Fool Portfolio Report
Wednesday, October 16, 1996


by David Gardner

ALEXANDRIA, VA, October 16, 1996 -- Solid day for Foolishness, as a strong Iomega and a weak Quarterdeck buoyed the Foolfolio higher. Rising just short of 2%, our unWise collection of investments tap-danced past its index competitors (S&P 500 up, Nasdaq down). And today we also managed to push our returns further past 50% for the year.

Hmmmm... let's go check out the funds page of our favorite daily financial paper. Investor's Business Daily's Mutual Fund Index tracks 23 of the nation's top-performing equity funds; of the whole group, the top performer is up just 26% this year. (That's Berger Small Company Fund.)

Actually, that's a very nice return, approximately 12 percentage points ahead of the S&P 500's '96 return. That is the very sort of performance we champion, in fact, since those guys are actually serving their customers, consistently beating the stock market's averages. However, consider also that a mechanical investment approach like the Foolish Four is also up 26% for the year. You now begin to wonder whether hiring professional investment management "expertise" pays. Plus, this year is a typical year for the Foolish Four. But for most mutual funds, on the other hand, any outperformance of the S&P 500 is highly atypical. And very few (needles in haystacks) return Foolish Four-like numbers in a given year, let alone over many years.

Enter Foolishness. (Those tuning into CNBC's Money Club early tonight -- 7 PM ET -- can see more of our stuff on this delightful approach.) Enter doing it yourself. Enter learning. Enter satisfaction, comfort, and security. Enter market-crushing outperformance. Enter long-term prosperity. And enter, during some enchanted years (two in a row, in fact), returns in excess of 50%

The biggest point of all of this is teaching investors that they can do this. Not that they will, necessarily, or will always. But just that it can be done.

You see, mutual fund companies put up TV ads suggesting that doing your own investing is like trying to do your own dentistry. And academics argue that the markets are "efficient," that no one -- especially the small guy -- can outperform them significantly over time. And some financial professionals make the same pitch on our own message boards! "You Fools are a bunch of idiots," they write, referring to our general readership... not realizing, ironically, that our readership includes scores of excellent (and smarter) financial professionals who appreciate and use this resource every day.

But "it can be done." If we've achieved nothing else (and I personally hope we've done many more interesting things), The Motley Fool has operated a real-money portfolio for two and a half years with the highest standard of accountability (self-created, self-imposed) in front of a national public. From it, people have learned as much from our mistakes as from our successes. And its bottom line -- the bottom line, in fact -- is that we've scored more-than-triple-the-market returns, way ahead of the country's best mutual funds every single year. And I like to think we're at least a small part of a movement driving millions of Americans to question the media, to identify and understand the financial world's conflicts of interest, and to consider stewardship over their own money as relevant and important as stewardship over their own children.

All that from just flipping open the mutual fund pages. (Sigh.) Sometimes, I actually do find time to reflect.

OK, America Online gave away $1 1/8 today, about half of its gains of yesterday. I personally think we're holding a beaten-down stock that will continue to tell a good long-term story to Wall Street. While much of the financial establishment is focusing on churning subscribers, AOL continues to build more partnerships, more revenue streams, and a larger network backbone. AOL is, frankly, continuing to build a new medium... one that it dominates. And the conventional wisdom today, perhaps more than ever, is to dump all over AOL. (You know what we think of conventional wisdom.) Anyway, we'll see who's right going forward -- and certainly, we always reserve the right to be wrong because we ain't stubborn and don't think we have any special genius here. But I would be quite surprised if AOL at these prices does not beat the market over the next two to three years. In fact, I'd be shocked.

On the other side of the ledger, our winners today included 3M Corp., which closed at an all-time high. Seventy-two and change... copacetic. AT&T and Lucent rose $1/2 and $1 3/8, respectively, Chevron tallied a $7/8 gain, and General Motors -- revving its engines after a strong third-quarter report yesterday -- motored another $5/8 into the black. Very nice Dow day.

Quarterdeck posted its lowest close yet since our September 27 short. We still expect eye-openingly disastrous earnings to be reported the second week of November.

Finally tonight, Iomega posted its highest close in three months, and achieved (re-achieved) ten-bagger status for us today. The stock has now doubled from its August low, and (as usual) continued to displease its short sellers. Iomega announces earnings tomorrow, and those on AOL can join us for an auditorium event at 9 PM ET tomorrow night to discuss the report with your fellow Fools, and Fooldom's finest analysts. Should be a treat.

I personally am expecting drab, downbeat numbers (priced into the stock long ago), with a bullish conference call looking ahead to the fourth quarter and 1997. In fact, that'd be quite the opposite of last quarter: excellent numbers and a downbeat conference call. (Geez, these conference calls seem pretty significant, perhaps even as indicators of intermediate-term price direction!) As always, we'll have a full Foolish summary of the conference call for you to read tomorrow night.

You can even listen to a replay of the call yourself, after 6:30 PM ET tomorrow night, just to be doubly well-prepared for the auditorium event. Call 800-633-8284, and use "reservation number" 2021724. I recommend the experience; in addition to their educational aspects, these calls can be highly amusing as well.

Fool on!

--- David Gardner, October 16, 1996

Today's Numbers 

Stock  Change    Bid
-------------------
AOL   -1 1/8   24.50
T     +  1/2   39.88
CHV   +  7/8   66.75
GM    +  5/8   52.75
IOMG  +1 1/2   25.75
KLAC  -  5/8   23.63
LU    +1 3/8   48.50
MMM   +1 1/8   72.13
QDEK  -  5/16  6.19
COMS  -1 1/8   64.88


    
  

      

                   Day   Month    Year  History
        FOOL     +1.92%   0.37%  53.20% 186.06%
        S&P 500  +0.27%   2.49%  14.37%  53.67%
        NASDAQ   -0.57%   1.96%  18.90%  73.71%


    Rec'd   #  Security     In At       Now    Change

  5/17/95 2010 Iomega Cor     2.52     25.75   922.24%
   8/5/94  680 AmOnline       7.27     24.50   236.87%
  8/13/96  250 3Com Corp.    46.86     64.88    38.44%
  8/11/95  125 Chevron       50.28     66.75    32.74%
  9/27/96 -890 Quarterdec     7.08      6.19    12.66%
  8/12/96  110 Minn M&M      65.68     72.13     9.82%
  10/1/96   42 LucentTech    47.62     48.50     1.86%
  8/12/96  280 Gen'l Moto    51.97     52.75     1.49%
  8/12/96  130 AT&T          39.58     39.88     0.75%
  8/24/95  130 KLA Instrm    44.71     23.63   -47.16%

    Rec'd   #  Security     In At     Value    Change

  5/17/95 2010 Iomega Cor  5063.13  51757.50 $46694.37
   8/5/94  680 AmOnline    4945.56  16660.00 $11714.44
  8/13/96  250 3Com Corp. 11714.99  16218.75  $4503.76
  8/11/95  125 Chevron     6285.61   8343.75  $2058.14
  9/27/96 -890 Quarterdec -6304.75  -5506.88   $797.88
  8/12/96  110 Minn M&M    7224.44   7933.75   $709.31
  8/12/96  280 Gen'l Moto 14552.49  14770.00   $217.51
  8/12/96  130 AT&T        5145.11   5183.75    $38.64
  10/1/96   42 LucentTech  1999.88   2037.00    $37.12
  8/24/95  130 KLA Instrm  5812.49   3071.25 -$2741.24


                             CASH  $22563.12
                            TOTAL $143032.00



Transmitted: 10/16/96