Fool Portfolio Report
Wednesday, March 6, 1996
(FOOL GLOBAL WIRE)
by David Gardner (MotleyFool)
ALEXANDRIA, VA, March 6, 1996 -- It was one of those dreary, forgettable days in which our portfolio (a) lost money, and (b) did so in virtual lockstep with the market. Hey, that's no fun! That's nothing for a WRITER to write about. But as you know, dear reader, The Motley Fool is here at the end of EVERY day, rain or shine, total global nuclear annihilation or otherwise.
America Online was our most exciting stock on this rather unexciting day, but even its excitement was "vapor news." For now, anyway. That is, CNBC reported this morning that America Online had initiated a partnership with Hewlett Packard to offer corporate "intranets." What's an intranet? Well, Business Week did a fairly informative cover article on this very subject in its February 26th issue. You can't find it OFFLINE anymore, but if you're interested in the topic you can type keyword BW and hit their search button, typing "intranet."
Anyway, the basic story here is that companies see the value to their businesses of using networks. . . not the regular office networks they're already using, but national networks which can serve as a meeting place for employees from all over the country. In other words, imagine if America Online were not a consumer-oriented, general service for you and me, but instead a specific business network for a specific business. When you compare the ADVANTAGE that that hypothetical business would enjoy over competitors which did NOT have their own "intranet," you'd see why these things will increasingly become musts. And so companies are paying huge amounts to set up online sites to do internal business.
Suffice to say that over the course of the day today, no news announcement came out of AOL HQ, or HP HQ, so that by the end of the day the story was cast away as a rumor. America Online, which had opened about $3 higher, closed up $1/2, bidding $46 1/2.
But is the story over? Apparently not.
If you look into Fooldom's mainscreen listbox you'll find one of our Spotlight news specials, put together by the Evening News crew. It features the AMER-HP alliance rumor, and mentions that AOL CEO Steve Case was asked a point-blank question about this "deal" yesterday at the National Press Club in Washington, DC. Somewhat ruffled (and this was after his speech), he apparently said that he was not comfortable talking about it "until it was made public." Keep your eyes peeled.
Sears, Medicis, and Applied Materials all declined more than a point Wednesday, bringing us down 0.62% for the day.
Y'know, I look down our list of stocks and their performances, and I'm flabbergasted by how BAD our semiconductor equipment companies have been. KLA Instruments off 49%. Applied Materials off 44%. Basically, since we bought these stocks on a torrid summer day last August, they've been halved.
Truth be told, it's been a cold winter for all semiconductor stocks, and KLAC and AMAT aren't really performing that much worse than any of their competitors. They really are great companies with great futures, and they really are despised by the short-termers on Wall Street.
It's "shake your perspective" time. Let's do a flashback.
It's August 24, 1995. It's hot out there. You're in Fool HQ. Grabbing at a lemonade, you're typing in the numbers at the end of the day. You see the Fool stocks down, .93%. Darn it. . . lost to the market. . . the dang S&P actually ROSE. Ah, well, no biggie, right? Because you've just added these two sleek new greyhounds to The Fool Port: Applied Materials and KLA Instruments. We're talking about great past performance (both having more than doubled in the previous year), earnings estimates to dream of, balance sheets to drool over. Wow. You're psyched.
Scanning down the portfolio holdings, you wrinkle your nose at a couple of other recent purchases: The Gap and General Electric. Those dogs. They're both down, do-nothings over the course of a 1995 that would end up featuring the best stock market in three decades. The "G" stocks, Gap and GE, big overstuffed NYSE entities that have been losin' money for you since you bought'em. Boy, are you glad you're finally putting some heat back into the Portfolio! Because let's face it, everybody and her left-handed brother is buying chips, and we ain't talking Doritos. You rock back, sipping more of the lemonade you stole from your brother's desk. Ahhhhhhhh.
OK, we're back, and it's dreary old March 6, 1996 once again. And we have a question for you. Would you, in your Foolishest dreams, have EVER imagined that KLA and Applied would go down an AVERAGE of more than 45% each? But even if we'd convinced you that it had happened, could you have POSSIBLY believed that over that time your OVERALL portfolio would have actually RISEN 27%? What's up with that? How could it be?
Maybe it has something to do with The Gap (now up 64%) and GE (now up 34%). As the old man says, the more things change, the more they. . . um. . . the more. . . the more your stocks will probably appreciate! It's just hard to figure out which one it'll be next.
The message to take away here is one that we repeat from time to time, but it bears repeating again. Diversify. With so many great companies out there, and so many great businesses out there, if you're a stock-market investor you should be spreading your money around in 8-12 different stocks. And don't concentrate in one or another industry too much, because no matter what prospects look like today, tomorrow (and I mean "tomorrow" literally---could be within 24 hours!) they might look much different. And the only investors who will truly be hurt by fate's cruel unpredictability are the ones who didn't diversify.
The other message is obvious, too. You never know what's going to happen next on the market. It's not predictable, and so please don't listen to those who waste their time trying to make you think it is. The whole fascinating thing about the stock market, and why I'm online most of my waking hours every day and help run this business, is what will happen next, and how will it all turn out? Fortunately, those who are diversified can enjoy the unfolding story, WITHOUT sweating its particular result.
You see, Mr. Holmes, when you're investing you really don't HAVE to pick who the murderer is. . . you can put down little bets on ALL of the suspects.
---David Gardner, March 6, 1996
TODAY'S OTHER FOOLISH STUFF: (to be read in Casey Kasem voice): The Motley Fool Invesment Guide debuted on the charts at number five this month. The New York Times Business Book Best Seller list shows Bill Gates' "Road Ahead" at number two. A little more momentum, a touch of old guard-new guard rotation, and Foolishness edges out the founder of the most profitable company of the 21st Century. Set to!
AMER + 1/2 AMAT -1 7/8 CHV + 5/8 GE - 3/8 GPS - 5/8 IOMG - 1/8 KLAC - 7/8 MDRX -1 1/4 S -1 1/8
Day Month Year History FOOL -0.62% -2.45% 11.64% 108.46% S&P 500 -0.58% 1.81% 5.86% 42.23% NASDAQ -0.46% -0.75% 3.77% 51.60% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 46.50 539.36% 5/17/95 1005 Iomega Cor 5.04 17.63 249.85% 8/5/94 165 Sears 28.93 47.88 65.51% 4/20/95 155 The Gap 32.55 53.38 63.98% 8/11/95 95 GenElec 57.91 77.88 34.47% 8/11/95 110 Chevron 49.00 56.00 14.29% 1/29/96 250 Medicis Ph 27.86 27.25 -2.19% 8/24/95 100 AppldMatl 57.52 32.50 -43.50% 8/24/95 130 KLA Instrm 44.71 22.75 -49.12% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 31620.00 $26674.44 8/24/95 100 AppldMatl 5752.49 3250.00 -$2502.49 5/17/95 1005 Iomega Cor 5063.13 17713.13 $12650.00 4/20/95 155 The Gap 5045.25 8273.13 $3227.88 8/5/94 165 Sears 4772.65 7899.38 $3126.73 8/11/95 95 GenElec 5501.87 7398.13 $1896.26 8/11/95 110 Chevron 5389.99 6160.00 $770.01 1/29/96 250 Medicis Ph 6964.99 6812.50 -$152.49 8/24/95 130 KLA Instrm 5812.49 2957.50 -$2854.99 CASH $12147.13 TOTAL $104230.88