Fool Portfolio Report
Thursday, February 27, 1997
by Dale Wettlaufer (MF Raleigh)

ALEXANDRIA, VA., (Feb. 27, 1997) -- Oh, great! I get to write about the Fool Port on a day when the thing has AGAIN underperformed the averages. This is a fine predicament! What the heck is wrong with Tom and David, I mean... THEY can't even beat the S&P. What a bunch of dogs...

MF BudFox: DALE! DALE! Your microphone is on!
MF Raleigh:
Dude, I'm busy getting ready to go on the air with the Fool Port report
MF BudFox:
Um, I think your watch is slow. You're on the air right now.

Cue Music...

MF Czar: Live, from Alexandria, it's Thursday afternoon!

Hi, Dale Wettlaufer here, MF Raleigh, reporting to you from high atop Fool HQ! So good to be with you this afternoon to explain what's going on with the Fool Port. On today's show, we'll see how the Port did, examine the tick by tick performance of each of the stocks in the portfolio, see if any of our trading alerts went off and if any of our stop-limit-sell orders were activated today.

No, no, that's not what's happening today. Too bad, though, because with some of the posts that I've seen here and elsewhere on AOL and on the Internet, you'd think the ratings would be huge on the day we explain stop losses, selling strategies which kick in when a stock cross its 200-day moving average line, or when a stock has broken support. Aint gonna happen -- this isn't the Turtle Trading School. There's a pretty solid reason why we don't teach trading. First, we're just not that concerned with the short run. Statistics show that people are equally adept at making or losing money in the short-term, whether they're trading or investing. It actually follows a normal distribution. Problem is, there's no long-term in trading. One can make an error on their valuation on a great enterprise, which can be vindicated in the long-term but look pretty awful in the short-term. I highly recommend MF Templar's January 7th, 1997 Fool on the Hill entitled "Why Do Stocks Go Up?" for the rationale here.

Nonetheless, there's every reason to analyze your holdings on more than an occasional basis, to make calls to a company's suppliers or customers and see what they think, to look at valuation again (from more than one perspective), and to share your findings with other Fools. You don't want to neglect the companies you own -- that's not really the spirit of a long-term approach -- but you don't want to obsess or stifle your holdings like some stage parent, either.

That being said, here I come with some fundamental observations on the Fool Port holdings.

First of all, the Fools underperformed the averages today. Big news, huh? Should the guys buy some silver and gold bullion and put it back in the market when things are looking brighter? Maybe some options on platinum futures? No thanks.

Let's just focus on the companies the guys own here. 3COM (Nasdaq: COMS) had a rough go of it today, as analysts carried through on the skepticism that was palpably evident on last night's conference call. I highly recommend listening to the call (the number is available in tonight's Evening News) or checking out the conference call synopsis located in our Earnings Central. It's funny that the analysts, some of whom have never really owned (I mean in the sense of investing in a company and experiencing recessions or inflation or 15% interest rates on the short term loan they've taken to finance their inventory) a company, can figure out why the company's merger with US ROBOTICS (Nasdaq: USRX) was such a bad deal. Right, like the people at Robotics, who built the company from nothing, don't know how to allocate capital and build a business. We wuz' robbed, they plaintively yell, when in fact the principals in this transaction explained quite articulately the entire deal last night.

Personally, I think there are a number of reasons why it makes sense, some of which I explained in last night's FoolWire. To summarize, one of the best reasons is that the combined market cap of the new company will allow 3Com to acquire companies in the private and public markets with less dilution risk and less risk to shareholder value if an acquisition fails. Anyone paying attention to 3Com, CISCO (Nasdaq: CSCO), ASCEND (Nasdaq: ASND), and CASCADE COMMUNICATIONS (Nasdaq: CSCC) knows that these companies are able to maintain return on capital by acquiring the best and brightest companies, both small and large. Very simply, it's the lifeblood of a company that wants to keep ahead of the curve in this industry.

Before I get carried away, I'll just move on to ATC COMMUNICATIONS (Nasdaq: ATCT). I'll take this opportunity to disagree with the bros on the efficiency issue here. Yeah, it's one person/one phone. That's just the nature of the beast. From my limited knowledge of this industry, the more intelligent questions to ask the management center on the use of help-desk software systems, their methods for retaining valuable employees, and its commitment to integrating computer systems with their customers' systems.

