Fool Portfolio Report
Thursday, November 2, 1995

Dollar plus moves in five of our stocks pushed The Fool Portfolio up 1.16% versus S&P gains of 0.94%, but we couldn't row past the Nasdaq dory, up 1.62% today.

With The Motley Fool Portfolio now up 66.11% for the year, and 84.43% over the past 15 months, it's time for us to again emphasize the importance of long-term profitability. Hopefully, our collection of daily Fool reports here since August, 1994 has helped you toward market-beating profitability for your savings. Compounding 20% annually is an excellent and Foolish aim.

But let us reiterate that, at some point, we're going to lose 20% of our portfolio as the market plummets, the bears explode out of their unhappy den, and the markets destabilize. That'll happen: dark hours, heavy losses, Senor Zweig's bliss. But the Foolish investor, putting away for investment up to 10% or more of their annual income, bolstering their portfolio with high-yield, large-cap growth stocks, and concentrating on long-term profitability sans debt, the Foolish investor doesn't sweat the volatility. As long as we beat the market, we needn't ever leave the market---housing, as it has, the most impressive annualized returns over the last century.

But doubling the market over the next decade isn't actually our highest aim, believe it or not. Rather, teaching, preparing, and providing for the generation that follows, and that which follows it, is the height of Foolishness. Over the past year, we've cracked open a number of envelopes sent from across the country in which sit the photographs of Foolish families, kids Foolcapped, notes that read: "Made some money off you all this year, thanks, but these little monsters are my most important holdings." We heartily agree.

And in that spirit, we begin and will continue urging anyone with nieces, nephews, godchildren, children, grandchildren, and great grandchildren (we see you!) to get some sort of dividend reinvestment plan or small investment going WITH each one of them. Yeah, it'll take some effort to organize it all. . . but the rewards of teaching those who follow you about business and investing in a verily Foolish way will transfer far more than dollar profits to them in the decades ahead.

You can send away directly to many companies for single shares of stock via dividend-reinvestment plans without paying brokerage commissions. Companies like: Intel, Motorola, Merck, General Electric, and McDonald's all have stocks that've compounded in excess of 15% growth per year over the last five years. And all can be purchased directly through the Company.

Then you sit down and teach the little Fools the basics of sales, earnings, shares, earnings per share, profit margins, dividends and yields, as well as projecting out growth for the investment over the next two decades. It needn't be tedious. Teach them a bit about the businesses, take 'em to McDonald's and make them eat a happy meal while you talk about the Company.

And we guarantee you that if you've loved this Foolish climb of 84% in 15 months, it doesn't compare to the sort of growth in savings your kids will be showing by the time they're in their mid-20s. 'Tis Foolish of them to have pushed lawnmowers, flipped newspapers and saved/invested rather than to find themselves at the age of 30 with $15,000 in plastic debts and seven cards in the wallet.

Oddly enough, both extremes are easily reached. And while the profit for teaching them now may seem only dollar-based, and something you might not want to encourage too aggressively, there is real intellectual profit in all of this---in all of these shenanigans online over the past year, no? Plus, if you teach them, they'll buy our IFG Primer someday, and we might still be in business!

All of that said, let's look at our portfolio for the day.

Hey, how about The Gap (NYSE:GPS)? Someone in our office liked their khakis and so we went out and bought the stock without ever cracking open their financials. . . what luck! Naa, just kidding. We dug through balance sheets, projected growth estimates, tracked monthly sales reports, and assessed the value of their brand and what we found was a great company, a financially healthy company, mired in an industry-wide slump. Didn't take any great sophistication of thought.

The Gap today rose $4 to $42 1/4 and now the stock is up 29.8% for us since last April. Total sales for the month came in at 17% and same-store sales sat at 2% over the same period last year. And so, our theory that strong companies in slumping industries GAIN market-share during the down times is playing out before our very eyes. And with the YPEG in hand and cash analyses complete, we're watching The Gap run rapidly up toward fair valuation. If you haven't had a chance to read our report on GPS, it sits in the listbox on our Hall of Portfolios. Worth a look.

Sears also announced same-store sales figures, and they didn't disappoint. Total sales were up 6.9% over last October, and same-store growth was up 4.6%. The Company's focus on their core retailing business continues to payoff, and we're happy to see the stock up $1 3/8 today to $36 3/8. We're pricing S in the year ahead around $45 a share.

Applied Materials raced ahead $3 1/8 with its group after annoucing that they'd entered into an agreement with France's SGS Tomson to jointly develop semiconductor equipment. Wall Street liked it; the stock is now down only 8.5% for us. KLA Instruments was our last dollar-plus winner, climbing $1 3/4 to $42 3/4. We're down 4.4% in KLAC. Still waiting, and we got plenty of time.

Our chief loser today has been our strongest stock of the month, quarter, year, and 15-month Foolish history. America Online fell $1 1/8 to $85 1/8. We continue to believe that when AOL announces their six-millionth subscriber, the stock is fairly priced in the $110-$115 range. Seems like number 4 million should be rolling in soon.

Be Foolish,

Tom Gardner, November 2, 1995

Today's Moves

AMER -1 1/8 AMAT +3 1/8 CHV - 1/8 GE +1 GPS +4 IOMG + 1/2 KLAC +1 3/4 RIDE - 3/8 S +1 3/8 SNIC ---

Today's Numbers

Day Month Year History FOOL +1.16% 2.98% 66.11% 84.43% S&P 500 +0.94% 1.41% 28.40% 28.65% NASDAQ +1.62% 2.05% 40.61% 46.81% Rec'd # Security In At Now Change 8/5/94 340 AmOnline 14.55 85.13 485.22% 5/23/95 510 Ride Inc. 9.91 23.63 138.47% 5/17/95 335 Iomega Corp 15.11 24.13 59.62% 4/20/95 155 The Gap 32.55 42.25 29.80% 8/5/94 165 Sears 28.93 36.13 24.89% 8/11/95 95 GenElec 57.91 63.25 9.21% 8/11/95 110 Chevron 49.00 47.38 -3.32% 8/24/95 130 KLA Instrm 44.71 42.75 -4.39% 8/24/95 100 AppldMatl 57.52 52.50 -8.74% 12/23/94 340 SonicSol 14.48 7.75 -46.49% Rec'd # Security Cost Value Change 8/5/94 340 AmOnline 4945.56 28942.50 $23996.94 5/23/95 510 Ride Inc. 5052.44 12048.75 $6996.31 5/17/95 335 Iomega Corp 5063.13 8081.88 $3018.75 4/20/95 155 The Gap 5045.25 6548.75 $1503.50 8/5/94 165 Sears 4772.65 5960.63 $1187.98 8/11/95 95 GenElec 5501.87 6008.75 $506.88 8/11/95 110 Chevron 5389.99 5211.25 -$178.74 8/24/95130 KLA Instrm 5812.49 5557.50 -$254.99 8/24/95 100 AppldMatl 5752.49 5250.00 -$502.49 12/23/94 340 SonicSol 4924.18 2635.00 -$2289.18 CASH $5969.86 TOTAL $92214.86