Stocks,
then Space
Friday, March 13, 1998
by Jeff Fischer ([email protected])
ALEXANDRIA, VA (March 13, 1998) -- Scientists just discovered the youngest possible galaxy in the... well, not in the world, but in the... well, of anyplace that we know of. It's some 12.2 billion light years away, so what scientists are viewing now (the very young beginning of a galaxy, they believe) happened 12.2 billion years ago -- about the same time that our galaxy might have been formed.
Amazing, hey? Even more amazing is that we'll talk about stocks instead. Maybe we'll end the column with some words on outer space, though.
For the week the Fool Port took the gold medal, gaining 2.3% and nearly doubling the S&P's 1.2% gain. The Nasdaq gained 1%. It seems that it's been a long time since stocks have lost ground on any given week. The S&P has continued to make new highs, but what has made higher highs?
Lucent Technologies (NYSE: LU) has been one of the portfolio's best performers this year, gaining 45% since January 1. Friday Merrill Lynch increased its earnings estimates for the company by about a dime for both 1998 and 1999.
Lucent is expected to earn $3.11 per share in fiscal 1998 (ended in September) and $3.68 per share in fiscal 1999. But the Merrill Lynch estimate for 1999 has now been increased to between $3.75 and $3.85 per share. (I like the flexible estimate that Merrill is giving, rather than the single dead-on number that the Wise often give and then too often fixate upon.)
With a $75 billion market cap, Lucent trades at less than 3 times sales. At $115, Lucent is priced at 37 times 1998 earnings estimates and 31 times 1999 estimates. We kept Lucent after receiving it from our AT&T (NYSE: T) Fool Four position, and we consider Lucent to still be a part of our Foolish Four approach, at least informally. There are several ways for our Dow giants to unlock value and spinning off subsidiaries can be one of the better ways.
A performer on equal footing with Lucent is America Online (NYSE: AOL). Like Lucent, AOL has gained 45% since January 1. On Friday the stock rose over $3 to a new all-time high. After the market closes on Tuesday, AOL's stock will split two-for-one, meaning that it could open on Wednesday at around $63. With a market cap of over $13.5 billion, AOL is trading above 6 times sales.
America Online's stock advanced on Friday even while Netscape (Nasdaq: NSCP) announced plans to enter AOL's turf. Netscape hopes that its new Netcenter site can serve as a broad gateway to the Internet, with content, community, and other like features. In a way, you have to feel sorry for Netscape. The company has publicly announced several different initiatives over the past two years, while not yet forming a definitive business niche in the marketplace nor in the minds of investors. You can't feel too sorry for the company's founders, though. They're doing fine.
Amazon.com (Nasdaq: AMZN) also made new highs this week and the stock is up 35% for the Fool since January 1. You'd think holding all of these large winners that the portfolio would be crushing the market. So, why aren't we?
In one word: Iomega (NYSE: IOM).
Iomega, formerly the second-largest position in the portfolio, has fallen 32% since January 1. (It's one ugly graph to look at.) Investors are concerned about Iomega's ability to grow earnings aggressively this year, with no growth expected for the current quarter and only 19% growth anticipated for all of 1998. After that, 26% earnings growth is hoped for in 1999. That's a guess, though. Little more.
Iomega trades at 17 times the 1998 earnings estimate of $0.50 per share, and 13.4 times the current 1999 estimate of $0.63 per share. If the company can achieve the 1999 number, we should probably continue holding onto the stock. Your guess is as good as ours right now, though.
3Com (Nasdaq: COMS) was flat for the week despite defining its stratified business plan, which can be read about in great detail on the Internet. The stock trades at 35 times earnings estimates for the year ending in May.
Finally, to begin to wrap up this comatose Friday evening column, 3Dfx (Nasdaq: TDFX) stock was comatose itself this week, but I want to share the following link. On our message board for the stock, 3Dfx followers really enjoy reading "Tom's Hardware Guide" page on the Web. Tom recently reviewed 3Dfx's new Voodoo 2 chip and gave it high marks. It's a great review. 3Dfx trades at 25 times 1998 earnings estimates of $1.00 per share and 20 times the 1999 estimate of $1.24 per share.
