Fool Portfolio Report
Wednesday, August 7, 1996
by David Gardner
ALEXANDRIA, VA, August 7, 1996 -- GONG!
GONG! GONG! GONG!
Wednesday saw the ringing of our Double Gong at Fool HQ. Long-time readers know that the day a Fool Portfolio stock hits the 100% return mark for the first time, we wheel out the Double Gong and smash the heck out of it in our daily report.
GONG! GONG! GONG! GONG!
Medicis, riding the wave of its strong earnings report yesterday, rose another $2 today to close bidding $37 1/2. Its total return since our January 29th purchase is now 101.90%. (GONG!) We are delighted once again to see the market confirm the usefulness of our Fool small-stock strategy.
Let's go into what I mean by that. Namely, the small stocks we look to add to the Fool Portfolio are often those that have minimal analyst coverage. What we're looking for are strong products, good management, high profit margins, and little institutional coverage. This very well describes past and present Fool Port picks like Medicis, Iomega (at the time we bought it), Ride Snowboards, and Boston Technology; the first three of those all more than doubled for our portfolio, while Boston Tech turned in a 40% gain.
The idea is to locate superior prospects among the smaller fry at a time BEFORE the institutions can purchase them in bulk. Fools buy early, and then let the institutions come along, discover the stocks, and bid them up further. It's our textbook Motley Fool small-stock strategy (please see Chapter 14 of "The Motley Fool Investment Guide," pp. 115-122, for a more in-depth explanation), and we see this at play once again.
In Medicis's case, the stock was recommended as a BUY by Robertson Stephens a couple of months ago, making RS the first mainstream brokerage firm to follow the company. You may remember that the stock rose (we still can't believe this) $13 that day. Since then, we've seen continued strength in these shares, holding up well in the NASDAQ summer selloff. And with another fine earnings report in hand, Medicis hit a new all-time high yesterday and again today.
Four of the eight stocks currently in The Fool Portfolio now show returns in excess of 100%. One of those, The Gap, had a fine day Wednesday as well, rising $1 3/8. Was there any news? Kinda hard for me to tell, with AOL down all day. (We rely on AOL for lotsa stuff, and I know many of you do too; very strange to see this happen.)
AMER stock was down most of the day, perhaps in reaction to the company losing several hours of business. (I know that seems absurdly short-term, but the market will react to stuff like this.) AOL's system went down at about 4 AM this morning and stayed out all day (still out as of this writing). Mysteriously, the stock rallied in the afternoon and closed up $3/4 on the day.
Tom asked me to correct information regarding when the company reports fourth-quarter earnings. AOL will report after market close TOMORROW (not on August 9th, as originally reported). We'll have a full analysis for you tomorrow night... assuming, of course, that the system is back up!
Did I say "earnings"? KLA Instruments skyrocketed (for it) today, rising $2 5/8. The company reports its earnings tomorrow, AND the book-to-bill ratio numbers come out tonight. The rise, therefore, is in anticipation of inventory levels dropping and more growth coming back to semiconductor and semiconductor equipment companies. We'll see how all this plays out over the next week. It'll be interesting to see where KLAC is by, say, a week from today.
All told, the Fool Portfolio sported a gain of 1.97%, well ahead of its competing indices. (The actual numbers are, as always, accessible on AOL via clicking that blue button over there, and on the Web, by scrolling down.) August remains a pleasant month of recovery, and we continue to gear up for our Dow switch next week.
Y'know, when we do change over our Dow holdings, it'll mark the first fresh blood in The Fool Portfolio since the purchase of Medicis in January. How's that for buy-and-hold? It may not make for exciting, DYNAMIC trading, or fresh reading every day or every week, but it's been profitable. We keep the money out of the broker's and market makers' pockets, and in ours, and have ridden our winners to a 35% gain so far in '96. That seems fairly Foolish.
-- David Gardner, August 7, 1996
Day Month Year History FOOL +1.97% 9.65% 34.67% 151.45% S&P 500 +0.27% 3.78% 7.83% 44.88% NASDAQ +1.08% 5.61% 8.46% 58.45% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 17.88 609.62% 8/5/94 680 AmOnline 7.27 34.88 379.52% 4/20/95 310 The Gap 16.28 34.25 110.45% 1/29/96 375 Medicis Ph 18.57 37.50 101.90% 8/5/94 165 Sears 28.93 43.38 49.96% 8/11/95 95 GenElec 57.91 85.75 48.06% 8/11/95 110 Chevron 49.00 58.38 19.13% 8/24/95 130 KLA Instrm 44.71 22.50 -49.68% Rec'd # Security Cost Value Change 5/17/95 2010 Iomega Cor 5063.13 35928.75 $30865.62 8/5/94 680 AmOnline 4945.56 23715.00 $18769.44 1/29/96 375 Medicis Ph 6964.99 14062.50 $7097.51 4/20/95 310 The Gap 5045.25 10617.50 $5572.25 8/11/95 95 GenElec 5501.87 8146.25 $2644.38 8/5/94 165 Sears 4772.65 7156.88 $2384.23 8/11/95 110 Chevron 5389.99 6421.25 $1031.26 8/24/95 130 KLA Instrm 5812.49 2925.00 -$2887.49 CASH $16754.13 TOTAL $125727.26 Transmitted: 8/7/96