Fool Portfolio Report
Friday, April 18, 1997
by Jeff Fischer (TMF Jeff)
ALEXANDRIA, VA. (April 18, 1997) -- A week of important quarterly reports has come to a close, and leading American companies continue to lead. In the Fool Portfolio, four companies announced earnings. All were strong.
The market recovered recent losses, but the S&P was the star, gaining 3.89% in five days. The Nasdaq added 1.30%, while the Fool's ten stocks managed 0.70%. The week was also important in that we sold partial positions in our two largest holdings, America Online and Iomega. Both stocks still represent our largest positions, as winners should, but now account for 25% of the portfolio rather than 50%. It feels good.
The portfolio now sits with nearly $40,000 in cash, but as the Fool believes in being invested as full-time as possible, we're seeking to deploy the money as the right opportunities present themselves. As the sell report explains, this is why we sold some stock: to buy new opportunities while reaching a better balance. We no longer have small-caps in the portfolio, for instance. Success has grown our small-caps (Iomega and AOL) into strong mid-caps, while ATC Communications has shrunk to a micro-cap.
Two Fool stocks releasing earnings were GENERAL MOTORS (NYSE: GM) and KLA INSTRUMENTS (Nasdaq: KLAC). Both reports were strong and both were written of in the nightly recaps:
General Motors, 4/14/97
KLA Instruments, 4/15/97
LUCENT TECHNOLOGIES (NYSE: LU) also released earnings. The company pre-announced last month, though, so the good news was already known. Being a Foolish Four offspring, there's nothing we need do about its earnings or those of General Motors. Come August we'll make the appropriate Dow Dividend switches regardless. If we swapped today, we'd be buying International Paper, Philip Morris, Exxon, and keeping General Motors. I would miss owning 3M, but wouldn't mind shedding AT&T.
IOMEGA (NYSE: IOM) announced strong earnings too, beating estimates by 20%, but the stock drifted lower. The Fool covered the earnings and conference call completely. Meanwhile, Hambrecht & Quist analysts raised their 1997 estimate to $0.87 per share from $0.77, expecting revenues of $1.77 billion. For 1998 they project $1.20 earnings per share, and they believe the stock can return to the mid-20s, or twenty times their 1998 estimate.
Iomega has $1.35 billion in trailing sales and $69 million in earnings ($0.52 per share), with net margins of 5.1%. The stock trades at 33 times trailing earnings. Rising to the mid-20s would present a 40% increase.
Personally -- just me talking -- I'm glad that we don't have 25% of the Fool portfolio in one storage technology company anymore. But I'm very glad the investment was so successful to have become such a large portion of the portfolio. I'm also very glad we've kept 15% of assets in this dynamic market leader. Finally, I'm extremely pleased that we invest for the long-term, while so many are lost in the day-by-day noise of stock moves -- the noise of wasted time.
Living in a "short-term" mind-frame usually leads a person into tireless concern. Concern leads to uneasiness and frustration, and that can lead to unfounded criticism of others.
Consider this:
It is much easier to be critical
than to be correct.
This was written by Benjamin Disraeli, who achieved great progress in making England's politics accountable in the 1800s.
His statement explains why so many in the media, especially, are critical. Writing on a regular basis, it's incredibly easy to draw on daily stresses or worries and write continually critical columns. It's easy to be critical -- you merely spout off all the things that could possibly go wrong with any subject -- while finding facts, thinking, relating those thoughts to the world, and writing something that may actually be correct, or, heaven forbid, helpful -- that takes too much work.
Certain Barron's writers have very little to write if they're not criticizing. That publication and The Wall Street Journal have often shown tremendous ineptitude in covering the stories of Iomega and America Online, for example. Critically, though, they have every possible base covered. If you've read these papers for the past two years, you know every possible danger that Iomega and AOL have faced each step of the way -- every dark, world-ending scenario that just might befall either stock.
(Have any of these warnings proved true? No. Most dark scenarios presented by people who pound keyboards for a living derive from the writer's lazy desire to criticize rather than research or think with any foresight). Again:
It is much easier to be critical
than to be correct.
After so many journalists criticized Iomega's prospects for the past two years, the very day after The Fool announced that it was selling 50% of its Iomega holding (at four times the dollar amount of the entire initial purchase), Dow Jones ran this news flash:
"...Many analysts now think (that Iomega) has a product edge against other storage-device makers. "
Fools have been profitably watching the Iomega story unfold for two years, while the Wise understand the "product edge" that Iomega holds only now. We saw the company grow trailing sales from under $200 million to $1.35 billion, sell over 5 million Zip drives, and increase shareholder value ten-fold, all the while facing no true competition. Now the story is surfacing -- correctly, finally -- in the Wise media.
The Fool sold 1030 shares at $18 3/8 Thursday, for a 600% gain.
Have a Foolish weekend.
Stock Change Bid -------------------- AOL - 1/2 45.00 T --- 33.63 ATCT - 3/16 5.44 CHV +1 64.63 GM - 1/8 56.25 IOM - 1/4 17.50 KLAC -1 41.38 LU - 1/8 54.00 MMM + 5/8 83.25 COMS -1 29.25Day Month Year History FOOL -0.59% 3.20% -4.23% 155.59% S&P: +0.60% 1.22% 3.46% 67.18% NASDAQ: +0.45% 0.07% -5.30% 69.76% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 17.50 594.73% 8/5/94 355 AmOnline 7.27 45.00 518.74% 8/11/95 125 Chevron 50.28 64.63 28.52% 8/12/96 110 Minn M&M 65.68 83.25 26.76% 10/1/96 42 LucentTech 47.62 54.00 13.41% 8/12/96 280 Gen'l Moto 51.97 56.25 8.23% 8/24/95 130 KLA Instrm 44.71 41.38 -7.46% 8/12/96 130 AT&T 39.58 33.63 -15.04% 8/13/96 250 3Com Corp. 46.86 29.25 -37.58% 10/22/96 600 ATC Comm. 22.94 5.44 -76.29% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 4945.56 15975.00 $11029.44 5/17/95 980 Iomega Cor 5063.13 17150.00 $12086.87 8/12/96 110 Minn M&M 7224.44 9157.50 $1933.06 8/11/95 125 Chevron 6285.61 8078.13 $1792.52 8/12/96 280 Gen'l Moto 14552.49 15750.00 $1197.51 10/1/96 42 LucentTech 1999.88 2268.00 $268.12 8/24/95 130 KLA Instrm 5812.49 5378.75 -$433.74 8/12/96 130 AT&T 5145.11 4371.25 -$773.86 8/13/96 250 3Com Corp. 11714.99 7312.50 -$4402.49 10/22/96 600 ATC Comm. 13761.50 3262.50-$10499.00 CASH $39092.98 TOTAL $127796.60
