Fool Portfolio Report
Wednesday, June 4, 1997
by Jeff Fischer (TMF Jeff)
ALEXANDRIA, VA, (June 4, 1997) -- The company makes cool products related to an exciting new industry: personal computers. Sales rose from $115 million to $1.3 billion in about two years. The market cap rose from a few hundred million to $3 billion. The next two products from the company (n-Hand and RecordIt) sound like fun -- and useful -- toys at reasonable prices. Management is aloof and quiet.
All that, but I still fail to grasp the enormity of the public interest in this stock. I don't dislike or like the intense coverage that IOMEGA (NYSE: IOM) grabs from the investing world. I'm a Fool: I simply try to enjoy it. In so many respects, Foolishness is about enjoying what you can -- including the noise surrounding you -- while investing only for the long run.
The Iomega board is hopping with people who are somewhat upset about some of the media coverage that the company received today. Be Foolish and don't worry about it. Stocks always move on the merits of the underlying business over the long-term, and a Fool profits on that truth.
Today Iomega's stock moved up another $1, to prices not seen since December 13th, 1996 (that was the last time the stock was above $20). Seventeen million shares traded to carry IOM above that twenty-dollar level again, and made it the most-active stock on the NYSE.
In fact, the New York Stock Exchange asked Iomega to respond or give a reason for the three-day stock rise on increased volume. Iomega answered -- rightly so -- that it doesn't comment on price movements or rumor.
The Fool message boards reported that CNBC was airing take-over rumors on their national cable show. While mentioning take-over rumors, one broadcaster reportedly warned people about buying the stock. Fundamentals of the company -- earnings estimates for the year, the revenue run-rate, the price-to-sales ratio, and enterprise value -- were not mentioned alongside any such warning.
Co-founder of The Motley Fool, David Gardner, wasn't following the stock today, but heard of the happenings. David stated,
"We never invest based on take-over rumors, we just buy stock in good companies and hold for the long-term. We've always discounted the take-over rumors as they've come. Meanwhile, we don't think that the take-over rumors are moving the stock."
He continued, "Iomega announced Monday that the sixth millionth Zip drive had been sold, and yesterday the company proved that it can be a software company, too. That surprised everyone, and that more than anything else may be moving the stock. We've been rewarded for buying good companies and holding for the long-term. That's how individual investors are rewarded. That's how we invest, and so we place no value on rumors."
Analysts at J.P. Morgan did attribute the rise to fundamentals, stating that institutions are paying more attention to the company. Iomega is a great story, J.P. Morgan reportedly stated, while reiterating that nearly every OEM possible has signed up for the company's Zip drive, while Iomega's competition is going nowhere. The analysts also mentioned the take-over rumors as highly speculative. Based on estimates of $1.20 per share in 1998, J.P. Morgan is looking for a stock price in the $30s.
Meanwhile, Iomega scored another OEM agreement today as well, this one with Chicony Electronics, of Taiwan. Iomega's internal notebook Zip drive will be included as an optional feature on a series of notebook computers made by Chicony.
Bill Polk, a Fool message board user, reported on the Iomega board that Chicony has annual notebook manufacturing capacity of 130,000 units, and that the company has made notebook computers in the past for Canon and Zenith, among over a dozen other names.
Despite this being good news, it's very unlikely that the stock gained on it alone. Iomega announces OEM agreements constantly.
After the bell the reason for the stock rise was finally discovered by Fool HQ. Not surprisingly, it was discovered on the Fool message boards. Fool MBardIJD gave the reason:
"It's simple. I've been a long time (investor in Iomega), but I finally got impatient enough yesterday to sell my shares at $19 for a small loss... and of course the next day it makes its biggest move of the year.
"If anyone has other stocks they want to see go up, let me know and I'll sell them short... that will insure a significant rise."
Well, most of us have been there, including the Fool.
Still, the long-term aim is what we base an investing life upon: to beat the market over decades.
Keep on Foolin'...
--Jeff Fischer, June 4, 1997
Boards -- what are Fools saying?
Evening News -- Big movers, up and down.
Daily Double -- How can you find the next double?
Daily Trouble -- Is there value in this beaten down stock?
Boring Portfolio -- Oxford -- new high.
Fool Four -- These giants are... gigantic.
Stock Change Bid -------------------- AOL + 5/8 56.63 T - 3/4 35.13 ATCT - 9/32 4.84 CHV + 3/4 72.13 DJT - 1/8 9.75 GM - 1/4 56.63 IOM +1 20.25 KLAC + 1/2 46.75 LU + 1/8 62.63 MMM -1 5/8 89.75 COMS -1 13/16 44.06Day Month Year History FOOL +0.39% 2.05% 4.68% 179.38% S&P: -0.64% -0.96% 13.41% 83.27% NASDAQ: -0.38% -1.47% 6.87% 91.57% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 20.25 703.57% 8/5/94 355 AmOnline 7.27 56.63 678.89% 8/11/95 125 Chevron 50.28 72.13 43.43% 8/12/96 110 Minn M&M 65.68 89.75 36.65% 10/1/96 42 LucentTech 47.62 62.63 31.52% 8/12/96 280 Gen'l Moto 51.97 56.63 8.95% 8/24/95 130 KLA Tencor 44.71 46.75 4.56% 8/13/96 250 3Com Corp. 46.86 44.06 -5.97% 8/12/96 130 AT&T 39.58 35.13 -11.25% 4/30/97 -1170 *Trump* 8.47 9.75 -15.13% 10/22/96 600 ATC Comm. 22.94 4.84 -78.88% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 20101.88 $17520.01 5/17/95 980 Iomega Cor 2594.53 19845.00 $17250.47 8/11/95 125 Chevron 6285.61 9015.63 $2730.02 8/12/96 110 Minn M&M 7224.44 9872.50 $2648.06 8/12/96 280 Gen'l Moto 14552.49 15855.00 $1302.51 10/1/96 42 LucentTech 1999.88 2630.25 $630.37 8/24/95 130 KLA Tencor 5812.49 6077.50 $265.01 8/12/96 130 AT&T 5145.11 4566.25 -$578.86 8/13/96 250 3Com Corp. 11714.99 11015.63 -$699.37 4/30/97 -1170*Trump* -9908.50 -11407.50 -$1499.00 10/22/96 600 ATC Comm. 13761.50 2906.25-$10855.25 CASH $49211.92 TOTAL $139690.30