Fool Portfolio Report
Friday, January 19, 1996

By Tom Gardner

--(New York, NY, Jan. 19)-- How would I go about entering The Fool Portfolio? Which stocks are bargains here, which are you thinking of selling, which are on the fence?

Them's the most frequently asked questions in all of Fooldom---leaving out split questions sent at Huibs---and depending on your perspective, they're the most complex or most facile ones to answer. Let's take the complex approach by overrating the importance of today's portfolio moves.

America Online fell another $1 1/4 as the market struggles to come to grips with and value AOL's Internet strategy. Voila, that's The Fool's largest holding, having grown from $5,000 a year ago into over $23,600 today, and it's in an extremely wide-open and yet competitive market. The company is adding new subscribers hand over fist but the list of its hundreds of new content providers may threaten to make it more Web-like and less useful than originally hoped.

"Should I buy America Online?"

Then turn your attention to Iomega Corportation (NASDAQ:IOMG), they of the Zip and Jaz storage drives. Iomega rose $3 3/8 to $39 3/8 today, and our investment of $5,000 in May, 1995 is now valued above $13,000. Storage-drive technology has traditionally been a low-margin, unbranded, fiercely competitive market. . . and the wild volatility in market pricing of this company over the past year proves that the Street has not yet made up its mind.

Can Iomega boost margins, heavily brand their products, marginalize the competition, and keep the momentum going forward? Remember that twelve months ago to this day, Iomega was trading at $4 a share. And remember that one month ago it was trading above $50 a share. Wow.

"Should I buy Iomega?"

The Gap (NYSE:GPS) has also bucked the market and, more particularly the retailing trend, rising from a Foolish purchase price of $32 1/2 to $43 3/8 today, an over 33% climb. GPS has posted strong same-store sales growth, successfully introduced Old Navy Stores, continued to improve their winner, Gap Kids, and The Fool Port has watched our $5,000 bloom into over $6,700.

Our YPEG valuation---well defined in a Fribble by MF DowMan---prices Gap shares above $50, but retailing is getting such a bad rap with consumer debt problems and the end of Christmas that many are wondering if estimates aren't too high.

"Should I buy The Gap?"

KLA Instruments (NASDAQ:KLAC) and Applied Materials (NASDAQ:AMAT) present another frustrating problem. Semiconductor and semiconductor-related operations have gotten blitzed by Wall Street as concerns have arisen about product oversupply, about pricing softness, about increased competition, about simpler and less expensive machines less reliant on memory chips.

Applied Materials rose $1/2 and KLA Instruments dropped $1 1/2 today. . . and The Fools have been gutshot on these investments. Each are down more than 37%; The Fool Port has lost more than $4,500 in 'em. Is now the time to get in. . . or will Fools bail on this one?

"Should I buy Applied Materials and KLA Instruments?"

That's the complex approach to all this. . . and it's entirely understandable. It's extraordinarily rare that any of us enters a new field and understands immediately that simplicity, clarity, statistical work, and curiosity are some of the primary tools in every discipline, that they lead you to solutions from one industry to the next and certainly in finance.

A Fool would note that, say, the study of language growth, the assessment of marbled-salamander population growth along Route 43 in Pittsfield, Massachusetts, the analysis of condominium development on the northern side of Mount Sentinel in Missoula, Montana. . . all of these projects---and innumerable other examples---carry philosophical and experiential precedents that tell us how to invest simply, Foolishly, and profitably.

The challenge is to find in your daily life the products and services you're most familiar with and the principles in your own profession (engineering, programming, housekeeping, reporting, accounting, whatever) that naturally carry over into all other fields and specifically here, finance.

We'd propose the following: Accountability, performance, efficiency and simplicity. They seem to have a pretty broad reach, and that's why our first investment suggestion is Beating the Dow. Your first entry into Foolishness should be via our Dow selections.

Like General Electric, which rose another $1 3/4 to $74 1/4 today, and is now up over 28% for us since August, smashing past S&P growth. We've seen a lot of activity in the wake of GE's reshuffling at their financial channel CNBC, and lookie there, they're creating internal competition. CNBC versus MSNBC (the General Electric-Microsoft tagteam effort).

Welch for President?

Next stop Chevron, which rose $5/8 to $54, up 10.2% for us now. Chevron makes for a nice defensive play, and the Dow yields are definitely telling Fools with ears something about undervalue. How many defensive stocks are in the top ten yield group of the Dow Industrials? Click over to MF DowMan's home in The Fool's School and you'll find your answer.

Last on the list is actually one that wouldn't sit on your list today if you entered the Dow group of The Fool Portfolio: Sears (NYSE:S), which rose $7/8. Sears has been the second best Dow performer, up over 70% in 1995. Man, there's nothing like buying shares of a company with tens of millions in sales, a management team that knows how to control their selling platform, and to have found it during a period in which market inefficiencies were badly underpricing it. . . bliss! However, Sears is not in the Foolish Four group of high-yielding Dow stocks. For the present list, click into the Dow Industrials area of our Fool's School.

So when wondering how exactly to enter The Fool Portfolio, you ought look no further than what your own instincts tell you---for instance, that research, education, and debt-free, long-term capital gains are the very best motivations. In an auditorium some time ago, MF Boring proposed that Foolish investors who focus on educating themselves first and on investing profits second will notably outperform even the most experienced investors who pass the hours looking for a couple of the latest hot picks. MF Boring speaks like the motliest of Fools.

To close, we suggest the following: Enter via Beating the Dow and play this group for decades to come; learn how to value the stocks in our portfolio; begin researching and valuing other companies on your own, take your time always, and focus on keeping trading costs to an absolute minimum. Then The Fool Portfolio will be nothing more than a mere example---a shell, a shadow, but an image---for your own investments decisions, for your own style of money management.

We've always intended for it to be just, and only, that.

Today's Moves

AMER -1 1/4
AMAT + 1/2
CHV + 5/8
GE +1 3/4
GPS - 1/2
IOMG +3 3/8
KLAC -1 1/2
S + 7/8

Today's Numbers

Day Month Year History FOOL +0.49% -4.46% -4.46% 78.40% S&P 500 +0.68% -0.67% -0.67% 33.47% NASDAQ +1.14% -3.20% -3.20% 41.42% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 34.75 377.80% 5/17/95 335 Iomega Corp 15.11 39.63 162.18% 8/5/94 165 Sears 28.93 40.00 38.29% 4/20/95 155 The Gap 32.55 43.38 33.26% 8/11/95 95 GenElec 57.91 74.25 28.21% 8/11/95 110 Chevron 49.00 54.00 10.20% 8/24/95 130 KLA Instrm 44.71 27.75 -37.94% 8/24/95 100 AppldMatl 57.52 33.88 -41.11% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 23630.00 $18684.44 5/17/95 335 Iomega Corp 5063.13 13274.38 $8211.25 8/5/94 165 Sears 4772.65 6600.00 $1827.35 4/20/95 155 The Gap 5045.25 6723.13 $1677.88 8/11/95 95 GenElec 5501.87 7053.75 $1551.88 8/11/95 110 Chevron 5389.99 5940.00 $550.01 8/24/95130 KLA Instrm 5812.49 3607.50 -$2204.99 8/24/95 100 AppldMatl 5752.49 3387.50 -$2364.99 CASH $18981.96 TOTAL $89198.21