Fool Portfolio Report
Friday, February 20, 1998
by Jeff Fischer (JeffF@fool.com)

ALEXANDRIA, VA (Feb. 20, 1998) -- The Fool Portfolio almost looks unfamiliar now. Our Fool Four switch was completed without a hitch on Friday, so we don't need to worry about the Fool Four stocks again for another eighteen months. As for the rest of the portfolio -- well, it looks ok for now, despite underperformance so far this year. Some thoughts are churning about a few of the holdings, but nothing to report immediately.

So have a good weekend.

Fool on!

--Jeff Fischer

...and now, the rest of the report for Fools who simply demand more!

(Actually, guilt got ahold of me.)

In the past week the Fool Port gained just over one percent while the S&P and Nasdaq gained 1.38% and 1.04%, respectively. America Online, Lucent, and our Spiders made new all-time highs, while Amazon is close. Our remaining stocks aren't exactly hitting on all cylinders despite the strong market, which has been striking new highs.

Briefly, Iomega is being held down by fears of slowing sales and earnings (and "tired" lawsuits); KLA-Tencor is a semiconductor equipment stock in a period of Asian uncertainty; Innovex is in the throes of disk drive market woes; 3Com is 3Com; and 3Dfx hasn't been able to rise despite earnings estimates being doubled. Next Wednesday's Dueling Fools will feature Iomega, and the week after that it will feature 3Dfx. Both should be insightful duels.

Our Foolish Four Switch

Despite every Wise attempt to buy low and sell high today -- squirming, hands clenched in nervousness, brow sweating, watching every tick of these Dow giants and the market as a whole -- well, it just couldn't be done. It was double-witching day, and that always makes the market more volatile. (If "double-witching day" sounds stupid and meaningless -- well, it basically is.)

Still, to combat the volatility, I began my day by pretending to watch CNBC. (I don't own a television, and yet my portfolio has done well the past years.) So, I got the early morning indicators from CNBC and then moved from there, reading charts, candlesticks, looking at the past trading volume and block sizes on our targeted stocks, until finally lighting torches above my desk and then running around in a skirt while pounding a bongo and chanting "Market timer, Market timer, Market timer..." -- eventually collapsing to the ground.

Upon waking, the trades were made.

If you did happen to watch the Dow on Friday, you noticed that it was down until about 2:00 in the afternoon Eastern time, and then it turned, climbed, and ended higher. We made our Fool Four trade at about the same time that the market was even on the day -- staging a recovery. Selling four stocks and buying three, it's basically a wash. But you still hope (as Wise as it is) to get higher prices on the sells and lower prices on the buys.

Well, did we? Let's be Wise for a moment.

After day one, we're making money on two of our three new Dow stocks, although DuPont is losing us more than a few pennies due to commissions. Surely this will all change on Monday anyway, one way or another. Meantime, it's a little strange to see the Fool Portfolio without Chevron or General Motors, not to mention 3M. Chevron had been in the portfolio since August of 1995. It's been replaced, you could say, by Exxon (NYSE: XON). Let's run through Friday's trades:

Sold:
125 Chevron @ 77 13/16
280 General Motors @ 65 11/16
110 3M @ 87
17 RTN.A @ 53 7/8

Bought:
215 DuPont @ 59 3/4
200 Exxon @ 64
270 Intl Paper @ 47 5/8

We bought $12,800 worth of each new stock, give or take, and we own nearly the same amount of AT&T (NYSE: T), the holdover Fool Four stock, and Lucent Technologies (NYSE: LU) combined. All told, we're holding about $50,000 in Fool Four stocks, or 30% of the entire portfolio. This is right about the percentage that we aim for.

News on Other Stocks

Iomega (NYSE: IOM) is facing a few class action lawsuits that I personally feel are groundless. But I'm not an attorney.

Whenever a stock falls sharply these types of lawsuits frequently emerge -- often with frightening speed. It happened with Oracle (Nasdaq: ORCL) recently, to name one. The class-action lawsuits will claim that Iomega's management misled the public about the business, but I've never heard Iomega make any business promises to anyone.

More important and relevant to investors is the earnings growth that Iomega creates going forward. Currently, earnings estimates aren't showing the amount of growth that one likes to see in what is considered a mid-cap company (now) that should still be growing quickly. The latest First Call earnings estimates project fifty cents in earnings per share this year, for a 19% gain over 1997, and fifty-six cents per share next year, for a 12% gain over 1998. 1999 estimates are a shot in the dark, sure, but a slowdown from the rapid Zip-crazed growth of yesteryear does unfortunately make sense. The possibility makes high-growth investors (and even longer-term Fools) worry. 12% is slower growth than giants like Campbell Soup or Hershey achieve annually. Let's hope that Iomega's aggressive advertising pays off in higher-than-anticipated sales growth.

