Fool Portfolio Report
Thursday, April 4, 1996

by Tom Gardner

The Fool Portfolio rose another 2.44% today versus a 0.00% move for the Standard & Poor's 500 Index. We confessed two weeks ago that we didn't want the month of March to end but now, a week into April, The Fool Portfolio is up 5.19% versus S&P growth of 1.60%.

No sweat either way on that short-term performance. We could be down 15% in April, and spring'd still be springing in Virginia, and The Motley Fool would ever be as intently focused on providing the most educational financial services on the planet. (Do you have a friend who hasn't been turned onto Folly yet? A pox on you. Do you have an adversary who hasn't? Bravo---there's no better way to punish thine enemies than by keeping all this from them.)

Much as we downplay short-term growth, though, it does bear attention that The Fool Portfolio is now up 33.70% in 1996 versus market growth of 6.48%---led by strength in our Dow heavies and by our two stalwarts, America Online and Iomega. Those portfolio returns are based on a real-money account---not a model portfolio. The returns are net all commissions and spreads.

We hope this goes a long way toward proving that the market *can* be beaten soundly and that individual investors have distinct advantages over the Street---no short-term expectations, no incentive to trade overactively, no regulations requiring needless diversity, among others.

That said, the first step really is just to MEET market-average growth. It's our strong opinion that, if you are employing a full-service broker, he needs to be able to give you the up-to-the-minute, *bottom-line* returns on your entire account at your behest. Not six months from now, not a year from your request, but this minute. . . or, at the very least, by market close. If that sounds radical, just say the word, "Quicken."

The following questions are more than fair game for anyone overseeing the management of your dinero:

a. "Jim, are my total savings up more than the S&P 500 in 1996?"

b. "Did I beat the market's growth of 37.4% in 1995, Jim?"

c. "Jim, do these figures include the deduction of all costs---spreads, commissions, and research?"

If your broker can't give you these figures lickety-split, you should think very seriously about moving your money. Even if he or she is an old friend. These are *your* savings. And if your broker can't add value beyond index returns, pay him for some other service: cooking, filing, personal training, gardening, travel planning, etcetera. You already know that you can get market-average growth without significant cost or risk in an index fund. And you know that historical annual market returns sit at 10.5%.

Fools, the stock market is a SAVINGS VEHICLE. . . not a trading mechanism or a giant set of furry dice bouncing 'round Manhattan, waiting for you to grab them. It provides a quite predictable long-term rate of return. And as the S&P 500 index is measured in an ongoing fashion, you can know exactly how much money you have in your account every second of the day, every hour of every week, each month and every quarter by investing in it.

Business 101: There's no reason to pay for a service unless value's added.

Sadly, the chances are that if you are paying for full service today, you're in a broad mix of stocks, mutual funds, bonds, gold coins, real estate partnerships, foreign stocks, a couple diamond mine projects, 1.5 ostrich farms (to be distinguished from real estate), and an MBA degree (gasp!) . And you're most probably losing to the market. Consistently and badly. For your records, did you know that 85% of all stock mutual funds lost to the S&P 500 in 1995---the same index that Fools are 106.6% ahead of since August 4, 1994. . . and 27.2% ahead of since January 1, 1996?

Now, do we expect our performance to continue at this rate? Naa. But we do have a quite healthy confidence in our ability to beat the market over any 10-, 15- and 20-year period. *Long-term* capital growth coupled with a rigorous and thoroughly entertaining education---that's Foolishness in a bottle.

Down at the level of Foolish trees: Where else should we start and end today than with Iomega Corporation (NASDAQ:IOMG), which rose $3 3/8---making it a "single-digits" stock in one day---to a bid of $32 1/2. Iomega is now a double since the text version of Fortune's article was completed, when the magazine cited IOMG's market cap at a frothy-tulipy $1 billion. And though the entire city of San Francisco is still waiting for the stock to bend down to $5 a share, we expect they'll have to wait for a rather peculiar split.

7-for-1 anyone?

