Fool Portfolio Report
Thursday, September 18, 1997
by Jeff Fischer (JeffF@fool.com)


ALEXANDRIA, VA (Sept. 18, 1997) -- The Fool again couldn't keep pace with the S&P, which gained 0.45% while the port lost 0.14%. Looking at these small daily changes is akin to picking up a pebble while climbing the Himalayas, and declaring -- pebble in your hand -- that the mountain range was conquered. These numbers mean very little today, but collectively of course we need to win more than we lose.

After four losing days in a row, perhaps tomorrow, Friday, we'll break the losing streak. If not, we may as well go for broke and hope to top the Chicago Cubs record for its longest losing streak. How many games is that? Twenty?

(And this was supposed to be the year that the Cubs would go all the way!)

INNOVEX (Nasdaq: INVX) continued its drip-by-drop decline, falling to about thirty dollars and fifty cents today. The stock has slowly descended ever since earnings estimates were lowered for the fourth quarter. The company announced in June that the quarter would be flat to down, and the "down" part prevailed. Earnings should increase nearly 100% from last year, but due to slow orders numbers will be lower than those accomplished in the third quarter. Business is picking up again going forward.

On the new estimate of $2.37 per share for this year, the $30 stock is trading at 12.8 times expected earnings. The company's record year ends this month and results are reported around November 6th. A majority of the industry stocks are trading at around 16 times earnings, and Innovex usually trades at that multiple as well. To hit that trailing multiple the stock would rise to about $39 in November, if Innovex meets estimates ($39 divided by $2.37 = 16.4 P/E). With a 20% long-term growth rate, the sixteen multiple is realistic. The stock has traded between 11 times and about 24 times trailing earnings over the past year.

There was little news on our stocks today, except that AMERICA ONLINE (NYSE: AOL) announced a deal with a music retailer on the Web. That may have sent AMAZON.COM (Nasdaq: AMZN) lower, as music is one possible future business for Amazon. In an interview with Amazon, though, CEO Jeff Bezos admits that he wants to sell books correctly, first, before considering other options. Music dealer N2K Inc. will pay AOL at least $18 million over the coming three years to be a primary music retailer on the site.

3COM (Nasdaq: COMS) continued to languish. Being an underperformer for 1997 (after a quick double for the Fool last year), perhaps 3Com will shine again in 1998. The stock trades at 19 times estimates for the year ended next May.

The stocks that have helped the portfolio most in the past weeks have actually been the Foolish Four. These giants have powered ahead to new highs, all of them, except for 3M (NYSE: MMM), which hasn't gone anywhere but down since reporting lackluster earnings last quarter. 3M has still been a great investment for the Fool, though. We'll make our Dow switch in February.

THE SIX MONTH REVIEW.  It's been six months already since the March recap that presented eight world-leading companies that we are going to follow biannually. Since March 7th, 1997:

3/7/97 9/18/97 Dell Computer $36.25 $95.63 +163% Microsoft $96.75 $132.25 +37% Coca Cola $60.50 $58.81 - 2.8% Intel $71.75 $95.13 +33% AOL $42.00 $73.93 +76% Oracle $23.83 $36.68 +54% McDonald's $44.50 $47.75 +7% Cisco Sys. $51.38 $74.06 +44% No Brainer port +51.4% S&P since 3/7/97 +17.7%

The portfolio is called the "No Brainer" because the companies were chosen due to the "obvious" industry-leading status that each possess. Each company leads its industry, if not dominates it. "No Brainer" isn't meant to imply that investing is entirely easy, but investing in companies that you know are world-leaders is a lot easier, inherently, than trying to find the next world leader. While a broker might call you on the phone and try to sell you shares of Xyloco, a new train manufacturer, shares of the companies that you know best -- and that everyone else knows, too! -- are often crushing the market. That makes sense, no?

It's worth noting that all the large winners in the No Brainer port are technology stocks. In large part, the volatility of the technology sector causes the Wise to label the group as a "risky," but volatility shouldn't be considered a "risk" in an investment. Volatility is a characteristic, not a risk. Because a sector is volatile is hardly a reason to avoid it if you're investing long term. An industry is often volatile because the potential -- while felt to be very substantial -- is difficult to measure on a short-term basis. David noted this in relation to Amazon.com, America Online, and Iomega. All these stocks have been volatile since entering the public light that shined "potential" on them.

Anyway, regarding the eight stocks above: Over the past six months, Intel has become the first Drip Port purchase, Coca-Cola has been put on hold in the Drip because of an earnings slow-down, and both Cisco and Oracle have greatly helped the Boring Port to pass the S&P. A few of these stocks are in Tom's Cash-King or MoneyHeavy portfolios. Tom has good reason to have the stocks in his portfolios, so rather than take the No Brainer approach, it's worth reading Tom's old material to see what these stocks, and others, have in common.

To close, LUCENT TECH (NYSE: LU) had a press release today regarding the plans of 9,000 Lucent employees this weekend. It sounds very Foolish. We wish them a great weekend.

Fool on!

--Jeff Fischer

Drip Portfolio -- On Intel.
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.


TODAY'S NUMBERS
Stock Change Bid ---------------- AMZN -1 1/4 39.38 AOL +1 73.94 T +1 1/8 44.81 ATCT + 1/16 4.81 CHV +1 7/8 88.50 DJT + 1/4 11.63 GM + 5/16 68.69 INVX - 11/16 30.44 IOM - 1/16 26.63 KLAC - 3/4 70.88 LU +1 7/8 80.75 MMM -1 5/8 87.50 COMS + 3/16 46.63
Day Month Year History FOOL -0.14% 4.33% 21.77% 224.97% S&P: +0.45% 5.32% 27.88% 106.65% NASDAQ: +0.21% 5.21% 29.36% 131.89% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 26.63 956.55% 8/5/94 355 AmOnline 7.27 73.94 916.62% 8/11/95 125 Chevron 50.28 88.50 76.00% 10/1/96 42 LucentTech 47.62 80.75 69.59% 8/24/95 130 KLA-Tencor 44.71 70.88 58.52% 8/12/96 110 Minn M&M 65.68 87.50 33.23% 8/12/96 280 Gen'l Moto 51.97 68.69 32.16% 8/12/96 130 AT&T 39.58 44.81 13.23% 6/26/97 325 Innovex 27.71 30.44 9.84% 9/9/97 290 Amazon.com 38.22 39.38 3.02% 8/13/96 250 3Com Corp. 46.86 46.63 -0.50% 4/30/97 -1170 *Trump* 8.47 11.63 -37.27% 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 26247.81 $23665.94 5/17/95 980 Iomega Cor 2594.53 26092.50 $23497.97 8/11/95 125 Chevron 6285.61 11062.50 $4776.89 8/12/96 280 Gen'l Moto 14552.49 19232.50 $4680.01 8/24/95 130 KLA-Tencor 5812.49 9213.75 $3401.26 8/12/96 110 Minn M&M 7224.44 9625.00 $2400.56 10/1/96 42 LucentTech 1999.88 3391.50 $1391.62 6/26/97 325 Innovex 9005.62 9892.19 $886.57 8/12/96 130 AT&T 5145.11 5825.63 $680.52 9/9/97 290 Amazon.com 11084.24 11418.75 $334.51 8/13/96 250 3Com Corp. 11714.99 11656.25 -$58.74 4/30/97 -1170*Trump* -9908.50 -13601.25 -$3692.75 10/22/96 600 ATC Comm. 13761.50 2887.50-$10874.00 CASH $29541.35 TOTAL $162485.98