Monday, April 13, 1998
Glendale, CA (Apr. 13, 1998) -- Greetings from what used to be known as sunny California. This seems to be the year that we southern Californians get to discover the many joys of grey coldness and snapping raindrops. It should come as no surprise to most of you to read that we don't like it one bit!
As I write this report, I'm watching the umpteenth downpour of the year, out my home-office window, and longing for the sun-splashed days that could be taken for granted in the Aprils of days past. Oh well, into each life a little rain must fall. Into this year's life, a lot.
It has come to my attention that you're probably not here for a weather report nor to commiserate with a spoiled southern Californian who suffers bad weather but once a decade (if that). So let me start this report again...
Glendale, CA (Apr. 13, 1998) -- Good evening, Fools. I hope you had a nice holiday weekend, whether for Easter or Passover. Since today is Monday, it's Cash-King week-in-review day -- that day upon which we study what lately became of our businesses. First though, let's take a look at the Portfolio's weekly performance:
Cash-King Last This Change T R Price $71.44 $72.25 + 1.1% Coca-Cola $80.44 $78.56 - 2.3% Pfizer $101.88 $99.25 - 2.6% Intel $76.69 $73.69 - 3.9% Microsoft $92.94 $88.94 - 4.3% Fool Four Last This Change GM $67.50 $67.44 - 0.0% Emn Kodak $64.56 $64.06 - 0.8% Chevron $81.94 $80.31 - 2.0% Exxon $69.19 $66.75 - 3.5%
Let the first week of April forever be remembered as a dark and dreary time for Cash-King Investors. All but one of our stocks lost ground. And even T. Rowe Price nibbled less than a new dollar of value, barely more than one percent, for us.
It would be fun to write, "Let's see what foul deeds caused this agony," except for the fact that weekly, daily, hourly, and monthly stock-price fluctuations are meaningless to our kind. The news and discussion does interest us, though. So let's get to it.
We'll start with Pfizer (NYSE:PFE), since it seems to be getting the most attention lately, with its newly-approved impotence drug, Viagra. Tom, Phil, Rob and I received a note last week from Todd Hachey, a pharmacist in Vermont, who wrote:
"I've had at least 10 patients asking me when I will have Viagra in, so that they can talk to their doctor about trying it. I've been a Pharmacist for 5 years now, and I worked in a pharmacy while in school, and let me say that I haven't seen this level of consumer interest in a new medication since Prozac. I'm not exaggerating. And right now, this product is intended for men only. I work in a Supermarket Pharmacy (Grand Union) that does a low volume of prescriptions, and yet I've had 10 inquiries. I can only imagine what the high-volume pharmacies are seeing."
Viagra obviously promises to be very popular. It's certainly the primary reason that Pfizer is the best-performing stock in the Cash-King portfolio right now, up more than 20% since early February. For me, though, the real news about Pfizer last week was made right in this column. To our knowledge, no Street analysts have raised the issue of the company's ascending receivables and weakening cash-conversion cycle. I think Phil did a bang-up job both of identifying a manageable problem at Pfizer and of providing ways to solve it. To find the reports from last week, click here: Phil on Pfizer.
Moving on to T. Rowe Price Associates (Nasdaq: TROW), last week word hit the wires that investors pumped about $27.5 billion into domestic-stock mutual funds in the month of March. That matches up pretty well against last year's accumulation of $10.0 billion into stock funds in March. And you can bet that our company is getting its share of the action. TROW Spokesman Edward Giltenan said last week, "There is lots of interest in retirement investment, spurred by the new Roth IRA. For us, also, outflows from international funds have slowed considerably."
T. Rowe Price also benefited last week from news of the proposed merger between Citicorp and Travelers -- which was covered quite ably by Fool Dale Wettlaufer in our Evening News. To read that, click here: Citigroup Aftermath. And click here for today's news on the proposed mergers between BankAmerica & NationsBank, and First Chicago & Banc One: Financial Merger Mania.
On the Coca-Cola (NYSE: KO) front, the story, as usual, is marketing and more marketing. Last week, our company told its story to Russian customers in a five-segment series of commercials shown also on CNN and MTV. A Coke press release explained that the commercials told the tale of Ivan and Helen the Beautiful in Coke's "Drink the Legend" campaign.
It's a tale with which we're as of yet unfamiliar. What we do know is that Coke currently outsells its nearest soft-drink competitor in Russia by more than a 3-to-1 margin. We're happy to see, though, that they're not satisfied with that. And why should they be? Even though they're stomping on the competition, check out the population and Coke consumption differences between the U.S. and Russia.
