Foolishness
Why we do it, and what it all means

When I was One, I had just begun.
When I was Two I was nearly new.
When I was Three I was hardly Me.
When I was Four I was not much more.

-- A.A. Milne, Now We Are Six

by David Gardner
(DavidG@fool.com)

ALEXANDRIA, VA (Aug. 4, 1998) -- Happy Birthday to the Motley Fool Online, and happy day for the bears! The two sentiments may not mix perfectly, but both are equally true and fit to be printed. The Motley Fool is four years old. The market got blasted today. And that's most of the story.

But let's delve into it a bit more.
Four years ago this merry day, Foolishness was truly born.

Erik Rydholm, Tom Gardner, and I had been running a silly little newsletter for our friends (or, as it turned out, our parents' friends) the previous year. It had the name The Motley Fool, and we'd been written up briefly in The Wall Street Journal and again in Forbes. By the spring of '94, we had developed a following in a little message board of our own on America Online, which we'd named "The Motley Fool." And America Online invited us out to lunch to consider the possibility of our opening up an online area.

What lay in store for us online, however, we'd never have guessed.

Oh sure, it wasn't a tough decision to make at the time. We decided to close down our small print newsletter -- which we believed would pay us more than we'd get from AOL that first year, which we were wrong about -- in order to start something that would surely be forward-thinking, surely be "The Future" eventually, whenever The Future should finally show up.

With the help of Rob Shenk, Bill Youstra, and Katherine Borsecnik at AOL, the Motley Fool opened up shop on this very day four years ago. Sixty readers tapped into the site that day.

In between then and now, the Future has arrived. Today, we have nearly a million online readers, five million newspaper readers, three best-selling books, a national radio show, our first international toe-hold with Fool UK, and nearly 150 full-time employees. And yet those achievements pale in comparison to the scope of our future plans. We think we've made a good start, nothing more.

That's why I led off today with the Milne quote. Even though we're four, we still don't think we're much more.

Anyway, most importantly this has all been one heck of a lot of fun! And our daddy ain't taking our T-bird away, either. As Foolishness begins to spread its wings over a still very Wise world, we're looking for much more fun, which wouldn't really be any fun unless we were providing oodles for you. As a company, we will be entering many new fields in the next 10 years, doing so always with the idea of debunking the conventional wisdom, improving the consumer experience, and spreading sweetness and light ahead and behind, creating shared pleasures for our customers.

Yeah, I'm proud to be a Fool. And it's my earnest hope that you share these very same sentiments, dear reader, with every bit as much fervor. Foolishness is open to all -- only those without a sense of humor, an open mind, or a kind spirit need not board The Ship of Fools. From everyone here at Fool HQ, I wish to thank you deeply for your support of our efforts. And as always, we rely as much on your constructive criticism as your praise. Please keep both flowing copiously, as together we encounter the friendly trade winds and occasional dark shoals of Life.

The debut of The Motley Fool four years ago also featured the debut of this very portfolio, which four years later is now taking on the proportions of cyberspace's Grandaddy Portfolio. Four full years before the public spotlight -- and yet there wasn't anything like a spotlight on us when we started this thing -- our aims were always to provide education, amusement, and enrichment in this space each day, believing that over the long term we would demonstrate that average private investors (that's all we are) can invest their own money successfully and:

  • don't need to pay fees to mutual fund managers
  • don't need to fob around Wall Street looking for tips
  • don't need "guidance" from the CEOs of companies they invest in
  • don't need access to Wall Street's vaunted (and exclusive) research
  • don't need to trade regularly
  • don't need to invest in anything but common stocks
  • don't need their noses glued to CNBC or Bloomberg screens to follow "the action"

Further, we created this portfolio with a few self-imposed disciplines:

  • we announce all our buy and sell decisions before making them
  • we occasionally short companies in the broad light of day
  • we invest our own real money (no "model" portfolios here)
  • we explain all our reasoning and keep updating our opinions
  • we aim at truth and excellence above all

We knew from August 4, 1994 forward that we would surely accomplish all these things, because they were all factors under our direct control. But we wanted to achieve one thing more. In a world whose Wise advertising and university teachings have formed an unholy alliance to teach our young people otherwise, we wanted to demonstrate that mere average investors, mere Fools, could beat the stock market. Maybe even crush it. That last prized aim of ours had no guarantee, but as of market close today The Fool Portfolio shows an historical gain of 378% vs. the S&P 500's 134%. It's been a great four years for most investors, of course, and for Foolish investors, it's been even better.

More important than all of this, though, is just that we aimed to have FUN, to keep things light-hearted and amusing, and in so doing to make it as FUN for you as it is for us. Because that's as serious as we'll ever be about money. Money is not a serious subject -- it is serious FUN. Those who disagree can now frequent many other online personal finance areas that have sprung up in the meantime! For the rest of us, let's continue to improve our own plights and the plights of our family, friends, co-workers, and fellow Fools as we educate each other together to save more, invest more, and give more away. The Motley Fool is all things money, and we judge our own success by the success of our customers in saving more, investing more, and giving more away.

OK, today both the S&P 500 and the Nasdaq lost about 3.5% of their total value. The Motley Fool Portfolio traded lower as well, but (mercifully, on our birthday) the Fool Portfolio lost only 1.9% of its value.

Only 1.9% of its value?!

