Qualiport

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Friday, 30 October 1998

The Gardners are coming

Before I begin the formal part of tonight's update (hey -- is anything formal or conventional about this site?), I want to update you on a few forthcoming Foolish events.

For those of you familiar with the US Fool, you'll be interested to know that founding brothers Tom and David Gardner are winging their way to the United Kingdom. They are co-authors of The Motley Fool UK Investment Guide, along with our very own David Berger, and the motley crew will be spreading the Foolish message to the masses.

Starting Monday, and running for a full week, the Foolish Threesome will be hitting the airwaves of radio and television channels across the country. Look and listen for them on:

Monday -- BBC Radio 5 Live Money Check & Sky Business Report
Tuesday -- Bloomberg TV
Wednesday -- Talk Radio & World Service

There are lots of other things scheduled, too, including more TV and radio appearances, along with newspaper and magazine interviews. The Independent On Sunday is running the second part of a 10 week serialisation of The Motley Fool UK Investment Guide. So if you don't see or hear the Fools next week, you're snoozing.

I am now going to make a shameless plea to all Fools out there. Please take the time and register as a Fool. It will ultimately help us to help you. The more Fools we have, the bigger and better we can make this site. By registering, you will not be bombarded with e-mail from us or anyone else (because we don't sell our mailing list). Every now and then, we will keep you informed of new features about the site and service. For example, did you know that we now have a quotes facility on the website? Have a look on the left hand side of this page, up near the top, and you will see a little box titled "Get Quotes." If you entered "piz" you'd get the latest quote from PizzaExpress.

In the last week, over 200 new Fools have signed with us. Let's all try and break that record in a day! Register, register, register.

Word of mouth is our best advertising tool. If you visit the site regularly and like the "experience," then why not tell all your friends? We've made it easy for you to mass e-mail all the people in your address book. Simply cut and paste the content from this article into an e-mail, and whammo! Again, the more Fools we have, the better the site becomes. Our aim is to be the UK's biggest and best one stop investment site.

Now, on with the real show.

The Qualiport

After the recent flurry of Qualiport action, it is time to take stock of where we are and where we hope to get.

Firstly, we haven't yet bought our shares in PizzaExpress. We're hoping for a short term irrational crash in their share price (but not because of a profit warning) so that we can pick up our holding a little cheaper. In accordance with the Fool's trading policy, we've got until next Wednesday evening to place our order.

Once PizzaExpress shares are actually purchased, we will have 6 companies in the Qualiport. We happen to think that these are 6 of the best companies in the United Kingdom. We could be wrong, of course, but only time will tell.

If I asked every person to name the 6 best companies in the UK, each and every one of us would come up with a different 6. In fact, if asked right now, I'd probably come up with 6 completely different companies to our current Qualiport holdings.

That's where valuation plays a big part in the investing equation. I have been guilty of buying Unilever at a price which I didn't feel comfortable. A little patience and we could have picked them up at a 20% discount. For a huge company growing relatively slowly, that mistake could take a long time to rectify itself. Luckily, we've got time on our side.

We believe that the Foolish Six are great companies and are reasonably valued. Say, though, that we forget completely about valuation for the purpose of choosing the six best companies in the country. The list suddenly becomes a little different. Most investors will be aware of the amazing price appreciation of Colt Telecom. This company is now in the FTSE 100, yet it has never made a profit and had 1997 sales of just £81 million! Ladbroke Group, with sales of £3.8 billion, has a market value less than that of Colt. How we'd all like to have ridden the frisky Colt as its share price reared ever higher.

Is Colt one of the best companies in the country? I don't know the answer to that, but if it is, should we consider an investment in it? I can't for one moment think that it will be attractively valued, but there may come a point, in a moment of market irrationality, where we could pounce. But without looking at the company, or any other for that matter, we don't know what that point is. Ultimately, we want to be at a stage where we have a list of six companies that pass our Qualiport criteria, complete with our preferred buy points. This is known around here as the Qualiwatch. More on this in the weeks ahead.

Unilever report third quarter results next Friday. Analysts are expecting constant currency pre tax profits for the quarter of about £875m, up from £831m in 1997. The poor European weather is expected to have an adverse affect on high margin ice cream sales. Fools will remember that Unilever has a huge cash pile and have been patiently waiting for the right acquisition at the right price. Analysts love putting pressure on Unilever to spend the money, but they've been admirable, even Foolish, with their patience. If the Glaxo Wellcome-SmithKline Beecham merger ever happens, you can bet that Unilever will have their eye of SKB's branded products. We will cover the results here next Friday. Isn't it great when companies report quarterly? You can really get a feel for where they are headed and how they are getting there.

Our long time laggard EMAP got a little boost today as a broker allegedly put a 12 to 18 month target price of 1150p on them. That's a whole 13% higher than the current price. People were hardly falling over themselves to buy EMAP today, as the shares only edged upwards by 2p to 1020p. Check out the latest numbers on all the Qualiport shares, updated on this page each Wednesday and Friday.

Next Week

On Wednesday, I will set out a Qualiport plan of attack for the next few weeks. Basically, we've got 6 companies in the portfolio, and we've got £5,925.16 sitting in the bank waiting to be invested in some more great companies. I sort of know which two I'd like to invest in, but I must admit I haven't got into the real nitty-gritty work of analysing the accounts and looking at their valuation. One thing I know is that they are not cheap, but you expect to pay a premium for a quality product.

Which are your 6 Qualiwatch companies? Post them on the Qualiport message board.

Happy Halloween. (Is that a contradiction in terms? It just doesn't feel right to say "Hope someone scares the hell out of you.")

See you next Wednesday. Don't forget to register.

Bruce Jackson (TMF Googly)

Qualiport Numbers

                    30/10/98 Close

                 Company   Change    Bid
                   EMA      0.02    10.15
                   IIG     -0.05     2.65 
                   MKS      0.04     4.40
                   RTO      0.14     3.72
                   ULVR     0.15     5.98 

Qualiport Stocks

Last Rec'd Total # Company  In At  Current  Change
 19/12/97    783     RTO     2.55    3.72    45.9%
 27/10/98    755     IIG     2.58    2.65     2.7%
 17/07/98    298     ULVR    6.72    5.98   (11.0%)
 17/04/98    169     EMA    11.85   10.15   (14.3%)
 11/05/98    368     MKS     5.54    4.40   (20.5%)


Last Rec'd Total # Company  In At     Value    Change
 19/12/97   783      RTO   2046.53   2912.76   866.23
 27/10/98   755      IIG   1972.64   2000.75    28.11
 17/07/98   298      ULVR  2052.54   1782.04  (270.50)
 17/04/98   169      EMA   2052.57   1715.35  (337.22)
 11/05/98   368      MKS   2054.11   1619.20  (434.91)


Cash:                                   £5,925.16
Current Total :                        £15,955.26

Total Invested:                        £16,184.62
Profit/(Loss) :                          (£239.36)

Value Per Share

                   Day     Month    Year     History
Qualiport         1.39%    7.90%   31.53%    34.49% 
FTSE 100          1.49%    7.38%    5.90%     8.33%
FTSE All Share    1.52%    6.82%    3.89%     6.08%

For an explanation of Value Per Share accounting, please click here.