Fool Portfolio Report
Monday, April 15, 1996

by David Gardner (MotleyFool)

ALEXANDRIA, VA, April 15, 1996 -- With eight out of nine Fool stocks rising, we began the third week of April splendidly, with The Fool Portfolio rising 2.14%. The market had a good day too, returning about 1%. That brings our 1996 returns up to 35.28%, vs. the S&P 500's 4.31%. But darn it, we STILL ain't beating the NASDAQ by 30 percentage points yet. . . it's up 5.54%. Sickening.

A brief scroll through the numbers below suggest that April will wind up another fair-weather month for our tiny Foolish skiff, as it navigates through the big bad waters of Wall Street attempting to find the New World. What's the New World for you and me? A world in which individual investors enjoy the same access to the best and timeliest investment information as institutional traders. The average citizen in the New World will have facile familiarity with proper investment principles, with correct investment technique about as easy to come by as a simple education in parallel parking a car. (In my experience, it takes longer to learn how to parallel park well!) In the New World, the financial professional will be as necessary only as your driving instructor. . . he'll be there for you at the BEGINNING, but just another guy riding somebody else's wheels, ever after.

While it's too early to claim "Land ho!" we do think we're in the right boat sailing in the right direction. Columbus, you may recall, made his discovery of the New World by picking an exact line of latitude and putting his fleet directly on it, sailing due west. Some weeks later (33 days after leaving the Canary Islands), the Nina, the Pinta, and the Santa Maria bumped directly into Watling Island in the Bahamas. Now, we haven't quite reached Watling yet, but our guy up in the crow's nest thinks he may see something sort of brownish-green on the horizon. We'll keep you posted.

Today was marked by another good earnings report from KLA Instruments, boosting KLAC up $1 3/8 to a bid of $25 1/2. We remain down all of 42.97% on the investment, however. . . unbelievable. OK, OK, maybe we DID pay up a bit too much for these shares. . . we managed to buy them right about their tippy-top, at a split-adjusted $44.71. But at the same time, the company has only ever released strong estimate-beating earnings since we've been shareholders.

The latest version looks like this:

KLAC 3Q (March) Numbers

(sales and net income in millions)


1996 1995

Sales $187.4 $118.1

Net Income $31.8 $20.8

Earnings/share $0.61 $0.43

YEAR (so far)

1996 1995

Sales $502.3 $306.0

Net Income $89.0 $34.5

Earnings/share $1.70 $0.72

Estimates for the quarter according to First Call were $0.60 per share, so KLAC put up a penny more. The market responded nicely to this announcement, kicking this stock to the top of our Foolish percentage gainers list today.

Current earnings per share for this stock are $2.17, putting the price-to-earnings ratio at 12. Is it just me, or does that look pretty cheap for a company with a strong business, a bright future, a fine balance sheet, and an increasing backlog? OK, maybe it IS just me.

By the way, if you're a rock-bottom novice new reader, and even the term "price-to-earnings ratio" looks grotesquely incomprehensible to you, we've created an area to help you hit the ground running in your quest for Foolishness. The Investing Foolishly button on our main screen presents a series of 13 articles which you can read systematically in your efforts to get Foolish. There is a section of The Tenth Step entitled "Price-to-Earnings Ratio". . . read all about it right there.

The Business Wire version of the KLAC earnings release resides in our KLAC slot right here online. To reach it, just click the KLA Instruments entry in the upper-right of this window.

You know, we don't really think the Fool Ratio works for semiconductor stocks. . . we mention that in our book ("The Motley Fool Investment Guide" from Simon & Schuster), and in our online articles. The reason is that these stocks can be somewhat cyclical, and thus not "pure growth plays" like our non-cyclical technology stocks. What this really means is that our normal ways of valuing stocks don't work too well here, so I'm not really going to update our Fool Ratio on this stock. But I'll just reiterate that a P/E of 12 for this company looks cheap to this Fool.

First Call's 1996 earnings per share for KLA (ending this June) are $2.33, and for 1997 (five quarters hence) they come to $2.84. . . annualized growth of 24%.

A number of other Fool stocks enjoyed strong outings as well, particularly America Online (up $2 1/8 to bid $54 1/8) which primarily drove our gains today. Our three Dow Dividend stocks all looked good as well: Chevron and GE gained $1 1/4, and Sears heaved forward another $7/8. New all-time high for Da Searssss. . . gotta love it.

Catch you on the other side of the next wave tomorrow.

Oh, and here's a postscript serving as a Foolish public service announcement:

It was Tax Day today.

If you did just find that out here for the first time, you're in fairly big trouble. May we suggest purchasing your own skiff and departing the country?

Fool on!

---David Gardner, April 15, 1996

Transmitted: 4/15/96 6:07 PM

Today's Numbers

AMER +2 1/8 ...AMAT + 5/8 ...CHV +1 1/4 ...GE +1 1/4 ...GPS - 1/8

IOMG + 1/2 ...KLAC +1 3/8 ...MDRX + 3/8 ...S + 7/8 ...

Day Month Year History

FOOL +2.14% 6.44% 35.28% 152.61%

S&P 500 +0.91% -0.47% 4.31% 40.16%

NASDAQ +0.86% 0.82% 5.54% 54.19%

Rec'd # Security In At Now Change

8/5/94 680 AmOnline 7.27 54.13 644.20%

5/17/95 1005 Iomega Cor 5.04 32.75 550.07%

8/5/94 165 Sears 28.93 52.63 81.94%

4/20/95 310 The Gap 16.28 27.88 71.27%

8/11/95 95 GenElec 57.91 78.25 35.11%

8/11/95 110 Chevron 49.00 56.63 15.56%

1/29/96 250 Medicis Ph 27.86 26.25 -5.78%

8/24/95 100 AppldMatl 57.52 35.75 -37.85%

8/24/95 130 KLA Instrm 44.71 25.50 -42.97%

Rec'd # Security Cost Value Change

8/5/94 680 AmOnline 4945.56 36805.00 $31859.44

8/24/95 100 AppldMatl 5752.49 3575.00 -$2177.49

5/17/95 1005 Iomega Cor 5063.13 32913.75 $27850.62

8/5/94 165 Sears 4772.65 8683.13 $3910.48

4/20/95 310 The Gap 5045.25 8641.25 $3596.00

8/11/95 95 GenElec 5501.87 7433.75 $1931.88

8/11/95 110 Chevron 5389.99 6228.75 $838.76

1/29/96 250 Medicis Ph 6964.99 6562.50 -$402.49

8/24/95 130 KLA Instrm 5812.49 3315.00 -$2497.49

CASH $12147.13

TOTAL $126305.26