Fool Portfolio Report
Thursday, December 7, 1995

Yesterday, the talk was of 100% gains, clean Foolish doubles, and an Iomega Corporation boom. Today, all the talk is of 97.5% gains, and a slowdown in our two strongest investments, America Online and Iomega.

That's right, our portfolio fell a full 2.64% versus a drop in the S&P 500 of 0.65%. Yowch. Just for levity's sake: If we compounded 2.64% losses every single market day of the year, our $98,700 portfolio would vanish before the end of January. Yikes!

In order to keep the chin up today, allow us to peek in on some of today's winners before reviewing the issues that make December 7, 1995 a day to forget.

Hey, The Gap (NYSE:GPS) rose $1 today to a bid of $45. We noted that this past week here in Alexandria, VA, the Banana Republic down the street threw up some stylish new awnings. And even as everyone is talking of only the high-end retailers showing strong Christmases---what with the stock market zooming---we continue to observe strong activity in the adjacent Gap and Banana Republic stores here.

Of course, activity does not always mean sales, and sales don't always mean earnings, so let's keep our eyes on the coming quarters and the earnings estimates. Heading into Christmas, we continue to price this stock above $50.

Sears, the hottest Dow stock over the last twelve months, hopped up $1/2 to $39 3/8 today. Foolish large-cap fair-pricing is placing this one above $45 in the year ahead. Of course, we'll be holding this according to the Beating the Dow approach right through until mid-August 1996.

Holy cow, even KLA Instruments caught a $1 wave today. No news from KLAC. The stock is off 26.75% for us, and sure, let's chalk this one up to horrible timing. We stick to the "timing" explanation because we continue to think this stock will significantly outperform the market off our cost basis in the years ahead. And we've seen no fundamental news in the wake of a great earnings report to indicate any reason for the slide. It must be technical in nature---we don't use charts and we don't spend time trying to "time" our investments. So we'll chalk it up to bad timing.

Hey, can we call General Electric (NYSE:GE) a winner today even though it fell $3/8? After all, that makes for a 0.52% drop versus the 0.65% drop in the S&P. So, by george, GE was a winner today! The Company annouced that its GE Power Systems unit had won contracts totalling $350 million in Canada, Finland, Chile, and in Italy from Turbotecnica---of which GE owns over 80%. Gotta love winning contracts from yourself!

GE is also being bounced around as one of the possible bidders for Sony's entertainment and music business. So, even with the slight drop, today was an exciting day over at GE HQ.

And it's been a nice few weeks here at Fool HQ as we look at our Dow stocks. GE has to be one of the quietest market-doubles since last August on the market. The stock is up 22.38% for us since then. We continue to believe this is an investment that every individual investor should think seriously about making. Historical performance, present financial circumstance, and quality of management say this one ought be a market-beater into the next millenium.

And now, today's dawgs!

Smith Barney hurt our America Online shares today, as it initiated coverage of our beloved online service, stamping it with a neutral rating. That was only slightly better than Smith Barney's "Sell" recommendation on Netscape today, which helped dunk that stock $28 3/4, or 17.83% (taken straight from AOL's great new quote system). Yowch!

Our America Online shares fell $3 1/4 to a bid of $41 3/8, and given the size of our investment in AMER now---relative to our entire portfolio, that smarts! We certainly respect Smith Barney's research department, but we at Fool Global HQ see no sign of slowing subscriber growth heading into Christmas.

And whereas we were projecting six million subscribers by June, 1996. We could be swayed to bring that date in closer in the wake of the winter buying spree. Do we think America Online looks cheap here relative to the S&P. . . in other words, do we think AMER will outperform the market in the five years ahead? Yes.

Finally, Iomega fell $2 a share today to a bid of $51 3/8, perhaps a burst of profit-taking. Fools who have followed this issue know that volatility is now being acronymed I-O-M-G. Iomega, down around $16 in early October, has three-bagged in just over two months!

A fair number of Fools have been dialing and writing in, requesting some fair pricing from other Fools on Iomega. We stick close to the work by MF Chiros et al and their projections for $6 EPS in 1996. Our fair price---though incredibly loose---is for more than a $90 stock in the year ahead. . . possibly well more than this. We're in waiting and holding mode, and can't imagine being drawn out of it.

And so, we lose today. But although we end the day down, and down considerably to the market, and are now out of our Foolish doubling, we're not hanging our heads. The Iomega folder here in Fooldom has to be the single most unbelievable development in all of cyberspace---and the last few days of work there has us smiling broadly.

Now I want to tone that down ("the best in cybespace?"), I want to be less the marketer, less prone to exaggeration than I am, but in all my wanderings through cyberspace, nothing right now compares to the Foolishness in the Iomega folder, and the sort of collaborative enterprise throughout the forum. And it's your work and ours. Take "Bigfootmm."

Bigfootmm's double post in the Iomega folder yesterday pointed, as others have, to a new investing paradigm---one that doesn't pay much attention to the "fear" and "greed" alternation that we hear so much about. But rather, one that focuses on intelligence, objectivity, and information versus ignorance, bias, and speculation. It's a remarkable battle that all of us will fight in small ways in the years ahead online---the struggle to know more, think more clearly, and dig out what really matters.

And thoughts like those have us accepting the declines of the day and concentrating on the challenges---and the pure Foolishness---ahead.


Tom Gardner, December 7, 1995

Today's Moves

AMER -3 1/4
CHV - 1/4
GE - 3/8
GPS +1
S + 1/2

Today's Numbers

Day Month Year History FOOL -2.64% 3.28% 77.91% 97.54% S&P 500 -0.65% 1.78% 34.16% 34.42% NASDAQ -0.81% -0.57% 40.06% 46.24% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 41.38 468.89% 5/17/95 335 Iomega Corp 15.11 51.38 239.92% 4/20/95 155 The Gap 32.55 45.00 38.25% 8/5/94 165 Sears 28.93 39.38 36.13% 8/11/95 95 GenElec 57.91 70.88 22.38% 8/11/95 110 Chevron 49.00 50.50 3.06% 8/24/95 100 AppldMatl 57.52 44.25 -23.08% 8/24/95 130 KLA Instrm 44.71 32.75 -26.75% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 28135.00 $23189.44 5/17/95 335 Iomega Corp 5063.13 17210.63 $12147.50 4/20/95 155 The Gap 5045.25 6975.00 $1929.75 8/5/94 165 Sears 4772.65 6496.88 $1724.23 8/11/95 95 GenElec 5501.87 6733.13 $1231.26 8/11/95 110 Chevron 5389.99 5555.00 $165.01 8/24/95 100 AppldMatl 5752.49 4425.00 -$1327.49 8/24/95130 KLA Instrm 5812.49 4257.50 -$1554.99 CASH $18981.46 TOTAL $98769.59