A Tough Week
...keeping some perspective
by Paul Larson (TMFParlay@aol.com)
CHICAGO, IL (Aug. 28, 1998) -- Was this a tough week to be in the market or what? While it's painful to watch asset values evaporate across the globe, we here at the Fool have a bit of a different view of things. It's not that we think global events are unimportant, it's just that we prefer to look at things from the bottom up on a company-by-company basis. Call me a Fool, but I just don't see how anything going on in Russia is going to significantly hurt 3Dfx (Nasdaq: TDFX) or help out Trump (NYSE: DJT). No, we're not selling all of our stocks, buying diamonds, and stuffing them in our sock drawers. We're Fools, confident that over time this too shall pass.
Let's take a tally and see how the Fool Port did relative to the market this week:
Fool Port: -12.57% Russell 2K: -9.38% Nasdaq: -8.74% S&P 500: -5.00%Not a good week by any measure.
One of the common things I hear market commentators speaking of is, "Blah blah is off X percent from its high." Just out of curiosity, I decided to tabulate the annual highs for all the FoolPort stocks to see just how far away from these levels each of the stocks are. Of course, our lone short, Trump, is shown as a percentage away from its yearly low.
Ticker Ann. High Today Off High AMZN 147 105 57/64 28.0% AOL 140 1/2 96 1/4 31.5% COMS 56 3/4 26 1/16 54.1% DD 84 7/16 58 1/8 31.2% DJT 3 3/8 (low) 3 11/16 9.3% INVX 35 7/8 11 1/2 67.9% IOM 16 3/4 3 7/8 76.9% IP 58 15/16 39 33.8% KLAC 76 1/2 24 3/4 67.6% LU 08 1/2 80 7/8 25.5% SBUX 59 15/16 32 11/16 45.5% T 68 1/2 55 5/8 18.8% TDFX 35 1/4 10 7/8 69.1% XON 76 67 9/16 11.1% Average: 40.7%Rather shocking when you look at it this way, huh? I can see the headlines now:
"AVERAGE FOOL PORT STOCK LOSSES 40% FROM HIGH."
And you know what? The headline wouldn't exactly be wrong. It scares people. It shocks people. It makes people want to read further. Nevertheless, even with such negativity, look at how the Fool Port has performed over the past year and things don't look so bad. As of August 28th last year, the Fool Port was worth $157,339.53. Value today, even with the average stock 40% from its highs? $221,105.78, up 40.5%.
The lesson here is that, yes, you can time things terribly, have significant declines in the value of all of your stocks, and still perform just fine. It's all a matter of perspective, and we tend to look at things with as long as a view as possible.
Let's now look at some of the news concerning the stocks in the portfolio. I remember the days when this column used to report with great optimism when America Online (NYSE: AOL) reached three million members. Then five million. Then eight million. Yesterday, it was announced that the online service topped the 13-million member mark. Woo Hoo!
Those of us who use some alternative valuation techniques, such as member-based valuations, view these pieces of news with a smile on our faces. Not only do more members mean more monthly fees that we value similar to an annuity, but more members also mean more eyeballs looking at AOL's online ads. Having more members also brings much greater leverage for cutting online commerce deals.
In addition, AOL announced this week that the company has over 800,000 modems installed and that it is likely to reach a million modems in the next year. Just think about that for a moment. A million modems. For those of us who remember the days of many busy signals, this is more good news. Surely, a decent chunk of those modems are being sold by one of the other portfolio stocks, 3Com (Nasdaq: COMS). In any case, it's good to see that AOL is not only adding members, but also the capacity to service its members well and retain them well into the future.
Sure, the earnings are absent in any great amounts from AOL at the moment, but the member growth is intact, and cash flow, a precursor to earnings, is starting to explode. AOL has been residing in the portfolio for over four years, and I won't be surprised to see it here in the year 2003. I guess I should also mention that AOL was clocked for a $8 3/4 loss today and was the second most actively traded stock on the NYSE this Friday.
One last thing. Make sure to check out this week's edition of StockTalk in which AOL's VP of Investor Relations, Richard Hanlon, sat down and had a little chat with some Fools. There's some great insights into what the company is all about in there. Next week, look for the StockTalk team to interview the CEO of Starbucks (Nasdaq: SBUX), Howard Schultz. I don't know about you, but I know I'm looking forward to listening in!
