Fool Portfolio Report
Friday, May 30, 1997
by Jeff Fischer (TMFJeff)
ALEXANDRIA, VA, (May 30, 1997) -- The shortened week was more volatile than the final numbers suggest. In the past four days, the S&P gained a scant 0.15%, while the Nasdaq Composite increased by 0.76%. The Fool Portfolio led the parade, tacking on 1.13%. BA BOOM!
The largest market news came from NIKE (NYSE: NKE) and INTEL (Nasdaq: INTC), as both companies announced that earnings for the quarter will fall below expectations. This kind of "market inefficiency" involving industry leaders (were expectations simply too high?) is usually worth a gander. Foolish analysis of both situations can be read in the Fool News, on May 30th and 29th.
For the Fool Port, 3COM (Nasdaq: COMS) led the charge, rising nearly five bucks. The stock put on its bathing suit and goggles and kept swimming upstream. Nothing else moved much at all, in the end, though there was news. IOMEGA (NYSE: IOM) announced a bootable ATAPI Zip drive (more on that later), and rumors of a monstrous merger floated around the stock of AT&T (NYSE: T)(more on that below, too). Also, ATC COMMUNICATIONS (Nasdaq: ATCT) announced management changes, and an increased focus on marketing.
All in all, it was another very interesting week, and now, just as if we're at the Oscar's watching clips of the best movies, this recap will run some of the best posts on Fool stocks over the past week, from the Fool message boards. The posts again demonstrate the benefits of having Foolish investors spread out across the country -- and globe -- sharing information, intelligently, thoughtfully, and Foolishly. Some posts are downright funny. Enjoy all of them!
ONE. ATC COMMUNICATIONS (Nasdaq: ATCT), from Bruin83: "...Over the last several days in Dallas, ATC has begun radio ads for temporary (4-6 weeks) workers to work on a major account (AT&T), with the potential for these workers to become part of 'our permanent team.' ATCT has always been heavy advertisers in the Classified Ads but I've never heard it on radio before."
From MPBrush: "Obviously new management has had to make a difficult transition from outdated infrastructure, loss of customer/client confidence, & drastically poor financial decisions by senior executives.
"But, believe it or not, the fundamentals have changed for the better. Growth industry. Company better positioned now to capitalize with upgraded equipment, promising contacts in private (Arthur Anderson) and public sector (ISI), smart management in Chavoya & Waller (I'd put my money on a Williams grad anyday). ATC also has the best, most ambitious vision and wants to shape its industry. Who else is defining the sector vocabulary ("telesourcing") and claiming the future popularity of Michael Jordan? Remember Buffet -- 'If you can't see owning a stock for 10 years, don't buy it for 10 minutes.'"
TWO. Thoughts on 3COM (Nasdaq: COMS) from Yumski: "Forgetting the (U.S. Robotics) merger, here's a crack at valuation (around $46). 3COM's fiscal year ends this week. Earnings are predicted to grow 30% over last year. Next year another 20 %. Five year is also 30%. Earnings this year predicted at $2.05. Let's give them a 30 P/E. What the hell, we're all friends here. Now that those dang shorts have all cleared out, anyway. So $2.05 X 30 equals about $61.50. Another 15 points or so. That's about another 30% growth in share price from today." [YPEG values the stock at $74, with $2.47 estimated next year, and a 30% growth rate.]
From KArne71585: "Now isn't that the perfect example of the "Herd (Mentality)" as we have ever seen!! Incredible that a month ago when COMS bottomed at $24 none of the analysts seemed to have any (interest), and now at $46 both Paine and SmithB today can't get enough! Investors have truly left the game! Though it seems now for us holders that every single money manager must own this stock NOW! 17.6 M shares (trading)!!"
Posted by MAPARIED: "Funny how this "herd" mentality works: Intel makes an announcement to reduce prices on competing products (even though COMS dominates the market) and the stock goes from $81 to $24 in a hurry (not unlike a casual comment from Michael Dell that sends the hard drive industry spinning).
"Nothing fundamental has changed and yet doomers run for cover and don't see a bottom even when the price is slashed by over two-thirds. They still don't believe when the report comes that not only the Intel price reduction hasn't affected 3Com sales adversely but that the opposite was happening -- increasing market dominance [by 3Com, in the latest numbers]. The fall persists and with it the fall of US Robotics that is called everything this side of Class Action.
