Fool Portfolio Report
Tuesday, November 11, 1997
by Jeff Fischer (JeffF@fool.com)


ALEXANDRIA, VA (Nov. 11, 1997) -- The Fool couldn't buy a break today, and the result is one of the weakest performances compared to the S&P in a long time. The Fool Port lost 2.23% while the S&P gained 0.29%.

It doesn't take a specific disaster to ring the bell of underperformance with four long, sullen gongs. The past four days have presented no cataclysmic changes at any of our companies -- our stocks have simply been weak. Today the losing trend continued, with the same names (AOL, Amazon, Innovex, KLA-Tencor, and 3Com) falling, and a few new names (Iomega, Lucent, and General Motors) joining the others in their glum parade. Only 3M and Chevron offered any respite, the two stocks marching beneath sunny skies while all of the other Fool stocks wallowed in misery.

Before we become too serious, though, we need to remind ourselves that we're Fools and we're invested for the long term. What happens today or even next year is of little or no consequence compared to the importance of what will be achieved five or ten years from now. In fact, if not for the necessity of this daily recap, today's performance probably wouldn't be given a second thought. So rather than give it a third thought, let's zip through the news and then click ourselves out of the Fool Port page and onward to greener pastures.

Today I phoned the CFO of INNOVEX (Nasdaq: INVX), Mr. Douglas Keller, and as usual he was very helpful and considerate. Yesterday IBM (NYSE: IBM) announced a new technology called Giant MR (GMR), which Randy Befumo (TMF Templr) wrote about in last night's Evening News. For Innovex, it turns out, the news is a non-event. IBM's new product uses MR technology, and MR wires account for about 70% of Innovex's revenues. Mr. Keller believes that the new technology uses four wires, the same amount as traditional MR.

First Call released updated earnings estimates for Innovex today. Though the company shared in its latest conference call that it expects to grow 20% to 25% in the current quarter (year-over-year) and 20% to 25% in the new fiscal year, analysts currently estimate only 14% year-over-year growth for fiscal 1998. Mr. Keller reiterated that the company's growth should be 20% to 25% for the year. Analysts are accounting for a slowdown in the industry, though, and some folks haven't updated estimates or have sent in lowball numbers. Estimates currently range from $2.30 to $2.78 per share for fiscal 1998.

The stock trades at 9 times the mean fiscal '98 estimate of $2.64 per share. As in the past, the industry is difficult to forecast. It swings like a good wedding party. Hopefully the disk drive market will come out of its glut soon and the companies that haven't had their margins scorched or their earnings power flatten will again be granted higher multiples. For now, disk drive stocks are typically trading at multiples that are only one-half the industry's expected long-term growth rate of 18% to 20% -- or are trading at even lower multiples.

Last night Amazon.com (Nasdaq: AMZN) announced a deal with the @Home Network (Nasdaq: ATHM). The companies signed a multi-year agreement that makes Amazon the premier bookseller for the Internet company. @Home Network offers high-speed Internet services using a cable infrastructure. As of mid-October, @Home had 26,000 subscribers, third quarter revenue of $1.9 million, and $132 million in cash.

"Woah. Wait a second there, Fool.
$1.9 million in revenue and
$132 million in cash?"

Yup, that's right. A successful initial public offering (IPO) is a beautiful thing, is it not, Fool? Eh, Fool?

Iomega (NYSE: IOM) announced the availability of its Ditto Max family of tape backup drives and cartridges that can store up to 10 gigabytes (GB) of compressed information. As with Amazon, the news did nothing to help the stock. Iomega trades at 22.9 times earnings estimates for 1998.

Finally, 3M (NYSE: MMM) continued to rise following yesterday's announcement of a 25 million share repurchase program. The size of the program surprised Wall Street. With just over 400 million shares outstanding, 25 million shares is nearly 6% of the company's public shares. Again, it's unlikely that 3M will repurchase the complete amount, but anywhere near the limit is good news.

To close: as we barrel towards the holiday season, it's time to begin thinking about shopping for loved ones, very distant relatives (did you catch that little joke?), and friends. No, this isn't a blatant plug for FoolMart, though FoolMart does offer great gifts and is one of the top 50 consumer Internet commerce sites online (that's a very rough estimate). No, instead, this is simply an interesting story that's worth sharing.

Will Internet commerce ever become universal? I think it already has.

On Saturday CNN told the story of cosmonauts circling 200 miles above the Earth who went shopping in New York, from the space station, by using the Internet. One Russian cosmonaut bought Barbie Dolls and Chicago Bulls sportswear while circling in the Mir space station. They also bought a computer (which is probably more advanced than their space station) and an exercise machine (they're going to need that thing when they return to gravity). One cosmonaut was quoted as saying, "It's much better than shopping on a cold Moscow day." It's a fun story -- and at the same time, it's an important story. Give it a click, and Fool on!

--Jeff Fischer

Today's FoolWatch: all the latest in Fooldom.


TODAY'S NUMBERS

Stock Change Bid ---------------- AMZN -3 1/4 47.25 AOL -2 7/8 73.00 T - 1/16 48.25 CHV + 15/16 84.75 DJT --- 8.88 GM -1 13/16 63.63 INVX - 3/8 24.75 IOM - 13/16 28.00 KLAC -1 9/16 42.75 LU -3 9/16 78.88 MMM +2 1/8 96.13 COMS -1 35.06
Day Month Year History FOOL -2.23% -3.34% 19.94% 220.09% S&P: +0.29% 1.00% 24.71% 101.52% NASDAQ: -0.37% -0.55% 22.76% 120.06% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 28.00 1011.11% 8/5/94 355 AmOnline 7.27 73.00 903.73% 8/11/95 125 Chevron 50.28 84.75 68.54% 10/1/96 42 LucentTech 47.62 78.88 65.65% 8/12/96 110 Minn M&M 65.68 96.13 46.36% 9/9/97 290 Amazon.com 38.22 47.25 23.62% 8/12/96 280 Gen'l Moto 51.97 63.63 22.42% 8/12/96 130 AT&T 39.58 48.25 21.91% 8/24/95 130 KLA-Tencor 44.71 42.75 -4.39% 4/30/97 -1170 *Trump* 8.47 8.88 -4.80% 6/26/97 325 Innovex 27.71 24.75 -10.68% 8/13/96 250 3Com Corp. 46.86 35.06 -25.18% Rec'd # Security In At Value Change 5/17/95 980 Iomega Cor 2509.60 27440.00 $24930.40 8/5/94 355 AmOnline 2581.87 25915.00 $23333.13 8/11/95 125 Chevron 6285.61 10593.75 $4308.14 8/12/96 110 Minn M&M 7224.44 10573.75 $3349.31 8/12/96 280 Gen'l Moto 14552.49 17815.00 $3262.51 9/9/97 290 Amazon.com 11084.24 13702.50 $2618.26 10/1/96 42 LucentTech 1999.88 3312.75 $1312.87 8/12/96 130 AT&T 5145.11 6272.50 $1127.39 8/24/95 130 KLA-Tencor 5812.49 5557.50 -$254.99 4/30/97 -1170*Trump* -9908.50 -10383.75 -$475.25 6/26/97 325 Innovex 9005.62 8043.75 -$961.87 8/13/96 250 3Com Corp. 11714.99 8765.63 -$2949.37 CASH $32438.81 TOTAL $160047.19