Fool Portfolio Report
Tuesday, May 14, 1996

by Tom Gardner

ALEXANDRIA, VA, May 14, 1996 -- GONG. . . GONG.

The Fool is proud to announce our fourth double since kicking open our weather-beaten gates back on August 4, 1994. Up until yesterday, The Fool Portfolio had ridden higher on doubles from Ride Snowboard, Iomega Corporation, and America Online. Let's take a look at the stats on those three investments.

Rec'd # Security In At Now Change

5/17/95 1005 Iomega Cor $5.04 $66.00 +1210.06%

8/5/94 680 AmOnline $7.27 $57.50 +690.61%

5/23/95 510 Ride Inc.* $9.91 $21.13 +113.22%

Rec'd # Security Cost Value Change

5/17/95 1005 Iomega Cor $5063.13 $66330.00 $61266.87

8/5/94 680 AmOnline $4945.56 $39100.00 $34154.44

5/23/95 510 Ride Inc.* $5052.44 $10,746.26 $6295.06

(* Stock sold on 11/30/95)

Each one of the three has their own story. But I do think they all reinforce the notion that investors ought to at least consider investments in blistering-growth companies with products on the market that operate in roaring new industries. In other words, though Barron's might propose it, our belief is that not all accelerated growth is fluff, froth, fiddle-faddle, flimflam, flummery; it's not all fabricated, fronted, faddish, falsified, faked, fantastical, farcical, far-fetched, fishy, fatal, faulty, feigned, flighty, fiendish, flawed, fleeting, foppish, forbidden, formless, fraudulent, freakish, frivolous, futile. . .

Some of it is Foolish.

At the time of our investment in 'em, each of these three companies was in position to define or re-define an entire industry. They were driven by management teams intent on designing superior products or services, on building consumer brands, on running profitable businesses, and on maximizing shareholder value. They were Lynchian to an extreme: familiar, explosive, American. They were---at least theoretically---Buffetian (is that a word?) as well: consumer-branded, profitable, well-managed.

And they all, at least, doubled for us. While the Wise focused too much on predicting market twitches, on the price movements of stocks, on the horrors of private investors entering the market en masse. . . I think we Fools have stuck quite close to identifying great products, researching businesses, valuing brands, and generating earnings-growth estimates. Sure, the market's going to fall. . . our stocks are going to get mashed at differing points along the way. But as long as we remain committed to the selection of profitable businesses in growing industries, I think we have a handful of pretty fine decades ahead of us.

In that vein, I think Barron's might do well to at least balance out Mr. Abelson's fairly rigid, anti-technology curmudgeoning with a columnist who shows some passion for and some expertise in the worlds of growth and technology. A college kid with the gift of gab and a fascination with computer software and hardware, storage technology, networking equipment, digital communication, etcetera. She would add great value.

If there ARE some Barron's staffers in Fooldom tonight, I hope you'll think very seriously about bringing on that sort of a senior level Growth & Technology writer. Because to my recollection---and my brain doesn't always work---Barron's has repeatedly hit our best two investments, America Online and Iomega, with full-throated bearishness. Both are companies that are eating up market-share in tomorrow's growth industries; AMER is up 690%; IOMG is up 1210%. Dow Jones' weekly financial paper hasn't just missed the story; they've MISTOOK it.

Ok, time to trot out our fourth double---that jittery, unpredictable, purely speculative (jest kiddin') issue: The Gap (NYSE:GPS). Gap shares rose $3/4 to close at $33 a share. Let's look at the GPS performance record since we called over to Aufhauser for shares, noting as well that our records include commissions, spreads, and our customary transaction pre-announcement---standards which we hope the entire financial industry will promptly adopt. Here are the Gap numbers:

Rec'd # Security In At Now Change

4/20/95 310 The Gap $16.28 $33.00 102.76%

Rec'd # Security Cost Value Change

4/20/95 310 The Gap $5045.25 $10230.00 $5184.75

Similar to our other three doubles, The Gap is an extraordinarily well-managed business, with high profit margins, strong working capital and cashflows, neglibible long-term debt, a superior brand, and a low-cost product. Welcome, Gap, to the Doubling Gang. Management is now entitled to two free games of Foosball at Fool Cosmos HQ.

Before closing out with a recap of the rest of our portfolio, allow me to emphasize just one more time that we don't think there's anything terribly spectacular about what's going on here in the Hall of Portfolios. Here in our Foolish offering, we're up 76.4% versus 8.0% growth for the S&P in 1996, and up 229.4% versus 45.2% for the market since our inception. These numbers are shocking compared to the performance of *any* of the 8,000 mutual funds on the market or any of the big-name investment firms.

