Fool Portfolio Report
Thursday, February 8, 1996

NOTE: This just in! David Gardner will be appearing on CNN's Talk Back Live at 3:30 PM (in all time zones) tomorrow, doing a show on "grass-roots investing." He'll be appearing via satellite, to be joined by two of the Beardstown Ladies. . . and this one's for half an hour, not two minutes (per Good Morning America). Should be most amusing! (Details could change, as always, but we're pretty sure this one's a go.)

OTHER NOTE: Tom Gardner will be doing a Foolish booksigning tomorrow night in PORTLAND, OR at Powell's bookstore. Details:
Friday, February 9th, 7:30 to 9 PM
Powell's Books
1005 West Burnside
Portland, OR 97209
Questions? Call 503-228-4651

by David Gardner (MotleyFool)

--(Alexandria, VA, Feb. 8)-- Ah. . . back in Alexandria. Home again, after a delightful two-and-a-half week book tour in which Tom and I toured 10 cities and got to shake hands with many a fellow Fool. And to boot, the Fool Portfolio storms to a new high our first day back. These are Foolish times.

The Fool Portfolio celebrates two milestones today. First, thanks to six of our nine stocks rising a buck or more, we knocked through the 110% historical return barrier for the first time ever. The Fool Portfolio easily outdistanced its competitors, putting up a gain of 2.20% vs. decent rises in the S&P 500 and NASDAQ (as shown below). Second, our shares of America Online rose $1 1/2 to a total return of 601.24%. . . our first-ever Fool Port seven-bagger.


But despite the great rise in AMER, our best investment to date, what I'd really like to feature today is our shares in The Gap. Gap (NYSE:GPS), which we purchased less than 10 months ago (April 20, 1995), rose $1 7/8 today to a new 52-week high and has now returned us 56% on our money. We bought the stock at a time when retail stocks were under serious fire. Gap had dropped in the previous 6 months from $48 to $32; this huge, cash-rich multibillion-dollar company had lost 33% of its value and we felt that was a teensy bit of an overkill by our inefficient markets..

In Tom Gardner's original purchase writeup, he penned (OK, typed), "We're playing a growth and sector turnaround: a company with a respected brand name, some market-beating estimates, repeated estimate-beating quarters, and one in an industry that has been kicked around by the short-sighted Street. The meltdown looks to have provided an excellent opportunity for long-term, buy-hold-and-outperform investors like us to gather up some shares and sit on 'em."

Many people tend to view our success through the small-cap growth lens, with great moves in America Online, Iomega, Ride, and Boston Technology (forgetting, perhaps, Sonic Solutions and our two semi-equipment barkers---which we still like, by the way, as both rose again today). But when you look over the whole picture, we've gotten outstanding support from a bunch of stocks of huge companies that most people would consider pretty Boring. (PLUG, PLUG: the other portfolio in The Motley Fool's Hall of Portfolios, the Boring Portfolio, will be making a new trade tomorrow, I hear).

Look it over: Merck 64%, American Express 36%, General Electric 37% (and still going), and Sears 63% (and still going). And please do add to that group El Gappo. Sure, we've had one underperformer; Chevron is up only 8% right now since our August investment.

But seriously, dear Fool, can you believe the returns from these behemoths? Many people, when we bought Sears through the Dow Dividend Approach, said "I never shop at Sears. . . I refuse to buy that dog!" And buying stocks in products or services you DISlike certainly runs contrary to Peter Lynch's teaching. But Peter Lynch never met, or espoused, the mutual-fund-crushing Dow Dividend approach, where you often buy something that EVERYONE hates at the particular time you buy it. (You weren't finding many Merck fans when we bought it in the midst of the Clinton Healthcare Regulation Crisis that was afflicting pharmaceuticals in the summer of '94.) It is truly a beautiful approach.

Ah, but Lynch (bless him) would no doubt have approved of our Gap purchase last April, since this was one of the long-term growers he loved and made money on for years running. And here we are, just today, reading our company news reports and coming across the latest from our darling, GPS: "Gap Inc. reported sales of $315 million for the five-week period ended Feb. 3, an increase of 48% from sales of $213 million for the four-week period ended Jan. 28, 1995. The company said in a press release its comparable store sales for January 1996 increased 6%."

Yes, we find ourselves nodding. . . yesssssss.

Iomega dropped an eighth today. The stock is now back where it was approximately three seconds prior to Dan Dorfman's opening his mouth on Monday. (Chuckle.) I'm not terribly surprised that the shares are settling down and mostly rising again, following the media bashing that featured two Barrons columns, six S.F. Chronicle columns, and one Dorf-o-rola in the space of a couple weeks. I continue to watch the stock closely, and based on the outstanding research being done by our staff (particularly MF Chiros) and our readers, I continue to believe that long-term investors will receive superior investment returns in these shares going forward. As we've consistently repeated, we've never cared much about the short term.

And that's Foolish. Fool on!

Today's Moves

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

Today's Numbers

Day Month Year History FOOL +2.20% 6.31% 12.72% 110.48% S&P 500 +0.94% 3.15% 6.52% 43.12% NASDAQ +0.77% 3.15% 3.90% 51.79% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 51.00 601.24% 5/17/95 1005 Iomega Cor 5.04 14.38 185.33% 4/20/95 155 The Gap 32.55 50.75 55.91% 8/5/94 165 Sears 28.93 44.75 54.71% 8/11/95 95 GenElec 57.91 79.50 37.27% 8/11/95 110 Chevron 49.00 53.00 8.16% 1/29/96 250 Medicis Ph 27.86 28.63 2.75% 8/24/95 130 KLA Instrm 44.71 31.75 -28.99% 8/24/95 100 AppldMatl 57.52 40.50 -29.60% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 34680.00 $29734.44 8/24/95 100 AppldMatl 5752.49 4050.00 -$1702.49 5/17/95 1005 Iomega Cor 5063.13 14446.88 $9383.75 4/20/95 155 The Gap 5045.25 7866.25 $2821.00 8/5/94 165 Sears 4772.65 7383.75 $2611.10 8/11/95 95 GenElec 5501.87 7552.50 $2050.63 8/11/95 110 Chevron 5389.99 5830.00 $440.01 1/29/96 250 Medicis Ph 6964.99 7156.25 $191.26 8/24/95 130 KLA Instrm 5812.49 4127.50 -$1684.99 CASH $12147.13 TOTAL $105240.26