Fool Portfolio Report
Tuesday, February 18, 1997
by Jeff Fischer (MF BudFox)
ALEXANDRIA, VA., (Feb. 18, 1997) -- After witnessing last week through the sterile height of hotel windows, eating from flying-saucer plates, and demolishing several cases of Coke, it's natural to ease back into Fool HQ's friendly clutter thoughtfully. The past week will be remembered best by jokes, industrious hours of silence, and seeing the sun bleed in and drain out on opposite horizons each day, every day, while we never left the room. I spent most my hours sleeping. I'm not sure what Tom and David were doing. Writing a book or something.
While away, we enjoyed Fooldom from afar, our lap-top computers fully loaded and aimed at Alexandria, VA. We read five excellent Fool recaps and confirmed we never needed to return to this space. It is well accounted for. Moreover, the Fool's Daily Double launched last week, along with Bust The Tipster, which we all played. David is sharing that he has only answered correctly to Bust the Tipster. Somebody will write a question that stumps him!
To top off events last week, KLA Instruments finally broke into the black for the Fool, after 18 months of hang-gliding on stagnant air, drifting downwards as much as 60%. David collapsed into quiet sobbing when KLA rose above the dried and flaked watermark purchase price set in August of 1995.
Actually, far from sobbing, we thought of running the Fool's first audio clip of celebratory song to mark the occasion. (James Brown came to mind). It's only a matter of time before we may have audio clips placed conveniently around the Fool, with Tom remarking such truisms as, "Coke, Gillette, and Johnson & Johnson. Any questions?"
Nope. No immediate questions. All stocks rise and fall in the near-term, while the stocks of great companies compound over the long-term. Few admissions are more Foolish.
Part Two
Now, some questions for your thoughtful consideration:
5. How do you feel, mentally, after watching three hours of television?
4. How do you feel after spending that same amount of time online?
3. Do you most look forward to:
a) turning on the television
b) reading a book
c) going outside for a walk
d) signing online
2. When you upgrade home appliances to include the latest technology, which
will you be most excited to upgrade:
a) television
b) sound system
c) computer
d) egg beater
1. Which of those four would you upgrade first?
0. Which would you upgrade if you could upgrade only one?
5. If you have teenagers in your family, in what are they most interested:
a) dating
b) driving the car
c) messing up the house
e) breaking away from overbearing parents
f) eating
5. Try that again: If you have teenagers or younger children in your family,
what technological trend is most prevalent in their overall lives:
a) We get the idea.
4. Do you think computing will become much more prevalent, or less prevalent,
over the next thirty years?
a) much more
b) less
3. Television use exploded quickly when it became affordable. Did television
became less prevalent in society during the following three decades, or much
more prevalent?
a) more
b) less
A). Has Time/Warner grown to become the largest media giant in the world
thanks greatly to television? And are Disney/ABC, and General Electric/NBC
still good investments?
a) yes
b) no
B). Which technology arguably has a brighter future:
a) computer
b) television
2. What is the long-term argument that you might avoid the stocks of Microsoft, Intel, Cisco Systems, and America Online?
a) technology changes
1. Okay. What about Coca-Cola?
Part 3
Sixty million personal computers were sold in the world in 1995.
Impressive? That number represents only about one percent of the current population.
Estimates vary, but about 20% of U.S. households own a personal computer. Some expect that number to be doubled around the year 2000. Over 90% of American and world households own a television. Less than 5% of world households own a computer. Before the turn of the century, the production rate of personal computers is on track to surpass the production rate of televisions.
In this country, modem ownership among homes doubled in 1995. Of children surveyed, age eleven to seventeen, nearly 50% said they would rather use the computer than the television. In a recent first-of-its-kind survey, Nielsen revealed that homes with America Online watch 15% less television than those without AOL; moreover, these homes watched as much as 32% less television than those without AOL during certain hours. Time spent on the Internet is eclipsing time formerly spent watching television.
Worldwide advertising expenditures are estimated at around $360 billion per year -- spent on television, print, and traditional media. That money is divided into these mediums in proportion to the number of viewers in each. Advertising is growing increasingly prevalent on the Web, benefiting leaders such as Yahoo! and America Online. Other leaders benefiting from the growth in the Internet and personal computer are companies the likes Intel, Microsoft, Netscape, Dell, Cisco Systems, and other greats, such as Oracle and Sun Microsystems.
These companies and hundreds more are fighting to gain footholds in forthcoming business growth -- while working to guess where the market is heading next. The Internet will be the best thing to happen to many technology-intensive companies. For many others, the Internet will be their demise. Even Intel sees the very possible threats. Technology shareholders, place your bets!
