Fool Portfolio Report
Wednesday, November 05, 1997
by Jeff Fischer (JeffF@fool.com)


ALEXANDRIA, VA (Nov. 5, 1997) -- Like a strong boxer knocked to the mat, the stock market -- bruised but not bleeding -- pulled itself up without needing to use the ropes. Since being punched in the stomach for a 7% loss last Monday, the S&P has climbed back to end today at 942, the same level that it was before the October 27 plunge.

The Fool has led the market during the rebound, gaining another 0.83% today on a six dollar move from AMERICA ONLINE (NYSE: AOL). AOL announces first quarter earnings for fiscal 1998 tomorrow, and twelve cents per share is expected. Last quarter the company announced earnings of nine cents per share, beating estimates of seven cents, on a 42% increase in revenue to $475 million -- a record.

Uh oh. Can you sense it? It's time for another "Fool Service Announcement" (FSA tm).

Begun last month, Fool Service Announcements are ancillary tidbits of news that usually don't affect the performance of your investments, but that do add a personalized touch to your companies and offer value-added benefit to Foolish readers. Last month we alerted readers to the $10,000 that Amazon.com was awarding to a random shopper, and in that same recap we notified readers that AOL was interviewing for a writing position. We even provided prose that job seekers could use. Now, today, we prepare AOL users for a frightening possibility.

As AOL members know, when you log on to the service your computer usually says, "You've got mail." We all know the phrase. Now imagine those words coming at you full volume every time that you sign on, but in the voice of Dennis Rodman. Or Rosie O' Donnell. Or David Letterman.

Now imagine no more.

America Online is launching a "Celebrity You've Got Mail" promotion that will allow just that. A contest lets you to choose your favorite celebrity voice for your email beginning November 10 (keyword: Celebrity Contest), with a different voice debuting each Monday. The possibilities are endless. Zsa Zsa Gabor? Henry Winkler (with a personalized Fonz touch?). Or how about Tom and David? Many of us might enjoy hearing, "You've got mail, Fool" in a duet every day. Watch for the contest and suggest celebrity voices, if you wish. Surely AOL has an email box accepting suggestions.

That's our first FSA (tm) for today. Thankfully it was brief. Back to business:

Over the last quarter America Online announced several new multi-million dollar marketing contracts and signed its 9 millionth member as well. Our subscriber-based valuation puts the stock at around $92 per share. It's interesting how the implied fair value has risen over the course of the year. It was around $48 to begin this year, when the stock was in the $20s. With every new member, though, the numbers essentially change. It's important to remember that fair value is always a term that applies to the immediate moment, while investments are made for the years ahead. The fair value of leading companies consistently increases over time.

Tomorrow we'll have coverage of America Online's earnings.

Since the Fool shorted TRUMP HOTELS (NYSE: DJT) on April 30 of this year, the S&P has gained 17.6%. Trump is underperforming, up only 8.49%. Yes, shorting Trump has been a money loser for the Fool Port thus far, but seeing how on average you lose 5% of every single bet placed at a casino, this stock has been inexpensive long-term entertainment -- if you can call it that. Losing only 8% over seven months would equate to one long game of blackjack.

There was news today from the Donald. Every month the Atlantic City casinos announce gaming numbers. Paul Larson (TMF Parlay) is our Foolish gaming analyst, and he had this to say about the recent results:

"Those readers of our active gaming message board or our post of the day feature on AOL know that Trump did not have such a good October this year. According to the Atlantic City Press, Trump's October AC gaming revenues were down approximately 6% versus the year ago period. This contrasts to the city-wide gaming results that were up 3.8% for the month. It's hard to make much from the month to month revenue reports, but it is clear that Trump's market share withered a tad in October. Even with this news, the stock was up 1/16th today. Go figure."

INNOVEX (Nasdaq: INVX) was up slightly today following yesterday's fourth quarter results that put the stock at 12 times trailing earnings after a $3 rise on Monday. Since the June 26 purchase of Innovex, the S&P has gained 6.4%. Innovex is trailing, having risen only 3.5% over that time. What's really losing to the S&P over the past years, though, is KLA-TENCOR (Nasdaq: KLAC), up only 16% since August of 1995, and 3COM (Nasdaq: COMS), down 7% since August 1996. Networking hit a snafu early this year after 3Com had nearly doubled for the Fool Port in short order, and KLA was recently about to surpass the S&P 500 (David has been tracking it in the recaps) before its 68% gain for the Fool shrank all the way down to the current 16%.

