Fool Portfolio Report
Thursday, February 19, 1998
by Jerry Thomas (TMFCheeze@aol.com)

SHERMAN OAKS, CA (Feb. 19, 1998) -- It's an exciting day for Fool Port Watchers, not merely because we nearly doubled the performance of the Nasdaq, but also because today is the day we get to announce our long-awaited Foolish Four Switch. For 18 months we've patiently waited for this mechanical investment device to work its magic, and now we're ready to move on to some new companies that have muscled their way into those important low-priced, high-yielding slots in the Dow 30 rankings. The new Foolish 4 is (drum roll, please): International Paper, DuPont, Exxon, and AT&T.

I'll have my own twisted comments to make on the new picks later in this column, but you can study the official buy and sell reports in the Foolish Four Switch collection. First, let's look at today's Fool Port Performance.

The Fool Port's 1.23% gain can be attributed mostly to a strong performance by America Online (NYSE: AOL), which was up $5 1/8, and Amazon.com (Nasdaq: AMZN), which rose a healthy $1 7/8. No news emerged that was sufficient to account for the upsurge, so we're left with offering the less-than-satisfactory attribution to "market factors" to explain our good fortune. On the news front, Iomega Corp. (NYSE: IOM) is facing a rather frivilous-looking lawsuit from shareholders this week, and followers of 3Dfx (Nasdaq: TDFX) can now peruse a new annual report on the Web at TDFX form 10-K. Other than that, there is little to stir our interest.

Anyway, on to other things.

I am fascinated by mechanical approaches to investing, especially the Foolish Four, which has us buying into stocks with almost no formal research, but has bettered the market returns historically for more than 30 years. Still, some might find it troubling to buy into companies without any detailed knowledge of what they are putting their money into. For those of you who would like to know more about our new Fool Four stocks, I've prepared a bit of an introduction below.

AT&T (NYSE: T)

We can all be very grateful to AT&T as the company that invented the telephone. But that admiration should be tempered with the knowledge that AT&T also invented the Hold Button, the "We're-Sorry-Your-Call-Cannot-Be-Completed-As-Dialed" recording, and the Busy Signal. Of course, that company has been split 16 ways to Sunday over the last couple of decades, so there is plenty of blame to go around.

Since the 1980s, the telecommunications industry has seen considerable change, leaving the market terribly fragmented and Americans everywhere with the nagging guilt that they have not chosen the long-distance plan which best matches their calling habits. The industry is constantly being reshaped by spin-offs and mergers; companies are splitting and recombining at such a rate that from a distance, the industry looks like amoebas cavorting in a Roman orgy on a petri dish. It's a wonder my calls ever get through with all that mitoses going on.

AT&T has performed extremely well over the last year, doubling off its lows of April, 1997. We aren't buying this stock tomorrow because we already own it, since it was part of the Foolish Four back when we made our last switch. Most companies in the Foolish Four work hard to get good grades so that they can graduate out of the Foolish Four by the time the next switch comes along, but AT&T is one of those slow children that needs special attention. It will be held back this semester in hopes that it will be ready to move to a higher grade next term.

International Paper (NYSE: IP)

I've always thought that International Paper would be a great company to work for, mainly because of the ready availability of office supplies. I imagine I'd be sitting at my desk writing something down, and suddenly I'd realize that I was using my last sheet of paper. I'd turn to Chet at the next desk (for some reason, the guy at the next desk is always named "Chet") and I'd say, "Hey, Chet -- I'm out of paper. Where can I get more?" Chet would turn to me with incredible scorn and say, "You unbelievable moron, we work at International Paper, for crying out loud. We make paper! If you can't find paper here, you're never going to find it." Red-faced, I'd wander around the office for twenty minutes or so hoping to find some more paper by accident, until I'd blunder into the supply closet, where 10,000 reams of off-white Xerographic cotton bond would slide off the shelves and crush me to death. But I wouldn't mind so much, because I'm a big fan of irony.

IP is a cyclical company in a cyclical industry, and indications are that it might at a low period of the current cycle, though it is already up sharply off its lows of earlier this year.

