Fool Portfolio Report
Thursday, December 28, 1995
Every day, you click in here to get sound, reasoned reports about finance, Foolishness, and life. Well, today is going to be a little different.
See, David is off on some Jamaican beach, celebrating the New Year with his lovely wife and daughter. Tom is somewhere in New York "without electricity" (yeah, right), and Dusty, the Fool HQ janitor and secret genius behind the Foolfolio, pulled a muscle in his back last night while attempting to sweep up a chunk of holiday fruitcake.
That leaves one person to write tonight's report: Me. Fletch. How ya doing?
The main thing you should know about me is that I know very little about stocks. Last night, Tom was surprised when I demonstrated a working knowledge of the "bid" and the "ask." (And tonight, he's asking me to write the report. Hmmm... makes you wonder how much he really knows, eh?) Anyway, let's get to work here, one section at a time.
The Fool stocks slogged into a second place showing tonight, no doubt still a bit queasy from that fruitcake that ended Dusty's duty last night. Our semiconductor stocks, Applied Materials and KLA Instruments, both took it on the chin---something they seem to do with alarming consistency. But remember, this entire sector has been hit hard for months. Today, it was fellow chip-maker Cirrus Logic delivering the body blow, announcing that its future ain't looking so rosy.
On the upside, we find our favorite triple, Iomega. Up another 7/8 today, Iomega is now a 218% percent gainer since we bought it on your advice last May. What say we all chip in with a bit of our profits, buy a top thoroughbred from one of those sprawling Kentucky farms, name it "Iomega", and set it loose on dirt tracks across the country? After the inevitable triple-crown and Breeders' Cup victories, we'd retire the thing to stud, where it would produce offspring named "Jaz" and "Zip" and we'd be off and running again. Think about it: Tom could wear one of those big silly hats, stare through those dainty binoculars, and gush like mad as our equines raced down the backstretch. Whaddya think, Tom? Oh yeah, you can't read this. Your "electricity isn't working."
Your investing lesson for the day comes from me, the guy who knows nothing about stocks. It's about the time I took a really bad stock tip and lost a whole bunch of money. And it's a particularly appropriate tale, since it was our own David Gardner who gave me the tip.
About two years ago, well before all this Foolishness, I sunk a bunch of dough into a company called... well, let's call it "New Look Industries." The company manufactured pen-like video cameras that dentists poked around your mouth, so you could see your tartar and decay on a 19-inch television screen. The idea was that you would see how lousy your teeth really looked and would quickly sign up for more dental work.
David had held the stock from $4 all the way up to $19, which is when he happened to tell me about it. The earnings estimates were astounding. Heck, I even went out of my way to attend a screening of a New Look sales tape, where pained people with grotesque gums and rotting bicuspids acheived amazing oral turnarounds with the help of the trusty New Look-Cam.
A few weeks after I bought it, the stock suddenly dropped six points to $14, the start of a slippery slide that left it below $3. What happened? Who knows? I sure didn't. I knew very little about the company's finances before I bought it. My entire rationale for the purchase consisted of, "Heck, David's in it, and he knows stocks, so I'll get into it, too."
What did I learn here? Where do I start?
1) Know your company. Look hard at the numbers. Question them. Those earnings estimates were a red flag. They were a little *too* outstanding.
2) If the company's earnings' estimates are coming from a single analyst, look even harder.
3) If the company is in a new market, make sure it isn't doing something that is easily duplicable. A camera, a cord, a monitor, and a plug ain't exactly hi-tech.
4) When the fundamentals change, get out. I should have been out when the stock bounced back a bit on buyout rumors. I hung on, hoping to win it all back.
5) The best stock tip in the world is to never take stock tips. Not from anyone. Not even from Fools. I don't blame David. He found this company on his own and quadrupled his money. I stole it from him and lost 80% of mine.
That's my fault.
Alright, because I bored you to tears in that last section, I'll keep this short and sweet. Today's nugget comes from the inside cap of the Eliot's Apple Juice I drank at lunch.
"There aren't any embarrassing questions---only embarrassing answers." - Carl Rowan
Folks, this whole forum is about asking questions, even the simplest ones. Never be afraid to ask anything.
Just don't ask me.
- Erik Rydholm (MF Fletch), December 28, 1995
AMER - 1/2 AMAT -1 1/2 CHV + 1/4 GE - 3/8 GPS - 1/4 IOMG + 7/8 KLAC -1 1/2 S - 1/8
Day Month Year History FOOL -0.49% -3.12% 66.89% 85.30% S&P 500 -0.07% 1.45% 33.72% 33.97% NASDAQ -0.56% -1.61% 38.60% 44.72% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 36.25 398.43% 5/17/95 335 Iomega Corp 15.11 48.13 218.42% 8/5/94 165 Sears 28.93 38.63 33.53% 4/20/95 155 The Gap 32.55 42.75 31.34% 8/11/95 95 GenElec 57.91 71.13 22.81% 8/11/95 110 Chevron 49.00 52.13 6.38% 8/24/95 100 AppldMatl 57.52 40.25 -30.03% 8/24/95 130 KLA Instrm 44.71 26.00 -41.85% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 24650.00 $19704.44 5/17/95 335 Iomega Corp 5063.13 16121.88 $11058.75 8/5/94 165 Sears 4772.65 6373.13 $1600.48 4/20/95 155 The Gap 5045.25 6626.25 $1581.00 8/11/95 95 GenElec 5501.87 6756.88 $1255.01 8/11/95 110 Chevron 5389.99 5733.75 $343.76 8/24/95 100 AppldMatl 5752.49 4025.00 -$1727.49 8/24/95130 KLA Instrm 5812.49 3380.00 -$2432.49 CASH $18981.96 TOTAL $92648.84