Ah, the Hall of Portfolios. Way back when, as we started The Motley Fool, we felt it both imperative and a fun challenge to start our own real-money portfolio beginning on the very first day of our service. That was the "Fool Portfolio." In time, we diversified further adding one or another portfolio that answered a different need among a certain group of investors -- those just starting out with little money (the Drip Portfolio), those looking to the Foolish Four, etc.
We even had one way back when called "Running with the Market," which was run by a trader who was the poster boy of an Investor's Business Daily ad campaign. He was a very nice guy, but was pretty hamstrung by our rules -- we wouldn't allow him to daytrade the portfolio, and his performance was very poor. (I'm not sure it would've been very good even if he'd been allowed to daytrade.) Anyway, it gave any reader an opportunity to watch what happens when a portfolio was traded, and we honestly thought the guy (based on dynamic past returns) might be The Man. In addition to the bad returns, many of our readers were very confused as to why we'd offer such a portfolio in Fooldom. Some thought we were saying trading was Foolish. We closed that one!
Anyway, that's The Motley Fool's Hall of Portfolios, which today is home to six real-money portfolios and two competing indices. The Rule Breaker Portfolio is this one, where we invest in companies that are revolutionizing business, driven by entrepreneurs who've looked at the world and said, "That's not good enough!" and created a new product or service that breaks the rules. Then there is Tom's Rule Maker portfolio, invested in the companies that make the very rules that my companies are trying to break. And you have the Boring Portfolio, the Drip Portfolio, and the Foolish Four Portfolio, all great reads through good times and bad. In fact, if you're new to The Motley Fool, take about five minutes to read our Quick Facts on the portfolios:
And PLEASE NOTE, at the bottom we have the very Foolish "Your Portfolio" entry. It's by far the most important reading on that page.
OK, so Starbucks (Nasdaq: SBUX) shot up today, rising 11%. On what news? Some website supposedly posted takeover rumors in the middle of last week, Dow Jones reports. Why that would make the stock a hot ticket (on no real news) today -- Tuesday -- is not clear. Pepsi is the rumored acquirer, even though Pepsi shed all of its restaurant businesses (KFC, Taco Bell, Pizza Hut) when it spun off Tricon Global. This is a rumor that apparently resurfaces with regularity. Which leads me to mention...
...Fools ignore takeover rumors, and do not buy on such speculation. Our approach is to buy great companies. Now, great companies do occasionally become the subject of takeover speculation, since they are great companies. (But more often than not, they end up being the companies that buy out, rather than get bought out.) But we don't buy the companies for those reasons. We always make an investment on a company's own merit, not on any (often vain) hope that it'll be bought out.
Then again, there was a report on Starbucks today that an Alex Brown analyst reiterated his BUY rating, following bullishness surrounding a recent visit of his to Starbucks.
Do Fools react to brokerage firm rating changes? Noooooo. Hey, we appreciate the efforts of anyone who is going to dig up some more info on a company (particularly new info) and is going to share it with the world at large. Of course, our suspicions are that more often than not, any really valuable information will already have been used by the firm or individual who digs it up. So that's a major part of the reason that while the market may react to such pronouncements, we for the most part do not.
We also know that brokerage firms are incentivized to screw around with their ratings far more hyperkinetically (I like to write words like that from time to time) than the average investor should. Why? Brokerage firms USE their analysts' research to justify increased trading of their clients' accounts. We have many times written about the negative consequences of this, though perhaps never more amusingly than our story about The Gap and its ratings, on pp. 251-52 of You Have More Than You Think.
By the way, for those wanting to figure out which of our books is the best to start out with for people new to investing, that's the one: You Have More Than You Think.
AOL rose substantially as well today, over $8. That helped out the BreakerPort tremendously. Not much else to reflect on, at the end of a rather dreary, hyperkinetically humid (OK, blow the whistle on me) day here in Alexandria, Virginia.
Heck, I'll take 5% ANY day of the week... and even just for some years.
Finally tonight, we are hiring like crazy at The Motley Fool. If you'd like to wear some motley and join the cause, drop by http://jobs.fool.com, check us out, and apply! And that goes for your 10 smartest, funniest, most talented friends as well. Fool on!
-- David Gardner, September 28, 1999
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