Fool Portfolio Report
Wednesday, October 30, 1996


by David Gardner (MotleyFool)

ALEXANDRIA, VA, October 30, 1996 -- Today marks an historic day in the history of Folly. This article, along with a sheaf of our top daily stuff, is debuting on the online version of USA Today (http://www.usatoday.com). (If you'd like to bookmark our daily page, it's http://www.usatoday.com/money/motley/mmfront.htm.) In initiating this exciting new relationship with a great media company and a larger, new set of readers, it behooves me as a co-founder to spend some time explaining exactly what The Motley Fool is, how it came about, what it all means, and why -- darn it -- you need to click in and read this stuff every day!

We picked our name The Motley Fool from Shakespeare. Shakespeare's most interesting and delightful characters, to our unWise way of thinking, were his Fools... the court jesters employed to entertain and inform the king and queen, and keep courtly life mirthful, smart, and honest. Indeed, during an age in which the commoners and most of the nobility could not criticize the crown without fear of decapitation, Fools enjoyed immunity to the king's whims, and they did so because they couched their truths in offbeat humor.

And of course, we always write of these Fools using a capital F, to distinguish them from the more traditional small "f" variety.

So geez, wait, Foolishness is all very well and good, but how does it translate to the online world circa mid-1990's?!

Good question. It's like this:

Do you know what the heck you're doing with your money? Granted, you've found your way to a financial online area, but do you actually know what to do with dollars once you've saved 'em? In our experience, most people don't. Most people have no savings -- they have credit-card debt, and suffer the debilitating penalty of 18% annual fees. Of those who do save, most employ somebody else to manage their money for them, be it a mutual-fund manager, a broker, a financial planner, or stock-pickin' Uncle Harry who loved Apple Computer all the way down.

The Motley Fool works fervently every day to champion a revolution, a revolution about self-reliance and money. Because you see it is our educational aim to teach you to manage your own money, and we provide the ongoing help, handholding, and services to do just that. We offer our Foolishly opinionated market news, interactive games, and our systematic 13 Steps to Investing Foolishly (now appearing on USA Today one per week) written to inform the novice, and amuse the sophisticate. We grant you, the conventional wisdom says you can't do it, you shouldn't do it, you're an imbecile for trying to manage your money yourself. But Fools have traditionally fought conventional wisdom every step of the way.

What do I mean by conventional wisdom? Stuff like this:

"You should just let 'experts' invest your money for you by putting your money in mutual funds."

"Hey, I've been to business school, and we learned the 'Efficient Markets Theory' (EMT) there. What it essentially teaches is that NO ONE can beat the market consistently. So why are you wasting your time?"

Read our First Step to Investing Foolishly for our answers to these and other wise conventionalities.

And another of those services is The Motley Fool's real-money portfolio, where we show you exactly what we're doing with our own real money. That's what's in this space every weekday. Every weekday, we write up how our stocks did, review company news, and put up complete performance numbers (all expenses deducted) compared to the market's returns. And when we make a change to our portfolio, we make the highly Foolish and unique move of letting you know ahead of time what we'll be doing. That's a bit of a contrast with Wall Street, which would love for you to know what it's already bought so you can help push it higher.

Foolishness is all about education, accountability, and excellence. We believe that average people (using online resources, or not) can consistenly beat the stock market without the help of a financial professional, and without even spending much time at it. The Fool Portfolio has proven that, because we're just average investors who do not get to sit down with the CEOs of the companies we invest in, and the portfolio you're reading about has beaten the market every year since its birth in the summer of 1994 (this year we're up 49.25% as of market close today, well ahead of the market's overall return of 13.80%, as measured by the Standard & Poor's 500). Indeed, we wrote a funny book on the subject, The Motley Fool Investment Guide (Simon & Schuster, 1996), where we lay out our entire investment approach for you. No secrets, no complexities, no holds barred.

But wait... the stock market's a terribly complicated thing, right? It isn't just for anybody, is it? Just who are we writing for?

