Fool Portfolio Report
Friday, January 24, 1997
by Jeff Fischer (MF BudFox)

ALEXANDRIA, VA., January 24, 1997 -- Kick back, Fool. It's the weekend. Stocks are silent. Ahhh. Relax... stretch... yawn... breathe....Okay. Ready? Easy now...

After rising more than 6% in three weeks, stocks finally surrendered some ground Thursday and Friday. The S&P and Nasdaq both lost about one percent Friday, and the Fool was not immune, losing 1.10% as well. It was a flat week for the Fool overall (-0.23%), while the S&P lost three-fourths of one percent, and the Nasdaq gained one percent.

Friday Iomega (NYSE: IOM) was one of few stocks which helped the Fool's cause. The stock held rock-steady in the storm, never dipped below Thursday's close, and ended the day up $3/8. Next Tuesday (the 28th) the company announces earnings. Sixteen cents is the consensus estimate.

Yesterday we incorrectly stated Iomega's estimate by the old numbers, which both Zacks and First Call incorrectly listed. (First Call on AOL is having difficulties and isn't updated, so Fools should be careful about taking those numbers at face value until corrected). Meanwhile, we should have checked the Fool's IOM board for the latest estimate.

The estimate is 16 cents. The big 1 - 6. Analysts stand as follows:

          H&Q             $0.16 per share.
          J.P. Morgan   $0.17
          Emerald         $0.16
          H.D.Brous     $0.18

Sales should jump above $400 million for the fourth quarter and total more than $1.2 billion for fiscal 1996. That's $1.2 billion in sales following sales of only $326 million in 1995. Very nicely done. The company is fulfilling every promise the Fool has for it, and the investment has well-outperformed the expectations. (Tom and David figured on fundamentals they might double their money in the stock within a year from purchase. It's up 629% in 19 months).

Elsewhere in Fooldom, 3Com (Nasdaq: COMS) was clocked for a $4 5/8 decline on no specific news, though a 35% tumble in Cascade Communications (Nasdaq: CSCC) didn't brighten the mood for networking stocks. (See Fool's news). Surveying the "wreckage" on the Nasdaq -- (it's no big deal, actually, just a natural dip after such a quick rise)(but let's play along with the sensationalism) -- so, surveying the horrible wreckage, KLA Instruments (Nasdaq: KLAC) also fell sharply, on no news, and same thing with Lucent Tech (NYSE: LU). One ship which bucked the violent seas and rose on its own tide Friday, and another which nearly did, were Microsoft (Nasdaq: MSFT) and Intel (Nasdaq: INTC). Set sail in a ship which commands its sector, swims in cash, possesses margins a pirate would pillage for, and is run by the gifted, and you're much less likely to sink during market typhoons.

When the market does fall, the media is quick to give specific reasons behind the drop; though frequently the media gives little explanation when the market rises, simply writing, "The market rallied on a positive outlook," for example. So why must there always be a defined reason behind a market decline? Is it because we believe the market is meant to naturally rise (as history suggests), so "unnatural" drops in the meantime must be explained? It's interesting to read how separate publications give different reasons for the same drop.

Difference of opinion in the media (offline and online) is to be championed, but when opinion enters the reporting of news, boundaries can be crossed -- or at least blurred. When IBM (NYSE: IBM) announced earnings in October of 1996, two print publications posted in their newspapers near opposite "reports" on the results. I read the full articles and wrote about them in the 10/22/96 Fool recap named "A Tale of Two Papers." From that day:

"Both Investor's Business Daily and The Wall
Street Journal
ran cover stories about IBM's earnings.
Investor's Business Daily headlined:

                          IBM's 3rd-Qtr Net Up 7%;
                         Offers a Rosy Outlook

       And went on to read,

"...IBM's chief financial officer
gave a rosy assessment of the company, particularly
for its main computer hardware business..."

Meanwhile, The Wall Street Journal wrote:

"...A company official's cautious statements
about the company prompted some analysts to cut
profit forecasts. IBM's finance chief (the same man
that IBD refers to) said the computer giant is taking
a revenue hit as more customers lease mainframes
rather than buy them. He said that problem could
hurt the current quarter..."
So, IBD claims a rosy outlook. WSJ says the current
quarter may be hurting. Both these views came
from the same source, the same man.
Reading the entire Investor's Business Daily and Wall
Street Journal articles, both papers continue their
different slants throughout -- slants which read
nearly as opposites."

Well, three months later, which publication's "news" was closer to being correct?

When IBM announced earnings this week investors were disappointed and the stock fell $15 in two days. Much of the disappointment was blamed on areas in IBM's business which had been written about by The Wall Street Journal three months earlier. The Journal had it right in this case, while the Investor's Daily didn't mention any such warnings. All was going well, according to them.

