$18 Billion Left Over
Alexandria, VA (Aug. 24, 1998) -- The Cash-King portfolio had another fine time of it last week, with the account scooting ahead 3.1% versus S&P 500 gains of 1.7%. Going into Monday, the portfolio is now up 14.8% vs. S&P gains of 7.5% since our inception in early February, 1998.
This past week, we formally added $2,000 in new savings, while also adjusting upward the cash position by $65.01 to account for recent dividend and cash payments. The end result is a real-money portfolio with thirteen holdings valued at $25,023, with $48.07 of that value in cash. The portfolio has paid a total of $103.35 in commissions, will have minimal tax debits at year-end, and is near to 7.5% ahead of the market's average return.
Here's a quick look at the breakdown of the portfolio by holding...
CK Total Percentage Holding Value of Total Portfolio Microsoft $2,655.00 10.6% Cisco $2,363.25 9.4% Gap $2,347.19 9.4% Pfizer $2,326.50 9.3% Schering Plough $2,156.00 8.6% Coca-Cola $2,141.44 8.6% T R Price $1,988.00 7.9% Intel $1,868.63 7.5% American Express $1,711.13 6.8% Eastman Kodak $1,690.00 6.8% Exxon $1,420.00 5.8% Chevron $1,202.81 4.8% General Motors $1,105.00 4.4% Cash $48.07 0.2% Total $25,023.01 100.0%No matter what the size or style of your portfolio, we think it's important to lay out the holdings from the largest to smallest position. As I do this for the Cash-King Portfolio, I'm reminded that I should be spending considerably more time following Microsoft, Cisco, Gap and Pfizer than I should be watching General Motors, Chevron, and Exxon. The larger the position relative to the entire portfolio, the more closely should we tend to it.
Take a look at our portfolio broken out by category...
CK Total Percentage Category Value of Total Portfolio Cash-King $19,557.14 78.2% Fool-Four $5,417.81 21.6% Cash $48.07 0.2% Total $25,023.01 100.0%
Because the Cash-King holdings make up nearly 80% of our account, we naturally follow them much more closely. Add to this the fact that the Fool-Four Approach is a mechanical model for value investing, and you'll understand why we hardly ever report on news on our four Dow Heavies or spend time trying to evaluate their businesses. The heavy focus of this portfolio and its managers are on the nine world-beating companies that make up our Cash-King brand of investing.
Now, let's take a look at how our portfolio did, stock by stock, in the week that was...
Cash-King Last This Change Cisco $96.44 $102.75 + 6.5% Microsoft $104.25 $110.63 + 6.1% Pfizer $101.19 $105.75 + 4.5% Coca-Cola $76.81 $79.31 + 3.3% T Rowe $34.63 $35.50 + 2.5% S Plough $95.99 $98.00 + 2.1%* AmEx $93.69 $95.06 + 1.5% Gap Inc. $62.94 $63.44 + 0.8% Intel $86.19 $84.94 - 1.5% Fool Four Last This Change Exxon $68.38 $71.00 + 3.8% Kodak $82.50 $84.50 + 2.4% Chevron $80.13 $80.19 + 0.1% GM $67.81 $65.00 - 4.1% S&P 500 1063 1081 + 1.7% Total C-K $22,337 $25,023 + 3.1%*** purchased on Friday
** cash reflects $2,000 of new money added
Our CK stocks rolled over the market, gaining 3.1% during a week of political turmoil. Let's take a look at some news from our companies, from largest position to smallest.
Microsoft confirmed that it had won a trial delay in the Department of Justice's anti-trust suit last week. The hearing has been pushed back until September 23rd, winning us a few more weeks to report on this story (Zzz.) In other news from Redmond, Microsoft's founder and former executive, Paul Allen, announced that he will sell off another $105 million in Microsoft stock. That brings his total sale of MSFT stock to $1.7 billion since May of this year. Of course, Allen will still hold a few shares after the sale -- around 165 million shares of them, valued at over $18 billion today.
Cisco had a great week, up more than 6%. The company announced that it will spend over $60 million on a print, television and online advertising campaign to promote its brandname, its products, and its role in building the Internet around the world. On Friday, Cisco announced that it will pay $56 million in stock to acquire American Internet, whose Internet's products make it easier to install television set-top boxes and cable modems to hook consumers up to the Internet.
Gap announced on Tuesday that will seek an interactive agency to help run its gap.com and gapkids.com Web sites. The company will commit $20 million to the relationship, in an effort to keep its online retailing efforts swinging and grooving across the planet.
Pfizer confirmed that the Public Citizens Health Research Group had petitioned the Food & Drug Administration (FDA) to withdraw or re-examine its decision to allow the release of Viagra. FDA Spokesman Brad Stone agreed to consider the consumer group's concerns but added, "With the data now available, we still believe that Viagra is safe when used according to the labeling."
