Fool Portfolio Report
Wednesday, October 11, 1995
STRONG day for the Fool Portfolio.
Following a strong rebound in technology issues today, the FOOL rose 2.62%, going back over the 60% historic return mark. Unable to keep up, but still posting a mammoth day, was the red-ribboned NASDAQ, which vaulted forward 1.84%. The S&P 500 was still in the midst of rounding the bend as these two horses hit the tape. The S&P, the index of Big Industrial America, rose .33%.
Lots of action with the Fool Portfolio this week, as news and other stories begin to hit the wires after a serious dearth of information over the past few weeks. And I'm pleased to spend a little extra time and space today examining some of our stocks.
Applied Materials was the top Foolish dollar-gainer Wednesday, rising $3 3/4 to $95 1/4. The company's shares will split 2-for-1 at market close tomorrow. That means when you check your portfolio during the day Friday, you should NOT think that AMAT is down $50. . . this message being, of course, just a friendly public service announcement designed to keep your blood pressure down. The next time your online bill shows up, you can explain to your spouse just how darn therapeutic all this stuff is.
MF DowMan diligently informed everyone in our Applied Materials folder today that Goldman Sachs just added Applied Materials to its recommended list, publishing a 12-month target price of $130. We'll assume that's PRE-split numbers, for now, suggesting price appreciation of about 40% from the current level. We're looking for more than that. Applied Materials is also a current Investing for Growth (IFG) stock, which is why DowMan has an interest in it. (And to answer an oft-asked question, the new IFG primer will go on sale in FoolMart---keyword FOOLMART---tomorrow!)
We haven't yet gotten to see Goldman Sachs's numbers, but our own MF Cubster did post recent adjustments to AMAT's earnings estimates made by Salomon Brothers. The numbers were all substantially upped. For this fiscal year ending 10/31, Salomon upped its estimate from $4.45 to $5.05 per share. The first quarter of next year was upped from $1.48 a share to $1.72 a share. Further, Salomon reported estimates of $1.86 and $2.06 for the two quarters after that, and upgraded its 10/96 fiscal '96 estimate from $7.00 to $7.80.
. . . all of which may have you asking just how the heck we're down 17% on this stock! We sometimes ask the same question, but then remind ourselves that the market already has a lot of this stuff factored in. The stock didn't go from $37 to $120 over the past 12 months for nothing! Anyway, we remain extremely confident that this investment will work out swimmingly for Fool HQ.
America Online also really helped out The Fool Port today, up $3 1/4 to a bid of $61 5/8. If you're a shareholder and have just received your copy of the company's annual report, you'll note a gross inaccuracy on page 13. "The successful 'buzz' surrounding the Motley Fool---and the recognition that they have created a unique subculture on AOL---has resulted in a book and movie deal for the duo." This comment has already led to some humorous speculation in our AMER folder about what actor will be called on to play which role. The book deal is of course true (it'll be out in a few months) but the movie deal is not. We think some copywriter somewhere got confused about our Movie Under Construction in Follywood. Either that, or Simon and Schuster did some double-dealing under our very noses and reached a contract they never told us about.
Did you see the press releases (keyword PRESS) yesterday that mentioned that (a) VH1 was coming up with its own area on AOL, while at the same time (b) the man who started MTV was just named to AMER's board of directors? This is becoming an entertainment company, and an entertainment medium.
KLA Instruments also almost made the Three-Dollar Club today, rising $2 3/4. Ride helped out too, gaining $7/8 to close at its high bid of the day, $20.
Iomega was one of our few losers Wednesday, down $3/8. The company did indeed report fine numbers yesterday morning, coming in with record quarterly revenues ($84.7 million) and 10 cents per share of earnings. . . extremely close to estimates already provided in the IOMG folder by MF Ben and a few others. Meanwhile, you can read an excellent summary of the company's conference call by MF Chiros, which was posted yesterday at 11:17 AM (for those who'd like to read them in the Iomega message folder). There has been some unpleasantness in recent weeks in that folder, as some people have purportedly been using multiple screen names to hype their (mainly negative) predictions. It was of course pleasing to see Iomega prove the naysayers wrong. But it's always a shame when the message boards get spoiled for a few days by obnoxious people. Of course, truth always will out, and good manners take you further than anything else.
