<THE RULE MAKER PORTFOLIO>
What Happened to Cash-King?
A few great memories
By Tom Gardner (TomGardner@aol.com)
Alexandria, VA (Dec. 31, 1998) -- To close out 1998, I'd like to be selfish and share six of my Motley Fool highlights for 1998. I encourage you to drop by the Rule Maker Strategies folder and share either your 1998 Highlights or 1999 Resolutions with other Fools, as well.
Ok, here are six of my favorite Motley Fool moments for 1998:
The Launch of This Portfolio
On February 3, 1998, we launched the Cash-King Portfolio -- now renamed the Rule Maker to match it up as a philosophical balance to the Rule Breaker Portfolio.
Its first eleven months have brought us 30 percent gains, beating the S&P 500 by more than eight percentage points and nosing out the Nasdaq. More than short-term gains, I hope and believe that the Maker portfolio has, with your help, brought to Fooldom a unique look at public companies and portfolio allocation. I can honestly say that my study this decade of overdog businesses has totally convinced me that owning the likes of Microsoft, Gap, Intel, and Pfizer is safer than owning managed mutual funds. And it's a heckuva lot more rewarding, with fees and taxes factored in.
In 1999, we're going to make two more $2,000 investments to the portfolio. And we'll be getting closer to the companies that we already own -- attending shareholder meetings, speaking with company executives, and carefully reviewing quarterly earnings estimates as they roll through. I think we have a valuable bag of unpredictables to share with you in 1999, which I expect you'll like.
The launch and maintenance of this portfolio has been a great source of joy for Al, Phil, Rob, and myself. I hope it has been for you as well. In 1999, as your favorite sports coach is wont to say, "We'll be taking it to the next level."
CBS This Morning: The Dolan Show
On the first of September, David and I appeared on CBS television's morning show, CBS This Morning, and reiterated that, for most investors, the turbulent downdraft of the previous few weeks was inconsequential. To our complete surprise, CBS then brought out their regular financial advisors, Ken and Darya Dolan, to respond to our comments. We had never encountered the couple nor made any comments about their work.
Ken Dolan turned from the show host, looked directly into the camera at millions of Americans, and uttered these immortal words:
"Let me tell you something. Let me look into this camera, okay? I'm from Wall Street for a lot of years. I'm so tired of this long-term, buy and hold, everything's going to be all right. It's a bunch of baloney! The market goes down 500 points, the market goes down, it goes down, it goes down, up a little bit, too. Let me tell you Mr. Motley Fools and everybody else going on, that the long term is the easiest cop-out way to talk about the market. Yes, if the market continues down, then you take 7 or 8 or 9 years to get the value back again in your retirement plan. And you can keep knocking [us] who are bearish of saying, take your profits off the table, go into treasuries, go into money market funds, go into the sidelines and wait for a better day. You tell the retirees that have been told by Wall Street to go do high tech stocks so they can boost up their retirement plan, you go make up the difference of money to them. Well, they don't have any money, because they are long-term buyers."Since that appearance on September 1st, the stock market, as measured by the S&P 500, is up 23.5%. The Nasdaq, something of a bellwether for the technology stocks that the Dolans suggest that individuals should not "do," has risen 37.8% since September 1st.
- Ken Dolan, CBS This Morning
September 1, 1998
The whole exchange is flush with educational material for Fools. I take an unusual lesson from the circus hype, though. CBS This Morning hasn't revisited the national prediction of its financial advisors. I guess that isn't what television programming is all about. And the world appears to be turning elsewhere. TV viewing at the three major networks was down 10% in 1998.
And today, Yahoo! is worth more than all of CBS.
You and The Cisco Vote
In the spring of 1998, we decided to put our portfolio entirely into your hands. We asked you for guidance on our next investment -- you, the average folks that the full-service brokerage firms of America don't think should be managing their own money. After a public discussion on the message folders, we collected the five most popular submissions and entered them into a Fool's Online Poll. Of the five stocks -- General Electric, Tellabs, Cisco, Dell, and Schering-Plough -- you selected Cisco Systems (Nasdaq: CSCO).
Since our purchase in June, Cisco has risen more than 58%. That's interactivity at work among thousands of people around the world. That's open discussion in an open market. It's a meritocracy at work. And it's 58% growth in our pockets. Thanks, Fools.
The Tom Kurlak Roundabout
A week ago, Merrill Lynch semiconductor analyst Tom Kurlak reversed his position on Intel (Nasdaq: INTC). He raised his earnings estimates and boosted his rating on the stock from "neutral" to "accumulate." During this year of his bearishness, Intel doubled in price.
Now, not long ago, the financial media would not have reported on Mr. Kurlak's mistake -- choosing, instead, to just name him one of the technology world's premier analysts, without regard for his cost-adjusted performance record. Things are changing, though. Bloomberg reported that the markets may be losing confidence in this analyst's calls -- to which, we add, all analysts' short-term calls.