DuPont (NYSE: DD)

DuPont is probably most famous as the company that invented the nylon stocking. It also manufactures many chemicals and has a 1-year stock chart that looks a lot like Boris Yeltsin's EKG. DuPont makes chemicals, fibers, polymers, and petroleum products. Word is that the guys in the polymer division are a regular riot, and if you ever want to have some laughs, just go to a Polymer Engineer's Convention and watch them squirt colloids into each others' pants and throw emulsifiers at each other from hotel balconies.

I know next to nothing about DuPont, except that a man of the same name ran for President in 1988. Pierre DuPont's rallying cry went, if I recall correctly, something like, "Hey, I know! Let's end the minimum wage!" The resulting populist groundswell went almost unnoticed by voters, and Mr. DuPont's neighbor George Herbert Walker Bush won the election instead.

Exxon (NYSE: XON)

We're also buying Exxon, the oil company. Hoover's Company Profile for Exxon notes that in addition to oil products, Exxon also produces "aromatics, solvents, fertilizer, and other products." I have been asked by my Foolish colleagues to refrain from noting the appearance of the words "aromatics" and "fertilizer" in the same sentence. Nevertheless, I am much encouraged by the knowledge that Exxon is in the business of selling "other products," knowing full well that the worldwide market for things that are not aromatics, solvents, or fertilizer is extremely large and I hope that Exxon is well-poised to take advantage of this looming opportunity.

So there's the new Foolish 4... We'll be sticking with 'em for another 18 months, come what may.

Cheeze :-)

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TODAY'S NUMBERS

Stock Change Bid ---------------- AMZN +1 7/8 62.75 AOL +5 1/8 117.63 T - 3/8 63.75 CHV - 3/8 78.38 DJT - 3/16 10.63 GM + 1/8 65.69 INVX - 3/8 24.00 IOM - 1/8 8.88 KLAC +1 1/2 44.00 LU +2 1/16 99.94 MMM - 3/8 87.50 RTN.A - 1/16 53.25 COMS - 1/16 33.50 TDFX - 9/16 23.06 SPY - 1/2 102.94
Day Month Year History FOOL +1.23% 8.13% 1.86% 241.83% S&P: -0.37% 4.90% 5.96% 124.32% NASDAQ: +0.66% 6.65% 9.98% 139.80% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 117.63 1517.31% 5/17/95 1960 Iomega Cor 1.28 8.88 593.14% 10/1/96 42 LucentTech 47.62 99.94 109.88% 9/9/97 290 Amazon.com 38.22 62.75 64.17% 8/12/96 130 AT&T 39.58 63.75 61.08% 8/11/95 125 Chevron 50.28 78.38 55.86% 8/12/96 280 Gen'l Moto 48.74 65.69 34.76% 8/12/96 110 Minn M&M 65.68 87.50 33.23% 1/8/98 115 S&P Depos. 95.91 102.94 7.33% 12/19/97 17 Raytheon 53.21 53.25 0.08% 8/24/95 130 KLA-Tencor 44.71 44.00 -1.59% 1/8/98 425 3Dfx 25.67 23.06 -10.15% 6/26/97 325 Innovex 27.71 24.00 -13.39% 4/30/97 -1170 *Trump* 8.47 10.63 -25.46% 8/13/96 250 3Com Corp. 46.86 33.50 -28.52% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 41756.88 $39175.01 5/17/95 1960 Iomega Cor 2509.60 17395.00 $14885.40 9/9/97 290 Amazon.com 11084.24 18197.50 $7113.26 8/12/96 280 Gen'l Moto 13647.92 18392.50 $4744.58 8/11/95 125 Chevron 6285.61 9796.88 $3511.27 8/12/96 130 AT&T 5145.11 8287.50 $3142.39 8/12/96 110 Minn M&M 7224.44 9625.00 $2400.56 10/1/96 42 LucentTech 1999.88 4197.38 $2197.50 1/8/98 115 S&P Depos. 11029.25 11837.81 $808.56 12/19/97 17 Raytheon 904.57 905.25 $0.68 8/24/95 130 KLA-Tencor 5812.49 5720.00 -$92.49 1/8/98 425 3Dfx 10908.63 9801.56 -$1107.06 6/26/97 325 Innovex 9005.62 7800.00 -$1205.62 4/30/97 -1170*Trump* -9908.50 -12431.25 -$2522.75 8/13/96 250 3Com Corp. 11715.99 8375.00 -$3340.99 CASH $11259.61 TOTAL $170916.61