Monday, May 11, 1998

Cash-King Portfolio Report
by Tom Gardner

Alexandria, VA (May 11, 1998) -- The Cash-King Portfolio trailed down with the market last week, losing 1% versus the 1.1% decline in the value of the S&P 500. The market fell on fears of an interest rate hike by the Federal Reserve and perhaps on the mounting Justice Department investigation of our software giant.

Verily, the chances are slim that the stock market and our portfolio will continue to fall in 1% increments every week for the next 52 weeks. If it did, we'd witness a 40% decline in the value of our account heading into next May. Hey, it could happen, though. Given that, we've not borrowed money to buy stocks and we've not invested any cash we'll need in the next five years -- effectively neutralizing all short-term drops in the value of the U.S. market. Pretty keen, eh? (Can you tell I spent last week doing Foolish business in London?)

Pretty keen.

Let's take a look at the stock-by-stock performance for the Cash-King this week.

Cash-King    Last   This Change 
 Intel      $82.06 $84.06 + 2.4% 
 Gap Inc.*  $51.06 $52.19 + 2.2% 
 Coca-Cola  $76.19 $76.44 + 0.3% 
 Pfizer    $112.75$111.13 - 1.4% 
 T. R Price $36.75 $35.38 - 3.7% 
 Microsoft  $89.63 $85.69 - 4.4% 
 Fool Four   Last   This Change 
 GM        $68.56 $68.69 + 0.3% 
 Chevron   $86.38 $84.88 - 1.7% 
 E Kodak   $73.38 $71.50 - 2.6% 
 Exxon     $75.63 $73.19 - 3.2% 
 S&P 500   1121.02 1108.14 - 1.1%   
 Total C-K $21,793 $21.572 - 1.0% 

And now for the news...

Let's start with our latest entry, Gap Inc, which announced 1Q sales of $1.7 billion versus $1.2 billion for the 1st quarter of 1998. That represents an increase of 40%. Gap's first quarter comparable store sales increased 17% versus a decrease of 3% a year ago. An outstanding beginning to 1998 for our retailer.

In non-numerical news, Gap's Old Navy division announced that it has a slot on the oncoming final episode of Seinfeld, in which Joan Collins will make her debut in a spot entitled "Woof." Hmm, interesting. Old Navy's new ad campaign will also feature Isabelle Sanford and Sherman Hemsley of The Jeffersons and Dr. Joyce Brothers. All three commercials are set in the first-class section of an early seventies luxury jet. Should be interesting.

Pfizer (NYSE: PFE) announced last week that Mexico will block imports of the new impotence drug Viagra until there is more proof that it works. The country's Health Minister Juan Ramon de la Fuente told the government news agency Notimex, "For now we are not going to register it (as a legal drug) because it is not a medicine that has shown effects of improving male impotence."

Foolishly, we expect that decision to change in the year ahead.

In the meantime, Pfizer kept pounding out more sales of Viagra. Last week, PaineWebber analyst Jeff Chaffkin told Reuters that Viagra leaped to 207,868 written prescriptions for the week ending April 24 -- eclipsing its stellar performance during prior weeks. For example, over the preceding week, Pfizer sold 113,134 new prescriptions for its impotence pill.


Of course, Microsoft (Nasdaq: MSFT) was in the news. In fact, search any of the numerous financial news sites on the Web and you'll find dozens of Microsoft clips each day. An increasing number, of course, relate to the ongoing Justice Department investigation of Mr. Softy.

Last week, Microsoft CEO Bill Gates took time to meet with lead antitrust prosecutor, Joel Klein. Then on Friday, Microsoft spokesman Mark Murray said the company could not predict when the Appeals Court might rule on the Windows 98 release but added, "We still plan to ship the product to computer makers on May 15 and to consumers June 25."

Elsewhere, our Redmond giant gleefully announced on Friday that its Exchange software outsold rival Lotus Notes during the first quarter of this year -- the first time in its nearly ten-year history that Lotus hasn't run first. A statement from Microsoft quoted the Electronic Mail & Messaging Systems newsletter as saying 3.1 million Microsoft Exchange client licenses were sold in the January-March period compared to 2.7 million licenses for Lotus Development's Notes.

Additionally, news hit the market that Microsoft, Coca-Cola, and all four of our Foolish Four stocks will be available for trading on the Argentine bourse in early June.

