Fool Portfolio Report
Monday, December 23, 1996

by David Gardner (MotleyFool)

ALEXANDRIA, VA, December 23, 1996 -- Quiet day on the market, as the Fool Portfolio edged 0.13% higher in light trading versus a market that was slightly down (S&P 500 off 0.26%) to moderately down (Nasdaq off 0.71%).

America Online kicked us higher, spurring the Fool Port with a $1 gain. That put the stock back in the five-bagger category once again. Rocky at times -- in fact, more than half the time, probably -- these volatile shares have nevertheless been a great investment since our purchase that lonely first day of Foolishness, August 5, 1994. There weren't many people hangin' in Fooldom back then... I can tell you, because I wrote the buy report. The market didn't swing. And speaking of swinging, we only got 60 swings at our Today's Pitch game that day, and there were easily enough messages in our folders (50) to answer every single one.

It was a different world, in many ways, and yet here we are two and a half years later sitting on a 400% gain. That's the bigger picture. And it behooves me to say that that's a picture rarely seen by people who get caught up in day to day trading (making lots of money for their broker, if not for themselves). That's a picture you'll almost never read in magazines, since magazines are fixed on whatever's the latest "hot" (read: faddish) thing. That's the picture you really can only see if you're an individual investor doing your thing for the long term. S&P 500 up 63% since we started; AOL up 407%. Simple as that. End of story.

As of today, anyway.

No news of consequence on our stocks, Monday. ATC Communications continued its weakness, down another $1/2 to bid $12 1/4. How weak can this stock be? Geez Louise. We said we should be prepared to lose 50% on the investment if it went bad, and that's pretty much what's happening, off 47% as of today. Something in me tells me that this stock has been badly overdone to the downside, but the market may always know things I don't. I intend to find out, going forward... we're not about to sell this one at the bottom.

"The market may always know things I don't," I just wrote. Yep! Take, for example, my proclamation six months ago about Iomega. Fool reader sent me over a kind and highly Foolish note recalling these very words, which appeared in my June 19, 1996 report: "And I can tell you that I expect [Iomega] to be well ahead of this price six months from now." Where was the stock that day? $30. Oomph. MASimmons mentioned how important accountability is in this media-heavy world of no accountability. I completely agree. And I was clearly wrong about Iomega.

At the time, the stock had precipitously dropped from $55 to $30 in the face of ongoing business success. The company signed more original equipment manufacturer (OEM) deals, making the Zip

a standard in a number of high-profile machines. Earnings were good, sales growth huge, and the prospect of the Jaz drive remained seductive.

As things played out, the market knew more than I did, ahead of time. (That's usually the case with the market.) Iomega came in with a decent second quarter, though the numbers were somewhat lower than we'd hoped. And third-quarter estimates would later get dropped. So would fourth-quarter estimates, as it turned out. At the time, the bearish arguments were all inane: company can't obtain financing, the Syjet is a competitive threat, Compaq's LS-120 will put Iomega out of business, etc. I was partly reacting to the inanity of those arguments when I wrote of my expectation that the stock would finish above $30 six months later. At close today, though, Iomega lost $1/8 to $18.

Obviously, I still like the company very much and we hold lots of shares confidently; we believe in Iomega's future. It's been a great investment! Our best ever, still. But at the same time, even some of our firmest convictions will, from time to time, get shot down by the market. It's a very important lesson to us all, and argues further against ever trying to "time" the market, use options, or excessive margin. You just never really know.

Thanks again, MASimmons.

That's one of the things I love about this medium, and I'm going to close my last pre-Christmas report with another... one that fits in similarly. I'm here to give thanks.

Last week, I wrote a report on the technological advances driving business and society, largely through the efforts of Intel. My example, a fairly easy and visual one to grasp, was the use of computers in space exploration. I want to share with you what came out of that report, because it's a great example of why the new medium blows away all the others.

Upon putting the report up online, the first thing I received was a note from a technical editor. "You spelled the abbreviation for 'megaHertz' as 'mHz' when it actually should've been 'MHz.' " The guy was right. I won't go into the particulars, but right away I learned, and resolved to do better next time. It's MHz, people.

