Rule Breaker Portfolio

Fool Portfolio Report
Monday, November 03, 1997
by David Gardner (DavidG@fool.com)


ALEXANDRIA, VA (Nov. 3, 1997) -- The Fool Portfolio swaggered around the marketplace Monday and obtained a 3% gain, boosting its 1997 return to 27.83%. This swagger went mostly unnoticed, since the rest of the marketplace was busy helping itself out to 2.5% gains. It was yet another volatile, busy trading day on Wall Street, as we open November in much the same way we closed October... although the upward trend was a welcome change.

Nary a stock in the Foolish Portfolio declined, which helps us out 11 out of 12 times. The odd man out is Trump Hotels & Casino Resorts (NYSE:DJT) -- our short sale. Short sales are only to be considered by experienced investors who want to play a more aggressive game -- you can read more in The Fool's School, where our 11th Step to Investing Foolishly is "Think About Shorting Stocks." The Fool Portfolio currently demonstrates the way we think an aggressive portfolio should be invested: a dozen stocks, with one stock (often two, maybe even sometimes three) held short. We do this because we like to counterbalance our aggressive long holdings ever so slightly with a hedge against the market. The idea is to make money both ways at the same time, of course, which is great in theory and even greater in practice (though we reach the ideal less frequently).

It certainly helps in a month like October to hold The Donald short, having watched the stock drop from a high of $13 to $9. That said, we remain down 10% on the investment. We could make the excuse that the market is up 27% this year, and it's been tough to make money short now or, really, at any point over the past three years (30% annualized gains). Then again, that hasn't held back our portfolio from beating the market, either, as it shouldn't hold back yours, dear Fool.

Four Fool stocks rose more than two bucks today, including growth stocks America Online (up $2 3/4) and KLA-Tencor (recovering $3 1/4) alongside Dow heavyweights Chevron (up $3 13/16) and General Motors (up $2 15/16).

Indeed, on the same day that General Motors (NYSE:GM) announced the appointment of Pfizer's Karen Katen to its board (14 of the board's 16 directors come from outside the company), GM also declared its quarterly dividend, paying 50 cents per share. It was pleasing to note that our company's shares outstanding have now declined from 756 million at the beginning of this year to 708 million, due to the share-repurchase plan. If GM continues to buy back 48 million shares a year, we'll be talking about a private company in, what, two decades?!

Changing gears... ALERT, ALERT! As our skyrocketing Web readership already knows, The Fool Web site took on a brilliant new look over the weekend, reorganized and redesigned from the ground up. We first launched www.fool.com in January of 1996, redesigned it and added message boards on April Fool's Day of 1997, and are now rolling out a much improved site to begin November. If you haven't visited the Fool Web site before, or don't have an AOL connection at work, we encourage you to click in and see the thing. If you'd like to share your reactions to it, please let our production team know! If you have any questions, I sit here as usual twiddling my thumbs and awaiting your e-mail (DavidG@fool.com). We rely on your comments and suggestions to help The Fool "every day in every way to become better and better."

Another new launch: AOL readers will find our new FoolWatch feature most useful. FoolWatch provides you a running list updated dynamically throughout the day to keep you up with everything happening in Fooldom. When new articles go up, new products come out, when Tom and I will be appearing as guest hosts of MTV's dance show "The Grind," you'll be the first to know thanks to FoolWatch... it has links to every new thing in Fooldom. Favorite-place the feature by clicking the heart. And Fool Web readers can expect FoolWatch to show up shortly, as well.

Also, we have a new survey up for those who'd like to see portfolio-tracking functionality brought to The Motley Fool Web site. If that means you, please do take a few minutes out to fill the thing in, which will help us optimize the design.

Iomega's (NYSE:IOM) rise of $1 3/4, in addition to powering up the Fool to a market-beating day, also put our historic return back over the 1000% mark. Much was made over the past year of the new competition for the Zip drive coming in the form of the Compaq-originated LS-120 drive. But those of us who've followed Iomega and the story of its so-called competition continue to see articles like the one just out in the new issue of MacWorld magazine. BADGERBOB@aol.com brought this to our attention, pointing out, "The article basically pans the drive as being way too slow (three times slower than Zip) and more expensive." That's what Fools have been pointing out for months now, but it's pleasing as shareholders to see the media and the market begin to recognize this, as well. No more fodder for journalists who use short-sellers as their exclusive sources, no?!

Fool on!

-- David Gardner, November 3, 1997


TODAY'S NUMBERS
Stock Change Bid ---------------- AMZN --- 61.00 AOL +2 3/4 79.75 T + 13/16 49.75 CHV +3 13/16 86.75 DJT + 15/97 9.31 GM +2 15/16 67.13 INVX + 1/8 25.63 IOM +1 3/4 28.56 KLAC +3 1/4 47.00 LU +1 1/8 83.50 MMM + 11/16 92.19 COMS +1 15/16 43.38

Day Month Year History FOOL +3.01% 1.55% 27.83% 241.14% S&P: +2.66% -0.88% 26.76% 104.84% NASDAQ: +2.28% -3.30% 26.25% 126.33% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 28.56 1033.43% 8/5/94 355 AmOnline 7.27 79.75 996.54% 10/1/96 42 LucentTech 47.62 83.50 75.36% 8/11/95 125 Chevron 50.28 86.75 72.52% 9/9/97 290 Amazon.com 38.22 61.00 59.60% 8/12/96 110 Minn M&M 65.68 92.19 40.37% 8/12/96 280 Gen'l Moto 51.97 67.13 29.15% 8/12/96 130 AT&T 39.58 49.75 25.70% 8/24/95 130 KLA-Tencor 44.71 47.00 5.12% 8/13/96 250 3Com Corp. 46.86 43.38 -7.44% 6/26/97 325 Innovex 27.71 25.63 -7.52% 4/30/97 -1170 *Trump* 8.47 9.31 -9.96% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 28311.25 $25729.38 5/17/95 980 Iomega Cor 2509.60 27991.25 $25481.65 9/9/97 290 Amazon.com 11084.24 17690.00 $6605.76 8/11/95 125 Chevron 6285.61 10843.75 $4558.14 8/12/96 280 Gen'l Moto 14552.49 18795.00 $4242.51 8/12/96 110 Minn M&M 7224.44 10140.63 $2916.19 10/1/96 42 LucentTech 1999.88 3507.00 $1507.12 8/12/96 130 AT&T 5145.11 6467.50 $1322.39 8/24/95 130 KLA-Tencor 5812.49 6110.00 $297.51 6/26/97 325 Innovex 9005.62 8328.13 -$677.50 4/30/97 -1170*Trump* -9908.50 -10895.63 -$987.13 8/13/96 250 3Com Corp. 11714.99 10843.75 -$871.24 CASH $32438.81 TOTAL $170571.44








Note
The Fool Portfolio was launched on August 5, 1994, with $50,000. It was renamed the Rule Breaker Portfolio in October 1998. The investing strategy began with the first investments of the Fool Port and has evolved with time and experience. In July 2001, the portfolio began adding $12,500 each quarter (We missed Jan. 2002, so we added $25,000 in April 2002). We skip a quarter if we have enough uninvested cash or cash available in stocks we would prefer to sell to make new investments. All transactions are shared and explained publicly before being made, and returns are compared in each week's column to the S&P 500 (including dividends where noted) and the Nasdaq composite. For a history of all transactions, please click here.