Fool Portfolio Report
Monday, November 4, 1996

by David Gardner (David Gardner)

ALEXANDRIA, VA, November 4, 1996 -- Sweet day for Folly, as the Foolfolio vaulted forward more than one percent on November's second day of trading. Aided by a bounceback in ATC Communications, continued strength in General Motors, and continued weakness in Quarterdeck, Foolishness easily outpaced the mixed market averages (S&P 500 up, Nasdaq down).

I would've also mentioned a nice move in Lucent Technologies, except even when that stock rises more than $2 (as it did today), it only barely registers on the Foolchter scale. Today's LU gainer propped us up less than a tenth of a percent. Not surprising, insofar as we picked up our few shares from the AT&T spinoff.

And by the way, how loud is AT&T barking these days? Sheeeesh. As good as 3M Corp. has been for the Foolish Four (up 15.0%), just about that bad has been Mother Bell (T's now down 14.7%, after another $7/8 drop today).

That, ladies, gents, and Fools, is why we diversify.

Speaking of diversify, the latest Fool purchase of ATC Communications reminds us all of how important it is to diversify. While the company is excellent, and we like the company's and stock's prospects going forward, it cracked a hoof for us before even reaching the first turn. ATC's off 24% in just two weeks, following a respectable but underwhelming earnings report last Thursday. Fortunately, although the stock was dropping some 30%, our overall portfolio was only losing some 4%-5% because ATC is just one of 11 stocks we hold (in a wide variety of industries). That's Foolish.

And it was pleasing seeing our newest pony smash through the end-o'-the-day tape at daily highs, hitting $17 1/2 (with a closing bid of $17 3/8) at 3:59 PM. Volume remained heavy: 791,000 shares. Conversation in our ATCT message folder on AOL is an interesting melange of (1) Fools getting to know the company and learn about the long term, mixed with (2) short-termers firing off out price predictions... I suppose this information is of some interest to some people, but not I. It's rather like sitting down at a major-league baseball game and having the guy next to you shout predictions of "Ball!" or "Strike!" before every pitch. Just tell me who wins the game.

Hey, I'm happy as a clam that ATCT rose $7/8 today, but clams don't live very long and thus their happiness is even shorter-lived. Anyway, a good day for a stock we expect will continue to earn more institutional buying, more institutional coverage, and a capitalized value more in sync with its industry peers.

General Motors rose $1 5/8 today on no particularly interesting news that crossed my desk. In other words, more bouncing back. More profits (GM now up 7% for us). More Foolish Four doin' its thang. More improved sentiment following Canadian labor talk resolution. More recognition of that delectable-looking third-quarter earnings report the company churned out three weeks ago. (Remember that? Earnings per share for the quarter were $1.23, vs. consensus estimates of 75 cents!)

Of course, the GM move today was lost in the face of the merger between MCI and British Telecom, surely the most overblown story of the day. Yes, certainly, the largest transAtlantic deal of all time is newsworthy, but I'm not sure the prospects for the new enterprise are terribly exciting. "Concert Plc" is the proposed new name for the British company -- upon regulatory approval from both the US and UK. Billed as "a major competitor both in the U.S. and internationally, [the new entity] would help drive down call rates."

Fair enough. And let's completely ignore the difficulty of integrating two different corporate cultures separated by four thousand miles of ocean. Let's just concentrate on my expectation that the Internet will be a teensy bit more effective in driving down call rates than commercial entities which have traditionally derived billion-dollar businesses from such fees. When I hear about Internet Phone (haven't really tried it yet -- just read about it), getting voice contact with friends and family via the Net at flat-rate fees (I can take poor sound quality for flat rates to Europe), I really wonder about telecommunications conglomerates maintaining market share. America Online (down $1/8 today to $25 5/8) has talked about launching AOL Phone in 1997. AOL members, imagine your Instant Messages as not text but voice calls over a speakerphone (neatly hooked into your computer, deployed next to your monitor) and you'll see why I'm not that excited about Concert Plc.

(Hey, wait... oops! We own AT&T. Aw, heck, maybe I'm just an embittered shareholder.)

What has been interesting is the ongoing cooperation in piecing together information by British and American investors right here in our Motley Fool MCI message folder, on AOL. But then again, none of them are paying MCI for their long-distance discussion, which may be further evidence for my silly suppositions!

In the "it's almost getting boring" department, Quarterdeck lost another eighth on the ask today. The stock has been in freefall since the brief jump over $7 following the company's announcement of a restructuring one month ago. MF BudFox's stealth call to the Investor Relations department reveals that earnings will be reported next Friday, November 15th. Now up 33% for us, the QDEK short has created a very sweet 40-day return. Some may think us greedy for holding on, pointing out our traditional aim of 20% returns on our shorts. Well, in this case we're balancing the potential for covering at the current 30%+ gain with the fairly decent possibility of disastrous financial statements appearing next week, driving the stock lower. We shall see.

--- David Gardner, November 4, 1996


Stock Change Bid ------------------- AOL - 1/8 25.63 T - 7/8 33.75 ATCT + 7/8 17.38 CHV --- 65.13 GM +1 5/8 55.63 IOMG + 1/4 21.00 KLAC +1 25.38 LU +2 1/8 49.13 MMM - 3/8 75.50 QDEK - 1/8 4.75 COMS + 1/8 67.75
Day Month Year History FOOL +1.22% -1.57% 42.82% 166.68% S&P 500 +0.42% 0.21% 14.74% 54.17% NASDAQ -0.11% -0.08% 16.00% 69.47% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 21.00 733.67% 8/5/94 680 AmOnline 7.27 25.63 252.34% 8/13/96 250 3Com Corp. 46.86 67.75 44.58% 9/27/96 -890 Quarterdec 7.08 4.75 32.95% 8/11/95 125 Chevron 50.28 65.13 29.51% 8/12/96 110 Minn M&M 65.68 75.50 14.96% 8/12/96 280 Gen'l Moto 51.97 55.63 7.03% 10/1/96 42 LucentTech 47.62 49.13 3.17% 8/12/96 130 AT&T 39.58 33.75 -14.72% 10/22/96 600 ATC Comm. 22.94 17.38 -24.25% 8/24/95 130 KLA Instrm 44.71 25.38 -43.25% Rec'd # Security In At Value Change 5/17/95 2010 Iomega Cor 5063.13 42210.00 $37146.87 8/5/94 680 AmOnline 4945.56 17425.00 $12479.44 8/13/96 250 3Com Corp. 11714.99 16937.50 $5222.51 9/27/96 -890 Quarterdec -6304.75 -4227.50 $2077.25 8/11/95 125 Chevron 6285.61 8140.63 $1855.02 8/12/96 110 Minn M&M 7224.44 8305.00 $1080.56 8/12/96 280 Gen'l Moto 14552.49 15575.00 $1022.51 10/1/96 42 LucentTech 1999.88 2063.25 $63.37 8/12/96 130 AT&T 5145.11 4387.50 -$757.61 8/24/95 130 KLA Instrm 5812.49 3298.75 -$2513.74 10/22/96 600 ATC Comm. 13761.50 10425.00 -$3336.50 CASH $8801.62 TOTAL $133341.75 Transmitted: 11/4/96