Fool Portfolio Report
Tuesday, July 16, 1996

Tuesday, July 16, 1996 (FOOL GLOBAL WIRE)
by Tom Gardner

ALEXANDRIA, VA, July 16, 1996 --- This way and that, that way and this. To and fro. Back and forth, and forth and back.

The Motley Fool Portfolio rose 1.39% versus S&P and NASDAQ losses of 0.22% and 0.64% today. The NAZ has now fallen 11.10% in the month of July. The S&P 500 is off 6.30%. And strange creatures are running amok down Broad Street and up Wall. The bears are kicking in jam jars, scratching open canisters of trail mix, and snorting at the midnight moon.

They haven't eaten in some time.

Peering back on their performance over the last 25 1/2 years, US stocks have compounded over 12.50% growth PER YEAR. That makes for 1800% growth. And that includes the near 50% decline in value during the 1973-1974 recession. If it weren't for the low-quality (read: non-existent) financial education in our country today, you might actually think our nation's anxious ramblings about the equity markets were brought on by a colossal, Soviet-style, propaganda-pumping machine.

But you just have to accept that it's a general ignorance about public companies and equity performance over the past six decades, the past three decades, and the past decade in America. Conspiracy theories all be damned in an open, enterprising nation that reinvents itself every decade.

Reinvents itself. . .how so? Well, look at these three categories:

Consumer Technology---

1966: What was a calculator?

1976: Who owned a personal computer?

1986: What was the Internet?


1966: Bell-bottoms didn't exist.

1976: Spandex: Not yet born.

1986: The nose-ring, not yet popular.


1966: The Brady Bunch, a decade a way.

1976: The Terminator trilogy, not started.

1986: Who was Oprah Winfrey?

In 2006, what will they be saying didn't exist today? Full-motion video networked across the planet, jetpack hightops, and The Motley Fool Global Weekly Broadcast (TMFgwb). I mean, if you can get away with: CNNfn, why not TMFgwb?

Fools, the point is that we re-create ourselves every decade. And each of those conversions is built upon creativity, marketing prowess. . .and capital investment. Consumer technology, apparel and entertainment are transformed and flourish because of our collective need for Lee Deming's continual improvement, for amusement and learning, for activity and rejuvenation.

It's this enterprising nature---woven into the diversity of our people and tied to the reach of our land from Tampa Bay to Glacier Park---that demands creativity, that drives growth and multinational business opportunities, and that generates bottom-line profits and, by extension, long-term appreciation in equity values. The story of corporate and equity growth in 20th century America is stroked in indelible ink---annual growth for the Standard & Poor's 500 of 11%.

At that rate, every six years, the bear placing bets against the US market lost all of his savings.

It's no wonder then that they raise such a ruckus when the market does turn down. No wonder they yell, "Sell, sell, sell!" And no wonder they dress in 1970s polyester suits and pull out kooky pencil-and-paper charts on financial television. At the rate of stock-market growth over the past sixty years, these guys lost all their money every six years. Conversely, the Foolish investor doubled her money every six years.

So let's start with $100,000 in 1940.

On one side of the table, you have the academic, with his latest jargon---y'know, candlesticks and resistance levels, bands and hoops---and armed with the latest portfolio theory model. He's shorting the market, cause he hasn't taken the time to analyze the business fundamentals from the bottom-up. Six years later, he has nothing. He dreams up a new marketing plan, attracts new assets---which is how he gets compensated, gathers another $100,000, shorts the market, and loses it again. Now, fifty-six years later, it's no surprise that he's in an old suit, with charts on giant pads of paper, waiting for moments like these. Hoping to make the magical call that will allow him to peddle high-priced investment products and develop a his own, self-named financial jargon. He has no money left. He has not used any of the latest technologies. And for some reason, he's still blind to historical performance.

