Fool Portfolio Report
Thursday, July 25, 1996

by Tom Gardner

NORTHERN VERMONT, July 25, 1996 -- All day today it rained in Vermont. Apparently there's been a steady squall all summer up here. Not as bad as the flood of 1927 that all but wiped out the state. But the fern has grown thick. And today everywhere was swollen a dark shade of green in the darkness. Not even a lone birch among pines could light its surroundings. And the crooked line of mountains against the sky was even darker.

But, on days like these, it's easy to look deep into the woods and see what you hadn't before. Light waves don't bend from around trees nor do they dart up off a pond and blast you in the eyes. There's clarity in the greyness, if you look at it right. Things slow down. All the enthusiasm of a summer sheen slackens. A cardinal's red is red, not golden, too. It may not really be easier to see things for what they are in the middle of a rural storm, but it does seem like it.

Maybe there's an analogy here with the market and your money.

By now, perhaps your computer monitor---like a giant viewer window---is showing windswept vegetable gardens, flooded out fields, branches down on the horizon line. When you peer down into quote screens, financial software and Fooldom, it probably seems darker, and less green, than it did three weeks or six weeks back. Back when the market was glittering from every angle.

But, in times like these, it's easier to look deep into the woods and see what you hadn't before. There's clarity in the greyness, if you look at it right. Things slow down. All the enthusiasm of a summer sheen slackens. It may not really be easier to see things for what they are in the middle of a market storm, but it certainly seems like it.

So here you are.

Your portfolio must be down at least 10% off its highs for 1996. Maybe much, much more. Maybe not. Some folks out in Fooldom have obviously been practicing their half-court jumpshots and apparently called the top perfectly. Swish! The oddsmakers haven't yet toted up the chances of that happening again at bottom. Nor at the succeeding top. Nor the following loop.

But I'd guess those are some steep odds.

You see, Fool, it isn't the investor compensated off merit, but the trader rewarded for motion or the newsletter publisher paid for noise, that profits from guessing at market direction. The great body of private-investor literature, digitized and not, offers plenty of tales of market-timing woe. Unfortunately, it will offer plenty more. Unless you can generate commissions or newsletter subscriptions by searching for needles in haystacks, odds are that you're either going to abandon dreams of calling the market or altogether give up investing.

We hope it's the former, because history so clearly shows that if you're standing in similar shoes as those of the vast, vast majority of Americans, and have more than five years to invest your savings, than you're better off buying stock in strong companies and holding it. Buying more in the greyer hours. And holding it. Avoiding short-term capital gains taxes and harmful commissions. And pursuing an exploration into what makes great businesses profitable, free of debt, unburdened by the need for heavy capital investment, and enduringly so.

Thus, let's certainly not question the genius of that newsletter publisher who just invited the nation to tear back reigns to a 100% cash position, less than a week after predicting a 20% rise for the Dow. She has less interest in being right than in being seen. I think MF Health's Fribble today, You Think Elaine Uses Quicken? hit it right. Volatility and publicity on Wall Street, thy name is salary!

But out here in the wooded areas where individual investors find themselves exiled, Fools in the forest, the fogginess of rainy days should help clarify things. . . like the structure of a long-term investment portfolio, of a lifelong endeavor. I don't think it includes buying heavily on margin nor trading options. Nor trying to call the market. Nor paying much attention to the clowns in the marketplace, who would have you think them wise. All these---margin, options, and market-timing---separate out the quality of endurance and replace it with impatience. They take from you your greatest advantage. They lure you into playing the insecurities of the market rather than its securities.

The businesses we've invested in look secure to me in today's light.

This isn't the Vermont Flood of 1927. And there are hundreds of other businesses that look comparably strong and stronger than what we've got. I'll take Microsoft's 4th quarter earnings over that newsletter, call-in, go-to-cash performance. I'll take Beating the Dow on a rainy day over cash in the sun. Call me a Fool for it. Time will value this contrariness and Folly for what they're worth. Maybe nothing more than what they are.

Oh, our portfolio was up 2.2% today.

--- Tom Gardner, July 25, 1996

Today's Numbers

Day Month Year History

FOOL +2.22% -24.79% 20.88% 125.71%

S&P 500 +0.72% -5.88% 2.48% 37.69%

NASDAQ +1.93% -10.35% 0.98% 47.52%

Rec'd # Security In At Now Change

5/17/95 2010 Iomega Cor 2.52 17.38 589.77%

8/5/94 680 AmOnline 7.27 26.88 269.52%

4/20/95 310 The Gap 16.28 28.88 77.42%

1/29/96 250 Medicis Ph 27.86 43.50 56.14%

8/5/94 165 Sears 28.93 41.50 43.47%

8/11/95 95 GenElec 57.91 80.50 39.00%

8/11/95 110 Chevron 49.00 58.75 19.90%

8/24/95 130 KLA Instrm 44.71 18.75 -58.06%

Rec'd # Security Cost Value Change

5/17/95 2010 Iomega Cor 5063.13 34923.75 $29860.62

8/5/94 680 AmOnline 4945.56 18275.00 $13329.44

1/29/96 250 Medicis Ph 6964.99 10875.00 $3910.01

4/20/95 310 The Gap 5045.25 8951.25 $3906.00

8/11/95 95 GenElec 5501.87 7647.50 $2145.63

8/5/94 165 Sears 4772.65 6847.50 $2074.85

8/11/95 110 Chevron 5389.99 6462.50 $1072.51

8/24/95 130 KLA Instrm 5812.49 2437.50 -$3374.99

CASH $16434.53

TOTAL $112854.53

Transmitted: 7/25/96