The best Iomega discussions are taking place on the stock's message board, while, again, Dueling Fools will tackle the topic on Wednesday.

KLA-Tencor (Nasdaq: KLAC) acquired German semiconductor firm, Nanopro GmbH. "The acquisition will extend KLA-Tencor's existing technology portfolio for measurement of surface topography, which includes stylus profiling and laser-based stress measurement." This morning it was reported by KLA's Chairman (on CNBC -- give credit where it's due) that Asian sales (or a lack thereof ) will dampen the company's ability to grow extensively in the near term. DRAM prices and a recently flooded DRAM market were part of the issue -- still. (This has been ongoing.)

KLAC trades at 18 times 1998 earnings estimates and 16 times 1999 estimates (the fiscal year ends in June). On this measure, it isn't exactly pricey. The company has yet to state that it would miss estimates and it has guided analysts well in the past. The next quarter is announced in mid-April. Related topic: If you own Intel (Nasdaq: INTC) or are interested in learning more about the company, Intel has been the topic of discussion in two of the past three weeks in the Drip Port.

Finally, on Friday the Cash-King Port announced its fifth buy. Give it a look!

Have a great weekend! This time, signing off for real...

--Jeff

P.S. The new Fool Four buys have strange changing prices from Thursday's close because we begin quoting them from our Friday buy price, including commissions, not from Thursday's close.

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TODAY'S NUMBERS

Stock Change Bid ---------------- AMZN + 1/2 63.25 AOL +1 13/16 119.44 T -1 3/4 62.00 DD - 2/25 59.75 DJT - 3/16 10.44 XON + 2/9 64.31 INVX - 1/8 23.88 IP + 10/23 48.13 IOM --- 8.81 KLAC -1 3/4 42.25 LU +2 1/2 102.50 COMS - 5/16 33.19 TDFX - 7/8 22.13 SPY + 25/32 103.66
Day Month Year History FOOL +0.04% 8.17% 1.89% 241.96% S&P: +0.58% 5.50% 6.57% 125.61% NASDAQ: +0.06% 6.72% 10.05% 139.96% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 119.44 1542.23% 5/17/95 1960 Iomega Cor 1.28 8.81 588.26% 10/1/96 42 LucentTech 47.62 102.56 115.39% 9/9/97 290 Amazon.com 38.22 63.25 65.48% 8/12/96 130 AT&T 39.58 62.00 56.65% 1/8/98 115 S&P Depos. 95.91 103.66 8.08% 2/20/98 270 Int'l Pape 47.69 48.13 0.91% 2/20/98 200 Exxon 64.09 64.31 0.35% 2/20/98 215 DuPont 59.83 59.75 -0.14% 8/24/95 130 KLA-Tencor 44.71 42.25 -5.51% 1/8/98 425 3Dfx 25.67 22.13 -13.80% 6/26/97 325 Innovex 27.71 23.88 -13.84% 4/30/97 -1170*Trump* 8.47 10.44 -23.25% 8/13/96 250 3Com Corp. 46.86 33.19 -29.18% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 42400.31 $39818.44 5/17/95 1960 Iomega Cor 2509.60 17272.50 $14762.90 9/9/97 290 Amazon.com 11084.24 18342.50 $7258.26 8/12/96 130 AT&T 5145.11 8060.00 $2914.89 10/1/96 42 LucentTech 1999.88 4307.63 $2307.75 1/8/98 115 S&P Depos. 11029.25 11920.47 $891.22 2/20/98 270 Int'l Pape 12876.75 12993.75 $117.00 2/20/98 200 Exxon 12818.00 12862.50 $44.50 2/20/98 215 DuPont 12864.25 12846.25 -$18.00 8/24/95 130 KLA-Tencor 5812.49 5492.50 -$319.99 6/26/97 325 Innovex 9005.62 7759.38 -$1246.25 1/8/98 425 3Dfx 10908.63 9403.13 -$1505.50 4/30/97 -1170*Trump* -9908.50 -12211.88 -$2303.38 8/13/96 250 3Com Corp. 11715.99 8296.88 -$3419.12 CASH $11233.54 TOTAL $170979.45