Fool Portfolio Report
Tuesday, August 27, 1996


by Tom Gardner (MotleyFool)

SAN FRANCISCO, Ca., August 27, 1996 -- All in all, a pretty nice day today for The Fool Portfolio, which rose 1.22% versus S&P 500 gains of 0.38%. Today's outing sets 1996 performance numbers at:

Fool: +26.67%

S&P: +8.19%

I sifted through the Morningstar research area and didn't locate a single Alger mutual fund that is beating the market in 1996. Their small-cap fund is actually in the red with the Nasdaq up more than 9%.

Short-term performance. . . I agree, who cares? But the most of 'em are trailing the S&P 500 over the five-year period. Eesh. And when you mix in those 5% loads, 5% deferred sales charges, management fees, 12b-1 licks and such, blech, it makes for a broth not worth brewing, not worth tasting.

In truth, we have no bones to pick with Mr. Alger. We're not into character assassination but performance assassination here at Fool HQ. That said, I will pass on free counsel. Methinks it better to let sleeping Fools lie---particularly when you're limping through five years of market underperformance with a 5% back-end load jes' sittin' out there snarling at any investors that dare think of leaving.

We do, though, name the guy "courageous" for willingly and publicly speaking of performance records. If only the whole lot of fund managers would engage this debate on baseline accountability on television, in magazines, in their prospecti, in their glossy advertisements.

How things would change!

Lickety-split, thousands of bad businesses would be restructured. Entire mutual fund families would shutter shop doors. And American investors might gradually earn their just desserts for investing in public companies. Because today that reward is not commensurate with the burden of risk fund investors assume. 5% upfront loads, backloads, and everywhichway management fees ruin the enduring and loving relationship between Risk and Reward.

If ya don't want to manage your money, grab onto the no-load, low-expense index fund. Exeunt mediocrity stage left. With five hundred US stocks bundled electronically, the management-less fund, the one that beats the majority of managed funds. . . what but ignorance keeps America from it?

Things are changing. I was gratified to hear of another business school today that in the year ahead will begin counseling its students not to invest in mutual funds. The numbers just don't justify it.

Now before racing through our daily record, I'd like to turn your eyes to an article in today's CHICAGO TRIBUNE by columnist Bill Barnhart. Mr. Barnhart reports on our recent partnership with the NASD to put investors but a mere finger's length away from the regulatory agencies fashioned to protect their best interests.

As we've noted in various forums over the past year, we welcome regulatory scrutiny of the most powerful of communication tools. I expect we'll ink a succession of agreements over the next 24 months that will further open up the flow of information and analysis to everyone. When that happens, what we now think of as performance accountability on Wall Street will seem amateurish and inconsequential.

Mr. Barnhart at the Trib is seeing the future better than most anyone in the financial industry. Capital flows are being re-routed. Information is jumping from one household to the next. Cold-calling, heavy commissions, high-priced market underperformance, the isolated individual investor---these are features of our financial dark ages. Glowing monitors in dens across the country are sending an ever brightening light into Wall Street's shadowed alleys.

In The Fool Port today, 3COM (NASDAQ:COMS) rose $2 1/8 to $45 7/8, putting us in striking distance of our cost basis. The Company announced that Home Depot's Atlanta headquarters are up and running on CELLplex and SuperStack switching systems. HD is using 3Com technology to link together its business campuses across the country.

3Com also announced today an operational restructuring to bring its customer service department, its sales force, and all local- and wide-area networking initiatives under a single umbrella "3Com Systems." 3Com is raising the bar on itself, trying to better identify and service customer needs. The stock responded nicely. Fools should know that we've had an interesting discussion of 3Com in its stock folder, listed alphabetically as "Three"Com on our stock boards.

Not much other news to report on today. 3M rose $1 1/4 to $67 3/8. We're now up $186 there. But our other two new Dow heavies aren't carrying their load. AT&T and GM are unFoolishly running in the red. But we love those giants plugging along year after year for us.

To close out a fine day here in San Francisco, let me remind folks of how little controversy there really is in all of this. True, the Great Financial Debate is exciting and makes for good marketing material. But the truth is purely statistical here, and plainly evident. With mutual funds pushing fees higher and letting performance slide relative to the market , it does not take but a Fool to say what is so. . . is so.

Today's Numbers

Day Month Year History FOOL +1.22% 3.14% 26.67% 136.53% S&P 500 +0.38% 4.13% 8.19% 45.38% NASDAQ +0.87% 6.34% 9.21% 59.55% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 30.88 324.52% 5/17/95 2010 Iomega Cor 2.52 15.50 515.33% 1/29/96 375 Medicis Ph 18.57 39.25 111.32% 8/11/95 125 Chevron 50.28 59.88 19.07% 8/12/96 110 Minn M&M 65.68 67.38 2.59% 8/13/96 250 3Com Corp. 46.86 45.88 -2.10% 8/12/96 130 AT&T 54.96 53.63 -2.43% 8/12/96 280 Gen'l Moto 51.97 50.00 -3.80% 8/24/95 130 KLA Instrm 44.71 20.63 -53.87% Rec'd # Security Cost Value Change 8/5/94 680 AmOnline 4945.56 20995.00 $16049.44 5/17/95 2010 Iomega Cor 5063.13 31155.00 $26091.87 1/29/96 375 Medicis Ph 6964.99 14718.75 $7753.76 8/11/95 125 Chevron 6285.61 7484.38 $1198.77 8/12/96 110 Minn M&M 7224.44 7411.25 $186.81 8/12/96 130 AT&T 7144.99 6971.25 -$173.74 8/13/96 250 3Com Corp. 11714.99 11468.75 -$246.24 8/11/95 280 Gen'l Moto 14552.49 14000.00 -$552.49 8/24/95 130 KLA Instrm 5812.49 2681.25 -$3131.24 CASH $1379.61 TOTAL $118265.24