"Even though a quick glimpse will tell anybody (not only experts) that both cos. are complementary by about 90%+ and that the sum of two great proven winners rarely produces a mediocre co., let alone a loser, the stock of both cos. still takes time to start getting up and running... But then, for no other reason than following the herd (still no fundamentals changed, nothing), the rush takes the prices to a quick double (USRX) and almost that (COMS). Funny."
THREE. Foolish thoughts on the rumored AT&T (NYSE: T) merger, from HStern1951: "Hey, I live just outside the beltway, and there is a chance the rumored merger could fly. Why? When it comes to politics and big money, anything can happen. Let's not get too hung up on the ideals of "free competition." Just look at the gem of a job our regulators have done to date. I'm betting that the ATT/SBC deal, or something close to it, will be done. Just like the banking industry, where bigger has become better; and once that Pandora's box is opened, there is a tidal wave of mergers. (Even Glass-Steagal is going down.) AT&T probably leaked the story to test the waters. Come on in, the water's just fine."
Posted by MarkRogo: "There is absolutely no chance that this merger will go through. The media will eventually report this but, in the meantime, is excited by the hype like many others. Why won't it go through? Because it would kill the competitive dream for SBC and Pacific Telesis customers. AT&T wouldn't be there to compete with them in local calling -- which they otherwise clearly would do -- and wireless would be a near monopoly in those regions too.
"Folks, the government does bizarre things with antitrust, but you can bet your sweet bippy that this merger was contemplated to avoid and circumvent prospective competition. In Bell Atlantic/Nynex, the only thing that saved it was that there's already local competition in New York from MFS, TCG, Time Warner, et al. The fact that Bell Atlantic was not going to be a Nynex local competitor wasn't as critical. Also, the government had already allowed the wireless combination to take place before.
"Here, it is clear that AT&T is going to push into local service (they're already in it here in California in a limited way) using reselling and wireless local loop. If the merger were to go through, that wouldn't happen. And, regulators know that no one but AT&T has a real chance of penetrating the local markets to create competition.
"The California Public Utilities Commission was very wary about PacTel/SBC, they will put the kibosh on this if need be. Also, I believe FTC, DOJ, FCC, and Congress will all be opposed to it. Likely so will the unions because they don't trust AT&T with its job-cutting mania in recent years.
TMF Jeanie, in response to MarkRogo: "Well, Mark, let's start with the FCC. Yesterday in a masterful stroke of timing, the chairman, Reed Hundt, resigned. That makes 4 departures out of the 5-member Commission in the past year, which leaves the "biggest (rumored) deal in history" to the scrutiny of an FCC that has only one member known today.
"And over at the Justice Dept, the division chief of the antitrust division is a temp. So now you have 5 of the 6 most important regulators who would make this decision, all relatively new kids on the block."
FOUR. Digging for information on IOMEGA (NYSE: IOM), from HeyKerry: "Just got off the phone with my buds at MacWarehouse. I'm practically on a first name basis with all 500+ phone jockeys, so much Apple stuff have I ordered from them thru the years... Anyway, while ordering some printer supplies I threw in some IOM questions for the guy, who seemed pretty sharp.
"He said MacWarehouse hadn't seen any shortages or backorders of Jaz or Zip products in recent months. He'd made Iomega product sales pretty much every day and never saw less than a 'healthy number' in his on-screen inventory. I asked what was 'healthy' and he said "around 1,000 units sitting in the warehouse", and several hundred Jaz's.
"Rather than beat around the bush, I just told the guy flat out that I was thinking of investing in IOM, and could he tell me what was happening with sales. He replied that while Zip sales were way up since the price decrease, it was Jaz sales that were really skyrocketing, with the internal for $299 being the bigger seller. Personally, he said he preferred Syquest products to the Zip/Jaz and he couldn't understand why nobody wanted them. ;-D
"All in all, it was a rather informative purchase of color ink cartridges...."
The ATAPI Zip explained by JIMMUNROE, answering another Fool's question of what it means: "When your hard drive conks out, you can now boot up with a 100 Meg Zip containing a full operating system and many of the programs you need. Depending upon the nature of the problem, you now have a chance of recovering important files and not being entirely out of luck. This alone will make the Zip standard." [We'll see.]
