Fool Portfolio Report
Friday, October 27, 1995
Ride Incorporated closed out a highly Foolish week with a gain of $2 5/8 Friday, helping the FOOL to a 2.67% gain for the day. For the week, The Fool Portfolio posted a return of 4.68%. The week was particularly satisfying and enjoyable in the face of nearly identical weekly DECLINES for the NASDAQ and S&P 500 of 1.32% and 1.34%, respectively.
This reversing of the market indices also brought us within a tiny fraction of our all-time Foolish high. Fool trivia fans will recall that date as September 22, 1995, and the return, 73.89%.
The past seven days saw us lose money in our big-money NYSE stocks, as Chevron, Gap, General Electric, and Sears all pulled back with the overall market. Sonic Solutions, following another poor earnings report, also dropped (from $8 3/4 to $8 1/8). But the rest was pure profit, with the biggest single move being America Online's week-long spurt from $65 3/4 to its Friday all-time high closing bid of $74 1/4. That move by AMER brought it up to a 410% return on our investment since we bought last August 5th, the lonely second day of our online service.
Which deserves some comment. Weeks and weeks ago, we received a lot of questions on our message boards and in e-mail that ran roughly along these lines: "America Online is up 40% so far. . . would you actually consider buying in here?" This question, when posed by a minion of the Wise, might often also be accompanied with the additional notion: "This stock is now SO overpriced that only a Fool would hold it." Then it went up 100%, then 200%, and some people still asked us, "You wouldn't actually buy it here, would you?" 300%. And now, back over 400%. And you know what? It's STILL my single favorite stock. As always, do your own research, make your own investment decisions. . . listen to your fellow Fools only insofar as you're looking for new ideas to check out.
But one of the more popular investment mistakes made by individual investors is to penalize a good stock's future due to its illustrious past. Just because something is up 50% or 250% in the past year does NOT mean that it's NOT a good buy. It could well still be. That's news for Barron's in particular, which routinely "picks off" big stocks by doing articles about how overpriced they must be, now that they've tripled in the past year. Yeah, yeah.
OK, so America Online had a good week. But so did RIDE (up $2 3/8), Iomega (up $1), KLA Instruments (up $1 1/2), and Applied Materials (up $1 1/4). Consider that the NASDAQ lost money and you see why we'll sleep well this weekend.
RIDE is an interesting case. Last week, the company announced earnings of 33 cents per share for its third quarter, coming in 6 cents (or 22%) above estimates. The stock sold off down below $20 at one point, as investors "bought on the rumor (of good earnings, ahead of time), and sold on the news." That's a typical pattern that any experienced investor recognizes. But ultimately, that's not the way the market works. Ultimately, the market recognizes good earnings by rewarding investors. And so at the end of this week, we see RIDE make a huge one-day move (13%) back to reflecting the strong growth of the snowboard business, and its dominant niche position within that dynamic industry.
Combine that with America Online's all-time high Friday, and we can't wait for the next week of trading. By the way, both Tom and I wrote up more valuation stuff in our Fool Recaps this week, so if you missed'em go back and check out our Tuesday and Wednesday writeups. Tom wrote about AOL's subscriber valuation, while I did a valuation comparison between America Online and Netscape.
Fool on!
David Gardner, October 27, 1995
AMER +2 1/2 AMAT +2 CHV - 1/2 GE - 1/4 GPS + 1/4 IOMG - 3/4 KLAC +1 1/2 RIDE +2 5/8 S + 1/2 SNIC - 3/8
Today's Numbers
Day Month Year History FOOL +2.67% 2.26% 55.59% 72.75% S&P 500 +0.52% -0.80% 26.22% 26.46% NASDAQ +0.78% -1.73% 36.38% 42.40% Rec'd # Security In At Now Change 8/5/94 340 AmOnline 14.55 74.25 410.46% 5/23/95 510 Ride Inc. 9.91 23.38 135.95% 5/17/95 335 Iomega Corp 15.11 23.25 53.83% 8/5/94 165 Sears 28.93 34.00 17.54% 4/20/95 155 The Gap 32.55 37.25 14.44% 8/11/95 95 GenElec 57.91 62.25 7.49% 8/11/95 110 Chevron 49.00 46.25 -5.61% 8/24/95 130 KLA Instrm 44.71 41.75 -6.62% 8/24/95 100 AppldMatl 57.52 48.75 -15.25% 12/23/94 340 SonicSol 14.48 8.13 -43.90% Rec'd # Security Cost Value Change 8/5/94 340 AmOnline 4945.56 25245.00 $20299.44 5/23/95 510 Ride Inc. 5052.44 11921.25 $6868.81 5/17/95 335 Iomega Corp 5063.13 7788.75 $2725.62 8/5/94 165 Sears 4772.65 5610.00 $837.35 4/20/95 155 The Gap 5045.25 5773.75 $728.50 8/11/95 95 GenElec 5501.87 5913.75 $411.88 8/11/95 110 Chevron 5389.99 5087.50 -$302.49 8/24/95130 KLA Instrm 5812.49 5427.50 -$384.99 8/24/95 100 AppldMatl 5752.49 4875.00 -$877.49 12/23/94 340 SonicSol 4924.18 2762.50 -$2161.68 CASH $5969.86 TOTAL $86374.86