On two other notes, it was good to see the company hire a marketing firm today. This is somewhat of a new market -- educating customers is incumbent upon the better companies in new markets. Furthermore, sometimes the sales cycle is just a little longer, especially when the preferred contracts are long-term one. My Dad has told me that you have to call on a customer eight times before you make the sale. ATC is a young company. If I owned it, I'd give it some time. On the complaint side, I did listen to conference call when Arthur Chavoya was introduced as the new CEO. His credentials were quite impressive, having done some big things at EDS (NYSE: EDS), the ten-ton gorilla in data outsourcing. However, I was quite surprised when he made statements such as 'At EDS, I built a $500 million division in two years.' That really surprised me that a CEO of such experience wouldn't say "At EDS, we built a $500 million...". Those are the sorts of intangibles I listen for, in addition to learning what the business model is and what the profit margin targets are. I'm sure Mr. Chavoya had help at EDS. For that reason, I was somewhat turned off on the company.

In case anyone's wondering, I did happen to communicate that to the company in a chance encounter with one of its officers. Small but important point, in my mind. ATC did great today, and I'm glad to see the stock going the other way. I'm still considering if a purchase would be an intelligent investment, but I won't pull the trigger until I can ask someone at ATC the above questions.

Other than that, there's not too much happening on the Fool Port front. AMERICA ONLINE (NYSE: AOL) looks like it's starting to execute very well on its business plan with the TEL-SAVE HOLDINGS (Nasdaq: TALK) deal signed this week. KLA INSTRUMENTS (Nasdaq: KLAC) succumbed to the moody market today and did almost as poorly as industry bellwether APPLIED MATERIALS (Nasdaq: AMAT). In all other respects, the Fool Port was very well behaved on this Thursday, February 27.

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.


Stock Change Bid -------------------- AOL -2 1/8 37.00 T - 5/8 40.13 ATCT +1 1/2 8.00 CHV - 5/8 66.38 GM -1 57.75 IOM - 1/4 15.75 KLAC -3 1/4 40.75 LU - 7/8 54.25 MMM - 1/2 92.50 NCR -1 1/8 33.88 COMS -4 1/8 34.88
Day Month Year History FOOL -2.42% -9.82% -8.06% 145.36% S&P: -1.32% 1.13% 7.34% 73.45% NASDAQ: -2.08% -4.87% 1.68% 82.28% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 15.75 525.26% 8/5/94 680 AmOnline 7.27 37.00 408.74% 8/12/96 110 Minn M&M 65.68 92.50 40.84% 8/11/95 125 Chevron 50.28 66.38 32.00% 10/1/96 42 LucentTech 47.62 54.25 13.93% 8/12/96 280 Gen'l Moto 51.97 57.75 11.12% 8/12/96 130 AT&T 39.58 40.13 1.38% 1/2/97 8 NCR 33.63 33.88 0.74% 8/24/95 130 KLA Instrm 44.71 40.75 -8.86% 8/13/96 250 3Com Corp. 46.86 34.88 -25.58% 10/22/96 600 ATC Comm. 22.94 8.00 -65.12% Rec'd # Security In At Value Change 5/17/95 2010 Iomega Cor 5063.13 31657.50 $26594.37 8/5/94 680 AmOnline 4945.56 25160.00 $20214.44 8/12/96 110 Minn M&M 7224.44 10175.00 $2950.56 8/11/95 125 Chevron 6285.61 8296.88 $2011.27 8/12/96 280 Gen'l Moto 14552.49 16170.00 $1617.51 10/1/96 42 LucentTech 1999.88 2278.50 $278.62 8/12/96 130 AT&T 5145.11 5216.25 $71.14 1/2/97 8 NCR 269.00 271.00 $2.00 8/24/95 130 KLA Instrm 5812.49 5297.50 -$514.99 8/13/96 250 3Com Corp. 11714.99 8718.75 -$2996.24 10/22/96 600 ATC Comm. 13761.50 4800.00 -$8961.50 CASH $4639.01 TOTAL $122680.39