Workshop Portfolio

<FOOLISH WORKSHOP>

A Fool is Born      

by Louis Corrigan (TMF Seymor)


[Ed Note: This article was originally written in September 1996 for our Teens and Their Money message board.]

Baltimore, MD (March 10, 1999) -- Since one thing that age has going for it is a heightened sense of perspective, I'd like to share with you a little investment autobiography.

To be really complete, my first actual investment began with a gift. Around the age of 10, I was given one share of a stock by my uncle, in a company called EMI. I kind of ignored it, rarely checking its price in the paper. To this day I'm not sure exactly what the company did. The family all laughed when my quarterly dividend checks for about six cents came in the mail. Without any other knowledge about investing, it was hard to get excited; somewhere I think the stock certificate is sitting in my basement, and if anyone knows if EMI changed its name to Microsoft, or if the certificate is worth anything, please let me know.

Unfortunately, my next experience didn't come until about 13 years later. My wife and I scraped together about $2000 in an IRA. Where did it end up? A Certificate of Deposit (CD) with a maturity of 5 years. Looking back, I can't really recall what we were thinking then. It was the late '70s, when the investment environment was markedly different from today's. Imagine 15% inflation, falling stock prices, and CDs paying about 12%, which I guess is what enticed us to buy. As inflation was whipped eventually, my wife and I congratulated ourselves on our investment acumen. Little did we realize that 12% returns were actually quite pitiful compared to the roaring Bull market in stocks enjoyed during the '80s.

Over the next few years, we contributed to our IRAs, rolling over those CDs when they came due. Eventually we learned that maybe there were other opportunities out there; the world of mutual funds beckoned brightly. At that time, one of my friends was a fledgling stockbroker for a regional investment firm. Who better to give us good, straightforward investment advice? The returns from the glossy brochures looked great. And the 8% load really would not have much effect in the long run. Whoa! "Eight percent?" I asked myself. Was that really necessary? My broker friend explained that yes, it was part of standard operating procedure. Sure, there were some funds out there that did not require loads, but he was more than happy to point out, "You're on your own, Buddy, if you want to find them." Furthermore, when I asked to see what the actual investments the mutual funds he was pitching were invested in, i. e. a copy of the annual and quarterly reports, he looked at me askance. In effect, he said it was inconceivable to him how this information would be helpful, given my lack of investment experience.

The next years were the decade of the Mutual Fund, otherwise known as the Blue Period. I did the research, put in the time, and invested most of my money in no-load funds on the Forbes Honor Roll list. These funds seemed to have long track records of excellent returns in both up and down markets. Where could I go wrong?

First let me say that I actually did make some money in these funds, just never quite as much as that darned Standard and Poor's 500 Index, which everyone kept harping on. Year in and year out, the annual reports said the funds had a satisfactory year, although when actually compared to the S&P 500, not quite as satisfactory. The excuses these funds gave were numerous: 1) We weren't fully invested because the short-term outlook for stocks didn't appear to be bright. 2) We had too many bonds in the portfolio that underperformed the stock component. 3) Hey look, our investment in stock XYZ gained 250%! Too bad it was only 0.3% of our portfolio. 4) We took an unexpected loss this year because of our investment in junk bonds in your "total return fund," which we marketed to you for its safety in all kinds of markets. 5) Our investment style is out of favor right now.

The list goes on and on, but let's just say that somehow my funds never quite achieved the superior record touted on the Forbes Honor Roll. In retrospect, I'm sure the concept of "regression towards the mean" was playing a major role here -- a topic we'll have to delve into another time.

Finally, I (partially) wised up and figured that if I couldn't beat the S&P 500 year in and out, why not join 'em? John Bogle, his Vanguard Index 500 Fund, and I became partners. Up until recently, this fund was far and away my investment with the best track record.

Now we're caught up to relatively modern history. Some time ago I happened on a heretofore obscure part of AOL with the quirky name the Motley Fool. The more I read there, the more I saw how extremely typical my experience was, almost to the point of being a classic case study. After a number of months online, I took that first major plunge, opened up an account at a deep-discount broker, and invested in Beating the Dow: Merck (NYSE: MRK), General Electric (NYSE: GE), Sears (NYSE: S), Chevron (NYSE: CHV), and 3M (NYSE: MMM).

Well, needless to say, I have never looked back. Since then I've divested myself of all those mutual funds. (I've still kept some international funds and, sentimental Fool that I am, I still have my dear old Vanguard Index 500 Fund). I've added growth stocks since then, some from the Rule Breaker Portfolio and others not. I've dabbled more extensively in the world of high dividend investing, a la Beating the Dow, and have developed a variant of BTD based on my beloved S&P 500, which I've unimaginatively titled "Beating the S&P."

I guess the point of all this is to emphasize that by just being here in Fooldom, reading this and other message boards, and learning, you have gained an enormous advantage already, even if you have not yet actually invested one cent. The communications world has changed dramatically since I bought that first Certificate of Deposit about twenty years ago, with modems now available to connect you to virtually an infinite amount of information.

Recently I calculated the return on an investment in Beating the Dow starting at the age of 20, investing $2000 a year for the first 10 years, $3000 a year for the next decade, $4000 a year for the next decade, etc., until you're adding $6000 a year in your 60s. Total portfolio worth by age 65, excluding taxes and transaction costs? About 14 million dollars! This pie in the sky number is real. Start now with whatever you can muster up. While you may not yet have much capital, time's on your side.

And that's one advantage over me you will always have.