We are writing for YOU. We're writing for anyone who possesses the willingness to learn about money and the stock market (with our help all the way along), who has a desire to start saving for his or her children. As it turns out, this is a huge number of people from all walks of life. Take a typical example, a note just dropped in my e-mailbox this afternoon: "I'm an ultra compulsive cardiologist who thinks exactly the way the Fools do and believe I can figure out the system as well as the average stockbroker. I'm getting into this stuff so much that I have to keep reminding myself and my husband that saving kids' lives has its own rewards too!"

You see? We're ruining society, cheapening the Hippocratic oath, and killing kids everywhere. But completely apart from that, we're teaching people that managing their money is a serious responsibility that also happens to be highly rewarding and great fun. Above, you have a female professional who probably spends more than eight hours a day at hospital, has the blessed responsibility of a family life, and finds the time to learn how to beat the market, while having a great time doing it! That's a beautiful thing. That's Foolish.

OK, down to brass tacks at the close, here. You see, normally we use this space to gab about how our stocks did for the day. So here goes: the Fool Portfolio rocketed up 3.92% in value today against a flat S&P 500 and Nasdaq. Our three top growth stocks, America Online, ATC Communications, and Iomega each turned in outstanding $1+ days. But the day was won by 3Com, which rose $3 1/2 following the company's announcement that it expected its upcoming quarters to show gross margins higher than its traditional 52%-54%.

What are gross margins? It's what you have left after subtracting cost of sales from sales, as a percentage of sales. If you sell $3 million of thumb tacks (good luck), and those thumb tacks cost you $1 million, your gross margin is 67% (that's $3 million minus $1 million, divided by $3 million). What COMS essentially announced late last night is that next year, it's paying less for its thumb tacks. Mmm-mmmm... the market liked that.

See ya here tomorrow. Fool on!

--- David Gardner, October 30, 1996

Today's Numbers


Stock Change Bid ------------------- AOL +1 3/4 27.50 T - 1/2 35.13 ATCT +1 1/2 23.75 CHV - 5/8 66.25 GM - 3/4 53.25 IOMG +1 3/8 22.13 KLAC - 1/8 23.75 LU - 7/8 47.38 MMM -1 1/8 75.38 QDEK - 1/16 5.06 COMS +3 1/2 66.00
Day Month Year History FOOL +3.92% -2.22% 49.25% 178.69% S&P 500 -0.09% 1.98% 13.80% 52.90% NASDAQ +0.26% -1.68% 14.65% 67.49% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 22.13 778.34% 8/5/94 680 AmOnline 7.27 27.50 278.12% 8/13/96 250 3Com Corp. 46.86 66.00 40.85% 8/11/95 125 Chevron 50.28 66.25 31.75% 9/27/96 -890 Quarterdec 7.08 5.06 28.54% 8/12/96 110 Minn M&M 65.68 75.38 14.77% 10/22/96 600 ATC Comm. 22.94 23.75 3.55% 8/12/96 280 Gen'l Moto 51.97 53.25 2.46% 10/1/96 42 LucentTech 47.62 47.38 -0.51% 8/12/96 130 AT&T 39.58 35.13 -11.25% 8/24/95 130 KLA Instrm 44.71 23.75 -46.88% Rec'd # Security In At Value Change 5/17/95 2010 Iomega Cor 5063.13 44471.25 $39408.12 8/5/94 680 AmOnline 4945.56 18700.00 $13754.44 8/13/96 250 3Com Corp. 11714.99 16500.00 $4785.01 8/11/95 125 Chevron 6285.61 8281.25 $1995.64 9/27/96 -890 Quarterdec -6304.75 -4505.63 $1799.13 8/12/96 110 Minn M&M 7224.44 8291.25 $1066.81 10/22/96 600 ATC Comm. 13761.50 14250.00 $488.50 8/12/96 280 Gen'l Moto 14552.49 14910.00 $357.51 10/1/96 42 LucentTech 1999.88 1989.75 -$10.13 8/12/96 130 AT&T 5145.11 4566.25 -$578.86 8/24/95 130 KLA Instrm 5812.49 3087.50 -$2724.99 CASH $8801.62 TOTAL $139343.25