Fool Portfolio Report
Wednesday, October 15, 1997
by Jeff Fischer (JeffF@fool.com)
ALEXANDRIA, VA (Oct. 15, 1997) -- America Online's stock leapt to a new high today on no significant news. Oppenheimer raised the stock to a Buy rating and increased its 1998 earnings estimate from $0.80 per share to $0.86, which is actually one penny below the current mean estimate. So why the leap?
AMERICA ONLINE (NYSE: AOL) did announce a nationwide talent search for a writer that would tour readers through all of AOL's content, though certainly the stock didn't rise due to this. If you're looking for work and you know AOL inside and out, though, certainly give the job opening a try. Especially if you're a Fool. The typical tour of AOL might be described as:
"Hello members, welcome to your complete tour
of America Online. Let's start with Keyword: Fool.
Here we begin with the 13 steps to investing
Foolishly. After that, we'll move into more detail
about index funds, and then the Foolish Four.
From there, we'll take a break by reading a
humorous Fribble, and then we'll move onto..."
Six pages later into the tour of AOL:
"And, finally, we're reading the Fool's Nightly
News and portfolio recaps, where we see
analysis and investing come together, live
and donning Foolish motley garb. Every night
the Motley Fool offers these columns, and
after reading them many "Fools" (as AOL members
call themselves) move onto the Fool message
boards. From there..."
Three pages later into the tour of AOL:
"That was your tour of the Fool's America Online.
There is an AOL UK service, too, that
the Fool just launched last month. Fool on."
OK, before AOL pulls the plug on our show, I'll admit that they must have other content on their service -- I just haven't seen much of it.
At a record-high of $87 per share, America Online has a market cap of over $10 billion -- for the first time. Congratulations, AOL. With $1.7 billion in trailing revenue, the stock trades at just over 6 times sales. The company will announce first quarter results on November 6th. Twelve cents per share is expected for the quarter, and $0.87 per share is expected for the fiscal year ending in June of 1998. The wild cards going forward are plenty: can AOL remain profitable in the near term as it continues to grow and takes on CompuServe's business? What will margins be in the near-term, not to mention the long term? How large can America Online become? How many homes own televisions that one day may subscribe to America Online? Why is television such a banal source of entertainment 90% of the time? Why do I not own a television? How many more days must readers be subjected to my recaps? (Answer: tomorrow we all get a break.)
AOL's stock has compounded 110% annually over the past five years, making it one of the best investments of the decade, so far.
AMAZON.COM (Nasdaq: AMZN) was upgraded today by Everen Securities. The investment firm raised the stock to Intermediate-term Market Outperform, from Market Perform. So... whatever.
The Fool is about service, and value added service at that. Just as we shared the job opening at AOL with readers today -- and even drafted a proposal that you could send to AOL -- I would be amiss if I didn't mention that now is a good time to buy books from Amazon.com -- even if you don't want to buy books. Why? As part of Amazon's promotion for having reached its one millionth customer, the company is giving away $10,000 to a random shopper sometime over the next two weeks. What are your odds of winning? Well, at least one in a million. That ain't all bad! Much better than the lottery. And your odds are even better if you buy two dozen books, but one at a time, stretched out over the next two weeks. Sure, your shipping charges for each individual book would be large, but that's the gamble you take. Just like the gamble you take stepping up to a 7-11 counter and plunking down $10 on eighty-million-to-one odds of hitting the Lotto -- and in buying and drinking a giant Slurpee on your way out, facing twenty-million-to-one odds of death by bloating.
(A smooth transition from that paragraph to the next is not possible. Foolish apologies.)
There was news related to Amazon on the Dow Jones wire today. The stock of BARNES & NOBLE (NYSE: BKS) was burned for a 9% loss after at least six of the fourteen analysts following the company cut earnings estimates. Management announced that it is increasing expenditures for its Internet business. It's estimated that the company, while playing a mean game of catch-up with Amazon, has spent over $20 million on its online site already, but more spending is needed. This is despite the fact that Amazon bears argue that barriers to entry in this business are very low. Apparently bears haven't researched the costs involved.
All of that money hasn't yet translated into much online success at Barnes & Noble, though. While Amazon had sales of $28 million last quarter, analysts expect Barnes & Noble to have Internet sales of $25 million to $30 million for all of fiscal 1998 (ending December). The analysts may be wrong, but even so, the estimates are a staggering shortfall when compared to Amazon's recent results. Analysts go on to predict Internet sales of $120 million at Barnes & Noble in fiscal 1999, ending in six quarters -- the amount of trailing sales that Amazon could reach in the next three quarters alone.
