New Fool Port High!
Monday, April 20, 1998
by Jeff Fischer (JeffF@fool.com)

ALEXANDRIA, VA (April 20, 1998) -- Just as Shakespeare demonstrated sheer genius by writing play after play that revolve around cross-dressing and that end with the entire cast on stage, each revealing their true sex and their true love (to the uproarious merriment of the knowing audience), and just as Hemingway had the imagination to end most of his novels with the death of a main character, we too have the wit and brilliance to begin most of our Fool columns with the daily numbers.

So...

Today's daily numbers:

Fool +1.44% S&P +0.08% Nasdaq +1.10%

But today's numbers hold special meaning, because through them the Fool Port has set a new all-time record high.

Launched in August of 1994, as of today the Fool Port has gained 312% against the S&P's 145% advance. The portfolio's prior record was set on May 22, 1996, when Iomega peaked after an insatiable run. While Iomega has lost nearly three-quarters of its infamous 1996 advance, the Fool Port has climbed to a new high.

You can tell your neighbor that the humble Fool's $50,000 portfolio has grown to $206,000 in less than four years -- without any help whatsoever from the professionals (we choose to make our own mistakes, and we certainly have made several), and with only a small handful of discretionary trades. (If we had traded even less we probably would be doing even better.) And finally, the amateur Fool Port has easily topped every mutual fund in existence since its launch.

This weekend The Washington Post reported that over the past ten years there have been only five mutual funds, out of 796 that existed for the entire time period, that have beat the market over the past 3, 5, and 10 years. Only five! All of the other mutual funds have lost to the market. This is why Fools buy the S&P 500 index fund, so they can at least match the market. And, when ready to move beyond that, this is why Fools invest their own money in what they know and understand, hoping to beat the market just as the Fool Port has demonstrated.

But instead of devoting our entire night to a celebration, choose to celebrate on your own if you, fellow Fool, are:

  1. Paying off debts and refinancing high interest mortgages.

  2. Reading, learning, thinking, and taking your time.

  3. Beating the market or preparing to beat it when you begin to invest.

  4. Being Foolish and enjoying yourself. If you're not, what's the point?

  5. Managing your own money successfully, in charge of your future, and sharing your knowledge with others so that they might benefit. Have you told everyone you know about the simplicity of the Foolish Four? Send them an email!

We all remember here at Fool HQ that this portfolio doesn't exist to celebrate itself. It was started by David and Tom in hopes of showing others that they could beat the market (and of course mutual funds), and in doing so build a better future. It's a long-term project, done Foolishly.

I tip my hat to it!

Now for the necessary "daily" part of the column.

TODAY

Microsoft's (Nasdaq: MSFT) announcement that the computer industry is growing with vigor sent the Nasdaq to a record high, while Dow stocks submerged for the day and never resurfaced, in part thanks to AT&T. All of our Fool Four stocks declined, except for Exxon, while all of our Nasdaq stocks advanced, except for Amazon.

With earnings season in full swing, today was AT&T's turn to show the world what it accomplished over the past three months.

Under the guiding hand of its recently appointed CEO, Mr. C. Michael Armstrong, AT&T (NYSE: T) was able to lower its expenses enough in the first quarter to beat earnings estimates by four cents per share (after extraordinary gains and charges). The long-distance leader reported diluted earnings of seventy-seven cents per share, topping the seventy-three cent estimate by over 5%. But revenue growth was anemic (sales were less than $100 million higher than last year's $12.5 billion), and Ma Bell's consumer business was down.

The good news: AT&T's selling, general and administrative expenses declined by 4%, or $142 million. For the year, the company aims to cut these costs by an impressive $1.6 billion. And sales are expected to grow more generously during the second half of this year (thanks in part to AT&T's company data business), even though in the first quarter consumer services revenue, for one, fell 5% from last year, to $5.6 billion. AT&T said that lower calling volumes are to blame. If you're an average citizen, though, you're certainly aware of the intense competition in this market.

For the well-detailed earnings press release from AT&T on the Web, click here.

Being a Foolish Four stock, this is about as much as we'll delve into AT&T's numbers for now. Having held onto the stock for 18 months as of February 20, we're remaining an investor in AT&T for at least the next 16 months because it met the Fool Four criteria again. Overall, with business services and other corporate revenues growing and with the company cutting costs as dramatically as possible, AT&T is hopefully going to serve us well in its Foolish Four role. At $65, the stock trades at 19.6 times the 1998 earnings estimate of $3.30 per share, and at 16.8 times the 1999 estimate of $3.85.

