Fool Portfolio Report
Friday, November 22, 1996

by Jeff Fischer (MF BudFOX)

ALEXANDRIA, VA., November 22, 1996 -- Long-term investors were rewarded generously today, as they have been the past many days, as they have been the past two years, as they have been, in total, as long as they've been invested. In the case of my Great Aunt, she has been rewarded since 1921.

In the past two years the market has made so many new highs I've lost count. Since 1921, who knows. So, a "daily recap" or "summary" seems ludicrous. Time sweeps along and each day people try to provide a thought about the current -- or actually, just past -- moment, while time keeps going. A recap is hardly a recap, but rather more of an attempt to catch up and keep up with time, which of course is never accomplished. Foolishly, though, that doesn't matter.

Two weeks ago my Great Aunt celebrated her 90th birthday, and a surprise celebration was held. If you're picturing a quiet, almost glum event, think again. She was a Fool long before the time of Fools, and she is still one now, though she probably doesn't know it. For one thing, her party was one of the best I've been to.

When it comes to living Foolishly, my Great Aunt doesn't mess around. You'd guess she was a youthful sixty or younger from all she does. She travels often, to Europe, Florida, Wisconsin, Iowa, while every week her calendar is filled with events and dinners and "dates." Often she goes to gambling boat parties (okay, not Foolish, but she can afford to lose some money). She enjoys herself immensely, probably much more so than many of the so-called "Generation X" blokes out there. And she has enjoyed herself Foolishly her entire life. She's also an incredibly "talented investor."

She worked at Sears in Chicago all her working life, and she never had an intense "focus" on making money. She began to work at Sears in 1921, and she started with one share of Sears stock. Within a year I believe she had two shares, and soon they split to 4. While working, she continued to invest in the company's stock. She invested all through the roaring twenties, until the Great Depression struck in 1929, wiping many people out of the market.

But not her. She didn't use margin. So she kept working and investing through the hard-knocks of the 1930's, into World War 2, through the booming Fifties, the rad Sixties, up to the sequined Seventies, around which time she retired and hasn't had to work since. Her original money in Sears had been invested about 50 years at the time she retired -- 75 years as of now. What her stock is worth she won't tell me, but she hasn't had to touch much of the total shares at all -- ever.

She, to me, is the quiet, uncelebrated, but very successful "Warren Buffett-style" investor of American women. She bought what she knew -- heck, she stuck to the company she worked for -- and she put the shares away and held, and continues to hold, for the long-term. She didn't diversify (which is an added risk and not advised), but she displays very well how one or two solid investments can carry you through life.

I encourage you to visit this historical graph of the Dow Jones Industrial Average at:

In 1921 the Dow was trading around 75; through the 1920's it soared to 381 before the "disastrous" and lengthy crash that began in 1929. Interestingly, the rise of the stock market through the 1920's followed a technological boom. 1927 brought about the first public demonstration of the television, and the Lindbergh flight, and the first "talkie," and the first rocket. 1928 saw the automatic bread slicer invented, and the first color movies -- and all the while the market continued to rise sharply. 1929 saw the market crash, with more than half the Dow's value wiped out in a single day.

The web site allows you to follow the Dow back to the very beginnings, in 1896, and takes you to the present, marking hundreds of substantial events along the way. You can view how the market was closed for an extensive period of time at the dawn of World War One, and then the immense gap down when it finally opened again for trading. The market fell sharply again in 1940 when the Germans took Paris, and fell further after Pearl Harbor. Each recession is marked as well, along with major legislative acts, presidential elections and assassinations, natural disasters, wars, new inventions... it truly is incredible to Foolishly sit back and look at the past 100 years of the market and see how it reacted to history...

... judging from the graph, each moment seems so large as it happens... but look at the outcome...

You realize that the people who are able to stay invested in good companies over all this time are the ones who win and keep winning the game of investing. The irony is that somebody in a coma the entire century could easily outperform a Market gooroo who slaved his life away on Wall Street, attempting to react to every moment or even every year presented by the market. Time is the most powerful weapon you have, and the arguments that try to deny that are lost to it.

In this mind-frame, I'm not excited by today. I don't care about it at all, truthfully. It was just another day en route to somewhere much further down the graph -- or down the road. I think back to my Great Aunt long ago. I bet many times when the market was making new highs over the past seven decades, she wasn't even aware of it. She was too busy Foolishly enjoying her life, while at the same time comfortable with where she had her money. Also, if the market was to give all the recent gains back, or heck, even fall 30% next year, I'd remember that my Great Aunt rode out the Great Depression and kept investing, and I'd remind myself to look at where she is now.

I wonder if she knows that the markets made record highs today, and that her Sears Roebuck stock rose $1 1/4 to $49 1/2, near the 52 week high. Ahh... it's Friday. She's out somewhere or going somewhere for the weekend. I doubt she knows. Perhaps Monday she'll see. Or maybe not for a week. Either way, it doesn't really matter.

