and great long-term potential. If so, it's in some very select company.
I couldn't find anything of note with our other two Cash-King companies last week --T. Rowe Price (Nasdaq: TROW) and Coca-Cola. Moreover, now that the General Motors (NYSE: GM) strike is settled, we can once again let the Foolish Four suffer from benign neglect. Therefore, I'll wrap up this past week's review, except to wish you all to Fool on until tomorrow!
Day Month Year History C-K +0.21% -1.57% 13.76% 13.76% S&P: -0.58% -3.35% 8.17% 8.17% NASDAQ: -0.41% -1.77% 11.27% 11.27% Cash-King Stocks Rec'd # Security In At Now Change 2/3/98 24 Microsoft 78.27 104.44 33.43% 2/3/98 22 Pfizer 82.30 103.88 26.22% 5/1/98 37 Gap Inc. 51.09 62.94 23.19% 2/27/98 27 Coca-Cola 69.11 80.13 15.94% 6/23/98 23 Cisco Syst 86.35 99.19 14.87% 2/6/98 56 T. Rowe Pr 33.67 35.63 5.80% 2/13/98 22 Intel 84.67 86.63 2.30% 5/26/98 18 American E 104.07 100.81 -3.13% Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Eastman Ko 63.15 83.88 32.82% 3/12/98 20 Exxon 64.34 67.75 5.31% 3/12/98 17 General Mo 72.41 71.06 -1.85% 3/12/98 15 Chevron 83.34 75.69 -9.19% Cash-King Stocks Rec'd # Security In At Value Change 2/3/98 24 Microsoft 1878.45 2506.50 $628.05 2/3/98 22 Pfizer 1810.58 2285.25 $474.67 5/1/98 37 Gap Inc. 1890.33 2328.69 $438.36 2/27/98 27 Coca-Cola 1865.89 2163.38 $297.49 6/23/98 23 Cisco Syst 1985.95 2281.31 $295.36 2/6/98 56 T. Rowe Pr 1885.70 1995.00 $109.30 2/13/98 22 Intel 1862.83 1905.75 $42.92 5/26/98 18 American E 1873.20 1814.63 -$58.58 Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Eastman Ko 1262.95 1677.50 $414.55 3/12/98 20 Exxon 1286.70 1355.00 $68.30 3/12/98 17 General Mo 1230.89 1208.06 -$22.83 3/12/98 15 Chevron 1250.14 1135.31 -$114.83 CASH $94.76 TOTAL $22751.14