On the other side of the table sits the private investor focused on business realities, on growth in earnings, on the aggressive management or elimination of debt, and on the future. She put her $100,000 into stocks in 1940. And let's say her investments were just average. Nuthin' special. In a tax-deferred account, she now finds herself with $34.5 million. I don't know where she's living but I can promise you, if she wants warmth and white sand, she has it. If she wants high altitudes and deep powder, she's got it. And if she wants to ignore the 15% decline in the NASDAQ over the past few weeks---and I suspect she does---she's got good reason to. Apologies to most of the folks covering the market today, but most likely she's canceled her subscriptions to all financial services that don't see the benefits of using the stock market as a savings vehicle. And that's most of them today---the ones that think stocks are speculative, that the market can only be properly interpreted by trained professionals, that the individual investor will get their comeuppance in time. I don't suspect our lifelong investor is passing much of her time in front of financial television---where too often long-term business optimism based on fundamental and historical research is called "chatter" or named "hype."

Oh, and if the market climbs 11% a year through 2010, she'll have $149 million in that account. She'll probably know even better that the bears get too loud during short-term corrections and get too much air-time given their calamitous, long-term performance.

And though she's abandoned all financial-information services, I hope she's come across The Motley Fool so that her children and grandkids can help tinker with the Dow stock model that hasn't returned that 12% annually for 25 years, but rather 22% annually. The difference in dollars is astounding.

So, Fools, we hope you're sticking to the numbers. To that ten year focus, at which point we might all be looking at each other, monitor to monitor, through 3-D shades. Maybe we all have jetpack hightops in the closet---for fashionable, local transportation. And are we not waiting up late for The Fool Television's business expose of the week: "The Ab-Roller---What Went Wrong?"

It's been a wacky 1996, but not totally foreign. Technology thrived until the Spring and is getting stomped in the summer. There's more tennis being played than computer tennis. More hiking and biking, less buying and borrowing. It's summer and it's a slowdown. But if you look forward fifty years, or thirty, or ten. . . stocks are headed higher. Not all stocks. Not low-grade, 40-cent mining ventures absent what might be called management. Not those of low-margined, commodity businesses. But spy the ones with products on the market selling into rampant consumer demand, with a management that preaches business performance and shareholder value, with cash positions growing, debt positions slowing. . . and all you see are stocks heading higher in decades hence.

Someday our educational system will teach us that and steal all this fire from us Fools. Darn! :)

Note: Iomega rose $1 3/4 today. Earnings are coming. The average of all Fool Stock-Board estimates came to 15 cents per share and $342.3 million in total revenues. The Street is expecting 10 cents for the quarter. Da Fool Board has consistently been more accurate than Da Street. Let's see what happens this time.

Tom Gardner, Fool

Today's Numbers

Day Month Year History

FOOL +1.39% -13.76% 38.62% 158.83%

S&P 500 -0.22% -6.30% 2.02% 37.08%

NASDAQ -0.64% -11.10% 0.13% 46.28%

*Scroll down or expand screen for full portfolio accounting

AMER -1 7/8 ...CHV -1 1/8 ...GE - 5/8 ...GPS + 1/2 ...IOMG +1 3/4 ...KLAC +1...MDRX -2 7/8 ...S + 7/8 ...

Rec'd # Security In At Now Change

5/17/95 2010 Iomega Cor 2.52 23.63 837.88%

8/5/94 680 AmOnline 7.27 33.38 358.90%

4/20/95 310 The Gap 16.28 29.88 83.56%

8/5/94 165 Sears 28.93 43.75 51.25%

8/11/95 95 GenElec 57.91 80.75 39.43%

1/29/96 250 Medicis Ph 27.86 38.75 39.09%

8/11/95 110 Chevron 49.00 58.13 18.62%

8/24/95 130 KLA Instrm 44.71 19.75 -55.83%

Rec'd # Security Cost Value Change

5/17/95 2010 Iomega Cor 5063.13 47486.25 $42423.12

8/5/94 680 AmOnline 4945.56 22695.00 $17749.44

4/20/95 310 The Gap 5045.25 9261.25 $4216.00

1/29/96 250 Medicis Ph 6964.99 9687.50 $2722.51

8/5/94 165 Sears 4772.65 7218.75 $2446.10

8/11/95 95 GenElec 5501.87 7671.25 $2169.38

8/11/95 110 Chevron 5389.99 6393.75 $1003.76

8/24/95 130 KLA Instrm 5812.49 2567.50 -$3244.99

CASH $16434.53

TOTAL $129415.78