A few minutes later, the next note comes in. It was from a Mr. John Hammer of New York. Mr. Hammer corrected another inaccuracy in my report. Writing of the Galileo mission to Jupiter, I'd said that Europa was Jupiter's smallest moon. Mr. Hammer wrote, "Actually, Europa is the smallest of Jupiter's four Galilean moons -- those first seen by Galileo and easily visible by an amateur with a small telescope. Jupiter has more than 26 moons; that makes Europa #4 of 26, and coincidentally one of the largest in the entire solar system."

Right on. And you know what? Mr. Hammer just so happens to be the Director of Education of the New York Hall of Science. Located in Flushing Meadows-Corona Park, the Hall offers its 230,000 annual visitors over 160 interactive hands-on exhibits on physics, microbiology, and technology. As a side note, Mr. Hammer informs me that the Hall has the highest visitor density of any museum in New York City, and possibly the highest of any museum anywhere. (Visitor Density = square feet of public space divided by number of visitors per year.) Also, the Hall has received more grants and more total dollars from the National Science Foundation's Informal Science Education Division than all but four other organizations nationwide, which are all much bigger.

So what I'm saying here is that I love being corrected, especially from those in high places.

But that wasn't all. Humble Fool that I am, I had already been exposed to the wonderful correcting effects of this medium; almost any inaccuracy I ever unknowingly print gets corrected for me right away via e-mail, and then I can come back to you in a report like this and retract and correct and eat crow. (I quite enjoy it.) As I said, however, that wasn't all.

You see, the last e-mail I got on my report started like this:

Dear David,

My wife and I read your Fool Wire today - and were duly impressed with the comments you made about Galileo and the Europa encounter. I read your remarks with particular interest since I am a scientist on the Galileo mission and conduct the atmospheric and auroral observations using the ultraviolet spectrometer.

No joke. And Mr. Kent Tobiska went on from there to offer Fool HQ a glossy photo of the high-res image of Europa once it finishes downloading in January (at 20-40 bits per second, vs. the 9,600-28,800 your modem probably operates at!) Of course, we jumped at his kind offer!

That's why I love the online medium. I think I'll write about more technical subjects going forward, just so I can see how attentive, brilliant, and well-placed some of our readers are.

For these things and many others, I give thanks. Merry Christmas!

--- David Gardner, December 23, 1996

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Stock Change Bid -------------------- Stock Change Bid -------------------- AOL +1 36.88 T + 1/2 40.00 ATCT - 1/2 12.25 CHV + 1/8 66.00 GM + 5/8 55.63 IOM - 1/8 18.00 KLAC - 3/8 35.25 LU - 7/8 46.25 MMM - 1/4 84.50 COMS - 3/8 76.38
Day Month Year History
FOOL +0.13% -6.30% 46.56% 173.67%
S&P 500 -0.26% -1.33% 21.27% 62.94%
NASDAQ -0.71% -1.02% 21.61% 77.66% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 18.00 614.58%
8/5/94 680 AmOnline 7.27 36.88 407.02%
8/13/96 250 3Com Corp. 46.86 76.38 62.99%
8/11/95 125 Chevron 50.28 66.00 31.25%
8/12/96 110 Minn M&M 65.68 84.50 28.66%
8/12/96 280 Gen'l Moto 51.97 55.63 7.03%
8/12/96 130 AT&T 39.58 40.00 1.07%
10/1/96 42 LucentTech 47.62 46.25 -2.87%
8/24/95 130 KLA Instrm 44.71 35.25 -21.16%
10/22/96 600 ATC Comm. 22.94 12.25 -46.59% Rec'd # Security In At Value Change 5/17/95 2010 Iomega Cor 5063.13 36180.00 $31116.87
8/5/94 680 AmOnline 4945.56 25075.00 $20129.44
8/13/96 250 3Com Corp. 11714.99 19093.75 $7378.76
8/12/96 110 Minn M&M 7224.44 9295.00 $2070.56
8/11/95 125 Chevron 6285.61 8250.00 $1964.39
8/12/96 280 Gen'l Moto 14552.49 15575.00 $1022.51
8/12/96 130 AT&T 5145.11 5200.00 $54.89
10/1/96 42 LucentTech 1999.88 1942.50 -$57.38
8/24/95 130 KLA Instrm 5812.49 4582.50 -$1229.99
10/22/96 600 ATC Comm. 13761.50 7350.00 -$6411.50 CASH $4291.89
TOTAL $136835.64 Transmitted: 12/23/96