Fool Portfolio Report
Tuesday, September 9, 1997
by Jeff Fischer (JeffF@fool.com)
ALEXANDRIA, VA (Sept. 9, 1997) -- The Nasdaq hit a new high today, rising 0.66%, and the S&P rose 0.26%. The Fool gained 0.53%, including commissions paid for the purchase of AMAZON.COM (Nasdaq: AMZN).
This latest addition to the portfolio was bought at $38 1/8 in the early afternoon. With commissions, our cost basis is $38.22. We bought 290 shares for a total of $11,084, and we now have about $16,000 in cash left to invest (after backing out the short position).
Amazon closed bidding at $38 3/4 after rising to a new high above $40 soon before the market closed. The purchase has already stirred up some good conversation on the Fool's message boards. Hopefully in the coming years Amazon's business will be nearly as interesting to follow as AOL's business has been over the past three years. If it's any indication, there are plenty of interesting opinions about the stock and company on the message boards already. The buy report shares the Fool's opinion, but we'll have much more to write about -- and that we look forward to writing -- here in this space, of course. For now, the message board is the best place to catch up.
This morning we phoned Douglas Keller, Vice President of Finance at INNOVEX (Nasdaq: INVX). (Mr. Keller is one of the more helpful and considerate executives at any company that I've dealt with.) We talked about the current quarter that ends in September. Over the summer, Innovex announced that it expected this quarter to be flat, but over the past week analysts have lowered estimates again. The current quarter will be a little "flatter" than previously expected, because July and August were slow, as was known, and only in the first week of September has business volume begun to increase.
Mr. Keller shared that orders are coming in already for the next quarter, and production has returned to 11 million units per week again, which was the volume achieved before the slow-down. The order slow-down is believed to be inventory related. Drive makers appear to have built up inventory early in the year (as the early year blowout quarters at Innovex intimate) and so were clearing out inventory over the slow months of July and August. Earlier in the year the drive guys "got a little ahead of themselves," Mr. Keller stated, speaking of Innovex's customers and their order volume.
Four of six analysts following Innovex have lowered estimates, and the current consensus estimate for the quarter is $0.59 per share, down from $0.68. Innovex feels that earnings of about $0.50 per share are closer to realistic, and as all analysts know this, the two remaining analysts probably will be lowering their estimates shortly in order to reflect the company's expectations. This should lower the mean estimate to around that number. Being a result of industry demand, and nothing internal at Innovex, the news isn't something that makes one reassess the investment. It's just something to wait through, and which, actually, is already over. No more waiting. The current month, as Innovex shared, and the coming months, based on orders, look very good again. Growth is picking up.
Even figuring earnings of $0.50 per share this quarter, trailing earnings would total $2.30 per share at the end of this quarter. The stock trades at 14 times that estimate, apparently already factoring in the slow quarter and then some, as for most of this year the stock has had a trailing multiple of about 16 time earnings. Earnings per share of $2.83 are expected in the next fiscal year, a 23% increase. The stock trades at 11.4 times that estimate. Regarding the company's new HIF technology, Mr. Keller stated that everything was on schedule for January production.
So everything is going well at Innovex itself, and the company is glad to see orders increasing again. Perhaps the drive industry -- in the doghouse over the past several months -- is finally setting up for more growth to end the year and begin the next. It appears as such at Innovex. Summary: our opinion of the investment hasn't changed at all. We went into the drive industry knowing that it has cycles... we actually bought Innovex during some of the darker moments of the latest cycle. The glowing flotsam from that darkness is still with us, but we're moving beyond it and into daylight.
Another phone call today revealed that ATC COMMUNICATIONS (Nasdaq: ATCT) will announce earnings sometime in mid-September. Two cents per share is still expected. No, we're not reading anything into the so-called "delayed" earnings report (late August or early September was the expected release date). End of the year numbers often take more time to compile, and accountants are doing the work, not ATCT itself.
The last bit of news today concerns Fool short TRUMP HOTELS (NYSE: DJT). This afternoon MIRAGE RESORTS (NYSE: MIR) announced that it is suing Trump for anti-competitive practices, including "improper political contributions" that Mirage claims Trump made in order to impede Mirage's building plans. Hey, we'll stand on the sidelines and watch this fight unfold.
Having written the Drip Recap on Coca-Cola today, too, I've got to bow out now, go find a good book to read, and kick back this evening.
We welcome Amazon.com to our portfolio!
Stock Change Bid ---------------- AMZN +2 3/4 38.75 AOL + 13/16 76.88 T + 1/2 40.69 ATCT + 5/16 5.00 CHV + 15/16 81.63 DJT + 1/16 11.31 GM +1 3/8 67.06 INVX - 3/8 32.50 IOM -1 1/4 27.06 KLAC +1 7/8 69.75 LU - 3/8 82.25 MMM + 1/16 92.13 COMS +3 7/16 51.44Day Month Year History FOOL +0.53% 5.76% 23.43% 229.41% S&P: +0.26% 3.80% 26.04% 103.67% NASDAQ: +0.66% 4.34% 28.29% 129.97% Rec'd # Security In At Now Change 9/9/97 290 Amazon.com 38.22 38.75 1.38% 5/17/95 980 Iomega Cor 2.52 27.06 973.91% 8/5/94 355 AmOnline 7.27 76.88 957.01% 10/1/96 42 LucentTech 47.62 82.25 72.74% 8/11/95 125 Chevron 50.28 81.63 62.33% 8/24/95 130 KLA-Tencor 44.71 69.75 56.00% 8/12/96 110 Minn M&M 65.68 92.13 40.27% 8/12/96 280 Gen'l Moto 51.97 67.06 29.03% 6/26/97 325 Innovex 27.71 32.50 17.29% 8/13/96 250 3Com Corp. 46.86 51.44 9.77% 8/12/96 130 AT&T 39.58 40.69 2.80% 4/30/97 -1170 *Trump* 8.47 11.31 -33.58% 10/22/96 600 ATC Comm. 22.94 5.00 -78.20% Rec'd # Security In At Value Change 9/9/97 290 Amazon.com 11084.24 11237.50 $153.26 8/5/94 355 AmOnline 2581.87 27290.63 $24708.76 5/17/95 980 Iomega Cor 2594.53 26521.25 $23926.72 8/12/96 280 Gen'l Moto 14552.49 18777.50 $4225.01 8/11/95 125 Chevron 6285.61 10203.13 $3917.52 8/24/95 130 KLA-Tencor 5812.49 9067.50 $3255.01 8/12/96 110 Minn M&M 7224.44 10133.75 $2909.31 6/26/97 325 Innovex 9005.62 10562.50 $1556.88 10/1/96 42 LucentTech 1999.88 3454.50 $1454.62 8/13/96 250 3Com Corp. 11714.99 12859.38 $1144.39 8/12/96 130 AT&T 5145.11 5289.38 $144.27 4/30/97 -1170*Trump* -9908.50 -13235.63 -$3327.13 10/22/96 600 ATC Comm. 13761.50 3000.00-$10761.50 CASH $29541.35 TOTAL $164702.73