Apparently not everyone is running the YPEG which points, off existing estimates, to a fair value for Iomega shares of $35. Now does anyone beside us think projections of $0.65 this year and $1.00 in 1997 seem low? We've enjoyed watching the estimates come rolling through our Iomega folder---particularly from those of you who have been near right for a few quarters running. The one-way media forgot to report on that, eh?

And if The Wise still can't figure out why America Online has more subscribers than The Wall Street Journal, The New York Times and the USA Today combined---and heck, toss Fortune Magazine in there as well---they need make no more sophisticated a comparison than an analysis of two things: 1) perspectives on the constancy or inconstancy of long-term stock market growth and 2) the recent and ongoing coverage of Iomega Corporation in print, video, and digital form.

I'll leave those for everyone to quietly ponder tonight over a small glass of lemonade or champagne. Though I can't quite bring myself to close out this report without sharing two very brief takes that I have on the differences.

1) Market Fear: Where the traditional media see bear markets coming round the mountain, a Fool notes, among much other evidence supporting long-term investing, this single example. The hungriest bear since World War II dropped the market 10.86% in 1973 then 16.91% in 1974---reducing a $100,000 portfolio to $74,048.

During that period, the Foolish Four Dow stocks *rose* 35.25% in 1973, then *rose* 2.67% in 1974---expanding a $100,000 portfolio to $138,861. 26% declines for the index fund were 39% gains for Dow investors.

Oh, and including that bear market, stocks are up 12% per year from 1970 to today. And the Dow Four Billion-Dollar Behemoths are up over 22% per year. Hmmm.

2) Iomega Corporation: Where the worlds of financial print and video often see price fluctuations, hype, and chaos. . . digital Fools see companies, products, and financial statements.

And whilst The Wise consider the "masses" of shoe-shiners and software developers and taxi drivers and toll takers and hot dog vendors to be ignorant in investing---and more, a Fool sees sophisticated individuals in a nation of public markets driven directly and primarily by consumer demand.

Oddly, not surprisingly, and unfortunately, 90% of America isn't yet in Fooldom and so they may not yet know how powerful a voice the consumer has in America today. That iterated, you'll well understand why we don't at all think that portfolio returns here much matter. It's the education, the communication, the snakeskin-shedding of Wisdom.

I'm taping on my belled-cap.

Today's Numbers

Day Month Year History FOOL +2.44% 5.19% 33.70% 149.65% S&P 500 -0.00% 1.60% 6.48% 43.08% NASDAQ +0.21% 1.53% 6.28% 55.27% AMER -1...AMAT - 3/8 ...CHV + 3/8 ...GE + 1/8 ... GPS ---...IOMG +3 3/8 ...KLAC + 1/8 ...MDRX +1...S - 1/8 ... Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 54.75 652.80% 5/17/95 1005 Iomega Cor 5.04 32.50 545.10% 8/5/94 165 Sears 28.93 48.38 67.24% 4/20/95 155 The Gap 32.55 53.38 63.98% 8/11/95 95 GenElec 57.91 80.38 38.78% 8/11/95 110 Chevron 49.00 57.75 17.86% 1/29/96 250 Medicis Ph 27.86 24.25 -12.95% 8/24/95 100 AppldMatl 57.52 35.38 -38.50% 8/24/95 130 KLA Instrm 44.71 22.63 -49.40% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 37230.00 $32284.44 8/24/95 100 AppldMatl 5752.49 3537.50 -$2214.99 5/17/95 1005 Iomega Cor 5063.13 32662.50 $27599.37 4/20/95 155 The Gap 5045.25 8273.13 $3227.88 8/5/94 165 Sears 4772.65 7981.88 $3209.23 8/11/95 95 GenElec 5501.87 7635.63 $2133.76 8/11/95 110 Chevron 5389.99 6352.50 $962.51 1/29/96 250 Medicis Ph 6964.99 6062.50 -$902.49 8/24/95 130 KLA Instrm 5812.49 2941.25 -$2871.24 CASH $12147.13 TOTAL $124824.01