Gap Blasts Ahead

by Phil Weiss

TOWACO, NJ (Sept. 14, 1998) -- I was out of the country on a much-needed vacation during this rather tumultuous period for the market over the last two weeks. During this time my belief in the meaninglessness of the market's day-to-day activity was only strengthened. I'm even more positive on the sort of buy-and-hold investing for the long-term that we do here with the Cash-King Portfolio.

My family and I went to Great Britain to see some historic sites and visit some of my wife's relatives on August 31. I must admit that I was rather surprised when I picked up a copy of The Herald Tribune the next day and learned of the market's rather precipitous drop. I started going through the stock tables with the intention of seeing how each of my stocks had performed the day before. I knew that I'd lost some paper profits that day, but I wasn't overly distressed; I care more about the overall quality of the companies in my portfolio than I do about the immediate direction of our public markets (or those in Russia, Latin America, and Asia).

As each day of my vacation passed, I found myself even less interested in looking at how each of my stocks performed and more interested in enjoying my vacation. I was growing far more amazed by the new words that my son learned to speak in the UK and his new mannerisms. It offered a constant reminder of the advantages of Cash-King investing and the way that it allows us to have more time to focus on the world around us.

During this trip, my wife and I had the longest period of uninterrupted time with my son that either of us had been able to spend with him since my wife returned to work when he was nine weeks old. It was really wonderful. At 14 months old his vocabulary is now more than 30 words. He also made it a habit to pick up each of his favorite books a few times a day, say "book" each time, hand it to one of us, and then come and sit in one of our laps so that we'd read it to him.

Within a couple of days I found that although I read the paper as we took the Underground (London's version of the subway) to various sites around the city, I worried even less about my stocks. After all, it wasn't like I was going to make a panicked call to my discount broker and dump any of them anyway. I was just looking forward to the opportunity to buy some more shares of my favorite stocks upon my return.

Now, why have I rambled on about my world away from the market? Because a funny thing happened when we returned to New Jersey the day after Labor Day, not knowing of the market's surge earlier that day. That night I updated all of my stocks in Quicken and much to my surprise, I learned that my portfolio had actually increased in value while I was away. I couldn't help but laugh at this result.

Okay, on to our stocks. Let's start things off with a look at last week's performance:

 Cash-King  Last    This     Change 
 Gap Inc.   $53.50   $59.75  +11.7% 
 Intel      $78.25   $84.94  + 7.9% 
 Microsoft  $96.63  $104.25  + 7.9% 
 AmEx       $73.63   $79.25  + 7.6% 
 Pfizer     $95.38  $100.50  + 5.4% 
 Cisco      $89.25   $92.75  + 3.9% 
 S Plough   $91.25   $94.63  + 3.7% 
 Coca-Cola  $62.13   $62.44  + 0.1% 
 T Rowe     $28.25   $27.75  - 1.8% 
 Fool Four  Last       This  Change 
 Exxon      $66.06   $70.56  +6.8% 
 Chevron    $77.88   $82.50  +5.9% 
 GM         $56.31   $56.44  +0.2% 
 Kodak      $81.00   $78.00  -3.7% 
 S&P 500    973.89  1009.06  +3.6% 
 Total C-K $21,878  $22,890  +4.6% 

All in all, it ended up being quite a good week for our stocks.

The Cash-King news for the week was really dominated by the world of sports -- and the exploits of Mark McGwire. Both The Herald Tribune and the International version of USA Today carried regular updates (there were even front page stories in both papers) on the chase of the home run record by both McGwire and Sosa. Then yesterday, Sosa bopped two more. I feel like those are two Cash-King hitters slamming their way down the stretch. Conversely, it's a shame how many individual investors get sold penny stocks by brokers -- they're betting on Rookie League ballplayers (often batting less than .150) to make it big, rather than investing their future into the greats.

As far as the news on our stocks goes, I'm going to limit them a lot more than usual this week. My focus will be on the stories that give us good insights into the company's current and future prospects. I'm also going to limit it to no more than one story per company.

Thursday after market close, Intel (Nasdaq: INTC) announced that third quarter revenues are expected to be about $500-$600 million more than had originally been expected (Intel Third Quarter Above Expectations). It's also expected that the increased revenues will lead to higher earnings this quarter.

On Friday, two of American Express' (NYSE: AXP) executives � Harvey Golub, Chairman and Chief Executive Officer, and Kenneth Chenault, President and Chief Operating Officer -- distributed a memo to company employees that was also made available to the public (American Express Comments on Market Impact). The memo discussed their perspective on the current performance of the company's stock and the current state of its business. I found it to be a particularly good read. Here's a clip of my favorite lines: "Given all this, our focus will continue to be: to run our businesses well, to manage expenses carefully and to select appropriate investments to make. We will not become preoccupied with the short-term ups and downs of the market; neither should you�." It's great to know that the managers of our company have the same view of the market as we do.

