<FOOLISH FOUR PORTFOLIO>

3M, GM, and GT
... a Foolish Four company roundup

by Chris Rugaber (TMF [email protected])

Alexandria, VA (July 6, 1999) -- Welcome back from your holiday, Fools! I hope the July 4th weekend wasn't too hard on anyone, despite the temperatures. Maybe I'm an East Coast wimp, but doing anything outdoors when it's 100 degrees is not my idea of fun. Nevertheless, this did not stop me from stuffing myself at a couple of different barbecues.

Let's ease ourselves back into the work week with a quick roundup of what some of our Foolish Four companies have been up to, both in and out of our own real-money portfolio.

First, let me add to what I wrote last week about Minnesota Mining & Manufacturing <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %>, because on the same day my last article appeared, they announced a partnership with Xerox that intends to produce "E-Paper," a commercially viable electronic paper that sounds surprisingly similar to Etch-A-Sketch.

According to Bloomberg, "Electronic paper works like this: the material is composed of tiny white and black beads in a plastic sheath that's the thickness of a manila folder. The microscopic beads can show one color, such as black or blue, or another, such as white. Voltage is then used to move the... beads into place through a kind of 'pen' or other device." The article doesn't say if you erase what you've written by shaking the paper, though apparently "images could be wiped clean and reworked almost instantly."

The e-paper was developed by Xerox's Palo Alto Research Center (PARC), the innovative lab that invented the computer mouse but essentially gave it away. By contracting with 3M to manufacture the product, Xerox hopes to actually earn some money from this creation. 3M will use the technologies it developed making office transparencies and other plastic coatings to manufacture the product. There are many envisioned commercial applications -- from whiteboards to textbooks to magazines -- though it won't be available for at least a year. Should be interesting to see, and good for 3M's bottom line, since there presumably won't be any competing products anytime soon.

Moving on to International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IP)") else Response.Write("(NYSE: IP)") end if %>, the company's New Zealand subsidiary, Carter Holt Harvey, reported some unpleasant news out of Asia: while its exports to Asian markets have recovered from their depths, this quarter is not showing the improvement over 1999's first quarter that was expected. Carter Holt's spokesman noted that "We're certainly not seeing the same sort of volumes that we were pre-crisis," and that volumes "rose to something like 90% [of pre-crisis] levels in the first quarter, but slipped back this quarter." Perhaps the Asian recovery will take a little longer than we thought. The news doesn't seem to have caused IP much trouble, given that it was up $9/16 to $51 9/16 this afternoon, perhaps because Carter Holt Harvey provided only 7.7% of IP's revenues last year.

Fools with General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %> in their Foolish Four accounts presumably are happy with the stock's jump of about 5% today. The company reported on Friday that it captured 30.4% of American auto sales in June, which topped the goal of 30% that it set earlier this year. More importantly, this week's Barron's includes a story on how the company, which has a trailing P/E of 7, could unlock some of its value. The article, based on the work of a research analyst at Sanford Bernstein & Co., recommends that GM spin off its Hughes <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GMH)") else Response.Write("(NYSE: GMH)") end if %> satellite subsidiary, repurchase $4 billion in shares a year, and as a result reduce its shares outstanding from over 600 million now to under 200 million by 2004. This would presumably enable the company's share price to almost triple, even without a change in P/E.

Of course, the company says it has no plans to spin off Hughes, and this year it will repurchase only about $2.2 billion worth of shares (30 million shares at the current price) because it wants to save money in the event that another strike occurs when the UAW's contract expires this September. As a result, there's no reason to believe that the company will necessarily do anything that the article recommends. Nevertheless, it does demonstrate the value inherent in GM, and shareholders in the company should definitely check out the article, though unfortunately it is only available on the Web through subscription. GM has returned 24.6% (with dividends reinvested) to its investors so far this year.

Finally, Fools with Goodyear Tire <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GT)") else Response.Write("(NYSE: GT)") end if %> in their Foolish Four accounts have certainly had a roller-coaster ride this year, though fortunately with more ups than downs. The company has returned 11.6% so far this year, despite its gyrations. The most recent downturn, late last month, followed an announcement by the company that its second quarter earnings could be as much as 68% below year-ago levels, as it cuts inventory and makes changes to its product line. Estimates had been for the company to earn about $0.77 in the second quarter, but the company stated that 40-50 cents was more likely. The market didn't overreact too much, for once, since the company had warned of this back in April.

Stay cool, and Fool on!

Today's Stock Lists | 1999 Dow Returns

07/06/99 Close

Stock Change Last -------------------- CAT -2 5/8 59.31 JPM +3 3/16 145.06 MMM +1 5/8 90.50 IP -3/8 50.63

Day Month Year History FOOL-4 -0.38% 1.62% 27.80% 29.70% DJIA -0.04% 1.50% 22.06% 21.58% S&P 500 -0.22% 1.12% 13.50% 13.78% NASDAQ -0.15% 1.91% 24.82% 26.53% Rec'd # Security In At Now Change 12/24/98 24 Caterpillar 43.08 59.31 37.67% 12/24/98 9 JP Morgan 105.51 145.06 37.48% 12/24/98 14 3M 73.57 90.50 23.01% 12/24/98 22 Int'l Paper 43.55 50.63 16.26% Rec'd # Security In At Value Change 12/24/98 24 Caterpillar 1034.00 1423.44 $389.44 12/24/98 9 JP Morgan 949.62 1305.54 $355.92 12/24/98 14 3M 1030.00 1267.00 $237.00 12/24/98 22 Int'l Paper 958.12 1113.86 $155.74 Dividends Received $49.99 Cash $28.26 TOTAL $5188.09