Fool Portfolio Report
Monday, March 10, 1997
by Jeff Fischer (MF BudFox)
ALEXANDRIA, VA, March 10, 1997-- The Fool Portfolio just closed its second best day of 1997, five of our ten stocks rising a buck or more, and America Online a bit better than that. As the cannons fall into silence and the blue smoke curls away into nothingness, we find our motley banner intact, our platoon tired but happy. We gave more than we got.
The Portfolio is perched on a small rung of history today, as America Online's $5 rise coupled with Iomega's recent doldrums has put a new name on top. Our largest holding, and now best-ever performer, is those three identifiable letters "AOL." Not since April 22nd of 1996 had America Online been our lead husky... at which point, Iomega came along and stole the show. But we digress. In fact, let's.
For Iomega, it's been a rollercoaster ride up (after a Fortune magazine cover story propelled the stock last year) and then down. During that period -- roughly the past year -- Iomega has gone from any other ol' stock in the Fool Port, to the most talked about equity since a little thing called IBM started making headlines a few decades ago, to a heavily traded recent disappointment.
I use the phrase "recent disappointment" truly in the short-term sense, emphasizing "recent." Go back and quote Iomega at market close one year ago, and you'll see it was just over $8, 70% below where it closed today. That's the big picture.
Of course, after having achieved twenty-bagger status last summer, the only way Iomega could have been bypassed is the loss of a couple dozen points. That's exactly what has happened, Iomega shares having painfully lost more than two-thirds of their value since their peak last summer. So America Online takes over top spot, though it is ironically below where it was one year ago, having depreciated its way into the Fool's #1 spot. Yep, one year ago the then AMER closed at $48 3/8. Its $5 rise today back to $47 is a buck below that, and 33% below its $70 peak last May 7th.
But all of this is just playing with numbers... short-term gab. Get away from the shouts and the bayonets, climb up to a promontory high over the battlefield, and any casual survey will reveal that over the long term (the only term that counts, dear Fool), both have done wonderfully, up over 500% in less than three years.
America Online's rise today was, on the face of it, driven by news from AOL Studios... the portion of its business that creates new interactive online content. AOL's Greenhouse (of which The Motley Fool is counted as a property) is consolidating its efforts around the attempted creation of a few, big-name brands. To that end, former NBC exec Brandon Tartikoff will be helping to run the Greenhouse's entertainment network as its chairman. Big name, big brands.
The market apparently liked this information a great deal, perhaps viewing it as a sign that AOL is figuring out better and better how to capitalize on its position as number-one Internet access provider. The company continues to evaluate its advertising opportunities, and certainly we expect that one day AOL will put decide to put ad banners on e-mail and instant messages (in addition to the recent announcement about chats). That will help turn AOL into a higher-margin publishing company, as opposed to a low-margin access company.
The Greenhouse strategy is to create online "shows" that can then be spun off into television shows, syndicated columns, and books. Tartikoff's first plan is for a show called "Beggars and Choosers," described as "a spicy serial about a struggling TV network." It'll launch both as an AOL site and a made-for-TV movie on Showtime.
As shareholders, we'll hope for success. At present, it's unclear to us whether this model of pouring $10-$20 million into the creation of new media properties is good or bad. As Karen Kaplan put it in today's Los Angeles Times, "The Greenhouse strategy is not exactly brand-new in the young Internet content industry. The M3P studio creates and buys shows for the Microsoft Network and even has a talent scout in Los Angeles. Last month, MSN announced it was canceling 10 of its 20 Web sites and cutting 30% to 40% of its temporary work force."
For illustrative purposes only, The Motley Fool was created organically, with a tightly focused vision, and with very little money... a model that AOL aimed to duplicate in its first incarnation of the Greenhouse. This new direction attempts to spend megabucks obtaining publicity and offline distribution for online vehicles. We'll be watching and learning.
For now anyway, the upshot of it is that AOL stock has smashed through its intermediate-term highs. These shares hadn't seen $47 since last July.
