Fool Portfolio Report
Wednesday, April 10, 1996

MF Bogey (David Forrest)

Providence, RI, Apr. 10 - ACK! What's going on with this market? Down 88 on Monday, down 74 points today. The Commodity Research Bureau Index of 17 commodities closed the day at an eight-year high with 15 of 17 commodities advancing. Bonds fell almost a full point, backing yields on the 30-year Treasury bond up to around 6.93%. The employment numbers are booming according to the Department of Labor statistics. Retail Sales are up. And, to top it ALL off, the Foolish Four Dow Dividend stocks are General Motors (GM), Chevron (CHV), General Electric (GE), and Minnesota Mining and Manufacturing (MMM). As you can see, I can make a darn convincing argument that the economy is getting stronger.

In some perverse "Street" logic, good news is bad news. As the story goes, if the economy does well, inflation heats up, and "eats" into rates of return on all sorts of investments. That makes some sense. What they don't tell you is that a stronger economy also means higher corporate profits! So, what does all of this tell you, Fool? How can you benefit from a stronger economy? The same way you benefit from a weak economy. The story doesn't change. Invest in the Foolish Four as your foundation. The whole design of Beating the Dow allows you to profit in most every economic environment.

But, what do you do about your smaller caps? I'm not smart enough to know if the market is going down in the next day, week, month, or year. What I am smart enough to know is that great companies always find a way to "get it done" in all environments. Redefining markets, like Iomega and America Online have done (IOMG down $1 3/4 to $30 3/8 - AMER down $1/8 to $53 1/4), and maintaining incredible profit margins in an industry notorious for price cuts and discount business like Gap Stores has done (GPS up $3/8 to $52 5/8), are great examples of companies that "get it done".

While we at the Fool espouse an incredibly long-term approach to investing, what should you do if we do trade lower? We don't often talk about it other than to say that over time, the market returns 10% and to not worry about the short-term too much. All true. However, if we do decline in any meaningful way, I will personally be looking very closely at companies like Cisco Systems, Microsoft, Sun Microsystems, Coca Cola, McDonalds, Motorola, Intel, Nike, et cetera. These are the companies that, despite [or "IN spite of"] the economy, continue to plow ahead with excellent results. With great management and dominant positions in their industries, these are Foolish, Foolish companies.

Finally, before I get to the actual moves of the rest of our stocks, I just want to issue a word of Foolish caution: overvalued stocks tend to fall to very proper valuations when the stock market corrects (duh). Every Fool who reads this has hopefully grown with us and learned with us enough to know that we should all understand the businesses that we own. Each of us is very well equipped if we can run the PEG, YPEG, perhaps the Ben Graham valuation analysis, etc. Take some time, if you are not already, to learn how to value your stocks. If they are very overvalued, you should consider selling them. There is nothing wrong with selling. As Tom pointed out last night, the Fool sells lots of stocks. We sold SNIC, BSTN, and RIDE. These stocks were sold because we thought they were overvalued based on current numbers. Don't be afraid to sell a stock you think is overvalued.

What, you say? You don't know how to properly value stocks? No problem, Fool, you're in LUCK! We have a place just for people who want to learn about investing. Click the "Investing Foolishly" button on the main Fool screen and learn the valuation methods. For advanced info on valuing stocks, check out the "Stock Research" area.

Then, after you get these down pat, venture into the Industry area and examine all the different industries. Ask the Industry MF's questions! These people know the industries WELL. Take advantage of all the Foolish tools we have tried to provide for you. For my $2.95 an hour, I'm gonna get everything I can out of it, yes? Yep.

Okay, enough of my ranting and raving -- on to the details. The Fool Portfolio lost ground to the S&P 500 and the Nasdaq today. Down 1.75% on the day, the Port is historically only up 143% versus an S&P up 38% and a Nasdaq up 53%. I hate finishing last. GE, Sears, and Iomega were down $1 3/4 each. The other stocks were not very exciting today, but it is worth noting that KLAC was up $3/8 after the Semiconductor Industry announced the worst Book-to-Bill number in 8 years. Sell the rumor, buy the news?

Let me close tonight's report with a quick note about my trip to school last week. I made it home alive, without anyone even trying to stick a whoopee cushion on my chair! (To tell ya the truth, I was kind of disappointed that nobody tried any Foolish pranks.) The reality of the situation is that those seventh grade children are as insightful, perhaps more so, than most every analyst on the Street. A wonderful experience all around. The best part of the day was when one little girl named Amanda came up to me and said "Ya know. I really liked your talk. All the other guys (two brokers) made it so complicated. You used examples we understand and I really learned a lot. Thanks."

No, thank YOU, Amanda.

Folly Forever!

Transmitted: 4/10/96

Today's Numbers

AMER - 1/8 ...AMAT - 3/8 ...CHV - 5/8 ...GE -1 3/4 ...GPS + 3/8 ...IOMG -1 3/4 ...KLAC + 3/8 ...MDRX + 1/2 ...S -1 3/4 ... Day Month Year History FOOL -1.75% 2.62% 30.44% 143.56% S&P 500 -1.40% -1.90% 2.81% 38.14% NASDAQ -0.35% 0.36% 5.05% 53.47% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 53.25 632.17% 5/17/95 1005 Iomega Cor 5.04 30.38 502.92% 4/20/95 155 The Gap 32.55 52.63 61.67% 8/5/94 165 Sears 28.93 46.38 60.33% 8/11/95 95 GenElec 57.91 76.63 32.31% 8/11/95 110 Chevron 49.00 55.75 13.78% 1/29/96 250 Medicis Ph 27.86 26.75 -3.98% 8/24/95 100 AppldMatl 57.52 36.88 -35.90% 8/24/95 130 KLA Instrm 44.71 25.38 -43.25% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 36210.00 $31264.44 8/24/95 100 AppldMatl 5752.49 3687.50 -$2064.99 5/17/95 1005 Iomega Cor 5063.13 30526.88 $25463.75 4/20/95 155 The Gap 5045.25 8156.88 $3111.63 8/5/94 165 Sears 4772.65 7651.88 $2879.23 8/11/95 95 GenElec 5501.87 7279.38 $1777.51 8/11/95 110 Chevron 5389.99 6132.50 $742.51 1/29/96 250 Medicis Ph 6964.99 6687.50 -$277.49 8/24/95 130 KLA Instrm 5812.49 3298.75 -$2513.74 CASH $12147.13 TOTAL $121778.38