That said, on October 22nd, IBM's stock closed at $127 per share. Today, even after a sharp fall, the stock is above $150. If warnings from the Journal had influenced a person's buying decision, they would have missed an18% gain in the stock thus far. Meanwhile, maybe Investor's Daily felt things were rosy enough at IBM to post as such in their paper, and maybe after an 18% rise they end up in the right.

Either way, posts in the one-way media are probably best taken as just that: posts. Posts which need to be followed-up on your own, and upon which, ideally, a community of persons can respond to together, continuously, for all to read and contemplate.

For weekend reading, Guy Kawasaki wrote a fairly simplistic article about America Online (NYSE: AOL), called "Get off Steve's case." The arguments he presents are pretty obvious to bulls of AOL's stock, but the writing is directed toward bears. Meanwhile, America Online's lawsuit problems continue. I like Steve Case's response today:

"The reason we went to unlimited pricing is because our customers asked for it," Case said. "Once they are online, they don't have to worry about the clock ticking. We did say there will be a surge in demand and there will be some busy signals. It will probably take us a few months to build out our capacity. That's our intent and we are doing everything we can to do it as soon as possible," Case said.

Okay. The folks at AOL made a mistake by offering unlimited access to the world while not having the capacity for the demand created. They made a blunder. They're surprised by the demand. So, sue them? Or give them some time to fix the problem, and have some good-natured patience about it? (It is a "new world" they're dealing in, after-all). Unless a member's business or life has been harmed by AOL's busy signals, I'm on the side of saying the lawsuits are frivolous, and represent more "a sign of the times" than a sign of wrong-doing by AOL. Intentional wrong-doing merits a lawsuit. Honest "mistakes" or "catching up to the curve" do not, in my mind. Irritation I understand. Immediate lawsuits on that irritation I question. Give AOL a month or two to focus on the problem. (One Fool's naive opinion....)

Another article interesting enough to offer is one written about Steve Ballmer, executive vice president of sales and support at Microsoft. This writing gives a look into the one of the key figures at the company, and touches on the competition in Netscape (Nasdaq: NSCP), Oracle (Nasdaq: ORCL) and Sun Microsystems (Nasdaq: SUNW).

Saving the best for last, here at the Fool's homestead, Rogue's Louis Corrigan wrote an informative article on "The SEC's New Trading Rules." If you invest on the Nasdaq market, this may be of interest to you. Also, MF Cheeze wrote quite an amusing Fribble.

Take good care, Fools! Enjoy the weekend.


Stock Change Bid -------------------- AOL -1 1/8 36.13 T + 3/8 38.38 ATCT - 1/4 12.13 CHV + 1/4 66.13 GM + 5/8 62.50 IOM + 3/8 18.38 KLAC -2 1/8 41.25 LU -3 53.00 MMM - 5/8 81.00 NCR --- 39.00 COMS -4 5/8 68.63
Day Month Year History FOOL -1.10% 3.49% 3.49% 176.19% S&P 500 -0.91% 4.01% 4.01% 68.08% NASDAQ: -1.05% 5.64% 5.64% 89.37% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 18.38 629.46% 8/5/94 680 AmOnline 7.27 36.13 396.71% 8/13/96 250 3Com Corp. 46.86 68.63 46.45% 8/11/95 125 Chevron 50.28 66.13 31.50% 8/12/96 110 Minn M&M 65.68 81.00 23.33% 8/12/96 280 Gen'l Moto 51.97 62.50 20.25% 1/2/97 8 NCR 33.63 39.00 15.99% 10/1/96 42 LucentTech 47.62 53.00 11.31% 8/12/96 130 AT&T 39.58 38.38 -3.04% 8/24/95 130 KLA Instrm 44.71 41.25 -7.74% 10/22/96 600 ATC Comm. 22.94 12.13 -47.14% Rec'd # Security In At Value Change 5/17/95 2010 Iomega Cor 5063.13 36933.75 $31870.62 8/5/94 680 AmOnline 4945.56 24565.00 $19619.44 8/13/96 250 3Com Corp. 11714.99 17156.25 $5441.26 8/12/96 280 Gen'l Moto 14552.49 17500.00 $2947.51 8/11/95 125 Chevron 6285.61 8265.63 $1980.02 8/12/96 110 Minn M&M 7224.44 8910.00 $1685.56 10/1/96 42 LucentTech 1999.88 2226.00 $226.12 1/2/97 8 NCR 269.00 312.00 $43.00 8/12/96 130 AT&T 5145.11 4988.75 -$156.36 8/24/95 130 KLA Instrm 5812.49 5362.50 -$449.99 10/22/96 600 ATC Comm. 13761.50 7275.00 -$6486.50 CASH $4600.04 TOTAL $138094.92