Bias In the Fool Port?
...but of course!
by Nico Detourn (TMF Nico@aol.com)
SANTA CLARA, CA (Oct. 12, 1998) -- And so closes another one of those big-move days in the stock market, the kind we've been getting accustomed to recently. Today it was to the upside, and to the benefit of the Fool Port, which gained 2.40%, neatly ahead of the S&P's 1.36%, though not up to the Nasdaq's 3.59%. That's OK. We'll take that kind of "middling" performance any day.
It's not always possible to account for what the market does on any given day, or what a particular company's stock does, whether it moves with or contrary to the market as a whole. After the fact, the same piece of news can probably be used to explain a move in any direction, depending on how we happen to spin it, or what other pieces of news we connect to it.
Watching the day-to-day ups and downs is exciting. It can also be fun, when things are going your way. Unfortunately, "fun" is probably not the first word most of us would use to describe the market recently. Especially if we've only recently entered the world of investing, and managed to invest just prior to the market's downturn, or correction, or whatever we prefer calling it.
In commenting on down-markets and volatility in last Thursday's Fool Port, Paul Larson (TMF Parlay) mentioned the important point that over time "the bias in the market is strongly up." This is of course true, and a basic principle of Foolish, long term investing. Though it might be too obvious to mention, the bias of the market is not only up, but forward, also. Investing is always about tomorrow. And I don't mean this Tuesday, or even a week from today, but a future located some years, and often decades, down the road.
This kind of long-range perspective, or forward bias, is in sync with the relentlessly upward bias of the market. It allows Foolish investors to remain engaged in daily market moves -- should they choose to do so -- without becoming overly concerned when things move against them.
The investments we make, the companies we choose to purchase small pieces of, will also reflect a bias. How can they not? If our investments are well chosen, our portfolios will come to reflect our views and expectations, our particular bias, towards the future. That bias is in some way the theme, the personality, if you will, of a portfolio. It is a reflection of how a portfolio, as a collection of individual investments, makes sense.
Looking over the companies in the Fool Portfolio, I'm struck by how, for the most part, they reflect just such a coherent future-bias. And that includes the (current) winners AND the (current) losers.
Companies like America Online (NYSE: AOL) and 3Com (Nasdaq: COMS), despite the different contributions they've made to the Fool Port's fortunes, both look forward to a wired world, where information of all sorts is exchanged faster and more efficiently than previously possible. The same goes for Lucent (NYSE: LU), which was kept in the portfolio after being spun-off from the Fool Four's AT&T (NYSE:T), because it made sense. In the context of the Fool Port, Lucent was a "company you keep."
Amazon.com (Nasdaq: AMZN) also fits within the bias of the Fool Port. The online bookseller is a leader not only in defining electronic commerce as a technical process, but in getting it accepted as a matter-of-fact part of everyday life. This is similar to how AOL has made going online part of the day-to-day routine for millions of people around the world.
Each in their own way, companies such as Innovex (Nasdaq: INVX), KLA-Tencor (Nasdaq: KLAC), 3Dfx (Nasdaq: TDFX), and Iomega (NYSE: IOM) likewise contribute to the bias or theme of a wired, information-rich world that runs through the Fool Port. These companies are currently not performing well, to put it delicately. (Ouch!) And with the exception of Iomega -- yep, it's still in there! -- they've been unalloyed drags on the portfolio. Be that as it may, these companies did, and continue to, make sense within the Fool Port's investment context.
Interestingly, even Starbucks (Nasdaq: SBUX), which first got the Foolish nod as an investment in brand-power (and a good cuppa Joe), plays into the Port's wired-world investment thesis. Indeed, the launch last week of Starbucks.com can be taken as a cuppa validation for that "biased" view of the world.
To be sure, being able to string these companies along a single thread does not automatically make them good investments, whether long term, short term, or any term. But recognizing the biases they collectively reveal can provide a framework for evaluating them as a coherent set of investments. And being able to do that seems like a good thing. Maybe even a little Foolish.
By the way, this week and next will see several Fool Port companies reporting their quarterly results. As best we can tell, KLA-Tencor, 3Dfx, and Iomega will be ganging up... I mean... announcing, this Thursday. And in the following weeks we should be hearing from Lucent (Oct. 22) and Amazon.com (Oct. 28.) Afterwards, why not click into our message boards and join with the world wide community of Fools in figuring out just what all those numbers mean?
See ya on the boards!
- Nico Detourn, October 12, 1998
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Today's FoolWatch: all the latest in Fooldom.
Day Month Year History Annualized FOOL +2.40% -9.84% 28.59% 331.56% 41.81% S&P: +1.36% -1.90% 2.81% 117.65% 20.42% NASDAQ: +3.59% -8.72% -1.55% 114.68% 20.02% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 93.38 2467.76% 9/9/97 580 Amazon.com 19.11 93.19 387.62% 10/1/96 84 LucentTech 23.81 66.63 179.84% 5/17/95 1960 Iomega Cor 1.28 3.56 178.23% 4/30/97 -1170*Trump* 8.47 3.19 62.36% 8/12/96 130 AT&T 39.58 58.56 47.97% 2/20/98 200 Exxon 64.09 71.81 12.05% 2/20/98 215 DuPont 59.83 59.94 0.17% 2/20/98 270 Int'l Pape 47.69 46.06 -3.42% 7/2/98 235 Starbucks 55.91 36.13 -35.39% 8/24/95 130 KLA-Tencor 44.71 27.44 -38.63% 8/13/96 250 3Com Corp. 46.86 28.31 -39.59% 6/26/97 325 Innovex 27.71 11.50 -58.50% 1/8/98 425 3Dfx 25.67 10.38 -59.58% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 66296.25 $63714.38 9/9/97 580 Amazon.com 11084.24 54048.75 $42964.51 4/30/97 -1170*Trump* -9908.50 -3729.38 $6179.13 5/17/95 1960 Iomega Cor 2509.60 6982.50 $4472.90 10/1/96 84 LucentTech 1999.88 5596.50 $3596.62 8/12/96 130 AT&T 5145.11 7613.13 $2468.02 2/20/98 200 Exxon 12818.00 14362.50 $1544.50 2/20/98 215 DuPont 12864.25 12886.56 $22.31 2/20/98 270 Int'l Pape 12876.75 12436.88 -$439.88 8/24/95 130 KLA-Tencor 5812.49 3566.88 -$2245.62 8/13/96 250 3Com Corp. 11715.99 7078.13 -$4637.87 7/2/98 235 Starbucks 13138.63 8489.38 -$4649.25 6/26/97 325 Innovex 9005.62 3737.50 -$5268.12 1/8/98 425 3Dfx 10908.63 4409.38 -$6499.25 CASH $12005.75 TOTAL $215780.69