Schering Plough, added as a King on Friday, announced that the FDA has agreed to give priority-review status to REBETRON, a combination drug used in the treatment of Hepatitis C. The drug is the result of a marketing partnership with ICN Pharmaceuticals. Schering Plough also announced that it is seeking priority-review status for Temodal, a drug for adult patients with recurrent gliomas, the most advanced and malignant of brain tumors. (Note: Priority-Review Status means that the FDA agrees to rule on the drug application within 180 days.)
Coca-Cola had little news last week, but did appear prominently in another wailingly-bearish article from the Associated Press entitled "The Ghost of the 1970s." The article notes:
[Market] optimists contend the past cannot be used to measure the present or future. This, they say, is a new world destined to get even better, and higher P-Es are justified.
They said things similar to that in the 1970s, before shares of Coca Cola (NYSE:KO - news), a new-age investment, fell 70 percent. The shares now are said to represent the new global economy. This year, their P-E was nearly 50.
To which this Fool wonders: Who are these market optimists that make such blanket statements? Is it smart to focus so much attention on the P/E ratio? And why is so much financial news geared toward traders? Remember that on an annualized and total basis, Coca-Cola has dramatically outperformed the stock-market's average return since 1970 -- which includes that 70% drop.
Your Cash-King managers believe that traders should definitely be selling Coca-Cola today. We also think, however, that investors should consider holding. We plan to hold, and happily, as we watch the business develop -- following value rather than valuation.
There was little news from T Rowe Price, Intel, American Express. These three are the smallest of our Cash-King holdings, so we can overlook them for awhile. And that's the news for the week. In the days ahead, I'll be writing about the importance of the forward direction of a business, a quality difficult to dig out in screening software today and yet a quality critical to finding great companies to own.
To close, if you didn't get a chance to read a fine article in The Fool Portfolio recap of last week, check this one out: Software Investing. Indirectly it speaks to our top CK holding, Microsoft. Then drop a vote in our poll on Apple, a company partially owned by Mr. Softy (Apple Poll).
Tom Gardner, Fool
Stock Change Bid AXP +2 1/8 97.19 CHV -1 1/2 78.69 CSCO + 1/4 103.00 KO + 5/16 79.63 GPS +2 1/2 65.94 EK +1 1/8 85.63 XON - 7/16 70.56 GM -1 3/8 63.63 INTC - 5/16 84.63 MSFT - 1/4 110.38 PFE - 5/8 105.13 SGP +2 1/4 100.25 TROW + 1/16 35.56
Day Month Year History C-K 0.56% -0.08% 15.48% 15.48% S&P 500 0.64% -2.90% 8.16% 8.16% Nasdaq -0.32% -4.36% 7.47% 7.47% Cash-King Stocks Rec'd # Security In At Now Change 2/3/98 24 Microsoft 78.27 110.38 41.02% 5/1/98 37 Gap Inc. 51.09 65.94 29.06% 2/3/98 22 Pfizer 82.30 105.13 27.74% 6/23/98 23 Cisco Syst 86.35 103.00 19.29% 2/27/98 27 Coca-Cola 69.11 79.63 15.22% 2/6/98 56 T. Rowe Pr 33.67 35.56 5.61% 2/21/98 22Schering Pl 95.99 100.25 4.44% 2/13/98 22 Intel 84.67 84.63 -0.06% 5/26/98 18 AmExpress 104.07 97.19 -6.61% Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Eastman Ko 63.15 85.63 35.60% 3/12/98 20 Exxon 64.34 70.56 9.68% 3/12/98 15 Chevron 83.34 78.69 -5.59% 3/12/98 17 General Mo 72.41 63.63 -12.13% Cash-King Stocks Rec'd # Security In At Value Change 2/3/98 24 Microsoft 1878.45 2649.00 $770.55 5/1/98 37 Gap Inc. 1890.33 2439.69 $549.36 2/3/98 22 Pfizer 1810.58 2312.75 $502.17 6/23/98 23 Cisco Syst 1985.95 2369.00 $383.05 2/27/98 27 Coca-Cola 1865.89 2149.88 $283.99 2/6/98 56 T. Rowe Pr 1885.70 1991.50 $105.80 2/21/98 22Schering Pl 2111.7 2205.50 $93.80 2/13/98 22 Intel 1862.83 1861.75 -$1.08 5/26/98 18 AmExpress 1873.20 1749.38 -$123.83 Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Eastman Ko 1262.95 1712.50 $449.55 3/12/98 20 Exxon 1286.70 1411.25 $124.55 3/12/98 15 Chevron 1250.14 1180.31 -$69.83 3/12/98 17 General Mo 1230.89 1081.63 -$149.27 CASH $48.06 TOTAL $25162.19 *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