Schering-Plough's Blowout
C-K news of the week...
by Tom Gardner ([email protected])
ALEXANDRIA, VA (Oct. 26, 1998) -- Last week was a soft week for Cash-King investors, as our portfolio climbed but 0.1% versus S&P 500 gains of 1.4%. That narrows our lead over the market to just 1.2% since our birth last February. Our three best-performing investments -- Microsoft (up 36%), Pfizer (up 26%), and Gap (up 11%) -- have afforded us some measure of glory, while our financial stocks, American Express and T. Rowe Price, have played the part of hangnail.
Since our February launch, the market is now up 6.43% and the Cash-King Portfolio is up 7.63%. I want to make it clear that I would be as happy about our performance if the market was down 15.2% and we were down 14%. With decidedly long-term aims, the total returns in the short-term are immaterial to us. What we do care about is our performance versus the market's average return. We want to beat the market; we want to beat it soundly; yet we don't care where it goes from one month to the next.
In other words, the frequently asked question of when to start a Cash-King portfolio is an easy one for us to answer: Whenever we have money saved to begin it. We suggest you approach investing the same way, not caring about the direction of the market at the open. Be apprised that the media pundits may call you "Fool" for acting thus.
Let's take a look at our stock-by-stock and total performance relative to the market over the past week:
Cash-King Last This Change Cisco $55.38 $58.69 + 6.0% Pfizer $98.50 $103.50 + 5.1% Intel $83.75 $87.25 + 4.2% S Plough $97.88 $100.31 + 2.5% Coca-Cola $69.06 $70.25 + 1.7% Microsoft $105.06 $106.38 + 1.3% AmEx $88.88 $87.63 - 1.4% T. Rowe $32.00 $30.63 - 4.3% Gap Inc. $61.06 $56.75 - 7.1% Fool Four Last This Change GM $59.00 $60.31 + 2.2% Kodak $74.56 $73.50 - 1.4% Exxon $75.94 $71.25 - 6.2% Chevron $86.94 $80.94 - 6.9% S&P 500 1056 1071 + 1.4% Total C-K $23,476 $23,452 - 0.1%
T. Rowe Price (Nasdaq: TROW) announced third-quarter earnings of $43 million, off sales of $219 million. That adds up to net margins of 19.6%, a half-percentage point higher than margins at the beginning of this fiscal year. Huzzah. But the stock fell back $1 3/8 for the week on news that CIBC Oppenheimer analyst, Steven Eisman, cut his rating on T. Rowe from Strong Buy to Hold. The analyst cited valuation concerns in his downgrade, while not changing his estimates for the year ahead.
To which we playfully respond, "Whatever."
Schering-Plough (NYSE: SGP) reported impressive third-quarter numbers. Sales came in at $1.99 billion, earnings at $432 million, resulting in profit margins of 21.8%. That figure marks a rise in net margins over the same period last year of more than 1%. The Plough's leading drug, Claritin, sneezed out (bleck!) excellent numbers during its relentless advertising campaign over the past three months. And in the wake of this earnings announcement, the company projected that fiscal 1998 sales and earnings will top 1997 figures by more than 20% -- even with the negative currency translations.
Not bad, not bad at all.
Cisco Systems (Nasdaq: CSCO) pre-announced that it will report first-quarter performance on November 4th at 4:45 p.m. EST and that all shareholders are welcome to listen in on the conference call. Cisco's playback begins at 7:30 p.m. EST and runs for a week. The call-in number is 800/633-8284 and the reservation number is 4116230. Hey, Wall Street and the SEC, please take note of this pre-announcement. It represents the abiding of basic securities laws, laws which dictate that shareholders of all shapes and sizes deserve the simultaneous full disclosure of all material information by all publicly-held businesses. Yep, we're going to continue banging this drum.
Bong bong!
