Fool
Portfolio Report
Friday, February 27, 1998
by Jeff Fischer ([email protected])
ALEXANDRIA, VA (Feb. 27, 1998) -- Short, gray and cold February, how dearly we'll miss you.
The month shined for stocks and especially for the Fool Port. The S&P gained 7% this month, the Nasdaq jumped 9%, and the Fool gained over 12%. We're still behind the S&P by 2% for the year, but that's a far cry better than the 8% deficit that we had going into this month.
Alas, February, we'll miss you.
We were also able to bang the Double Gong twice this month, once for Lucent and a second time, today, for Amazon. Both stocks have gained over 100% for the Fool Portfolio, so stand back... get ready... cover your ears... here we go in honor of Amazon...
...GONG!!!
(Imagine ongoing reverberations for the rest of this column....)
Since our September purchase the online bookseller's stock has gained 101%. The Amazon.com (Nasdaq: AMZN) purchase was one of the most controversial in the Fool Portfolio's young life. There are many more vocal bears on the stock than there are bulls -- reminiscent of AOL in the early days. With a float of 8.4 million shares, a full 3.2 million of those shares were sold short as of February 14 (the stock was $62 then). This is despite the fact that since our purchase several analysts have initiated coverage of the stock with "buy" ratings. The short sellers have been adamant.
Amazon's stock made new highs this week despite news of more competition coming from overseas. Perhaps instead of fearing competition, investors were reminded of Amazon's large market lead. Instead of falling, the stock rose -- partially on concurrent news of the company's imminent entrance into the music selling business, and also on news that President Clinton supports a tax moratorium on Internet commerce.
As "MadPeacock" wrote on our Amazon Web board, "Much more pressing to the future value of this business than insider sales is Clinton's support for a moratorium on Internet commerce taxes. If a five-year, zero tax plan is passed, Amazon can translate more top-line growth to the bottom-line, insuring a bigger earnings stream as the market develops."
Some analysts are already increasing sales estimates for online commerce vendors over the coming years. Current estimates could prove quite low no matter how the tax law unfolds.
At $77 per share Amazon has a market cap of $1.83 billion, so the stock trades at 12.4 times trailing sales of $147 million. The company will announce first quarter results around April 23. In the meantime, all we can say for now is: Gong!
3Com (Nasdaq: COMS) was initiated with a "buy" rating from Deutsche Morgan Grenfell on Friday and the stock enjoyed a resurgence of sorts this week. The company has its work cut out for it, though, if it wants to serve the higher-end networking market on a significant scale. Cisco Systems (Nasdaq: CSCO) continues to take market share. 3Com trades at 35 times earnings estimates for the year ending in May, and at 18 times May of 1999 estimates.
More important than earnings-based valuations (including YPEGs) and other similar measures, though -- epecially for long-term Foolish investors -- is a company's business itself. Buying the absolute leader (the # 1 leader selling the high-margin, most technologically important products) has always been the way to go in software, hardware, and any ware. Microsoft rather than Oracle. Intel rather than AMD. Cisco rather than 3Com. 3Com's stock has lost 24% since August of 1996 while Cisco's stock has gained 81%. Ouch. Big ouch. Cisco sells the backbone of networking. 3Com sells the fingers.
We all live and learn, and hindsight is easy, but we should still try to learn from it.
Finally, Trump Hotels (NYSE: DJT) rose against us on Friday. No news. The company should announce its quarterly loss next week.
Now let's forget about this money-related stuff for a few days. Have a thoroughly enjoyable and Foolish weekend.
Fool on!
--Jeff Fischer
WE
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TODAY'S
NUMBERS
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Day Month Year History FOOL -0.71% 12.47% 5.94% 255.55% S&P: +0.06% 7.04% 8.13% 128.91% NASDAQ: -0.37% 9.33% 12.75% 145.84% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 121.13 1565.44% 5/17/95 1960 Iomega Cor 1.28 9.13 612.66% 10/1/96 42 LucentTech 47.62 108.13 127.08% 9/9/97 290 Amazon.com 38.22 77.00 101.46% 8/12/96 130 AT&T 39.58 61.00 54.13% 1/8/98 115 S&P Depos. 95.91 105.00 9.48% 8/24/95 130 KLA-Tencor 44.71 46.13 3.16% 2/20/98 215 DuPont 59.83 61.31 2.47% 2/20/98 200 Exxon 64.09 63.81 -0.43% 2/20/98 270 Int'l Pape 47.69 46.63 -2.24% 1/8/98 425 3Dfx 25.67 23.38 -8.93% 6/26/97 325 Innovex 27.71 23.13 -16.55% 4/30/97 -1170*Trump* 8.47 10.38 -22.51% 8/13/96 250 3Com Corp. 46.86 35.75 -23.72% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 42999.38 $40417.51 5/17/95 1960 Iomega Cor 2509.60 17885.00 $15375.40 9/9/97 290 Amazon.com 11084.24 22330.00 $11245.76 8/12/96 130 AT&T 5145.11 7930.00 $2784.89 10/1/96 42 LucentTech 1999.88 4541.25 $2541.37 1/8/98 115 S&P Depos. 11029.25 12075.00 $1045.75 2/20/98 215 DuPont 12864.25 13182.19 $317.94 8/24/95 130 KLA-Tencor 5812.49 5996.25 $183.76 2/20/98 200 Exxon 12818.00 12762.50 -$55.50 2/20/98 270 Int'l Pape 12876.75 12588.75 -$288.00 1/8/98 425 3Dfx 10908.63 9934.38 -$974.25 6/26/97 325 Innovex 9005.62 7515.63 -$1490.00 4/30/97 -1170*Trump* -9908.50 -12138.75 -$2230.25 8/13/96 250 3Com Corp. 11715.99 8937.50 -$2778.49 CASH $11233.54 TOTAL $177772.60
