Fool Portfolio Report
Wednesday, May 1, 1996

NOTE: Tomorrow, we'll be selling Applied Materials. Click the Applied Materials entry for the full report. As you'll discover, we're not down on the stock. . . we just find our holdings of AMAT and KLA Instruments redundant, and wish to deploy the resources elsewhere.

by David Gardner (MotleyFool)

LONG BEACH, NC, May 1, 1996---As Wall Street institutions continue to learn about---and buy---Iomega stock, the Fool Portfolio continues to rise. It was another multiple-percentage-point gain today (I know, I know, it's getting both boring and ridiculous) as our money rose another 3.11%. We got some nice support from the still-hot KLA Instruments (up $1 1/8) and good ol' Sears (up $1) as well, but it still mainly came down to Iomega, yet again, Wednesday.

What is happening? I mean, what the heck is going on with IOMG stock? Have you ever seen anything like this?

You may. I have. C-Cube Microsystems (NASDAQ:CUBE) shot up 10 times last year, and I think too of Glenayre Technologies (NASDAQ:GEMS) a few years ago. . . which we mention in our book. I see occasional comments in our Iomega folder or elsewhere to the effect of: "This is the greatest stock of all time," or "I know I'll NEVER see anything like this again." Actually, I disagree on both counts. Iomega IS a grrrreat stock, and you won't see this happen very often, but we're not watching any uniquely stupendous gain here. Stupendous? Sure. Unique? Nope.

But just what IS happening here? I'll take a stab at answering that. What is happening, as alluded to above, is that a company that was down-and-out under a former management (little more than two years ago) got new management, great new products, and revolutionized an industry. . . in just two years ago, a veritable snap of the finger in conventional business terms. That's what happened with the company.

What happened with Wall Street? Well, Wall Street did what it normally does to down-and-out companies. . . it forgets about 'em. In Iomega's case, Wall Street blew it off. . . a nothing company (supposedly) with some government contracts in a boring industry. Analysts disappeared. Formal "initiations of coverage" just didn't happen. A few small firms began to take notice early last year (and their numbers look much better for it), but basically the Merrills, the Goldmans, the Paines, and the Prudentials hadn't any real interest in---or knowledge of---what was going on. And still don't, apparently, as none of them are doing "coverage" on the stock.

But then the company's business exploded, the online revolution exploded, The Motley Fool exploded, the stock exploded, Fortune writes about it, etc. etc. and NOW what do you think is happening? Wall Street is scrambling to buy the darn stock. Now suddenly realizing that this company will do upwards of $1 billion in sales in an exciting new consumer-oriented segment of the computer hardware industry. (About the only ones not yet to realize this are our Wisest financial journalists.) In fact, it's now quite obvious that Iomega is completely dominating the consumer storage technology industry. Lo and behold, here comes the herd of mutual-fund managers, pension-fund managers, brokerage houses, banks, you name it, all of whom want the stock. The shares are changing hands at an incredible rate, and the stock is rising.

Let's take a quick gander at the S&P Stock Guide:



February 9.9* 17%
April 20.3 34%

*expressed in post-split terms
Source: S&P Stock Guide

Does that speak as eloquently to you as it does to me? Institutions doubled their holdings in this stock in just the past two months. And the 34% number as of April is still low compared to lots of big computer companies. Hewlett Packard stock, for example, is 60% owned by institutions. So anyway, on top of this ongoing institutional accumulation you can throw in the momentum investors, the stock-split speculators, and all the rest, and you have the most exciting stock in the United States of America over the past 12 months.

That's the story, as I see it, and there really isn't much more to it than that. In our bestselling book (I can now say that!---giggle) "The Motley Fool Investment Guide," it's just such small-cap situations we write about. Heck, we have a whole chapter dedicated to why we buy small caps, and about how we hope to find these stocks before the institutions find them, or can manage to buy them.

In a word: Voila!

OK, we'll close tonight by saying goodbye to Applied Materials, which we'll be selling tomorrow (see note at top of report). It wasn't good, it wasn't fun, but the brief six months of our part ownership of the company did give rise to a fair number of good jokes in our Fool Portfolio report.

For that, at least, we shall give thanks.

Fool on!

---David Gardner, May 1, 1996

Transmitted: 5/1/96 7:35 PM

Today's Numbers

Day Month Year History
FOOL +3.11% 3.11% 73.20% 223.41%

S&P 500 +0.06% 0.06% 6.28% 42.80%

NASDAQ +0.77% 0.77% 14.02% 66.58%

*Scroll down or expand screen for full portfolio accounting

AMER - 5/8 ...AMAT - 1/2 ...CHV - 3/8 ...GE + 3/8 ...GPS + 1/4 ...IOMG +5...KLAC +1 1/8 ...MDRX - 1/4 ...S +1...

Rec'd # Security In At Now Change

5/17/95 1005 Iomega Cor 5.04 59.50 1081.04%

8/5/94 680 AmOnline 7.27 63.25 769.67%

4/20/95 310 The Gap 16.28 30.38 86.64%

8/5/94 165 Sears 28.93 50.88 75.88%

8/11/95 95 GenElec 57.91 77.88 34.47%

8/11/95 110 Chevron 49.00 57.63 17.60%

1/29/96 250 Medicis Ph 27.86 28.25 1.40%

8/24/95 100 AppldMatl 57.52 39.25 -31.77%

8/24/95 130 KLA Instrm 44.71 30.00 -32.90%

Rec'd # Security Cost Value Change

5/17/95 1005 Iomega Cor 5063.13 59797.50 $54734.37

8/5/94 680 AmOnline 4945.56 43010.00 $38064.44

4/20/95 310 The Gap 5045.25 9416.25 $4371.00

8/5/94 165 Sears 4772.65 8394.38 $3621.73

8/11/95 95 GenElec 5501.87 7398.13 $1896.26

8/11/95 110 Chevron 5389.99 6338.75 $948.76

1/29/96 250 Medicis Ph 6964.99 7062.50 $97.51

8/24/95 100 AppldMatl 5752.49 3925.00 -$1827.49

8/24/95 130 KLA Instrm 5812.49 3900.00 -$1912.49

CASH $12462.02

TOTAL $161704.52