An Investment Opinion by Dale Wettlaufer
What Do You Know? The Secret to Smart Investing
Getting sick of hearing how overvalued things like COKE (NYSE: KO)
and GILLETTE (NYSE: G) are? Getting sick of hearing how Warren Buffett
is just an old buffoon? To borrow a phrase from one of the more entertaining
traders/investors I read,
Has anybody noticed Buffett raising his stake in Coke outside of that happening automatically when that company buys back shares? No, he's out buying stuff that nobody likes and doesn't carry a New World Order multiple, like MCDONALD'S (NYSE: MCD). I'm not going to take this time talking about Mickie Ds. Rather, I think that Buffett's McDonald's purchase points out one of the most important lessons about Buffett: It fits the style of the person making the investment choice. The lesson of Buffett is not "buy what I buy," but "know what you are buying." Buffett is not trying to set an example for people to slavishly follow. Buffett doesn't say, "You should buy Coke because it's easy to understand." He's saying he buys Coke because it's easy for him to understand.
If you're a chip designer and have a very good idea about how INTEL (Nasdaq: INTC) is going to be stuffing more things onto the motherboard of a PC, raising its sales dollars per PC each year at steady or gradually increasing margins, Buffett might slap you on the back and say "congratulations" after you've just backed the truck up on Intel. Of course you'll look like a darned genius in 20 years if you've grown that capital at 20% per year over that period. Anybody that turns $10,000 into $383,000 over 20 years would be regarded as a pretty knowledgeable investor. However, that would have been an easy decision for that chip designer to make. That chip designer isn't an expert in "stocks," though -- she was an expert in business.
In that sense, the individual investor possesses a great knowledge base to work with. If you're a store clerk and decided to invest in Wal-Mart in the early 1970s, you could have handled a few other mistakes along the way and still probably have beaten the market. That is, if you didn't put 2% of your portfolio in things in which you had a crystal clear investment thesis and then filled up the rest of the portfolio with things you were fuzzy on, all in the name of diversification.
BAY NETWORKS (NYSE: BAY) moved $2 7/8 higher to $36 7/8 this morning
on the strength of a press release that guided consensus market expectations
higher for the internetworking products company.
Architectural and engineering firm URS CORP. (NYSE: URS) gained $1 1/8 to $14 3/4 as it announced an agreement to buy privately owned Woodward-Clyde Group Inc. for $100 million in stock and cash.
Bigfoot shoe company GENESCO INC. (NYSE: GCO) outgrew its old size, stepping up $11/16 to $12 3/4 on reporting 2Q EPS of $0.15 versus $0.11 expected by analysts.
Direct sales computer maker GATEWAY 2000 (NYSE: GTW) advanced $2 13/16 to $40 1/16 after Advanced Logic Research (ALR), a subsidiary of Gateway, reported ALR Revolution 6X6 and ALR Revolution Quad6 servers ready for shipment next month.
PAMIDA HOLDINGS (AMEX: PAM) recharged $5/8 to $5 1/8 after the mass merchandise retailer received approval from shareholders to recapitalize, or change the equity structure of the company.
Prudential Securities started coverage of DI INDUSTRIES (AMEX: DRL) with a "buy" rating, moving the onshore contract driller $3/8 to $5 11/16 on the news.
Memory semiconductor maker RAMTRON INTERNATIONAL CORP. (Nasdaq: RMTR) got a boost $1 5/32 to $8 3/16 after announcing that its memory technology will be used in personal computers running on DIGITAL EQUIPMENT CORP. (NYSE: DEC) Alpha microprocessors and VLSI TECHNOLOGY (Nasdaq: VLSI) Polaris chipsets.
IFR SYSTEMS (Nasdaq: IFRS) passed the test with investors today, rising $1 5/8 to $23 1/4 after the manufacturer of electronic test instruments for wireless and fiber optic communications reported 4Q EPS of $0.37, which was $0.06 higher than expectations.
Shares of CLEARVIEW CINEMA GROUP (AMEX: CLV) began trading today and
promptly moved $1 to $9 1/4, making shareholders in the multiple movie theater
FORE SYSTEMS (Nasdaq: FORE) rose $1 1/2 to $19 13/16 after the company began its 24 city North American tour showcasing network operation of its asynchronous transfer mode (ATM) technology.