On Thursday, Gap Inc. (NYSE: GPS) filed its quarterly for the second quarter which ended August 1, 1998 (Gap 10Q). Run the numbers. We think you'll like what you find. The market did, as well -- driving Gap shares up more than 11% on the week.

That's it for the news in the media. I do have some personal observances about some of our companies to relate as well. I was quite surprised to see how many times I saw people wearing Gap sweatshirts while I was walking through London. There were also many more Gap stores throughout the city than I would have expected. For me, this just reinforced the growing strength of Gap's brand name on a global basis.

I did get a good chuckle when I went into a Woolworth's looking for some milk for my son. Inside the store was a big refrigerated case of soft drinks with the Pepsi (NYSE: PEP) logo emblazoned on it. What really made me laugh was that it was filled with Coke (NYSE: KO) products. All in all, Coke's products were found much more frequently around London. As a matter of fact, I don't recall seeing anyone drinking a can or bottle of anything other than Coke. Kinda weird. The only downside was that Pepsi did seem to have a strong presence in restaurants.

Finally, I was also happy that I was never told -- not even once -- that I had to use Visa or MasterCard rather than American Express!

I'm planning to spend the rest of the week discussing the works of Philip Fisher, who was one of our nation's preeminent buy-and-hold investors. When reading his books, gee whiz, you can't help but whisper to yourself, "Cash-King, Cash-King, Cash-King..."

Have a joyous evening and Fool on,

Phil Weiss

Cash-King Strategy Folder
Cash-King Companies Folder

09/14/98 Close

Stock  Change    Bid 
 AXP   +2 3/8   81.63 
 CHV     ---    82.50 
 CSCO  +  15/16 93.69 
 KO    +  7/8   63.31 
 GPS   +  7/16  60.19 
 EK    +2 5/16  80.31 
 XON   -  1/16  70.50 
 GM    +3       59.44 
 INTC  +  7/8   85.81 
 MSFT  +1 3/4   106.00 
 PFE   +2 3/4   103.25 
 SGP   +3       97.63 
 TROW  +1 3/4   29.50 
              Day      Month       Year       History 
 C-K          2.08%     8.87%      7.28%       7.28%  
 S&P 500      2.05%     7.54%      2.36%       2.36%  
 Nasdaq       1.47%    11.11%     (0.04%)     (0.04%) 
 Cash-King Stocks 
     Rec'd    #  Security     In At       Now    Change 
     2/3/98   24 Microsoft     78.27    106.00    35.43% 
     2/3/98   22 Pfizer        82.30    103.25    25.46% 
     5/1/98   37 Gap Inc.      51.09     60.19    17.81% 
    6/23/98   23 Cisco Syst    86.35     93.69     8.50% 
    8/21/98   22 Schering P    95.99     97.63     1.71% 
    2/13/98   22 Intel         84.67     85.81     1.34% 
    2/27/98   27 Coca-Cola     69.11     63.31    -8.38% 
     2/6/98   56 T. Rowe Pr    33.67     29.50   -12.39% 
    5/26/98   18 AmExpress    104.07     81.63   -21.56% 
 Foolish Four Stocks 
     Rec'd    #  Security     In At     Value    Change 
    3/12/98   20 Eastman Ko    63.15     80.31    27.18% 
    3/12/98   20 Exxon         64.34     70.50     9.58% 
    3/12/98   15 Chevron       83.34     82.50    -1.01% 
    3/12/98   17 General Mo    72.41     59.44   -17.91% 
 Cash-King Stocks 
     Rec'd    #  Security     In At     Value    Change 
     2/3/98   24 Microsoft   1878.45   2544.00   $665.55 
     2/3/98   22 Pfizer      1810.58   2271.50   $460.92 
     5/1/98   37 Gap Inc.    1890.33   2226.94   $336.61 
    6/23/98   23 Cisco Syst  1985.95   2154.81   $168.86 
    8/21/98   22 Schering P   2111.7   2147.75    $36.05 
    2/13/98   22 Intel       1862.83   1887.88    $25.05 
    2/27/98   27 Coca-Cola   1865.89   1709.44  -$156.45 
     2/6/98   56 T. Rowe Pr  1885.70   1652.00  -$233.70 
    5/26/98   18 AmExpress   1873.20   1469.25  -$403.95 
 Foolish Four Stocks 
     Rec'd    #  Security     In At     Value    Change 
    3/12/98   20 Eastman Ko  1262.95   1606.25   $343.30 
    3/12/98   20 Exxon       1286.70   1410.00   $123.30 
    3/12/98   15 Chevron     1250.14   1237.50   -$12.64 
    3/12/98   17 General Mo  1230.89   1010.44  -$220.45 
                               CASH     $48.07 
                              TOTAL  $23375.82 
 *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