Over the long haul, we believe that these companies still have the potential to beat the market, otherwise we'd look to sell. The companies are growing at market beating paces, but each has had news that make the weak stock performances understandable, which is a good thing. We'd rather understand weakness than wonder what was wrong. KLA was bought when every semi-related company was gold, and networking stocks are seeing multiple contractions following a minimal slowdown in growth rates -- and increased competition. Disk drive industry: price concerns and estimate revisions. All appear to be shorter-term concerns, while each company continues to churn out record quarters.

We'll end with another useful FSA. This came from AT&T (NYSE: T) yesterday. The company announced that it is simplifying its domestic long-distance phone service rates. Peak times will now be from 7 a.m. to 6:59 p.m. Monday through Friday. Off-peak is all other times except for the weekend. The entire weekend gets a weekend rate. Rates for peak, off-peak, and weekend time periods are 28 cents, 16 cents, and 13 cents per minute. Anywhere in the continental U.S., these are your AT&T rates unless you sign up for some other plan. Useful Fool Service Announcement, wasn't this?

Finally, if you haven't seen the new Fool website, please click on through. One new feature is called FoolWatch, which is available on both AOL and the Fool's Web page. The consistently updated feature lists all the new and latest content on the Fool. (There's no better way to find out what slop I've written lately.) It's on the left side of the Fool's homepage.

Those Fool Service Announcements (FSA tm) weren't all bad, were they? We probably won't have another for several months.

The Fool won the day, up 0.83% while the S&P gained 0.21%. With 38 more trading days in the year, the Fool is up 29.8% and the S&P is close behind at 27.27%.

Fool on...


TODAY'S NUMBERS

Stock Change Bid ---------------- AMZN - 3/4 58.50 AOL +6 1/16 84.88 T -1 3/8 48.00 CHV -1 7/16 84.75 DJT + 1/16 9.19 GM + 1/16 66.75 INVX + 3/16 28.69 IOM - 1/4 28.69 KLAC + 9/16 52.25 LU +1 5/16 85.56 MMM + 1/8 93.00 COMS - 3/16 43.38
Day Month Year History FOOL +0.83% 4.60% 29.80% 246.41% S&P: +0.21% 3.08% 27.27% 105.66% NASDAQ: +0.38% 2.74% 26.82% 127.35% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 84.88 1067.01% 5/17/95 980 Iomega Cor 2.52 28.69 1038.39% 10/1/96 42 LucentTech 47.62 85.56 79.69% 8/11/95 125 Chevron 50.28 84.75 68.54% 9/9/97 290 Amazon.com 38.22 58.50 53.06% 8/12/96 110 Minn M&M 65.68 93.00 41.60% 8/12/96 280 Gen'l Moto 51.97 66.75 28.43% 8/12/96 130 AT&T 39.58 48.00 21.28% 8/24/95 130 KLA-Tencor 44.71 52.25 16.86% 6/26/97 325 Innovex 27.71 28.69 3.53% 8/13/96 250 3Com Corp. 46.86 43.38 -7.44% 4/30/97 -1170 *Trump* 8.47 9.19 -8.49% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 30130.63 $27548.76 5/17/95 980 Iomega Cor 2509.60 28113.75 $25604.15 9/9/97 290 Amazon.com 11084.24 16965.00 $5880.76 8/11/95 125 Chevron 6285.61 10593.75 $4308.14 8/12/96 280 Gen'l Moto 14552.49 18690.00 $4137.51 8/12/96 110 Minn M&M 7224.44 10230.00 $3005.56 10/1/96 42 LucentTech 1999.88 3593.63 $1593.75 8/12/96 130 AT&T 5145.11 6240.00 $1094.89 8/24/95 130 KLA-Tencor 5812.49 6792.50 $980.01 6/26/97 325 Innovex 9005.62 9323.44 $317.82 4/30/97 -1170*Trump* -9908.50 -10749.38 -$840.88 8/13/96 250 3Com Corp. 11714.99 10843.75 -$871.24 CASH $32438.81 TOTAL $173205.87