Fool Portfolio Report
Friday, September 12, 1997
by Jeff Fischer (JeffF@fool.com)
ALEXANDRIA, VA (Sept. 12, 1997) -- A great deal of action was packed into the past five days. The Fool made a new purchase, America Online announced that it was acquiring CompuServe's online service, and the portfolio passed the S&P 500 for the first time since January.
Historically the Fool Portfolio has been beating the S&P from the start, since that first day back in August of 1994. But as the world enjoys segmenting time (and numbers) based upon the earth's rotation around the sun, ever since the beginning of this "solar rotation" the Fool has been losing. 1997 has not always been pretty. Of course the year isn't over yet, but the Fool is again beating the S&P for now, and we're Foolishly hoping for the fourth straight year of market outperformance. Rather than make a big deal of today's eclipse (sorry) of the S&P, it seemsreasonable to state that it's the overall return that matters. Not one year, but twenty years. We all know that. In the meantime, though, sure, it's more fun when you're winning by all measures!
The Fool gained 3.10% this week while the S&P lost 0.55%. The Nasdaq gained 0.89%. The large winner was AMERICA ONLINE (NYSE: AOL), ringing up an eleven dollar gain to a new all-time high. AOL spun-off its non-core network services division to WORLDCOM (Nasdaq: WCOM) for five times the price AOL had paid two years ago (nice investment), and received the online services of COMPUSERVE (Nasdaq: CSRV) as well. The online service is likely to remain separate from AOL's -- a "business-oriented" online service, if you will. CompuServe currently has 2.6 million members.
Early in the year The Wall Street Journal reported rumors that such an acquisition was in the works, but tax laws, it turned out, canned the deal. The deal was reconfigured with WorldCom buying CompuServe for $13.60 per share, and then trading parts of the company to America Online for AOL's network services division. The Wall Street Journal broke the story on good investigative reporting. This leaves me wondering, though, what constitutes inside information and what doesn't. Should a newspaper be able to print "rumors" heard from "inside sources" at companies, especially when -- as with this case -- the paper didn't even print the story as rumor, but as fact? The details of the deal changed, but the outcome remained the same, with Compuserve being bought for the same price that the paper quoted months ago.
Following the eleven dollar rise, America Online has a market cap of $7.8 billion. One week ago we priced the company on a subscriber-based valuation at around $8.7 billion, or $90 per share. We'll account for the acquisition and take a closer look after the dust settles. Of course the acquisition merited full Foolish coverage, available from the Evening News page.
Along with AOL, the latest addition to the Fool Portfolio led us higher as well. AMAZON.COM (Nasdaq: AMZN) -- the Fool purchase announced Monday night and completed on Tuesday -- rose $6 on Friday to a new high. The leading online bookseller has increased sales from $2 million four quarters ago to $28 million last quarter. The stock purchase has led to interesting debate on the message board. Many Fools are skeptical of the stock's valuation. In fact, Greg Markus (TMF Boring) plans to write about Amazon in his Boring recap on Friday. I look forward to reading the recap and then responding to Greg's points next Tuesday. The Boring Portfolio owns stock in the number two bookseller, BORDERS GROUP (NYSE: BGP).
There's good reason to be optimistic about the future of online commerce. The ease with which a person anywhere in the world can buy something (in Amazon's case, 2.5 million book titles) from a computer is obviously going to drive Internet commerce volume much higher as the years go by. Just a few decades ago the thought of having food delivered to your front door was alien. A new convenience business was born. Convenience -- what you have at your fingertips, be it amazon.com, or whatever -- is only a small aspect of the potential here, though.
The risks are there, too, certainly. Plenty of them. Some are written of in the Amazon buy report. If the stock went to zero the Fool Portfolio would lose 7%. We weighed the risks, and we're diversified. Amazon is up 15% for the Fool after Friday's move. The stock began the week strong, rising from $30 to $36 on Monday after Amazon announced that it had signed on 15,000 "Associate Websites" so far. These sites will point readers to Amazon books and earn a commission on the sales. The program was initiated in July of 1996.
Also moving this week on news was KLA-TENCOR (Nasdaq: KLAC). The stock rose after it was announced that it will be added to the S&P 500. Wednesday, INNOVEX (Nasdaq: INVX) was started as a "buy" at Schroder & Co. The stock was flat on the week. We talked to Innovex on Tuesday to get the latest news on earnings for the current quarter. The quarter will be down from the last, but business is increasing again going forward. The slow-down was known, only not the extent, and our opinion hasn't changed on the stock.
ATC COMMUNICATIONS (Nasdaq: ATCT) will announce earnings the middle of this month.
Enough with the "stock talk." Have a Foolish weekend!
Drip Portfolio --
Fool Message Boards -- Speak your mind!
Boring Portfolio -- Boring holds Cisco, Oracle.
Fool Four Portfolio -- 23% annually, historically.
Market News -- All the news, early.
Port Tracker -- Update your portfolio daily.
Daily Double -- Learn what makes good business. Maybe.
Daily Trouble -- Cut in half! A good deal?
Fribble -- A fun lesson from readers.
Stock Change Bid ---------------- AMZN +6 1/8 44.00 AOL +1 7/16 79.94 T - 3/16 42.81 ATCT --- 4.81 CHV +1 9/16 82.38 DJT --- 11.44 GM + 1/4 66.50 INVX - 3/8 32.13 IOM - 9/16 26.56 KLAC +3 9/16 75.06 LU - 3/16 78.69 MMM +111/16 91.75 COMS +1 50.13Day Month Year History FOOL +1.67% 7.12% 25.02% 233.65% S&P: +1.24% 2.72% 24.73% 101.55% NASDAQ: +0.58% 3.91% 27.75% 129.02% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 79.94 999.12% 5/17/95 980 Iomega Cor 2.52 26.56 954.07% 8/24/95 130 KLA-Tencor 44.71 75.06 67.88% 10/1/96 42 LucentTech 47.62 78.69 65.25% 8/11/95 125 Chevron 50.28 82.38 63.82% 8/12/96 110 Minn M&M 65.68 91.75 39.70% 8/12/96 280 Gen'l Moto 51.97 66.50 27.95% 6/26/97 325 Innovex 27.71 32.13 15.93% 9/9/97 290 Amazon.com 38.22 44.00 15.12% 8/12/96 130 AT&T 39.58 42.81 8.17% 8/13/96 250 3Com Corp. 46.86 50.13 6.97% 4/30/97 -1170 *Trump* 8.47 11.44 -35.05% 10/22/96 600 ATC Comm. 22.94 4.81 -79.02% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 28377.81 $25795.94 5/17/95 980 Iomega Cor 2594.53 26031.25 $23436.72 8/12/96 280 Gen'l Moto 14552.49 18620.00 $4067.51 8/11/95 125 Chevron 6285.61 10296.88 $4011.27 8/24/95 130 KLA-Tencor 5812.49 9758.13 $3945.64 8/12/96 110 Minn M&M 7224.44 10092.50 $2868.06 9/9/97 290 Amazon.com 11084.24 12760.00 $1675.76 6/26/97 325 Innovex 9005.62 10440.63 $1435.01 10/1/96 42 LucentTech 1999.88 3304.88 $1305.00 8/13/96 250 3Com Corp. 11714.99 12531.25 $816.26 8/12/96 130 AT&T 5145.11 5565.63 $420.52 4/30/97 -1170*Trump* -9908.50 -13381.88 -$3473.38 10/22/96 600 ATC Comm. 13761.50 2887.50-$10874.00 CASH $29541.35 TOTAL $166825.91
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