Beating the Market? Whatever!
Monday, March 30, 1998
by David Gardner ([email protected])
ALEXANDRIA, VA (March 30, 1998) -- Fool Downs today featured another of those tight but dull races, as three naggish equestrians came neck-and-neck down the home stretch in a contest that had by then bored the spectators to tears. The S&P 500 horse won, giving the lachrymose fans of that plodding pony some small pittance for their pains. The rest of us tore up our stubs mechanically, as we watched Nasdaq place with a 0.27% loss, and the Foolish steed show, tallying a loss of 0.39%.
One casts one's eyes down the page at the performance of our individual stocks, and finds little of interest. The day essentially came down to a buck-and-a-quarter loss in America Online stock -- otherwise we walk away with a "W."
This was important only because we actually passed the S&P 500's return last Friday with little fanfare. And I want to comment on that for a moment.
Away from the office all day Friday speaking to the National Association of Sign Supply Distributors (hey guys -- and they were pretty much all guys), I was curious as usual to "sign" into the Fool Friday night to see how we'd done. After all, we'd been losing to the S&P 500 pretty much from the 1998 opening bell, but had pulled steadily closer through February and March. What to my wondering eyes should appear but a market-passing performance and eight tiny reindeer?! (OK, lose the reindeer.) We had actually just passed the S&P 500, and there was NARY A MENTION of it in the report! Paul Motter, our own TMF DotCom, had kindly stepped in to write that report all about 3Com -- if you're a 3Com shareholder, you shouldn't miss that baby, so read it. But we hadn't informed Paul of the surprise momentous occasion, so that he was unaware of what I would've been blaring my trumpets about.
The more I thought about this, though, the more I liked it. Beating the market shouldn't be any big thing, since any ol' Fool can just use an index fund to garner the market's return without using any intelligence at all. By selectively picking individual stocks, we believe we can beat the market averages over the long term -- as we have done quite significantly. Thus, isolating any short-term period like the first quarter of 1998 and going, "Rah! Rah! Rah! We're ahead again!" really isn't that necessary -- not a trumpet-blare-inducing event.
(That said, I will still mourn our lackadaisical performance today as we dropped down below the S&P for the moment.)
Dipping into the mailbag, I got a number of nice notes last week following my evaluation of the good and the bad of now former CEO Kim Edwards of Iomega. In response to this line, "I now know many more people who've lost money on this stock than made money on it," one long-time reader wrote in to advise us not to forget those who had made a ton of money, even despite the stock's drop. I'm always glad to hear that. Of course, this particular reader himself mentioned that he'd just sold out all the way. We shall see how that plays out; we'll keep our fingers crossed that he sold out at the bottom, even while wishing him best of luck redeploying that money into other market-beating opportunities.
Several people wrote in mentioning something I'd failed to include in my write-up, namely, just exactly why the heck Edwards had resigned. I didn't mention this because I had no specifics. Neither Edwards nor the company -- as is typical -- would publicly explain his reasoning. It was kinda the same when one-time AOL chief operating officer William Razzouk resigned after his brief tenure with the company. Heck, AOL is bigger and more successful than Iomega, but still never provided its shareholders any specific public rationale for its move. (Oh yeah, do you remember what the company did say? Something about the difficulties for Razzouk in relocating to the area with his family! As if that wouldn't have been considered before he took the job months before.)
Fellow Fool Terry Fox probably summarized my own thinking best, by writing me, "I can only think of a few reasons for a CEO to resign, and none of them are good. The best we can hope for is that there was a conflict of interest with the board of directors; the worst is that he knows something and is jumping ship. All we can do now is speculate." Yes. And speculation can be useful, can be fruitful, despite the negative connotation that term normally carries around. I haven't been able to read the Iomega message folder yet over the weekend, but I'm quite sure I'll find some pretty intelligent consideration given to the question when I click in there later tonight.
Finally tonight, a heartwarming story to close. I had the occasion to quote a fellow named Bob Silvestri when I opened up the mailbag last week. Bob was asking why we bother reporting on our performance every day when we preach long-term investing, and you can read my response here. Anyway, later that night I received an e-mail from another chap named Steven Kaufman, who had this to say:
"Dear David, I am loyal Fool -- follow your material -- and have read your latest book and workbook.�It has been invaluable to my investment knowledge and performance.�Ironically, I was talking to my wife Sunday about locating my best man at our wedding -- 30 years ago! -- whom I can't locate.�Then, on Monday I read your column, and you quote Bob Silvestri -- the name of the best man at our wedding. He has to be the guy!! What a bonus from the Fool if this is the case -- a new role for the Motley Fool -- locating long, lost friends!"
And you know what? I am delighted to say that, having forwarded Steven's note to Bob, I can now confirm that Bob is the RIGHT Bob. Amazingly, simply through reading last week's Fool Portfolio recap, Steven Kaufman located the long-lost best man at his wedding, a wedding that gave rise to 30 years of happy marriage and still counting.
No word yet on when we'll open our locateyourfriends.com service, but the scenario does remind me of what perhaps I love most about the Motley Fool: You never know what'll happen next!
-- David Gardner, March 30, 1998
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TODAY'S
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Day Month Year History FOOL -0.39% 6.16% 12.47% 277.46% S&P: -0.17% 4.21% 12.69% 138.56% NASDAQ: -0.27% 2.72% 15.81% 152.53% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 67.75 1763.09% 5/17/95 1960 Iomega Cor 1.28 6.94 441.82% 10/1/96 42 LucentTech 47.62 125.25 163.04% 9/9/97 290 Amazon.com 38.22 85.75 124.35% 8/12/96 130 AT&T 39.58 66.94 69.13% 2/20/98 215 DuPont 59.83 68.75 14.90% 1/8/98 115 S&P Depos. 95.91 109.56 14.24% 1/8/98 425 3Dfx 25.67 28.50 11.04% 2/20/98 200 Exxon 64.09 67.94 6.00% 2/20/98 270 Int'l Pape 47.69 48.75 2.22% 4/30/97 -1170*Trump* 8.47 9.38 -10.70% 6/26/97 325 Innovex 27.71 24.63 -11.13% 8/24/95 130 KLA-Tencor 44.71 37.75 -15.57% 8/13/96 250 3Com Corp. 46.86 35.13 -25.05% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 48102.50 $45520.63 9/9/97 290 Amazon.com 11084.24 24867.50 $13783.26 5/17/95 1960 Iomega Cor 2509.60 13597.50 $11087.90 8/12/96 130 AT&T 5145.11 8701.88 $3556.77 10/1/96 42 LucentTech 1999.88 5260.50 $3260.62 2/20/98 215 DuPont 12864.25 14781.25 $1917.00 1/8/98 115 S&P Depos. 11029.25 12599.69 $1570.44 1/8/98 425 3Dfx 10908.63 12112.50 $1203.88 2/20/98 200 Exxon 12818.00 13587.50 $769.50 2/20/98 270 Int'l Pape 12876.75 13162.50 $285.75 8/24/95 130 KLA-Tencor 5812.49 4907.50 -$904.99 6/26/97 325 Innovex 9005.62 8003.13 -$1002.50 4/30/97 -1170*Trump* -9908.50 -10968.75 -$1060.25 8/13/96 250 3Com Corp. 11715.99 8781.25 -$2934.74 CASH $11233.54 TOTAL $188729.98
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