Fool Portfolio Report
Thursday, November 20, 1997
by Tom Gardner (TomGardner@aol.com)


ALEXANDRIA, VA (Nov. 20, 1997) -- I just spent a fascinating last two hours, learning more about the hottest stock in the Fool Portfolio: AT&T (NYSE: T). Fortunately, I had an opportunity to drop in on an ongoing conference about the recent history of the telecommunications industry and its prospects in the years ahead.

I learned about fixed wireless telephony and the battle for local phone markets. I meditated on the recent merger-mania in communications around the world. And finally, I learned more about the executive shake-up at AT&T, which put former CEO Robert Allen on a golf course in Maui and transported Michael Armstrong from his post as helmsman of DirecTV and Hughes Electronics to the chief executor of AT&T's operations around the globe.

Oddly enough, most investors don't yet know about this extremely educational and never-ending telecom conference. That's particularly strange because it plays out every single day of the year, right there on desktop computers around the globe. I attended that conference today, spending my late afternoon paging through the 364 messages posted to our AT&T folder on the Web (our web boards) over the past eight months.

(Veteran readers should know that -- unfortunately -- our Web boards and our AOL boards are separate environments. So drop by Webby during the day at work and The Fool on AOL, prime time!)

That AT&T discussion has proven incredibly valuable for investors. On April 2nd, when our Web boards launched, AT&T was trading at $34 per share. Today, it sits at $54 1/2 -- 60% higher.

Back in its darker days, AT&T was comfortably ensconced in the group of high-yielding Dow stocks for which Fools have a particular fondness. After years of costly executive mistakes, punctuated by the billions of dollars lost in the NCR Computer investment, AT&T was excruciatingly grinding to a halt. CEO Robert Allen was busily training successors whom he never intended to succeed him. The company's stranglehold on long-distance communication was being loosened by hoards of mosquito companies around the nation. And just as the company needed to focus its attention on global expansion, it was forced to look down and in -- at America only, and worse... at itself. At the vicious squabbling on its own board of directors.

Then... ka-blaaaam!

MCI went with WorldCom, slowing international expansion of U.S. carriers. AT&T's board of directors put its golden slipper on Allen's hindquarters. Then, Hughes Electronics CEO Michael Armstrong was brought in to redirect the business, align its necessary components, and take the company into the 21st century. The stock exploded, and ongoing coverage of AT&T -- not available anywhere else on the planet -- was buzzing in Fooldom.

Here are three selections from our Web boards that particularly caught my eye. The first, a humorous one. The second, a link to excellent information. And the third, a celebration.

1. The Price Wars

ILuvMoney

I was with AT&T. MCI offered 5000
frequent-flier miles on American Airlines,
so I switched. Then AT&T offered $50 to
get me back, so I switched back. Then,
after I cashed the check, MCI offered
another 5000 frequent-flier miles to get
me back. So... I switched.

I feel like such a slut! But, if they keep
offering, I'm accepting.

By the way, my average long distance bill
is about $10-$20 per month. Go figure.

2. Thoughts from AT&T's COO, John Zeglis

Here is a note posted by an AT&T employee. It provides a link to a talk by AT&T's chief operating officer, John Zeglis, at Goldman Sachs' Communacopia Conference in New York in early October. (Zeiglis at Goldman -- click here)

3. Celebration of a New Day

Finally, I dropped in on JohnJay -- a patient AT&T shareholder -- as he celebrated the executive turnover and the market's acceptance of 't.

JohnJay

I'm dancing in the streets. In classic Beating
the Dow (BTD) fashion, a slumbering, bumbling
corporate giant starts to remake itself to the
general acclaim of Wall Street and the experts.
And BTD put me into AT&T at $36, when
most observers were certain this Dog would
always stay a mutt. General Motors, same
story. Just as it was with Union Carbide and
Sears.

Hooray for Beating the Dow! I am a believer.

Today AT&T rose another $1 11/16 to $54 1/2. Over the past three weeks, AT&T has risen 25%. And as JohnJay noted, it is the classic example of why the Foolish Four approach works. A very large, very out-of-favor corporate giant boots management and brings in an enterprising director bent on tying reward to performance and boldly investing the company's substantial resources into the new world. Playing offense. Sounds like IBM, no?

When Michael Armstrong stepped into this role, he announced that he would tackle an industry rife with incompetence and neglect (monopolies have a way of promoting those) by championing customer service, cost cutting, and swift, systematic international expansion. The company is now being ridden by Willie Shoemaker -- the Headless Horsemen days are over (thanks for that analogy goes to Web Fool, "Rushkoff").

