Fool Portfolio Report
Monday, February 5, 1996
***Hi there, boys and girls, it's promo time! That's right, your favorite part of the show! The Fools'll be in Philly tomorrow at Gene's Book Store at the King of Prussia Plaza from 12:30 to 1:30 PM for a booksigning. Then on Wednesday, they'll finally get to ask Joan and Charles if they're short Iomega on Good Morning America. Don't touch that dial!***
by Dave Neiman (MF Gameboy)
--(Minneapolis, MN, Feb. 5)-- The bad news is I was unable to make it to Chicago to fete the Brothers Gardner in their Book Tour's Midwest whistle stop. The good news is I get to write today's Fool Portfolio recap, which is about as close as one can get to being a Fool without shaving one's head.
Quite a positive day on the boards with the Fool Port up 1.11% today on pleasant upticks by our IFG runners KLAC and AMAT. We'll have more on these later in the program, along with a couple lines on IOMG. First, let's run through the rest of the field and give 'em all a nice round of applause for their efforts in the greater cause today.
Sears moved up $3/8 to $41 5/8 today, rebounding last week's doldrums. The Gap also moved up $1/2 to $48 1/4, nearing its 52-week high. Chevron was flat today, but *snore* we're banking on its BTD status to reward us in the long term, so today's move is of little note. GE moved up $7/8, but *snore* we're banking on its BTD status to reward us in the long term -- we'll open our eyes to this stock next August.
America Online, our bestest, fastest filly barely moved today with no news to fuel the online engine.
Our newest Foolish Warrior, Medicis Pharmaceuticals, moved farther into the black for the Fool Port today, up $1/2 to $29 1/4. We're looking for BTD-beating returns for this contestant, otherwise we'd have just called up our BTD broker (Cheap Charlie, down at the General Store) and had him rustle us up a few more shares of the current batch of BTD's with the buckaroos we spent on MDRX. For now, though, we're closing our eyes to this rascal too, giving it time to make good on its Foolish promise.
With these short stories out of the way, we've got a little bit more to say about IOMG, AMAT, and KLAC.
On the IOMG front, several salvos were picked up on Fool radar today as Iomega CEO Kim Edwards released a letter to shareholders explaining the postponement of their secondary offering. Essentially, the letter says that they took this action because of rumors, controversy, and incorrect information haunting the marketplace. Mr. Edwards explains that while financing is still needed for supporting the company's further growth, the climate was unfavorable for a stock offering at this time.
He also corrected misinformation regarding IOMG's debt reserve and explained the reasons for a seemingly-high inventory of components and seemingly-low inventory of completed product. They are continuing to explore all avenues for securing financing, including a secondary offering at a later date. The complete text of the shareholder letter is two clicks away, off the main Fool Screen in the Special Iomega folder. Do yourself a favor and read it.
In related news, leading contrary indicator Dan Dorfman was bearish on IOMG today in his CNBC segment; you can read a transcript of his comments in the Special Iomega Folder in the main Fool listbox.
Finally, MF Templar passes on a news item reporting that Epson will be very soon making Zip drives too. They'll be identical to the IOMG models, only platinum. In addition, several companies will be making Zip cartridges, too.
Oh, almost forgot. IOMG was up $3/8 today, to $13 3/8.
On the AMAT front, Templar also passes on a highly-technical intelligence that AMAT has developed a new epitaxy process that will improve on and solve many of the problems confronting semiconductor-making companies today. The company was up $2 5/8 to $43 on the news.
Finally, finally, (this is getting long, and you've got other things to do, we know...) MotleyFool himself contributes the following report on KLAC. KLAC, up $1 1/2 to $34 3/4 today, has been making very Foolish strides towards positive numbers lately. We're happy to see it, and hey, we knew ya could do it, KLAC! Without further ado, David Gardner:
KLA Instruments has been on a major recent comeback, up about 50% in the past month. We continue to love the company and its prospects going forward, despite riding a significant loss in these shares (that was a lot MORE significant just a few weeks ago when KLAC rested at $21 1/4!).