Holly Golightly's safe haven, TIFFANY & CO. (NYSE: TIF), sparkled this morning, rising $2 1/2 to $43 1/4 after reporting 2Q EPS of $0.29 and beating estimates by a penny.
Uniform rental company UNITOG CO. (Nasdaq: UTOG) got starched $4 1/4
to $24 1/4 this morning after posting $0.32 EPS after the bell yesterday.
Analysts expected $0.34 per share.
In another late hour announcement, ADVANCED ENERGY INDUSTRIES (Nasdaq: AEIS) said last night that it expects to take a one-time 3Q charge of about $3.1 million from the acquisition of Tower Electronics Inc. The power conversion and control systems company is down $4 1/4 to $27 3/8 this morning.
Information technology consulting firm ANALYSTS INTERNATIONAL CORP. (Nasdaq: ANLY) lost $3 1/2 to $35 1/2 after reporting that net income for the year ended June 30, 1997 increased 32% to $16,381,000, equal to $1.09 per share, just missing estimates of $1.10 per share.
PRIME CAPITAL CORP. (Nasdaq: PMCP) announced an expected return to profitability in its upcoming third quarter after taking some hits from a number of its clients engaged in "fraud or material misrepresentation." Prime's candor was rewarded with a $ 7/16 loss to $5 7/16.
After announcing the cloning of the human telomerase gene involved in cancer cell proliferation, GERON CORP. (Nasdaq: GERN) lost $2 1/8 to $14 this morning on traders taking profits.
Disease care contractor COMPREHENSIVE CARE CORP. (NYSE: CMP)
lost $1 1/4 to $11 after posting a 4Q loss of $0.39 per share versus a loss
of $0.94 per share for its year-ago quarter.
ROSS SYSTEMS (Nasdaq: ROSS), a provider of enterprise wide software, fell $1 7/16 to $3 1/2 after announcing that it expects to report a loss of $2.5 to $3 million for fourth quarter 1997.
WILLIAMS-SONOMA (Nasdaq: WSGC)
(800) 633-8284 (reservation # 3051244) -- replay 8/19 from 3:00-6:00 pm EDT
DELL COMPUTER (Nasdaq: DELL)
(800) 839-3306 -- replay from 8:30 pm EDT through 8/20 @ 8:30 pm EDT
WOOLWORTH (NYSE: Z)
(800) 953-6481 -- replay
CARRAMERICA REALTY (NYSE: CRE)
(800) 677-1575 (password 1234) -- replay through 8/19
(402) 998-0105 (password 1234) -- replay for international callers
DAYTON HUDSON CORP (NYSE: DH)
(800) 633-8284 (reservation # 2943671) -- replay through 8/20 @ noon EDT
HEWLETT-PACKARD (NYSE: HWP)
(800) 633-8284 (code: 2857062) -- replay through 8/22
HOME DEPOT (NYSE: HD)
(402) 220-3005 -- replay through 8/22
ROSS STORES (Nasdaq: ROST)
(402) 222-9936 -- replay through 8/26
THIS WEEK'S CONFERENCE CALL SYNOPSES
FOOL PORTFOLIO BORING PORTFOLIO ATCT down $1/16 at $4 5/8 ATLS dn $3/16 at $27 3/16 AOL unch. at $66 7/16 BGP up $15/16 at $23 1/4 CHV up $3/8 at $78 CSL up $1/8 at $42 9/16 COMS down $1/16 at $53 11/16 CSCO up $1/16 at $76 1/8 DJT up $1/2 at $10 1/4 GNT up $1/8 at $43 13/16 GM up $5/8 at $61 5/8 ORCL up $2 1/8 at $40 5/8 INVX up $1 5/8 at $33 OXHP up $3/8 at $76 3/8 IOM up $1/4 at $23 1/4 PMSI up $3/8 at $11 3/8 KLAC unch. at $67 3/8 TDW up $9/16 at $49 1/2 LU up $3/4 at $83 3/8 MMM up $5/8 at $92 3/8 T down $1/8 at $40 3/8
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Dale Wettlaufer (TMF Ralegh), a Fool
FPS and Ups & Downs
Brian Bauer (TMF Hoops), another Fool