Fool Portfolio Report
Thursday, October 12, 1995
Funny thing happened this past week. . . we heard through the grapevine that a financial services company, which will remain nameless, opined aloud that The Motley Fool Inc. was really nothing more than an entertainment company---absent investing expertise, absent serious investment research, absent much of anything but a few goons juggling mouse pads.
You might think we'd be distressed, guys tugging ties, gals tugging scarves, all crying, "We don't get no respect!" That might be the case were we branded "The Prudent Trader" or "The Arrogant Speculator." But it doesn't come into play at Fool Global Headquarters.
Frankly, we like the idea of appearing "insubstantial" perhaps "juvenile" in the eyes of the institutional world, which has for so long done a smashing job of underperforming the market's average return. Remember that youthful traders with little or no investment experience make up much of the financial industry, trading the accounts of individual investors, profitlessly---for sometime. And how? Simple. It's called "affectation" and branding. "Building our business one investor at a time. . . " blah, blah, blah.
Gimme Fools with the succeeding investment approaches at their behest over any single institutional vehicle any day of any year up until The Fool Inc. brand is owned by a couple penny players with a fax machine!
Sounds unfathomable. *Any* vehicle? Well, for now we'll let Berkshire and a handful of others slide by, but when you look at our 15-month returns, supported by 15-25 years of historical backtesting, and balanced on a research team that extends from Fool Central to Boston, to Chicago, to Portland, to Phoenix, to Austin, to Raleigh. . . with thousands of individual investors throwing sophisticated research up into our message boards every day. . . yep, we'd like to see some more comparison between Wisdom and Folly. And, sher, we like that "entertainment" company label.
And what, Fool, are these investment approaches?
Let's start with Investing for Growth, the investing guide which is now purchasable in Foolmart. Robert Sheard (MF DowMan) has built a growth and momentum approach to investing which has returned 28.8% growth annually over the last 15 years. We issue a challenge to the financial world: Can any institutional investor offer up a model that outperforms Investing for Growth? Until then, we'll continue to manage our monies in "entertaining" fashion.
Backing Investing for Growth is the Foolish modification to Michael O'Higgins' Beating the Dow approach. Buying a collection of four of the highest-yielding Dow stocks has compounded 25.5% annually over the past 25 years. Thank you, Ann Coleman (MF Numbers) and others, for the fine work there.
And behind these two models sits the PEG approach, a multiple-to-earnings approach that is spelled out in The Fool's School and The Motley Fool Investment Primer. The PEG is responsible for digging up stocks like America Online, Boston Technology, Ride Snowboard, et al (Oh, and yes, Sonic Solutions as well).
And behind the PEG sits the YPEG which does a nice job of valuing stocks of the larger corporations, like Sears, American Express, and The Gap.
All rolled up into one, The Fool Portfolio is up 63.2% versus S&P 500 returns of 27.2%, meaning we're 36% ahead of the index that most institutional investors lose to each year. And yet they smile at how pleasingly we "entertain" them with our idle Foolishness.
"They say, what they say." (George Bernard Shaw)
Additionally, we get touched up on occasion by the traditional media. . . Barrons recently opined via national radio that online financial services offer "too much information" which does more to confuse individual investors than enlighten them. Hmmmm. Better to just get that cold-call around 8 PM and guess at whether or not to buy the stock sans assistance? Funny, ain't it?
The variety of approaches outlined all worked today to land The Fool in second place, pulling in 0.95% versus 1.4% growth for the NASDAQ and 0.63% for the S&P 500.
America Online (NASDAQ:AMER) rose $1 1/4. Sometimes we wonder aloud where Michael Murphy is, and what he must be thinking with this issue up more than 300% since he first shouted, "Short!" Off Foolish projections of 6 million subscribers before June, 1996, and valued as it is today off subscriber value, AMER would be sitting above $100 per share, up another 60% from here. Seems impossible, but when you spy the stock's compounded growth of 168% annually over the last three years, and apply some of the basic motion laws you learned in grade school, it seems reasonable. How long does it take for a train traveling 168 miles per hour to slow it down to 10.5 miles per hour (market average growth)?
Sears moved up another $1 1/4 to $36 3/8. No news; this has truly been an awesome investment for The Fool. Sometime next week we'll sit down and figure out just how much we've made in dollar and percentage terms off Sears. Difficult to read with the Allstate spinoff last August.
General Electric, another of our Dow heavies, climbed $3/4 to $62 3/4. GE is up 8.35%. And Chevron fell $1/4; we're dead even in CHV.
How about The Gap, Fools, which rose $1/2 to $38 3/4, up 19% for us. This is a new 52-week high for GPS, which touched just below $39 last November. Our aim is to beat the Dow stocks with our YPEGged giants, and The Gap is doing just that. Double the market, double the market!
Ride Snowboard chugged up another $5/8 to $20 5/8, nearing it's 52-week-high of $21 3/4 as well. RIDE will be announcing quarterly earnings on the 19th of October, and we'll be there to cover 'em.
And lastly, Iomega fell $1 as traders continued to play games, separating stock from company performance. C'est la vie, sometimes you have to defer the dream. With 10 cents and strong financials behind it, perhaps as MF Chiros jokingly opined today in the IOMG folder, Iomega and we will have to wait until the 4Q numbers till the Street wakes up. Yep, we'll wait.
And so we close out a strong day, battling back ferociously in our attempt to outdo the S&P 500 in a horrible month (thus far) for tech stocks. One of the nice things is that if we underperform---even over a period of decades, as many institutions have---we've got the tap shoes in the basement and that entertainment thing to fall back on.
- Tom Gardner, 10/12/95
AMER +1 1/4 AMAT +2 3/4 CHV - 1/4 GE + 3/4 GPS + 1/2 IOMG -1 KLAC - 1/2 RIDE + 5/8 S +1 1/4 SNIC - 1/8
Day Month Year History FOOL +0.95% -3.40% 46.98% 63.19% S&P 500 +0.63% -0.22% 26.96% 27.20% NASDAQ +1.40% -2.68% 35.06% 41.02% Rec'd # Security In At Now Change 8/5/94 340 AmOnline 14.55 62.88 332.26% 5/23/95 510 Ride Inc. 9.91 20.63 108.19% 5/17/95 335 Iomega Corp 15.11 21.13 39.77% 8/5/94 165 Sears 28.93 36.38 25.76% 4/20/95 155 The Gap 32.55 38.75 19.05% 8/11/95 95 GenElec 57.91 62.75 8.35% 8/11/95 110 Chevron 49.00 49.00 0.00% 8/24/95 130 KLA Instrm 44.71 38.75 -13.33% 8/24/95 50 AppldMatl 115.05 98.00 -14.82% 12/23/94 340 SonicSol 14.48 9.88 -31.82% Rec'd # Security Cost Value Change 8/5/94 340 AmOnline 4945.56 21377.50 $16431.94 5/23/95 510 Ride Inc. 5052.44 10518.75 $5466.31 5/17/95 335 Iomega Corp 5063.13 7076.88 $2013.75 8/5/94 165 Sears 4772.65 6001.88 $1229.23 4/20/95 155 The Gap 5045.25 6006.25 $961.00 8/11/95 95 GenElec 5501.87 5961.25 $459.38 8/11/95 110 Chevron 5389.99 5390.00 $0.01 8/24/95130 KLA Instrm 5812.49 5037.50 -$774.99 8/24/95 50 AppldMatl 5752.49 4900.00 -$852.49 12/23/94 340 SonicSol 4924.18 3357.50 -$1566.68 CASH $5969.86 TOTAL $81597.36 Transmitted: 95-10-12