Fool Portfolio Report
Thursday, January 18, 1996
JANUARY 18 (FOOL GLOBAL WIRE--New York)
By Tom Gardner
Well, what a day. The Wall Street Journal coughed out another article about America Online this morning, proving once again that they are obsessed with their competition. Absolutely obsessed. The Journal's article today entitled, "Web Trap," promotes the idea that Internet growth is so significantly outpacing growth on the commercial services that outfits like America Online are literally scrambling to stay above water, to find new business.
I've been trying all day to reason out the Journal's position and I can't generate explanations for it that don't link this to anything but their self-interest. We've labored over this matter for months now---are we wrong, is America Online not experiencing a subscriber-growth explosion to the upside? What we see as Fools, investors, online users, editors and managers from out our modest windows at Fool Global HQ conflicts with almost every assertion the Journal has made about the digital world over the past year---leaving aside the admirable work that Mr. Mossberg does in his technology column.
If we just look at AOL's subscriber growth today, this is the fastest growing new media organization on da planet. The last 500,000 subscribers came onboard America Online over a 51-day period, making for an average of 9,800 new subcribers per day.
This growth does NOT include the post-Christmas runup which last year saw AOL subscriber growth double from around 4,100 new subs per day (pre-Xmas) to over 8,300 subscribers per day (post-Xmas). And America Online CEO Steve Case has said (paraphrased) that the Company is at present resisting a flat rate heavy-user package because the growth is maximal and they have to manage capacity.
I don't want to waste too much time getting into the issue of profitability and the Journal's kooky assertion that AOL lost $34 million last year "on acquisition-related charges." Good God. . . bury earnings growth inside one-time charges? That just seems so unbearably Wise. All in favor of a new medieval accounting standard which does NOT break out one-time charges say, "Aye, I am not a Fool!" Because there's really no apparent logic to it. . . UNLESS the Journal believes the acquisitions were worthless. We'll be looking for that article.
None of all of this is to say that the Web isn't growing nor that it doesn't offer tremendous infrastructural, technological and editorial opportunities in the decade ahead. But writing bearish-and-critical article after bearish-and-critical article about the most impressive media operation out there---and one sporting a stock that has risen many times over of late---it just doesn't seem enough customer-service oriented to us. A media battle can be awfully confusing in one-way, non-interactive publishing, no?
But maybe Foolishness is too much tied to collaboration, education, and service. I dunno.
America Online fell $1 3/4 to $36 3/4.
Iomega also took one in the chops today, falling $1 5/8. The baseball we keep our eyes on---earnings---is right around the corner. The challenge is to watch the rotation of the stitching on the earnings-ball as it passes from pitching hand to mid-air to home plate.
The pitcher's motion, the third-baseman's chatter, the popcorn concessionaire, the crowd commotion down the first base line, the alignment of Jupiter, the price of tea in Soho, the expiration of equity option contracts, the left-fielder's stance. . . none of these at all matter in relation to the stitching on the earnings ball as it heads home.
You can bet that we're not letting ourselves get much distracted by other matters, particularly when the print media has only really told us that no one will know about IOMG until we see return rates on the Zip drives after Christmas. Yeah, right. Let's look at the quarterly financials when they come.
Another nice day from our semiconductor-equipment stocks bailed us out of an otherwise sorry day. Applied Materials rose $1/2 and KLA Instruments banged ahead $2 1/2. Still we watched in vein as our portfolio fell 1.56% versus a relatively flat day for the S&P 500.
No anxiety at Fool HQ, though. In our ongoing effort to find great companies, to buy them and hold, to minimize commissions costs, to in a phrase: maximize reward and minimize effort, we find today entirely bearable.
Why? For many reasons. Certainly one of them is that one of our Foolish heroes, Jack Welch, watched his stock climb $1 1/4 to $72 1/2, making all seem right with the world. As fellow owners of General Electric, we're reminded that the best businesses---the ones that incentivize customer service, eliminate inefficiency, and never turn their eyes from what market reality is saying---these make for the very best investments.
Which is why we won't be investing in the financial print media's coverage of the digital world quite yet.
AMER -1 3/4 AMAT + 1/2 CHV - 3/8 GE +1 1/4 GPS --- IOMG -1 5/8 KLAC +2 1/2 S - 3/4
Day Month Year History FOOL -1.56% -4.93% -4.93% 77.52% S&P 500 +0.13% -1.34% -1.34% 32.57% NASDAQ +0.88% -4.29% -4.29% 39.83% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 36.00 394.99% 5/17/95 335 Iomega Corp 15.11 36.25 139.85% 8/5/94 165 Sears 28.93 39.13 35.26% 4/20/95 155 The Gap 32.55 43.88 34.79% 8/11/95 95 GenElec 57.91 72.50 25.18% 8/11/95 110 Chevron 49.00 53.38 8.93% 8/24/95 130 KLA Instrm 44.71 29.25 -34.58% 8/24/95 100 AppldMatl 57.52 33.38 -41.98% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 24480.00 $19534.44 5/17/95 335 Iomega Corp 5063.13 12143.75 $7080.62 4/20/95 155 The Gap 5045.25 6800.63 $1755.38 8/5/94 165 Sears 4772.65 6455.63 $1682.98 8/11/95 95 GenElec 5501.87 6887.50 $1385.63 8/11/95 110 Chevron 5389.99 5871.25 $481.26 8/24/95130 KLA Instrm 5812.49 3802.50 -$2009.99 8/24/95 100 AppldMatl 5752.49 3337.50 -$2414.99 CASH $18981.96 TOTAL $88760.71