Fool Portfolio Report
Wednesday, December 11, 1996


by David Gardner (davidg@fool.com)

ALEXANDRIA, VA, December 11, 1996 -- With seven stocks down and two stocks up, it's little surprise that Wednesday's Fool Portfolio move was downwards, off three-quarters of a percentage point. Our performance slightly bettered the S&P 500 (off 0.91%), but lost to the Nasdaq (down 0.26%).

The Dow was down more than 100 points during the day, recovering to close down 70. Seventy points may sound like a lot, but it's only slightly more than one percent. A one-percent daily move in the market is par for the course, historically, happening a bunch of times every year. For those of us who've been watching the markets for a decade or more, 70 points may sound like a lot, but that's only the natural price of "inflation" that occurs over time, the Dow being over 6000 and all that jazz. The price of baseball cards (65 cents and up) also sounds like a lot these days, to those of us who paid a dime a pack or less, growing up. But it's pretty much still in line with natural inflation and the cost of living. The real "value," the real change, isn't significant.

Heck, the Dow down 120 points is not even two percent. A two percent change in the price of a car or the average daily temperature high for your hometown is something you probably wouldn't notice. But when it comes to market recap articles, you'll often find some of the poorer journalism out there using terms like "meltdown" and "bloodbath," completely inappropriate. The trick is for us Fools is to keep everything in perspective, and the better we understand numbers, the easier that is.

Always keep in mind, when I say "understand numbers," I'm never talkin' calculus. Most of the numbers we use in Fooldom are straight out of our friendly sixth-grade mathematics textbook.

Interesting release today on Business Wire regarding Fool Portfolio holding AT&T. Our company released the results of its online-transactions survey, conducted by an independent research firm. The basic discovery is that consumers are ready to buy online, but businesses are not generally ready to sell. Almost 40% of Americans say they plan to buy through the Internet in 1997 (129 million American consumers have access to PCs today). In 1996, only 7% of those surveyed had purchased something over the Internet.

Consider that 70% of consumers purchased something by phone in 1996 (16 average purchases per customer for the year), and you can easily visualize the potential for Internet commerce. Giving your credit card number over the phone isn't terribly different from typing it into a secured Internet site, so customers are clearly not hung up on security worries.

This is all pretty good news for AT&T, which offers Web-hosting services over its Easy World Wide Web platform. And of course, the message above is very much a promotional one for the company. ("Consumers want to buy your stuff on the Web, so LET US host your Web site.") But I don't think it's wayward self-interest at play, here. I think this is for real.

In fact, while AT&T will benefit from this good news, the news is even better for America Online (up $1 today). Transaction revenues represent some of the lowest-hanging fruit for AOL, and are the ace-in-the-hole third revenue stream (after usage and advertising) that the online medium enjoys over TV (where "home shopping" is lame, lame, lame... even it if is fairly big business at present).

AT&T's study is also good news for a computer networking company like 3Com, which will continue to supply the equipment to make a lot of this commerce possible. Man, I love being a 3Com shareholder. COMS scored a gain of $3/8 today.

ATC Communications, which generally benefits from the use of the telephone not the Internet, dropped $3/8 today. With per-share earnings in hand of 31 cents and a last price of $14 3/8, the company's price-to-earnings ratio at present is 46. Consensus June '98 earnings sit at 60 cents per share, meaning an annualized growth rate of 46% from here to there. By traditional Fool Ratio valuation, that's 1.00 on the nose. This is good and bad news. The bad news is ATCT looks fully valued by this measurement, following disappointing earnings last quarter. (Hence it's presently our worst-performing stock.) Good news is that its Fool Ratio of 1.00 should be considered in the context of its industry, in which its peers show Ratios of 1.75 and up. We'll continue to hold this one for the long term.

Finally tonight, I'd like to draw your attention to two nifty features elsewhere in Fooldom. The first feature is Rogue -- an incisive column that explores the jungle that is modern media, technology, and finance. Rogue can be found in our FoolWire section. Tonight, Rogue writer Jim Surowiecki presents, "AOL: Wired or Tired?" an examination of a recent story on AOL in Wired magazine.

Fool on!

-- David Gardner, December 11, 1996

TODAY'S NUMBERS


Stock Change Bid ------------------- AOL +1 37.00 T --- 38.50 ATCT - 3/8 14.25 CHV - 3/4 62.88 GM - 7/8 57.88 IOM - 1/2 22.00 KLAC -1 3/8 35.50 LU -1 1/8 47.63 MMM -1 1/4 83.13 COMS + 3/8 78.75
Day Month Year History FOOL -0.78% 0.48% 57.17% 193.48% S&P 500 -0.91% -2.15% 20.26% 61.59% NASDAQ -0.26% 1.28% 24.42% 81.78% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 22.00 773.37% 8/5/94 680 AmOnline 7.27 37.00 408.74% 8/13/96 250 3Com Corp. 46.86 78.75 68.05% 8/12/96 110 Minn M&M 65.68 83.13 26.57% 8/11/95 125 Chevron 50.28 62.88 25.04% 8/12/96 280 Gen'l Moto 51.97 57.88 11.36% 10/1/96 42 LucentTech 47.62 47.63 0.02% 8/12/96 130 AT&T 39.58 38.50 -2.72% 8/24/95 130 KLA Instrm 44.71 35.50 -20.60% 10/22/96 600 ATC Comm. 22.94 14.25 -37.87% Rec'd # Security In At Value Change 5/17/95 2010 Iomega Cor 5063.13 44220.00 $39156.87 8/5/94 680 AmOnline 4945.56 25160.00 $20214.44 8/13/96 250 3Com Corp. 11714.99 19687.50 $7972.51 8/12/96 110 Minn M&M 7224.44 9143.75 $1919.31 8/12/96 280 Gen'l Moto 14552.49 16205.00 $1652.51 8/11/95 125 Chevron 6285.61 7859.38 $1573.77 10/1/96 42 LucentTech 1999.88 2000.25 $0.37 8/12/96 130 AT&T 5145.11 5005.00 -$140.11 8/24/95 130 KLA Instrm 5812.49 4615.00 -$1197.49 10/22/96 600 ATC Comm. 13761.50 8550.00 -$5211.50 CASH $4291.89 TOTAL $146737.77 Transmitted: 12/11/96