Catching Up to the Market
Monday, March 23, 1998
by David Gardner ([email protected])
ALEXANDRIA, VA (March 23, 1998) -- Strong moves from the Fool Portfolio's growth component tipped the scales mightily Monday, granting a gain of 1.92% to cyberspace's original real-money investment portfolio (you know, before those other copycats showed up, like the Boring Portfolio, Drip Portfolio, and the newest upstart run by my bro, the Cash-King).
This return of 1.92% far exceeded the mixed market averages today, and positioned us quite close to their 1998 returns. At present, the numbers read this way:
Nasdaq +14.15% S&P 500 +12.89% FoolPort +11.01%
That tastes like nectar and ambrosia to the Fool Port managers, who've had to watch our second biggest stock, Iomega, give up 41% so far this year. That's a pretty nasty drop, especially given that Iomega began the year representing 15% of our portfolio's net worth. It's thanks to stocks like America Online (up another $3 3/8 today -- new high), Lucent Technologies (up $3 5/8 today -- new high), and Amazon.com (up $1/16 today -- no new high) that we're still that close to the market. And we'll keep our fingers crossed going forward that these leaders will continue to lead, while some of our other followers begin to lead themselves. We've never lost to the Nasdaq for a single year, and lost to the S&P 500 only in 1997, so we have high standards to uphold -- in other words, our work is always cut out for us.
I wanted to dip into the mailbag briefly today, as we haven't done that in a while. In Foolish form, I'll skip the nice stuff and go right to a particular concern that is occasionally expressed by one or another Fool reader. It came to me last week once again in the words of Bob Silvestri, who wrote:
"I'm greatly puzzled by The Motley Fool's apparent schizophrenia. On the one hand you talk endlessly about long-term investing, yet every day you seem unable to get by without comparing how you either beat the 'market' or didn't... down to 100ths of a percent. Even remotely thinking about daily performance is a bad habit, much less ruminating about it in writing."
Well first off, while we do provide updated numbers and fresh recaps each weekday, we obviously do not act nearly so often as we think or write about our stocks. For all of 1997, for example, we made only one outright sale of a stock: the ill-fated ATC Communications (not soon enough, eh?), in October. This is consistent with our approach to the market, which is to trade infrequently, tending only to trim our losers and redeploy money to better prospects. So far as the daily comparison goes, that's mostly in fun and just a way to lead off the reports. We'll be the first to say (as we've said in the past) that how we did against the market today, or yesterday, or last week, or last month, isn't of tremendous consequence!
Second, we think it is very important and worthwhile to compare our returns to the market averages regularly. The average American has no idea how her mutual funds performed last year; even experienced investors frequently do not bother to go back and see how they're doing. In providing performance numbers, we hold ourselves accountable to the market averages and provide a model for our readership to follow. We also offer a superb product, PortTrak, to help you monitor your own investments. It's our own portfolio tracker that enables you to download quotes directly from online and keep up with your performance against the market averages, including deduction of commissions and other costs. If you're new to Fooldom and would like more information about it, just click here.
OK, now why do we report to you on a daily basis? Well, basically just because we really enjoy this stuff. To me it's like following the box scores of your favorite baseball team. Sure, they play 162 games, meaning that any given single game is meaningless. But it's fun to follow anyway, to know the story, get to know the players better, track the statistics, watch the highlights! For those of us who enjoy investing as a hobby, we tend to treat our stocks as our sports teams: While we may check up on them every day, that attention doesn't cause us to trade them. I'm certainly not about to sell out my favorite sports team in the midst of a 7-game losing streak. The same generally goes for our stocks.
So... we report daily; we analyze daily; we communicate with our readership daily. But we do not act daily. That's the heart of the matter.
I certainly concede to Bob the danger of taking too seriously this notion of daily tracking. In fact, Bob gives me an opportunity to wheel out one of my favorite epigrams, a Ralph Waldo Emerson special. It is this:
When you sow a thought, you reap an act.
When you sow an act, you reap a habit.
When you sow a habit, you reap a character.
When you sow a character, you reap a destiny.
Truer words are rarely writ, and I encourage everyone I know to cogitate about this, and internalize it, to the greatest extent possible. We all should be examining our own minds and actions constantly, to make sure we're living up to our principles. So if you see us beginning to reap acts that are not in line with our principles, please let us know. We're always just an e-mail or a message board posting away.
Foolish best wishes to you, Bob, and thanks for writing. And to all the rest, stay Foolish out there!
-- David Gardner, March 23, 1998
WE
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TODAY'S
NUMBERS
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Day Month Year History FOOL +1.92% 4.79% 11.01% 272.57% S&P: -0.33% 4.40% 12.89% 138.99% NASDAQ: +0.19% 1.24% 14.15% 148.90% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 66.00 1714.96% 5/17/95 1960 Iomega Cor 1.28 7.31 471.11% 10/1/96 42 LucentTech 47.62 123.75 159.89% 9/9/97 290 Amazon.com 38.22 83.81 119.28% 8/12/96 130 AT&T 39.58 65.94 66.60% 2/20/98 215 DuPont 59.83 68.75 14.90% 1/8/98 115 S&P Depos. 95.91 109.63 14.30% 1/8/98 425 3Dfx 25.67 28.06 9.33% 2/20/98 200 Exxon 64.09 68.00 6.10% 2/20/98 270 Int'l Pape 47.69 49.63 4.05% 4/30/97 -1170*Trump* 8.47 9.44 -11.44% 8/24/95 130 KLA-Tencor 44.71 37.38 -16.41% 6/26/97 325 Innovex 27.71 21.19 -23.54% 8/13/96 250 3Com Corp. 46.86 35.06 -25.18% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 46860.00 $44278.13 9/9/97 290 Amazon.com 11084.24 24305.63 $13221.39 5/17/95 1960 Iomega Cor 2509.60 14332.50 $11822.90 8/12/96 130 AT&T 5145.11 8571.88 $3426.77 10/1/96 42 LucentTech 1999.88 5197.50 $3197.62 2/20/98 215 DuPont 12864.25 14781.25 $1917.00 1/8/98 115 S&P Depos. 11029.25 12606.88 $1577.63 1/8/98 425 3Dfx 10908.63 11926.56 $1017.94 2/20/98 200 Exxon 12818.00 13600.00 $782.00 2/20/98 270 Int'l Pape 12876.75 13398.75 $522.00 8/24/95 130 KLA-Tencor 5812.49 4858.75 -$953.74 4/30/97 -1170*Trump* -9908.50 -11041.88 -$1133.38 6/26/97 325 Innovex 9005.62 6885.94 -$2119.68 8/13/96 250 3Com Corp. 11715.99 8765.63 -$2950.37 CASH $11233.54 TOTAL $186282.92
