THE CASH-KING PORTFOLIO
by Tom Gardner (TomG@fool.com)
Captiva Island, FL (Nov. 30, 1998) -- Today marks the beginning of the first Theme Week in Cash-King Portfolio history. After clearing out the news today, I will launch our Keeping Our Eyes on the Wise week tomorrow.
Over the next four days, we'll sort through data, examine conflicts of interest, and poke around inside of an investment firm. I think we've dug up some information about the world of high finance that may startle you. But I promise we'll amuse you, too.
If you've relied on names like Kurlak or Gabelli to guide your retirement plan, or if you don't know how well your investments have done over the past five years, or if you're not entirely sure how your financial professional is compensated (the first bit of disclosure they should have offered), or if you're just fed up with feeling like individual investors don't get a fair shake on Wall Street (cf. exclusion from conference calls, hidden 12b-1 fees, the massive bailout of a previously-unknown hedge fund while the original managers still take fees today, et al.), you'll want to tune in all week.
On to the performance of our holdings last week...
Cash-King Last This Change Microsoft $113.63 $128.06 + 12.7% Gap Inc. $68.00 $76.63 + 12.7% Cisco $74.63 $79.81 + 6.9% S Plough $104.19 $109.75 + 5.3% T. Rowe $35.25 $36.75 + 4.3% Pfizer $112.00 $114.00 + 1.8% AmEx $104.56 $103.44 - 1.1% Coca-Cola $72.81 $71.69 - 1.5% Intel $112.06 $110.00 - 1.8% Fool Four Last This Change Chevron $80.88 $85.63 + 5.9% Exxon $72.00 $74.38 + 3.3% GM $72.00 $71.44 - 0.8% Kodak $76.69 $74.75 - 2.5% S&P 500 1164 1192 + 2.4% Total C-K $26,355 $27,422 + 4.0%
Another nice showing saw us extending our lead over the market benchmarks, as we racked up a 4% gain for the shortened week. But, try as we may, we can't keep up with the danged Rule Breaker (Fool) Portfolio across the way. As of Friday, they were up more than 38%... for the month of November! Gee whiz. For the year, the Rule Breaker Portfolio is now up more than 115%, illustrating the very best of what long-term investing in great businesses can bring.
Unfortunately, with that as our backdrop, it's extremely tough to throw a series of hoo-hah celebrations about our own 7% lead over the S&P 500 for the year. True, we are ahead of 99% of the stock funds in the U.S. in 1998, while offering this as a free service around the world. And I do expect comparable levels of our fund outperformance to continue over the next two decades. But man, oh, man. I can't imagine catching up with the Fool Portfolio. Think of it this way: The Rule Breaking Gang has extended a 30% lead over the S&P 500 during this month alone.
I feel like a wimp over here, measuring out our gains in half-percentage points. All the while, the Rule Breaker Portfolio is circling us with cartwheels, scampering on their hands where we can't get to on foot, instantly performing numerical gymnastics which take us hours to tote up on a counting machine, spinning investment returns faster than a comb-footed spider spits out webs. Let's face it...
They're blowing us out.
Thankfully, David has opted not to beat up his younger brother with his performance figures.
Perhaps, though, we can take small comfort over here in a simple life of steady compounding. I expect that our account will gain steady momentum, directing profits toward us with the escalating force of a mountain stream. It starts on the north face with a droplet of melting ice, which wanders into a rivulet that turns into a run, which -- gathering sound and speed -- races as a fast-running brook. Then the local news puts out flood warnings. Then we begin gathering a band of Foolish accountants to tidy up our financial matters for us in our waning years.
All the while, as compounding pounds more savings into our accounts, perhaps we'll deed a few shares to charitable organizations like Share Our Strength. Or maybe we'll just post like mad on The Motley Fool Web Boards, knowing that each note drives another two cents toward the fight against poverty and hunger in America. As the public markets steadily push new capital into our accounts, we might then steadily drive opportunity into the world around us. Not with the force or fury of the Rule Breaker Portfolio, no. Instead, with a steady gait, marching through good weather and bad. And, yes -- sigh -- probably never catching up to the Breakers.
On to our stocks...
