Fool Portfolio Report
Friday, May 16, 1997
by Jeff Fischer (TMFJeff)
ALEXANDRIA, VA, (May 16, 1997) -- I didn't see the stock market Friday.
A glance at the numbers shows obviously that the market was down. I'm not sure why, and there's no need to know. I'm not about to sell Intel because stocks go down periodically and -- gasp -- sometimes for long periods of time. Over the weekend all kinds of financial journalists will write about Friday's falling market, and give their own explanations. But sadly -- unbelievably -- many of these "stock journalists" don't own stocks, and so it's hard to believe that they understand them.
If you don't own stocks, it's difficult to comprehend the mentality that comes about with long-term investing: namely, that good investors don't care what the market does on any give day. They focus on what their given companies are doing each year, and are aiming to do over the long-term. The journalists writing about daily moves are scribbling outdated history before they even write it, and are missing the big picture while focusing on the petty. Also, the readers of such articles are wasting their time, when instead they should be focusing on finding winning business models for the next decade.
To conclude this thought: there's a good reason why so many non-invested journalists are bearish: it's called human nature. They don't own stocks, and they don't want to miss anything, so they naturally write bearishishly about stocks more often than otherwise.
I question the integrity of any business that doesn't allow its employees to participate in the best investment possible -- stocks. I wonder how such businesses plan to invest its own capital.
PART TWO. Since childhood we've always heard the statement, "Buy low and sell high."
The sooner that philosophy is banished, the better. It's one of the most misleading pieces of advice that a person can give, and it fosters a poor investing philosophy.
One, it assumes that you can determine what is high and low in the near-term. Two, so many people use 52-week highs and lows to get a feel for "where" a stock is trading -- without considering that those numbers are as fluid as time, and easily outdated within months. Case in point: too many times in conversation with friends, the topic comes to, "Microsoft made a new high." The typical response: get out, man. Get out now while it's high.
Three, the statement focuses on the stock price and inherently doesn't consider the business valuation beneath it, or the prospects going forward. I realize it's a simplified statement, and it's considered "witty" to say on CNBC or write in a newspaper, but if you're investing in companies that you need to sell when they're "high," you're not investing in the right companies.
Teaching investors to "Buy low and sell high" doesn't teach a whole-picture way of investing. It fails to present the reality that a mere $5,000 invested in a market-beating company in the 1980's can now be worth over $200,000. Instead, it taught a person to sell that stock when it was at a new "high" back in 1987, for a 20% gain. Who has "conditioned" you to sell?
Who says these words: "It's high! You should sell high! Sell it!" And why do they usually say it with exclamation points?
PART THREE. Consider grumbling bears, perpetually dramatic, claiming that the world is ending. On weekends they walk the streets with cardboard signs over both shoulders.
They must not realize that life is meant to be enjoyed, rather than a mess of worry and anxiety. They also must not realize that over the past ten decades they've been proven wrong -- incessantly. The worst market crash lasted some ten years before recovering. You shouldn't be fully-invested unless you can be for at least ten years. If you're invested for that amount of time, in the right companies, then enjoy it. That's the point of investing: so you can enjoy the future while not worrying about the present.
Meanwhile, even those who supposedly called the "Crash of 1987" have since lost out. They missed much of the subsequent recovery and the move in the 1990s, too. Is it worthwhile to guess the market, and to attempt to "buy low and sell high?"
1. On the macro-level, you're miserable trying to guess when "high" is.
2. You're wrong 80% of the time.
3. If you're buying the right investments, selling them at anytime is a mistake over the long-term.
4. You need to waste your time reading the "market tracking," "Wall Street," articles mentioned above.
PART FOUR. Buy early and sell late.
Buy early in life -- and continue buying leading companies -- or the S&P 500 -- and sell late in life. Buy early and sell late.
The most substantial returns on your investments -- the returns that really make a difference in your life -- arrive at the back-end of the investment. After decades in a leading position, the dividend alone can be enough to live on -- and can overshadow your entire initial investment. This type of reward comes at the back-end of your investing life. It's the reward that comes through patience and Foolish investing -- long-term investing.
Buy early and sell late. If you're lucky, you'll never need to sell much. "Buy low and sell high" will never be written by me, and when you hear someone say it, forgive them their small mind.
The Fool's numbers are below. Have a Foolish weekend.
--- Jeff Fischer, May 16, 1997
Stock Change Bid -------------------- AOL - 7/8 49.25 T + 5/8 33.50 ATCT - 1/16 3.94 CHV - 5/8 70.25 DJT --- 10.13 GM - 5/8 55.50 IOM - 5/16 17.56 KLAC -1 1/4 48.75 LU -1 7/8 60.88 MMM -3 91.50 COMS - 3/4 37.38Day Month Year History FOOL -1.19% 2.59% -1.67% 162.42% S&P: -1.44% 3.55% 12.02% 81.01% NASDAQ: -0.95% 6.34% 3.85% 86.17% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 17.56 596.92% 8/5/94 355 AmOnline 7.27 49.25 577.44% 8/11/95 125 Chevron 50.28 70.25 39.70% 8/12/96 110 Minn M&M 65.68 91.50 39.32% 10/1/96 42 LucentTech 47.62 60.88 27.85% 8/24/95 130 KLA Tencor 44.71 48.75 9.03% 8/12/96 280 Gen'l Moto 51.97 55.50 6.79% 8/12/96 130 AT&T 39.58 33.50 -15.36% 4/30/97 -1170 *Trump* 8.47 10.13 -19.56% 8/13/96 250 3Com Corp. 46.86 37.38 -20.24% 10/22/96 600 ATC Comm. 22.94 3.94 -82.83% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 17483.75 $14901.88 5/17/95 980 Iomega Cor 2594.53 17211.25 $14616.72 8/12/96 110 Minn M&M 7224.44 10065.00 $2840.56 8/11/95 125 Chevron 6285.61 8781.25 $2495.64 8/12/96 280 Gen'l Moto 14552.49 15540.00 $987.51 10/1/96 42 LucentTech 1999.88 2556.75 $556.87 8/24/95 130 KLA Tencor 5812.49 6337.50 $525.01 8/12/96 130 AT&T 5145.11 4355.00 -$790.11 4/30/97 -1170*Trump* -9908.50 -11846.25 -$1937.75 8/13/96 250 3Com Corp. 11714.99 9343.75 -$2371.24 10/22/96 600 ATC Comm. 13761.50 2362.50-$11399.00 CASH $49020.02 TOTAL $131210.52