The Fool rose more than 4% today. Hurray. Good for the Fool. It outpaced the market. That IS important, I admit.

Especially strong was KLA Instruments (KLAC). The stock jumped $5, or 15%, after peer and former Fool holding Applied Materials (AMAT) announced good news today, following fair earnings last night. Applied said that even at this low point in the chip industries' cyclical downturn, profit margins are going to be higher than in previous market cycles, which indicates so far that, hey, this downturn ain't so bad as some thought! A couple analysts upgraded KLA Instruments today, which I find hilarious. The stock has doubled since September and they upgraded it today.

I'm not making fun of the upgrade, I'm making fun of the fact that the analysts ever downgraded the stock in the first place. It would appear so many analysts don't see the long-term picture because they're trying to guess the near-term picture. KLA is a solid firm and downgrading stocks should be considered a serious and infrequent business, in my mind, not something to simply throw around. The downgrades were not needed and perhaps even pointless -- except that they generated trades and revenues for the investment firms.

Briefly consider a downgrade on Coke in 1980. For what reason? Was the world coming to an end in 1981? That may be one of the few good reasons to downgrade a world-leading company. Investors and analysts should be looking at least five years ahead. If they did so, downgrades would have little argument to stand on in 90% of instances. It's 1996 now and anyone who sold out of Coke in 1980 missed a chance to become a millionaire. Short-term downgrades should be eliminated. They serve one purpose.

Believe it or not, KLA Instruments made a new 52 week high today! How's that for long-term investing? The biggest dog in the portfolio has become a momentum monster, doubling in a few months and hitting a new 52 week high. There's a great Foolish lesson here and I don't need to state it.

Also rising sharply today was America Online (AOL), up $3 7/8 to $31. Yesterday CompuServe announced weak subscriptions, poor earnings (losses actually), the cancellation of its fairly new "Wow!" service, and that they were redirecting to become more of a business service provider once again, which is good news for America Online. Battle joined and won? America Online's stock rose nearly 15% on almost twice normal volume.

Another beauty was 3Com (COMS), which has been downright amazing since August. The stock made another new high today, soaring $3 to a close of $75 5/8.

But all these numbers don't matter, right? Right. Handily beating the market shows the Fool is doing something very well this year, and that's great; but as for just today, this snap-shot of a moment, it means so little. So if you think 3Com has done well as of today, rising 61% for the Fool, I'm sure my Great Aunt thought that of her Sears stock at one point back in 1922, when her first shares had made decent gains for her. Thank God for her she kept the shares the next 74 years, and counting.

Have a Foolish weekend!


Stock Change Bid ------------------- AOL +3 7/8 31.00 T - 1/8 37.00 ATCT + 3/8 16.00 CHV + 3/8 67.38 GM + 3/8 57.50 IOM + 5/8 22.13 KLAC +5 38.25 LU + 3/8 52.13 MMM +1 3/8 84.75 QDEK + 1/4 5.13 COMS +2 7/8 75.50
Day Month Year History FOOL +4.02% 6.36% 54.33% 188.17% S&P 500 +0.81% 6.16% 21.56% 63.33% NASDAQ +1.28% 4.32% 21.11% 76.93% 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 31.00 326.24% 8/13/96 250 3Com Corp. 46.86 75.50 61.12% 8/11/95 125 Chevron 50.28 67.38 33.99% 8/12/96 110 Minn M&M 65.68 84.75 29.04% 9/27/96 -890 Quarterdec 7.08 5.13 27.65% 8/12/96 280 Gen'l Moto 51.97 57.50 10.63% 10/1/96 42 LucentTech 47.62 52.13 9.47% 8/12/96 130 AT&T 39.58 37.00 -6.51% 8/24/95 130 KLA Instrm 44.71 38.25 -14.45% 10/22/96 600 ATC Comm. 22.94 16.00 -30.24% 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 21080.00 $16134.44 8/13/96 250 3Com Corp. 11714.99 18875.00 $7160.01 8/11/95 125 Chevron 6285.61 8421.88 $2136.27 8/12/96 110 Minn M&M 7224.44 9322.50 $2098.06 9/27/96 -890 Quarterdec -6304.75 -4561.25 $1743.50 8/12/96 280 Gen'l Moto 14552.49 16100.00 $1547.51 10/1/96 42 LucentTech 1999.88 2189.25 $189.37 8/12/96 130 AT&T 5145.11 4810.00 -$335.11 8/24/95 130 KLA Instrm 5812.49 4972.50 -$839.99 10/22/96 600 ATC Comm. 13761.50 9600.00 -$4161.50 CASH $8801.62 TOTAL $144082.75