Fool Portfolio Report
Monday, December 16, 1996


by David Gardner (MotleyFool)

ALEXANDRIA, VA, December 16, 1996 -- My, my, how quickly the short-term outlook can change.

Rewind the tape to one week ago, last Monday, when I was blabbing about how disappointed I was that we'd lost to the market that day -- even though we'd still been up... up to a total 1996 return in excess of 62%, in fact. Since that fateful day, it has been grimness... grimness everywhere you look.

The market began last Tuesday by shedding a third of a percent, while the Foolfolio dropped a solid 2.2%. The beat went on. Check out these numbers:

Tuesday: Fool -2.29%, S&P 500 -0.30% Wednesday: Fool -0.78%, S&P -0.91% Thursday: Fool -4.45%, S&P -1.54% Friday: Fool -2.89%, S&P -0.10%

... and today, my fellow Fools, it just got even uglier, down 4.81%. The S&P 500 lost another 1.04%, with the Nasdaq off worse, off 1.85%. Negative numbers every day for everybody.

My, my, how quickly the short-term outlook can change. Our 1996 return is now just 38.82% (I say "just," even though you'll be hard-pressed to locate many mutual funds that are up even 20%), down 23 percentage points IN ONE WEEK.

Ouch!

What's to conclude from this? One is a lesson we've learned before. The market can change dramatically over a short-term period, even when it doesn't "crash." Our latest 62% down to 39% over one week makes that quite clear. But the lesson was demonstrated even more clearly earlier this year, though, when the FoolPort swooned from over 100% for the year in late May to just 20% by late July. (It was back to triple that five months later.)

The second lesson follows naturally from the first: if you're going to be invested in dynamic growth stocks, you need to be able to stomach volatility. Some can, and some can't... it's up to each of us either to know what sort of person we are before we start investing, or to learn it over the course of our investing lives.

Let's cut straight to the point: The Foolish Four was actually up once again today, up 0.52%, in fact. And our Dow Dividend Approach is about all most people need for investment strategy: takes little time, even less attention, no expertise, doubles the market returns, etc. No surprise why we led off The Motley Fool Investment Guide making exactly that point, suggesting you should consider moving your money out of underperforming mutual funds and into this self-directed investment approach. It's also a very safe way to invest.

So the Foolish Four was up today. But you know what? On the year, it's well below our portfolio's returns. Oh, it's still doing snappily, now up 26% (good and market-beating). But compare that to the much more volatile Fool Portfolio, which after a horrible run is up 39% (very good, and extremely market-beating).

The points here are self-evident. Greater volatility can lead to greater returns, but you must be the sort of person who can take risk level-headedly, keep an eye on your portfolio, and stomach the occasional 20% drop. If you are, great: you're like me, and we should do well with an aggressive and diversified approach. If you're not, that's great too: we have a spate of wonderful investment approaches for you (Foolish Four, the new Beating the S&P by MF Cormend, etc.) which should consistently and strongly outperform your average money manager, to say nothing of the broker who gets paid for trading your account, or the mutual-fund manager who's primary goal is to capture assets.

To conclude, there are many ways to invest Foolishly. You need to pick the one that best suits you.

We got a full transcript today of ATC Communications's conference call last month. We'd already provided a complete summary for our readers that day, but it's still nice to see a company take the time to communicate with the general public.

Say, did you read about Starbucks last week? In Investor's Business Daily the CFO of the company, Michael Casey, explained why his company doesn't let individual investors listen to SBUX's conference call this way: "We certainly don't encourage them. The conference call has a certain basis of fundamental understanding of the company assumed. We don't want to do anything that's confusing to someone hearing things for the first time.''

Yeah, I know, I know... coffee is so confusing for stupid little individual investors. Tough business to understand for these same stupid little individual investors who actually fill your stores every day and represent the lion's share of your business. This was comic.

You know, some of the people barred from the call are shareholders, i.e. PART OWNERS of the company whose conference calls they can't be allowed to listen to because it'd be so "confusing." Some companies just don't get it... even more surprising when they're consumer-oriented ones.

It's not just enough for The Fool to criticize... with every critical breath, we make a point of breathing a line or more of praise for what we do like. We do like Intel. What IBD printed about them exactly duplicates our own experience: "Admission to Intel Corp.'s conference call, for example, is first-come, first-served. After the call ends, those who missed out can dial in to hear a tape of it. And management follows with an online Q&A for individual investors." And this is semiconductors, not coffee.