Leave it to Microsoft (Nasdaq: MSFT) to gain another 12.7% the week after Rob Landley, our resident Windows curmudgeon, pounded the company for putting out "bloated software" and racing into increasing competition from open-standards software. Like their product or not, we all have to recognize that Microsoft stands as clearly the most impressive financial machine of our time. With 92% gross margins, 38% net margins, with over $17 billion in savings, no debt, and double-digit sales growth to boot, it's hard to imagine a better illustration of wealth-building in the public markets this century. If the vehicle of public financing can be viewed as a game, nobody has played it as well as Microsoft. Not J.P. Morgan. Not Standard Oil. Not Coca-Cola. Not Berkshire Hathaway. Not anyone.
Speaking of Standard Oil, who would've thought that two of its children would go into business again? Last week, Exxon (NYSE: XON) and Mobil (NYSE: MOB) expressed an interest in creating a truly dominant American force in the world of oil. Exxon and Mobil might make a nice one-two punch -- with Exxon sitting as the largest oil company on the planet and Mobil resting comfortably as the second-largest oil business in America. The talk of merger -- one which would bring an over-$70 billion payment for Mobil -- comes in the wake of the British Petroleum/Amoco commingling, as well as riding on the heels of some of the lowest oil prices in memory. Exxon rose over 3% for us on the week. Chevron was up 5.9%.
Our other big winner last week was Gap Inc. (NYSE: GPS), which rose more than 12%. No doubt the rise was aided by the split announcement a few weeks back, which has the electronic elves feverishly at work tonight. They are cutting and sorting the new shares at Gap Inc. The company's 3-for-2 stock split is completed this evening. We don't think it's material news, but I share it here to ensure that no Gap owner is shocked to see their GPS shares trading around $50 tomorrow.
I'll return tomorrow night with the first of our Keeping Our Eyes on the Wise installments. You won't want to miss it. Fool on, Fools.
Order your copy of David and Tom Gardner's new book, Rule Breakers, Rule Makers, in advance. This Simon & Schuster beauty doesn't arrive until January, but you can reserve your copy today! The first half of the epic book, on Rule Breakers, elucidates the Fool Port's investment style; the second half, on Rule Makers, further explains Cash-King investing.
Day Month Year History C-K -2.95% 9.54% 20.63% 20.63% S&P: -2.40% 5.91% 16.21% 16.21% NASDAQ: -3.32% 10.06% 17.95% 17.95% Cash-King Stocks Rec'd # Security In At Now Change 2/3/98 24 Microsoft 78.27 122.00 55.87% 5/1/98 37 Gap Inc. 51.09 73.75 44.35% 2/3/98 22 Pfizer 82.30 111.94 36.01% 6/23/98 34 Cisco Syst 58.41 75.38 29.04% 2/13/98 22 Intel 84.67 107.63 27.10% 8/21/98 22 Schering-P 95.99 106.75 11.21% 2/6/98 56 T. Rowe Pr 33.67 35.75 6.17% 2/27/98 27 Coca-Cola 69.11 70.06 1.38% 5/26/98 18 AmExpress 104.07 100.25 -3.67% Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Exxon 64.34 75.00 16.58% 3/12/98 20 Eastman Ko 63.15 72.63 15.01% 3/12/98 15 Chevron 83.34 83.63 0.34% 3/12/98 17 General Mo 72.41 69.88 -3.49% Cash-King Stocks Rec'd # Security In At Value Change 2/3/98 24 Microsoft 1878.45 2928.00 $1049.55 5/1/98 37 Gap Inc. 1890.33 2728.75 $838.42 2/3/98 22 Pfizer 1810.58 2462.63 $652.05 6/23/98 34 Cisco Syst 1985.95 2562.75 $576.80 2/13/98 22 Intel 1862.83 2367.75 $504.92 8/21/98 22 Schering-P 2111.7 2348.50 $236.80 2/6/98 56 T. Rowe Pr 1885.70 2002.00 $116.30 2/27/98 27 Coca-Cola 1865.89 1891.69 $25.80 5/26/98 18 AmExpress 1873.20 1804.50 -$68.70 Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Exxon 1286.70 1500.00 $213.30 3/12/98 20 Eastman Ko 1262.95 1452.50 $189.55 3/12/98 15 Chevron 1250.14 1254.38 $4.23 3/12/98 17 General Mo 1230.89 1187.88 -$43.02 CASH $120.62 TOTAL $26611.93 *Please note: On 8/4/98 $2,000 cash was added to the
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