If you read the KLA Instruments folder in our Stock Boards, you've learned some wonderful lessons in the past week. One particular reader, coming to us from the ranks of the Wise, created a huge propaganda blitz in the folder trying to scare readers based on the insider sales of the stock during 1995. Apart from the analysis---which was poor---the person was bad-tempered and antagonistic, which we're always disappointed to see. Anyway, we were informed that all the inside guys are bailing, the opinions ran, and this stock's going to $15 along with a market crash. Typical Chicken Little stuff that unfortunately pervades our folders from time to time.
Never mind that most serious investors and Fools know to discount the selling of shares by insiders at corporations. Why? Because at high-tech companies, management is offered options annually to supplement their low salaries; their cash-outs reflect far more their own capital needs than any sense that their stock is overvalued.
Well, this reader made two emphatic predictions: that KLA would crash down from $28, and that the Fed would not lower interest rates, causing a major market drop.
As usual, short-term predictions proved difficult to make, and Foolishness emerged supreme. For one thing, the Fed did lower interest rates a quarter percent, sending the market to record highs. For another, KLA Instruments rose from $28 to a closing price of $33 1/4, up another 18%. And finally and most importantly, another reader (BCCzz, a scientist from San Bruno, CA) reported on insider sales of KLAC shares for several years BEFORE 1995. "In 1994 there were a total of 70 insider sells, this level of selling actually decreased in 1995 to 30 sells." We learned that insider Dag Tellefsen, identified as having sold 100% of his holdings in 1995, also made 100% sales in 1992 and 1994. . . not such a great move, since this stock is up more than 8 times since 1992---but again, understandable for a high-tech company insider to do, since most of Dag's wealth has probably been tied up in his shares.
You know, I don't ever object to bearish posts on stocks, because stocks are overvalued at times just as they're undervalued. What I do object to is bad analysis, or intentional telling of half-stories in an effort to deceive people. When we short stocks in The Fool Portfolio, as we've done in the past, we have often PRAISED the companies whose stocks we're shorting. We just think their stocks are overvalued; the truth about their financial strength, management savvy, etc. hasn't bothered us. The truth never threatens those who try to deal honestly and intelligently with their investments. On the other hand, the truth is at direct odds with those who have no firm ground on which to base their opinion, who create stories and use scare tactics to try to achieve their ends.
As always, the truth will out, whether it's a Federal Reserve interest-rate drop or an 18% recovery in KLAC. Please, dear Fools, do your homework, deal with the facts, and don't indulge in---or get shaken by---speculation. These are great lessons to learn and remember, and you should write down the screen names of bad "tipsters" on a little list by your computer so you can ignore (click past) their opinions in the future.
Ok, we'll let you go off to dinner now. Relax, enjoy, be Foolish, sleep well!
AMER - 1/8 AMAT +2 5/8 CHV --- GE + 7/8 GPS + 1/2 IOMG + 3/8 KLAC +1 1/2 MDRX + 1/2 S + 3/8
Day Month Year History FOOL +1.11% 0.39% 6.45% 98.77% S&P 500 +0.88% 0.85% 4.14% 39.93% NASDAQ +1.05% 2.22% 2.97% 50.43% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 44.38 510.14% 5/17/95 1005 Iomega Cor 5.04 13.38 165.49% 4/20/95 155 The Gap 32.55 48.25 48.23% 8/5/94 165 Sears 28.93 41.63 43.91% 8/11/95 95 GenElec 57.91 78.00 34.68% 8/11/95 110 Chevron 49.00 52.13 6.38% 1/29/96 250 Medicis Ph 27.86 29.25 4.99% 8/24/95 130 KLA Instrm 44.71 34.75 -22.28% 8/24/95 100 AppldMatl 57.52 43.00 -25.25% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 30175.00 $25229.44 8/24/95 100 AppldMatl 5752.49 4300.00 -$1452.49 5/17/95 1005 Iomega Cor 5063.13 13441.88 $8378.75 4/20/95 155 The Gap 5045.25 7478.75 $2433.50 8/5/94 165 Sears 4772.65 6868.13 $2095.48 8/11/95 95 GenElec 5501.87 7410.00 $1908.13 1/29/96 250 Medicis Ph 6964.99 7312.50 $347.51 8/11/95 110 Chevron 5389.99 5733.75 $343.76 8/24/95 130 KLA Instrm 5812.49 4517.50 -$1294.99 CASH $12147.13 TOTAL $99384.63