Given that Intel has risen from $2 to $120 over the past ten years, we Fools have been asking all year: "Wouldn't the individual investor have done better by ignoring Mr. Kurlak's opinions -- which seem to change with the seasons -- and instead just buying and holding Intel?" We have our answer. Thankfully, here in Rule Maker land, we've got Rob Landley covering the industry like a glove, without any interest whatsoever in your decision to buy, hold, or trade the stock. Rob's response to Mr. Kurlak in May, 1998 was one of my favorite articles on the site this year: Kurlak's Folly.
5. The April Fool's Joke
If you missed our 1998 April Fool's Day surprise, you missed my single favorite development on the site since our inception back in 1994. Here is a link to that collection: April 1, 1998. I suggest reading the Original Apology, the New 13 Steps to Investing, and the Email Excerpts. What an amazing day that was. I hope for many more like them.
6. The SOS Charity Drive
I'll close with something we've been throwing at you quite a bit to end this year. It's our charity drive for Share Our Strength, the non-profit that helps to fight hunger and rebuild lives in communities across America. Its founder, Billy Shore, is an incredible guy with an inspiring mission -- to end hunger in America and to take the experience from America out to communities across the world. With the Internet, that vision can become reality.
Share Our Strength's core mission is simply to get restaurants and cafeterias across the country to divert their clean leftover foodstuffs to community kitchens. An elegant solution that has had extraordinary results in the 1990s.
I hope you'll take a look at the SOS Information on our site and making an investment in the future. Our year-end drive, a unique model for Internet giving, has raised more than $140,000. Just awesome. Here's how to give before the New Year's Bell.
Happy New Year and thank you for all your contributions to this community.
I can't wait for 1999.
Tom Gardner, Fool
|Recent Rule Maker Portfolio Headlines|
|12/28/00||Cisco's Aggressive Call|
|12/27/00||What's Wrong With This Market?|
|12/26/00||Intel's Pentium 4 Comeback|
|12/22/00||Better Brand, Better Investment|
|12/21/00||Wireless Struggle Over the Airwaves|
|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 5/16 102.50 CHV -1 1/4 82.94 CSCO + 1/8 92.81 KO - 13/16 67.00 GPS -1 56.13 EK --- 72.00 XON -1 1/2 73.13 GM -1 3/8 71.56 INTC - 5/8 118.56 MSFT - 5/16 138.69 PFE -1 1/8 125.00 SGP - 1/4 55.25 TROW +3 34.25
Day Month Year History R-MAKER -0.27% 6.89% 30.14% 30.14% *S&P: -0.12% 5.47% 23.91% 23.91% NASDAQ: +1.19% 12.47% 31.59% 31.59% *S&P 500 numbers have been adjusted to reflect dividends. Rule Maker Stocks Rec'd # Security In At Now Change 2/3/98 24 Microsoft 78.27 138.69 77.19% 5/1/98 55.5 Gap Inc. 34.06 56.13 64.78% 6/23/98 34 Cisco Syst 58.41 92.81 58.90% 2/3/98 22 Pfizer 82.30 125.00 51.89% 2/13/98 22 Intel 84.67 118.56 40.02% 8/21/98 44 Schering-P 47.99 55.25 15.12% 2/6/98 56 T. Rowe Pr 33.67 34.25 1.71% 5/26/98 18 AmExpress 104.07 102.50 -1.51% 2/27/98 27 Coca-Cola 69.11 67.00 -3.05% Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Eastman Ko 63.15 72.00 14.02% 3/12/98 20 Exxon 64.34 73.13 13.66% 3/12/98 15 Chevron 83.34 82.94 -0.49% 3/12/98 17 General Mo 72.41 71.56 -1.16% Rule Maker Stocks Rec'd # Security In At Value Change 2/3/98 24 Microsoft 1878.45 3328.50 $1450.05 5/1/98 55.5 Gap Inc. 1890.33 3114.94 $1224.61 6/23/98 34 Cisco Syst 1985.95 3155.63 $1169.68 2/3/98 22 Pfizer 1810.58 2750.00 $939.42 2/13/98 22 Intel 1862.83 2608.38 $745.55 8/21/98 44 Schering-P 2111.7 2431.00 $319.30 2/6/98 56 T. Rowe Pr 1885.70 1918.00 $32.30 5/26/98 18 AmExpress 1873.20 1845.00 -$28.20 2/27/98 27 Coca-Cola 1865.89 1809.00 -$56.89 Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Eastman Ko 1262.95 1440.00 $177.05 3/12/98 20 Exxon 1286.70 1462.50 $175.80 3/12/98 15 Chevron 1250.14 1244.06 -$6.08 3/12/98 17 General Mo 1230.89 1216.56 -$14.33 CASH $120.62 TOTAL $28444.18 *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>