Starbucks Comin' Back
Plus, a Ceausescu moment....

by David Gardner
(DavidG@fool.com)

ALEXANDRIA, VA (Sept. 24, 1998) -- Helped along by a nice recovery in Starbucks today, Thursday's money-losing Fool Portfolio neverthless eked out a Pyrrhic victory over the market averages. The Fool lost 1.60%, versus drops in the indices of just over 2 percent. Yep, it was another of those volatile 2%+ days that have typified our stock markets over the past two months. Uncanny.

As we near the final quarter of the year, the Fool Portfolio sits atop the S&P 500 by 34 percentage points. It has indeed been another blessed year for Foolishness. And we can also remark with Kipling that we kept our heads when many about us were losing theirs and blaming it on us. Remember the Dolans on CBS This Morning?

It's not like 1998 hasn't been a volatile 'un, of course. We were up over 50% in July and dropped down below 20% at one point several weeks ago. The Fool has now come back to a year-to-date 41.28% return, which beats our primary competition -- the index fund. It won't happen every year, but it's always fun when it happens, and we do expect to continue to do so over the long term. Why? Because investing isn't as difficult as it's cracked up to be. It's really not very different from the way you'd approach anything else in life: Simplify, study, observe, use patience, use common sense, and have fun with it. And of course, never take the markets as seriously as the financial media want you to....

The day after "The Crash" several weeks ago, after the worst single day for the market in the '90's, we were about to appear on a TV show when the producer said, "Um, guys? Please take off your Fool caps."

"Uh, OK," we said. "If you say so. I mean we can go either way with it, but we do usually don the caps."

"I just think they're a bit inappropriate, given the seriousness of the situation."

We were a bit rushed, so I can't remember whether I actually said -- or meant to say -- "Hey, that's kinda the point. We don't think it is that serious. One bad day. Geez." Anyway, the TV audience got us without our Fool caps. A small blow struck for Wisdom, that day.

Speaking of Wisdom, how about that Wall Street Journal article yesterday?! I don't know if you saw the big splash about Merrill Lynch saying that do-it-yourself investing was endangering Americans' financial lives. The actual quote:

"The do-it-yourself model of investing, centered on Internet trading, should be regarded as a serious threat to Merrill Lynch."

Oops! Sorry. I blew that. I meant:

"The do-it-yourself model of investing, centered on Internet trading, should be regarded as a serious threat to Americans' financial lives."

I had to giggle. Later last night, I enjoyed the observation of our own Bill Barker, here at Fool HQ. Past 1 AM last night, Bill dropped me this e-mail:

"I don't know how overdramatic anyone wants to get with this one, but foreign policy wonks will be aware that after many years of unchallenged dictatorship, and while the rest of the Eastern European govenments were collapsing, [Romanian president] Nicolae Ceausescu was giving a typically fiery speech, and during it a heckler yelled something suddenly and Ceausescu flinched -- for the first time, and publicly. It was noticed, by the people and his guards. Almost immediately, within a matter of days -- it was over for him and he was dead. The flinch is referred to as "the Ceaucescu moment." It could be argued (mostly depending on at what hour you think about these things) that we have just witnessed a Ceaucescu moment."

Starbucks (Nasdaq: SBUX) has been strong of late. We're still way down on the investment, having purchased SBUX at $55.91 (including commission, as always). It closed today at $35.63, meaning we're off 36% in our nearly three months of owning a piece of The Siren (the logo). Or the First Mate (the name), if you remember that fella from Cap'n Ahab's Pequod. Anyway, $35.63 looks a bit better today than the $28.75 we saw several days ago. We expend very little energy at Fool HQ in any effort to explain, justify, or predict short-term movements of the stock market. I don't fully know why Starbucks should have lost 50% of its value in two months after we purchased it, and I also am not about to tell you what suddenly justifies an increase in the company's $2+ billion market cap of 25% in the past week.

I do know a few things, though. Starbucks has one of the strongest brands in America, and the product category that it dominates domestically is the second most consumed liquid in the world, after water. It is now expanding internationally. Also, SBUX make the best coffee ice cream, bar none. (That's my opinion -- I used to be a Breyer's fan -- what happened to that stuff? It's not the same thing it was in the '70's. And my next love, Haagen Dazs, where's that? Pretty good stuff, but I don't see it as frequently in the supermarket anymore.) Behind the brand, the company is well-managed. What you have there is a few key elements I look for in any long-term investment. The Fool Port has taken an expensive bath -- a bath that so far has cost us $4766.75 -- but I do expect that this investment will one day be paying us, rather than vice versa.

I want to pass along special congratulations to our fellows in Great Britain, as Fool UK turned one year old yesterday. That's very exciting for us, and if you're not already occasionally checking in for the finest investment writing that side of the Atlantic, do check out Fool UK. In Foolish fashion, the real-money sister portfolio to this one -- which is there called the QualiPort -- is up 23.48% since inception, versus a gain in the FTSE (British equivalent of the Dow called the "Footsie") of just 3.87%. Rock on, Folly.

