Fool Portfolio Report
Monday, June 17, 1996
Monday, June 17, 1996 (FOOL GLOBAL WIRE)
by David Gardner
ALEXANDRIA, VA, June 17, 1996 -- With two of the Fool Portfolio's top three holdings by dollar amount dropping $1+ today, no surprise that we lost to the market. The end-o'-the-day tally showed our efforts come to naught (-1.34%), in a dull-to-down market (S&P 500 off 0.10% and NASDAQ down 0.45%).
What are the three top holdings in the Fool Portfolio? Well, first we have $74,370 in Iomega, far and away the largest holding. Next, you'll find America Online---which FINALLY upticked today, up $3/8---at $30,855. And third? Anyone wanna take a guess? Yep, none other than tiny Medicis Pharmaceutical, which makes up $10,750 of the Foolfolio (barely edging out The Gap, $210 behind). Those three growth stocks together make up about two-thirds of our holdings. Interestingly, they each began as an investment of one-tenth or less of overall assets, with Medicis being the most recent purchase (January), with a cost basis of $6965. For individual investors like us, this serves as an educational reminder of the power of buying and holding.
Medicis, then, was one of today's culprits, down $1 1/4 following its outstanding week last week. We'll write that one off to profit-taking, following a 13-dollar gain on Thursday. (Friday's drop of $1 was very similar to today.) We look forward to the company's fiscal '96 fourth-quarter earnings report, upon the close of its fiscal year this June 30th. The 3Q report, you'll recall, featured sales and earnings per share gains of 40% and 414%, respectively. Our projections suggest further 4Q growth of 38% and 77% over 4Q '95. The stock remains undervalued, in our Foolish opinion.
Iomega was the other culprit that hurt us today. These shares dropped $1 1/8, and are now off 33% from their high of three weeks ago. The media tends to exaggerate the stature of this stock in our Fool Portfolio and Fooldom overall, but many of us (guys like me, for instance) note that it is just one of hundreds of good investment opportunities out there. The message to investors is (a) if you hold it, don't become obsessed and think it's the only good stock out there, and (b) if you "missed" it, don't think you've missed the boat on investing in the stock market. Too many great stocks out there.
Obviously, because Iomega has been a fourteen-bagger in 13 months for us, and because over that period it has been the best-performing stock on all American exchanges, and because our readers were onto it well before mainstream Wall Street had ever glimpsed the ticker symbol, for some "Iomega" is synonymous with "The Motley Fool."
Yet it might interest them to note that even if we had lost EVERYTHING in these shares---indeed, even if Iomega drops 37 points to $0 tomorrow---we'd still have $95,000 in our account... a less-than-two-year investment return of 90%! Looked at against the S&P 500 over that time, which rose 45%, we're talking about a clean market double... a clean market double, assuming we had lost all the money we'd ever invested in Iomega.
I mention this, my fellow Fools, for two reasons. First, I wish the record to be quite clear on the matter, since those are the facts. Forget about Iomega! Sure, it's my favorite stock in The Fool Portfolio at the moment, in addition to having been our best performer ever. But lest we forget, we've seen 40% gains or more in Ride (a double), Gap (a double), Merck, Sears, General Electric, Medicis, and Boston Technology. (We've also seen 30%+ losses in Paychex, Sonic Solutions, Applied Materials, and KLA Instruments---which demonstrates why we preach diversification!)
So let me say it again: "Forget about Iomega." The Motley Fool is all about learning how to beat the stock market by investing in superior companies, using the online medium to stay informed as an investor, buying and holding, not timing the market, and cutting your winners loose to run. We teach this from the ground up (you can read our "13 Steps to Investing Foolishly" here online in The Fool's School, or our bestselling "Motley Fool Investment Guide" available at your local bookstore). We champion the idea of well-diversified (but not TOO diversified) portfolios numbering 8-12 stocks. Iomega has been a great stock, but ONE stock alone won't lead to consistent market outperformance... may make for smashing returns in the short term, but if you want to be a long-term Fool you'll grab dependable market-doubling returns through smart diversification. Our IOMEGALESS historic return of 90% blows away virtually every mutual fund in the country since we started Fooldom. Foolishness Sans Iomega.
