Fool Portfolio Report
Wednesday, July 23, 1997
by Jeff Fischer (TMFJeff@aol.com)
ALEXANDRIA, VA, (July 23, 1997) -- The Fool Portfolio could have stayed in bed all day and achieved the same results. The Port was down 0.02% while the S&P rose 0.28%. Iomega and Innovex were the main culprits, both falling, while General Motors, America Online, Lucent, and 3Com were strong, and KLA-Tencor made a bold new high above $61, up $3 7/16.
To begin the day, both 3M and Chevron announced record earnings, but before we continue, Randy Befumo (TMF Templr) has something to share about 3M. Good Fools, if you wish, take a moment to read Randy's thoughts about the 3M conference call.
Randy is impassioned about 3M closing off small investors from its conference call, as he should be -- as all Fools should be. Impassioned, but Foolish and willing to take the time to work for change. If you would like to be allowed on 3M's conference call, give them a ring and let them know. 3M is a fine company (and has $512 million in cash and securities) and should be happy to allow a few hundred shareholders the respect of a conference call replay.
Now, you might think that what you just read was the most important part of this recap -- and that may very well be true. But the following is vital, too. Especially to the companies involved.
3M (NYSE: MMM) reported record earnings of $418 million, or $1.01 per share, two pennies shy of estimates. Sales rose eight percent to $3.8 billion -- setting a new record. For the first six months of this year, earnings per share rose eleven percent, to $1.99. The company's net profit margin remained near 11%, and gross margins remained near an impressive 44%.
The company expects the solid performance to continue into the second half of this year. The stock trades at 24 times the 1997 estimate, and 21 times the 1998 estimate of $4.66 per share.
We would have every reason to believe that 3M's strong performance could continue -- it's a great company -- but we'll be selling the stock in about three weeks as we make our annual Foolish Four switch. The chances of 3M continuing to grow seem substantially lower given the Fool's coming sell and considering the exposure and marketing push that the company gets here. Since La Fool bought 3M last August, the stock has gained 49%. Mere coincidence?
3M has been a fine specimen in our Foolish Four basket, though, and we'd gladly welcome it back if it fit the criteria again; so that gives 3M some incentive: either knock the stock price down, or face oblivion. Until then, the Fool Port -- fickle woman that she is -- has her back turned. How's that for gratitude?
In the same predicament is CHEVRON (NYSE: CHV). The company also announced record earnings today, but is in danger of falling from the Fool Port's Foolish Four slot next month; and worse: it's in danger of being replaced by EXXON (NYSE: XON).
Over the months we've received hundreds of emails from Fools who use Chevron's products in support of the Fool Portfolio. If Exxon claims the Fool Four slot next month, Exxon will soon benefit, and Chevron will suffer. Chevron either needs to knock its stock price down in order to save itself. Otherwise, gas pump volume will decrease dramatically.
Chevron reported record earnings of $823 million, or $1.26 per share, ahead of estimates. The company's production of oil increased the equivalent of 50,000 barrels per day, to over 1.4 billion barrels, while operating expenses per barrel declined 86 cents. (Wow! Do the math!) Revenue was down slightly at $10.2 billion, but net income for the first six months of this year was up eleven percent to $1.65 billion.
Now, if there are 500,000 Fools, each pumping on average of 20 gallons of gas per week from a Chevron station, as our email indicates, that means...
Hmmm. Think about it, Chevron. You only need to drop your stock price somewhat to put yourself back on the Foolish Four list -- or else you slip into obscurity and anonymity, while Exxon rises from the ashes. Of course, as a result Chevron's stock will probably fall enough that Foolish investors will return to it next August, in 1998, when the yield is 6% or so. Same with 3M. Forgotten until next year. Down to $3 like RIDE SNOWBOARD (Nasdaq: RIDE).
Okay. Enough kidding.
We'll make our Foolish Four switch on August 13th. Right now, a few companies are really battling for a position. We heard CATERPILLAR (NYSE: CAT) employees are selling stock like mad in order to drive down the price in hopes of making the list. It appears to be working. Yesterday Cat knocked off DuPont. Today the four stand as Caterpillar, Philip Morris, Exxon, and General Motors.
Which company will be victorious? Which will make it to the Fool Portfolio!? Stay tuned...
--Jeff Fischer, Fool
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Stock Change Bid ---------------- AOL + 13/16 67.00 T - 3/16 35.69 ATCT - 1/16 4.19 CHV - 7/8 76.75 DJT + 1/16 10.38 GM +1 1/4 59.00 INVX -1 3/8 31.88 IOM - 11/16 22.50 KLAC +3 7/16 61.38 LU +2 3/8 85.25 MMM -1 7/8 98.44 COMS +1 7/16 57.81Day Month Year History FOOL -0.02% 9.99% 16.00% 209.57% S&P: +0.28% 5.81% 26.44% 104.31% NASDAQ: +0.24% 8.71% 21.43% 117.67% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 67.00 821.60% 5/17/95 980 Iomega Cor 2.52 22.50 792.86% 10/1/96 42 LucentTech 47.62 85.25 79.04% 8/11/95 125 Chevron 50.28 76.75 52.63% 8/12/96 110 Minn M&M 65.68 98.44 49.88% 8/24/95 130 KLA-Tencor 44.71 61.38 37.27% 8/13/96 250 3Com Corp. 46.86 57.81 23.37% 6/26/97 325 Innovex 27.71 31.88 15.03% 8/12/96 280 Gen'l Moto 51.97 59.00 13.52% 8/12/96 130 AT&T 39.58 35.69 -9.83% 4/30/97 -1170 *Trump* 8.47 10.38 -22.51% 10/22/96 600 ATC Comm. 22.94 4.19 -81.74% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 23785.00 $21203.13 5/17/95 980 Iomega Cor 2594.53 22050.00 $19455.47 8/12/96 110 Minn M&M 7224.44 10828.13 $3603.69 8/11/95 125 Chevron 6285.61 9593.75 $3308.14 8/13/96 250 3Com Corp. 11714.99 14453.13 $2738.14 8/24/95 130 KLA-Tencor 5812.49 7978.75 $2166.26 8/12/96 280 Gen'l Moto 14552.49 16520.00 $1967.51 10/1/96 42 LucentTech 1999.88 3580.50 $1580.62 6/26/97 325 Innovex 9005.62 10359.38 $1353.76 8/12/96 130 AT&T 5145.11 4639.38 -$505.74 4/30/97 -1170*Trump* -9908.50 -12138.75 -$2230.25 10/22/96 600 ATC Comm. 13761.50 2512.50-$11249.00 CASH $40625.59 TOTAL $154787.34