Man, there's so much good stuff in Fooldom today, I have to mention some of it. (The rest of this recap is really just an aid to navigation to some of our best features, so click outta here if you're not interested.) My favorite thing in Fooldom today is Louis Corrigan's excellent analysis of the Hedge Fund Gone Wrong -- a must read -- headlining today's Lunchtime News. And if you're not already tapping into our newest feature, Breakfast with the Fool, you can now wake up everything morning and get a little early morning rundown and breakfast cheer from The Fool. That's a bookmark.

Also, dyed-in-the-wool Fools (tapping in every day) already know what the casual Fool (tapping in once a week) may not: We have many new thriving message boards at www.fool.com. Responding to our community's request for broader topics, we've opened a host of general message boards in The Fool Cafe where you can find practical, enjoyable, and Foolish advice on everything from the Best Travel Spots to Recipes/Cooking. Hey, why not surprise your significant other with a lovely supper tomorrow night? If you're like me, sounds like a great idea but you don't even know where to start. Fools stand ready to help right in that latter message board. My favorite, though, remains Help with this STUPID computer! -- free computer help for anyone who wants it.

Finally, if you'd like to enter a contest to have your name appear in our next book, Rule Breakers, Rule Makers -- coming in early '99 -- it's time for the Foolywed Game! Just click here.

And stay Foolish!

YOU HAVE MORE THAN YOU THINK!

David & Tom Gardner's new book, You Have More Than You Think, is now available! If you're like most people, you don't have a whole lot of savings, or maybe you're having trouble getting a firm grip on your finances? This book contains all the answers you'll need. It will help you conquer your debt, show you where and how to find the best investments ("Try looking in the fridge, for starters"), what to do with your IRA and 401(k), and much more. Add to that The Motley Fool Investment Workbook, which takes you step-by-step through the process of putting to use the lessons learned in YHMTYT and The Motley Fool Investment Guide. Check them out now in FoolMart!

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Today's FoolWatch: all the latest in Fooldom.


Bookmark Live Fool Port Quotes

09/24/98 Close

Stock Change Bid ---------------- AMZN -3 102.13 AOL -3 3/8 112.13 T - 3/8 59.25 DJT --- 3.25 DD - 9/16 58.13 XON - 15/16 69.38 INVX --- 13.50 IP +1 9/16 46.88 IOM - 1/16 4.25 KLAC - 1/16 25.88 LU -1 1/8 76.50 SBUX +2 11/16 35.63 COMS -1 1/8 30.44 TDFX + 3/16 11.31
Day Month Year History Annualized FOOL -1.60% 22.73% 41.28% 374.14% 45.68% S&P: -2.19% 8.90% 7.45% 127.47% 21.98% NASDAQ: -2.27% 14.75% 9.55% 138.88% 23.43% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 112.13 2983.38% 9/9/97 580 Amazon.com 19.11 102.13 434.38% 5/17/95 1960 Iomega Cor 1.28 4.25 231.93% 10/1/96 84 LucentTech 23.81 76.50 221.32% 4/30/97 -1170*Trump* 8.47 3.25 61.62% 8/12/96 130 AT&T 39.58 59.25 49.71% 2/20/98 200 Exxon 64.09 69.38 8.25% 2/20/98 270 Int'l Pape 47.69 46.88 -1.71% 2/20/98 215 DuPont 59.83 58.13 -2.86% 8/13/96 250 3Com Corp. 46.86 30.44 -35.05% 7/2/98 235 Starbucks 55.91 35.63 -36.28% 8/24/95 130 KLA-Tencor 44.71 25.88 -42.13% 6/26/97 325 Innovex 27.71 13.50 -51.28% 1/8/98 425 3Dfx 25.67 11.31 -55.93% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 79608.75 $77026.88 9/9/97 580 Amazon.com 11084.24 59232.50 $48148.26 4/30/97 -1170*Trump* -9908.50 -3802.50 $6106.00 5/17/95 1960 Iomega Cor 2509.60 8330.00 $5820.40 10/1/96 84 LucentTech 1999.88 6426.00 $4426.12 8/12/96 130 AT&T 5145.11 7702.50 $2557.39 2/20/98 200 Exxon 12818.00 13875.00 $1057.00 2/20/98 270 Int'l Pape 12876.75 12656.25 -$220.50 2/20/98 215 DuPont 12864.25 12496.88 -$367.38 8/24/95 130 KLA-Tencor 5812.49 3363.75 -$2448.74 8/13/96 250 3Com Corp. 11715.99 7609.38 -$4106.62 6/26/97 325 Innovex 9005.62 4387.50 -$4618.12 7/2/98 235 Starbucks 13138.63 8371.88 -$4766.75 1/8/98 425 3Dfx 10908.63 4807.81 -$6100.81 CASH $12005.75 TOTAL $237071.44

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