Finally this week, the Coca-Cola Company (NYSE: KO) was chastised on Thursday by the Center for Science in the Public Interest (CSPI). The consumer group claims that Big Red in Atlanta is pushing its soft drinks too aggressively on adolescents (reports suggest that Coke pays up to $15 per student to have their vending machines installed on high-school campuses). According to the consumer-advocacy group, the average teenage boy in America drinks three cans of soda pop each day. To be fair to Coca-Cola, the CSPI has also come out against the consumption of Girl Scout Cookies in the past. But to be fair to CSPI, guzzling three cans of soda pop each day does not constitute the ideal diet for teens. Maybe our company should equally promote in the schools an albeit lower-margin item: Minute Maid lemonade.
And now for a look at the week ahead.
Tomorrow, I'll review the earnings numbers from Cash-King companies that just reported third-quarter performance. On Wednesday, I'll write about Amazon.com and why many have missed its 500% gain over the past year. On Thursday, I'll analyze the worldwide brand, Playboy, and talk about why it hasn't proven a Cash-King. And on Friday, I'll be reviewing one of the Gap's lead competitors, Abercrombie & Fitch.
I hope you'll return for those articles. And please remember that if you'd ever like us to cover a topic of interest to you, drop a note in the Cash-King Strategies Folder, and we'll note it. Fool on, Fools and see you tomorrow.
Tom Gardner
Cash-King Strategy Folder
Cash-King Companies Folder
Stock Change Bid AXP + 1/2 88.13 CHV - 7/16 80.50 CSCO +2 11/16 61.38 KO - 3/8 69.88 GPS - 1/4 56.50 EK - 3/8 73.13 XON - 1/16 71.19 GM + 7/16 60.75 INTC +1 11/16 88.94 MSFT + 11/16 107.06 PFE +2 105.50 SGP - 1/8 100.19 TROW +1 9/16 32.19 |
Day Month Year History
C-K +1.10% 3.01% 8.81% 8.81%
S&P: +0.16% 5.44% 6.60% 6.60%
NASDAQ: +1.84% 1.84% 3.52% 3.52%
Cash-King Stocks
Rec'd # Security In At Now Change
2/3/98 24 Microsoft 78.27 107.06 36.79%
2/3/98 22 Pfizer 82.30 105.50 28.19%
5/1/98 37 Gap Inc. 51.09 56.50 10.59%
6/23/98 34.5 Cisco Syst 57.56 61.38 6.62%
2/13/98 22 Intel 84.67 88.94 5.04%
8/21/98 22 Schering-P 95.99 100.19 4.38%
2/27/98 27 Coca-Cola 69.11 69.88 1.11%
2/6/98 56 T. Rowe Pr 33.67 32.19 -4.41%
5/26/98 18 AmExpress 104.07 88.13 -15.32%
Foolish Four Stocks
Rec'd # Security In At Value Change
3/12/98 20 Eastman Ko 63.15 73.13 15.80%
3/12/98 20 Exxon 64.34 71.19 10.65%
3/12/98 15 Chevron 83.34 80.50 -3.41%
3/12/98 17 General Mo 72.41 60.75 -16.10%
Cash-King Stocks
Rec'd # Security In At Value Change
2/3/98 24 Microsoft 1878.45 2569.50 $691.05
2/3/98 22 Pfizer 1810.58 2321.00 $510.42
5/1/98 37 Gap Inc. 1890.33 2090.50 $200.17
6/23/98 34.5 Cisco Syst 1985.95 2117.44 $131.49
2/13/98 22 Intel 1862.83 1956.63 $93.80
8/21/98 22 Schering-P 2111.7 2204.13 $92.43
2/27/98 27 Coca-Cola 1865.89 1886.63 $20.73
2/6/98 56 T. Rowe Pr 1885.70 1802.50 -$83.20
5/26/98 18 AmExpress 1873.20 1586.25 -$286.95
Foolish Four Stocks
Rec'd # Security In At Value Change
3/12/98 20 Eastman Ko 1262.95 1462.50 $199.55
3/12/98 20 Exxon 1286.70 1423.75 $137.05
3/12/98 15 Chevron 1250.14 1207.50 -$42.64
3/12/98 17 General Mo 1230.89 1032.75 -$198.14
CASH $48.07
TOTAL $23709.13
*Please note: On 8/4/98 $2,000 cash was added to the
portfolio. $2,000 will be added every six months.
*The year for the S&P and Nasdaq is as of 02/03/98
