Monday, March 16, 1998

Cash-King Portfolio Report
by Al Levit
([email protected])

TOWACO, NJ (Mar. 16, 1998) -- It's Monday again, and it's my week in the saddle. Let's check out what our companies have been up to in the last week. First, a look at the performance of our five Cash-King stocks over the past five market days. 

Coca-Cola       0.0% 
 Intel          +1.9% 
 Microsoft      +0.4% 
 Pfizer         +0.3% 
 T. Rowe Price  -1.3%

Talking stock performance, last week was a snoozer. We did add our new Foolish-Four stocks on Thursday. If you weren't around for it, here's a link to the buy report (Click Here: CK Buying the RP4).

Okay, on to last week's news.

As is usual these days, the biggest news is being generated by the technology side of the portfolio -- in particular, that relating to Microsoft (Nasdaq: MSFT) and its continuing battle with the U.S. Department of Justice (DOJ).

Fools, the rhetoric has toned down considerably. Joel I. Klein, the DOJ's top antitrust enforcer, said at the end of the week that no decision had been made on how to proceed against Microsoft. In the meantime, Mr. Klein's department has taken on another high-profile antitrust case, the proposed merger between Northrop Grumman and Lockheed-Martin. It can't hurt Microsoft that the DOJ now has two very high-profile antitrust balls to juggle at once, can it?

From the long-term perspective of this Cash-King investor, I see several positives (and many more) about Microsoft's present position:

  • First of all, I'm not too worried about Windows 98 because the future of Windows really seems to be in Windows NT. As long as NT continues to capture market share in the intranet/workstation market, I'll rest easy about our investment. So, my advice is to follow the company's success (or failure) at expanding WindowsNT's market share.

  • If that's not enough, we all need to remember that Microsoft's stranglehold on office productivity suites is at least as great as its grip on PC operating systems!

  • Making the Office suite even better, Microsoft just announced that its new e-mail client, Outlook 98, will be released at the end of this month for its standard download price -- free. Those who wish to purchase a CD can pick it up for a nominal charge of $9.95. Compaq has already signaled that it will be "rolling out Outlook 98 aggressively."

  • Last, but not least, Microsoft seems to be learning the importance of public relations in Washington. Its recent concession to allow manufacturers to hide the Internet Explorer icon (as if they will) from the desktop in Windows 95 is a good example. This is a relatively easy fix to perform, it allows Microsoft to continue bundling the product at no charge to those consumers who prefer to buy it bundled (most do), and maybe most important, it allows the government to claim victory. It kinda reminds me of Sadaam Hussein's victory claim over the United States on Iraq TV the week before he allowed Scott Ridder unlimited access to Iraq's Presidential palaces. The analogy doesn't entirely work, but it did jump to mind!

Moving on to Intel (Nasdaq: INTC), there was very little news in the past week. Our stock took plenty of lumps from its little pre-announcement the week before, though, but things stabilized quickly. As noted in one of Phil's links at the end of last Monday's report, Intel COO Craig Barrett and Microsoft CEO Bill Gates made a joint presentation about using Windows NT on Intel-based computers for high-end engineering applications.

Interestingly, it was Intel's Craig Barrett who emphasized that companies that wield enormous industry power, like Microsoft and Intel, need to behave differently than other companies with small market share. But he did state specifically that he felt there was "nothing illegal about a monopoly." Barrett went on to say, "I hope in this country that we don't move toward a tendency to investigate people just because they're successful. You can be successful and frustrate your competition by competing hard, competing fairly -- just by being better than the competition."

I think that's largely what Intel and Microsoft have done. That's why they're Cash-Kings. Their competition doesn't like them very much, always whining about them to the media, but Microsoft and Intel aren't in business to make their competition happy. Until we hear sustained, angry protests from consumers across the country, we're not going to worry too much. But we will be watching their quarterly announcements and balance sheets carefully.

Departing the digital world, T. Rowe Price (Nasdaq: TROW) continues to benefit from the inflow of money into stock mutual funds. New money is on the increase this year as more people open up new Roth IRA accounts. In February, $19.5 billion in new cash went into stock mutual funds, up from $14.6 billion in January. As Fools, we'd still rather see that money go directly into stocks (or an index fund) than stall through a middleman's tollbooth. But we know that a lot of it won't and, in fact, a lot of it can't. Many 401(k) plans do not include an index fund. Oh well. At least the money is going into a growth vehicle. That must frustrate the CEO of Fool Portfolio short, Trump Hotels and Casino Resorts.

