Food, Stocks, Books
Friday, May 08, 1998
by Jeff Fischer (JeffF@fool.com)

ALEXANDRIA, VA (May 8, 1998) -- Food is the beginning theme in today's column, while useful links, investment books, and other Foolishness will constitute the running theme. In the middle, we'll discuss specific stocks and the past week. Throughout, you will enjoy yourself. You must.

First, Thursday's column wondered why large, national grocery chains were not yet selling products through the Internet. Several Fools wrote to remind me of Peapod (Nasdaq: PPOD), a company that came public one year ago. Peapod (at www.peapod.com) offers food delivery services through several grocery chains, but I'm wondering when the large national chains will begin to brand their own Internet food selling services. I believe that they'll want to eventually.

Anyway, Peapod (whose service isn't yet available in many areas, including mine) had a loss of $13 million last year on revenue of $60 million. Sales rose 56% in the first quarter of this year, to $19 million. Losses are expected for at least the next two years. The stock has a market cap of $127 million, or two times sales.

It's a tough business to start, and this service probably won't be popular for many years, but one telling story comes from a Foolish reader who has used Peapod. Michael Mathews wrote, "This company was an absolute God-send when I had foot surgery and couldn't drive for 7 weeks. I decided the fees were worth the convenience and I still use them for all but the smallest of grocery orders." This indicates that, once started, the grocery delivery service can be habit forming -- as can e-commerce in general.

Other Fools from around the country wrote to share that their small, local grocers offer food delivery and sell through the Internet, while the other big grocer that people wrote of was Netgrocer (www.netgrocer.com). Netgrocer is an all-around supermarket, offering groceries, computer software, housewares, and much more. Then of course there's Wal-Mart (www.wal-mart.com) and Sam's Club (www.samsclub.com), both of which sell online at a discount. But back to food only: One major grocery chain online is apparently experimenting with selling on the Web. Dominick's, of the Midwest, offers only 100 food items for sale online (so far) for parties. It's a start.

Keeping with the food motif, Friday's Drip Port column gives details on the giant Campbell Soup "Stamp Out Hunger!" food drive that is taking place this Saturday across the country. For most people, all you need to do is leave canned food by the mailbox and it will be picked up by your mail carrier. It's that easy. Last year 73 million pounds of food were collected. You should have received a postcard about the food drive in your mailbox (yes, it's that big) if you're in a participating area. There are more details in tonight's Drip Port report.

Swinging into phase two of this willfully constructed column (which is meant to brainwash you by the finish), let's finally get to stocks.

The market showed typical volatility this week. It's not thrilling to watch these numbers rise and fall, but in the near-term -- if you're a net buyer of stock -- you should hope for lower prices, not higher.

This week the S&P cooperated with stock buyers, losing over 1%, while the Fool Port tacked on more than 1%, widening its lead over the index. (We never add cash to the Fool Port, so we always like to see it rise. Go, baby, go!)

America Online (NYSE: AOL) and Trump Hotels (NYSE: DJT) -- the hero and the goat -- announced earnings this week that corroborated their respective reputations. AOL topped estimates and everything was so positive that management said, "If this gets much better we'll probably be investigated by Janet Reno. For this reason, we're working to make our company weaker, less competitive, and we hope to provide a poorer service." (Fabricated quote... but....)

Anyway, the America Online conference call summary and the third quarter press release sum up the quarter and the business very well. Revenue jumped 54% to $693 million and the company recently passed the 12 million member mark. AOL is now valued at $20 billion -- before taking into account the fact that the company has nearly $1 billion in cash. On a subscriber-based valuation, while adding in the network, brand name, e-commerce and advertising business... well, what can I say? AOL's CFO stated (using numbers available in the public market) that the stock could be worth $150 based on 1999 membership projections.

Trump's stock is worth considerably less. This company reported an unhealthy decline in revenue and a larger loss than was expected. Trump's aging casino property is, as we know, reportedly for sale, while competition is closing in on all sides. We're staying short.

Elsewhere in the portfolio, 3Com (Nasdaq: COMS) declined on a downward earnings revision (have you felt the need for a new modem lately?), and 3Dfx (Nasdaq: TDFX) continues to founder after doubling earnings estimates three weeks ago. Questions abound in the industry, but 3Dfx is without a doubt the current leader in the 3D graphics gaming market. Its stock trades at 12.8 times the 1998 earnings estimate. Beyond that: more questions.

Part three of this column is where the brainwashing occurs -- though it shouldn't need to. I want to share some old business and some new business. First, three weeks ago this column discussed how nobody had predicted the monstrous rise in the stock market. I received several emails and two Fools stated that if anyone had predicted anything, they predicted a very strong economy -- and they were right on. You've probably heard of the book by Harry S. Dent, The Great Boom Ahead, which predicted great prosperity in the '90s due to several factors -- many global.

