Fool Portfolio Report
Friday, June 7, 1996
Friday, June 07, 1996 (FOOL GLOBAL WIRE)
by Tom Gardner
SOHO, NYC, June 7 -- The Fool Portfolio rose 1.29% today, closing out a tough week which saw our savings fall by 8.96%.
Today's rebound comes courtesy of America Online, which rose $2 5/8 to $48 3/4. America Online was the recipient of a brokerage upgrade from Alex Brown technology analyst, Steve Eskenazi, who ratcheted AMER up from "Buy" to "Strong Buy." But America Online fell 13.7% on the week, and the company has shed $2.4 billion in capitalization since its third quarter earnings report.
Today's Alex Brown upgrade, coupled with Robertson Stephen's "Buy" reiteration, comes on the heels of a downgrade to "Hold" by Montgomery Securities and a reiteration of its "Neutral" rating by Cowen & Company. In that Cowen report, the firm reduced its domestic-subscriber growth projections for the June quarter from 750,000 all the way down to 400,000.
[Important note: No clarification on the trading positions of these firms is required.]
I think what you're seeing here is considerable confusion in the marketplace over America Online's position relative to oncoming competition and growth on the World Wide Web. My chief recommendation here is that Fools stick close to the work being done in our America Online stock folder, to follow the Company's quarterly financial performance, to study the company's efforts to improve the service in the month's ahead, and to minimize trading commissions.
Elsewhere in Foolsavingsville, General Electric, Sears and Chevron were all off eighth- or quarter-points for the day, but each outperformed the S&P 500 in week one of June. Without them, this would've been a truly horrible week.
Far more importantly, without the standard this model has set for performance, our portfolio would not be anywhere near its height of today. Per The Motley Fool Investment Guide, if you can't beat the 22%+ annual returns of these multi-billion-dollar giants, don't fly out of that nest. Since purchasing Chevron, more Sears, and General Electric on August 11, 1995, The Fool has earned $7,619 from the three, and returns of 48.6%. . . outstripping the market.
There has been some speculation that the Dow model is in the process of getting watered down and that it will not reward methodical investors with the same sort of returns in the decades ahead.
The Motley Fool will go on record again as believing that the popularity of the model should only result in greater access to capital for these giants. One of the qualities of Dow turnarounds stocks is the recent introduction of qualified and enterprising management teams, the sort of management that looks to turn a dollar into two for shareholders. Additional capital flows have not hurt performance at General Electric. It seems Fidelity agrees.
Hey, we may be wrong. But we'll put our money down on 25 years of annual market-doubling over, say, 1- 3- and 5-year periods of market unperformance.
But leaving the Dow Dividend Approach behind altogether, for me, a stock like General Electric---capitalized over $140 billion, having beaten the market soundly over the past decade---is the ideal mutual fund. It only costs $30 to get into and $30 to get out of; it can't raise management fees on me; and it doesn't send me promotional material in the mail.
But I'm a Fool.
KLA Instruments slipped back $1/4, finishing out another miserable week. KLAC dropped $1 7/8 to $24 3/4. We received a note in the forum today asking us to run a detailed analysis of the company and its prospects, and we will do just that in the week ahead. KLAC is now down 44.65% amidst talk of ever slowing demand for semiconductor equipment.
Medicis snuck up $1/4 to close the week up $1, at $34 a share. The Company landed additional credit lines from Norwest Bank in Arizona.
Iomega rose $1/4, but closed the week down 13.8%. The company secured over $180 million in cash from its recent secondary and brought JP Morgan onboard with Hambrecht & Quist this week. We look forward to the flow of information and analyses from these firms in the months ahead. That Iomega is being termed a "hype stock" by some, with products flying off shelves and some of the most sophisticated marketing plans for a technology outfit, is further indication that these markets ain't efficient. Either Fools aren't seeing something or the Wise aren't.
Sold on the news, Gap fell another $1/4 today in the wake of that impressive same-store-sales announcement. Every time numerical news comes out of Gap HQ in San Francisco, we inch our price targets up a notch.
Broken record: Gap, Microsoft, Nike, Coca-Cola, Gillette. . . global consumer brands, debt-free high-margined growth, methodical management.
And this stuff's supposed to be like cutting out an appendix or steering a DC-3 or touring with the Flying Wallendas? Hmmm. Is that: "Don't try this at home?" or "Don't try this at home because you might do better than I?"
Leave your computer behind for the weekend, leave your investments behind, and Fool on.
Day Month Year History
FOOL +1.29% -8.96% 83.82% 243.24%
S&P 500 +0.04% 0.62% 9.31% 46.88%
NASDAQ -0.22% -1.10% 16.88% 70.76%
*Scroll down or expand screen for full portfolio accounting
AMER +2 5/8 ...CHV - 1/8 ...GE - 1/4 ...GPS - 1/4 ... IOMG + 1/4 ...KLAC - 1/4 ...MDRX + 1/4 ...S - 1/8 ...
Rec'd # Security In At Now Change
5/17/95 2010 Iomega Cor 2.52 38.00 1408.55%
8/5/94 680 AmOnline 7.27 48.75 570.30%
4/20/95 310 The Gap 16.28 34.38 111.21%
8/5/94 165 Sears 28.93 52.25 80.64%
8/11/95 95 GenElec 57.91 86.00 48.49%
1/29/96 250 Medicis Ph 27.86 34.00 22.04%
8/11/95 110 Chevron 49.00 59.00 20.41%
8/24/95 130 KLA Instrm 44.71 24.75 -44.65%
Rec'd # Security Cost Value Change
5/17/95 2010 Iomega Cor 5063.13 76380.00 $71316.87
8/5/94 680 AmOnline 4945.56 33150.00 $28204.44
4/20/95 310 The Gap 5045.25 10656.25 $5611.00
8/5/94 165 Sears 4772.65 8621.25 $3848.60
8/11/95 95 GenElec 5501.87 8170.00 $2668.13
1/29/96 250 Medicis Ph 6964.99 8500.00 $1535.01
8/11/95 110 Chevron 5389.99 6490.00 $1100.01
8/24/95 130 KLA Instrm 5812.49 3217.50 -$2594.99