Fool Portfolio Report
Tuesday, August 5, 1997
by David Gardner (DavidG@fool.com)


ALEXANDRIA, VA, August 5, 1997 -- The 1997 bull market's unstoppable juggernaut crushed a few more bears in its path today, as the S&P 500 rose 0.22% and the Nasdaq rang the 1.00% gong exactly right. For the first 7 months and some, these two are now up 28.57% and 25.60%, respectively. Another great year!

The Fool Portfolio shined brightest Tuesday, sending its beam arcing up 1.56% into the black night. The Fool Portfolio remains in a black night as it remains below the market averages, for the first year ever. We beat the market in 1994, we trounced it in 1995, we smacked it in 1996, but here we are sitting on a 1997 return of 19.54% as of market close today. Let's gawk for a few secs at the annual totals:

S&P 500: 28.57%
Nasdaq: 25.60%
FOOL: 19.54%

Of course, we're still beating most of the mutual funds out there, but for any of our regular readers that's a statement of the OBVIOUS, no?

Looking back over the year so far, what has hurt us has been the abysmal performance of ill-fated ATC Communications, the rise of The Donald (shorted), and the fall of AT&T. These three sit well below the market averages over the time that we've held them, and are responsible for present net losses of about $13,500.

In any 12-stock portfolio, you're going to have a few losers, of course. That's been true of the Fool Port pretty much since inception, when we bought Sonic Solutions in December of 1994 and watched the thing lose half of its value in the succeeding months. This is an inevitable phenomenon for any Fool, which is precisely why we advocate that investors diversify into 8-15 stocks. After all, if ALL you owned was (ouch) ATC Communications, its inept sugar daddy AT&T, and a bet against Donald Trump, you'd be somewhat unhappy over the past few months. Fortunately, we own 9 other good stocks, not the least of which is our latest purchase, Innovex, which led all Fool stocks higher today, closing up $2 5/8 to bid $34 3/8.

INNOVEX (Nasdaq:INVX) came to Fooldom on June 26th. I wish I could tell you that was June 26th, 1995, because we'd be riding a monster gain similar to our correct bets on America Online and Iomega. Sadly, we bought it two years later. But not that sadly. Since INVX washed up onto our Foolish shores, it's earned a return of 24%. The S&P 500 during that time is up 7%. The Nasdaq? 12%. We said at the time back in June that we thought we'd acquired Innovex on the cheap. We'll continue to hope the market agrees as the company executes its business plan, and keeps its net profit margins up over the staggering 25% level, and its shares rising. Great long-termer, I think.

Y'know, I keep putting off buying a new hard drive for my home computer. I have a 133 mHz Pentium in the home office off my bedroom, with a 1-gigabit hard drive. I've been deleting old stuff off of it (moving the important stuff onto Zip disks) for a while now. With Innovex's lead-wire assemblies incorporated into my next hard drive, I should finally just buy the darned thing this week! Yet another Foolish company to support.

Back to ATC COMMUNICATIONS (Nasdaq:ATCT), returning to the subject of our black night. "Why do you guys continue to hold that dog"? we're frequently asked. I frequently answer, so let me do so again. First off, I think the thing's unfairly overkilled. It's way, way off Wall Street's radar screen at this point, has never reported a loss, and has about $100 million in sales.

How did it drop to $4? The growth rate slowed, the momentum players left immediately at $25, those who bought at $12 got depressed and sold at $6, and you now have this "crummy," unknown stock at $4 just sitting there. Meantime, the company has added new managers, and hired Arthur Andersen to try to revitalize its business. On the other side of the ledger, any sort of positive news releases haven't come out in months. Indeed, the company's last press release was more than two months ago. So perhaps one can infer that ATCT hasn't suddenly landed any humongous new deal.... though recently the Fool heard from ATCT that up to ten new clients will be announced in August, which is great news.

