Rule Breaker Portfolio

Fool Portfolio Report
Wednesday, December 24, 1997
by Jeff Fischer (TMFJeff@fool.com)


CHICAGO, IL (Dec. 24, 1997) -- In shortened trading today, the S&P lost 0.68% and the Nasdaq dropped 0.69%. It's official: there was no Santa Claus Rally this year. But we hardly need it following a record three-year span for the stock market. Fools are not about to look a gift horse in the mouth, which is somewhat what the market is: a gift horse. You invest your money with the companies and managements that you believe in most, and their hard work and the hard work of other citizens (who are consumers) results in success, which results in the stock price rising.

It's a wonderful life, eh? We all have much more to be thankful for than we might think.

The Fool Port was able to beat the market today, and for the year is beating the Nasdaq and close to -- ever inching closer to -- the S&P. But we may not pass it this year. (At the beginning of 1997 I was lamenting the New Year because we had such a large lead on the S&P after 1996. If you simply add the two years together... ah, but you can't change the calendar.)

Beating the S&P in 1997 was apparently more of a challenge than usual, with 91% of mutual funds losing to the benchmark index. Small and mid-cap stocks suffered, while giant companies lifted the S&P higher. If you didn't own the right few companies, though, keeping up with the S&P 500 was no small task. Over the past five years, in fact, about 90% of mutual funds have not been able to keep pace with the rising S&P.

Try steering a giant barge, while juggling bowling balls in your hands, down a very strong and narrow channel -- and now close your eyes.

Mutual fund managers often close their eyes to the long-term picture in favor of juggling stocks, thinking that they can outsmart the market that continues to flow downstream. Meanwhile, their barge is hitting the shore, getting stuck in mud, drifting sideways... What hurts most, though, is the overcompensation that most of these underperforming mutual fund managers are paid. Hopefully they are sharing some of that wealth with charity and with those less fortunate. (By the way, this week's Family Fool is about giving and charities.)

A Fool's words will close today's holiday-shortened column. His letter was sent to TMF Venus, who sent it along to us. We couldn't have said it better ourselves:

"My favorite Dickens' story is A Christmas Carol. About the only two of the seven deadly sins that old Ebenezer wasn't guilty of were Sloth and Lust, as I recall. The old man's redemption comes when he finally realizes that he had been concentrating on the wrong things and not really living. It's not a life, but more of a living death to concentrate on the mechanics of living (in this case the accumulation of wealth that served no purpose). It's not the acquisition itself that's the sin, but the attachment of significance to things rather than to the journey of one's life. Interestingly enough, when Scrooge finally wakes up to the truth, he doesn't beat himself up for missing out on all his misspent years, but starts living in the moment. This isn't to say Scrooge stops planning, he doesn't. His plans are just expanded to include those around him, most notably, Cratchit, Tiny Tim and Scrooge's young nephew. Scrooge becomes a Fool on Christmas day.

"Well, I've waxed the Philosophic, when it's the Toyota that really needs waxing.

"When you come to think about it, the Fool isn't about investing to get rich. The Fool is about being responsible for your own actions and getting your life in order so that you can concentrate on the things that are really important -- friends, family, community. Thanks."

To close, the Fool's first-ever charity fund has been a great success, raising nearly $100,000 to date. We thank everyone who has contributed to this great cause, and Fools everywhere should be proud. If you haven't yet given and can, please do consider giving. If you can't give this year, we hope that next year you will be in a position to give (perhaps with some help from the Fool). And again, if you have contributed, we're all grateful for the contribution -- all Fools, from Alexandria, to Captiva Island, to Iceland, to Japan.

Have a wonderful holiday season, from everyone at The Motley Fool.

Fool on!

Last Year's Christmas Eve Letter

Today's FoolWatch: all the latest in Fooldom.

Have You Given? The Fool Charity Fund


TODAY'S NUMBERS
Stock Change Bid ---------------- AMZN - 1/4 55.25 AOL -1 5/16 86.75 T + 7/16 62.13 CHV + 11/16 75.38 DJT --- 7.00 GM - 7/16 58.94 INVX + 1/16 20.50 IOM --- 12.50 KLAC + 3/8 37.25 LU + 5/16 77.50 MMM + 3/4 84.25 RTN.A +1 49.19 COMS - 3/8 32.94

Day Month Year History FOOL -0.26% -1.73% 21.94% 225.42% S&P: -0.68% -2.38% 25.91% 103.47% NASDAQ: -0.69% -6.31% 16.15% 108.22% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 86.75 1092.79% 5/17/95 1960 Iomega Cor 1.28 12.50 876.25% 10/1/96 42 LucentTech 47.62 77.50 62.76% 8/12/96 130 AT&T 39.58 62.13 56.97% 8/11/95 125 Chevron 50.28 75.38 49.90% 9/9/97 290 Amazon.com 38.22 55.25 44.55% 8/12/96 110 Minn M&M 65.68 84.25 28.28% 4/30/97 -1170 *Trump* 8.47 7.00 17.34% 8/12/96 280 Gen'l Moto 51.97 58.94 13.40% 12/19/97 17Raytheon 53.21 49.19 -7.56% 8/24/95 130 KLA-Tencor 44.71 37.25 -16.69% 6/26/97 325 Innovex 27.71 20.50 -26.02% 8/13/96 250 3Com Corp. 46.86 32.94 -29.72% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 30796.25 $28214.38 5/17/95 1960 Iomega Cor 2509.60 24500.00 $21990.40 9/9/97 290 Amazon.com 11084.24 16022.50 $4938.26 8/11/95 125 Chevron 6285.61 9421.88 $3136.27 8/12/96 130 AT&T 5145.11 8076.25 $2931.14 8/12/96 110 Minn M&M 7224.44 9267.50 $2043.06 8/12/96 280 Gen'l Moto 14552.49 16502.50 $1950.01 4/30/97 -1170*Trump* -9908.50 -8190.00 $1718.50 10/1/96 42 LucentTech 1999.88 3255.00 $1255.12 12/19/97 17Raytheon 904.57 836.19 -$68.38 8/24/95 130 KLA-Tencor 5812.49 4842.50 -$969.99 6/26/97 325 Innovex 9005.62 6662.50 -$2343.12 8/13/96 250 3Com Corp. 11715.99 8234.38 -$3481.62 CASH $32484.33 TOTAL $162711.77








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.