Fool Portfolio Report
Wednesday, March 13, 1996

by David Gardner (MotleyFool)

ALEXANDRIA, VA, March 13, 1996 -- Today, the Fool Portfolio continued what may wind up being its greatest week ever, as Foolishness appreciated a fraction over 2%. That outpaced the NASDAQ's 1.45% gain, and easily surpassed the S&P 500. For the first three days of the week, we're already up 12.42%. . . sheesh. . . maybe it's time to short the Fool! America Online (up $1 7/8) hit a new all-time high, Gap surged forward another point, Chevron rebounded $1 1/4, and a few others combined for another stellar day.

Throw out all the other Fool figures, the performance our first year, the 1995 overall return, the historic return, all the rest (for you newcomers, these are available by clicking the Today's Numbers down below to the right), and what you'll see is a fine return for calendar '96 so far. The Fool Portfolio now shows returns of 20.41% since January 1st, vs. the S&P 500 and NASDAQ results of 3.67% and 3.47%, respectively.

With no real news on the Fool Port today, this occasions some opportunity to answer one of the most often asked questions in Fooldom: "How should one enter the Fool Portfolio?" Seeing its historic returns, many new readers end up asking us this on the message boards or via e-mail. And in fact, we've answered the question in the past through a Fribble with the highly imaginative title, "How to Enter the Fool Portfolio." (You can find that by entering the Motley Fool Index in our mainscreen listbox, and selecting "Fribble.")

To summarize that work, we essentially say a couple of things. First is, we don't WANT you to enter the portfolio. We don't gain any reward from it; we receive no monetary compensation; the only money that we manage (that we will ever manage, we hope) is our own. Honestly, when people buy the Fool stocks, it just makes us feel more pressure, pressure that we're willing to accept but not cherish or appreciate. For those of us here at Fool HQ, the pressure sometimes makes us feel as if the next "pick" HAS to be a big winner because people like you will be buying it, etc. As if all of them will be. . . as if we won't have our typical loser stocks.

Our aim, as inveterate readers will know by now, is to teach YOU to invest your own money, make your own decisions, and find your own stocks. That's what we treasure more than anything, and it's that very ideal for which you yourself should be shooting. Nothing is more pleasing to me than to hear fellow Fools say, "You guys taught me how to find small caps, I found this one on my own, and it's doubled for me!" That's the model. That's what's Foolish.

Now, some people do wish to mirror our online portfolio, or buy some of the stocks. Fair enough. . . we've constructed the darn thing so you can do just that, so our returns can be duplicated. But what we make clear to everyone up front is that you really should get started investing using the Foolish principles we lay out in "The Motley Fool Investment Guide." That is based on a rigid chronological order for newcomers to use: first an index fund, then the Dow Dividend Approach, then small caps, then occasionally a shorted stock. No hurry, no pressure. . . you put these steps into play when you feel comfortable with them, at your own pace. If you're then an experienced investor, you might consider mucking about in the Fool Portfolio.

Some people try to play our losers: bad move. If you had consistently only bought Fool stocks that were down, figuring you'd scooped us, you'd be well below our historic returns. Not a good move, generally, just to buy up bad apples. Sonic Solutions, Paychex (which we shorted), Applied Materials, and KLA Instruments have been big dogs for our portfolio, and as of now, none of them ever really came back. If you bought them, you're down with us. If that's ALL you bought, you're well below us.

Some people, whom I think of as a bit more Foolish, may have bought only our winners. In other words, they're buying Fool stocks that are up 20% or more (let's say). Great strategy. If you'd done this consistently, your returns would be kicking our Foolish butts. The lesson here is of course that you should buy and add to your winners. . . don't bottom-fish.

Obviously, this is very hard for many people to do. Many people instinctively purchase things that are down, figuring they'll go back up. Yuck. On the other hand, you will have to leap a psychological hurdle to buy something that's recently up more than 100%. But leaping psychological hurdles is often what makes for good investing. If you had done just that---purchased only current Fool stocks that had already risen 100% for our portfolio---you would have bought just two stocks and ridden them to great returns. After all, America Online is now up 689% for us, Iomega 262%. You would have been buying great companies whose stock performance was confirming their greatness, and you would have made a lot of money.

We'll return to where we began tonight's report, then. Throw out the past. Don't worry about how far something has ALREADY risen. . . let mediocre financial journalists follow their own bad logic ("It's at a new high, therefore it must be dramatically overpriced") to poor returns. You're a Fool. You think for yourself, and judge companies and stocks by their own current merit, NOT by how far they have risen already, or what some short seller (embittered, generally) said on CNBC.

Sometimes, I worry that too much of the world is waiting for "the next hot pick." We're not traders at Fool HQ, and we don't think in those terms. So forget the next great stock. . . if you had just bought our existing portfolio at market close on December 29, 1995, you'd be beating the market substantially, and not having to fret over missing good past performance, or asking "How should I enter the Fool Portfolio?"

That's not to say I want you to, though. I really don't. But we're just trying to teach the right investment lessons here at Fool HQ, and tonight's was called, "Buy Winners, REGARDLESS of Past Performance." It's a great way to invest.

Today's Moves

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

Today's Numbers

Day Month Year History FOOL +2.09% 5.21% 20.41% 124.84% S&P 500 +0.22% -0.30% 3.67% 39.29% NASDAQ +1.45% -1.04% 3.47% 51.16% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 57.38 688.89% 5/17/95 1005 Iomega Cor 5.04 18.25 262.25% 4/20/95 155 The Gap 32.55 56.75 74.35% 8/5/94 165 Sears 28.93 50.13 73.29% 8/11/95 95 GenElec 57.91 74.63 28.85% 8/11/95 110 Chevron 49.00 55.00 12.25% 1/29/96 250 Medicis Ph 27.86 26.00 -6.67% 8/24/95 100 AppldMatl 57.52 33.50 -41.76% 8/24/95 130 KLA Instrm 44.71 22.00 -50.80% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 39015.00 $34069.44 8/24/95 100 AppldMatl 5752.49 3350.00 -$2402.49 5/17/95 1005 Iomega Cor 5063.13 18341.25 $13278.12 4/20/95 155 The Gap 5045.25 8796.25 $3751.00 8/5/94 165 Sears 4772.65 8270.63 $3497.98 8/11/95 95 GenElec 5501.87 7089.38 $1587.51 8/11/95 110 Chevron 5389.99 6050.00 $660.01 1/29/96 250 Medicis Ph 6964.99 6500.00 -$464.99 8/24/95 130 KLA Instrm 5812.49 2860.00 -$2952.49 CASH $12147.13 TOTAL $112419.63