Fool Portfolio Report
Friday, May 2, 1997
by Jeff Fischer (TMFJeff@aol.com)
ALEXANDRIA, VA, (May 2, 1997)-- Print this recap and save it. File it away in a drawer and in twenty years remove it, the paper yellow and faded, the silent words trapped on the page with the quality of an old photo.
If you're thirty, forty, or fifty-years-old now, and very wrongfully consider yourself "old," what will you consider yourself to be in twenty years?
The sky will look the same, the world will remain solid beneath you, the stock market should be much higher, and your monetary worth will depend on decisions made now.
It's your money. You're beginning to invest now and let's imagine that you have twenty years. The only certainty over those twenty years is that the Chicago Cubs will continue to lose ball games. Other than that, you only know that you want to invest in something strong,"new," and with plenty of room to grow. You worry about the prices of the hot technology shares -- the leading companies that continue to score new highs. You're equally concerned about the other giant companies that everyone already knows. Are you too late?
On a cool morning 823,000 hours ago the air was whipping around the Wright Brothers' plane as it slowly lifted off the sand; 674,000 hours ago the first radio station opened; 402,000 hours ago the first color television broadcast ran, and thousands watched -- the screens glowing against their faces. Commercial airlines have been flying regularly for 23,725 days. (Those giant, heavy birds that you see rolling down the runway, lifting up, and climbing away into the sky -- they've been flying for only 500,000 hours, total.)
Silicon chips have been in existence 14,235 days. Walkmans: 6,205 days. CD players: 5,110 days. (So, CDs have been spinning in this world for only 122,640 hours.)
How advanced are we?
Humankind only invented "angled" baby bottles -- meant to keep air bubbles out of the milk -- a few years ago. Before that, the bottles were straight. Babies were excessively burping all over the world, crying on bus trips, during movies, their stomachs aching. The invention of slanted baby bottles seemed revolutionary and brilliant -- this, 1,000 days ago.
The last 823,000 hours have been incredible:
1903 Wright Brothers flight
1908 Model T Ford
1920 First radio station
1927 Television demonstration
1934 Commercial airplane flights popularized
1946 Televisions mass produced
1951 First color television broadcast
1953 Computers first mass produced
1958 First silicon chip
1971 Nasdaq introduced
1978 Airlines deregulated
1980 Personal Computers enter picture
1983 CD Players
1986 Microsoft goes public
1989 Berlin Wall falls
1990 Soviet Union collapsing
1991 Internet popularity begins
Eastern Europe opening up
Democracy spreading over the world
1994 Gardner Brothers begin online site
The Internet has been rising in popularity for 2,190 days, while Microsoft has been public for 3,900 days. Coca Cola: 28,470 days.
For five decades television broadcasting has been dominated by ABC, NBC, and CBS, and they continue to dominate. No one can upstage the three largest networks. Barriers to the market are high and strong foundations are in place.
The personal computer is similar to television.
90% of computer users "watch" a single "broadcast" that begins with a Windows icon every time they turn on their computer. They aren't switching "channels" except to upgrade to the latest version. The worlds' computers are built around this one "broadcast."
Televisions were once considered to be a luxury item. Now 98% of American homes own at least one television. Meanwhile, 20% of American homes own a personal computer. By the turn of the century the production rate of personal computers will surpass that of televisions, and computer ownership is expected to double.
The early history of computers is in other ways different from that of the television.
No single company was able dominate the market for television tubes, leading the industry with each new generation of tubes, while having the capacity to supply tubes to the entire world, thus setting the standards for the industry, and rising to a position of dominance. Computers: a different story. There is one leader, and its product is found in 90% of all computers.
Likewise, no single company was ever the leading "distributor" of all television broadcasts -- if that was possible. Now, one company aims to be the leading distributor of the "computer broadcasts" -- laying the building blocks of computer networking, aiming to be the largest "broadcaster" beneath the Internet, one company dominates the fast-growing networking industry. The company has been public for 2,400 days.
The three leaders of the computer industry have formed a strategic alliance. The companies -- Microsoft, Intel and Cisco Sytems -- hope to control the direction of the personal computer. MSFT, INTC, and CSCO.
ABC, NBC, and CBS?
Television broadcasting has been dominated by three companies for roughly 17,600 days. Computers: only 3,500 days. Computer usage is expected to grow at a rate over 1000% faster than television usage over the next three years.
What else is there, for example?
In April of last year the world population was 5.7 billion. By the year 2015 it's expected to top 8 billion -- a 43% increase.
85% of the world's people live in Asia. At the end of 1995, despite intense marketing and an incredible distribution channel which has been growing for 60 years, a leading soft drink company still accounted for only this much of China's beverage market sales: 0%. (Measured by total unit case sales in ounces compared to total ounces consumed.)
Granted, Coca Cola sold 23% of the country's soft drinks, but in measuring itself by total beverage share, it has accomplished 0% market saturation.
Meanwhile, is the world at a "small-cap" or "mid-cap" stage?
Either way, the markets currently reached in the world represent only a small-cap proportion of the total existing markets. Leading companies that are growing with the world, no matter how large the company, may currently be at only "small-cap" levels compared to what they could become. Investing in dominant companies that are growing as the world grows, while also growing their existing markets, would appear to be a great place to park your money for the next 7,300 days.