Elsewhere in the Fool Portfolio, everything was up... except for Trumpy, which fell $1/16. The Donald had what I would call a grim performance on Fox Morning Television this past week -- to promote his book, The Art of the Comeback (check it out). We hope to buy a copy with our profits on the short.

The Fool Portfolio closed the day up 2.15% versus S&P gains of 1.52%. We're just over 3.50% down to the market this year... so we're within striking range. Today's heroes were Iomega (up $1 1/8 to $32), America Online (up $2 7/16 to $74 7/8), 3M (up $2 9/16 to $96 7/8) et al.

Heck, even Amazon.com rose $1/2 to $54 5/8, and the stock has now risen 43% for us in just over two months. And all this, even as Alan Abelson and Barron's newspaper continue to prattle on about how overrated the Internet is.

It would appear that Wall Street disagrees. The investing community seems to have recognized that the 'Net provides an enduring lower cost structure, global distribution, improved customer service, and increased convenience. Someday, when we sell a slice or all of this holding, I think we should send Mr. Abelson a computer. Don't you?

Now, playful humor isn't the ideal way to end my final portfolio recap before Thanksgiving. And so I'm again going to mention our partnership with Share Our Strength, the organization dedicated to battling hunger and poverty across the nation.

Earlier this week, we had the pleasure of sitting down with a host of business leaders in San Francisco, trying to figure ways to spread corporate wealth to our nation's neediest. I found myself thinking over and over again, "The Internet... use the Internet."

We're not asking that you consider giving large cuts of your savings account this holiday season. But I'd love it if we had 100% participation -- $1 or a few shares of your best-performing stock. Or heck, sure, more. But we're shooting for 100% Foolish participation.

What if everybody gave? (click here for more information).

Happy Holidays. I wish you and yours a happy, healthy, highly Foolish Thanksgiving.

Tom Gardner, Fool

Today's FoolWatch: all the latest in Fooldom.

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TODAY'S NUMBERS

Stock Change Bid ---------------- AMZN + 1/2 54.63 AOL +2 7/16 74.88 T +1 11/16 54.50 CHV +1 3/4 84.06 DJT - 1/16 8.81 GM + 3/8 61.56 INVX - 1/16 24.50 IOM +1 1/8 32.00 KLAC +1 7/8 47.44 LU + 5/8 83.75 MMM +2 9/16 96.88 COMS +1 1/16 34.31
Day Month Year History FOOL +2.15% 1.23% 25.61% 235.24% S&P: +1.52% 4.85% 29.46% 109.20% NASDAQ: +1.58% 2.07% 25.99% 125.85% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 32.00 1169.84% 8/5/94 355 AmOnline 7.27 74.88 929.51% 10/1/96 42 LucentTech 47.62 83.75 75.89% 8/11/95 125 Chevron 50.28 84.06 67.17% 8/12/96 110 Minn M&M 65.68 96.88 47.50% 9/9/97 290 Amazon.com 38.22 54.63 42.92% 8/12/96 130 AT&T 39.58 54.50 37.70% 8/12/96 280 Gen'l Moto 51.97 61.56 18.45% 8/24/95 130 KLA-Tencor 44.71 47.44 6.10% 4/30/97 -1170 *Trump* 8.47 8.81 -4.06% 6/26/97 325 Innovex 27.71 24.50 -11.58% 8/13/96 250 3Com Corp. 46.86 34.31 -26.78% Rec'd # Security In At Value Change 5/17/95 980 Iomega Cor 2509.60 31360.00 $28850.40 8/5/94 355 AmOnline 2581.87 26580.63 $23998.76 9/9/97 290 Amazon.com 11084.24 15841.25 $4757.01 8/11/95 125 Chevron 6285.61 10507.81 $4222.20 8/12/96 110 Minn M&M 7224.44 10656.25 $3431.81 8/12/96 280 Gen'l Moto 14552.49 17237.50 $2685.01 8/12/96 130 AT&T 5145.11 7085.00 $1939.89 10/1/96 42 LucentTech 1999.88 3517.50 $1517.62 8/24/95 130 KLA-Tencor 5812.49 6166.88 $354.39 4/30/97 -1170*Trump* -9908.50 -10310.63 -$402.13 6/26/97 325 Innovex 9005.62 7962.50 -$1043.12 8/13/96 250 3Com Corp. 11714.99 8578.13 -$3136.87 CASH $32438.81 TOTAL $167621.62