From investments to libations, from Baltimore to Atlanta, Coca Cola (NYSE: KO) announced last week that it'll invest $160 million to build a second drinks-concentrate plant in Ireland. The new factory is intended to supply 75 countries and to make Coke just a little stronger throughout the world. Phil Weiss reminds me that Coke will pay a reduced tax rate of 10% in Ireland for manufacturing there these days. Ireland has become an extremely popular nesting place for U.S. corporations with business throughout Europe. The Green Island has set up significant tax breaks for U.S. companies and the nation is home to a young, educated, and still under-employed workforce. Next time you're in Ireland, take a trip to Coke's plants (to balance out the journey to Guinness) and report back in the CK message folder!

I won't be covering any more of the portfolio in tonight's report. Nothing meaningful appeared on the wires for the past week from Pfizer (NYSE: PFE), and we wouldn't be mentioning anything about our Foolish-Four stocks unless it were truly earth shattering.

I would like to close tonight's report with two links. The first, a link directly to Berkshire Hathaway Chairman Warren Buffet's Letter to Shareholders, which was released online over the weekend. You can read it by skirting over to http://www.berkshirehathaway.com/1997ar/1997.html. The site has been very busy today, so it might take you a few times to get through. The annual letter from Mr. Buffett is as clever and useful and any you'll ever read.

The second link is to a short post on our Web folder that I thought Warren himself would enjoy. It's a reminder for me about how real wealth is accumulated in our public markets. Buy and Hold, Fool.

I'll see you tomorrow. Oh, the remainder of the week will be a little different than past weeks. Tomorrow, we're running what might be an occasional feature. It's an offshoot of the forum's Dueling Fools. We're going to debate Dell Computer over the next two days. I think you'll enjoy it.

Fool on,

Al Levit

TODAY'S NUMBERS

Stock  Change    Bid 
 ---------------- 
 CHV     ---    82.88 
 KO    +1 3/16  71.75 
 EK    +1 13/16 62.44 
 XON   -  1/8   64.19 
 GM    -  11/16 71.31 
 INTC  +1       77.63 
 MSFT  -  3/8   82.00 
 PFE   +2 1/4   88.25 
 TROW  -  1/8   69.38 
 
                  Day   Month    Year  History 
         C-K      +0.56%  -0.99%   0.76%   0.76% 
         S&P:     +1.00%   2.85%   7.79%   7.79% 
         NASDAQ:  +0.93%   1.00%   8.19%   8.19% 
  
     Rec'd    #  Security     In At       Now    Change 
    2/3/98    22 Pfizer        82.30     88.25     7.23% 
    2/3/98    24 Microsoft     78.27     82.00     4.77% 
    2/27/98   27 Coca-Cola     69.11     71.75     3.82% 
    2/6/98    28 T. Rowe Pr    67.35     69.38     3.01% 
    3/12/98   20 Exxon         64.34     64.19    -0.23% 
    3/12/98   15 Chevron       83.34     82.88    -0.56% 
    3/12/98   20 Eastman Ko    63.15     62.44    -1.12% 
    3/12/98   17 General Mo    72.41     71.31    -1.51% 
    2/13/98   22 Intel         84.67     77.63    -8.32% 
  
  
     Rec'd    #  Security     In At     Value    Change 
    2/3/98    22 Pfizer      1810.58   1941.50   $130.92 
    2/3/98    24 Microsoft   1878.45   1968.00    $89.55 
    2/27/98   27 Coca-Cola   1865.89   1937.25    $71.36 
    2/6/98    28 T. Rowe Pr  1885.70   1942.50    $56.80 
    3/12/98   20 Exxon       1286.70   1283.75    -$2.95 
    3/12/98   15 Chevron     1250.14   1243.13    -$7.02 
    3/12/98   20 Eastman Ko  1262.95   1248.75   -$14.20 
    3/12/98   17 General Mo  1230.89   1212.31   -$18.58 
    2/13/98   22 Intel       1862.83   1707.75  -$155.08 
  
                               CASH   $5666.26 
                              TOTAL  $20151.20 
   
 *The year for the S&P and Nasdaq will be as of 02/03/98