But Harry Dent doesn't see the party ending anytime soon. His next book, just published, is called The Roaring 2000s, and it sounds like Mr. Dent expects the greatest economic boom in history to be forthcoming. This book is on sale for $17 through that link to Amazon.com. One reviewer of the book, who gave it a 10 rating on amazon's website, wrote, "The author develops an amazing story of life in the early 21st century focusing on the Internet." I haven't read all of The Great Boom Ahead yet, but I'll simply skip forward and read The Roaring 2000s instead.

Speaking of "10" ratings, Robert Sheard has published the fourth Motley Fool book in history. The book is called The Unemotional Investor and it's for sale at Amazon for under $15. If you click through the link you'll see the reviews for the book from readers. The book has received six 10s, one 9, one 3 and one 1 (can't please everyone), and it's Amazon's top-selling business book. Robert's book focuses on models to beat the market -- mainly on different Foolish Four variations. He also discusses other models that he has developed.

This book has a bonus feature: If you give it a try and don't like it, you can flame the author daily. Robert is online writing great Foolish Four columns every day. Friday he wrote about Peter Lynch. If you have questions about his book, read the reviews on Amazon or just send Robert email at TMFSheard@aol.com.

Finally, it wouldn't be right to promote items for sale without offering something for free. You can download a free sample of the Fool's Industry Snapshot from our Electronic Library. If you like it, you might be interested in Dale's Wettlaufer's 13-page Snapshot (out this week) on mid-size banks. This in-depth issue on banking companies is sold for $7 for this single issue. Subscriptions are also available. With the banking industry under heavy consolidation, Dale takes a look at key mid-size players, while teaching about the industry.

Have a great Mother's Day (the Fool again offers a Stocks for Mom feature this year), and Fool on!

-Jeff Fischer

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TODAY'S NUMBERS

Stock Change Bid ---------------- AMZN +1 7/16 92.19 AOL + 3/8 90.13 T - 1/4 57.63 DD + 5/16 74.06 DJT + 1/16 8.75 XON + 1/16 73.19 INVX + 3/8 25.00 IP + 5/16 52.38 IOM + 1/16 7.88 KLAC +1 5/16 41.38 LU +2 1/8 73.81 COMS - 1/4 31.81 TDFX - 11/16 24.63 SPY +1 25/32 111.13
Day Month Year History FOOL +0.57% 3.25% 25.49% 321.15% S&P: +1.19% -0.33% 14.19% 141.74% NASDAQ: +1.59% -0.22% 18.72% 158.88% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 90.13 2378.39% 5/17/95 1960 Iomega Cor 1.28 7.88 515.04% 10/1/96 84 LucentTech 23.81 73.81 210.03% 9/9/97 290 Amazon.com 38.22 92.19 141.19% 8/12/96 130 AT&T 39.58 57.63 45.60% 2/20/98 215 DuPont 59.83 74.06 23.78% 1/8/98 115 S&P Depos. 95.91 111.13 15.87% 2/20/98 200 Exxon 64.09 73.19 14.19% 2/20/98 270 Int'l Pape 47.69 52.38 9.82% 4/30/97 -1170*Trump* 8.47 8.75 -3.32% 1/8/98 425 3Dfx 25.67 24.63 -4.06% 8/24/95 130 KLA-Tencor 44.71 41.38 -7.46% 6/26/97 325 Innovex 27.71 25.00 -9.78% 8/13/96 250 3Com Corp. 46.86 31.81 -32.12% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 63988.75 $61406.88 9/9/97 290 Amazon.com 11084.24 26734.38 $15650.14 5/17/95 1960 Iomega Cor 2509.60 15435.00 $12925.40 10/1/96 84 LucentTech 1999.88 6200.25 $4200.37 2/20/98 215 DuPont 12864.25 15923.44 $3059.19 8/12/96 130 AT&T 5145.11 7491.25 $2346.14 2/20/98 200 Exxon 12818.00 14637.50 $1819.50 1/8/98 115 S&P Depos. 11029.25 12779.38 $1750.13 2/20/98 270 Int'l Pape 12876.75 14141.25 $1264.50 4/30/97 -1170*Trump* -9908.50 -10237.50 -$329.00 8/24/95 130 KLA-Tencor 5812.49 5378.75 -$433.74 1/8/98 425 3Dfx 10908.63 10465.63 -$443.00 6/26/97 325 Innovex 9005.62 8125.00 -$880.62 8/13/96 250 3Com Corp. 11715.99 7953.13 -$3762.87 CASH $11558.06 TOTAL $210574.25

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