Fool Portfolio Report
Wednesday, May 7, 1997
by David Gardner (MotleyFool)
ALEXANDRIA, VA, May 7, 1997-- Biff! Boom! POWW! Bam!
A quick Bat-moment to lead off the Foolfolio report today, as we cracked the market over the nose with a flurry of Foolish hooks and uppercuts. In a year that's frequently featured the S&P going one way (namely, UP) and the Fool going the other (namely, DOWN), it was exceedingly refreshing to see Foolishness ascend 1%+ just as the turbo-charged 500 dove 1%+. A rare treat.
IOMEGA (NYSE:IOM) topped our leaders list with a resounding rise of $1 3/8, closing at $18 7/8 on 8.5 million shares traded. That's right... eight point five million shares. That made the stock the #2 most active on the New York Stock Exchange, and among the percentage gainers.
I checked the newswires, finding nothing.
I asked Jeff Fischer over the partition between our desks, and he responded, "Needham started coverage yesterday, but before market open." Nothing there.
I then clubbed myself over the head with a huge Nerf mallet. What had I been thinking? If something happened that mattered, our readers will be analyzing it. So I surfed on over to our Iomega message folder.
On the Web edition, ORWAHOO was pointing out: "I just noticed on the Dell site that the option to include a Zip on a Pentium II system (includes 1 disk) is $75 extra. Is this a new development? This is the lowest price I've ever seen on a Zip. For what it's worth, configuring a 200 MMX system with a Zip raises the price by $139."
When most companies' products drop in price, their stocks take a hit. One of the interesting aspects of Iomega's story is that it is trying as hard as it possibly can to reduce the price of its Zip drive. The cheaper the drive, the larger the market. The larger the market, the more people will be buying its proprietary, highly profitable Zip disks. So this is fine news once again.
Over on our AOL boards, ChrisProhm had some news of a different color: "[CNBC technical analyst] John Murphy just did analysis on IOM that was very positive... said he was getting a lot of mail about reasons IOM could not go higher and that he felt that it certainly could and would."
It's hard to believe anything about Iomega has been undercovered, as closely inspected as this stock has been by the media and the financial world at large for two years now. But if I were to point to one part of the story which has been missed, I'd point to the intentionally misleading negative hype created by institutional short sellers. That's not surprising, of course, given that Iomega remains among the top two or three most shorted stocks in America.
Now, I didn't see the Murphy segment, but if Chris was right about what the guy said, I'm humored. Why am I humored? Because we hear a simple and honest statement from a media figure about how he's getting "lots of mail" about why Iomega stock "could not go higher." Who would you suppose is sending that mail? And how come the financial media at large, so often a mouthpiece for the institutional crowd, doesn't ever mention this? (I suppose the answer is couched in the appositive marked off by commas in the previous sentence....)
That's why it's refreshing, terribly refreshing to see an unassuming, low-key guy like Murphy tell it like it is. What has too often occurred in the past is that other reporters take that "lots of mail" and boil it down into a story, attributed to "(unnamed) sources."
The one other thing I learned from our IOM boards is that a rumor is apparently in the air about Compaq having some buyout interest in Iomega. I am among the people least interested in takeover rumors of any sort, and I never make any investment decision based on them. But if you're still scrambling (as am I) to figure out why Iomega was the #2 most heavily traded stock, making a big move, on a day the Dow dropped 100+ points, you're probably looking in this direction. I doubt John Murphy's segment moved IOM stock, and I doubt it was Dell's Web site. So perhaps it's one of those "heard on the Street" things; as long-time Fool contributor RunngMoose wrote, "My broker just called to say that he has heard this from his 'sources on the street.' "
Closing up Iomega for today was this amazing line in the Needham buy report, out yesterday: "Zip and Jaz dominate their respective segments. The low-end removable magnetic class, [of] which Zip now holds an estimated 89% market share, is expected to grow 75% annually, to reach 43.3 million units in 2000." May I play the cynic one more time? Our readers were making similar projections more than a year ago, but that was called "online hype" and "Internet chatter" at the time.
America Online (up $1 1/4 to $50 1/4) and 3Com (up $1 3/8 to $37) each rose in excess of a buck today, also swimming against the market's southward tides. Those, combined with a $3/8 drop in TRUMP HOTELS AND CASINO RESORTS (NYSE:DJT), are what made for such a Foolish day.
Y'know, that fractional drop in Trump shares was the first one-day decline we've seen in the stock since we shorted it a week ago today. How interesting.
Car enthusiasts will enjoy the New York Times business section article on GENERAL MOTORS's (NYSE:GM) new electric car, the EV1. It's mostly favorable, even though the thing isn't for sale yet, and has only been leased so far to 176 people (in Southern California and Arizona). It runs out of power every 70-90 miles, but if you're a SoCal environmentalist who mostly just commutes back and forth to the office, you might pay the $34,000 to own one. As a pure novelty item, it'll sell to some people, anyway. This is really the first-generation of this technology, so you'd expect (much as with computers) to have to pay way up for something not that powerful. In time, we shall see.
--- David Gardner, May 7, 1997
Stock Change Bid -------------------- AOL +1 1/4 50.25 T - 3/4 32.63 ATCT - 3/8 4.31 CHV + 1/8 69.63 DJT - 3/8 9.88 GM -1 1/8 57.50 IOM +1 3/8 18.88 KLAC -1 3/8 48.63 LU - 1/8 61.88 MMM - 1/2 89.75 COMS +1 3/8 37.00Day Month Year History FOOL +1.30% 4.36% 0.03% 166.95% S&P: -1.47% 1.78% 10.11% 77.93% NASDAQ: -0.41% 4.93% 2.47% 83.69% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 18.88 649.01% 8/5/94 355 AmOnline 7.27 50.25 591.20% 8/11/95 125 Chevron 50.28 69.63 38.46% 8/12/96 110 Minn M&M 65.68 89.75 36.65% 10/1/96 42 LucentTech 47.62 61.88 29.95% 8/12/96 280 Gen'l Moto 51.97 57.50 10.63% 8/24/95 130 KLA Tencor 44.71 48.63 8.75% 4/30/97 -1170 *Trump* 8.47 9.88 -16.60% 8/12/96 130 AT&T 39.58 32.63 -17.57% 8/13/96 250 3Com Corp. 46.86 37.00 -21.04% 10/22/96 600 ATC Comm. 22.94 4.31 -81.20% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 17838.75 $15256.88 5/17/95 980 Iomega Cor 2594.53 18497.50 $15902.97 8/12/96 110 Minn M&M 7224.44 9872.50 $2648.06 8/11/95 125 Chevron 6285.61 8703.13 $2417.52 8/12/96 280 Gen'l Moto 14552.49 16100.00 $1547.51 10/1/96 42 LucentTech 1999.88 2598.75 $598.87 8/24/95 130 KLA Tencor 5812.49 6321.25 $508.76 8/12/96 130 AT&T 5145.11 4241.25 -$903.86 4/30/97 -1170*Trump* -9908.50 -11553.75 -$1645.25 8/13/96 250 3Com Corp. 11714.99 9250.00 -$2464.99 10/22/96 600 ATC Comm. 13761.50 2587.50-$11174.00 CASH $49020.02 TOTAL $133476.90