KO drinks Total per capita population per year U.S. 272 million 376 Russia 148 million 21
Go get 'em, Ivan and Helen the Beautiful!
* Microsoft lawyers and executives met with top United States Department of Justice (DOJ) lawyers for 3 hours as the DOJ decided whether to bring broader charges against the company. Neither side had any official comment on the meeting, although some DOJ staff lawyers said they believe the government has enough evidence to file charges against Microsoft.
* Several U.S. states are preparing to take their own anti-trust actions against Microsoft, with or without the DOJ.
Hard as it is to believe, however, there was actually Microsoft News that had nothing to do with anti-trust (at least not yet!). What's up? It has been reported that Mr. Softy is in negotiation to buy Kiplinger TaxCut, the number two tax-preparation title, although no deal has yet been made. In 1995, Microsoft tried to buy Intuit, which owns the #1 tax-preparer TurboTax, but the DOJ appeared to want to kill that deal. Time will tell whether Microsoft will have more luck buying TaxCut.
In addition, Microsoft and Intel were busy last week announcing new products together. A release went out last Tuesday about applications for in-car computing, such as voice-activated navigation, hands-free voice/data telephony, driver information and entertainment for drivers and passengers. Said Mike Aymar, the vice president and general manager of Intel's Consumer Products Group: "We see the automobile as one of the next strategic locations for computing. Intel Architecture and Windows CE provide a compelling combination to propel this emerging market segment forward."
Whoa, look out for that mailbox!
The next day, our Wintel tag-team announced they were working on "broadcasting interactive television content to personal computers and other devices." Just think, in a few years you'll be able to catch your favorite soap opera on your computer when your work gets boring and the boss isn't looking. Next on the horizon, of course, will be Microsoft's new application that your boss can install to keep you from accessing their interactive television software! The boss' application will need to run all the time demanding even more "Intel Inside" processing power.
Not a bad business model.
That wraps up this week's wrap-up of our Cash-King companies. Tomorrow, I'm going to explore a question that I introduced a few weeks ago, namely... is the telecommunications equipment master, Lucent Technologies (NYSE: LU), a Cash-King stock? It has risen in price from $39 to $70 just since January 1st, and The Fool Portfolio has dutifully held it throughout. But the future is the thing. And the business is our question. We'll try to provide some clues for answering it tomorrow.
Stock Change Bid ---------------- CHV -1 7/16 78.88 KO -1 77.56 EK +2 15/16 67.00 XON + 15/16 67.69 GM + 1/8 67.56 INTC +2 9/16 76.25 MSFT - 5/16 88.63 PFE +1 3/4 101.00 TROW +1 1/8 73.38
Day Month Year History C-K +0.72% 0.37% 4.33% 4.33% S&P: -0.09% 0.72% 10.83% 10.83% NASDAQ: +0.26% -0.58% 10.41% 10.41% Rec'd # Security In At Now Change 2/3/98 22 Pfizer 82.30 101.00 22.72% 2/3/98 24 Microsoft 78.27 88.63 13.23% 2/27/98 27 Coca-Cola 69.11 77.56 12.24% 2/6/98 28 T. Rowe Pr 67.35 73.38 8.95% 3/12/98 20 Eastman Ko 63.15 67.00 6.10% 3/12/98 20 Exxon 64.34 67.69 5.21% 3/12/98 15 Chevron 83.34 78.88 -5.36% 3/12/98 17 General Mo 72.41 67.56 -6.69% 2/13/98 22 Intel 84.67 76.25 -9.95% Rec'd # Security In At Value Change 2/3/98 22 Pfizer 1810.58 2222.00 $411.42 2/3/98 24 Microsoft 1878.45 2127.00 $248.55 2/27/98 27 Coca-Cola 1865.89 2094.19 $228.30 2/6/98 28 T. Rowe Pr 1885.70 2054.50 $168.80 3/12/98 20 Eastman Ko 1262.95 1340.00 $77.05 3/12/98 20 Exxon 1286.70 1353.75 $67.05 3/12/98 15 Chevron 1250.14 1183.13 -$67.02 3/12/98 17 General Mo 1230.89 1148.56 -$82.33 2/13/98 22 Intel 1862.83 1677.50 -$185.33 CASH $5666.26 TOTAL $20866.89 *The year for the S&P and Nasdaq will be as of 02/03/98