Fool Portfolio Report
Thursday, March 27, 1997
by Tom Gardner (TomGardner)
ALEXANDRIA, VA., (March 27, 1997) -- Before I descend into the mire, I thought this evening I'd just link in two things for your consideration:
#1: One of my most favorite features in Fooldom: The Daily Double. It arrives everyday in the evening. That's one to bookmark.
#2: There are a few remaining slots for the New-York April Fools Day party, which I'll attend. I admit it -- I want my party to win the attendance game. If you're interested in talking stocks and turkey in a few days in Manhattan, click here: Head to New York for The Fool's Day Party.
Now, for the descent:
Apparently, the stock market doesn't like it when the Federal Reserve hikes interest rates. Today was one of those days you celebrated having some cash in the money-market fund. The Fool Portfolio, therefore, didn't honk many kazoos -- since we have only around $5,000 of our $126,000 in cash.
Consequently, The Fool Portfolio fell a head-rattling 2.55%, as America Online, Chevron, 3M and 3Com all lost more than a buck a share. But our overall performance for the day actually wasn't half bad, given that the S&P 500 and the Dow Industrials also dipped more than 2%.
It was just a bad day to be an equities investor.
And, of course, it was a far worse day to be an equities investor with a short-term time horizon. Somewhere 'tween Appalachia's purple mountains and the golden, hay-baled fields of North Dakota, there is an investor pacing the back porch, wishing he hadn't risked so much on the short-term performance of the stock market.
Stocks were squashed like plum tomatoes -- nearly all of them, nearly all day -- and there's no guarantee they'll rebound tomorrow, or next week, or by the end of the year. When the market disintegrated in the Fall of 1987, leveraged market gamblers gazed in horror as:
a. what they had disintegrated
b. what they didn't have escalated
That's a dangerous duo. The market loves to feast on gamblers focused on all the todays of the market.
Today, even the rate-hike-resistant consumer giants bled tomato seeds and juice, with Coca-Cola and Nike both losing to the market. And how about Intel, which announced this morning that it would increase by 27% the aggressive plan to repurchase its own shares -- the stock rose over $3 on the news, then closed the day down $1 1/2.
But if all of that sounds bad, if that sounds really really bad, well then, consider the announcement today by Quaker Oats. The Company announced that it has agreed to sell its ailing Snapple unit for $300 million to competitor, Triarc Companies -- the company that owns Mistic beverages, which hydrates me regularly with its Tropical-Berry juice, my favorite. (No advertising deal there.)
The proposed sale today markes an 82% drop in the value of Snapple since Quaker Oats acquired it just over two years back for more than $1.8 billion. Check your portfolio, Fool. Have you lost $1.5 billion on any of your investments over the past twenty-four months? I hope not. And I hope that lends a little perspective to what was probably a dreary day for your money. Big companies worth billions and billions of dollars, operated upon statistical models developed by only the most sophisticated of business men and women, sometimes lose over 80% of their investment in two years.
The fifth-grade logician can here draw two snap conclusions:
a. "If the big guys with fifteen-foot-high
computers can lose 80% on one of
their investments, probably I can too."
b. "If the big guys with lear jets and
corporate offices over which their
lear jets have trouble ascending can
blunder that badly, maybe I'm a lot
smarter than I thought."
If that was your child's response to the announcement, hey, darned nice instincts for a fifth-grader. If your reactions to this story were like those above, and thus like mine, then no you may not be much more sophisticated than a fifth-grader. But the hidden glory of the stock market is that you really needn't be much more brilliant than that to generate enduring and substantial profits on your savings.
Giving yourself time, allowing that you'll make some sizable blunders, and recognizing that you're probably pretty smart when it comes to particular industries (as a consumer, an employee, and a hobbyist) -- you can expect to beat the market over the next fifty years, I think. No, you're right, not everyone can beat the market. Thankfully, though, there are plenty of Phd. investment scholars out there spewing theorems and Greek symbols, jargon and high-priced newsletters -- all apparently content to pull your outperformance back to the norm.
Stock Change Bid -------------------- AOL -2 42.75 T - 3/4 35.25 ATCT --- 6.75 CHV -2 1/4 69.88 GM + 1/4 56.13 IOM - 1/2 16.63 KLAC - 7/8 38.25 LU - 1/8 52.13 MMM -1 3/4 85.63 COMS -1 1/4 34.13
Day Month Year History FOOL -2.55% 3.77% -5.64% 151.84% S&P: -2.10% -2.14% 4.47% 68.82% NASDAQ: -1.54% -4.54% -3.22% 73.50% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 16.63 559.99% 8/5/94 680 AmOnline 7.27 42.75 487.80% 8/11/95 125 Chevron 50.28 69.88 38.96% 8/12/96 110 Minn M&M 65.68 85.63 30.37% 10/1/96 42 LucentTech 47.62 52.13 9.47% 8/12/96 280 Gen'l Moto 51.97 56.13 7.99% 8/12/96 130 AT&T 39.58 35.25 -10.93% 8/24/95 130 KLA Instrm 44.71 38.25 -14.45% 8/13/96 250 3Com Corp. 46.86 34.13 -27.18% 10/22/96 600 ATC Comm. 22.94 6.75 -70.57% Rec'd # Security In At Value Change 8/5/94 680 AmOnline 4945.56 29070.00 $24124.44 5/17/95 2010 Iomega Cor 5063.13 33416.25 $28353.12 8/11/95 125 Chevron 6285.61 8734.38 $2448.77 8/12/96 110 Minn M&M 7224.44 9418.75 $2194.31 8/12/96 280 Gen'l Moto 14552.49 15715.00 $1162.51 10/1/96 42 LucentTech 1999.88 2189.25 $189.37 8/12/96 130 AT&T 5145.11 4582.50 -$562.61 8/24/95 130 KLA Instrm 5812.49 4972.50 -$839.99 8/13/96 250 3Com Corp. 11714.99 8531.25 -$3183.74 10/22/96 600 ATC Comm. 13761.50 4050.00 -$9711.50 CASH $5240.09 TOTAL $125919.97