Check out the latest file updates for the Workshop:
New Rankings | Workshop Returns


Workshop Portfolio


9/28/01 as of ~5:30:00 PM EDT

Ticker Company Price
Change
Daily Price
% Change
Price
AETAETNA INC NEW0.943.36%28.94
BABOEING CO(1.04)(3.02%)33.36
CATCATERPILLAR INC1.112.53%44.91
COGCABOT OIL & GAS 'A'0.693.59%19.90
DDDU PONT (EI) DE NEMOURS0.992.74%37.14
DGXQUEST DIAGNOSTICS(0.45)(0.73%)61.42
EKEASTMAN KODAK0.421.31%32.49
GMGENERAL MOTORS1.393.38%42.55
LHLABORATORY CORP AMER HLDG(NEW)1.141.42%81.21
MOPHILIP MORRIS COS(0.76)(1.55%)48.24
NEWPNEWPORT CORP0.261.90%13.97
NVRNVR INC(0.54)(0.38%)140.41
PKXPOHANG IRON & STEEL ADS1.097.51%15.61
PVNPROVIDIAN FINANCIAL1.075.64%20.04
QCOMQUALCOMM INC(0.40)(0.84%)47.16
RJRRJ REYNOLDS TOBACCO HLDGS(0.69)(1.19%)57.31
SLESARA LEE CORPUnchg.Unchg.21.09
UNFIUNITED NATURAL FOODS0.563.18%18.15
WMIWASTE MANAGEMENT(0.01)(0.04%)26.74

Overall Return -- total % Gained (Lost)
  Day Week Month Year
To Date
Since
Inception
(12/24/1998)
Workshop1.30%7.32%(12.02%)(20.66%)(18.91%)
Comparable S&P 500n/an/an/an/a(19.07%)
S&P 500 (DA)1.95%7.48%(8.33%)(21.22%)(14.88%)
NASDAQ2.02%4.71%(17.46%)(39.68%)(31.41%)
DJIA (DA)1.68%7.07%(11.07%)(17.86%)(2.22%)

Internal Rate of Return -- Annualized Rate of % Gained (Lost)
  Since Inception (12/24/1998)
Workshop(17.62%)
vs. S&P 500(17.63%)

Trade Date # Shares Ticker Cost/Share Price Total % Ret
1/8/0126MO40.9448.2417.82%
1/8/0122RJR50.1057.3114.39%
1/8/0167UNFI16.4518.1510.34%
12/24/9824CAT43.0844.914.24%
1/8/018NVR136.63140.412.77%
1/8/0140WMI27.4426.74(2.54%)
1/8/0150SLE22.5421.09(6.42%)
1/8/0161PKX17.8315.61(12.46%)
1/8/0115DD48.8337.14(23.95%)
1/8/0129AET38.1728.94(24.19%)
1/8/0139COG28.7519.90(30.79%)
1/8/0114QCOM75.5447.16(37.57%)
1/8/018LH134.6981.21(39.70%)
12/27/9918GM73.2642.55(41.92%)
1/8/0118BA59.5333.36(43.96%)
1/8/019DGX114.4961.42(46.35%)
12/27/9920EK65.0932.49(50.08%)
1/8/0120PVN55.5020.04(63.89%)
1/8/0115NEWP74.9613.97(81.36%)

Trade Date # Shares Ticker Total Cost Current Value Total Gain
1/8/0126MO$1,064.50$1,254.24$189.74
1/8/0122RJR$1,102.25$1,260.82$158.57
1/8/0167UNFI$1,102.12$1,216.05$113.93
12/24/9824CAT$1,034.00$1,077.84$43.84
1/8/018NVR$1,093.00$1,123.28$30.28
1/8/0140WMI$1,097.50$1,069.60($27.90)
1/8/0150SLE$1,126.88$1,054.50($72.38)
1/8/0161PKX$1,087.75$952.21($135.54)
1/8/0115DD$732.50$557.10($175.40)
1/8/0129AET$1,107.00$839.26($267.74)
1/8/0139COG$1,121.37$776.10($345.28)
1/8/0114QCOM$1,057.62$660.24($397.39)
1/8/018LH$1,077.50$649.68($427.82)
1/8/0118BA$1,071.50$600.48($471.02)
1/8/019DGX$1,030.44$552.78($477.66)
12/27/9918GM$1,318.62$765.90($552.73)
12/27/9920EK$1,301.75$649.80($651.95)
1/8/0120PVN$1,110.00$400.80($709.20)
1/8/0115NEWP$1,124.37$209.55($914.83)
 
Cash: 
Total: 
$10.80
$15,681.03
 

Key
• S&P 500 (DA) = dividend adjusted. Dividends have been added to the total return of the index.
• DJIA (DA) = dividend adjusted. Dividends have been added to the total return of the DJIA.

Note
Note: The Workshop Portfolio was launched on December 24, 1998, with $4,000 which was invested in the Foolish Four strategy. Approximately $15,000 was added on January 8, 2001, to support five additional mechanical strategies. At that time approximately $1000 was transfered out of the Foolish Four strategy to bring the Foolish Four into balance with the other strategies. (That's why the Foolish Four's overall return is not consistent with stock values.) Such rebalancing will take place each year among the strategies so that each will start out with approximately the same value at the begining of the year. No more cash additions are planned. The first four tables above show the overall performance of the portfolio. Below that we also track the performance of each component strategy. All transactions are announced publicly before being made, and returns are compared daily to the S&P 500 and the Dow. (Dividends are included in the yearly, historic and annualized returns.) Stocks are chosen using strategies developed by the Workshop community.