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Cisco Getting Squashed

by Phil Weiss
(pweiss@homemail.com)

TOWACO, NJ (Oct. 5, 1998) -- Once again last week the market was full of ups and downs, and all the way arounds. Our stocks struggled a bit as we lost a little ground on the S&P 500. The hardest hit stock for us was Cisco Systems (Nasdaq: CSCO), which fell just over 13% for the week (and is getting hammered today).

Let's get right to the stats for the past week

 
 Cash-King   Last   This    Change 
 Coca-Cola  $56.25  $58.94  + 4.8% 
 S Plough  $101.25  $99.50  - 1.7% 
 T Rowe     $29.88  $28.69  - 4.0% 
 Intel      $88.31  $83.88  - 5.0% 
 Pfizer    $106.63  $99.13  - 7.0% 
 AmEx       $80.50  $74.38  - 7.6% 
 Microsft  $113.06 $104.13  - 7.9% 
 Gap Inc.   $53.38  $48.25  - 9.6% 
 Cisco      $66.44  $55.75 - 13.1% 
  
 Fool Four   Last     This  Change 
 Exxon      $68.38  $73.00  + 6.8% 
 Chevron    $83.38  $88.13  + 5.7% 
 Kodak      $80.88  $76.00  - 6.0% 
 GM         $58.69  $55.00  - 6.3% 
  
 S&P 500      1045    1003  - 4.0% 
 Total C-K $23,418 $22,244  - 5.0% 
 
Last week, the Cash-King Portfolio lost by slightly more than one percentage point to the S&P 500, dropping us to a 2.4% lead over the market's average return since our February launch. The total return since the portfolio started in February is now just above breakeven at 2.1%. On the other hand, the S&P 500 is down 0.3% during that period.

When I scanned through the news of the week in order to write tonight's report, I wasn't all that surprised to find that many of our stocks had passed a volatile week with virtually no significant news. Lately, much of the movement in the US stock market has been driven by rampant speculation related to events in foreign markets, including the need for struggling foreign countries to withdraw their funds from our markets. We've also been hammered by the sense of speculation whirling around Wall Street, in the form of "investment" vehicles like the Long-Term Capital Management Fund.

For those that are investing in the stocks of quality companies for the long term most of these events are nothing more than a clanging noise from miles away. In fact, for long-term investors, the recent drop creates an opportunity to buy good companies at lower prices.

Cisco is a prime example of a company that fell on little evident news. Its drop seems related to earnings warnings issued by its competition, like Nortel and Fore Systems, as well as news of a pending Federal Trade Commission investigation into their business practices. None of the bad news showed up in the copy of Cisco's annual report and proxy statement which I received in the mail last week. We'll continue waiting and seeing.

Schering-Plough (NYSE: SGP) announced a broad genomic data collaboration with Incyte Pharmaceuticals (Nasdaq: INCY), which will provide Schering-Plough with access to Incyte's microarray technology and databases. Agreements such as this are one of the ways that Schering-Plough leverages its research and development dollars. Our drugmaker has partnered up with smaller organizations for their research, then used its clout in the marketplace to carry the new products to the world.

Pfizer (NYSE: PFE), our other pharmaceutical company, saw Viagra make its debut in the German market last week. A German urologist estimates that there are approximately 4 million men in Germany suffering from serious impotence problems. It is estimated that sales in Germany will be approximately 1 billion marks for the year.

Gap Inc. (NYSE: GPS) recently rolled out its new GapBody store at a mall in Northbrook, IL. The intimate apparel store sells the same type of products that are sold by Victoria's Secret � bras, panties, pajamas, and other intimate apparel. The store caters to both men and women. A second store opened recently in Cherry Hill, NJ and the retailer is planning to open a handful of others by year-end -- some may even be inside Gap stores. GapBody is a new concept that the company hopes will help the company continue its growth in both earnings and sales. It will be interesting to see how successful this venture is. You can check out some of the available products at Gap's Online Store at www.gap.com.