That leads to the second point. It sounds like I'm bragging when I write stuff like the last paragraph, but I'm not... I'm merely reporting back to our readership on a DAILY basis about what's really going on here. In the eyes of the offline and uninformed, what's going on here is largely just the apotheosis of a single, controversial stock. (We continue to wish these people would actually sign on.... Time Magazine is among the real MINORITY of publications that actually INTERVIEWED us for their article---y'know, fact-checking and all the rest----featuring a writer who actually understands and uses the medium.)
What's REALLY going on here is that we regular individual investors---the Gardner brothers---are demonstrating to anyone Foolish enough to pay attention the incredible benefits of UNDERSTANDING the stock market, making your OWN decisions with your money, and using the power of ONLINE technology like Fooldom to get an edge over Wall Street. I have never once sat down with the management of ANY company we've invested in and heard the "scoop." The thirty-plus full-time employees at Fool HQ enjoy ZERO privileged information, in a Wall Street world awash in expensive info that is largely inaccessible to investors like us. Further, many financial "experts" and academics state that you can't beat the stock market over time as a small investor. OK, well, THAT'S why we're doing this. We're able to contribute to and benefit from the collaborative efforts of hundreds of thousands of others, as opposed to the much smaller staffs of even our biggest financial institutions. That's the changing model... that's the edge. Totally open to anyone with a modem.
Two final notes tonight. First regards KLA Instruments. The stock remains under pressure... a loudly barking dog in the Fool Portfolio. We did notice one pathetic thing cross the wires today: an insider registered to buy 100 shares. How 'bout that, huh? A company insider loaded up on another $2300. Our sentiments are with the guy... KLAC looks real undervalued to us. But if you like it, wouldn't you buy a bit more, Mr. Harrell? Pretty please?! That said, we've called this stock completely wrong from Day One, so don't go listening to us.
(For the record, the guy is up: purchase was from mid-March, at $22 and change.)
And last, General Electric remains a darling of the conventional press. Witness its plug from TWO separate commentators on "Louis Rukeyser's Wall Street Week" just last Friday. What's the going price for a Rukeyser plug, these days? Apparently only $3/8, if GE's gain today tells the truth. But look deeper: GE's market cap is, oh, about $144 billion these days. So 3/8 of a point is worth about $626 million in market cap... that ain't bad for a day's work. It'd buy out Medicis, and then some.
---David Gardner, June 17, 1996
Day Month Year History
FOOL -1.34% -10.25% 81.22% 238.39%
S&P 500 -0.10% -0.59% 7.99% 45.11%
NASDAQ -0.45% -2.88% 14.78% 67.69%
*Scroll down or expand screen for full portfolio accounting
AMER + 3/8 ...CHV + 3/8 ...GE + 3/8 ...GPS + 5/8 ...IOMG -1 1/8 ...KLAC -1 1/2 ...MDRX -1 1/4 ...S - 3/8 ...
Rec'd # Security In At Now Change
5/17/95 2010 Iomega Cor 2.52 37.00 1368.85%
8/5/94 680 AmOnline 7.27 45.38 523.89%
4/20/95 310 The Gap 16.28 34.00 108.91%
8/5/94 165 Sears 28.93 50.75 75.45%
1/29/96 250 Medicis Ph 27.86 43.00 54.34%
8/11/95 95 GenElec 57.91 86.13 48.71%
8/11/95 110 Chevron 49.00 60.00 22.45%
8/24/95 130 KLA Instrm 44.71 23.75 -46.88%
Rec'd # Security Cost Value Change
5/17/95 2010 Iomega Cor 5063.13 74370.00 $69306.87
8/5/94 680 AmOnline 4945.56 30855.00 $25909.44
4/20/95 310 The Gap 5045.25 10540.00 $5494.75
1/29/96 250 Medicis Ph 6964.99 10750.00 $3785.01
8/5/94 165 Sears 4772.65 8373.75 $3601.10
8/11/95 95 GenElec 5501.87 8181.88 $2680.01
8/11/95 110 Chevron 5389.99 6600.00 $1210.01
8/24/95 130 KLA Instrm 5812.49 3087.50 -$2724.99