Fool Portfolio Report
Monday, May 6, 1996

by Keith Pelczarski (MF Czar)

ALEXANDRIA, Va., May 6 -- Everyone has heard of the luck of the Irish, and lately, there's been a lot of talk about the luck of the Foolish. It's been said on our message boards and in the media that the Fool Portfolio returns are nothing but luck.

You know what? They're right.

Maybe not completely right -- there was (and continues to be) some work involved with it -- but no one sextuples the S&P 500 over a twenty-month period without a lot of luck on their side. (David and Tom are partially Irish, so that might account for some of it.)

It's not always enough to get lucky. Sometimes you have to be able to recognize good luck and not jinx yourself.

Some of you out there must be wondering why the heck I'm talking about jinxes -- that's superstitious stuff in a category with crystal balls and horseshoes (I happen to have both items on my desk). I'm not referring to jinx in the traditional sense. The jinx in question here is the one where you say to yourself, "It's had its run," and turn your back on your best stock to take up another.

Another common jinx is the diversijinx. The diversijinx strikes when one sells off part of their winners, so that they may evenly distribute their funds across all their stocks, winners and losers. Despite the fact that this is commonly accepted wisdom, the logic still baffles me. If you'll indulge a baseball simile, it's like pulling your best pitcher off the mound because you think that your middle reliever with a terrible ERA must be due. It just doesn't make sense.

That's not to say that you should load the boat in a few stocks right off the bat. That'd be like scrapping your bullpen in favor of two fireballers. Again, it just doesn't make sense.

So what kind of luck hit the Fool Portfolio today? Well, it was good luck to say the least. The two luckiest stocks of all, America Online and Iomega, continue to baffle the Wise.

Proving that not all people on the street are Wise, Alex. Brown & Sons analyst Steve Eskenazi reiterated a strong buy rating on America Online today, stating that, "This continues to be our single best idea (for investors)."

There was also a Japanese press report on the possibility of an AOL/Mitsui deal, to establish an Asian online service. As if all that luck weren't enough, America Online reports earnings on Wednesday, which seemed to add some extra fuel to the fire. America Online closed at a bid of $67 5/8, up $5 1/8. We'll take that kind of luck every day.

There was more bad luck for short-sellers of Iomega today, as it zipped up $5 3/4 to $65 3/4. There wasn't any news that I could see to warrant such a gain, so let's just chalk it up to luck.

The other issues in the Fool Portfolio didn't move much today. Actually, Medicis moved $1 based on last trade information, but only $3/8 when measured at the bid (as Fools do). For all the information on today's moves, scroll through the box below this one. It shows the breakdown for individual stocks, and the past performance of the Fool Portfolio.

Speaking of Fool Portfolio performance, it was up 5.84% today versus a Nasdaq gain of 0.14% and an S&P loss of 0.13%. Not too shabby, for a couple of lucky guys. This brings the Lucky, er, Fool Portfolio gains to 82% on the year, vs. an admirable Nasdaq gain of 12.74% and still respectable S&P gain of 4.04%.

There's a post in our Talk with the Editors board that spoke of this year's huge Foolish gains. A user named JonRodgers writes:

"I started to build my Fool portfolio along with yours last fall, but wasn't sure how to do it. I finally decided to just add a stock as new ones were recommended. Another method would have been to just jump in and pick a day to buy all the stocks in the current portfolio."

Please let me take this opportunity to reiterate that we are not investment advisors, and we really hope that people do their own homework before buying *any* stock. As I said above, a lot of this is due to luck, and everyone knows that luck can run two ways. A sharp drop in the Fool Port would be buffered by the huge gains. If you step on while the ride is moving, you might jump on just before it stops.

But I digress -- Jon continues:

"As it turns out my method was not all that good, as your newer picks last year lost money, while the older ones just kept growing and growing! So far this year I am okay and I am up 29% thru April, but nothing like the Fools 70%."

Take it from a guy who's struggling this year to stay neck-and-neck with the lethargic S&P 500 -- 29% for four months is much better than okay. You're stomping the S&P by 25 percentage points, septupling it, even. Any Fool should be proud of that accomplishment -- give yourself a pat on the back, Jon, you're doing great.

Today's Numbers

Day Month Year History FOOL +5.84% 8.34% 82.00% 239.84% S&P 500 -0.13% -2.04% 4.04% 39.79% NASDAQ +0.14% -0.35% 12.75% 64.72% *Scroll down or expand screen for full portfolio accounting AMER +5 1/8 ...CHV - 5/8 ...GE - 3/4 ...GPS + 1/2 ...IOMG +5 3/4 ...KLAC ---...MDRX + 3/8 ...S ---... Rec'd # Security In At Now Change 5/17/95 1005 Iomega Cor 5.04 65.75 1205.10% 8/5/94 680 AmOnline 7.27 67.63 829.82% 4/20/95 310 The Gap 16.28 29.88 83.56% 8/5/94 165 Sears 28.93 50.25 73.72% 8/11/95 95 GenElec 57.91 76.25 31.66% 8/11/95 110 Chevron 49.00 56.00 14.29% 1/29/96 250 Medicis Ph 27.86 26.13 -6.22% 8/24/95 130 KLA Instrm 44.71 30.25 -32.34% Rec'd # Security Cost Value Change 5/17/95 1005 Iomega Cor 5063.13 66078.75 $61015.62 8/5/94 680 AmOnline 4945.56 45985.00 $41039.44 4/20/95 310 The Gap 5045.25 9261.25 $4216.00 8/11/95 95 GenElec 5501.87 7243.75 $1741.88 8/11/95 110 Chevron 5389.99 6160.00 $770.01 1/29/96 250 Medicis Ph 6964.99 6531.25 -$433.74 8/24/95 130 KLA Instrm 5812.49 3932.50 -$1879.99 8/5/94 165 Sears 4772.65 8291.25 $3518.60 CASH $16434.53 TOTAL $169918.28