Fool Portfolio Report
Friday, February 16, 1996

by David Gardner (MotleyFool)

We've done a bunch of exhaustive writeups this week, following much that was interesting and newsworthy. But the week closed quietly, with The Fool off .36% vs. a NASDAQ gain of .02% and more significant big-cap losses (S&P 500 off .51%, with the Dow off .87%). So let's take a look back now at the week that was.

For one thing, all three of our competing horses (the FOOL, the NASDAQ, and the S&P 500) dropped marginally. A quick look:

Nasdaq -0.36%
Fool -0.64%
S&P 500 -1.28%

Pretty surprising it wasn't any worse for us, when you consider that the week began with The New York Times presenting the short sellers' point of view on America Online. We watched AMER drop $2 5/8 Monday, to $48 7/8. But following a wave of analyst support (Michael Parek of Goldman Sachs calling out a new 12-month target price of $100, and some other new buy reports), America Online rebounded and set new all-time highs ($54 3/4 intra-day Thursday), before sloughing off Friday. After all the bluster, when they'd finally cleared away all the paper plates and napkins, America Online closed up $3/8 for the week. That's Wall Street for ya.

Meantime, after a very poor semiconductor book-to-bill ratio report, Applied Materials then came out and announced strong estimate-beating earnings at market close on Tuesday. The stock rose only marginally the next day, however, and for the week also rose just $3/8. (We're still off 31% with it in our portfolio.) You can read our complete Foolish take on the Applied Materials report by visiting our new Weekend Research Center, where we've packaged together some of Fooldom's best special reports over the past week. You can locate that in our mainscreen listbox. (If you're a new reader and don't know how to find that section, please just send an e-mail to MF Czar and he'll provide instructions.) The report is also included in the Applied Materials entry in our Hall of Portfolios listbox.

Maybe we shouldn't complain too much about a modest gain in AMAT, since our other semiconductor equipment stock, the woeful KLA Instruments, lost $3 to $28 1/4 this week (unchanged this Friday).

Also in the dog crowd were our two retail stocks, Gap and Sears. Our third and fourth best performers overall, they closed down $2 3/8 and $1 5/8, respectively. In the absence of any significant news, we'll write those moves off to profit-taking, since the stocks of both of these huge retailers are well up over the past six months. Sears in particular hit a new high on Wednesday, but sold off sharply Thursday and Friday. We ain't complaining, though. . . any time you can catch 50% gains in less than a year in shares of multibillion-dollar retailers, you shouldn't wile away your minutes fretting.

Medicis gained $1 Friday, closing the week at $30. That means we've seen a nice little 8% gain in these shares since we bought in (on a gap up of $2) at $27 3/4 less than three weeks ago. The company announced successful results in independent tests of its new product TRIAZ (out for the past few months), the topical acne cream. Based on the sales and earnings boost from this product, we expect strong reports to continue to flow out of Phoenix, AZ; you can read our Fool HQ-generated sales and earnings estimates for the company in the Medicis entry in the Hall of Portfolios listbox. We'll have to all be patient, though, as the next earnings report is not due, however, until the last week of April.

Medicis continues to merit negative comments in our MDRX folder in the Stock Boards. Essentially, we're being told by our dermatologist-readers that the company's products could have been packaged under a Ronco label, and its credibility only slightly exceeds that of a Vancouver Stock Exchange broker. We do listen carefully to our readers, and always appreciate constructive criticism MORE than praise, but we must remind people that stocks are generally driven by earnings growth, and you don't ALWAYS have to produce the next Zip drive to drive earnings. Sometimes it doesn't take much more than an aggressive sales force and a savvy management.

The Fool Portfolio continues to hold about 12 thousand bucks in cold cash. We actually closed this week up 12.55% for 1996, vs. the S&P 500's 5.20% (and an even weaker NASDAQ). Given that more than 10% of our assets sit in cash waiting to be invested, we're delighted that we've managed to build up a nice lead over the market so far in '96. We never like to be leaving money on the table, since our approach involves remaining fully invested at all times, but we also NEVER rush into anything. . . when we make a new investment, we always intend it to stick at least a year (even if it doesn't always work out that way).

So we'll continue to scan the stock pages for our next short, or our next long.

Have an unWisely-spent weekend.

---David Gardner, February 16, 1996

Today's Moves

AMER - 1/2
AMAT + 3/8
CHV - 3/8
GE - 1/2
GPS - 3/8
IOMG + 1/8
KLAC ---
S -1 7/8

Today's Numbers

Day Month Year History FOOL -0.36% 6.14% 12.55% 110.15% S&P 500 -0.51% 1.88% 5.20% 41.36% NASDAQ +0.02% 2.92% 3.67% 51.45% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 51.88 613.27% 5/17/95 1005 Iomega Cor 5.04 14.25 182.85% 4/20/95 155 The Gap 32.55 49.00 50.54% 8/5/94 165 Sears 28.93 43.00 48.66% 8/11/95 95 GenElec 57.91 77.50 33.82% 8/11/95 110 Chevron 49.00 55.75 13.78% 1/29/96 250 Medicis Ph 27.86 30.00 7.69% 8/24/95 100 AppldMatl 57.52 39.75 -30.90% 8/24/95 130 KLA Instrm 44.71 28.25 -36.82% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 35275.00 $30329.44 8/24/95 100 AppldMatl 5752.49 3975.00 -$1777.49 5/17/95 1005 Iomega Cor 5063.13 14321.25 $9258.12 4/20/95 155 The Gap 5045.25 7595.00 $2549.75 8/5/94 165 Sears 4772.65 7095.00 $2322.35 8/11/95 95 GenElec 5501.87 7362.50 $1860.63 8/11/95 110 Chevron 5389.99 6132.50 $742.51 1/29/96 250 Medicis Ph 6964.99 7500.00 $535.01 8/24/95 130 KLA Instrm 5812.49 3672.50 -$2139.99 CASH $12147.13 TOTAL $105075.88