FIVE. Regarding TRUMP (NYSE: DJT). "My conversation with the Don," posted by Blaster411: "The Don and I breed our Jack Russell Terriers to the same sire, G0-Getter of Fox Warren Kennels. Unbeknown to me we share the same vet. On Monday, one of his domestics got into a slight accident causing him to actually come in to pick up his dog. Our two Terriers basically started to interact with each other and we started talking dogs and breeding for quite some time. After establishing a good repoire with the man I finally ventured my thoughts regarding my shorting of his company's stock. I didn't get his exact comments, however it was to the effect that he was tired of the politics involved in the casino business and that he was focusing his efforts on his first love, real estate dealing." (Blaster411 is a notorious and oft witty comedian of sorts on the boards.)
SIX. Bet you didn't know this about CHEVRON (NYSE: CHV), posted by RTHIS: "Chevron is continuing to keep a lid on expenses, at least in the Gulf of Mexico. Sharing shorebases and the aviation fleet with other oil cos, selling off marginal properties, combining Profit Centers, giving over some "marginal" fields to a Chevron in-house group called Harvest to manage as a declining asset: Harvest group is getting nicely Out of the Box in that they're using service companies in a less-supervised manner to generate fair cost savings.
"CHV's going with SAP's all-inclusive software by July 1997 to become danged near Paperless in its invoicing and other Company tasks. The 3rd world is becoming capitalist and demand for crude oil & product is surging.
"We stockholders are waiting to see the results of the deepwater Gulf of Mexico drilling now underway. But look out there: Tengiz in Kazakstan - the pipeline's going to happen. Angola, Africa- new fields being found one after another. CHV has beaten the S&P 500 total return over the last 5 yrs. I've held it since 1985, and, folks, I have been rewarded. Future so bright you got to wear shades."
Have a Foolish Weekend!
Tom's MoneyHeavy Portfolio.
Friday Evening News: Intel down $12.
Daily Double -- How can you find the next double?
Daily Trouble -- Value in this beaten down stock?
Boring Portfolio -- Cisco, Oracle and more.
Fool Four -- These giants are... huge.
Stock Change Bid -------------------- AOL - 1/8 55.13 T + 1/8 36.75 ATCT + 1/8 4.00 CHV - 3/4 70.13 DJT --- 9.75 GM - 5/8 56.13 IOM - 1/8 17.38 KLAC - 1/2 47.50 LU + 1/8 63.63 MMM - 3/4 91.88 COMS + 1/2 48.25Day Month Year History FOOL -0.26% 7.03% 2.58% 173.77% S&P: +0.50% 5.86% 14.52% 85.05% NASDAQ: -0.19% 11.07% 8.47% 94.44% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 55.13 658.25% 5/17/95 980 Iomega Cor 2.52 17.38 589.48% 8/12/96 110 Minn M&M 65.68 91.88 39.89% 8/11/95 125 Chevron 50.28 70.13 39.46% 10/1/96 42 LucentTech 47.62 63.63 33.62% 8/12/96 280 Gen'l Moto 51.97 56.13 7.99% 8/24/95 130 KLA Tencor 44.71 47.50 6.24% 8/13/96 250 3Com Corp. 46.86 48.25 2.97% 8/12/96 130 AT&T 39.58 36.75 -7.14% 4/30/97 -1170 *Trump* 8.47 9.75 -15.13% 10/22/96 600 ATC Comm. 22.94 4.00 -82.56% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 19569.38 $16987.51 5/17/95 980 Iomega Cor 2594.53 17027.50 $14432.97 8/12/96 110 Minn M&M 7224.44 10106.25 $2881.81 8/11/95 125 Chevron 6285.61 8765.63 $2480.02 8/12/96 280 Gen'l Moto 14552.49 15715.00 $1162.51 10/1/96 42 LucentTech 1999.88 2672.25 $672.37 8/24/95 130 KLA Tencor 5812.49 6175.00 $362.51 8/13/96 250 3Com Corp. 11714.99 12062.50 $347.51 8/12/96 130 AT&T 5145.11 4777.50 -$367.61 4/30/97 -1170*Trump* -9908.50 -11407.50 -$1499.00 10/22/96 600 ATC Comm. 13761.50 2400.00-$11361.50 CASH $49020.02 TOTAL $136883.52