Fool Portfolio Report
Tuesday, November 19, 1996
by David Gardner (MotleyFool)
ALEXANDRIA, VA, November 19, 1996 -- My single favorite contemporary public speaker is the Reverend Maurice Boyd of the City Church in New York City. If you've never heard him speak, next time you're in New York you have an amazing treat waiting for you. In New York myself last weekend, I made my usual point of getting over to 64th and Central Park West at 10 o'clock Sunday morning (no mean feat with two toddlers in tow these days). And I was once again enchanted.
Boyd is an Irish minister whose command of literature, philosophy, and history is as readily apparent as his command of the English language, the spoken word, and the ability to induce laughter. (He makes as many clear-sighted jokes about the church as about anything else.) Important to me, he has the brilliant ability of looking at all of the world's stale, old problems and providing completely fresh contrary solutions. In the face of conventional wisdom, week in and week out Maurice Boyd provides brilliantly creative and Foolish thoughts about living.
Boyd's method involves spending as much time telling you what others have said about his subject as what he himself has to say. Each of his talks is filled with the words of historical figures, classical writers, artists, heroes, Shakespearean villains and madmen... and he always (amazing to me) trots these out from memory as he wheels about in front of his audience. It is in fact one such Boyd line that I'll use today, to touch off my market closing (and market losing) report. I came across it in one of his old sermon books:
"William Temple once remarked that the world is like a shop window full of articles. But someone has slipped in and mischievously mixed up the price-tags, so that some valuable goods are priced cheaply, and some shoddy merchandise has a high price-tag."
Frankly, I can't think of a much better or more applicable metaphor for our financial world today. In fact, let's take a glance in that shop window. Ah, there they are: high-load funds with low-ball performance. Lookee there over in the corner: expensive newsletters with "hot picks" fax lines that cause their customers to churn their own accounts (without even a broker's help!). Heck, even Value Line is looking a wee bit overpriced to me these days, considering the wealth of investment information online at a fraction of the price.
OK, now look on the other side of our shop window. We spot a simple book called Beating the Dow by Michael O'Higgins, a paperback copy priced under twelve bucks. For many investors, it may be all they ever need to grant them outstanding long-term returns for their nest eggs. And it's a do-it-yourself process that takes 30 minutes a year, no hassles.
Just behind O'Higgins's book I spot Robert Sheard's work (Robert is MF DowMan, or firstname.lastname@example.org). Robert has written two primers that are deceptively light, deceptively amusing reads. In fact, they are quite profound, including mechanical investment models similar to Beating the Dow but with better returns, using different groups of stocks. And we've now collected and published his Fribbles, which range in subject matter from "How Bad Is That Tax Bite?" to "Retired Ralph's Portfolio Theory" to "So You Say Your Luck is Awful?" (both of Robert's primers are available in FoolMart). This work is eminently relevant to investors today, written in language that is extremely accessible to all, and a pleasure to read.
Back somewhere behind the window, in the shop itself, I believe I even see Boyd himself. After all, his insight is on display in New York every Sunday with no admission cost.
Geez, it's funny what happens when some mischievous fellow goes in and mixes up all the price tags.
The Fool Portfolio well underperformed the stock market today, continuing its underperformance since the 1st of October. Last month, we posted a loss in a flat market. This month we show minor gains, but we're still about three percentage points back of the S&P 500.
Not helping out today was a drop of $7/8 in Dow darling General Motors, a $3/4 rise in Fool short Quarterdeck, and a half-point decline for Iomega. Not a lick of news on any of those three... we'll write those off to "market forces." I never believe you can portray the movement of any stock as tied to a single, isolated factor, so "market forces" play a more substantial role than most might think. As our inveterate readers know, we do toss out reasons for stocks' movements from time to time in this report, when we see a relevant news item. But you should always take that with a grain of salt. Short-term fluctuations involving hundreds of millions of dollars of trading value have probably a thousand reasons for occurring every day.
