<THE FOOL PORTFOLIO>
An Embarrassment of Riches
Reiteration of why we do this
by David Gardner (DavidG@fool.com)
ALEXANDRIA, VA (Nov. 18, 1998) -- The Rule Breaker Portfolio scored one of its truly great days, Wednesday, rocketing ahead another 7.70% in value. This comes just a day after a gain of 5.52%... a veritable embarrassment of riches. I mean, quite seriously, it's rather embarrassing to be up as much as we are over the mutual fund industry, this year. It's like there's something wrong with it. The numbers don't look right -- it's embarrassing. This has been one of those two-day jumps that causes me to wonder whether I'm dreaming, or whether this is all just a big silly game. But I guess I'm not dreaming.
And I know this ain't no game. It's real money.
Following my recap yesterday, in addition to a number of congratulatory notes I received some other e-mail which reminded me that it's important to reiterate, from time to time, who we are, what we're doing, and why we do this. So, today's recap finds us dipping into the mailbag for just that purpose.
A few people e-mailed me yesterday saying that we shouldn't celebrate short-term moves -- that that's unFoolish. That is certainly true! But I want to make it clear that yesterday's pop-o'-the-champagne-cork (POP!) was not due to a good day. It was due to the landmark achieved, surpassing the 500% historical return mark. You'll note that we had an even better day today -- indeed, after just one day we're more than half the way to a 600% historical return -- but we ain't touching the champagne in the cellar tonight.
A few also mentioned that we shouldn't compare ourselves to mutual funds, but in this they misunderstand what we're doing here. Obviously, few mutual funds have just 15 or 20 stocks, and fewer still have any weighting in any given stock of 30% or more (as do we, through pure appreciation). But let's remember our Foolish aim. My name is David Gardner and I started this portfolio with my own money back on August 4, 1994. I began this portfolio for the purpose of demonstrating with my own real money that I (and we, all of us -- the little guys) don't need conventional wisdom -- don't NEED, that is, mutual funds. More often than not, I have said, anyone who buys any mutual fund other than a low-fee S&P 500 index fund may be getting ripped off -- getting played for a sucker by the financial services industry.
This portfolio is my own living, breathing sign of defiance against the mutual-fund industry. It aims to serve as a beacon for investors everywhere to take control of their own finances and do it themselves in the good ol' fashioned American tradition.
We are saying (and "we" here refers not to me, or Jeff, or Fool HQ, but to all Fools everywhere):
We can do it ourselves.
We don't need any "Wall Street insider tips" to succeed, nor do we require the "benefit" of expensive in-house Wall Street research.
Even though we may not have received any formal training, through the educational resources available over the Internet at www.fool.com we can get the quickest education about money ever available -- for FREE.
We believe that by managing our own money and paying you-the-financial-world nothing, we'll beat you -- which is simply a win for ourselves. Which is why anyone invests in the first place!
Our anti-Wall Street ethos stems from a simple nudge to the Street's ribs, saying, "Hey, Wall Street? Remember your customer?" Which, of course, it doesn't, since it's so much more concerned with "serving itself fully" than providing "full service" help to its customers.
The Fool Portfolio has demonstrated what can happen if you invest on your OWN, buy stock in good companies, show patience, let your winners run, don't try to "time" the market (supposing such a thing were even possible -- one of the great will o' the wisps of our time), AND pay no mind to your broker or the nitwits in the financial media, both of whom more often than not are trying to scare you into selling.
Which reminds me of another e-mail I received, an anonymous one in which the sender stated simply that he or she is sick of us patting ourselves on the back. I must admit that I'm finding it a tad cloying myself these days -- but please note that in the past we've also demonstrated an ability and a willingness to castigate ourselves, when circumstances called for it (as we will in future, too).