Iomega (NYSE: IOM) rose 6% after the company launched its internal ATAPI Zip drive for $99 a unit, making it a viable storage solution for the fast-growing sub-$1000 PC market.

Iomega announced earnings last week and the Fool covered the complete conference call. The company isn't expected to report a profit until the fourth quarter, so we'll have to value the stock on a price-to-sales basis for most of this year. With a market cap of about $1.9 billion and trailing twelve-month sales of $1.79 billion, the stock is scarcely trading above one times sales. For a computer storage company, this isn't unusual. But for a branded, market leading, and fast-growing technology company (which I would still call Iomega, especially in the OEM market), this low multiple certainly is unusual. The risks are higher than average, though. Can Iomega return to profitability and become cash flow positive again? Management seems to think so -- eventually.

Finally, KLA-Tencor (Nasdaq: KLAC) rose on an industry report that predicted the metrology and inspection side of the semiconductor industry to grow 62% from 1997 to 2000. KLA-Tencor is the market leader.

We should see earnings reports from Innovex (Nasdaq: INVX) and Exxon (NYSE: XON) tomorrow, and from high-flying Lucent Technologies (NYSE: LU) on Wednesday. Until next time...

Fool on!

--Jeff Fischer

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TODAY'S NUMBERS

Stock Change Bid ---------------- AMZN - 5/8 94.13 AOL +2 3/8 75.94 T -1 15/16 65.19 DD -2 3/16 74.81 DJT - 1/8 8.75 XON + 13/16 72.94 INVX + 3/4 27.56 IP -1 1/4 53.31 IOM + 7/16 7.50 KLAC +1 3/8 40.31 LU +2 3/16 71.50 COMS +1 3/8 34.50 TDFX + 7/8 33.00 SPY - 1/32 112.25
Day Month Year History FOOL +1.44% 9.48% 22.89% 312.42% S&P: +0.08% 1.99% 15.79% 145.12% NASDAQ: +1.10% 2.80% 20.17% 162.04% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 75.94 1988.24% 5/17/95 1960 Iomega Cor 1.28 7.50 485.75% 10/1/96 84 LucentTech 23.81 71.50 200.32% 9/9/97 290 Amazon.com 38.22 94.13 146.26% 8/12/96 130 AT&T 39.58 65.19 64.71% 1/8/98 425 3Dfx 25.67 33.00 28.57% 2/20/98 215 DuPont 59.83 74.81 25.03% 1/8/98 115 S&P Depos. 95.91 112.25 17.04% 2/20/98 200 Exxon 64.09 72.94 13.80% 2/20/98 270 Int'l Pape 47.69 53.31 11.79% 6/26/97 325 Innovex 27.71 27.56 -0.53% 4/30/97 -1170*Trump* 8.47 8.75 -3.32% 8/24/95 130 KLA-Tencor 44.71 40.31 -9.84% 8/13/96 250 3Com Corp. 46.86 34.50 -26.38% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 53915.63 $51333.76 9/9/97 290 Amazon.com 11084.24 27296.25 $16212.01 5/17/95 1960 Iomega Cor 2509.60 14700.00 $12190.40 10/1/96 84 LucentTech 1999.88 6006.00 $4006.12 8/12/96 130 AT&T 5145.11 8474.38 $3329.27 2/20/98 215 DuPont 12864.25 16084.69 $3220.44 1/8/98 425 3Dfx 10908.63 14025.00 $3116.38 1/8/98 115 S&P Depos. 11029.25 12908.75 $1879.50 2/20/98 200 Exxon 12818.00 14587.50 $1769.50 2/20/98 270 Int'l Pape 12876.75 14394.38 $1517.63 6/26/97 325 Innovex 9005.62 8957.81 -$47.81 4/30/97 -1170*Trump* -9908.50 -10237.50 -$329.00 8/24/95 130 KLA-Tencor 5812.49 5240.63 -$571.87 8/13/96 250 3Com Corp. 11715.99 8625.00 -$3090.99 CASH $11233.54 TOTAL $206212.04

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