Fool Portfolio Report
Friday, August 22, 1997
by Jeff Fischer (TMFJeff)


ALEXANDRIA, VA (August 22, 1997) -- Still smiling from Tom's Thursday recap, it's an additional pleasure to see the Fool Port end a volatile week on the winner's side of the table. Friday the portfolio closed up 0.68% while the S&P lost 0.16%.

This year the market has been as volatile as it was in 1987. The number of single days with point swings of one to two percent number well over a dozen. Friday alone the S&P was as low as 905 before closing at 923. Some folks believe that the volatility is indicative of a coming disaster -- like a car reeling left and right before finally plunging over a cliff.

From January to March we were surprised by the market's strength. Stocks gained 8% by the end of February, and the Dow crossed 7000 by the second week of March. Over the next month the market lost 10%. Over the next six weeks, it gained back 15%. On only May First, the Nasdaq was down 1.59% for the year. Now it's up 23.83%.

If this volatility is leading to anything, though, it would make more sense to call the destination an "opportunity," rather than a disaster. There has never yet been a sharp market decline that wasn't an excellent buying opportunity. With the median age of the country hovering around 34 and the average life-span rising close to 80, people investing regularly and for the long haul should all join hands, look up to the sun, and wish for a decline, together. In the meantime, Fools stay invested and keep on investing.

Over the nearly 860 months since 1926, the S&P has gained 11% per year with dividends reinvested. But when you eliminate the mere 36 months during which stocks performed best (making for a collective three years worth of market investing) the S&P's total annual return since 1926 falls to 3.6% -- no better than a treasury bill. You need to be in the market at all times in order to beat the market. That statement will certainly raise the ire of some traders out there, but over the long-term, it's a defensible belief.

Judging from all the attention that the traditional media gives to a possible market crash, you'd think that market declines were something so horrible that we should all spend our investing life trying to find a way to side-step them. Rather than studying businesses to find great investments in which to own for a lifetime, we should sell all of our stocks every single Friday, regardless of gains or losses, just in case bad news rolls out over the weekend and the market "crashes." (Some traders actually do this stuff. They don't want to own any stock over the weekend... (Huh?))

Since 1940, the S&P 500 has dropped more than 10% from a market peak only fifteen times. During these declines, stocks fell an average of 25%. If you've watched the market since 1996, you've seen it fall nearly 20% from the high already (last summer, and this late winter, nearly, too). More importantly, though, in its history the market has typically bounced back from the average 25% decline in less than two years. Foolish investors have time horizons of at least five years. Hopefully five times that. Does a possible market decline merit all the attention that it gets? Imagine if instead of going on CNBC and talking about how overvalued the market was, Wall Street personalities would teach people the merits of investing in leading companies over the next ten years. Of buying and holding. Of building value over the long-term.

How many people go on CNBC and let these truths fill their fifteen minute interviews, rather than waxing poetic about trendlines and moving day averages, the latest buy and sell reports, and "lightening up" on their exposure to stocks? Do American families really care about all that noise?

We added a new feature in the Fool's School that thinks otherwise. It's called The Family Fool. To borrow from the tag-line that the Fool plans to print on its letterhead, The Family Fool aims to amuse, entertain, and make your entire brood good money. The Family Fool is run by Dayana Yochim (TMF School), who is also responsible for the Fool's School. She writes of the new area, "Once the kids are done loading the dishwasher, have them gather 'round the monitor to take our family quiz. Each week we'll add ideas on teaching the tikes about companies whose products they use, how to take some of their allowance and invest it in stocks, and how to determine the value of a business. In fact, if you have a story or a tip on how you passed along Foolishness to your brood, write it in a Fribble and send it to TMF School."

The Family Fool, coupled with The Fool's School, will work to teach the ins and outs of personal finance and investing, for families and individuals alike -- and always with a Foolish twist.

DA STOCKS: The Fool won Friday mainly on the strength of IOMEGA (NYSE: IOM). The stock rose $1 1/8 on news of its new ZipPlus drive. The drive features all the qualities of the Zip drive in addition to a batch of enhancements, including easier connections, faster performance and multimedia software. The price is the same as the regular Zip, at $199. Capitalizing early on the multimedia boom that is certainly brewing, the drive offers full-version software and the capacity needed to store large multimedia files, including digital photo albums and audio postcards.