True, if we lost that every day, within two months we'd have less than half of what we started with. It's not a number to be celebrated, 1.9%... however, it is one to be gently, even pleasurably accepted. It's only about half the market's drop today. Given that we run a fairly "high beta" portfolio, anytime the market gets whacked real bad and we DON'T, we slap five.

The portfolio was hurt by America Online (NYSE: AOL) giving away $6 in advance of reporting earnings after market close. Those earnings look to be pretty good (you can read the whole release right here) -- 23 cents per share before extraordinary items, versus a consensus estimate of 19 cents per share. For the year (this June 30 report is the '98 fiscal year-end), AOL's revenues grew from $1.7 billion to $2.6 billion, growth of 54%, generating net income of $134 million ($57 million of that in this last quarter). We'll have more info on this in the coming few days, including information on the conference call. Stay tuned. (And as always, you can find out what Fools think by visiting our AOL message board.)

So AOL dragged us down -- what propped us up? Well, Amazon.com, Starbucks, 3Com, and Iomega all rose. Amazon in particular had an interesting announcement: it acquired two new Internet companies, one of which (get this) provides a Web-based calendar organizer. It is interesting to see how the company continues to invent itself as it grows up... the vision looks to be getting bigger....

Anyway, the market liked that as Amazon was up well more than its eventual $1 5/8 gain much of day.

That, and The Donald hit a new all-time low in trading, dear Fools. We had an outstanding response to our "Cover the Donald?" contest, with winners to be announced soon. As we're now up 27.68% on that short, let's put it this way: We're glad we haven't covered yet!

Now, to close... fourth birthday, fifth anniversary, fiftieth lap around the track, whatever. These are artificial distinctions. In the end, what counts? Foolishness, baby:

Fools don't claim that cats bark, but they talk about cats when everyone else is talking about dogs. They offend all the rules of conversation, and when they really offend, they're magnificent... --Umberto Eco, Foucault's Pendulum

Neither man nor woman can be worth anything until they have discovered that they are Fools. This is the first step towards becoming either estimable or agreeable; and until it be taken there is no hope. The sooner the discovery is made the better, as there is more time and power for taking advantage of it.
--Lord Melbourne (1779-1848), English statesman, Prime Minister

Let no man deceive himself. If any man among you seemeth to be wise in this world, let him become a Fool, that he may be wise. For the wisdom of this world is foolishness with God. --1 Corinthians 3:18-19

I have great faith in Fools: self-confidence, my friends call it.
--Edgar Allan Poe

Cheers.

--- David Gardner, August 4, 1998

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Bookmark Live Fool Port Quotes

08/04/98 Close

Stock Change Bid ---------------- AMZN +1 5/8 109.63 AOL -6 15/16 110.00 T -2 3/4 56.75 DJT - 9/16 6.13 DD -1 5/16 60.75 XON -1 7/16 67.06 INVX --- 13.38 IP - 2 43.00 IOM + 1/8 5.25 KLAC - 3/8 27.75 LU -3 5/8 87.06 SBUX +1 1/16 41.31 COMS + 5/16 24.25 TDFX - 3/16 13.69
Day Month Year History Annualized FOOL -1.91% -3.15% 42.43% 378.00% 47.90% S&P: -3.62% -4.33% 10.48% 133.88% 23.68% NASDAQ: -3.54% -4.63% 13.71% 147.94% 25.50% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 110.00 2924.94% 9/9/97 580 Amazon.com 19.11 109.63 473.63% 5/17/95 1960 Iomega Cor 1.28 5.25 310.03% 10/1/96 84 LucentTech 23.81 87.06 265.68% 8/12/96 130 AT&T 39.58 56.75 43.39% 4/30/97 -1170*Trump* 8.47 6.13 27.68% 2/20/98 200 Exxon 64.09 67.06 4.64% 2/20/98 215 DuPont 59.83 60.75 1.53% 2/20/98 270 Int'l Pape 47.69 43.00 -9.84% 7/2/98 235 Starbucks 55.91 41.31 -26.11% 8/24/95 130 KLA-Tencor 44.71 27.75 -37.94% 1/8/98 425 3Dfx 25.67 13.69 -46.67% 8/13/96 250 3Com Corp. 46.86 24.25 -48.25% 6/26/97 325 Innovex 27.71 13.38 -51.73% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 78100.00 $75518.13 9/9/97 580 Amazon.com 11084.24 63582.50 $52498.26 5/17/95 1960 Iomega Cor 2509.60 10290.00 $7780.40 10/1/96 84 LucentTech 1999.88 7313.25 $5313.37 4/30/97 -1170*Trump* -9908.50 -7166.25 $2742.25 8/12/96 130 AT&T 5145.11 7377.50 $2232.39 2/20/98 200 Exxon 12818.00 13412.50 $594.50 2/20/98 215 DuPont 12864.25 13061.25 $197.00 2/20/98 270 Int'l Pape 12876.75 11610.00 -$1266.75 8/24/95 130 KLA-Tencor 5812.49 3607.50 -$2204.99 7/2/98 235 Starbucks 13138.63 9708.44 -$3430.19 6/26/97 325 Innovex 9005.62 4346.88 -$4658.75 1/8/98 425 3Dfx 10908.63 5817.19 -$5091.44 8/13/96 250 3Com Corp. 11715.99 6062.50 -$5653.49 CASH $11876.47 TOTAL $238999.72

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