Anyway...

ATC Communications was up today... one of only three Fool stocks to rise. The shares were up more than a point in the morning, though they lost most of that gain in the afternoon's big selloff. Still, you're always happy to have a small cap appreciate $1/4 in a Nasdaq spanking.

I was playing the comparative-score game today while looking at the company's capitalization. At its closing price, the value (or "capitalization") as measured by the total common stock value is $213 million. I compared this to a recent favorite funny stock in Fool HQ: Copytele (Nasdaq:COPY).

We first found out about this operation when MF Boring wrote it up in our Scary Stocks special for Halloween. That special focused on providing good ideas for short sellers, looking for stocks that seemed poised to drop. Boring wrote a gem of a writeup about this dubious company and its even more dubious prospects; every Fool should read it. With no meaningful revenues and a questionable product, it was at $7 1/8 then. Today, COPY lost another $13/16 to close at $3 15/16.

Why do I mention this? Copytele is still capitalized -- even at the present price -- at $224 million. That's more than ATC Communications? Is there any justice in this world? Often not, in the short term. In the long term, though, the answer is an emphatic yes: truth and quality will always out.

The Motley Fool debuted on a neat new online product today called Downtown, from inCommon. Internet readers can download this product at http://www.incommon.com. What does it do? Well, it'll create an icon bar at the bottom of your screen that includes "dynamic links" to the participating Internet sites you like most. For example, if you select "The Motley Fool" as one of your faves, it'll give you an ongoing icon link to The Fool when you're using your browser, and when we publish new info (Lunchtime News, this Fool Portfolio report, and selected others) it'll light up to let you know "THIS JUST IN!" Check it out... we like Downtown's usefulness.

AT&T announced specifics of its NCR spinoff today. T shareholders will get 0.0625 shares of the new NCR for each T share, a "one-for-sixteener." The spinoff occurs December 31st.

-- David Gardner, December 16th

TODAY'S NUMBERS


Stock Change Bid ------------------- AOL -2 1/2 31.75 T + 1/8 39.13 ATCT + 1/4 13.25 CHV +1 1/8 63.13 GM -1 1/8 55.38 IOM -1 3/4 17.00 KLAC -1 1/2 34.50 LU - 7/8 46.25 MMM - 1/2 81.00 COMS -4 1/8 71.13
Day Month Year History FOOL -4.81% -11.25% 38.82% 159.21% S&P 500 -1.04% -4.76% 17.06% 57.28% NASDAQ -1.85% -2.44% 19.86% 75.11% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 17.00 574.88% 8/5/94 680 AmOnline 7.27 31.75 336.55% 8/13/96 250 3Com Corp. 46.86 71.13 51.78% 8/11/95 125 Chevron 50.28 63.13 25.53% 8/12/96 110 Minn M&M 65.68 81.00 23.33% 8/12/96 280 Gen'l Moto 51.97 55.38 6.55% 8/12/96 130 AT&T 39.58 39.13 -1.14% 10/1/96 42 LucentTech 47.62 46.25 -2.87% 8/24/95 130 KLA Instrm 44.71 34.50 -22.84% 10/22/96 600 ATC Comm. 22.94 13.25 -42.23% Rec'd # Security In At Value Change 5/17/95 2010 Iomega Cor 5063.13 34170.00 $29106.87 8/5/94 680 AmOnline 4945.56 21590.00 $16644.44 8/13/96 250 3Com Corp. 11714.99 17781.25 $6066.26 8/12/96 110 Minn M&M 7224.44 8910.00 $1685.56 8/11/95 125 Chevron 6285.61 7890.63 $1605.02 8/12/96 280 Gen'l Moto 14552.49 15505.00 $952.51 10/1/96 42 LucentTech 1999.88 1942.50 -$57.38 8/12/96 130 AT&T 5145.11 5086.25 -$58.86 8/24/95 130 KLA Instrm 5812.49 4485.00 -$1327.49 10/22/96 600 ATC Comm. 13761.50 7950.00 -$5811.50 CASH $4291.89 TOTAL $129602.52 Transmitted: 12/16/96