Part 4
The world population is about 5.6 billion. By 2015, it is estimated that 8 billion people will roam the earth, a 43% gain. Some companies are scattering their products across the world, in every nook and cranny, dotting the landscape endlessly. Affordable to everyone, wherever the products are placed, they sell, making the companies nearly recession-proof, if not depression-proof.
Coca Cola has compounded 30% annual growth the past dozen years, while turning a $4,000 investment in 1939 into $22 million today. Over the past decade, profit margins at the company have increased from 10% to 21%. Are the best times behind this company? Stealing more fire learned from Tom Gardner this past week, beverages made by Coca-Cola supply about 4% of the daily liquids consumed by each person; in addition, the company commands less than 10% marketshare in its industry, and considers itself small. Coca-Cola: a small company with tremendous opportunity to grow as the world grows, both in marketshare and by mere logistics, helped further by the company's aggressive stock buy-back plan.
Let's end here.
What? End? No "one-two" punch, no conclusion? Nope. Sorry. Just a snapshot of two very different investment possibilities: cutting-edge technology, and a soft-drink company; or what about razorblades?; and what of shampoo and band-aids? All these areas offer great opportunity, but also present very different risks. What do you wish to accomplish in the next 30 years with your investments? Steady growth?
Part 5
The Fool portfolio gained 0.61% today on the back of a hard-working IOMEGA (NYSE: IOM). The company announced that APPLE COMPUTER (Nasdaq: AAPL) will ship its new Power Macintosh model with an internal Zip drive as a standard feature. The operative word is "standard." Off the top of my head, I can't name a major computer manufacturer which doesn't offer Iomega's Zip drive as an option on new models. That's amazing considering the Zip was nearly unheard of two years ago.
AMERICA ONLINE (NYSE: AOL) fell on news that a few investors are selling one million shares. AT&T (NYSE: T) has filed to sell 480,000 shares of AOL. Not to criticize AT&T, but the company hasn't distinguished itself by making highly intelligent investments of late. Maybe AT&T has good reason to sell AOL, though.
Can AOL keep in-step with the progress of the Internet, even if America Online is part of the Internet? ("The Internet and more.") As I write this, as is too often the case, AOL is having difficulties, and I need to jump to the Web to find information or to read the Fool. Growing pains, yes. But when will AOL stop growing? Any why would a shareholder want it to stop growing? Catch 22.
Tomorrow, emerging after a week of virtual isolation, David Gardner!
Fool on!
(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.
TODAY'S NUMBERS
Stock Change Bid -------------------- AOL -1 3/8 36.25 T + 3/4 40.38 ATCT - 5/16 6.38 CHV - 3/8 68.00 GM + 3/8 59.00 IOM + 7/8 17.38 KLAC - 5/8 47.50 LU +1 3/8 59.00 MMM + 1/2 85.63 NCR +1 1/8 36.13 COMS - 1/4 41.38
Day Month Year History FOOL +0.61% -6.64% -4.82% 154.02% S&P: +0.97% 3.83% 10.20% 78.07% NASDAQ: -0.10% -1.02% 5.79% 89.65% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 17.38 589.77% 8/5/94 680 AmOnline 7.27 36.25 398.43% 8/11/95 125 Chevron 50.28 68.00 35.23% 8/12/96 110 Minn M&M 65.68 85.63 30.37% 10/1/96 42 LucentTech 47.62 59.00 23.91% 8/12/96 280 Gen'l Moto 51.97 59.00 13.52% 1/2/97 8 NCR 33.63 36.13 7.43% 8/24/95 130 KLA Instrm 44.71 47.50 6.24% 8/12/96 130 AT&T 39.58 40.38 2.01% 8/13/96 250 3Com Corp. 46.86 41.38 -11.71% 10/22/96 600 ATC Comm. 22.94 6.38 -72.21% Rec'd # Security In At Value Change 5/17/95 2010 Iomega Cor 5063.13 34923.75 $29860.62 8/5/94 680 AmOnline 4945.56 24650.00 $19704.44 8/11/95 125 Chevron 6285.61 8500.00 $2214.39 8/12/96 110 Minn M&M 7224.44 9418.75 $2194.31 8/12/96 280 Gen'l Moto 14552.49 16520.00 $1967.51 10/1/96 42 LucentTech 1999.88 2478.00 $478.12 8/24/95 130 KLA Instrm 5812.49 6175.00 $362.51 8/12/96 130 AT&T 5145.11 5248.75 $103.64 1/2/97 8 NCR 269.00 289.00 $20.00 8/13/96 250 3Com Corp. 11714.99 10343.75 -$1371.24 10/22/96 600 ATC Comm. 13761.50 3825.00 -$9936.50 CASH $4639.01 TOTAL $127011.01
