Fool Portfolio Report
Monday, December 30, 1996

by Jeff Fischer (MF BudFox)

ALEXANDRIA, VA., December 30, 1996 -- The Fool's "wrapping up" party was crashed today, as the Port dropped more than 2% with only one day remaining in grand old 1996. America Online fell on no news, and Iomega fell on news that the company is working towards a better future.

IOMEGA (NYSE: IOM) announced plans to increase production in its Malaysia plant, which has come "on-line" faster than the company expected (and which was written about in a recent Fool recap). The company is also relocating its European headquarters, and as part of these changes, plans to take a $10 million charge in the fourth quarter.

Ten million bucks is not a big deal when the quarter will likely show revenues around $412 million, and especially as this one-time charge will be accounted for to show non-diluted earnings. But the company said it is reducing its work-force in Utah as a result of increasing it in Malaysia, and perhaps the word "reducing" shook up Wall Street.

Iomega is a straight forward firm, so there's little to read into its press release other than the facts: it's closing up some of the shop and moving it to Malaysia, as was planned. It hurts to see work leaving America, but it's a world-wide economy.

As for closing shop, the Fool and you and I are in a sense doing the same thing. We're shutting off the lights, boarding up the windows, locking all the doors and calling it a year. Much of the world will participate in this ritual tomorrow night -- ringing out the old to ring in the new, as they say; make resolutions, quit bad habits, start a "new life." It's a curious holiday.

Ah. Another year! But what is a year anyway (aside from the astronomy behind it?) Of course many people of the world aren't celebrating the New Year tomorrow, and many don't celebrate it at all. Keeping "track" of time on a perpetual calendar is mainly a convenience, especially as nobody truly knows in what year we're living. Coming from the Roman calendar, December means the tenth month, November the ninth, October the eighth... While many disparate cultures claim we're living in completely different centuries. So where are we in time? Well, who knows, and what does it matter? You have yourself and the time you live in and here it is.

But tracking time is an almost necessary obsession. Wall Street tracks time as much as any other business, or more so. Wall Street is an arcade of numbers, and how better to keep track of numbers than year-by-year, with annual earnings, annual growth-rates, annual percentage returns; neat and organized instruments by which to measure investments. So, Fools, it's that mandatory time to re-set all the meters to zero again, as yet another year has taken us to its end.

It's been a heck of a great year for the market, and an even better year for the Fool. After the S&P rose more than 34% in 1995, it is set to rise another 22% or so in 1996. While the Fool, which rose 68% in 1995, is on track to gain another 42% or so in 1996. After such great numbers, where does the market go from here?

Well, it isn't Foolish to look back in order to look forward. The past can realistically say no more about the future than can a tarot card. So how best to survive and prosper in something as volatile as stocks? How to survive -- period -- is an age-old question, maybe the oldest question possible. You don't need great intelligence in order to yearn for survival. But if in hard times (suppose the market falls sharply), how can one be "saved?"

In the mid 1600's, George Saville, Marquis of Halifax, wrote, "To the question, What shall we do to be saved in this world? there is no answer but this, Look to your Moat."

Look to your moat. Do your investments have a moat? Or do you invest in all high-growth stocks and hope for the best? Do you sell stocks short? Do you hold large caps? What about dividends? Are you collecting any dividends? However you invest, a moat (or a solid foundation) is key to any investing strategy.

The Fool's moat is of course the Foolish Four. We've talked about this strategy until turning blue in the face, but for the simple beauty of it and for the Fools who haven't considered it before, it's always worth a mention. I'll keep it very brief.

The Foolish Four: 22% average annual returns, while the market accomplishes about 11%; Foolish Four: no extra fees, no worries, no wondering exactly in what your money is invested. The Foolish Four has returned over 32% this year. The work involved in the strategy is almost non-existent.

The Foolish Four is a moat around all your holdings keeping at bay your worst short-term enemies (losses in your port). This year, AMERICA ONLINE has dropped. The stock began around $36 a share, and is now around $33. IOMEGA, meanwhile, has doubled after all the hoopla, from about $8 to $16, but is obviously far from the high reached in the spring. ATC COMM has dropped over 40% for the Fool.

Meanwhile, there have been plenty of hot and cold stocks the last few years, and every year. 1995 presented the Internet craze, with Netscape, Spyglass and Netcom all doubling and tripling. (Only Netscape has since held up from its IPO price enough to offer a gain to investors). This year, year 2000 stocks have been the rage. Zitel (Nasdaq: ZITL) rose about four-fold in the last few weeks, and look at the price range today: it traded between $40 and $73 during 6 1/2 hours. Incredible. Down $20 today at the close.

What's the point? The only point is, if you have the gumption to take added risks, at any time, in any stock, the point is to first have a solid foundation beneath you. Have a moat around a good portion of your money, for protection, security and over-all returns. The Foolish Four is the best market-beating strategy the Fool knows of to offer.

Anyway... onto the new year! I hope you all have a healthy and prosperous 1997. If you're into the habit of making resolutions, make this one if you haven't already: build a solid portfolio underpinned and supported by a proven simple strategy like the Foolish Four, because the future IS so unpredictable. It is easy and fun to look back, though.

Here, right now, rather than offering a look back, I offer a hopeful look forward. All the best to all Fools!


Stock Change Bid -------------------- AOL -1 3/4 33.63 T + 3/8 44.00 ATCT +1 1/4 13.63 CHV + 1/2 66.50 GM --- 55.63 IOM - 7/8 16.50 KLAC - 1/8 35.88 LU - 7/8 46.75 MMM - 3/4 84.75 COMS -3 1/8 75.13
Day Month Year History FOOL -2.21% -9.04% 42.28% 165.67% S&P 500 -0.38% -0.42% 22.39% 64.45% NASDAQ -0.29% -0.38% 22.39% 78.81% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 16.50 555.03% 8/5/94 680 AmOnline 7.27 33.63 362.33% 8/13/96 250 3Com Corp. 46.86 75.13 60.32% 8/11/95 125 Chevron 50.28 66.50 32.25% 8/12/96 110 Minn M&M 65.68 84.75 29.04% 8/12/96 130 AT&T 39.58 44.00 11.17% 8/12/96 280 Gen'l Moto 51.97 55.63 7.03% 10/1/96 42 LucentTech 47.62 46.75 -1.82% 8/24/95 130 KLA Instrm 44.71 35.88 -19.76% 10/22/96 600 ATC Comm. 22.94 13.63 -40.60% Rec'd # Security In At Value Change 5/17/95 2010 Iomega Cor 5063.13 33165.00 $28101.87 8/5/94 680 AmOnline 4945.56 22865.00 $17919.44 8/13/96 250 3Com Corp. 11714.99 18781.25 $7066.26 8/12/96 110 Minn M&M 7224.44 9322.50 $2098.06 8/11/95 125 Chevron 6285.61 8312.50 $2026.89 8/12/96 280 Gen'l Moto 14552.49 15575.00 $1022.51 8/12/96 130 AT&T 5145.11 5720.00 $574.89 10/1/96 42 LucentTech 1999.88 1963.50 -$36.38 8/24/95 130 KLA Instrm 5812.49 4663.75 -$1148.74 10/22/96 600 ATC Comm. 13761.50 8175.00 -$5586.50 CASH $4291.89 TOTAL $132835.39 Transmitted: 12/30/96