Fool Portfolio Report
Wednesday, June 11, 1997
by David Gardner (MotleyFool)


Alexandria, VA (June 11, 1997)  There was an interesting article on page C1 of  The Wall Street Journal today. No, I'm not referring to the Investment Dartboard feature, which just so happens to include a new contest pick from our first cousin, Gene Gardner.

Way to go, Gene! Knock 'em dead with Wallace Computer Services (NYSE:WCS).

Nope, the article to which I'm referring is right next to it, entitled "AOL Insiders Trim Stakes in Company." Why is this article about AMERICA ONLINE (NYSE: AOL) interesting? Not for the reasons one might think.

One might infer from the headline that those who know AOL best -- those who are running it -- are bailing out of its stock. Perhaps the stock is overvalued. Perhaps the business is going down the tubes. The casual reader may be forgiven for conjuring up such images, since that's about where the headline leaves you. Which would be terribly interesting. But that's not the case, so that's not it.

What might be interesting about the article is that it's only the latest in a long series of Journal articles on this subject (particularly the section it appeared in today, "Inside Track," which follows changes in management stakes). It's getting to the point where if the Journal isn't running a few of these "AOL is selling out" articles a year, somebody must have tripped a power cord over there, or something. But is this interesting? Heck no. It's predictable, occurring with the same regularity -- in fact, at least double the regularity -- as the Perseid meteor shower. We must keep lookin'.

OK, what might be interesting is that a Georgia woman whose apartment was infested by 75,000 roaches won $1000 in cash this week for this very reason, in a contest sponsored by a cockroach bait manufacturer. That IS interesting ("Mary Esposito said roaches lived in her dishwasher, refrigerator, oven, coffee-maker, VCR, wallpaper, dresser drawers and bathtub faucet," the news report reads). But while interesting, it has little to do with AOL insiders or tonight's recap.

No, what's interesting about "AOL Insiders Trim Stakes in Company" is the run of the article, if you read it from start to finish. What is a constant, ongoing non-story reprinted every few months may finally be getting treated as such.

The article begins by listing the gross number of shares that AOL insiders have recently filed to sell: 462,000. (The writer doesn't mention total shares outstanding of roughly 100 million, but the knowledgeable reader will discover that's less than one-half a percent.) It lists who's selling and how much each is selling. Standard stuff. Next, it goes on to mention how well AOL stock has done, implying that the insiders might be getting out at "lofty levels."

Then comes the first surprise. "A spokeswoman for AOL said that the sales by the insiders represent small portions of the executives' holdings." Holy truth serum, Batman! I can't recall reading a line that so self-admittedly put these articles into perspective as this one. The import of the article, one suddenly begins to recognize, is as small as the portion of AOL stock that CEO Steve Case sold! Yep, sure enough, Case sold 3.2% of his holdings. Imagine if you sold 3.2% -- that's one thirty-third -- of one of your stocks and made the front page of the Journal's "Money and Investing" section.

After we learn that Case sold a tiny portion, the cascade begins. We learn that new president of AOL Networks Bob Pittman sold nothing at all. We learn more about AOL's good recent deal with CUC International (NYSE:CUC). We learn that the latest sales are part of "a tradition of heavy insider selling" (a "tradition" that hasn't stopped the stock from rising 716% since our purchase less than three years ago). We learn that AOL executives get attractive stock options plans because they "receive on average lower annual salaries, and rely on stock appreciation." Then we close out the article with bullish commentary from not one but two Wall Street analysts, both of whom have buy ratings on the stock and use phrases like "Everybody I've talked to at the company is bubbling over."

This is what's interesting. Again, if you're just a reader of the headlines, you figure the company's in trouble and the executives are probably shifty at best, dishonest at worst. But read the article, and the entire tone and emphasis that the Journal used to inject into these things -- that AOL is a troubled entity whose bad-faith management is bailing out -- has suddenly turned on its head by the last paragraph. It's as if the body text is trying to apologize for the headline, in much the same way Willy Loman starts making excuses for his son Biff in Death of a Salesman.

It's enough to make me think this may be the last inconsequential, irrelevant article we see about AOL insider selling, non-story that it is... at least until some real selling occurs, if and when it ever does.

The Fool Portfolio gained a tad today, a tad less than the market averages on a rather ho-hummer of a Wednesday. AOL declined $1 1/8, our worst dollar loser today. On the other side of the ledger, 3Com and KLA Instruments had dollar-plus rises, while our short sale of The Donald drifted back down to Earth $5/8, following a TV-plug-induced surge yesterday. (Oomph.) These were enough to enable us to toss up a 3-spot (0.34%), and stick close enough to the market averages while still being 30% in cash.

Cash, you ask? Yep, we're sitting on a pretty penny right now, and preparing in the next few weeks to get some of that to work for us.

Stay Foolish!

David Gardner (DavidG@fool.com)

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TODAY'S NUMBERS
Stock Change Bid -------------------- AOL -1 1/8 59.38 T + 1/4 36.50 ATCT - 1/16 5.94 CHV + 1/2 73.88 DJT - 5/8 11.13 GM - 3/8 57.38 IOM - 1/2 20.00 KLAC +1 3/16 44.44 LU + 1/2 66.38 MMM - 1/4 94.38 COMS +2 1/8 47.56
Day Month Year History FOOL +0.34% 3.24% 5.90% 182.63% S&P: +0.50% 2.51% 17.39% 89.70% NASDAQ: +0.44% 0.54% 9.05% 95.49% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 59.38 716.71% 5/17/95 980 Iomega Cor 2.52 20.00 693.65% 8/11/95 125 Chevron 50.28 73.88 46.91% 8/12/96 110 Minn M&M 65.68 94.38 43.70% 10/1/96 42 LucentTech 47.62 66.38 39.40% 8/12/96 280 Gen'l Moto 51.97 57.38 10.39% 8/13/96 250 3Com Corp. 46.86 47.56 1.50% 8/24/95 130 KLA Tencor 44.71 44.44 -0.61% 8/12/96 130 AT&T 39.58 36.50 -7.78% 4/30/97 -1170 *Trump* 8.47 11.13 -31.36% 10/22/96 600 ATC Comm. 22.94 5.94 -74.11% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 21078.13 $18496.26 5/17/95 980 Iomega Cor 2594.53 19600.00 $17005.47 8/12/96 110 Minn M&M 7224.44 10381.25 $3156.81 8/11/95 125 Chevron 6285.61 9234.38 $2948.77 8/12/96 280 Gen'l Moto 14552.49 16065.00 $1512.51 10/1/96 42 LucentTech 1999.88 2787.75 $787.87 8/13/96 250 3Com Corp. 11714.99 11890.63 $175.64 8/24/95 130 KLA Tencor 5812.49 5776.88 -$35.61 8/12/96 130 AT&T 5145.11 4745.00 -$400.11 4/30/97 -1170*Trump* -9908.50 -13016.25 -$3107.75 10/22/96 600 ATC Comm. 13761.50 3562.50-$10199.00 CASH $49211.92 TOTAL $141317.17