A Great Day
Monday, June 8, 1998
by David Gardner
ALEXANDRIA, VA (June 8, 1998) -- The Fool Portfolio had one of those rock'em-sock'em Mondays we live for, rising 2.74% vs. a gain of just a quarter percent for the market indices. In other words, BLOWOUT. I guess what was particularly satisfying about today is that we saw Mr. Market begin to warm up to some of our out-of-favor stocks, like Iomega (Nasdaq: IOM) and 3Dfx (Nasdaq: TDFX). Iomega rose $1 1/8 (or 19.2%) to close at $7, while 3Dfx tacked on $2 to its bid to close back up over $20 for the first time in a while.
Both companies are the leaders of their respective industries (portable storage technology and 3D graphics cards), both have approached their high-tech businesses through the creation and elevation of consumer branding, and both have been whacked badly by the market over the past month, having been cut in half. Iomega rose today on 8.7 million shares traded, but we couldn't really find a good solid single reason to explain the move. (That's generally a good thing; we like this feeling.) We are given to understand that the company's interim CEO will be on CNBC's "Power Lunch" tomorrow to discuss a new alliance possibly involving the upcoming Clik! mini-disks that will go into digital cameras. Anticipation of this new product introduction doesn't seem fully accounted for in the stock price. We continue to hold our IOM.
The talk about this interesting company continues to rage on, of course, available 24/7 on our Iomega message board.
Speaking of the branded technology approach, I was reminded once again of 3Dfx's intelligent management as I listened to CEO Greg Ballard explain to our Motley Fool StockTalk team (you can read this interview transcript here) that his company is consciously creating branded products in an industry that has never used that approach. For anyone interested in 3Dfx, that Foolish interview is must reading. 3Dfx today announced a new record for the speed of its Voodoo2 card, run through a hardware benchmarking system designed by Ziff Davis.
So I dunno if it's the bottom-fishers, institutions, short sellers covering -- or what. But it was heartening and I think significant to see both of these stocks rewarded with 10%+ gains today.
Combine that with sterling performances in America Online and Amazon.com, our two dollar leaders (the stocks in which we have the most money invested), and you have an extremely Foolish day at the races.
There was America Online (NYSE: AOL), gaining $1 5/8 in recovering back to $84 7/8, announcing the buyout of Mirabilis. This news was presaged by a Wall Street Journal article of a couple weeks ago. Mirabilis developed the ICQ instant-messaging technology that has more than 12 million registered users worldwide. I'm one of them. I love trying out new technology, and have been impressed by the functionality of ICQ and the execution of the company behind it. Indeed, a few months back I found myself, as an AOL shareholder, envying ICQ its technology and momentum when I first encountered the product. Lo and behold, they're now owned by AOL. You can check out ICQ (as in "I Seek You") at (what else?): http://www.icq.com.
And Amazon.com (Nasdaq: AMZN) also scored a nice gain, rising $2 1/8 to bid $46 1/8. Amazon's associates program, its program that makes other websites salesmen for Amazon books, doubled in participation in the past four months, the company announced today. The number of associates has risen like this:
September '97: 15,000 February '98: 30,000 June '98: 60,000The company continues to succeed with its business model, and the stock market reflects that by bidding the shares up.
Changing gears, I'm constantly reminded of how many (too many!) rich resources we have in Fooldom. Ever read our Daily Trouble (or Daily Double -- which is on Apple today)? This is a stock that has been halved (or, respectively, has doubled) in recent months, and our crack Fool writing team focuses on teaching and explaining why.
I took the time the other day to look at the archives of the past performance of all Daily Trouble stocks and found something very interesting. Namely, 69 out of 214 total past Daily Troubles have risen since we first published their respective articles. That's only one-third of the list, during a great bull market. So that means that two-thirds of them are down even further. Why does this matter? Well, it happens to support our shorting strategy, where we go in and short the stocks of beaten-down out-of-favor stocks like Trump Hotels & Casino Resorts.
Again, during a great bull market, more than two-thirds of the companies we've covered whose stocks had already been cut in half are down even further (some substantially). Look and learn: Daily Trouble Performance Tracking.
And that, my friends, is Folly Tonight!
-- David Gardner, June 8, 1998
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Day Month Year History FOOL +2.74% 2.77% 18.40% 297.34% S&P: +0.17% 2.28% 14.97% 143.40% NASDAQ: +0.27% 0.50% 13.84% 148.23% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 84.88 2234.02% 5/17/95 1960 Iomega Cor 1.28 7.00 446.70% 10/1/96 84 LucentTech 23.81 73.06 206.88% 9/9/97 580 Amazon.com 19.11 46.13 141.36% 8/12/96 130 AT&T 39.58 61.88 56.34% 2/20/98 215 DuPont 59.83 79.81 33.39% 1/8/98 115 S&P Depos. 95.91 111.88 16.65% 2/20/98 200 Exxon 64.09 71.19 11.07% 2/20/98 270 Int'l Pape 47.69 47.75 0.12% 4/30/97 -1170*Trump* 8.47 8.69 -2.58% 1/8/98 425 3Dfx 25.67 21.50 -16.24% 8/24/95 130 KLA-Tencor 44.71 28.00 -37.38% 6/26/97 325 Innovex 27.71 17.25 -37.75% 8/13/96 250 3Com Corp. 46.86 26.88 -42.65% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 60261.25 $57679.38 9/9/97 580 Amazon.com 11084.24 26752.50 $15668.26 5/17/95 1960 Iomega Cor 2509.60 13720.00 $11210.40 2/20/98 215 DuPont 12864.25 17159.69 $4295.44 10/1/96 84 LucentTech 1999.88 6137.25 $4137.37 8/12/96 130 AT&T 5145.11 8043.75 $2898.64 1/8/98 115 S&P Depos. 11029.25 12865.63 $1836.38 2/20/98 200 Exxon 12818.00 14237.50 $1419.50 2/20/98 270 Int'l Pape 12876.75 12892.50 $15.75 4/30/97 -1170*Trump* -9908.50 -10164.38 -$255.88 1/8/98 425 3Dfx 10908.63 9137.50 -$1771.13 8/24/95 130 KLA-Tencor 5812.49 3640.00 -$2172.49 6/26/97 325 Innovex 9005.62 5606.25 -$3399.37 8/13/96 250 3Com Corp. 11715.99 6718.75 -$4997.24 CASH $11662.57 TOTAL $198670.76