Package that together with $1 no-news rises in Chevron, KLA Instruments, Lucent Technologies, and the Two Threes (3M and 3Com) and you have a stellar Foolish performance. Monday gave us a rise of 3.22% vs. gains of 1.08% and 0.83% for the S&P 500 and Nasdaq, respectively. That puts us up 5.06% for March, as we attempt to recover from an exceedingly wintry past few months. The Fool remains down 14 percentage points to the S&P 500, 7 points to the Nasdaq. Not good, not good at all, but better than it had been!
Keep in mind, we don't manage anyone's money but our own, and the whole point of this endeavor is not to wow you with eye-popping numbers. If that happens, great. If not, we expect that you're learning as much from our mistakes as you are from our successes... and we'll cross our fingers we're doing the same. The Motley Fool is pure education. It's about teaching and helping you to do this yourself in a world full of institutions begging you not to. As Wall Street continues to be interested in scaring you as much as in serving you, the Foolish answer remains merely to do-it-yerself.
One example of our educational efforts is Bust the Tipsters, the online serial we've recently created to teach simple investment lessons through the use of colorful villains and an engaging daily narrative. One outstanding example is today's, Case #24: The Birth of Mo-Mental, by David Wolpe. If you're new to The Fool, new to investing, or both, we encourage you to click in and solve a case or two. There's a new one every day but Sunday.
Foolishness combines education with fun, never one without the other. Thus, I must mention one other highlight of Fooldom to close with today: our Road to the Final Fool contest, which follows the men's NCAA tournament round by round. And we ain't talking any of this "pick the winner" stuff that you can do at anybody's office, either. (Hey, those are fun to win, mind you... I'm just bitter because I never have. I enviously look on while others collect their winnings and then never pay taxes on them.) No, no. In our Foolish game, we begin the first round by asking you to answer 64 predictive questions, one on each team in the tournament. Like Foolball, this game makes watching the tournament even more fun than it was already.
And if you are Foolish enough to be the Final Fool, you will win a free golf vacation in Phoenix, Arizona, courtesy of the folks at Preview Travel. That's the "free golf" part of today's subheader. I told you so.
OK, tomorrow? Shucks. We'll take a day half as good as this one. Fool on!
--- David Gardner, March 10, 1997
(c) Copyright 1996, 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 +5 47.00 T + 5/8 36.75 ATCT - 1/4 7.50 CHV +1 1/4 67.38 GM + 5/8 57.25 IOM - 1/8 15.13 KLAC +1 1/8 41.38 LU +1 54.38 MMM +1 1/8 92.50 COMS +1 34.63
Day Month Year History FOOL +3.22% 5.06% -4.46% 154.99% S&P: +1.08% 2.89% 9.84% 77.50% NASDAQ: +0.83% 1.05% 2.45% 83.67% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 47.00 546.24% 5/17/95 2010 Iomega Cor 2.52 15.13 500.44% 8/12/96 110 Minn M&M 65.68 92.50 40.84% 8/11/95 125 Chevron 50.28 67.38 33.99% 10/1/96 42 LucentTech 47.62 54.38 14.19% 8/12/96 280 Gen'l Moto 51.97 57.25 10.15% 8/12/96 130 AT&T 39.58 36.75 -7.14% 8/24/95 130 KLA Instrm 44.71 41.38 -7.46% 8/13/96 250 3Com Corp. 46.86 34.63 -26.11% 10/22/96 600 ATC Comm. 22.94 7.50 -67.30% Rec'd # Security In At Value Change 8/5/94 680 AmOnline 4945.56 31960.00 $27014.44 5/17/95 2010 Iomega Cor 5063.13 30401.25 $25338.12 8/12/96 110 Minn M&M 7224.44 10175.00 $2950.56 8/11/95 125 Chevron 6285.61 8421.88 $2136.27 8/12/96 280 Gen'l Moto 14552.49 16030.00 $1477.51 10/1/96 42 LucentTech 1999.88 2283.75 $283.87 8/12/96 130 AT&T 5145.11 4777.50 -$367.61 8/24/95 130 KLA Instrm 5812.49 5378.75 -$433.74 8/13/96 250 3Com Corp. 11714.99 8656.25 -$3058.74 10/22/96 600 ATC Comm. 13761.50 4500.00 -$9261.50 CASH $4909.01 TOTAL $127493.39