Speaking of Starbucks, am I the only one who finds himself occasionally spelling the company "Starbux" when in a hurry? I guess that's what happens when you check your stock quotes too often. In any case, yesterday the company reported a same-store sales increase of 3% for the four weeks ended August 23. The market was obviously unimpressed with the news and sold Starbucks off to the point where it hit a new 52-week low today. Ouch. It sure would have been nicer to buy Starbucks at these levels instead of where we did up near $56. I guess it's just proof positive that your Foolish hosts here are NOT market timers! Nevertheless, the portfolio intends on holding Starbucks for a long time, long enough that these weekly and monthly moves will barely be remembered.
If you were clicking in here to find some market commentary, sorry I don't have more to offer. What I can suggest is reading the Spiders (AMEX: SPY) Dueling Fools from a few weeks ago in which Jeff and I have a bit of a tussle over the general direction of the market. While I argued the bear side in this particular Duel, I continue to believe that there are always ways to make money by choosing stocks well, and I am excited to see some quality companies selling for much cheaper than just a few weeks ago. Furthermore, make sure to check out Jeff's "No Bear, No Bull" column from last Friday for some more interesting insights into the market in general. And if that doesn't pique your interest, yesterday we featured some timeless advice on how to deal with a down market. (All linked below).
Here's some personal advice on how to deal with this bummer market. Forget about it for a couple days and go enjoy the weekend! The market will be here on Monday, and so will we.
-- Paul Larson
StockTalk -- Richard Hanlon
AOL announces 13 million members
Starbucks August Sales
Dueling Fools -- Spiders (08/05/98)
Fool Portfolio, 08/21/98: No Bear, No Bull
The Market Move & the Task at Hand, 8/27/98
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Today's FoolWatch: all the latest in Fooldom.
Day Month Year History Annualized FOOL -6.73% -10.40% 31.77% 342.21% 44.18% S&P: -1.53% -8.35% 5.84% 124.07% 21.97% NASDAQ: -2.77% -12.43% 4.41% 127.68% 22.45% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 96.00 2539.95% 9/9/97 580 Amazon.com 19.11 105.89 454.09% 10/1/96 84 LucentTech 23.81 81.00 240.22% 5/17/95 1960 Iomega Cor 1.28 3.88 202.64% 4/30/97 -1170*Trump* 8.47 3.69 56.46% 8/12/96 130 AT&T 39.58 55.81 41.02% 2/20/98 200 Exxon 64.09 67.63 5.52% 2/20/98 215 DuPont 59.83 58.06 -2.96% 2/20/98 270 Int'l Pape 47.69 39.00 -18.22% 7/2/98 235 Starbucks 55.91 32.69 -41.53% 8/13/96 250 3Com Corp. 46.86 26.06 -44.39% 8/24/95 130 KLA-Tencor 44.71 24.75 -44.65% 1/8/98 425 3Dfx 25.67 10.88 -57.63% 6/26/97 325 Innovex 27.71 11.50 -58.50% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 68160.00 $65578.13 9/9/97 580 Amazon.com 11084.24 61416.56 $50332.32 4/30/97 -1170*Trump* -9908.50 -4314.38 $5594.13 5/17/95 1960 Iomega Cor 2509.60 7595.00 $5085.40 10/1/96 84 LucentTech 1999.88 6804.00 $4804.12 8/12/96 130 AT&T 5145.11 7255.63 $2110.52 2/20/98 200 Exxon 12818.00 13525.00 $707.00 2/20/98 215 DuPont 12864.25 12483.44 -$380.81 2/20/98 270 Int'l Pape 12876.75 10530.00 -$2346.75 8/24/95 130 KLA-Tencor 5812.49 3217.50 -$2594.99 8/13/96 250 3Com Corp. 11715.99 6515.63 -$5200.37 6/26/97 325 Innovex 9005.62 3737.50 -$5268.12 7/2/98 235 Starbucks 13138.63 7681.56 -$5457.06 1/8/98 425 3Dfx 10908.63 4621.88 -$6286.75 CASH $11876.47 TOTAL $221105.78