Fool
Portfolio Report
Monday, December 15, 1997
by David Gardner
([email protected])
ALEXANDRIA, VA (Dec. 15, 1997) -- The Fool Portfolio beat the S&P 500 today, rising 1.36% vs. the 500 behemoths' gain of 1.05%. The Nasdaq underperformed once AGAIN, flat.
Look over the market for the year and you now see two roads having diverged in a yellow wood. But here, pace Robert Frost, the one that has been MORE traveled by has made all the difference. The big stocks (S&P) have repeatedly whacked the technology stocks (Nasdaq) for the past month, almost without letup. As of November 10th, the S&P was up 24.35%, with the Nas up 23.21% -- a difference of a percentage point. As of today December 15th, the S&P has risen to 30% while the Nasdaq has dropped to a 19% gain -- an 11-point gap, the widest of the year, and indeed, an unusually wide margin looked at in the light of recent history.
In fact, the gap is wider than at any point since The Motley Fool debuted online on that blessed day of August 4th of 1994. The difference between the indices during our run in '94 was just four percentage points. For 1995, it was five. And last year, the Nasdaq outperformed the S&P 500 by just two points. So an 11-point split is anomalous. I suppose it demonstrates the "safe haven" status of America's largest companies, at least during this (CLICHÉ ALERT!!!) "Asian flu."
Achoo.
Does it feel to anyone else out there that stocks like 3Com (Nasdaq: COMS) and KLA-Tencor (Nasdaq: KLAC) -- which have suffered so badly from the recent ague -- are huge buying opportunities right now? This reminds me of when KLA wilted to $17 back in early 1996. Or when 3Com wilted into the low $20's earlier this year. The cyclical semiconductor equipment industry, and the now somewhat more cyclical-looking networking industry, both are in the midst of unkind market whippings, and history shows that when these stocks get halved, they are good buys.
I look over the Fool Portfolio today, and I see that we're five points up on the Nasdaq and six back of the S&P 500. And I look at our three losers, all down from 22%-26%, and I see solid strong growth companies. There's little speculation in any of them, except perhaps for Innovex (Nasdaq: INVX) (up $2 7/16 -- Fool winner of the day), which would be vulnerable to technological innovation rendering the hard drive extinct. (It took a huge asteroid collision to make dinosaurs extinct 64 million years ago; it wouldn't take that much to put hard-drive manufacturers out of business, but it wouldn't be easy, either.)
When we talk about the future of technology, I have an absolute must-read for you tonight. It's a Forbes interview with venture capitalist John Doerr, Internet analyst Mary Meeker, the notably Foolish Roger McNamee, and a fund manager. Anytime you can get any one of the first three to talk about stocks, you're in luck; getting them all for the same panel interview is superb. Here's the direct link (and nota bene, most of all, Amazon (Nasdaq: AMZN) shareholders):
http://www.pathfinder.com/fortune/1997/971229/pan.html
Other notable Fool stocks today were GM and Iomega both rising $1+, and AOL going the other way, down $1 1/8. Lucent, despite a couple of positive press announcements, gave up $2 3/16; because it's a spinoff and our holding is only worth some $3000, it (and its 53% gain) exerts little influence over the Fool Port. (Sigh.)
Trump Hotel & Casino Resorts (NYSE: DJT) lost another $3/16, dropping below $7 for the first time ever. New low at the close: $6 15/16.
In my report last Wednesday, "Dump Trump? We're Stumped!" I invited each of you to mail me your thoughts on what we should do with this short holding. It's now made us 18% on our money since we went short on the last day of April.
Given that the company has had nothing but bad news since we shorted, our question has been whether to cash out at our 20% goal (traditional Foolish aim with a short sale), OR to hold the thing for more. Within 24 hours, I had 43 thoughtful responses, some of which I want to share below. But first, how did the numbers tally?
23 of you told us to cover, and 20 said continue to stay short.
Before my updated word, let me share some of my favorites of yours:
Joel Shaw wrote:
Recently, news reports about Hilton, SLOT, Atlantic City competition and
other negative articles have appeared. With The Donald wallowing in debt
and gaming proceeds declining, the environment that is Trump's business seems
worse now than at the time you originally initiated your short position.
And on top of that, the stock market is traveling down the same path as your
short.
[email protected]:
i've been following with interest your speculation in shorting DJT. It's
finally paying off and I think it would be a shame to cash in too soon. Not
only is DJT a highly leveraged money-losing operation, but, most importantly,
its basic business, gaming, is rapidly deteriorating. Overcapacity and the
"Asian flu" have already hurt the likes of Hilton... and Wall Street is souring
on the gamers as the Asian big rollers stay closer to home. My guess is that
DJT will go lower sooner rather than later, especially with tax-loss selling
kicking in now
Bucky Wood:
To be intellectually honest, one must remain true to the principles stated
at the outset. If they were to continually re-evaluate the "fundamentals"
of a company and not allow short term profit (or loss) to influence one's
decision, then you must hold the stock.... [But] please don't disappoint
your "fans" who applaud you more for your principles, intellectual honesty,
consistency, and discipline than we do for your results. Any one can lose
(or make) money. Not everyone demands respect for their honesty.
