FOOL PORTFOLIO
REPORT
(FOOL GLOBAL WIRE -- Monday, January 12, 1998)
by Jeff Fischer
([email protected])
ALEXANDRIA, VA (Jan. 12, 1998) -- Our Fool Four stocks, Spiders, Amazon, and 3Dfx kept us afloat today, while all of the other stocks worked against us. And we have too many of "all of the other." This portfolio has grown to fifteen positions, with two stocks being the result of AT&T and GM spin-offs. Though Lucent and Raytheon (the two adoptees) rose today, my point is that the portfolio feels a little "big" with fifteen stocks. Fifteen is the most that we've ever had, and we typically try to keep it around twelve (with four Fool Four stocks and eight others).
Luckily, come February the two stocks just mentioned should be sold at the time of our Fool Four switch (unless we decide to keep Lucent, which has been mentioned as a possibility). As a sidenote: If we were to make our Fool Four switch today we'd be buying Union Carbide, International Paper, DuPont, and Philip Morris (though I'm doubtful that Philip Morris would be accepted by David and Tom). Either way, these four stocks make for an interesting though not very consumer-friendly bunch. Yuck. All of these stocks have been subjects of heavy debate at various times. We'll make our switch around February 13, so we have time aplenty for the Fool Four rankings to change.
Back to the portfolio's size: It's worth noting that we shouldn't consider SPY a stock because it simply represents the S&P 500 index. So, we'll soon own only twelve stocks and one holding of Spiders. Much more important, of course, is that we understand each of our holdings and follow them all closely enough to keep up with them.
With America Online and Iomega lagging, the Fool Port still managed to gain 0.55% today. Our competition, the Nasdaq, bumbled to a 0.29% gain while the S&P was much more affable (though volatile), gaining 1.24%. This is a far cry from the heady 3% decline that we saw on Friday.
3Com (Nasdaq: COMS) slipped after an analyst stated that he thought the company's inventory problems were going to take six to nine months to dissipate, and that earnings estimates were still too ambitious. Tonight in the Evening News Randy Befumo writes about stale earnings estimates -- or estimates that might be too outdated to be taken seriously when considering recent news. Oracle's (Nasdaq: ORCL) earnings estimates come to mind. The 23% growth expected next year is rather ambitious considering the poor performance that came to light in December. Anyway, 3Com has an analyst meeting on Wednesday.
There was little other news on Fool stocks today, aside from 3Com's new PC cards and modem technology for laptops. I'm working on a future column about 3Com's latest technology for 1998, though, so we'll consider that later. Today let's prepare for the coming earnings announcements for our non-Fool Four holdings, and look at the stock valuations based on 1998 -- yup -- earnings estimates. (If there is any reason to suspect any earnings estimates as "stale," we'll share that thought right now and throughout the year.)
First up, we have KLA-Tencor and Innovex reporting... awww... heck... the lazy writer's friend, the table format, works best for this:
Company Date Qtr.Est./Sh. Price/'98 Est. KLAC ($34) 1/20 $0.60 14 INVX ($20) 1/20 $0.49 8 TDFX ($25)wk 1/20 $0.08 49 AMZN ($51)wk 1/20 ($0.44) n/a IOM ($12) wk 1/28 $0.15 19 AOL ($85) 2/6 $0.17 93 DJT ($7) wk 2/16 ($0.72) n/a COMS ($29)wk 3/20 $0.15 29Running down the list, KLA-Tencor, having gotten killed lately, is trading at 14 times '98 earnings estimates (year ending in June), and there is not yet reason to suspect those estimates as being off the mark. Innovex is trading at 8 times estimates (year ending in September) and is comfortable with the current quarter's number. We'll hear more from Innovex the night of the conference call on January 20. 3Dfx should report earnings next week sometime, while for '98 analysts are only guessing as to how profitable the company can be -- it becoming profitable for the first time.
Let's skip down to Iomega, which is trading at 19 times '98 earnings estimates of $0.61 per share. It's quite early to suspect those numbers as anything but realistic, but with over 11 million Zips sold, the company is increasingly making money on its OEM deals. 1998 should see revenue from sales to computer manufacturers increase much more quickly percentage-wise than any other revenue source -- meaning, direct retailers. Of the companies on the list, though, perhaps the numbers of Iomega and 3Dfx are the most open to scrutiny and most likely to deviate substantially. Aside from 3Com.
3Com is trading at 29 times the numbers expected for the year ending in May. Those numbers may be aggressive though. We'll see. And the 92% increase in earnings expected by analysts for fiscal 1999 is probably quite aggressive, too. That type of earnings growth implies an analyst mentality that deems this slowdown to be a one-time glitch (apparently that will be fixed with 3Com's new inventory policy), when in fact the slowdown is an industry dilemma that isn't likely to suddenly right itself and take off, giving companies instant jumpstarts in sales and earnings. The 1999 estimate might be "stale."
To find earnings estimates, AOL users can go to keyword: First Call. On the Web, the Fool offers First Call estimates with each company financial snapshot, which is available on the left side of the screen at all times.
Tomorrow, Tom and David are in Chicago! For details, please see the Book Tour information.
Fool on!
--Jeff Fischer
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TODAY'S NUMBERS
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Day Month Year History FOOL +0.55% -6.53% -6.53% 213.67% S&P: +1.24% -3.22% -3.22% 104.89% NASDAQ: +0.29% -4.00% -4.00% 109.34% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 85.00 1068.73% 5/17/95 1960 Iomega Cor 1.28 11.81 822.56% 10/1/96 42 LucentTech 47.62 76.75 61.18% 8/12/96 130 AT&T 39.58 62.38 57.60% 8/11/95 125 Chevron 50.28 73.31 45.79% 9/9/97 290 Amazon.com 38.22 51.44 34.58% 8/12/96 110 Minn M&M 65.68 82.81 26.09% 4/30/97 -1170 *Trump* 8.47 7.13 15.87% 8/12/96 280 Gen'l Moto 51.97 56.75 9.19% 1/8/98 425 3Dfx 25.67 25.25 -1.63% 1/8/98 115 S&P Depos. 95.91 94.00 -1.99% 12/19/97 17 Raytheon 53.21 46.88 -11.91% 8/24/95 130 KLA-Tencor 44.71 34.19 -23.54% 6/26/97 325 Innovex 27.71 20.25 -26.92% 8/13/96 250 3Com Corp. 46.86 29.31 -37.45% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 30175.00 $27593.13 5/17/95 1960 Iomega Cor 2509.60 23152.50 $20642.90 9/9/97 290 Amazon.com 11084.24 14916.88 $3832.64 8/12/96 130 AT&T 5145.11 8108.75 $2963.64 8/11/95 125 Chevron 6285.61 9164.06 $2878.45 8/12/96 110 Minn M&M 7224.44 9109.38 $1884.94 4/30/97 -1170*Trump* -9908.50 -8336.25 $1572.25 8/12/96 280 Gen'l Moto 14552.49 15890.00 $1337.51 10/1/96 42 LucentTech 1999.88 3223.50 $1223.62 12/19/97 17 Raytheon 904.57 796.88 -$107.70 1/8/98 425 3Dfx 10908.63 10731.25 -$177.38 1/8/98 115 S&P Depos. 11029.25 10810.00 -$219.25 8/24/95 130 KLA-Tencor 5812.49 4444.38 -$1368.12 6/26/97 325 Innovex 9005.62 6581.25 -$2424.37 8/13/96 250 3Com Corp. 11715.99 7328.13 -$4387.87 CASH $10740.46 TOTAL $156836.14
