Fool Portfolio Report
Friday, July 25, 1997
by David Gardner (

ALEXANDRIA, VA, (July 25, 1997) -- The Fool Portfolio gained 0.62% over the past week, while the S&P continued to rise, gaining 2.57%. Not the greatest week in Foolish history, but far from the worst. 3M and Chevron announced record earnings, though 3M's were not enough to keep the stock rising -- at least for now. Next week Trump announces earnings, and in early August America Online chimes in with its numbers.

The topic of today's Foolish recap begins with this statement: I don't read many financial print publications anymore.

In today's new publishing world, I can see only two real arguments for investors to read print. The first is the eternal argument for books. Books will always make sense, as they provide readers an extended, coherent teaching or entertaining tool that they can actually hold onto (literally -- everyone likes the feel of a book). So much for books. The other argument I can see is for financial dailies. While they're not as timely as tuning into The Fool or any one of your other dozen-plus Internet links, they are still relatively timely and sometimes thought-provoking.

The casualty is and will be financial magazines, which are almost comically dated these days when they arrive at their subscribers' doorsteps. Suitable for de-thawing, in fact. We enjoyed writing a column for SmartMoney magazine throughout 1996, and it has a fine staff led by editor Steve Swartz. But we still resigned the position at the end of the year anyway. Apart from the opportunities it was keeping us from, we felt an ongoing frustration at trying to write stuff that would still be meaningful 45 days later. I do of course hope we have some timeless things to say, but we'll continue to put those in our books!

Anyway, I read Investor's Business Daily for its numbers (best stock tables, hands down), and occasionally brush over the Wall Street Journal if I notice it in the office, or if somebody passes along a pertinent article. Thursday I read two articles on the front of the Money & Investing section that are worth some additional consideration by you and me.

The first was a fine column by Roger Lowenstein about Fool Port holding AT&T (NYSE:T). (I'd link to the thing here but that's a pay site!) Anyway, if you have a copy kicking around, go back and read Lowenstein's look at the company's management. It's a classically ugly, classically Foolish Four situation.

(Lowenstein, you may recall, is a journalist who's written a pretty good book about Buffett and a pretty horrible column about Iomega and The Fool last year. No hard feelings... some people are still trying to figure what this whole online phenomenon is really about.)

Robert Allen, the company's chairman and chief executive, has essentially run a once powerful telecommunications company into the ground. The stock, Lowenstein points out, is back to the same level it was more than four years ago... y'know, that same four years that have provided such a wonderful bull market. AT&T is the only Foolish Four stock to be down for us over the past year (not including its Lucent spin-off, which makes it profitable), and has even clearly acknowledged in the past it needs a leadership change. However, the guy (Walter) they announced they'd bring in last year was just fired. And meanwhile, various bigwig CEOs on T's board are affirming their support of Herr Allen.

Excuse me?

This reminds me of a spate of other such situations over the past decade in which large Dow Industrials companies finally changed management and quickly and dramatically increased share price. American Express under Jim Robinson is perhaps the most notorious example. Here, you had a large heavyweight that had floundered under Robinson's leadership through the late eighties and early nineties. Think of Visa and Mastercard as MCI and Sprint equivalents, and you have the necessary parallels (in so many ways) to our story of AmEx and AT&T. Robinson was booted out finally (largely through the efforts of embittered institutional investors) to be replaced by Harvey Golub. Just look at AXP stock since. Yowser.

Similar deal at Eastman Kodak a few years back, though CEO Fisher is coming under fire these days. (Anyway, the stock rocked in its Foolish Four year.) And one thinks of Gerstner at IBM and Martinez at Sears as other examples of guys shakin' things up and turning the tide of investors' fortunes.

Clearly this needs to happen for all of us who own AT&T. The company languishes, existing board members praise their buddy who's largely responsible, and together they fire the guy who was first hired to replace him. Alas, this will almost certainly not happen before our Fool Four switchover date in August, and chances are high that T won't make the cut into next year. So we'll chalk this one up as a loss (except for Lucent -- hurrah hurrah!). But the apparatchiks must go, and you can bet that before the end of the decade they will. Shareholders will then be rewarded.