In 7,300 days we'll all be twenty years older. Of those days, only 5,200 of them are market days. Can you buy some of the best companies in the world and hold them -- as long as still merited -- for the next 5,200 market days? That's only 33,800 market hours. Or only 1.21 billion seconds.
Time being what it is, it's no wonder brokers try to get us to trade actively.
You can invest your money in a company with millions of dollars in the bank and a world-leading business -- which includes companies like the Foolish Four. Or, you can invest your money in any number of other firms, down to small, debt-utilizing companies with large ambitions.
(Most leading companies achieve success by carrying little to no debt from the very beginning (think about that), and very few small companies grow large.)
Well... our next twenty years of stock investing -- 5,200 market days -- begins now. We want to buy the best companies we can find, and then enjoy those days doing things other than watching price fluctuations.
The trivial short-term part of this recap follows!
Stocks had one of their strongest weeks in recent history, as the S&P gained 6.22% in the past five days. Benign economic figures showed inflation to be under control. The Fool gained 6.14% on the week, keeping up with the S&P despite having 30% of assets in cash, as well as one short position that worked against the portfolio in the strong market. The Nasdaq entered positive territory on the year for the first time in over two months, rising 7.94% in the last five days. It's now up 1.11% for the year.
3COM (Nasdaq: COMS) rebounded strongly, gaining $8 on the week (Friday it was announced that the company's leadership in adapter cards had increased significantly in 1996). CISCO SYSTEMS (Nasdaq: CSCO) announces earnings Tuesday.
KLA INSTRUMENTS (Nasdaq: KLAC) rose to a new 52 week high, up nearly $10 on the week, and breaking $50. The Fool is now up 12% on KLA -- after being down about 70% last year.
TRUMP HOTELS (NYSE: DJT) was shorted by the Fool Wednesday at $8 1/2 and quickly rose on twice normal volume the next day, with no news. Hey, we hope that the new buyers of Trump enjoy owning the shares!
ATC COMMUNICATIONS (Nasdaq: ATCT) announced earnings Wednesday of $0.02 per share, well below estimates, but the stock rose 25% afterwards. David wrote about it in a link below. The conference call summary will be available on the Fool.
Let's end... time is ticking...
Modern human beings have existed for 125,000 years -- or 45,625,000 days. Only over the last 30,000 years did people begin to spread over the planet. 15,000 years ago the glaciers receded again -- that's 5.4 million days ago -- or 1.3 billion hours ago. And yet, the financial industry is still set up to make brokers and fund managers wealthy, while the majority of individual investors -- consumers -- pay for it. UnFoolish...
Have a Foolish weekend -- all 172,800 seconds of it!
1.Tom's Thursday recap on Simpleton, long-term investing
2.David's Wednesday recap on ATCT's "unhorrible" earnings
3.Tuesday's recap on AT&T
4.Stock and industry research
5.Cisco Systems Story
Stock Change Bid -------------------- AOL + 1/4 47.25 T - 1/4 33.75 ATCT + 15/16 4.75 CHV +1 1/8 69.13 DJT + 1/4 9.25 GM - 1/2 57.00 IOM + 1/4 17.00 KLAC +3 1/4 50.25 LU + 5/8 60.25 MMM + 1/2 87.63 COMS +3 3/8 34.25Day Month Year History FOOL +1.49% 2.22% -2.03% 161.47% S&P: +1.81% 1.45% 9.75% 77.35% NASDAQ: +2.74% 3.54% 1.11% 81.25% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 17.00 574.60% 8/5/94 355 AmOnline 7.27 47.25 549.93% 8/11/95 125 Chevron 50.28 69.13 37.47% 8/12/96 110 Minn M&M 65.68 87.63 33.42% 10/1/96 42 LucentTech 47.62 60.25 26.53% 8/24/95 130 KLA Instrm 44.71 50.25 12.39% 8/12/96 280 Gen'l Moto 51.97 57.00 9.67% 4/30/97 1170 *Trump* 8.47 9.25 -9.22% 8/12/96 130 AT&T 39.58 33.75 -14.72% 8/13/96 250 3Com Corp. 46.86 34.25 -26.91% 10/22/96 600 ATC Comm. 22.94 4.75 -79.29% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 16773.75 $14191.88 5/17/95 980 Iomega Cor 2594.53 16660.00 $14065.47 8/12/96 110 Minn M&M 7224.44 9638.75 $2414.31 8/11/95 125 Chevron 6285.61 8640.63 $2355.02 8/12/96 280 Gen'l Moto 14552.49 15960.00 $1407.51 8/24/95 130 KLA Instrm 5812.49 6532.50 $720.01 10/1/96 42 LucentTech 1999.88 2530.50 $530.62 8/12/96 130 AT&T 5145.11 4387.50 -$757.61 4/30/97 1170 *Trump* -9908.50 -10822.50 -$914.00 8/13/96 250 3Com Corp. 11714.99 8562.50 -$3152.49 10/22/96 600 ATC Comm. 13761.50 2850.00-$10911.50 CASH $49020.02 TOTAL $130733.65