(Interesting side-note: KODAK (NYSE: EK) has recently been a Foolish Four dog, hovering near its 52 week low. The stock has fallen due to price cuts, increased competition, and also due to its expensive release of digitial photography products. It's a classic Fool Four stock in the sense that most of these problems are time sensitive, while the company is still the leading film seller in the world. I hope the Fool can buy shares of Kodak in February when we make the new eighteen-month switch.)

KLA-TENCOR (Nasdaq: KLAC) rose sharply to new highs this past week as the industry stocks continue to score dates with analysts who had scorned the sector just months ago. KLA is up 66% for the Fool. On Thursday the company announced the initiation of a consistent share buyback program, to be continued over the coming years.

Now that GENERAL MOTORS (NYSE: GM) has finished hovering in the fifty-dollar range (which it did for nearly the past year) and recently moved to a new high of nearly $65, the stock was upgraded Friday to Buy from Market Perform by DLJ Securities. The stock trades at 8 times 1998 estimates.

Finally, Fool TMF Bruce called ATC COMMUNICATIONS (Nasdaq: ATCT) this week and learned that year-end earnings, which were due for release at the end of August, have been moved to early September. The accountants are taking their time. Two cents per share is expected. The stock trades at 16 times the current year's estimates.

Have a Foolish weekend....

-- Jeff Fischer, Fool

Drip Portfolio -- Defending Intel, the first DRP Buy.
Fool Message Boards -- Speak your mind!
Boring Portfolio -- Boring holds Cisco, Oracle.
Fool Four Portfolio -- 23% annually, historically.
Evening News -- All the news, early.
Port Tracker -- Update your portfolio daily.
Daily Double -- Woah... it's flyin'!
Daily Trouble -- Cut in half! A deal?
Fribble -- A fun lesson from readers.


TODAY'S NUMBERS
Stock Change Bid ---------------- AOL - 3/16 67.44 T + 5/16 40.25 ATCT - 1/16 4.50 CHV + 1/2 79.44 DJT + 3/8 11.50 GM +113/16 64.75 INVX - 3/4 34.13 IOM +1 1/8 23.69 KLAC +1 1/2 74.38 LU - 1/4 83.25 MMM +1 92.50 COMS - 5/8 52.69
Day Month Year History FOOL +0.68% 2.40% 18.34% 215.84% S&P: -0.16% -3.22% 24.68% 101.47% NASDAQ: -0.54% 0.31% 23.83% 121.98% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 23.69 839.98% 8/5/94 355 AmOnline 7.27 67.44 827.61% 10/1/96 42 LucentTech 47.62 83.25 74.84% 8/24/95 130 KLA-Tencor 44.71 74.38 66.34% 8/11/95 125 Chevron 50.28 79.44 57.97% 8/12/96 110 Minn M&M 65.68 92.50 40.84% 8/12/96 280 Gen'l Moto 51.97 64.75 24.58% 6/26/97 325 Innovex 27.71 34.13 23.15% 8/13/96 250 3Com Corp. 46.86 52.69 12.44% 8/12/96 130 AT&T 39.58 40.25 1.70% 4/30/97 -1170 *Trump* 8.47 11.50 -35.79% 10/22/96 600 ATC Comm. 22.94 4.50 -80.38% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 23940.31 $21358.44 5/17/95 980 Iomega Cor 2594.53 23213.75 $20619.22 8/24/95 130 KLA-Tencor 5812.49 9668.75 $3856.26 8/11/95 125 Chevron 6285.61 9929.69 $3644.08 8/12/96 280 Gen'l Moto 14552.49 18130.00 $3577.51 8/12/96 110 Minn M&M 7224.44 10175.00 $2950.56 6/26/97 325 Innovex 9005.62 11090.63 $2085.01 10/1/96 42 LucentTech 1999.88 3496.50 $1496.62 8/13/96 250 3Com Corp. 11714.99 13171.88 $1456.89 8/12/96 130 AT&T 5145.11 5232.50 $87.39 4/30/97 -1170*Trump* -9908.50 -13455.00 -$3546.50 10/22/96 600 ATC Comm. 13761.50 2700.00-$11061.50 CASH $40625.59 TOTAL $157919.59