Fool Portfolio Report
Tuesday, November 21, 1995
NOTE: Tonight in the America Online Odeon Auditorium at 11 PM, we'll gather with MF Ben, MF Chiros, and MF DrJimbo to talk Iomega (NASDAQ:IOMG), the recent "sell"recommendation by Equity Advisory analyst Rob Knie, which is getting Foolish treatment in the Iomega folder, and we'll generally talk turkey.
The Motley Fool Juggernaut Monstrosity Inc. will be donating 10% of our Iomega profits to charity this Thanksgiving, in following the lead of our subscribers from one edge of the nation to the other. If you haven't been reading the Iomega folder over the past week, I highly recommend a quick click-through to get a feel for the sort of collaborative, spirited environment that was and will always be a chief aim in Fooldom.
We're not the sort of organization to solicit tithing. . . but heck, we'll go against standard procedure today and propose to you that $20 buys a turkey and that it ain't too late to drop by a local community organization.
Iomega closed down $1 1/2 today to $38 1/2 on news of that Equity Advisory "sell" recommendation. Nope, we have no idea how analyst Rob Knie has done in the market in 1995, nor '94, nor before that. And we don't have a clue as to the investment performance of The Equity Advisory. That's just not standard fare in financial reporting, where *it ain't how they did* and *it ain't what they hold*. . . *it's what they said. *
Accountability has a way of slipping through the cracks in the offline world. Paying much heed to this sort of nonsense is an excellent way to markedly underperform the market over the long haul. We were not overwhelmed by The Equity Advisory's reasoning as it was reported in the IOMG folder today. Pretty awesome that it was reported, by the way. I don't expect the word "Knie" will be ringing out from rooftops across the land in 1996. Time will tell.
America Online was almost single-handedly responsible for our portfolio's decline of 1.79% today versus S&P GAINS of 0.57%. AMER dropped $4 7/8 to a bid of $67 5/8. The stock was at $88 a share less than three weeks ago. . . before word of the death of the personal computer hit Wall Street, home to the most aggressive and profound technology research on the planet. Uhh, yeah right.
For new and old AMER investors, over the last twelve months, America Online has fallen more than 20% off its highs on FOUR separate occasions. Tough to watch 20% of your investment evaporate---in what has transpried over a few weeks each time. Ouch! But take a second now and punch our Today's Numbers button here, and you'll see that the stock has risen over 360% for us in 16 months.
"HOWDY BOYS AND GIRLS. . . HOWDIEEEEEE! IT'S ME, THE COMPOUNDING CLOWN, HERE TO SELL YOU SOME QUICK PENNY STOCK POPS, UNDERPRICED OPTIONS GUARANTEED TO DOUBLE YOUR MONEY IN SIX WEEKS, AND OCEANFRONT PROPERTIES IN CLEVELAND, AND BOX SEATS FOR THE DAWGS IF YOU WANT 'EM.
"I'M ALSO HERE TODAY TO WALK YOU THROUGH THE SORTS OF GAINS YOU CAN EXPECT FROM INVESTMENTS THAT CONSISTENLY COMPOUND 360% GROWTH OVER 16-MONTH PERIODS. HERE GOES!
"I'll stop shouting. Did you know that $20,000 compounded at 360%, will turn into $1.7 trillion dollars over a 16-year period! Holy toledo, that'd allow for the purchase and distribution of over 145 billion Motley Fool Investment Primers. That's 623 primers for every single US citizen today. And all because you generated a mere 360% growth consistently over every 16-month period into and through the year 2012. Holy Quotronics! Imagine a world in which---"
All right, enough of that bluster. Off the the boards, Clown!
It is strange, though, that when you peel open the pages of any of our nation's daily financial newspapers, you find that sort of guff in the advertisements on the margins. It isn't that they actually made 88% last year by using the latest GizmoTrader Software. Nope, those are returns compounded off a single day or week. And that's just as foolproof as 360% compounded into $1.7 trillion in 16 years. Ahhh, the wiliness of the Wise---short-term business explosion, long-term deterioration.
But back to America Online. It IS worth looking at compounded returns over the past few years, at the unbelievable volatility the stock has shown over the last 12 months, at the direction we're headed---will we trend back away from interactivity?---at subscriber value, and I think it's best to disregard the stops and starts, to hope for long-term gains that wallop market average, and to stay on top of the fundamentals, even when traders are playing pinball with your portfolio. As Senor Lynch writes of growth stocks, there is a 1-to-1 correlation between earnings and equity growth over the LONG haul. That's our sort of haul.
Now, let us not end the day without contrasting dog with dynamo---a stock like General Electric, a Foolish holding, with one like Sonic Solutions, not a Foolish holding. Ya like how we're distancing ourselves from it!?
SNIC was dumped today at a bid of $6 3/8, and the only way we could ever imagine BUYING these shares back is if we had some borrowed positions to close up! In other words, hello MF Shorty! Sonic does present interesting potential as a short: tax-loss selling ahead coupled with borderline unmarginability, flitting as it is around $5 a share. Adieu, Sonic.
Compare that to General Electric, a stock that rose $7/8 to $67 1/4 today, rubbing back against its all-time high. We can't help but applaud when we read Fools in the GE folder saying things like: "This is one for everyone's portfolio." "As long as Welch is in charge, I'm buying on dips." "I love Beating the Dow."
Spy GE's five-year compounded returns of 17%; read up a bit on our CEO, when you get a chance; and consider its 16%+ performance for Fools since we bought in last August---doubling the market over that time. Beating the Dow---or some variation on it---ought be the birthplace of every individual investor's portfolio. There's no place like home.
Drop by the Foolish presentation of Iomega in the Odeon auditorium tonight at 11 PM EST for an active question and answer period.
Tom Gardner, November 21, 1995
AMER -4 7/8 AMAT + 7/8 CHV + 3/4 GE + 7/8 GPS - 1/8 IOMG -1 1/2 KLAC +2 1/2 RIDE - 1/4 S - 1/4
Day Month Year History FOOL -1.79% 2.27% 64.96% 83.15% S&P 500 +0.57% 3.23% 30.70% 30.95% NASDAQ -0.44% -1.07% 36.31% 42.32% Rec'd # Security In At Now Change 8/5/94 340 AmOnline 14.55 67.63 364.91% 5/17/95 335 Iomega Corp 15.11 38.50 154.73% 5/23/95 510 Ride Inc. 9.91 25.13 153.62% 4/20/95 155 The Gap 32.55 48.50 49.00% 8/5/94 165 Sears 28.93 39.38 36.13% 8/11/95 95 GenElec 57.91 67.25 16.12% 8/11/95 110 Chevron 49.00 50.75 3.57% 8/24/95 100 AppldMatl 57.52 43.63 -24.16% 8/24/95 130 KLA Instrm 44.71 33.00 -26.19% Rec'd # Security Cost Value Change 8/5/94 340 AmOnline 4945.56 22992.50 $18046.94 5/17/95 335 Iomega Corp 5063.13 12897.50 $7834.37 5/23/95 510 Ride Inc. 5052.44 12813.75 $7761.31 4/20/95 155 The Gap 5045.25 7517.50 $2472.25 8/11/95 95 GenElec 5501.87 6388.75 $886.88 8/11/95 110 Chevron 5389.99 5582.50 $192.51 8/24/95 100 AppldMatl 5752.49 4362.50 -$1389.99 8/24/95130 KLA Instrm 5812.49 4290.00 -$1522.49 8/5/94 165 Sears 4772.65 6496.88 $1724.23 CASH $8235.20 TOTAL $91577.08