Fool Portfolio Report
Thursday, July 10, 1997
by Tom Gardner (TomGardner)

ALEXANDRIA, VA, (July 10, 1997) -- The Fool Portfolio fell 0.11%, while the S&P 500 rose 0.69% -- and so our short three-day reign over the markets ends today. Now ten days into the month, and four days short of the birthday of one of my favorite authors, Isaac Bashevis Singer, The Fool Portfolio has risen 6.46%, doubling the S&P 500's July gains of 3.23%.

It's an absolutely brilliant, breezy summer day outside Fool Global Headquarters in Alexandria, VA; our office is buzzing with dozens of Fools writing reports, chatting with advertisers, programming code, drifting over to the pinball machine where Dirty Harry shouts at you, "Meet me at the warehouse!" Yep, Fool Global Headquarters includes a leased pinball machine, as well as pool, ping-pong and foosball tables. Fool HQ also includes a bang-up security system and nineteen-year-old programmers that work all night -- so don't even THINK about it, buddy!

Today's abbreviated portfolio report offers PEGs on our small-cap holdings and YPEGs on our large-cap positions. Simple price-to-earnings-growth valuations are much too simple, but these at least give a ballpark fair price for our stocks based off earnings growth.

Beyond these, Fools need to study the balance sheets, understand alternate pricing methods (in AOL's case, subscriber-based valuations), and involve themselves in a more thorough exploration of these businesses' prospects going forward. One of the problems with PEG- and YPEG-based valuations is that they don't take into effect earnings growth beyond twelve months or so, nor the value of long-term compounded growth, nor the implications of capital-gains taxes, nor the worth of strong management. Holding stocks through short-term overvalue hurts traders but can greatly reward investors.

All of that said, my favorite stocks right now in The Fool Portfolio still happen to be the ones with the most attractive valuations. Innovex and 3Com most interest me. And Iomega, given its industry position, is also notable.

PEG Small Caps Price Price ATC Comm. $4.80 $5.50 The Donald $10.50 n/a Innovex $28.40 $55-$70*
YPEG Large-Caps Price Price AOL $68.70 $50.00 Iomega $20.50 $23.50 KLA-Tencor $55.00 $53.00 3Com $53.50 $73.50

Now what would happen if you bought one of these stocks, after doing diligent research, and then blammo, the stock market tumbled 25%? The possibility almost always exists that U.S stocks could lose 25% of their value over the coming three months. Our response to market-valuation concerns is to focus even more intently on the merits and flaws of the businesses we own as well as to remind ourselves of the value of long-term compounded growth -- a growth preserved for investors.

If the market falls and you're fully-invested in good companies, remember that the sun still shines, the river is still waiting to be floated, the kids don't love you for your equity holdings, and in the words of one rather eloquent Fool (Doubting ThomaS) on the Investor's Roundtable board and in our Cash-King folder on the Web:

In the end, I doubt that I'll look back on
my life and remember the good times I
had monitoring the price of a particular

I say this summer, drop by Fooldom for your lunchbreak, read through our nightly stuff for a half hour in the evening, then spend every waking non-work hour as Foolishly as possible (i.e. without concern for the short-term performance of your investments). Turn your eyes on the next perch trout, the next flyball to leftfield, the next paddled ball on the beach, the next packing trip in the Beartooth mountains, the next climbed tree with your six-year-old grandson, daughter, niece or nephew. Besides battling the bad-guys with Dirty Harry at HQ on rainy days... we'll be doing the same things in our free time.

Tom Gardner, Fool

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Stock Change Bid ---------------- AOL + 1/4 68.69 T + 3/16 35.81 ATCT + 1/16 4.81 CHV + 1/4 74.63 DJT + 7/16 10.50 GM + 7/16 56.25 INVX - 3/4 28.38 IOM - 1/8 20.56 KLAC + 15/16 55.06 LU +1 5/16 77.38 MMM + 1/8 102.81 COMS + 7/8 53.50
Day Month Year History FOOL -0.11% 6.46% 12.27% 199.62% S&P: +0.69% 3.23% 23.36% 99.34% NASDAQ: +0.29% 3.39% 15.48% 107.02% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 68.69 844.81% 5/17/95 980 Iomega Cor 2.52 20.56 715.97% 10/1/96 42 LucentTech 47.62 77.38 62.50% 8/12/96 110 Minn M&M 65.68 102.81 56.54% 8/11/95 125 Chevron 50.28 74.63 48.40% 8/24/95 130 KLA Tencor 44.71 55.06 23.15% 8/13/96 250 3Com Corp. 46.86 53.50 14.17% 8/12/96 280 Gen'l Moto 51.97 56.25 8.23% 6/26/97 325 Innovex 27.71 28.38 2.40% 8/12/96 130 AT&T 39.58 35.81 -9.51% 4/30/97 -1170 *Trump* 8.47 10.50 -23.98% 10/22/96 600 ATC Comm. 22.94 4.81 -79.02% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 24384.06 $21802.19 5/17/95 980 Iomega Cor 2594.53 20151.25 $17556.72 8/12/96 110 Minn M&M 7224.44 11309.38 $4084.94 8/11/95 125 Chevron 6285.61 9328.13 $3042.52 8/13/96 250 3Com Corp. 11714.99 13375.00 $1660.01 8/24/95 130 KLA Tencor 5812.49 7158.13 $1345.64 10/1/96 42 LucentTech 1999.88 3249.75 $1249.87 8/12/96 280 Gen'l Moto 14552.49 15750.00 $1197.51 6/26/97 325 Innovex 9005.62 9221.88 $216.25 8/12/96 130 AT&T 5145.11 4655.63 -$489.49 4/30/97 -1170*Trump* -9908.50 -12285.00 -$2376.50 10/22/96 600 ATC Comm. 13761.50 2887.50-$10874.00 CASH $40625.59 TOTAL $149811.28