The last piece of company news that I want to mention this week was Monday's announcement by American Express (NYSE: AXP) that it approved the repurchase of up to 40 million shares of common stock over the next two to three years. This represents approximately 9% of the outstanding shares as of June 30, 1998. A company's repurchase of its stock is nearly always viewed as a positive development by a Cash-King investor. Stock repurchases increase our ownership interest in the company on a relative basis and are also another means by which earnings per share can be increased. Best of all, they provide a way for companies to return money to its shareholders without the tax liability that results from the distribution of dividends. We prefer quarterly stock buybacks to quarterly dividend payments.

I'll be discussing Pfizer's statement of Cash Flows over the next couple of days.

Have a Foolish evening,

Phil Weiss

Cash-King Strategy Folder
Cash-King Companies Folder


10/05/98 Close
Stock  Change    Bid 
 AXP   -1 7/8   72.50 
 CHV   +  13/16 88.94 
 CSCO  -7 7/16  48.31 
 KO    +2 1/2   61.44 
 GPS   +1       49.25 
 EK    -1 1/8   74.88 
 XON   +1 7/8   74.88 
 GM    -1 1/4   53.75 
 INTC  -3 5/16  80.56 
 MSFT  -2 15/16 101.19 
 PFE   -4 1/2   94.63 
 SGP   -  1/16  99.44 
 TROW  -1 5/16  27.38 
 

 
                 Day     Month    Year    History 
         C-K      -2.23%  -5.51%  -0.20%  -0.20% 
         S&P:     -1.40%  -2.80%  -1.74%  -1.74% 
         NASDAQ:  -4.85%  -9.28%  -7.78%  -7.78% 
  
 Cash-King Stocks 
  
     Rec'd    #  Security     In At       Now    Change 
     2/3/98   24 Microsoft     78.27    101.19    29.28% 
     2/3/98   22 Pfizer        82.30     94.63    14.98% 
    8/21/98   22 Schering-P    95.99     99.44     3.60% 
     5/1/98   37 Gap Inc.      51.09     49.25    -3.60% 
    2/13/98   22 Intel         84.67     80.56    -4.86% 
    2/27/98   27 Coca-Cola     69.11     61.44   -11.10% 
    6/23/98 34.5 Cisco Syst    57.56     48.31   -16.07% 
     2/6/98   56 T. Rowe Pr    33.67     27.38   -18.70% 
    5/26/98   18 AmExpress    104.07     72.50   -30.33% 
  
 Foolish Four Stocks 
  
     Rec'd    #  Security     In At     Value    Change 
    3/12/98   20 Eastman Ko    63.15     74.88    18.57% 
    3/12/98   20 Exxon         64.34     74.88    16.38% 
    3/12/98   15 Chevron       83.34     88.94     6.71% 
    3/12/98   17 General Mo    72.41     53.75   -25.77% 
  
 Cash-King Stocks 
  
     Rec'd    #  Security     In At     Value    Change 
     2/3/98   24 Microsoft   1878.45   2428.50   $550.05 
     2/3/98   22 Pfizer      1810.58   2081.75   $271.17 
    8/21/98   22 Schering-P   2111.7   2187.63    $75.93 
     5/1/98   37 Gap Inc.    1890.33   1822.25   -$68.08 
    2/13/98   22 Intel       1862.83   1772.38   -$90.45 
    2/27/98   27 Coca-Cola   1865.89   1658.81  -$207.08 
    6/23/98 34.5 Cisco Syst  1985.95   1666.78  -$319.17 
     2/6/98   56 T. Rowe Pr  1885.70   1533.00  -$352.70 
    5/26/98   18 AmExpress   1873.20   1305.00  -$568.20 
  
 Foolish Four Stocks 
  
     Rec'd    #  Security     In At     Value    Change 
    3/12/98   20 Eastman Ko  1262.95   1497.50   $234.55 
    3/12/98   20 Exxon       1286.70   1497.50   $210.80 
    3/12/98   15 Chevron     1250.14   1334.06    $83.92 
    3/12/98   17 General Mo  1230.89    913.75  -$317.14 
  
                               CASH     $48.07 
                              TOTAL  $21746.98 
   
 *Please note: On 8/4/98 $2,000 cash was added to the
portfolio for future investment. This will be reflected
in the numbers as soon as possible.

*The year for the S&P and Nasdaq will be as of 02/03/98

</THE CASH-KING PORTFOLIO>

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