Fool Portfolio Report
Monday, May 13, 1996

by David Gardner (MotleyFool)

ALEXANDRIA, VA, May 13, 1996 -- OK, don't expect any celebrating in the Fool Portfolio recap today. . . we may have risen almost a percent today (0.87%, to be exact), but the market averages doubled that return. We got whacked. No mincing of words in Fooldom, tonight. . . no sugar-coating, no window-dressing, no saying HOLD when we are a STRONG SELL. Foolishness is synonymous with accountability.

The goal of investing, as I understand it, is to make money. The goal of Foolish investing, I can tell you, is to beat the market. The latter of course presupposes the former: If you're beating the market over time, you will by default be making money, and lots of it.

That's why it's really never enough for a Fool to say, "Yeah! Wooooooooo! Up 0.87% today, baby." No. Today, it's, "Ouch. Spanked. Dead man's float, no time to gloat."

America Online declined $2 1/2 Monday, in the face of a very strong market overall. Not a good day, given the strong NASDAQ. The stock is now down 20% from its high a week ago.

Completely apart from the bad day, I'm somewhat disappointed by the turn of conversation in our America Online folder by market close. After a fascinating discussion about future AMER marketing campaigns over the weekend, the day ended with posts like "Why is the stock still dropping?!" or, "Stop worrying, people, the slide's over." The reason I'm disappointed is that what we're doing there is dissecting hour-by-hour moves on the stock, apparently because some of us are in extreme earnest about it. Hey, I confess, most days I check how Fool Portfolio stocks are doing six or seven times during market hours. That said, I do it just for fun. My investment approach doesn't hang on the next feed from the ticker; my investment returns today, this week, or next month don't REALLY matter all that much.

I suspect in some cases these are holders of puts or calls, options they've bought to speculate on the short-term movements of the price. Because options are both (a) a short-term game, and (b) a high-risk gamble. What Peter Lynch has said about options investors is that over 90% of them LOSE money in the long term. I'm not saying lose to the market averages. I'm saying lose, period. Take heed.

Our message boards are not for hourly price updates or, except during truly exciting moments, cheerleading. They become most meaningful and useful when they convey important information, news, or analysis (the occasional joke is always appreciated, too) that can make you, the reader, better off for having visited. We will not, of course, "control" what is said on our message boards, because this is a forum open to all; we wouldn't have it any other way. But I do like to urge Fooldom from time to time to be something bigger or better than it is. No one thinks more of what's happening around here than I, but that never means that it's quite good enough, or perfect. We can do better.

That leads me to Iomega, which rose $2 1/4 today. We have had a fair amount of grumbling recently from regular readers expressing disillusionment about the state of that folder in the past week. Bickering, flames, general idiocy, etc. have apparently dominated the conversation. A number of readers (yes, your e-mails have reached us---they always reach us and we read them ALL) have requested a "moderated" discussion, or a second folder that only allows certain people to post in it.

Let's talk about this. First off, no such technology exists on AOL---we have no way of "locking out" strangers and allowing only a specified few to contribute to a folder. So for us to provide "moderation" is technically impossible using AOL's message boards. What we CAN do, if we can afford the cost (i.e. do it profitably), is to provide an editorial filter. And based on the requests of a bunch of our readers we plan to do this, and to try it out in June using Iomega.

What plan will the filter take? Here's our idea, subject as always to your ideas and suggestions communicated to us via our Suggestion Box.

Our present intention is to pay an informed staff member to read EVERY SINGLE POST in the Iomega folder on a daily basis, in order to produce two things. One, our staffer will write a 1-3 paragraph summary of the day's talk, focusing only on USEFUL, IMPORTANT, or ENTERTAINING info that passed through the folder in the previous 24 hours. Second, the staffer will excerpt---in part or in whole---the best, most Foolish, most informative posts from the folder that day. Some days, this might include an exchange of 35 messages; others, it might be less than five. Our current plans are to make that information an e-mail subscription service, with a low fee attached ($5 a month). If this service were successful, we would use the example as a model in the coming months for some of our other most trafficked folders.

