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Still Beating the Market
C-K news of the week
by Al Levit ([email protected])
Glendale, CA (Oct. 12, 1998) -- Last week was not particularly pleasant for Cash-King investors. If you're one of the lucky ones who can go an entire week without checking on the progress of your portfolio, more power to you. You probably had a very pleasant week. If, on the other hand, you are like me and you can't help but track your portfolio (and you can set up a portfolio tracked against the S&P 500 here), then perhaps you didn't have such a good time.
The S&P was down 1.9%. The Nasdaq was down over 7%. And the Cash-King portfolio lost 2.7%. Mind you, we're still ahead of the market -- and by extension some 90% of mutual funds -- but we did lose some money last week. You can always check our performance against the market since our inception in February of this year by scrolling down on the Web or clicking "Today's Numbers" on AOL.
And here's our stock-by-stock performance for the week that was:
Cash-King Last This Change Coca-Cola $58.94 $63.81 + 8.3% Gap Inc. $48.25 $51.75 + 7.3% AmEx $74.38 $77.00 + 3.5% Intel $83.88 $83.81 - 0.0% S Plough $99.50 $94.69 - 4.8% Pfizer $99.13 $93.00 - 6.2% Microsoft $104.13 $96.88 - 7.0% Cisco $55.75 $50.06 - 10.2% T Rowe $28.69 $24.13 - 15.9% Fool Four Last This Change Kodak $76.00 $82.06 + 8.0% Chevron $88.13 $85.69 - 2.8% Exxon $73.00 $70.75 - 3.1% GM $55.00 $50.88 - 7.5% S&P 500 1003 984 - 1.9% Total C-K $22,244 $21,654 - 2.7%
On Wednesday, I'll be writing about the importance of diversity in a Cash-King portfolio. In keeping with that idea, I will now review the Cash-King companies' important events by industry group, starting out with the high-tech gorilla troika of Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>, Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>, and Cisco <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>.
The amazing thing about Microsoft is that some of its news is actually NOT related to any federal lawsuit. It appears that Microsoft is trying the old "fourth time's a charm" approach to their online service MSN, The Microsoft Network (stop snickering Oak!). This time it's free, and it's designed to compete with other Internet portals like Yahoo, AOL.com, and Lycos. First indications are that this version of MSN is better than the last three, but that it's still got a ways to go to catch up to the portals that have been out there awhile. You can check it out at www.start.com.
And yes, there is significant courtroom news for Mr. Softy as well. Microsoft's lawyers said they were concerned that the government was trying to throw the "kitchen sink" into its lawsuit against the software company. Microsoft was also ordered to give the government access to certain financial databases, while it was denied access to some of Netscape's confidential tapes. All in all, it was not a good week in court for our top-performing company.
Things are looking quite a bit better for Intel. First of all, the chip designer announced that it plans to make computer chips to replace the Pentium II. These new chips are code-named Foster and are expected to be released in late 2000 or early 2001. They have a target speed of one gigahertz, which is more than twice as fast as the fast Pentium II (the fastest Pentium II runs at 450 megahertz). Secondly, on the much shorter-term horizon, an analyst at Piper Jaffray just raised third and fourth quarter earnings estimates for Intel to $0.84 and $0.92 a share from $0.80 and $0.86 a share. Since Intel will be reporting on the third quarter earnings after the market close on Tuesday, we'll see how on top of things Piper Jaffray is.
Oh, and we are still watching Merrill Lynch chip analyst Tom Kurlak's short-term target price for Intel of $60... with some measure of glee.
Last, but certainly not least, is Cisco. To begin with, in case anyone missed it, Greg Markus wrote a GREAT "unauthorized" condensed version of the Cisco 10-K a few weeks ago. You'll really enjoy it if you haven't already. The only news about Cisco last week was that a Cowen analyst cut estimates. The analyst didn't seem to have any problem with Cisco's business; he just felt that the developing softness in the worldwide economy would impinge on Cisco's short-term earnings. Cisco's short-term stock price really took a hit. But over the long-term, its prospects still look very rosy to me.
Moving on to the drug companies, a report came out at the beginning of last week that prescriptions of Viagra were down. As most of you know, Viagra is made by Cash-King stalwart Pfizer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %> and this news resulted in somewhat reduced expectations for sales going forward, especially in the U.S. However, sales of Viagra outside the U.S. seem to be increasing at a faster rate than expected. That means that the overall change in sales growth may not be that significant.
There was also an item of significance concerning our other drugmaker, Schering-Plough <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGP)") else Response.Write("(NYSE: SGP)") end if %>. First, federal advisors recommended that the FDA approve Glaxo Wellcome's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLXE)") else Response.Write("(NYSE: GLXE)") end if %> Epivir for the treatment of hepatitis B virus. This would compete directly with Schering-Plough's Intron A, which currently is the only treatment for hepatitis B. The news of this new drug is clearly better for hepatitis B patients, since they now have two drug options (neither Intro A nor Epivir will work well with every patient). But this news hurt Schering-Plough last week.