But how else do you talk about 500% historical gains, or being up 94.85% for the year? And in fact, we have found that if we don't note our own successes, no one will. The financial magazines, newspapers, and cable channels simply won't tell you about The Motley Fool Portfolio. They won't tell you about our performance, or that we deduct all fees, or that we compare ourselves to the market averages, or that we tell people what we're doing BEFORE we do it. And they certainly won't extend any credit for our being the first ever and still the only ones to try such a grand experiment. Why? Because we're completely destroying the returns of all mutual funds! And it is mutual funds, dear Fools, that provide the advertising monies that keep many of these organizations afloat.
The entire revolution being created by The Motley Fool must remain like a light under a bushel so long as the financial services industry and their media friends can keep it that way. Hey, no sweat. We're patient. Here's why: When I go abroad these days -- most recently for the Motley Fool UK Investment Guide book tour in London -- I meet actual, normal people -- real people -- who speak in a different accent or language but who also happen to be wearing a Fool ballcap, or our jester cap. And when that happens, I know that the twinkle in their eye is the twinkle of the world to come, where individuals feel happier because they have more ownership, more control, and more confidence.
If this is all tooting our own horn, so be it. TOOT TOOT! We'll have fun with it. Because never has so much fun been had by any Internet startup that decided from the first day that it wanted to change the world, to transfer power from parasitic institutions to hard-working individuals... and won. THAT's Foolish.
A final couple e-mails looked at the Motley Fool's mission to educate and wondered whether this particular portfolio is "responsible," whether it represents a useful form of education for investors given its current weighting. Well, for any novice investor, or any investor who does not like to take risk, we have numerous other resources here in Fooldom -- I think the Motley Fool verily breathes with educational resources, whether it's our 13 Steps, our Foolish Four writeups, our sections on how to buy a car, how to buy a house, how to buy insurance, how to get out of debt, running a portfolio showing you how to buy stocks through DRiPs, etc. And our books are all about how important it is to maintain "Quality of Life" (the title of the closing chapter of our current hardback) right alongside your investment successes.
The Fool Portfolio, soon to be renamed "The Rule Breaker portfolio," is not the first place for any investor to look for education, as you'll discover by reading our principles. Read the first two principles of managing this portfolio and you'll find that we talk about maximizing our returns, and consciously taking on significant risk. Those provide educations unto themselves, but they are lessons for more experienced investors, more aggressive ones. That's the focus of this space each day. We serve all kinds in Fooldom, but only some kinds in each of our particular features.
I had hoped tonight to introduce our third principle of management of this, our Rule Breaker portfolio, but -- OUCH -- I have gone on too long. So let's quickly recap what happened today to make it memorable.
For one, our two biggest holdings rose in excess of 10% each, while our worst performer was none other than our short pick -- the man we're playing to drop -- Donald J. Trump, who surrendered 6%.
America Online (NYSE: AOL) split 2-for-1, the fifth such split since we purchased our shares in 1994. The gain in the shares today may have had something to do with people who unFoolishly speculate on stock splits -- who knows? The company also put out an early-morning press release stating that it was the world's #1 online retailer, and laying out all its plans for shopping on AOL during the holiday season. In fact, the way the release read it almost sounded like AOL was insecure about all of this, that it felt it needed to tell you that it was the world's #1 electronic commerce operation because, well... perhaps it isn't? Hmmmmm....
A bit worried about Amazon (and its own release, yesterday), are we?
AOL's release included such phrases as "No. 1 online shopping destination," "strongest buying power in cyberspace," "world leader in electronic commerce," and "leader in e-commerce" (again) -- all of these within the first three sentences! If you recall AOL's September quarter, revenues were $858 million, with $715 million of that being the subscription money paid to AOL by its online customers. That leaves $143 million for "advertising, commerce, and other revenues," the vast bulk of which comes from advertisers. Consider that Amazon.com's (Nasdaq: AMZN) September quarter revenues were $154 million, representing almost a pure play on e-commerce, and you may find yourself as dubious as I am that AOL is anything like the "No. 1 online shopping destination." Indeed, at last check, the true "world leader in electronic commerce," as measured by revenues, was neither of these companies -- but was, instead, companies like Dell Computer and Cisco Systems, which do a ton of business over their own sites -- to the point that they don't put out press releases shooting for holiday spikes.