What does this do? Well, what it DOESN'T do is change the existing format, or create any new barriers. No. Anyone can still come in and say what they like (within the bounds of Terms of Service, of course) about Iomega. Again, that's the way we want it. Sure, there'll always be junk, always be some rudeness or wrongheaded thinking, because that's human nature and rumor has it that most of the ongoing discussion is being conducted by humans.

But this new service does do three important things. First, it will provide you most of the information you NEED to know to keep up with the stock and the folder, and enable you to BYPASS the "junk" that inevitably occurs when a stock gets 150 posts a day. Second, it provides this info to you in your e-mailbox (similar to other successful Fool products like Evening News and Weekly Fool e-mails), giving you the convenience of reading it when you're at work (if you just have Internet there) or on the road away from AOL. Third, and for many people this is the most important aspect, it'll give you a substantial money and TIME savings over the amounts of money and time you're currently spending to keep up with the IOMG folder. Are you spending more than 2 hours a month reading the Iomega folder online, or hours more going through the whole thing offline? Then this new service should be an excellent economical answer.

Look for our "IOMG in Fooldom Today" product coming in June. We'll print you out a free copy for display ahead of time, so you can see what you'll be getting.

Back to the stocks to close. Iomega announced a secondary offering today, which will raise approximately $150 million. It'll be printing out five million shares (after the split) offered through Hambrecht & Quist and (ta-dah!) J.P. Morgan. "Playing the role normally played by Montgomery Securities in tonight's performance will be J.P. Morgan." That familiar line you encounter in the occasional playbill at the theater reads, in the above case, something like this one: "Playing the role normally played by Patrick Swayze in tonight's performance will be Sir Laurence Olivier." The market responded very well, helping to carry the Fool Portfolio along today. More on the offering tomorrow from Tom.

The Gap hit a new high for us, and rests just a shade below two-bagger status. If it can rise fractionally tomorrow, we'll have hit our fourth Foolish double in two years. We love these guys.

Finally tonight, Chevron caught a two-buck upswing today to hit a new annual (and Foolish) high, and General Electric rose $1, following a Morgan Stanley upgrade for 1996 earnings estimates from $4.35 per share to $4.41 per share.

But you know what? Mix it all up and stir the Foolish cauldron and you still don't have a potent enough brew to have put down the uppity market, Monday.

We lose. Fool on.

---David Gardner, May 13, 1996

Transmitted: 5/13/96

Today's Numbers

Day Month Year History

FOOL +0.87% 2.92% 72.89% 222.84%

S&P 500 +1.44% 1.12% 7.40% 44.31%

NASDAQ +1.59% 2.64% 16.13% 69.66%

*Scroll down or expand screen for full portfolio accounting

AMER -2 1/2 ...CHV +2...GE +1...GPS +1 3/8 ...IOMG +2 1/4 ...KLAC + 1/2 ...MDRX ---...S + 1/8 ...

Rec'd # Security In At Now Change

5/17/95 1005 Iomega Cor 5.04 64.13 1172.84%

8/5/94 680 AmOnline 7.27 55.63 664.83%

4/20/95 310 The Gap 16.28 32.25 98.16%

8/5/94 165 Sears 28.93 51.38 77.61%

8/11/95 95 GenElec 57.91 78.50 35.54%

8/11/95 110 Chevron 49.00 59.13 20.66%

1/29/96 250 Medicis Ph 27.86 25.25 -9.37%

8/24/95 130 KLA Instrm 44.71 30.50 -31.78%

Rec'd # Security Cost Value Change

5/17/95 1005 Iomega Cor 5063.13 64445.63 $59382.50

8/5/94 680 AmOnline 4945.56 37825.00 $32879.44

4/20/95 310 The Gap 5045.25 9997.50 $4952.25

8/11/95 95 GenElec 5501.87 7457.50 $1955.63

8/11/95 110 Chevron 5389.99 6503.75 $1113.76

1/29/96 250 Medicis Ph 6964.99 6312.50 -$652.49

8/24/95 130 KLA Instrm 5812.49 3965.00 -$1847.49

8/5/94 165 Sears 4772.65 8476.88 $3704.23

CASH $16434.53

TOTAL $161418.28