Fool Portfolio Report
Friday, May 31, 1996
Friday, May 31, 1996 (FOOL GLOBAL WIRE)
by David Gardner (MotleyFool)
ALEXANDRIA, VA, May 31, 1996 -- So, OK, we lost to the market today. The Fool Portfolio gave up about a half percent, slightly underdoing the S&P 500, and becoming a blowout victim of the spunky NASDAQ. Considering how absolutely perfect the weather at Fool HQ was today, I'll trade a half-percent loss for sunny-and-70 anytime. Why am I not throwin' a frisbee right now?
Ah, because it's time for our daily recap! Always here, every market day, we Foolish scribes aim to pen for you the latest on the performance of America's ONLY (to my knowledge, anyway) REAL-MONEY, FULLY EXPENSED portfolio that provides instant DAILY UPDATES online, compares itself to THE MARKET AVERAGES, and lets you know AHEAD OF TIME what it's doing.
So, the latest.
Well, the first thing I notice on this day on which I should've been throwing a frisbee is that Iomega dropped $1 3/8... Iomega, which currently occupies 47% of our overall portfolio. Needless to say, we watch this one fairly closely. The phrase "As Iomega goes, so goes the Fool Portfolio" is not completely accurate, but it's close. We get messages from time to time from people who say essentially this: "How the living heck can you put 47% of your money in one stock? That's irresponsible, and is just a further obvious indication to me that the market is about to crash." So, from time to time, I like to explain this very point, for the benefit of our new readers. Here's a paragraph on the subject.
First off, we would never put 47% of our money in any one stock, initially. Initially, we put about 10% of our portfolio ($5000, when we bought IOMG) in a new stock, which makes sense; we aim to hold about 10 stocks at a given time in our portfolio. But when you or I buy a small-cap stock, what are we hoping for? We're hoping for HUGE returns, although many of us (fellows like me, for instance) will be quite happy with just market-beating returns, in whatever market climate. Now, the dream is of course to buy a small cap with the hope of it BECOMING a large cap, and hey, the quicker the better, frankly. And that's just what has happened with Iomega, which is now regularly among the NASDAQ's most active stocks. And here's the rub: if we still like something, we're going to keep holding it... we are NOT going to sell out our winners just for the sake of selling winners. How else would we ever hit really huge homeruns, anyway? If you routinely sell out all or portions of a 20% gain, or a 50% gain, or a 100% gain, how exactly will you ever get (as is the case for us today in Iomega) a 1651.71% gain? You won't, of course. To reiterate: we would never put 47% of our money in ANYTHING, initially---highly unFoolish. But we do not MIND if a stock appreciates to 47% of our portfolio... don't mind it one bit. That just says we've had a gargantuan winner, a King Kong of the sort that makes an otherwise respectable mag like Barron's look silly (and bitter) constantly decrying. (Wonder what they'll print about Iomega this weekend---hey, I just hope they never turn bullish!) (Chuckle.)
Now, if any one stock appreciated to a truly RIDICULOUS portion of our overall holding (say, two-thirds or more, I dunno) we would probably sell some of it for that reason. But 47% isn't ridiculous enough. And thank God we've never thought it was.
America Online enjoyed a healthy Friday rise, up $2 3/8 on the bid to $56 1/2. No news. Of course whenever I see a nice rise in one of our stocks and don't find any news, I go to my single favorite information source: our Stock Boards. Today's AMER folder contains everything from a debate about the future of commercial online services vs. the Internet to an explanation of short squeezes. The note that most closely expresses my own feelings comes from WAINROBE, a Florida lawyer and sportsmen in his early fifties, who types:
"To my mind, the stock has outstanding long term growth potential. The problem is that it went from 7 to 70 in a year and one half. It is not going to 700 in the next year or two but I can see it hitting 100 in the next year, absent a major stock market correction."
Right on, Bob. I agree both that America Online will probably not be a 40-bagger again over the next 4 years, but that it WILL continue to outperform the market robustly going forward.
America Online yesterday announced a new president of its AOL Europe service; today, it apparently caught a buy recommendation from a financial newsletter.
I got a note in my box today from none other than the esteemed MF Bogey. He quoted a Fool recap of mine from a few weeks ago in which I tossed out the possibility that we'd add a short sale to our portfolio by the end of May. As it is now May 31st and we have no such annoucement to make, I have MF Bogey to flame for holding me accountable. You jerk. OK, OK, we'll try to find one in June.