Hey, Microsoft isn't the only Cash-King being charged with monopoly practices. In New York on Thursday, Coca-Cola (Nasdaq: KO) was served a lawsuit from PepsiCo. In it, the No. 2 soft drink company alleged that Coca-Cola is trying to monopolize the market for fountain soft drinks distributed through independent food service distributors. The suit alleges that Coke has violated antitrust laws by threatening to pull business from distributors that also carried Pepsi products.

Our company's response? "It seems that Pepsi would prefer to compete in court rather than in the marketplace. We believe that all facets of the soft drink industry are highly competitive, especially the fountain segment."

We'll keep our eyes on this one, as we slurp down KO's juice and soda pop offerings all the while.

Intel Corp. (Nasdaq: INTC) was all about China this past week. Our chairman, Andy Grove, spent the week in Beijing where he announced plans to invest $50 million over the next five years to build an information technology research centre. The Beijing-based Intel Research Centre will do original and applied research on Internet-related technology with relevance to Chinese-language applications.

That was just the beginning. On Thursday, Grove presided over the official opening of a $198 million flash memory chip plant in Shanghai in what company officials said was a vote of confidence in China despite the Asian financial crisis. Grove said of Asia in general: "Long-term I'm optimistic. Intermediate-term I'm cautious." But Intel officials reiterated that China was the bright spot in the region, preventing revenues for Asia from sliding further. "The Chinese (personal computer) market is continuing to grow," said Intel China president James Jarrett. "It has helped us keep our Asian results flat."

And no news from T. Rowe Price (Nasdaq: TROW).

And, that's the news for the week. I'll be filling in for CashKingAl (Al Levit) this week. See you tomorrow, Fools!

Tom Gardner


Stock  Change    Bid 
 CHV   +  1/8   85.00 
 KO    +1       77.44 
 GPS   +1       53.19 
 EK    +  7/16  71.94 
 XON   -  1/4   72.94 
 GM    +2 1/2   71.19 
 INTC  -1 9/16  82.50 
 MSFT  -1 7/16  84.25 
 PFE   -  1/8   111.00 
 TROW  +  1/2   35.88 
                  Day   Month    Year  History 
         C-K      +0.32%  -0.24%   8.20%   8.20% 
         S&P:     -0.14%  -0.46%  10.52%  10.52% 
         NASDAQ:  -0.87%  -1.09%  11.81%  11.81% 
 Cash-King Stocks 
     Rec'd    #  Security     In At       Now    Change 
     2/3/98   22 Pfizer        82.30    111.00    34.87% 
    2/27/98   27 Coca-Cola     69.11     77.44    12.05% 
     2/3/98   24 Microsoft     78.27     84.25     7.64% 
     2/6/98   56 T. Rowe Pr    33.67     35.88     6.54% 
     5/1/98   37 Gap Inc.      51.09     53.19     4.11% 
    2/13/98   22 Intel         84.67     82.50    -2.57% 
 Foolish Four Stocks 
     Rec'd    #  Security     In At     Value    Change 
    3/12/98   20 Eastman Ko    63.15     71.94    13.92% 
    3/12/98   20 Exxon         64.34     72.94    13.37% 
    3/12/98   15 Chevron       83.34     85.00     1.99% 
    3/12/98   17 General Mo    72.41     71.19    -1.68% 
 Cash-King Stocks 
     Rec'd    #  Security     In At     Value    Change 
     2/3/98   22 Pfizer      1810.58   2442.00   $631.42 
    2/27/98   27 Coca-Cola   1865.89   2090.81   $224.92 
     2/3/98   24 Microsoft   1878.45   2022.00   $143.55 
     2/6/98   56 T. Rowe Pr  1885.70   2009.00   $123.30 
     5/1/98   37 Gap Inc.    1890.33   1967.94    $77.61 
    2/13/98   22 Intel       1862.83   1815.00   -$47.83 
 Foolish Four Stocks 
     Rec'd    #  Security     In At     Value    Change 
    3/12/98   20 Eastman Ko  1262.95   1438.75   $175.80 
    3/12/98   20 Exxon       1286.70   1458.75   $172.05 
    3/12/98   15 Chevron     1250.14   1275.00    $24.86 
    3/12/98   17 General Mo  1230.89   1210.19   -$20.70 
                               CASH   $3910.83 
                              TOTAL  $21640.27 
 *The year for the S&P and Nasdaq will be as of 02/03/98