Is it the work of genius? We don't feel terribly smart here, just a bit Foolish. So why's it happening? Well, our only incentive as private investors is to beat the market over the long-haul. We don't get paid extra money based on the number of trades we make, do we? We don't look better in the mirror if we window-shop for winners at the end of every month or quarter, do we? We don't have to charge ourselves fees to market our Personal Portfolio brandname in newspapers and magazines across the country, do we? We don't have to beat the market over select periods in our life: tomorrow, next week, or in the quarter ahead, or next year, do we?

Our incentive as private investors is simple: build long-term, market-beating growth on our savings. It's the purest motivation on the Street. Therefore, should we not consistently beat those who, through mediocre business models, customarily lose to the market? Nothing special in it; service and accountability drive superior performance.


And hey, we beat the market today!

In the wake of its proposed secondary offering with H&Q and JP Morgan, Iomega continued to rise, pushing ahead $1 7/8 to $66. Fool, if you bought Iomega with us, left the country for a year, and only returned today, let me be the bearer of glad tidings. Between there and here, Iomega announced a 3-for-1 stock split, so off our original purchase price of $15, the stock is actually sitting at $198. Our $5,000 of a year ago is now $66,000. What a wonderful illustration of all that fundamental and online investing have to offer. . . when we research, collaborate, analyze, collaborate, buy, hold, track, study, collaborate, project, question, collaborate, hold, and maybe celebrate for a moment or two---wheeee!

There's no need for me to go into the attractiveness of this offering. You bring together two extraordinary firms in H&Q and JP Morgan. You dilute less than 5% of your company for more than $150 million. And you plink the capital down into robust growth. No wonder the Street has driven IOMG up another 10%.

America Online snapped back $1 7/8 to $57 1/2. The coverage of AMER in Fooldom in the wake of their 3rd quarter numbers has been outstanding. Chevron and General Electric continued their runs northward, up $1/8 and $3/8 respectively. GE is now up 36% and CHV has risen 21% for Fools.

To close, I'd like to point you all to our Foolish mainscreen and the six retailer conference calls that MF Debit sat in and reported on today. They're really spectacular. They remind me just why David and I throw on Fool caps in the middle of otherwise quite serious financial environs. Foolish investing is all about knocking down access walls.

Every time Debbie covers those conference calls for the forum, she's changing the way Wall Street works. Not so long ago, private investors were locked out of all conversation between corporate management and financial analyst. Closed communities created their own style of "inside information." Those conversations are being flipped to speaker phone here in Fooldom; analysts aren't the only ones "guided" to earnings projections by public companies; new product launches are being announced here with greater frequency.

Disintermediation, distributed intelligence. . . whatever you want to call it. I'd like to brand it Foolish. But I won't stoop tonight. Let's just agree to name it "awesome."

Tom Gardner, May 14, 1996

Today's Numbers

Day Month Year History

FOOL +2.04% 5.02% 76.42% 229.41%

S&P 500 +0.62% 1.75% 8.07% 45.20%

NASDAQ +1.03% 3.69% 17.32% 71.40%

AMER +1 7/8 ...CHV + 1/8 ...GE + 3/8 ...GPS + 3/4 ...IOMG +1 7/8 ...KLAC + 1/4 ...MDRX - 1/4 ...S - 3/4 ...

Rec'd # Security In At Now Change

5/17/95 1005 Iomega Cor 5.04 66.00 1210.06%

8/5/94 680 AmOnline 7.27 57.50 690.61%

4/20/95 310 The Gap 16.28 33.00 102.76%

8/5/94 165 Sears 28.93 50.63 75.02%

8/11/95 95 GenElec 57.91 78.88 36.19%

8/11/95 110 Chevron 49.00 59.25 20.92%

1/29/96 250 Medicis Ph 27.86 25.00 -10.26%

8/24/95 130 KLA Instrm 44.71 30.75 -31.23%

Rec'd # Security Cost Value Change

5/17/95 1005 Iomega Cor 5063.13 66330.00 $61266.87

8/5/94 680 AmOnline 4945.56 39100.00 $34154.44

4/20/95 310 The Gap 5045.25 10230.00 $5184.75

8/11/95 95 GenElec 5501.87 7493.13 $1991.26

8/11/95 110 Chevron 5389.99 6517.50 $1127.51

1/29/96 250 Medicis Ph 6964.99 6250.00 -$714.99

8/24/95 130 KLA Instrm 5812.49 3997.50 -$1814.99

8/5/94 165 Sears 4772.65 8353.13 $3580.48

CASH $16434.53

TOTAL $164705.78