Now you may wonder why I'm talking down one of our own stocks! Hey, we have a habit of doing that in our recaps, whether it's critiquing Iomega's ad campaign, suggesting that Innovex diversify its products' applications, or telling the KLA-Tencor president flat-out not to open up his legs so much in his company's annual report photos! If you are a true long-term owner, you should be constantly critiquing your own companies and trying to help them get better at what they do. This is easier than ever before, thanks to the Internet, and many is the company manager I have met who reads The Motley Fool message boards for the express purpose of getting ideas and gauge reactions. You'd be shocked to learn how many big-wigs are clicking through our boards right along with you....
To close tonight, I return to Shakespeare, which I don't ever think I do enough. "Every subject's soul is his own," wrote Shakespeare, putting these words in the mouth of King Henry V. The same is true of every subject's money. As a society at large, it's time all of us began taking full responsibility for our money and not allowing those "ever-helpful" and high-margin institutions to do it for us. THAT is what best of all creates a true embarrassment of riches (the phrase is Voltaire's -- credit where it's due). Not only will you make more, but you'll be in control, which as I mentioned earlier can lead to a happiness well beyond whatever the money itself represents. And there are no limits to these things -- you can be happy beyond your wildest present dreams.
As the sun sets tonight over a cold Alexandria, VA, I can say without reservation that I and many other Fools have discovered just that. And credit where it's due once again -- thanks, Dad and Mom.
-- David Gardner, November 18, 1998
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Today's FoolWatch: all the latest in Fooldom.
Day Month Year History Annualized FOOL +7.70% 21.80% 94.85% 553.93% 54.96% S&P: +0.45% 4.17% 17.94% 149.67% 23.79% NASDAQ: +1.01% 7.12% 20.83% 163.47% 25.35% Rec'd # Security In At Now Change 8/5/94 1420 AmOnline 1.82 83.88 4513.03% 9/9/97 580 Amazon.com 19.11 164.00 758.16% 5/17/95 1960 Iomega Cor 1.28 8.00 524.80% 10/1/96 84 LucentTech 23.81 89.25 274.87% 8/12/96 130 AT&T 39.58 61.63 55.71% 4/30/97 -1170*Trump* 8.47 4.63 45.39% 2/20/98 200 Exxon 64.09 70.69 10.29% 2/20/98 215 DuPont 59.83 61.06 2.05% 2/20/98 270 Int'l Pape 47.69 45.75 -4.07% 8/13/96 250 3Com Corp. 46.86 38.56 -17.71% 8/24/95 130 KLA-Tencor 44.71 36.56 -18.23% 7/2/98 235 Starbucks 55.91 42.25 -24.43% 1/8/98 425 3Dfx 25.67 14.94 -41.80% 6/26/97 325 Innovex 27.71 14.38 -48.12% Rec'd # Security In At Value Change 8/5/94 1420 AmOnline 2581.87 119102.50$116520.63 9/9/97 580 Amazon.com 11084.24 95120.00 $84035.76 5/17/95 1960 Iomega Cor 2509.60 15680.00 $13170.40 10/1/96 84 LucentTech 1999.88 7497.00 $5497.12 4/30/97 -1170*Trump* -9908.50 -5411.25 $4497.25 8/12/96 130 AT&T 5145.11 8011.25 $2866.14 2/20/98 200 Exxon 12818.00 14137.50 $1319.50 2/20/98 215 DuPont 12864.25 13128.44 $264.19 2/20/98 270 Int'l Pape 12876.75 12352.50 -$524.25 8/24/95 130 KLA-Tencor 5812.49 4753.13 -$1059.37 8/13/96 250 3Com Corp. 11715.99 9640.63 -$2075.37 7/2/98 235 Starbucks 13138.63 9928.75 -$3209.88 6/26/97 325 Innovex 9005.62 4671.88 -$4333.75 1/8/98 425 3Dfx 10908.63 6348.44 -$4560.19 CASH $12005.75 TOTAL $326966.50
</THE FOOL PORTFOLIO>