<THE RULE MAKER PORTFOLIO>
What Happened to Cash-King?
by Al Levit (firstname.lastname@example.org)
Glendale, CA (Dec. 14, 1998) -- Welcome to the Rule Maker portfolio. You will notice that it looks EXACTLY like the Cash-King portfolio. The name has changed, and the hyphen has died. Other than that, it's business as usual. Today is Monday, and that means we take a look at how the portfolio has done over the past week.
On an aggregate basis, we did OK. The Rule Maker portfolio went up 1.02% for the week, while the S&P 500 dropped 0.87%, and the Nasdaq went up 1.31%. Given the jumbo size of our companies, the S&P 500 probably provides a little better benchmark to measure performance. However, the performance of Microsoft (Nasdaq: MSFT), Cisco (Nasdaq: CSCO), and Intel (Nasdaq: INTC) makes up a significant part of the total performance of the Nasdaq, and since we have all three of those companies represented in the Rule Makers portfolio it helps to measure ourselves against that as well.
In any event, this is how each one of our companies fared last week:
Rule Maker Last This Change Cisco $78.25 $83.50 + 6.7% S-Plough $54.75 $57.75 + 5.5% Microsoft $127.38 $134.00 + 5.2% Pfizer $112.63 $114.88 + 2.0% Gap Inc. $50.56 $50.75 + 0.4% Intel $116.31 $116.44 + 0.1% T. Rowe $37.53 $35.94 - 4.2% AmEx $98.63 $93.75 - 4.9% Coca-Cola $69.00 $62.94 - 8.8% Fool Four Last This Change Chevron $81.69 $85.88 + 5.1% Exxon $71.50 $74.63 + 4.3% GM $69.50 $68.94 - 0.8% Kodak $73.56 $72.00 - 2.1% S&P 500 1177 1166 - 0.9% Total R-M $27,138 $27,414 + 1.0% RM History: + 25.42% S&P History: + 15.95%
At this point on Monday's we traditionally write about the news on our individual companies over the past week, but I will pass on that today. Instead, I am going to expand upon a couple of the charity ideas that have been floating around the Fool during the last few weeks. Now don't panic, this won't be yet another suggestion to make a contribution to our charity drive, although we certainly won't object if you decide to do so! In fact, I will start out by explaining why I am NOT making a contribution to the Fool's charity drive this year. I believe I have a good excuse, and here it is.
Everybody has to figure out how to help others by themselves. I've always found that the easiest, and more importantly, most certain way to give was to make the donation as soon as you received the income. Last year, when we had our first charity drive, I found a few dollars at holiday time for Share Our Strength, but I found quite a few more when I got my annual bonus this year.
However, at my company, annual bonuses are paid in March, so that's when I made my contribution. SOS was glad to have it, and they immediately put it to work on anti-hunger and anti-poverty programs. They can't count my donation towards the Fool charity drive without taking it away from the other programs, which doesn't make any sense.
What's the point? By doing things this way the Fool charity drive may be a little smaller, but I'm pretty sure the total amount that SOS will get from me to help the poor will be bigger because I gave them the money before I could spend it (or even invest it). If you're like me, and you find it hard to "save" your donations, you might also want to try to make your giving a full-year activity, rather than just at Christmas time. Then maybe next year David will have to come up with even more than $5,000 to kick off the Fool charity drive (with all the money his Rule Breakers make, he can afford it!).
One more idea on the giving front, and this one is of particular interest to Rule Maker investors. This comes under the "learn from my mistakes" category. I read several times that "donating shares" was the best way to give, but I always brushed it aside. After all, I'm a long-term investor, and I don't want to sell any of my stocks. I want to keep them for at least a decade! As a result, I've given away a lot of cash in the past.
I doubt if I'll being doing that in the future, at least not if I make any kind of sizable donation. I've finally thought this through. Assume I have 100 shares that I bought over a year ago (I believe this only works if you have held the shares at least a year and a day) at $30, and they are now worth $60. I'd like to make a donation to a charity. This is what I'll do:
- Donate the shares, which are worth $6,000
- Deduct $6,000
- Buy 100 shares of stock on the market the same day, for $6,000.