The predictions for Barnes & Noble don't bode well for the online site of BORDERS (NYSE: BGP), which is the last of the large traditional booksellers to hit the Internet. Borders faces a capital-intensive investment in something that won't likely return any favors for quite a while. Borders had planned to launch its online site by the shopping season, but now the company aims to be online by the end of January.
If anything, the early success of Amazon currently reiterates that being first to market and capturing mind share isn't to be underestimated. I was thinking the other day about how frequently I use Excite, Lycos, or any search engine other than Yahoo. The answer is never. It's been YAHOO! (Nasdaq: YHOO) since the beginning, and AltaVista only through Yahoo. It's not that Lycos or Excite offer inferior service, it's that I simply don't want to change from what I know and what I'm familiar with at Yahoo. Why bother? Maybe I'm lazier than the average Fool, but I think studies of human behavior actually bear me out here.
That's it for today's Fool Service Announcement (FSA tm). I nearly forgot to mention that the Fool gained 0.50% while the S&P lost nearly the same amount, making for a very Foolish day. Don't forget to apply for a job at AOL, and remember to hit Amazon.com and attempt to win some money. Prize chasing may be Wise, but reading is certainly Foolish.
Reminds me: Tom and David are hanging out at bookstores (Barnes & Noble, which is a great offline business) in Los Angeles tomorrow, Thursday. Stop on by!
Drip Portfolio --
Port update, and valuing stock part 5.
Fool Message Boards -- Speak your mind!
Boring Portfolio -- Boring beating Fool, barely.
Fool Four Portfolio -- 23% annually, historically.
Market News -- All the News, early.
Port Tracker -- Update your portfolio daily.
Daily Double -- Good business?
Daily Trouble -- What went wrong? Learn from it.
Fribble -- A fun lesson from readers.
Stock Change Bid ---------------- AMZN - 7/8 46.75 AOL +4 1/16 87.13 T -1 1/16 44.88 CHV +1 3/16 86.69 DJT - 1/8 10.00 GM + 1/16 70.44 INVX - 1/8 30.75 IOM - 3/16 24.56 KLAC -1 1/2 66.38 LU --- 88.00 MMM -1 1/16 97.63 COMS + 6/49 53.31Day Month Year History FOOL +0.50% 2.44% 28.95% 244.15% S&P: -0.47% 1.95% 30.37% 110.67% NASDAQ: -0.54% 2.24% 33.49% 139.30% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 87.13 1097.94% 5/17/95 980 Iomega Cor 2.52 24.56 874.70% 10/1/96 42 LucentTech 47.62 88.00 84.81% 8/11/95 125 Chevron 50.28 86.69 72.39% 8/12/96 110 Minn M&M 65.68 97.63 48.64% 8/24/95 130 KLA-Tencor 44.71 66.38 48.45% 8/12/96 280 Gen'l Moto 51.97 70.44 35.53% 9/9/97 290 Amazon.com 38.22 46.75 22.31% 8/13/96 250 3Com Corp. 46.86 53.31 13.77% 8/12/96 130 AT&T 39.58 44.88 13.38% 6/26/97 325 Innovex 27.71 30.75 10.97% 4/30/97 -1170 *Trump* 8.47 10.00 -18.08% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 30929.38 $28347.51 5/17/95 980 Iomega Cor 2509.60 24071.25 $21561.65 8/12/96 280 Gen'l Moto 14552.49 19722.50 $5170.01 8/11/95 125 Chevron 6285.61 10835.94 $4550.33 8/12/96 110 Minn M&M 7224.44 10738.75 $3514.31 8/24/95 130 KLA-Tencor 5812.49 8628.75 $2816.26 9/9/97 290 Amazon.com 11084.24 13557.50 $2473.26 10/1/96 42 LucentTech 1999.88 3696.00 $1696.12 6/26/97 325 Innovex 9005.62 9993.75 $988.13 8/12/96 130 AT&T 5145.11 5833.75 $688.64 4/30/97 -1170*Trump* -9908.50 -11700.00 -$1791.50 8/13/96 250 3Com Corp. 11714.99 13328.13 $1613.14 CASH $32438.81 TOTAL $172074.50