Plus, Starbucks is welcomed
by Paul Larson
CHICAGO, IL (July 2, 1998) -- Today saw the world's first online, real-money portfolio tack on another 1.79% to its all-time high while the rest of the market had its parade rained on a bit. On this holiday-shortened trading week, the Fool Portfolio really had an early fireworks show. Let's take a quick peek at the numbers.
6/26/98 7/2/98 % Gain $236,790.76 $257,181.22 +8.61%
As Jeff so eloquently said in yesterday's recap: "Wow."
Most of the color and sparkle this week was supplied courtesy of Amazon.com (Nasdaq: AMZN), which was up only another $9 7/8 on the day. Ho hum. (Yes, I'm being a bit sarcastic here.) It wasn't too long ago that we were banging the Double Gong as well as the Triple Chime for this stock. There are so many belled instruments banging this stock the noise is deafening. Today Amazon passed the 500% mark for the Fool Port, but we'll let this six-bagger pass silently. What do we ring if a stock seven-bags for us? (Suggestions invited.)
I would be remiss if I didn't link this absolutely amazing chart showing Amazon's movement over the past year. We'll be talking about these fireworks for some time to be sure. Check it out.
As reported yesterday, KLA-Tencor (Nasdaq: KLAC) hosed down its profit expectations on Wednesday evening. The company foresees a 10% sequential decline in quarterly revenues and does not expect to make the $0.33 profit estimate that analysts had expected. As we've stated here before, KLA is probably the most-exposed company to the Asian situation in the entire portfolio since a great number of its customers are in the Pacific Rim.
The company has done a relatively good job at keeping costs low during this downturn in its business, but Wall Street rarely likes shrinking sales. Another of the portfolio's companies, Innovex (Nasdaq: INVX), is also dogged by a revenue squeeze even though costs are in control. Hopefully, both these companies will see business conditions improve and sales growth start trending up again. The more time we allow (months, years, what?), of course the more likely a recovery.
It's interesting to note that KLA now represents a mere 1.3% of the portfolio's total value. Contrast this to the 7.1% of the portfolio it originally represented when it was bought way back in August 1995 and you can see just how much of a dog the stock has been, as well as how well the rest of the portfolio has done. On the day, KLA was down another $1 3/4 to bid at $26.
As we announced earlier this week, we planned on making some changes in the portfolio's lineup. Well, we didn't wait very long to execute the plan. As of approximately 1:55 PM Eastern Time, the Fool Portfolio welcomed 235 shares of Starbucks (Nasdaq: SBUX) to the team at a price of $55 7/8 per stub. Add in the $8 commission, and our average cost per share rings in at $55.91 -- for those of you keeping score at home.
The cash for the new purchase came after we sent down to the minors our 115 shares of S&P Depository Receipts (AMEX: SPY) for $114 1/2 a share, giving us $13,159.50 after commissions. We sold the Spiders about two hours before we bought Starbucks, so the cash didn't exactly have time to collect dust. The Spiders served us extremely well by rising 19% since we bought them in January of this year. We figured putting the Fool Port's extra cash into Spiders would out-earn a simple money market account while looking for another stock to buy. Our figuring proved correct (thanks to some luck!) since simple interest would have only earned the Fool Port about 2-3% over that timeframe. Should we find ourselves with extra cash laying around down the road, don't be surprised to see good ole Spidey back in the lineup again. The Spider sell report is available by clicking here.
Of course, our timing of the Starbucks purchase could have been better. The stock gapped open $1 1/8 to $53 3/4 this morning. We could have saved ourselves two bucks if we would have done our shuffling early in the morning. But no; we just had to go out and prove that, no, we are NOT market timers. At least the premium we paid today was nothing like the 24% "Fool tax" that the portfolio gave up between announcing its intention to buy and its actually buying of 3Dfx Interactive (Nasdaq: TDFX).
The main reason that Starbucks did so well today was the company's announcement of June sales. For the five weeks ended June 28, Starbucks had net sales of $131.0 million, or 33% higher than net revenues for the same period a year ago. While for the past 39 weeks, revenue increased 36% to $950.6 million, and same-store sales grew 6% from last year. You can read the press release on the Web by clicking here. While this news is certainly one of the reasons the stock had a strong morning, it also just confirms much of the thinking in the Fool's buy report.
As always, the Fool's thought process on every single trade is laid out for anyone who cares to see it. Nevertheless, a few caveats probably bear repeating here. Do not blindly follow what is done in this portfolio. If you do, you're missing the point of what Foolishness is all about.
Foolishness is about thinking for yourself and taking your financial life into your own hands. When we say that Fools don't follow talking heads on television, bearish columnists in newspapers, cold-calling brokers, or random posts on message boards, we mean that Fools don't follow anyone's advice except their own. If you're blindly mimicking Fool Port trades, you're not thinking for yourself. It also means that we're failing in our mission to teach financial independence.
In short, think independently.
Have a happy and safe holiday weekend, Fools.
-- Paul Larson
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Day Month Year History FOOL +1.79% 7.33% 53.17% 414.03% S&P: -0.19% 1.11% 18.14% 150.09% NASDAQ: -1.07% -0.04% 20.61% 162.99% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 110.31 2933.53% 9/9/97 580 Amazon.com 19.11 124.00 548.85% 5/17/95 1960 Iomega Cor 1.28 5.69 344.19% 10/1/96 84 LucentTech 23.81 82.44 246.26% 8/12/96 130 AT&T 39.58 54.94 38.81% 2/20/98 215 DuPont 59.83 76.19 27.33% 4/30/97 -1170*Trump* 8.47 7.19 15.13% 2/20/98 200 Exxon 64.09 72.88 13.71% 7/2/98 235 Starbucks 55.91 56.63 1.28% 2/20/98 270 Int'l Pape 47.69 43.38 -9.05% 1/8/98 425 3Dfx 25.67 17.25 -32.79% 8/13/96 250 3Com Corp. 46.86 29.31 -37.45% 8/24/95 130 KLA-Tencor 44.71 26.00 -41.85% 6/26/97 325 Innovex 27.71 13.06 -52.86% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 78321.88 $75740.01 9/9/97 580 Amazon.com 11084.24 71920.00 $60835.76 5/17/95 1960 Iomega Cor 2509.60 11147.50 $8637.90 10/1/96 84 LucentTech 1999.88 6924.75 $4924.87 2/20/98 215 DuPont 12864.25 16380.31 $3516.06 8/12/96 130 AT&T 5145.11 7141.88 $1996.77 2/20/98 200 Exxon 12818.00 14575.00 $1757.00 4/30/97 -1170*Trump* -9908.50 -8409.38 $1499.13 7/2/98 235 Starbucks 13138.63 13306.88 $168.25 2/20/98 270 Int'l Pape 12876.75 11711.25 -$1165.50 8/24/95 130 KLA-Tencor 5812.49 3380.00 -$2432.49 1/8/98 425 3Dfx 10908.63 7331.25 -$3577.38 8/13/96 250 3Com Corp. 11715.99 7328.13 -$4387.87 6/26/97 325 Innovex 9005.62 4245.31 -$4760.31 CASH $11876.47 TOTAL $257181.22