Fool Portfolio Report
Thursday, January 4, 1996
The idea shouldn't be named contrarian, but under present circumstances, I don't think there's any other proper label for it. That idea being that we actually celebrate down days when the market loses more than a Fool. Too many investors are happy to have turned 25% growth in 1995, when the S&P 500 climbed 35%. And too few are pleased to lose 0.47% on a day that the S&P fell 0.58%, and the NASDAQ 1.57%.
So today---with a strong rebound in two of our tech stocks---Fools can bite down on a wad of Big-League Gum, can cry out, "Victory!" heave our Fool ballcaps into the air, hang up our motley cleats, drive home at a leisurely pace, toss together a neighborhood barbecue, chew long sticks of meadow grass, drink lemonade, sit out under a crescent moon and watch the little Fools race up and down cornrows chasing fireflies.
Ooops, wrong season. . . AND. . . we live in a city. Oh well. Still, it was a decent day and cause for mild celebration.
America Online (NASDAQ:AMER) and Applied Materials (NASDAQ:AMAT) charged back after losing ground in morning trading. At one point today, both of our letter-A technology stocks had given up $3. . . or nearly 10% of their value. By market close, the turnaround was complete, with America Online up $1/4 and Applied Materials up $1/2. All of this as the oft-quoted Michael Metz, "celebrated" by The Fool in our monthly Smart Money Magazine column, called today's trading activity that of a "mini-panic." Hmmmm. . . it's funny what happens to the investment mind trained on daily market performance rather than decade-by-decade portfolio performance.
The Gap (NYSE:GPS) announced same-store sales were up 6% for the month of December, and total sales for the December period increased 22%, from $665 million to $811 million. The numbers appear to have allayed Street fears of a desperately bad winter season for Da Gap, making estimates that trend up toward $3.00 for the year ahead seem reachable. GPS rose $2 1/2 to $47 1/2 on the report.
Our Gap shares are now up just short of 46%. Is it just us or, Fool, have you also seen dozens of kids running around in blue Gap sweatshirts over the past few weeks? We continue to price this stock between $51-$55 in the here-and-now.
But what if you know nothing about retailing? Ahh, Beating the Dow.
Sears (NYSE:S) also announced same-store sales figures today, and yearly comparisons showed 7.3% growth, with over $5.3 billion in sales for the month of December. Our man in the CEO-shoes, Arthur Martinez, said today: "Despite a major snowstorm in the East during the final pre-Christmas week, we recorded the first $1 billion sales week in Sears history. This was also the biggest apparel month in the history of Sears, especially in women's apparel where we had significant double-digit increases over 1994."
Fools should expect lotsa good press for Mr. Martinez in the six months ahead. There's nothing quite like that standard Beating the Dow turnaround, eh? The process of tarnished brand, to management restructuring, to peeling away the low-margin or losing businesses, to a sales and earnings turnaround, to a stock rebound, to the CEO (rightfully, though a bit tardily) on the cover of the financial glossies. . . one-two-three, one-two-three, it's like a gliding waltz. Sears closed the day flat but remains the second strongest Dow stock over the past year---up over 70%.
Chevron (NYSE:CHV) rewarded dividend investors today as well, climbing $1 3/8. No significant news, other than talk of continuing cold weather in the northeast. But why dig around for market-condition explanations when the answer for today's move seems to sit with the dividends?
Did you know that three of the five highest-yielding Dow stocks are oil issues: Texaco, Exxon, and Chevron? No wonder MF Rigs is looking for a strong year for oil & gas in 1996 (keyword: Fool Oil or keyword: Sector). Chevron is probably being added to a lot of dividend-backing portfolios. Glad to get the bump up, Fools are up 10.7% in CHV since early August.
But don't allow us to sneak out of the back of this report without detailing the single stock that kicked us into the red today: Iomega Corporation (NASDAQ:IOMG). Even as Fools are madly planning for a bash in Roy, Utah at Iomega's mid-April shareholders meeting, the stock is whirling around like a disco ball. IOMG shares fell $3 1/8 today, or 6%, on no news.
Long-term company-value investors believe that the best way to invest in this issue is to close your eyes between quarterly announcements---opening them only to the work of a few handfuls of top researchers in Fooldom and occasionally eyeballing their products in computer stores across the nation.
Talk of SOES banditing isn't something we fret over. And while on occasion we enjoy reading mediocre analyses of the company by those who worry about, of all things, *returned* Zip Drives post-Xmas, we're in the business of letting the short-term cookies crumble as they may, and focusing on the long-term prospects, which taste sweet to Foolish tongues.
At this point in time, we don't make a practice of owning stocks that don't bother us when they fall 6% in a single day. . . but y'know, it might not be a bad idea to look for them. When great management launches great products with sophisticated marketing plans and a focus on the NEXT generation of great products, in those instances, volatility thy name is buying opportunity, thy name is prosperity.
Let's hope IOMG fits the bill. Fourth quarter earnings are on the way in the next few weeks. Can't wait.
Tom Gardner, January 4, 1995
AMER + 1/4 AMAT + 1/2 CHV +1 3/8 GE - 7/8 GPS +2 1/2 IOMG -3 1/8 KLAC - 5/8 S ---
Day Month Year History FOOL -0.47% 2.09% 2.09% 90.63% S&P 500 -0.58% 0.29% 0.29% 34.75% NASDAQ -1.57% -2.12% -2.12% 42.99% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 39.38 441.39% 5/17/95 335 Iomega Corp 15.11 47.00 210.97% 4/20/95 155 The Gap 32.55 47.50 45.93% 8/5/94 165 Sears 28.93 40.38 39.58% 8/11/95 95 GenElec 57.91 72.63 25.40% 8/11/95 110 Chevron 49.00 54.25 10.71% 8/24/95 100 AppldMatl 57.52 38.00 -33.94% 8/24/95 130 KLA Instrm 44.71 24.00 -46.32% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 26775.00 $21829.44 5/17/95 335 Iomega Corp 5063.13 15745.00 $10681.87 4/20/95 155 The Gap 5045.25 7362.50 $2317.25 8/5/94 165 Sears 4772.65 6661.88 $1889.23 8/11/95 95 GenElec 5501.87 6899.38 $1397.51 8/11/95 110 Chevron 5389.99 5967.50 $577.51 8/24/95 100 AppldMatl 5752.49 3800.00 -$1952.49 8/24/95130 KLA Instrm 5812.49 3120.00 -$2692.49 CASH $18981.96 TOTAL $95313.21