Quarterdeck has been interesting to watch. The stock was below $4 for a brief moment, up almost 40% for us (since we're short) at that point. Today, a few weeks later, it's back up over $5 1/2. Who's to say why it dropped to $4 back then, or what timing has led to its rise over $5 1/2 now? We've seen no real material changes in the company's business. There have been (1) a few new products released, (2) the inability to locate and name a new CEO, (3) a delay in releasing its earnings report, (4) a NEUTRAL rating from a brokerage firm, and a few other results; but until the next earnings report appears next Monday after the bell, it's hard for us to offer much of an updated opinion... or figure out why this stock might jump around as it does.
I know one thing: I see the future, and I don't see Quarterdeck in it. I see Windows95, I see Quicken, I see Electronic Arts, and a bunch of other software companies, but I can't find a place for a company that makes software utilities whose uses are mostly already integrated into the existing Windows software or other "freeware." That's the part of the story I don't see changing -- however the stock is fluctuating over the short term -- amid red ink bleeding like Niagara Falls.
Rises in excess of a dollar characterized Chevron, Lucent Technologies, and 3Com today, reclaiming our portfolio from the jaws of the Multiple-Percentage-Point-Loss Monster.
I'll close today as I started, in tribute to Boyd. He often quotes Maxim Gorky on Tolstoy, a quotation I offer up in thanks to him tonight. I find it one of the more simply beautiful statements in the English language:
"In the musing, motionless of the old man I felt something fateful, magical, something which went down into the darkness beneath him and stretched up like a searchlight into the blue emptiness above the earth in my soul there was joy and fear, and then everything blended in one happy thought: "I am not an orphan on the earth so long as this man lives on it."
--- David Gardner, November 19, 1996
Stock Change Bid ------------------- AOL - 1/8 27.13 T --- 37.13 ATCT --- 16.50 CHV +1 5/8 67.50 GM - 7/8 54.88 IOM - 1/2 22.50 KLAC + 3/8 29.75 LU +1 1/2 51.25 MMM --- 82.38 QDEK + 3/4 5.56 COMS +1 1/8 71.88
Day Month Year History FOOL -1.00% 2.68% 48.99% 178.20% S&P 500 +0.70% 5.23% 20.49% 61.90% NASDAQ +0.64% 3.36% 20.00% 75.31% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 22.50 793.22% 8/5/94 680 AmOnline 7.27 27.13 272.96% 8/13/96 250 3Com Corp. 46.86 71.88 53.38% 8/11/95 125 Chevron 50.28 67.50 34.24% 8/12/96 110 Minn M&M 65.68 82.38 25.42% 9/27/96 -890 Quarterdec 7.08 5.56 21.48% 10/1/96 42 LucentTech 47.62 51.25 7.63% 8/12/96 280 Gen'l Moto 51.97 54.88 5.58% 8/12/96 130 AT&T 39.58 37.13 -6.20% 10/22/96 600 ATC Comm. 22.94 16.50 -28.06% 8/24/95 130 KLA Instrm 44.71 29.75 -33.46% Rec'd # Security In At Value Change 5/17/95 2010 Iomega Cor 5063.13 45225.00 $40161.87 8/5/94 680 AmOnline 4945.56 18445.00 $13499.44 8/13/96 250 3Com Corp. 11714.99 17968.75 $6253.76 8/11/95 125 Chevron 6285.61 8437.50 $2151.89 8/12/96 110 Minn M&M 7224.44 9061.25 $1836.81 9/27/96 -890 Quarterdec -6304.75 -4950.63 $1354.13 8/12/96 280 Gen'l Moto 14552.49 15365.00 $812.51 10/1/96 42 LucentTech 1999.88 2152.50 $152.62 8/12/96 130 AT&T 5145.11 4826.25 -$318.86 8/24/95 130 KLA Instrm 5812.49 3867.50 -$1944.99 10/22/96 600 ATC Comm. 13761.50 9900.00 -$3861.50 CASH $8801.62 TOTAL $139099.75