Here's my take: I don't think that at these prices ATCT is worth selling. If any of the question marks hanging over the company becomes an exclamation point (a happy exclamation point), this stock should rebound. Also, its value is now almost inconsequential to the Foolfolio (80% drops will do that to most of your stocks, eh?), and I'd just as soon sit and wait on the company's earning report in the last week of August. We can reevaluate then, as we do after each of our growth companies' quarterly reports.

To close this one down, I find something liberating -- almost confessional -- about holding out this hideous albatross around our necks for all the world to see. ATC serves as an eloquent symbol. It says: "We screw up sometimes." Are we not complete and utter Fools for hanging our dirty linen in public view?!

You know, of course, that mutual fund managers "window-dress" at the end of every quarter. They churn their fund accounts (more expenses for YOU) to move money OUT of the ATCs of the world and into the Microsofts. That's just to look good. You'll never have known they ever owned any ATCT. "They owned Microsoft," you're supposed to think.

That's not the way we operate. We're Fools. We don't mind you knowing. In fact, we WANT you to know. Because the whole point of this blasted portfolio enterprise is to teach through our successes and our failures, never one without the other.

And... oh yeah... to come out with some pretty decent returns at the end of it all. That's the idea, anyway.

Tomorrow night we'll have Julie Bick online for a major chat event. (Don't you love that phrase? Its intended to lampoon the "major motion-picture EVENTS" that I'm always hearing about.) Julie is the author of All I Need to Know in Business I Learned at Microsoft, the hot-selling #36 book at Amazon.com. She's here in Fooldom to answer your questions tomorrow (Wednesday) night... so AOL participants please join us for a superlative hour. Just click this to read more: Microsoft Chat (and contest!).

Fool on!

--David Gardner

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TODAY'S NUMBERS
Stock Change Bid ---------------- AOL +111/16 73.19 T + 11/16 38.06 ATCT - 1/16 4.19 CHV + 3/8 79.88 DJT + 1/8 10.38 GM + 3/8 63.00 INVX +2 5/8 34.38 IOM + 5/8 22.75 KLAC +2 65.63 LU +1 3/16 85.88 MMM + 3/8 95.56 COMS - 1/16 55.38
Day Month Year History FOOL +1.56% 3.43% 19.54% 219.03% S&P: +0.22% -0.20% 28.57% 107.76% NASDAQ: +1.00% 1.74% 25.60% 125.16% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 73.19 906.71% 5/17/95 980 Iomega Cor 2.52 22.75 802.78% 10/1/96 42 LucentTech 47.62 85.88 80.35% 8/11/95 125 Chevron 50.28 79.88 58.84% 8/24/95 130 KLA-Tencor 44.71 65.63 46.77% 8/12/96 110 Minn M&M 65.68 95.56 45.50% 6/26/97 325 Innovex 27.71 34.38 24.05% 8/12/96 280 Gen'l Moto 51.97 63.00 21.22% 8/13/96 250 3Com Corp. 46.86 55.38 18.17% 8/12/96 130 AT&T 39.58 38.06 -3.83% 4/30/97 -1170 *Trump* 8.47 10.38 -22.51% 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 25981.56 $23399.69 5/17/95 980 Iomega Cor 2594.53 22295.00 $19700.47 8/11/95 125 Chevron 6285.61 9984.38 $3698.77 8/12/96 110 Minn M&M 7224.44 10511.88 $3287.44 8/12/96 280 Gen'l Moto 14552.49 17640.00 $3087.51 8/24/95 130 KLA-Tencor 5812.49 8531.25 $2718.76 6/26/97 325 Innovex 9005.62 11171.88 $2166.26 8/13/96 250 3Com Corp. 11714.99 13843.75 $2128.76 10/1/96 42 LucentTech 1999.88 3606.75 $1606.87 8/12/96 130 AT&T 5145.11 4948.13 -$196.99 4/30/97 -1170*Trump* -9908.50 -12138.75 -$2230.25 10/22/96 600 ATC Comm. 13761.50 2512.50-$11249.00 CASH $40625.59 TOTAL $159513.90