Kim Edwards, Iomega's CEO, stated that the company shipped 2 1/2 times more Zip drives in the third quarter than it did in the second. Further, he said that Iomega would ship 2 times more than THAT in the fourth quarter. When asked if he thought that would satisfy demand, he was quoted as saying, "I hope not."
Emerald Investments remains the analyst with the highest projections. It projects fourth-quarter earnings at 72 cents per share, and for 1996, $800 million in sales and a stock price of $50 a share. Commenting on this outlook, MF Chiros writes, "This does not seem far-fetched at all, now. Come January 1996, when IOMG has just done 70 cents on revenue of $170-$180 million in the fourth quarter, with sales in Asia and Europe starting in significant fashion, I believe the stock will double from where it is today." Other analysts still see a great year, but with sales closer to $600 million. That will largely depend on acceptance of the company's new removable Jaz hard drive, which is supposed to show up at the end of the current quarter. The company announced that its backlog overall right now was more than its $177 million of fiscal '95 sales so far. Gotta love it. Makes one wonder what this talented technology company will dream up next.
Given all this stuff, you may wonder (as we did above with AMAT), why has the stock been weak recently? The answer is, once again, that the market looks ahead. The whole reason that the stock rose from $3 to $30 in the first place was on expectations of this good third quarter, and high hopes for an outstanding fourth quarter and 1996.
To close, you had to love what happened yesterday, when CNBC's Joe Kernan incorrectly called Iomega's earnings disappointing. KSuitter posted Joe's fax numbers at 12:51 PM in the afternoon, inducing a flood of faxes going CNBC's way from Foolish readers concerned about the misperception. By 1:54 PM, Wesley0428 was already reporting that CNBC had reported Iomega's numbers again, and "got it right this time."
This induced SDTrent to write, Foolishly, the following words which serve niftily as today's Fool Portfolio Recap finale:
"Way to go Fools! Joe K. was falling over himself explaining why he was slighting IOMG this morning. Talk about moving the media! I think this may be another first. What TEAM WORK! And don't give me any hassle about this being hype. The TRUTH is always in order."
---David Gardner, October 11, 1995
AMER +3 1/4 AMAT +3 3/4 CHV - 3/8 GE - 1/2 GPS + 1/4 IOMG - 3/8 KLAC +2 3/4 RIDE + 7/8 S + 5/8 SNIC + 1/8
Day Month Year History FOOL +2.62% -4.30% 45.60% 61.66% S&P 500 +0.33% -0.85% 26.17% 26.41% NASDAQ +1.84% -4.02% 33.19% 39.07% Rec'd # Security In At Now Change 8/5/94 340 AmOnline 14.55 61.63 323.66% 5/23/95 510 Ride Inc. 9.91 20.00 101.88% 5/17/95 335 Iomega Corp 15.11 22.13 46.39% 8/5/94 165 Sears 28.93 35.13 21.43% 4/20/95 155 The Gap 32.55 38.25 17.51% 8/11/95 95 GenElec 57.91 62.00 7.05% 8/11/95 110 Chevron 49.00 49.25 0.51% 8/24/95 130 KLA Instrm 44.71 39.25 -12.21% 8/24/95 50 AppldMatl 115.05 95.25 -17.21% 12/23/94 340 SonicSol 14.48 10.00 -30.95% Rec'd # Security Cost Value Change 8/5/94 340 AmOnline 4945.56 20952.50 $16006.94 5/23/95 510 Ride Inc. 5052.44 10200.00 $5147.56 5/17/95 335 Iomega Corp 5063.13 7411.88 $2348.75 8/5/94 165 Sears 4772.65 5795.63 $1022.98 4/20/95 155 The Gap 5045.25 5928.75 $883.50 8/11/95 95 GenElec 5501.87 5890.00 $388.13 8/11/95 110 Chevron 5389.99 5417.50 $27.51 8/24/95130 KLA Instrm 5812.49 5102.50 -$709.99 8/24/95 50 AppldMatl 5752.49 4762.50 -$989.99 12/23/94 340 SonicSol 4924.18 3400.00 -$1524.18 CASH $5969.86 TOTAL $80831.11 Transmitted: 95-10-11