Fool Portfolio Report
Tuesday, February 6, 1996
*** Go out tonight and rent a big screen TV, because tomorrow, David and Tom Gardner will finally be on "Good Morning, America!" Yes, that's right, no weiner kids are getting in the way this time. Not only will the Fools be on, the Muppets will be there, too. The scheduled time for the KingFools' appearance with Joan and Charlie is 8:15ish (that's what we've been told), which is one hour and fifteen minutes into the show for those of you who don't live on the east coast. So set your alarm clock, or at least your VCR, you won't want to miss this one! ***
by MF Swagman (Jeff Robinson)
--(Syracuse, NY, Feb. 6)-- EXCITING DISCOVERY!!! SCIENTISTS AMAZED!!!! A living AMER bear was discovered today in what scientists say is a Nobel Prize winning piece of work. Thought to be the last of its kind, the bear, somewhat disheveled and prone to muttering "Overpriced! Overpriced!", was taken today by the shore of Onondaga Lake in Syracuse, NY. Scientists think the prospect of another fine earnings report from AOL was too much for the old fellow, and flushed him from his lair.
What? You don't believe me? Well, OK. I confess. I made it up. But AMER did report earnings. MF Templar, who participated in a conference call with AOL today has the scoop on that topic. His report closes this write-up. Dessert, you might say!
Speaking of eating, the Fool portfolio performance was mighty tasty today. Yessir! Mighty tasty. Let's take a look.
It was a huge, make that HUGE day in Fooldom today. Excluding a couple of paltry fractional losers (the nerve), every stock was up, and most up strongly. With a notable lack of news for most issues, it was the likely a case of surging markets lifting our menu of stocks. The DJIA was up some 52 points without an obvious excuse. There was no startling news moving the markets. Guess folks just decided it was time to buy. Ah, well, perhaps tomorrow they'll decide to sell. The Fool says let 'em! No leaping in and out on a daily basis for the Fool. Find strong stocks and stick with them until they prove themselves. That's the way of a Fool.
Not much news on Iomega, and THAT is surely newsworthy. The stock moved barely at all today, closing up $1/8 to $13 1/2. Have the shorts fired their last shot? Or is this lull a temporary one for reloading, before they come back firing in all directions, broadcasting their ill-researched blather hither and yon? Only time will tell. True Fools, confident in their analysis of Iomega's fine fundamentals, don't give a hoot!
Medicis and KLA were the only losers, shedding $1/4 and $1/2, respectively. Chevron barely came to the feast at all, closing up slightly at $52 1/4. There was no news to report on these slug-a-beds.
Sears, which was up $1 to $42 5/8 reported the thrilling news that they've left their dividend unchanged at 23 cents. There was no other news on the retailing giant. Applied Materials shot up $1 1/8 to $44 1/8, again on no news. This action is likely due to the return to reality of investors about the changes technology is bringing to the world and the companies that are profiting from them. General Electric zapped upwards for a $1 1/8 gain to close at $79 1/8 and the Gap joined the party with a $1 1/4 jump to $49 1/2. Truly an exciting day on very little news.
The star of the day was America Online. Fittingly, here's the author of those fantastic Evening News reports, MF Templar, to tell us all about it. Take it away, Templar!
America Online reported quarterly earnings today at about 5:00 PM EST, an hour behind schedule. This was no indication about the quality of the earnings, as the company reported revenues above consensus expectations at $249 million and earnings per share of $0.10, in line with expectations. It should be noted that America Online had more shares on a fully diluted basis than most analyst models, suggesting that core earnings were slightly higher than had been anticipated.
Quarter to quarter acceleration in earnings and revenues still remains solid. Interesting to note was the growth in America Online's much watched "other revenues" from $9.6 million to about $25 million in this quarter, about 10% of total revenues. Other revenues is stuff like merchandising and advertising money. This is important going forward as America Online rejiggers its business model away from reliance on subscription fees toward a more balanced model.
America Online's gross margins and operating margins improved in the quarter and the amortization of subscriber acquisition costs remained pretty much constant. The growth in subscribers has picked up tremendously, with almost 900,000 subscribers added in the last quarter alone. In the period between the end of the first quarter and the conference call, about two weeks, America Online added about 400,000 subscribers.
America Online continues to build its brand, servicing the massive online service customer market with very little competition. The GNN brand, which serves a smaller, technically elite customer base, actually has more competition but in spite of this is probably sitting at number two. With other revenues growing at a rapid clip, America Online is on its way to becoming a balanced media company and not just an online service company. These revenues are especially important because they are very high margin.
AMER was up $2 7/8 to close at $47 1/4 on the bid side. The shares seem fairly valued to me at about $60 given the current 5.0 million plus subscriber basis and growth in advertising/merchandising revenues.
AMER +2 7/8 AMAT +1 1/8 CHV + 1/8 GE +1 1/8 GPS +1 3/8 IOMG + 1/8 KLAC - 1/2 MDRX - 1/4 S +1
Day Month Year History FOOL +2.58% 2.98% 9.20% 103.90% S&P 500 +0.76% 1.62% 4.94% 41.00% NASDAQ +0.53% 2.76% 3.51% 51.22% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 47.25 549.67% 5/17/95 1005 Iomega Cor 5.04 13.50 167.97% 4/20/95 155 The Gap 32.55 49.63 52.46% 8/5/94 165 Sears 28.93 42.63 47.36% 8/11/95 95 GenElec 57.91 79.13 36.62% 8/11/95 110 Chevron 49.00 52.25 6.63% 1/29/96 250 Medicis Ph 27.86 29.00 4.10% 8/24/95 100 AppldMatl 57.52 44.13 -23.29% 8/24/95 130 KLA Instrm 44.71 34.25 -23.40% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 32130.00 $27184.44 8/24/95 100 AppldMatl 5752.49 4412.50 -$1339.99 5/17/95 1005 Iomega Cor 5063.13 13567.50 $8504.37 4/20/95 155 The Gap 5045.25 7691.88 $2646.63 8/5/94 165 Sears 4772.65 7033.13 $2260.48 8/11/95 95 GenElec 5501.87 7516.88 $2015.01 8/11/95 110 Chevron 5389.99 5747.50 $357.51 1/29/96 250 Medicis Ph 6964.99 7250.00 $285.01 8/24/95 130 KLA Instrm 5812.49 4452.50 -$1359.99 CASH $12147.13 TOTAL $101949.01