[email protected]:
Stick with your program -- 20 per cent. You advocate it in your book. If
you deviate, then you don't really have a strategy.
[email protected]:
I would recommend that you hold on to the short position on DJT. Not so much
as to watch it sink to new lows, but rather to hold it until you have found
a new short position. Part of the Fool Portfolio allows investors to "learn"
different approaches to investing, shorting being one of them.
Keith Garner:
Donald is one of the few people I know who has made, lost, and remade himself
a billionaire. Continuing to bet against him is a gamble that he will not
be able to unload the Plaza, that he won't be able to manage the enterprise
with his current debt structure, and that the management of the company is
weak. I believe the company's management is actually pretty good, the franchise
is valuable, he will likely be able to unload a property, and interest rates
may give him "room" to manage his enterprise even if he doesn't.
[email protected]:
It is a sinking ship, leaking badly and weighted down with the ballast of
all the cash Trump has borrowed. Hold on tight and reap the profits.
[email protected]:
I was in the stock for a couple of months. I got a pretty good feel for the
situation. I have a number of reasons that I have based my opinion on; I
don't want to bore you with the many reasons. But, I can see this situation
going to zero. I can easily see the Taj boarded up. Not in the short term.
But in the long term. IMO of course.
...so we're never really lacking for strong feeling from you, our Foolish
contributors, are we?!
Jeff and I talked about it more this afternoon, and we've decided to be
contrarians, to side with the minority, and to stay short. Many of
you said, "Hey guys, don't be greedy, take your 20%." The problem is, we
took that same attitude for our most recent Foolish short, cashing out
Quarterdeck (Nasdaq:QDEK) for that 20% gain (actually, 21.78%). That
was at $5 ½, about one year ago today. Where's QDEK now, one year later?
Trading over 800,000 shares today, it's at $1 ½, dear Fools.
We weren't greedy, were we?
Darn it!
Will we hold until the Taj is boarded up? Probably not -- indeed, we may
not even hold that much longer. We do think there's more room to the
downside. This isn't to say we might not cash out next week, if it drops
another point. Who knows? Our decision is ours, and your own (if you hold
a position) is your own. That's Folly, at the very root of it.
Anyway, we do like to let you know our feelings, since that's presumably
one of the reasons you tap in here every day.
Meanwhile, stay Foolish out there!
-- David Gardner, December 15, 1997
Do your Foolish gift
shopping now, in time for the Holidays. And consider the Fool's Industry
Focus '98
book
-- to learn not only about industry-leading stocks, but about the industries
in which they operate as a whole -- and see which one company in each industry
that our news and analysis team favors most.
Today's FoolWatch: all the latest in Fooldom.
Have You Given? The Fool Charity Fund
TODAY'S
NUMBERS
|
Day Month Year History FOOL +1.36% -0.01% 24.06% 231.09% S&P: +1.05% 0.84% 30.06% 110.16% NASDAQ: 0.00% -4.00% 19.02% 113.36% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 85.00 1068.73% 5/17/95 980 Iomega Cor 2.52 27.50 991.27% 10/1/96 42 LucentTech 47.62 72.94 53.18% 8/11/95 125 Chevron 50.28 76.19 51.51% 8/12/96 130 AT&T 39.58 57.25 44.65% 9/9/97 290 Amazon.com 38.22 54.88 43.57% 8/12/96 110 Minn M&M 65.68 92.69 41.13% 8/12/96 280 Gen'l Moto 51.97 63.81 22.78% 4/30/97 -1170 *Trump* 8.47 6.94 18.08% 6/26/97 325 Innovex 27.71 21.44 -22.64% 8/24/95 130 KLA-Tencor 44.71 34.50 -22.84% 8/13/96 250 3Com Corp. 46.86 34.56 -26.24% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 30175.00 $27593.13 5/17/95 980 Iomega Cor 2509.60 26950.00 $24440.40 9/9/97 290 Amazon.com 11084.24 15913.75 $4829.51 8/12/96 280 Gen'l Moto 14552.49 17867.50 $3315.01 8/11/95 125 Chevron 6285.61 9523.44 $3237.83 8/12/96 110 Minn M&M 7224.44 10195.63 $2971.19 8/12/96 130 AT&T 5145.11 7442.50 $2297.39 4/30/97 -1170*Trump* -9908.50 -8116.88 $1791.63 10/1/96 42 LucentTech 1999.88 3063.38 $1063.50 8/24/95 130 KLA-Tencor 5812.49 4485.00 -$1327.49 6/26/97 325 Innovex 9005.62 6967.19 -$2038.43 8/13/96 250 3Com Corp. 11714.99 8640.63 -$3074.37 CASH $32438.81 TOTAL $165545.94
