Fool Portfolio Report
Monday, March 4, 1996

by David Gardner (MotleyFool)

ALEXANDRIA, VA, Mar. 4 -- March, cruel month that it has been for Fools (we lost to the market last March), got a little bit crueler today. Our Fool Portfolio once again declined, this time .31%. The NASDAQ also dropped, though not as badly (down .11%), while the S&P 500 galloped forward 1% and the Dow---up over 100 points in the afternoon---raced past everything, up 1.15%.

The rule today is that if you were a huge NYSE stock in the Fool Portfolio other than Chevron, you had lotsa fun. The Gap, breaking into new highs once again, tacked on $2 1/2, while both GE and Sears rose a point. Meanwhile, all six other Fool stocks lost ground.

Looking over 1996's returns so far, the S&P 500 is now up 5.66%, while the NASDAQ is up 3.11%. . . it's looking more and more like a big-stock year. We saw it happen again today.

My brother Tom shot me an e-mail this afternoon with something he thought our fellow Fools would find very informative. I quite agree! Let's lead it off with it. Note if you will, please, ladies and gentlemen, Exhibits A and B below:

Exhibit A: January 17, 1996

ALEXANDRIA, Va., Jan. 17 /FOOLWIRE/ --- NatWest Securities lowered The Gap from "accumulate" to "hold" today. Sources at the brokerage stated that this was part of a series of downgrades involving the retail stocks due to the weak retail environment.

Exhibit B: February 29, 1996

02/29 Gap -2-:NatWest Ups FY97 View To $2.95 From $2.71/Shr >GPS

NEW YORK (Dow Jones)--NatWest Securities Corp. analyst Robert Buchanan raised his rating on Gap Inc. (GPS) to accumulate from hold. In a research report, Buchanan said he is ''very impressed'' by the company's strong performance in a still-depressed environment for apparel sales.

Buchanan raised his earnings estimate for fiscal 1997 ending in January to $2.95 a share from $2.71.Earlier, Gap reported fourth-quarter net income of $1.08 a share, compared with 82 cents last year and a First Call consensus estimate of estimate of $1.02.

Now, OK, fair enough. . . some people do change their minds from time to time. And we respect their rights to do so. But at the same time, anyone find this a little bit rinky-dink, or maybe even fishy? NatWest Securities hopped off the Gap bandwagon in mid-January, apparently unimpressed by the stock's prospects despite strong retail numbers from GPS and a glowing balance sheet that we have written about at length in past reports. Then, lo and behold, last week Gap becomes presentable once again to clients, as it's upped from hold to "accumulate" not much more than a month later.

This, my dear Fools, is exactly why we don't like what we have termed Wall Street Wisemen. They focus on the short-term, make short-term calls looking at short-term returns, and end up making lots of short-term mistakes. I'll reiterate that it's perfectly OK for Mr. Buchanan to change his mind, of course. But what I would like to point out is a couple of stock quotes for you:

GPS, 1/17 (date downgraded): $43 7/8

GPS, 2/29 (date upgraded): $53 1/2

$10 of missed profits, and commissions to sell out and then buy back in, to boot. Not great for their customers' portfolios.

That's the story behind the story. . . the accountability part that everyone forgets to check up on. We don't think you're going to find many other entities actually FOLLOWING analysts' moves AFTER they make them in order to see the results. I hope that's one of the reasons that you sign in to read our Foolish stuff every night.

Gap closed today at $55 1/4 on the bid.

The other amusing story involving conventional wisdom occurred today with shares of Iomega. The company got more negative press yesterday (yes, I know, I know. . . MORE negative press), this time in The New York Times, where a reporter put a bearish spin on IOMG's prospects, including being short of cash and lacking patent protection. In other words, no issue that is really very significant to intelligent shareholders, or that hasn't already been considered and discarded by our online readers due to its irrelevance.

This, combined with a "minor Dorfing" on Friday (when CNBC's Dan Dorfman mentioned that Compaq would announce a product today comparable to the Zip---read all about it in our Compaq and Iomega folders), induced lots of speculation about just how battered IOMG shares would get today. The answer ended up being down, oh, just $3/8 (although the stock was more than a point lower than that around noon Eastern).

