Fool Portfolio Report
Thursday, December 14, 1995
OK, this was your basic ugly day on the market. The NASDAQ dropped almost two percent, and it took down most technology-related issues with it. Of course, since AOL was having problems with its Quotes & Portfolios section for much of Thursday (since fixed), we didn't feel it too hard until the end. But the truth remains: KLA Instruments down $3 more, Applied Materials off $2 1/2, America Online surrenders $1 5/8, and Chevron loses $1 3/8.
But a couple of news releases sallied forth from Roy, Utah today that the market apparently loved, sending IOMG shares up $3 1/8 to a bid of $50 3/4. And this move, combined with a move over $40 for Sears (up $3/4 to $40 3/8) made for a somewhat tolerable down day. Often volatile, the FOOL looked a lot more like the S&P 500 by the end of the day, and may almost be said to have thumbed its nose at the NASDAQ.
And the $18,981.96 that we have sitting on the sidelines also served as ballast over stormy seas.
Iomega announced two things this morning. First, the company signaled its intention of doing a secondary stock offering, meaning that it will float more shares on the market. . . 5.25 million of'em, in fact. The offering, to be done by Hambrecht & Quist and Montgomery Securities, should add some $200 million to the company's coffers, though diluting the earnings per share that you and I rely on for attractive valuations. More on that in a sec.
The other news was a more traditionally bullish announcement. . . can you say, "Three-for-one stock split?" I knew you could. Dependent on a special vote from shareholders to increase the maximum shares allowable, IOMG stock will split three-for-one at the end of January. What does this mean? Very little, actually; no change in the underlying value of the stock or the company. It simply means that with three times as many shares outstanding, IOMG stock will soon be trading in the teens, rather than the fifties. But stock splits have always been interpreted as bullish events by speculators, and so on a very nasty day for the NASDAQ, one of the NAS's best stocks in 1995 did it again. . . way up.
OK, now more about the share offering. Normally, this is kind of a bummer, because earnings per share are obviously diluted whenever a company issues more shares but maintains the same earnings. But two potentially bullish things present themselves for our attention. The first is that Iomega will now have LOTS more cash. That might enable the Roy Rascals to bring their product to market in sufficient amounts to meet demand in a more timely manner. If this is part of what comes out of the secondary offering, then it won't only be share totals that rise. . . it'll be earnings too.
But second, Iomega has not enjoyed any institutional sponsorship from major Wall Street sell-side firms. And yet, with its secondary offering Iomega is teaming up with the highly reputable Hambrecht & Quist (esteemed for its work with great small-cap technology firms) and Montgomery Securities. Either or both might be expected to issue positive reports on IOMG, therefore, in 1996. I have to believe the market was thinking this today, and suggesting it with the $3+ rise.
There you have MY Foolish take on it. But for the whole story (and more---trust me---lots more) you should go directly to the Iomega folder without collecting $200. You'll always find all the best and most timely information and opinion right there.
KLA Instruments sunk to a new Foolish low today, and MF Templar tells me that block trades were unusually high. Block trades are huge trades made by institutions, which means that I have a feeling some big honcho or another (or maybe a few of them) sunk the price today upon exiting KLAC. That might suggest that this already beaten down stock could rebound in the short term, since it may have been artificially deflated as some huge bank or mutual fund said, "Sayonara." We'll see. Anyway, needless to say I'm extremely disappointed by KLA's decline, now off 34% for us since our August purchase.
That is, of course, why Foolish investors diversify their portfolios, so that when one of your technology stocks surprises you with a drop, another may step in and bring your returns back in line. No appreciation without diversification. . . or not for Fools, anyway.
---David Gardner, December 14, 1995
AMER -1 5/8 AMAT -2 1/2 CHV -1 3/8 GE - 5/8 GPS - 1/4 IOMG +3 1/8 KLAC -3 S + 3/4
Day Month Year History FOOL -0.85% 0.66% 73.40% 92.53% S&P 500 -0.77% 1.91% 34.33% 34.58% NASDAQ -1.74% -1.99% 38.06% 44.16% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 38.00 422.49% 5/17/95 335 Iomega Corp 15.11 50.75 235.79% 4/20/95 155 The Gap 32.55 46.25 42.09% 8/5/94 165 Sears 28.93 40.38 39.58% 8/11/95 95 GenElec 57.91 71.25 23.03% 8/11/95 110 Chevron 49.00 51.88 5.87% 8/24/95 100 AppldMatl 57.52 43.00 -25.25% 8/24/95 130 KLA Instrm 44.71 29.50 -34.02% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 25840.00 $20894.44 5/17/95 335 Iomega Corp 5063.13 17001.25 $11938.12 4/20/95 155 The Gap 5045.25 7168.75 $2123.50 8/5/94 165 Sears 4772.65 6661.88 $1889.23 8/11/95 95 GenElec 5501.87 6768.75 $1266.88 8/11/95 110 Chevron 5389.99 5706.25 $316.26 8/24/95 100 AppldMatl 5752.49 4300.00 -$1452.49 8/24/95130 KLA Instrm 5812.49 3835.00 -$1977.49 CASH $18981.96 TOTAL $96263.84