Fool Portfolio Report
Thursday, November 9, 1995
Can't you just see the ideal Fool out there, lounging back in her desk chair to read today's Fool report on America Online, donning thick wool socks and Gap khakis, Zip drive whirring---saving Fribble after Fribble (multi-tasking) in Fooldom, overhead lights brought to you by General Electric, hairnet on and semiconductor equipment and test systems chalking out wafer after wafer in her den?
Every one of the companies above saw their stock driven forward today, and each pitched in to one of the most bewildering Fool Portfolio days ever. Before reviewing what happened, let's put up the overall numbers right here:Day Month Year History
FOOL +2.79% 5.52% 70.21% 88.98%
S&P 500 +0.26% 2.02% 29.17% 29.42%
NASDAQ +1.68% 2.85% 41.71% 47.96%
We now near 90% returns in less than sixteen months of what could only be called a low commission, low anxiety, low trading activity portfolio. 1995 is now looking particularly sweet. . . with 70.2% returns versus 29.2% returns for the S&P 500.
No we aren't tracked in Hulbert's Digest, but yes we do apply more rigorous, more accurate accounting standards than any other equities portfolio on the planet---reporting all commissions, reflecting bid/ask spreads, and announcing trades to Fools BEFORE making them ourselves. So we don't get that little front-running bump up, we don't get 300 free trades per year, and we actually have to deal with market-makers. . . and you know what, we wouldn't have it any other way.
Let's check in on our stocks.
The Gap announced 3rd quarter earnings today, and look out, the Company in the business of turning profits and generating cash *internally* walloped estimates by 14 cents, posting 81 cents versus Street projections of 67 cents. Look out for the upgrades, Fools!
The Company was expected to earn less than $100 million for the quarter, then announced $117 million in earnings on quarterly sales of $1.2 billion. Check the margins out! Current assets are doubling up on current liabilities; cash and equivalents blossomed; we're still searching for loads of long-term debt but haven't found 'em. And GPS rose $3 5/8 to $47 3/8, now up 45.5% for us since we purchased our shares in April, 1995. Nothing like investing in companies that know how to "make" cash and leave it on the table for their shareholders.
Note: A multi-billion-dollar company is now valued 45% higher than it was less than seven months ago. Ahh, market efficiency, it's a lovely thing, eh? Anyone out there still think the individual investor can't outperform market average?
Iomega Corporation (NASDAQ:IOMG). Uh-huh, SyQuest has the superior drive (NY Times). The stock's move is based on "online chatter" (The Wall Street Journal). Third quarter earnings were "a disappointment" (CNBC). What was an offline investor to do but short IOMG. . . what with all the trained financiers skeptical? Iomega moved forward $2 1/8, to close bidding $31 3/8, and:
GONG GONG GONG GONG GONG!
That's a two-bagger. Iomega has risen from $15.11 per share to $31.38 per share, a 108% rise in six months. Monstrous sales growth, strong branding, rampant consumer demand, an excellent and proven management team, a wide-open market: look for situations like these. Iomega's announcement that it would partner with Micron to provide the full array of their products internally has driven the stock up over 20% in two days. More OEMs seem probable. . . demand doesn't look to be slackening. . . Christmas is around the corner. . . the institutions are finally looking in. . . by golly, it's nice having this one in our portfolio.
America Online snapped back $2 3/4, as the post-earnings volatility continues. At $81, the stock has risen 457% percent for us in less than a year and a half. It HAS to be time to cash out. Take your profits. Generate commissions. Move on. Find the next hot one. Get out now. Online issues are a bubble about to burst. Michael Murphy says he is taking his Overpriced Stock-Service newsletter onto the Microsoft Network and thinks AMER is fairly priced below $30. Or was it $15? Or was it $7 1/2? So many splits. Get out now!
Nope. 4 million subscribers today. 6 million in Spring, 1996. 8 million by when? Then 10. How much does it cost to acquire them? How much more will they be worth per sub when the advertisers more carefully read the most recent Nielsen report about online activity? Is the future in one-wayed information? Do we go back from here into a world where one reporter tells us the story? Is collaboration, the most Foolish of all things, about to be squelched? Naaa, we're going to hold on tight to our AMER shares.
The semiconductor group headed north and again, we're on the verge of actually making some money in our Applied Materials and KLA Instruments investments. They're both down around 9% now. . . and while some talkative few see supply beginning to meet demand, we don't. That is, when you're talking about 2-year, 5-year or 10-year supplies and demands. We're not terriby anxious about next month's book-to-bill. We see the cash, we see the blank long-term debt line, and we think we can see the future pretty well.
Last Tuesday, in our weekly chat, I asked the forty Fools there whether they thought technology as a group would outperform or underperform the S&P 500 into the year 2000. Not one person typed "underperform." Not one typed "not sure." Every single one of them believe the Microsofts, Intels, America Onlines, Broderbunds, Applied Materials, KLAs, Dells, Iomegas, et al will beat the market. . . and I bet they'd say, beat it handily.
Now either you believe there is mania there. . . or you think the traditional media has knowingly or unknowingly misrepresented what is happening with the new technology. And that MOST people still don't understand what being online means. When we read a few months back that a Washington State newspaper wouldn't run advertisements for a prominent online service provider, because "we consider them a competitor". . . one wonders what they're saying over on the editorial side.
So is there mania in thinking technology will outperform or is there sophistication in 't.
Great day for The Fool Port. Let's take the night off. A small glass of wine, a simple meal, and bells jangling at our ears.
Tom Gardner, November 9, 1995
AMER +2 3/4 AMAT +4 1/8 CHV - 3/8 GE + 3/8 GPS +3 5/8 IOMG +2 1/8 KLAC +1 1/4 RIDE - 1/4 S --- SNIC - 1/4
Day Month Year History FOOL +2.79% 5.52% 70.21% 88.98% S&P 500 +0.26% 2.02% 29.17% 29.42% NASDAQ +1.68% 2.85% 41.71% 47.96% Rec'd # Security In At Now Change 8/5/94 340 AmOnline 14.55 81.00 456.86% 5/23/95 510 Ride Inc. 9.91 23.88 141.00% 5/17/95 335 Iomega Corp 15.11 31.38 107.59% 4/20/95 155 The Gap 32.55 47.38 45.55% 8/5/94 165 Sears 28.93 38.63 33.53% 8/11/95 95 GenElec 57.91 65.13 12.45% 8/11/95 110 Chevron 49.00 47.63 -2.81% 8/24/95 130 KLA Instrm 44.71 41.00 -8.30% 8/24/95 100 AppldMatl 57.52 51.88 -9.82% 12/23/94 340 SonicSol 14.48 7.75 -46.49% Rec'd # Security Cost Value Change 8/5/94 340 AmOnline 4945.56 27540.00 $22594.44 5/23/95 510 Ride Inc. 5052.44 12176.25 $7123.81 5/17/95 335 Iomega Corp 5063.13 10510.63 $5447.50 4/20/95 155 The Gap 5045.25 7343.13 $2297.88 8/5/94 165 Sears 4772.65 6373.13 $1600.48 8/11/95 95 GenElec 5501.87 6186.88 $685.01 8/11/95 110 Chevron 5389.99 5238.75 -$151.24 8/24/95130 KLA Instrm 5812.49 5330.00 -$482.49 8/24/95 100 AppldMatl 5752.49 5187.50 -$564.99 12/23/94 340 SonicSol 4924.18 2635.00 -$2289.18 CASH $5969.86 TOTAL $94491.11