...for AOL. Plus, wanting what's past
by Jeff Fischer (JeffF@fool.com)
ALEXANDRIA, VA (Sept. 10, 1998) -- The stock market lost more than 2% today and it hardly seems worth mentioning. One month ago a 2% decline would have been unusual, but today it isn't newsworthy. We've seen many such days over the past thirty, and as a result the S&P 500 is 18% below its July 17 high.
You know what this means, don't you?
The decline means that we're now all seasoned investors who have witnessed a significant downturn, or a "market correction," as the Wise call it. Print the T-Shirts: "I've seen a bear... a bear market, that is."
The Wise on television can no longer say, "All these new investors riding the bull have never seen a bad market. They don't know what it's like. They're in for a surprise."
The biggest surprise is on the Wise who made these prognostications. New investors appear to be holding steady in the downturn, many of them likely committed to a life-long investment approach (like Buffett and Lynch and the Fool), instead of fleeing from volatility and near-term uncertainty. After all, uncertainty creates opportunity, too. Though scorned now, stocks will again be loved later.
A parallel: Society pushes for relentless improvement but then covets everything from the past, pushing up prices of antiques, seeking paintings from long departed artists, and even replicating old lifestyles, decorating its homes with oil lamps and candles.
The more "modern" we become (a paradox in and of itself, as we're always only as modern as the current day, which is always outdated by the next), the greater the value of antiquity. As soon as something is lost to time, its worth skyrockets.
The Berlin Wall fell and suddenly everyone wanted a piece of stone from the hated landmark. The evil Soviet Union collapsed and people bought anything possessing its once ominous symbol. We replaced paddlewheel boats a century ago only to bring them back now, coveted reminders of a different day. A 19th century cobblestone street is visited by tourists.
The further we go into the future, the dearer the past becomes.
That's generally true of stocks, too. Place your investment "bookmarks" now. Mark your page in the 1990s. Come the year 2010, you'll be glad that you did.
The Fool stomached today's fall without fanfare, shedding 1.9% like a dog sheds hair in summertime. The S&P was a larger dog and did more shedding, losing 2.6%. For the year, the FoolHound is up 20% while the S&PMutt has gained 1%.
America Online (NYSE: AOL) essentially ended the day unchanged. We quote the stock as closing at around $93, but after the New York Stock Exchange closed, AOL was trading above $95.
Internet service provider MindSpring Enterprises (Nasdaq: MSPG) announced that it will purchase AOL's Sprynet division for $35 million to $45 million in cash, and the sale should be completed this fall. AOL acquired Sprynet with its CompuServe purchase. Investors apparently favor its sale. AOL has nearly $1 billion in cash so this would only add another dollop, but it would spin-off a business that is perhaps less than perfectly cohesive.
AOL trades at 58 times fiscal year 2000's earnings per share estimate of $1.60.
Our Internet companies are, not surprisingly, the ones moving most quickly, like early Americans racing to claim land in the West.
Yesterday Amazon.com (Nasdaq: AMZN) opened its classical music store. It took longer to open this branch of its business because the company needed to build its own database of classical music from scratch. Now, suddenly, Amazon is probably the best place in the world to find and buy classical music, and I'm offering this belief from just one shopping day's experience. Classical music is a large, confusing genre, with hundreds of titles available for every single Beethoven symphony, for example. Amazon helps make sense of it.
Also yesterday, CD Warehouse announced that it will sell music online, not helping Amazon's stock, though Amazon is already developing a community of music shoppers and online reviews of music.
As for Innovex, other disk drive companies saw their stocks rise in today's weak market. I was speaking to a Fool on the phone who aptly pointed out that you can't kill something once it's already dead, and these stocks have been dead for a while. This is a good thing, now. Now they aren't getting killed while everything else is. Many financial stocks, he pointed out, have been cut in half over the past month -- Citicorp, Merrill Lynch, American Express.
They, too, will again be revered someday.
In Cash-King tonight, Al shares his dumbest investment. Or is it? Also, today's Lunchtime News discussed the day's volatility Foolishly. Meanwhile, our Community of Bears message board has been the most active on the Fool's website for months. Pay it a visit if you wish to discuss the stock market.
DELIVER - Get Fool Portfolio Nightly Reports
delivered straight to your e-mailbox every evening!
Today's FoolWatch: all the latest in Fooldom.
Day Month Year History Annualized FOOL -1.88% 4.76% 20.59% 304.71% 40.65% S&P: -2.58% 2.37% 1.01% 113.84% 20.38% NASDAQ: -2.41% 5.75% 0.96% 120.15% 21.23% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 93.88 2481.51% 9/9/97 580 Amazon.com 19.11 79.63 316.65% 10/1/96 84 LucentTech 23.81 76.00 219.22% 5/17/95 1960 Iomega Cor 1.28 3.56 178.23% 4/30/97 -1170*Trump* 8.47 4.31 49.08% 8/12/96 130 AT&T 39.58 55.25 39.60% 2/20/98 200 Exxon 64.09 69.69 8.73% 2/20/98 215 DuPont 59.83 55.50 -7.24% 2/20/98 270 Int'l Pape 47.69 41.50 -12.98% 8/13/96 250 3Com Corp. 46.86 27.31 -41.72% 7/2/98 235 Starbucks 55.91 31.69 -43.32% 8/24/95 130 KLA-Tencor 44.71 22.06 -50.66% 1/8/98 425 3Dfx 25.67 10.69 -58.36% 6/26/97 325 Innovex 27.71 10.00 -63.91% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 66651.25 $64069.38 9/9/97 580 Amazon.com 11084.24 46182.50 $35098.26 4/30/97 -1170*Trump* -9908.50 -5045.63 $4862.88 5/17/95 1960 Iomega Cor 2509.60 6982.50 $4472.90 10/1/96 84 LucentTech 1999.88 6384.00 $4384.12 8/12/96 130 AT&T 5145.11 7182.50 $2037.39 2/20/98 200 Exxon 12818.00 13937.50 $1119.50 2/20/98 215 DuPont 12864.25 11932.50 -$931.75 2/20/98 270 Int'l Pape 12876.75 11205.00 -$1671.75 8/24/95 130 KLA-Tencor 5812.49 2868.13 -$2944.37 8/13/96 250 3Com Corp. 11715.99 6828.13 -$4887.87 7/2/98 235 Starbucks 13138.63 7446.56 -$5692.06 6/26/97 325 Innovex 9005.62 3250.00 -$5755.62 1/8/98 425 3Dfx 10908.63 4542.19 -$6366.44 CASH $12005.75 TOTAL $202352.88