Fool Portfolio Report
Monday, March 3, 1997
by David Gardner (MotleyFool)

ALEXANDRIA, VA., (March 3, 1997) -- Yah! Yah! Yah!

Do you remember that old Chuck Wagon commercial in the late 70's depicting a tiny cowboy urging on and whipping a miniature horse-drawn wagon, with a big hungry dog padding along behind it? The wagon would go careening down the hallways and around the corners of your basic suburban American home with the driver shouting, "Yah! Yah! Yah!"

That's the very sound I make today as we kick off a new month of Foolishness. Yah! Yah! Yah!

February was a downer. 3Com -- y'know, the multibillion-dollar company at the forefront of our explosive networking industry -- was cut in half, then closed the month by announcing a merger with another company I similarly admire. New partner US Robotics (Nasdaq:USRX) also just so happens to be a multibillion-dollar company at the forefront of our explosive networking industry (remote access, here). Result? You guessed it. Trois Com goes on to lose another five bucks after that announcement!

Take a quick look at COMS's graph over the past month. Ugly. It's dropped 15 days out of the past 20, and the drops were much bigger than the rises. That, and poor performance from the rest of the portfolio (almost no one exempted, except 3M, which rose five points) made February one of our very worst. At the close of the month, the Fool Portfolio lay 10 percentage points below the Nasdaq for 1997, and 16 behind the S&P 500.

We'll usually do poorly in market periods in which technology stocks are battered (February '97 and Summer '96 are good recent examples), so it's not surprising to see that we're underperforming the S&P 500 by so much right now. It's happened in two-month periods before, and it'll happen many times again. But as is always the case, the past is merely prologue. Nothing that went before matters nearly as much as what's coming after.

Yah! Yah! Yah!

Today, the Fool Portfolio careened down the hallway and swept round the corner into March, as we rode gains from America Online (up $2 1/2 to $40), General Motors (up $1 3/8 to $59 1/4), and Chevron (up $1 1/4 to $65 3/4) to score 1.87%. That put us well ahead of the other dogs on our way to the red-and-white-checkered enamel bowl. (The idea was you added hot water to Chuck Wagon, right?) The S&P 500, still so strong, rose 0.57%, with the Nasdaq mostly just spinning its wheels Monday, up 0.17%.

America Online was probably buoyed by a nice plug in last weekend's Barron's, in which fund manager William Miller of the Legg Mason Value Fund says he's buying, and thinks the stock is easily worth $55-$60. We'll assume Bill has already established his position (as is true of most guys who are quoted in the press), so that must've been a bunch of other people buying today. And maybe a few shorts covering. Would that be surprising? I don't think so. As of the most recent report (through February 14th), a full 21.8 million shares of AOL's 95.9 million shares outstanding had been shorted... equal to 23% of the company's capitalization. Somebody doesn't believe in those guys.

Iomega rose $1/4 today as well, bouncing back after a poor February as well. The company announced that Micron Electronics would include the Ditto 2-gig tape backup drive as an option on all its models.

We did have two stocks that fell off our wagon today. KLA Instruments continued its volatility within the $40-$47 range, edging down $3/4 to bid $40 5/8. The company now appears poised to effect its merger with Tencor Instruments (Nasdaq:TNCR) on April 30th.

Today's big loser was AT&T. As mentioned in our Lunchtime News, the company warned of disappointing first-quarter results, to be released in mid-April. At the beginning of a two-day meeting with security analysts today, AT&T revealed that earnings would come in around 70 cents per share, down from the consensus estimate which had been $0.78. That set the stock back three pocorobas, and put our August investment in AT&T/Lucent/NCR into the red for the first time in a while.

I don't know at $36 7/8 whether T stock will even tempt many investors here. It now sits squarely atop the Dow average in terms of its dividend yield, but it's become the lowest priced of the Dow's ten highest-yielders. That has been a bad sign in the past, making it the situation stock that we kick out to form the Foolish Four. Of course, that only applies to those who would be buying today. Foolish Four investors know to buy and hold their annual picks, which we'll be doing until August... however little admiration we may have for our own management. You want my take? AT&T remains a big, fat piece of cheese working in an industry that is attracting increasing numbers of nimbler mice. You tell me where this one's headed.

Fortunately, we diversify, yes? That's Foolish.

And that's where the report ends tonight, though if you're one of our AOL readers please read on below about our message boards.

It's great to be back after a restful vacation badly needed, and we're now hard at work looking for a few new additions to the Fool Portfolio this month. We'll see what we come up with. As we always like to have a little money on the other side of the table, I'm expecting we'll come up with at least one short.

I'll leave you with this, courtesy of MF Czar's outstanding Web-surfing skills. Yah! Yah! March on!

--David Gardner, March 3, 1997

(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 1/2 40.00 T -3 36.88 ATCT --- 7.63 CHV +1 1/4 65.75 GM +1 3/8 59.25 IOM + 1/4 15.63 KLAC - 3/4 40.63 LU + 5/8 54.50 MMM + 1/2 92.50 COMS - 1/4 32.75
Day Month Year History FOOL +1.87% 1.87% -7.36% 147.25% S&P: +0.57% 0.57% 7.37% 73.50% NASDAQ: +0.17% 0.17% 1.56% 82.06% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 15.63 520.29% 8/5/94 680 AmOnline 7.27 40.00 449.99% 8/12/96 110 Minn M&M 65.68 92.50 40.84% 8/11/95 125 Chevron 50.28 65.75 30.76% 10/1/96 42 LucentTech 47.62 54.50 14.46% 8/12/96 280 Gen'l Moto 51.97 59.25 14.00% 8/12/96 130 AT&T 39.58 36.88 -6.83% 8/24/95 130 KLA Instrm 44.71 40.63 -9.14% 8/13/96 250 3Com Corp. 46.86 32.75 -30.11% 10/22/96 600 ATC Comm. 22.94 7.63 -66.76% Rec'd # Security In At Value Change 8/5/94 680 AmOnline 4945.56 27200.00 $22254.44 5/17/95 2010 Iomega Cor 5063.13 31406.25 $26343.12 8/12/96 110 Minn M&M 7224.44 10175.00 $2950.56 8/12/96 280 Gen'l Moto 14552.49 16590.00 $2037.51 8/11/95 125 Chevron 6285.61 8218.75 $1933.14 10/1/96 42 LucentTech 1999.88 2289.00 $289.12 8/12/96 130 AT&T 5145.11 4793.75 -$351.36 8/24/95 130 KLA Instrm 5812.49 5281.25 -$531.24 8/13/96 250 3Com Corp. 11714.99 8187.50 -$3527.49 10/22/96 600 ATC Comm. 13761.50 4575.00 -$9186.50 CASH $4909.01 TOTAL $123625.51