The other article of note in yesterday's Journal was the top headline, entitled "Die-Hard Short Sellers Chase Bubbles They Think Are About Ready To Burst." I have only one primary point to make about this article, which you need not bother reading. And this is a point I've made before but it bears repeating, succinctly, and perhaps the inclusion of a larger point.

Why does the media continue to write about short-sellers as if anyone who shorts does so exclusively? Were the proverbial Martian to make the proverbial arrival to Earth today in order to arrive at his proverbial conclusion, it would be (in this case) that our world is populated by only two sorts of investors: longs, and shorts. The notion that anything might be in between, that anything might be Foolish, may be obtained by that alien only by a read of this online site. As you know, The Motley Fool believes that experienced (and more aggressive) investors should consider doing both, which is exactly what The Fool Portfolio has always done and will continue to do. The rest of the world seems to believe this is impossible!

I think sometimes that we may blame the media (but ultimately, we must blame ourselves) for dividing up the world too much. For a few years, it's been "Microsoft vs. AOL" to see who "wins" the online wars. Really? If you're a Foolish reader, you've read us saying from the very beginning that it's not either, it's both. That is, BOTH are going to win, and both have won (just check those stock prices). Both should, in fact, continue to win. Similarly, it's not Coke vs. Pepsi, it's both. Neither was it ever exclusively "USA vs. USSR" in the Olympics... both consistently walked away with the most and second most medals.

And, by extension, it's not "online vs. print." As our recent syndication deal with papers across the country has demonstrated, it's both.

Everything is NOT mutually exclusive. We do NOT live in a zero-sum world. So let's not write articles about sorry short sellers who are "quitting the business." If they ever were in the business of shorting exclusively, they were numskulls.

Be a Fool. View both sides of the coin, read our Dueling Fools features for instance (Dell Computer will be featured on Monday), and don't allow anyone else's narrow viewpoint to dominate or constrain your own. Fool on!

David Gardner, July 25, 1997

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Stock Change Bid ---------------- AOL -1 1/16 64.19 T + 1/4 35.88 ATCT --- 4.19 CHV +1 1/8 78.00 DJT + 3/16 10.75 GM -1 7/16 56.88 INVX + 1/8 32.63 IOM + 1/16 21.81 KLAC -111/16 62.00 LU - 1/2 84.38 MMM -1 94.63 COMS - 1/16 56.56
Day Month Year History FOOL -0.71% 7.88% 13.77% 203.64% S&P: -0.16% 6.06% 26.74% 104.80% NASDAQ: +0.03% 8.84% 21.58% 117.94% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 64.19 782.91% 5/17/95 980 Iomega Cor 2.52 21.81 765.58% 10/1/96 42 LucentTech 47.62 84.38 77.20% 8/11/95 125 Chevron 50.28 78.00 55.12% 8/12/96 110 Minn M&M 65.68 94.63 44.08% 8/24/95 130 KLA-Tencor 44.71 62.00 38.67% 8/13/96 250 3Com Corp. 46.86 56.56 20.71% 6/26/97 325 Innovex 27.71 32.63 17.74% 8/12/96 280 Gen'l Moto 51.97 56.88 9.43% 8/12/96 130 AT&T 39.58 35.88 -9.36% 4/30/97 -1170 *Trump* 8.47 10.75 -26.94% 10/22/96 600 ATC Comm. 22.94 4.19 -81.74% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 22786.56 $20204.69 5/17/95 980 Iomega Cor 2594.53 21376.25 $18781.72 8/11/95 125 Chevron 6285.61 9750.00 $3464.39 8/12/96 110 Minn M&M 7224.44 10408.75 $3184.31 8/13/96 250 3Com Corp. 11714.99 14140.63 $2425.64 8/24/95 130 KLA-Tencor 5812.49 8060.00 $2247.51 6/26/97 325 Innovex 9005.62 10603.13 $1597.51 10/1/96 42 LucentTech 1999.88 3543.75 $1543.87 8/12/96 280 Gen'l Moto 14552.49 15925.00 $1372.51 8/12/96 130 AT&T 5145.11 4663.75 -$481.36 4/30/97 -1170*Trump* -9908.50 -12577.50 -$2669.00 10/22/96 600 ATC Comm. 13761.50 2512.50-$11249.00 CASH $40625.59 TOTAL $151818.40