As far as the financial companies go, American Express <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AXP)") else Response.Write("(NYSE: AXP)") end if %> may have some good news on the law-suit horizon. The federal government is suing MasterCard and Visa for anti-trust violations, claiming that the two are not competing enough with one another. American Express will benefit if the government's claims are valid.
In retailing, I noticed that The Gap <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %> released September sales of $874 million for the five-week period ended October 3, 1998, an increase of 35% over sales of $648 million for the comparable period ended October 4, 1997. The Company's comparable store sales for September 1998 increased 14% compared to a 6% increase in September 1997. Great news, all around. Gap was one of our few winners last week.
There was nothing much of note for T. Rowe Price <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TROW)") else Response.Write("(Nasdaq: TROW)") end if %> or Coca-Cola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %> last week, which moved in dramatically opposite directions.
I close with a brief comment on our Foolish-Four holdings. In the past, that method has done particularly well when the overall market has been in the doldrums. All of a sudden, it seems like we may be entering such a period. Whether in fact we are in a "bear market" now, and if so for how long, is not something that a Motley Fool spends much time pondering. But if we must endure it (and periodically in our investing lives we will have to endure it), it's nice to know that about 25% of our Cash-King portfolio is allocated to a value approach. The Foolish Four are up 12% this year -- and they are reported on every day here in Fooldom.
That's it for today. Tomorrow I'll be back writing about why we Cash-Kingers feel that quality is 100 times more important than valuation.
Until then, Fool on!
Al Levit
Cash-King Strategy Folder
Cash-King Companies Folder
Stock Change Bid AXP +2 3/4 79.75 CHV - 5/8 85.06 CSCO +2 5/16 52.38 KO -1 62.81 GPS +1 1/4 53.00 EK +1 1/2 83.56 XON +1 1/16 71.81 GM +1 1/16 51.94 INTC +1 5/8 85.44 MSFT +2 7/8 99.75 PFE --- 93.00 SGP +1 95.69 TROW +1 5/8 25.75 |
Day Month Year History
C-K +1.97% -4.06% 1.33% 1.33%
S&P: +1.36% -1.90% -0.82% -0.82%
NASDAQ: +3.59% -8.72% -7.22% -7.22%
Cash-King Stocks
Rec'd # Security In At Now Change
2/3/98 24 Microsoft 78.27 99.75 27.45%
2/3/98 22 Pfizer 82.30 93.00 13.00%
5/1/98 37 Gap Inc. 51.09 53.00 3.74%
2/13/98 22 Intel 84.67 85.44 0.90%
8/21/98 22 Schering-P 95.99 95.69 -0.31%
6/23/98 34.5 Cisco Syst 57.56 52.38 -9.01%
2/27/98 27 Coca-Cola 69.11 62.81 -9.11%
5/26/98 18 AmExpress 104.07 79.75 -23.37%
2/6/98 56 T. Rowe Pr 33.67 25.75 -23.53%
Foolish Four Stocks
Rec'd # Security In At Value Change
3/12/98 20 Eastman Ko 63.15 83.56 32.33%
3/12/98 20 Exxon 64.34 71.81 11.62%
3/12/98 15 Chevron 83.34 85.06 2.06%
3/12/98 17 General Mo 72.41 51.94 -28.27%
Cash-King Stocks
Rec'd # Security In At Value Change
2/3/98 24 Microsoft 1878.45 2394.00 $515.55
2/3/98 22 Pfizer 1810.58 2046.00 $235.42
5/1/98 37 Gap Inc. 1890.33 1961.00 $70.67
2/13/98 22 Intel 1862.83 1879.63 $16.80
8/21/98 22 Schering-P 2111.7 2105.13 -$6.57
2/27/98 27 Coca-Cola 1865.89 1695.94 -$169.95
6/23/98 34.5 Cisco Syst 1985.95 1806.94 -$179.01
5/26/98 18 AmExpress 1873.20 1435.50 -$437.70
2/6/98 56 T. Rowe Pr 1885.70 1442.00 -$443.70
Foolish Four Stocks
Rec'd # Security In At Value Change
3/12/98 20 Eastman Ko 1262.95 1671.25 $408.30
3/12/98 20 Exxon 1286.70 1436.25 $149.55
3/12/98 15 Chevron 1250.14 1275.94 $25.80
3/12/98 17 General Mo 1230.89 882.94 -$347.95
CASH $48.07
TOTAL $22080.57
*Please note: On 8/4/98 $2,000 cash was added to the
portfolio. $2,000 will be added every six months.
*The year for the S&P and Nasdaq is as of 02/03/98
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