This column began on the topic of space, then used words to fill a bunch of empty cyberspace, and is now going to conclude by suggesting some other "space" for you to visit. With April around the corner, the Fool has a comprehensive tax area online meant to help you along your merry way with the IRS. You can visit our tax area (and bookmark it) through this link. And if you're thinking of buying a car now or anytime in the future, bookmark this Foolish car link.
Next, Friday's Cash-King column is about debt, and it also gives the lowdown on the Fool's Stock Madness competition on the Web. Entries to play this game must be received by Monday. Check it out to win a $2,000 account with National Discount Brokers.
Finally, on Tuesday this column touched on the growth of the Internet. Vice President Al Gore is a large proponent of the Internet and last year at this time he spoke at the National Museum of American History for the "24 Hours in Cyberspace Awards" (which the Motley Fool was proudly a part of). The Vice President has his own website.
What brought Mr. Gore to my attention this Friday afternoon, though, was an interesting story in the Washington Post about his idea for a camera that circles the sun with the Earth, some one million miles from Earth, and provides a constant full video of our planet for us to see. He had the idea one month ago and already NASA is on the project. They're hoping to have this done by around the year 2000. How this would work is pretty interesting (using the balanced gravity of both the Earth and the sun). The story is much better in its full form in the print newspaper, but it's still good to read in condensed form behind this link on the Web.
Have a very Foolish weekend. Take care...
--Jeff Fischer
WE
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TODAY'S
NUMBERS
|
Day Month Year History FOOL +0.44% 2.27% 8.34% 263.60% S&P: -0.12% 1.84% 10.12% 133.12% NASDAQ: +0.43% 0.07% 12.82% 146.00% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 127.44 1652.23% 5/17/95 1960 Iomega Cor 1.28 8.56 568.73% 10/1/96 42 LucentTech 47.62 115.00 141.51% 9/9/97 290 Amazon.com 38.22 78.63 105.71% 8/12/96 130 AT&T 39.58 64.75 63.60% 1/8/98 115 S&P Depos. 95.91 107.17 11.74% 2/20/98 270 Int'l Pape 47.69 51.00 6.94% 2/20/98 215 DuPont 59.83 62.94 5.19% 2/20/98 200 Exxon 64.09 64.31 0.35% 1/8/98 425 3Dfx 25.67 25.19 -1.87% 8/24/95 130 KLA-Tencor 44.71 38.25 -14.45% 4/30/97 -1170*Trump* 8.47 9.88 -16.60% 6/26/97 325 Innovex 27.71 22.00 -20.61% 8/13/96 250 3Com Corp. 46.86 34.94 -25.45% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 45240.31 $42658.44 5/17/95 1960 Iomega Cor 2509.60 16782.50 $14272.90 9/9/97 290 Amazon.com 11084.24 22801.25 $11717.01 8/12/96 130 AT&T 5145.11 8417.50 $3272.39 10/1/96 42 LucentTech 1999.88 4830.00 $2830.12 1/8/98 115 S&P Depos. 11029.25 12324.55 $1295.30 2/20/98 270 Int'l Pape 12876.75 13770.00 $893.25 2/20/98 215 DuPont 12864.25 13531.56 $667.31 2/20/98 200 Exxon 12818.00 12862.50 $44.50 1/8/98 425 3Dfx 10908.63 10704.69 -$203.94 8/24/95 130 KLA-Tencor 5812.49 4972.50 -$839.99 4/30/97 -1170*Trump* -9908.50 -11553.75 -$1645.25 6/26/97 325 Innovex 9005.62 7150.00 -$1855.62 8/13/96 250 3Com Corp. 11715.99 8734.38 -$2981.62 CASH $11233.54 TOTAL $181801.53
