Fool Portfolio Report
Tuesday, November 28, 1995
WARNING: FOOL PORTFOLIO UP 3.7%.
FOOL THROWS CHEST THROUGH COMPUTER MONITOR. PLEASE EXCUSE.
It seems fitting that on the day we report some of the biggest single-day gains for The Fool Port, and on the day we skirt past the elusive 90% overall profit mark, we also announce an evening get together with MF DowMan to discuss Investing for Growth.
Tonight at 10 PM in the Globe auditorium (keyword: Globe), Robert Sheard (MF DowMan) will review the Investing for Growth model, as well as discuss some of his latest attempts to improve on the model. As it lies now, Investing for Growth has compounded 28.8% annual growth over the last 15 years, nearly four full percentage points above the Foolishly-modified Beating the Dow model, and a good fifteen percentage points above the market's average growth---per year.
Investing for Growth primers are available for $14 per copy in Foolmart (keyword: Foolmart). . . that's about $150 less than 95% of the financial newsletters, around 95% of which UNDERperform the stock market each year. We'll see you in The Globe tonight at 10 PM, if you're feeling Foolish.
So what exactly happened out there today? Yesterday, David shared the dream that we might outperform the market this month. It didn't look good. Check out Today's Numbers on the bottom right.
On a day in which the Standard & Poor's 500 rose 0.85%, Fools tacked on another 3.70% growth, a market quadruple today. In that we're putting our eggs into the most profitable basket over the last century, the stock market, we aim not to knock out fixed percentage profits per year but rather to more than double the returns that most mutual funds underperform. Total portfolio growth in relation to total market growth is our chief concern.
In that spirit, today was a huge day. In that spirit, it has also been a huge year, and a monstrous 16-month (historical) period for us. Since it was launched, The Fool Portfolio is now up 90.98% versus market gains of 32.30%, meaning that we're approaching a market tripling now. And all of this is from an inactive, low-commission, long-term approach to outperforming the stock market. It reminds Fools again that trading LESS often means profiting MORE.
Let's start with Iomega (NASDAQ:IOMG). In the first three days of October, our portfolio reports were stamped with the following headlines:
10/2: Fool Gut Shot
10/3: Fool Down Another 1.6%
10/4: One of Very Worst Days
Much of these declines were directly linked to weakness in our Iomega shares. The stock fell down to $18 a share in early October, after having touched $30 over the summer. Supposedly, the entry bar to storage-drive products had been kicked off its hook; EVERYONE and their great uncle, Mildred, was nailing together a storage product, with sophisticated marketing plans to boot! Goodnight, Iomega. The Wall Street Journal seemed right. . . IOMG's summer move was all the consequence of online stock hype.
Since October 4th, when Iomega closed the day at $18 3/8, the stock has been on a frozen rope northward, and today it closed bidding $43 3/4. That's 138% growth in eight weeks. Don't worry, we're not going to compound that annually and begin advertising globally. But oh, if we did! We will note, however, that we're now less than $2 away from bringing out our nerf mallet and slapping The Fool Gong thrice. The stock will have tripled.
America Online climbed $5 1/8 today, as it continues to confound "Isolated-P/E" investors across the nation---but mostly in New York! After all, with subscribers across America being online, loads of individual investors from Paduca, Kentucky to Bozeman, Montana have known about this company and investment long before Big Apple Investing began calling it a short, a couple hundred percentage points back. Look out, what an ugly generalization! A number of firms, many in NY, have also been LONG America Online throughout the year. Apologies.
Tomorrow morning, America Online will open around $37 1/2, or at exactly one half its closing price today. We all know that splits have no material effect on the value of the COMPANY we invest in. After all, with twice the shares and half the price, the price-tag on the company---the company's market capitalization---remains the same.
With around 50 million shares and a price near $75 today, AOL is priced around $3.75 billion. Tomorrow, with 100 million shares out and a stock at $37 1/2, lookie there, our Company is priced around $3.75 billion. It's a non-event. That said, we do expect to see the stock trading above $50 (post-split) when they announce their six-millionth subscriber sometime in the Spring of 1996.
Klickety-KLAC, don't look back. KLA Instruments and Applied Materials both snapped back today, the former rising $3 1/4, the latter up $4. After market close today, Applied Materials announced fourth-quarter earnings of 84 cents, beating estimates by a penny. Here's the financial table:
4Q '95 4Q '94 Fiscal '95 Fiscal '94
$982,650 $467,798 $3.061,881 $1,659,807
$155,398 $63,098 $454,053 $220,696
$0.84 $0.37 $2.56 $1.30
Essentially, you're looking at 2x sales growth, 2x earnings growth, 2x earnings per share growth, across the board above. Receivables crept up a touch more than we would have liked, but otherwise, a cursorial look at the balance sheet reveals financial dynamism. The quick and current ratios broadened, and cash, equivalents and short-term investments continued to outspeed long-term debt obligations.