Ten years from now, when I finally sell these shares, they may be worth $60,000. At that time, I will owe tax on $54,000 of capital gains. If I had merely given $6,000 in cash to the charity, then I would owe tax on $57,000 of capital gains. This may not sound like much of a difference, but remember:
- You can play this game year after year if you wish with further charitable deductions.
- The charity receives the stock. Many times the charity will sell the stock immediately and use it for charitable purposes, but sometimes it needs an endowment to generate income in the future. If so, a Rule Maker should fit well in the charity's portfolio.
One last note about giving shares. I have a deep discount broker. My broker, at least, will allow a direct transfer of shares to the charity, but it is MUCH EASIER to accomplish if the charity also has an account at the same broker. Therefore, you may want to contact the charity and ask them to set up an account at your broker specifically so that you can transfer shares to them. There should be time to do this before the end of the year, but not a lot.
Tomorrow we go back to investing. Until then, Fool on!
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|Rule Maker Portfolio Archives »|
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.
Stock Change Bid AXP -2 1/4 91.50 CHV - 3/16 85.69 CSCO -3 1/8 80.38 KO + 7/16 63.38 GPS -3 1/4 47.50 EK -1 1/8 70.88 XON - 1/16 74.56 GM -3 3/16 65.75 INTC -4 7/8 111.56 MSFT -6 1/16 127.94 PFE -3 1/8 111.75 SGP -4 3/16 53.56 TROW -1 5/16 34.63
Day Month Year History R-Maker -3.56% -0.65% 20.96% 20.96% S&P: -2.17% -1.93% 13.44% 13.44% NASDAQ: -3.07% 0.89% 18.04% 18.04% Rule Maker Stocks Rec'd # Security In At Now Change 2/3/98 24 Microsoft 78.27 127.94 63.46% 5/1/98 55.5 Gap Inc. 34.06 47.50 39.46% 6/23/98 34 Cisco Syst 58.41 80.38 37.60% 2/3/98 22 Pfizer 82.30 111.75 35.79% 2/13/98 22 Intel 84.67 111.56 31.76% 8/21/98 44 Schering-P 47.99 53.56 11.60% 2/6/98 56 T. Rowe Pr 33.67 34.63 2.83% 2/27/98 27 Coca-Cola 69.11 63.38 -8.29% 5/26/98 18 AmExpress 104.07 91.50 -12.08% Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Exxon 64.34 74.56 15.90% 3/12/98 20 Eastman Ko 63.15 70.88 12.24% 3/12/98 15 Chevron 83.34 85.69 2.81% 3/12/98 17 General Mo 72.41 65.75 -9.19% Rule Maker Stocks Rec'd # Security In At Value Change 2/3/98 24 Microsoft 1878.45 3070.50 $1192.05 6/23/98 34 Cisco Syst 1985.95 2732.75 $746.80 5/1/98 55.5 Gap Inc. 1890.33 2636.25 $745.92 2/3/98 22 Pfizer 1810.58 2458.50 $647.92 2/13/98 22 Intel 1862.83 2454.38 $591.55 8/21/98 44 Schering-P 2111.7 2356.75 $245.05 2/6/98 56 T. Rowe Pr 1885.70 1939.00 $53.30 2/27/98 27 Coca-Cola 1865.89 1711.13 -$154.77 5/26/98 18 AmExpress 1873.20 1647.00 -$226.20 Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Exxon 1286.70 1491.25 $204.55 3/12/98 20 Eastman Ko 1262.95 1417.50 $154.55 3/12/98 15 Chevron 1250.14 1285.31 $35.17 3/12/98 17 General Mo 1230.89 1117.75 -$113.14 CASH $120.62 TOTAL $26438.68 *Please note: On 8/4/98 $2,000 cash was added to the
portfolio. $2,000 will be added every six months.
*The year for the S&P and Nasdaq is as of 02/03/98
</THE RULE MAKER PORTFOLIO>