Fool Portfolio Report
Thursday, May 2, 1996
(FOOL GLOBAL
WIRE)
by Tom
Gardner (TomGardner)
The market dipped 1.71% amidst interest rate concerns and Foolishness fell 2.28%, led down by a $2 1/4 drop for Iomega. But hey, it wasn't just Iomega. America Online gave back $3/4; Medicis was off $1 7/8; Gap fell $3/4 and Sears was off $7/8. Every single Fool stock fell.
Not everything went wrong today; we did hold onto our Applied Materials far enough into the day to benefit from Rick Whittington's upgrade of a number of semi stocks, from Micron to KLA Instruments to LSI Logic, Intel, Texas Instruments, and our once very-own Applied Materials.
We cashed out of Applied Materials at $40 today, so it rose $3/4 off its close of yesterday. So much for Fool transaction announcements shaking the market in its stocks this way and that, backward and forward, to and fro. Not happening. As long-term investors, it wouldn't be a focus of great concern even were it happening. Given our investment approach, trying to time and profit off the short blips here or there at transcation time doesn't make sense.
When Applied Materials rose $3/4, we made $75.00. Hey, no one at Fool HQ is tossing that money out the window; we'll take it. But relative to the overall size of our portfolio, eighths and quarter-points don't much matter. Relative to the overall size of *any* long-term investor's portfolio, sixty-fourths and sixteenths, eighths, quarters, halves, and three-quarters don't register.
It'd be kinda neat to just close down the portfolio report without exploring our purchase and sale of Applied Materials, our total loss on the investment of 32%, or $1800, and the rationale behind exiting this afternoon. I could get out of here early. It's such a nice evening, and I have a cool new midnight-blue mountain bike---after my last two-wheeler was lifted over a parking sign and run-off in the middle of the night last Spring; I could cruise down along the Potomac river and enjoy dinner with two Fools in Washington. What would it take but a quiet willingness to let a bad investment smuggle its way into the bottom drawer, unnoticed---down there with Sonic Solutions, confirmation slips of borrowed Paychex shares, a handful of ballpoint pens without their caps, a pair of scissors, a torn photo, and an old box of letters?
Damn.
Ok, what went wrong with Applied Materials?
Let me begin by saying that I personally think we're selling Applied Materials at the wrong time. Strip this stock out of our Foolish context, and who out there believes that at $40 a share, Applied Materials is over- or fairly-priced? Apparently not Rick Whittington of SoundView Financial, whose interview today with Randy Befumo (MF Templar) is available on our mainscreen.
Semiconductor automation equipment isn't going out of style, and even the mild downgrades over the past six months leave us with very healthy growth rates. The balance sheet is still sterling. The world of technology will crave chips for the foreseeable future---just a glance at Morgan Stanley's projected growth rates for the entire semiconductor universe tells us there are tremendous opportunities out there. (Aside: Apparently we have considerably more respect for Street analysts than does the lead writer at Barron's.)
For well-diversified portfolios, I think holding onto AMAT makes a lot of sense. Given the growth potential and the company's financial standing, Applied Materials could certainly double over the next 24 months, to $80 a share, rewarding shareholders with 41% annual growth.
So, why did we sell? If you read our transaction report, you know that it was a portfolio management decision. Addlebrained as we are, we finally realized that getting into two semiconductor-equipment companies on the same day wasn't very Foolish. And in that we hold portfolio management in highest regard, we felt it prudent to prune one from the portfolio.
We like to manage our portfolio like a business... every time we make a transaction, we ask ourselves, "Is this defensible?" Is this decision putting our portfolio at a short, intermediate, or long term risk that will keep us worried either while sleeping or awake? In this case, we're decreasing the risk that we've been subjected to for these past eight months.
Is the Fool Portfolio defensible as a business? We think so. Have we made mistakes? We sure have. Will we make more mistakes? You'd better believe it. But whether we're making mistakes or not, we'll let you know either way.
Fool on!
TODAY'S OTHER FOOLISH THING: Join Rupert Baines of Analog Devices, Inc. (NYSE: ADI) for a chat on ADSL, a nifty new networking technology. We've assembled a great collection of information on the technology, so you can study up before the chat starts. Then, at 9 pm ET, in Fool Chat #2, you can bring your questions to be answered by one of the industry's best. How Foolish!
Transmitted: 5/2/96 7:38 PM (foolport)
Day Month Year History FOOL -2.28% 0.75% 69.24% 216.02% S&P 500 -1.71% -1.65% 4.46% 40.35% NASDAQ -1.79% -1.03% 11.98% 63.60% *Scroll down or expand screen for full portfolio accounting AMER - 3/4 ...CHV - 5/8 ...GE - 1/4 ...GPS - 3/4 ...IOMG -2 1/4 ...KLAC - 1/4 ...MDRX -1 7/8 ...S - 7/8 ... Rec'd # Security In At Now Change 5/17/95 1005 Iomega Cor 5.04 57.25 1036.38% 8/5/94 680 AmOnline 7.27 62.50 759.36% 4/20/95 310 The Gap 16.28 29.63 82.03% 8/5/94 165 Sears 28.93 50.00 72.86% 8/11/95 95 GenElec 57.91 77.63 34.03% 8/11/95 110 Chevron 49.00 57.00 16.33% 1/29/96 250 Medicis Ph 27.86 26.38 -5.33% 8/24/95 130 KLA Instrm 44.71 29.75 -33.46% Rec'd # Security Cost Value Change 5/17/95 1005 Iomega Cor 5063.13 57536.25 $52473.12 8/5/94 680 AmOnline 4945.56 42500.00 $37554.44 4/20/95 310 The Gap 5045.25 9183.75 $4138.50 8/11/95 95 GenElec 5501.87 7374.38 $1872.51 8/11/95 110 Chevron 5389.99 6270.00 $880.01 1/29/96 250 Medicis Ph 6964.99 6593.75 -$371.24 8/24/95 130 KLA Instrm 5812.49 3867.50 -$1944.99 8/5/94 165 Sears 4772.65 8250.00 $3477.35 CASH $16434.53 TOTAL $158010.16