One trade you can COUNT on us making (mark it down, date and time) is our Dow Dividend Approach switch in mid-August... the only Fool Portfolio trades that can ever be front-run! Yep, folks, we make our August Dow switch every year, and continue to believe (as we write in our "Motley Fool Investment Guide") that THIS is the way for any new equities investor to start. It's right up there in black-and-white online, too. Just click our Fool's School button on the Fool main screen and read our 13 Steps to Investing Foolishly, designed to take the total novice from baby Fool steps to full Foolish strides in 100,000 words or less. (Something like that; I've never counted.) No, seriously, please start there... that's why we wrote the darn articles. If you come across a newcomer on our message boards, please point him or her right to that section. And don't forget our FAQ (Foolishly Answered Questions) section, always accessible from that little question-mark button at the bottom of our main screen.
The Dow stocks dropped for us today, in keeping with a lower Dow average. Interesting divergence between the big and the small today... small stocks reigned supreme. The gooroos quoted by the press said the market was down due to fears of rising interest rates; I never know what to think of that stuff; day-to-day economic sentiment seems to change with the winds. Anyway, it doesn't explain much about small stocks.
I'll close with two separate items. First off, Friday was the last day of May, and we'll just say once again, "Thank you, May!" The Fool Portfolio rose an amazing 20.20% this month. It's funny. I go back and read our March 29th report entitled, "Dear March, Sorry to See You Go," which laments the end of that wonderful month for the Fool Portfolio. The Fool Portfolio rose 11.06% in March. The next month, April, was our greatest ever: up 32.17%. Now once again we see May's stupendous 20% gain, which could make it very easy for us to get blase and complacent... "Another 20% gain, right? Whatever!" Yeah, right. We are incredibly fortunate to have seen such growth over the past quarter: three months like those don't happen in some investing lifetimes! That's total growth of 76%, my fellow Fools. Enjoy it for what it's worth. Celebrate quietly. And never expect anything like this again. Might happen, but do NOT expect it. That's greed.
Second, I want to remind anyone who missed last night's report of the exciting announcement of our newest product, debuting MONDAY. Called "IOMG in Fooldom Today," it's a daily e-mail service brought to you by MF Numbers, MF Jeanie, and MF Cheeze. Every day, subscribers will receive a 3-5 paragraph summary of our Iomega folder's best contents over the previous 24 hours, complete with excerpts of the best posts. It is, in my Foolish opinion, an OUTSTANDING offering, an innovative way for you to always get the best analysis of our most talked-about stock. On a side note, it also serves as a test product for similar future offerings.
We're giving away the service for free during its first few weeks, so you can try it at no cost or obligation. Sign up right now by sending an e-mail to MF Selena (or firstname.lastname@example.org).
OK, I'm off to scare up a bright, preferably ostentatious (preferably neon) plastic disk to fling carelessly into the dusk.
---David Gardner, May 31, 1996
NOTE: Our policy regarding Fool Portfolio trade announcements has changed...Click HERE for details (Foolish e-mail list subscribers have a copy in their box, as well). Interested readers should make a point of reading this document.
Day Month Year History
FOOL -0.46% 20.20% 101.91% 277.02%
S&P 500 -0.38% 2.29% 8.64% 45.97%
NASDAQ +0.81% 4.45% 18.18% 72.66%
*Scroll down or expand screen for full portfolio accounting
AMER +2 3/8 ...CHV - 5/8 ...GE - 1/4 ...GPS + 7/8 ... IOMG -1 3/8 ...KLAC + 3/4 ...MDRX ---...S ---...
Rec'd # Security In At Now Change
5/17/95 2010 Iomega Cor 2.52 44.13 1651.71%
8/5/94 680 AmOnline 7.27 56.50 676.86%
4/20/95 310 The Gap 16.28 33.63 106.61%
8/5/94 165 Sears 28.93 50.88 75.88%
8/11/95 95 GenElec 57.91 82.75 42.88%
8/11/95 110 Chevron 49.00 59.75 21.94%
1/29/96 250 Medicis Ph 27.86 33.00 18.45%
8/24/95 130 KLA Instrm 44.71 26.63 -40.45%
Rec'd # Security Cost Value Change
5/17/95 2010 Iomega Cor 5063.13 88691.25 $83628.12
8/5/94 680 AmOnline 4945.56 38420.00 $33474.44
4/20/95 310 The Gap 5045.25 10423.75 $5378.50
8/5/94 165 Sears 4772.65 8394.38 $3621.73
8/11/95 95 GenElec 5501.87 7861.25 $2359.38
1/29/96 250 Medicis Ph 6964.99 8250.00 $1285.01
8/11/95 110 Chevron 5389.99 6572.50 $1182.51
8/24/95 130 KLA Instrm 5812.49 3461.25 -$2351.24