This may not have been the sort of estimate-smashing performance that the Street wanted, but we're very pleased. We continue to price our AMAT shares above $70 a stub in the year ahead. And we're willing to wait. Of course, heck, we think personal computers might make it into the next millenium. So factor that in.
How about The Gap? It has to be the quietest winner Fools have ever had. Since April 20th, when we purchased our shares, the stock has seen a mere 139 posts in its folder, or less than nine posts per MONTH. That's just the way we like to sneak up on the market. Over these seven months, during which retailing has been about as out of fashion as big hair and bell-bottoms, The Gap has risen 55.9% to its close today bidding $50 3/4. At this price, GPS looks to be moving awfully close to Foolish fair value.
It's so tempting not even to mention our gains in General Electric and Sears, of $1 3/4 and $5/8 respectively. Later this week, I'm going to be tabulating our total Dow Stock profits over the 16-month period. Those are some important numbers for all individual investors. . . this is the most powerful support an individual's stock portfolio can find, in our estimation.
Today, we'll cool it on the Martinez/Sears praise, and we won't even say anything about General Electric being one of the stocks that 90% of all individual investors ought have in their portfolio.
Further, we won't crack jokes about firms that push penny stocks on unsuspecting clients as NICE ways to enter the world of equities. And, no, we're not going to poke fun at the use of hot-stock pickers on major financial TV networks. We also will not waste your time talking up Buffett, Lynch, and O'Higgins---all who propose long-term, buy-and-hold, sit-and-profit, family-building, wait-and-celebrate approaches to generating market-mashing portfolio returns in the decades ahead.
And we certainly aren't going to try to hit you over the head with our "FOOL" marketing brand stamp, Fool. Not us. And the last thing we'd do is take up your time, recommending that you get your neighborhood online with us. We wouldn't be pleased to hear that you were posting Fool-style investment profits this year.
We also wouldn't want you to be seen in public with a belled-cap. When you next get invited to the White House, please do not wear your pointy slippers, Fool. And tonight at 10 PM, when we're in The Globe talking about one of the most important investment approaches ever outlined for the individual investor, please do not smile.
And, lastly, don't play our two new highly-Foolish games at keyword: Smash. Do not go there. Do not have fun. Do not learn. Do not be Foolish.
Tom Gardner, November 28, 1995
AMER +5 1/8 AMAT +4 CHV + 1/8 GE +1 3/4 GPS +1 1/4 IOMG +3 KLAC +3 1/4 RIDE -1 1/4 S + 5/8 SNIC ---
Day Month Year History FOOL +3.70% 6.64% 72.01% 90.98% S&P 500 +0.85% 4.29% 32.05% 32.30% NASDAQ +2.01% 1.35% 39.64% 45.80% Rec'd # Security In At Now Change 8/5/94 340 AmOnline 14.55 74.88 414.75% 5/17/95 335 Iomega Corp 15.11 43.75 189.47% 5/23/95 510 Ride Inc. 9.91 23.13 133.43% 4/20/95 155 The Gap 32.55 50.75 55.91% 8/5/94 165 Sears 28.93 39.25 35.70% 8/11/95 95 GenElec 57.91 67.00 15.69% 8/11/95 110 Chevron 49.00 49.50 1.02% 8/24/95 100 AppldMatl 57.52 46.13 -19.82% 8/24/95 130 KLA Instrm 44.71 35.25 -21.16% Rec'd # Security Cost Value Change 8/5/94 340 AmOnline 4945.56 25457.50 $20511.94 5/17/95 335 Iomega Corp 5063.13 14656.25 $9593.12 5/23/95 510 Ride Inc. 5052.44 11793.75 $6741.31 4/20/95 155 The Gap 5045.25 7866.25 $2821.00 8/11/95 95 GenElec 5501.87 6365.00 $863.13 8/11/95 110 Chevron 5389.99 5445.00 $55.01 8/24/95 100 AppldMatl 5752.49 4612.50 -$1139.99 8/24/95130 KLA Instrm 5812.49 4582.50 -$1229.99 8/5/94 165 Sears 4772.65 6476.25 $1703.60 CASH $8235.20 TOTAL $95490.20