Much is made of the consistent bashing that Iomega has taken by the financial press. Some of our online readers seem convinced that "the establishment is out to get Iomega," and urge their fellow shareholders not to heap scorn upon poor journalistic work because it'll only fuel the press's ire.

We encourage people to be polite, fair-minded, and always aiming at the truth, but that doesn't mean you shouldn't disagree publicly with stuff that you read.

Heck, just check recent history, if you will. Although "they" have hammered and hammered away at Iomega, the stock has hit new highs for months and months. The company has made all the right moves, and all the bearish articles with negative spins have been proven wrong. Wrong at $5, wrong again at $8 1/2, wrong at $12, and wrong, I think (based on past performance) at $16.

In the New York Times yesterday, the writer based much of his thinking on a selective reading of the "cautious" elements of IOMG's offering prospectus, what amount to legal disclaimers. That included trying to make it sound like Wells Fargo (Iomega's primary lender) won't renew or expand its financing when its deal with Iomega expires on June 30th.

Our own MF Robert was quick to point out (in yet another of his superb posts) that Wells Fargo would be insane not to continue the relationship. Wouldn't you want to lend money to a company with huge future prospects that was already doing great business with you, especially if YOUR business were lending money? Would there be anyone else you'd RATHER lend to? Gimme a break.

Anyway, it doesn't take a very close reading to see what the end result of these articles is, does it? The end result is nothing, irrelevance quickly forgotten. . . or maybe even worse. . . millions in profits missed by readers turned off by sloppy or slanted research.

When we hang around The Fool, we don't JUST get more, timelier, and better information and opinion about our stocks than any other media source. We ALSO get an amazing lesson in how inaccurate or badly spun so much of our "conventional journalism" is. It's a lesson I learned when I started noticing that virtually every article ever written about The Motley Fool contains at least one (often more) factual inaccuracy. In most cases they were tiny (a misquoted number of readers here, or our names or ages reversed there), but the lesson is the same. I'm not bitter about this, or even distressed. . . I'm slightly bemused, and a bit better educated for the experience. I suspect the exact same thing has happened to readers following Iomega.

We close with this: With the help of friends, think for yourself. That is, make up your OWN mind, but surround yourself with the best people you can. I myself have never found anything nearly comparable to the outstanding quality of our readership.

Indeed, it seems that a more effective expenditure of journalistic energies would be put toward situations like that of NatWest's caprices, rather than non-existent "cover-ups" in the financial statements of great companies whose stocks have quintupled in the past year. That sort of thing. And I think we'll see journalism move in this direction in future. Yes, I think we'll see things move toward accountability, away from slanted speculations. You'll see it here at The Fool, anyway.

Just some unWise musings on an uninteresting day on the market.

Today's Moves

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

Today's Numbers

Day Month Year History FOOL -0.31% -3.49% 10.46% 106.25% S&P 500 +1.00% 1.62% 5.66% 41.97% NASDAQ -0.11% -1.38% 3.11% 50.64% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 45.13 520.46% 5/17/95 1005 Iomega Cor 5.04 16.50 227.51% 8/5/94 165 Sears 28.93 49.13 69.83% 4/20/95 155 The Gap 32.55 55.25 69.74% 8/11/95 95 GenElec 57.91 77.75 34.25% 8/11/95 110 Chevron 49.00 55.75 13.78% 1/29/96 250 Medicis Ph 27.86 28.25 1.40% 8/24/95 100 AppldMatl 57.52 33.88 -41.11% 8/24/95 130 KLA Instrm 44.71 23.63 -47.16% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 30685.00 $25739.44 8/24/95 100 AppldMatl 5752.49 3387.50 -$2364.99 5/17/95 1005 Iomega Cor 5063.13 16582.50 $11519.37 4/20/95 155 The Gap 5045.25 8563.75 $3518.50 8/5/94 165 Sears 4772.65 8105.63 $3332.98 8/11/95 95 GenElec 5501.87 7386.25 $1884.38 8/11/95 110 Chevron 5389.99 6132.50 $742.51 1/29/96 250 Medicis Ph 6964.99 7062.50 $97.51 8/24/95 130 KLA Instrm 5812.49 3071.25 -$2741.24 CASH $12147.13 TOTAL $103124.01