Fool Portfolio Report
Thursday, July 11, 1996

Thursday, July 11, 1996 (FOOL GLOBAL WIRE)
by Tom Gardner

Soho, NY, July 11, 1996 -- So, how about that Chevron? Up $3/4. Very sweet day.

Thanks for dropping by this evening. That's all I have to say: Chevron. CHV. Bucking the market trend. Traveling northward with the other oils and gasses: Texaco, Exxon. Schlumberger. And some of the Oilfield Services companies that MFs Rigs and Wildcat have been following diligently in our Industry Research Area.

Today, it was all Chevron for The Fool.

Cover your eyes from the rest of the screen, though, cuz our stocks were sliced and diced, ginsu-style. The Fool Portfolio fell 4.41%, in one day, bringing 1996 returns down to 51.80%. The Dow Jones Industrials sagged 1.5%, the S&P 500 was off 1.58%, and the Nasdaq was dealt a 3.05% blow. A number of market pundits---some who might even be named "Fool"---have been projecting a 10% correction oncoming in the summer heat. And blammo. July has housed a 6.64% Nasdaq decline.

Do you remember, layFool, those days of wine, roses, mirth and song when we had been treated to 119% gains since January 1? Back in the middle of May, when it didn't seem like the stocks of profitable, forward-thinking, and aggressive companies could do anything but rise, inch by inch, dollar after dollar. Heck, even the weaker hands were finding trump.

It was great. You didn't have to know what a company did, just that it had a prayer, and a tale, and a name. Like Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:YHOO)") else Response.Write("(NASDAQ:YHOO)") end if %>, which on its first day of frenzied trading in early April, ran as high as $43. At the time, the company was valued at $1.19 billion, off trailing 12-month sales of less than $3 million. Yahoo actually bucked the market today, rising $7/8 to $17 1/4, but the stock is off more than 60% since first setting foot into the public marketplace.

And I say the "stock" is off that much because the notion that any value had actually been assigned to the company ain't much of a notion. Folks were trading paper. "Yahoo" meant Internet, things digital, some sort of revolution. And the exclamation point meant paydirt. . .

. . . !

Traders weren't strolling market aisles looking for long-term value in the butchershop or bakery. Buying into Yahoo was not about the purchasing of ownership. Nor working to understand business down at the level of the income and cash-flow statements and the balance sheet. I'm certainly not saying that the stock market is only for investors. Some people believe they can make more money trading paper than buying into a business. And hey, if you had a big enough account back in April and strong ties to the brokerage community, you could've lapped the Net indexer for $20 a share and doubled your money on the opening day.

Readers of The Motley Fool Investment Guide and veterans of this Folly recognize that we don't suit up for that sort of game. Just not our thang. I think we made a reasonable case in The Guide for why anyone with less than $250,000 to invest and anything less than a whole lot of time on their hands shouldn't be actively trading stock certificates.The hurt of commissions, damage from short-term taxing, and the claims on your time 250 days a year from 9:30 AM to 4 PM all seem powerful negatives to the wee, bell-capped Fool. If you have a full-time job already, or not a lot of money, or have aspirations to see the light of a weekday hour here in mid-summer, trading probably isn't for you.

It isn't for us.

Moving then from paper-trading to business investing, we must emphasize patience. Do we think that investors should have even a dollar of their long-term savings sitting outside of the Vanguard S&P Index Fund or The Foolish Four Dow Stocks, if they haven't learned how to interpret financial statements? Nope. There's certainly nothing wrong with S&P Index returns. Over the past two years in an index fund, you'd have turned nearly 45% in profits. And if you've been maintaining an aggressive savings plan, you made a lot more than that.

It is then, up from the safety net of the S&P Index Fund and our Dow High-Yielders that we find investments in large-, mid- and small-cap growth businesses. Outfits like The Gap, America Online, Iomega, KLA Instruments, Medicis. If you've purchased pieces of these businesses, or others like these, we hope that you understand the product or service they offer, that you've scoured the financial statements, and have some sense of what to expect---or at least what the Street expects---in sales and earnings growth going forward.

So armed, you will be left with little more choice on days like these than to smile. Orders at Hewlett-Packard are slowing. The technology sector is in flux. Defensive stocks are holding strong, some advancing. Oil, precious metal, chemicals, plastics---not your sexiest industries. Eyeball the beaten-down, high-yielding Dow stocks of today, and you won't find Timothy Dalton and Michelle Pfeiffer in swimsuits on a Seychellian pier. IBM isn't there at $47, hinting at a rebound in technology. In its place, the sleeper: Chevron.

Just as orders in the personal computing and related groups are slowing, you Fool must now ask yourself if you're secure enough with your non-Dow business investments to wait for and wade through the earnings reports as they flow through. Because you've always got the income and the strong potential for market-stomping gains in Dow heaviness. With that backing you up, and with decades ahead of you and/or your family, smile as the stocks of stalwarts get slammed.

America Online fell $2 3/4. Iomega was off $2. Medicis dropped $ 2 3/4. The Gap gave back $1 3/4. In a single day, we lost 4.4% of the value of our portfolio---on paper. However, it's the business structure that sits behind that paper that will determine Foolish savings growth and portfolio performance. Let's just hope we're in some good businesses while others pass paper this way and that.

Tom Gardner, Fool

ANOTHER FOOLISH THING: Rogue Media & Technology presents a review of The New York Times' recent coverage of The Motley Fool Forum this past week. Researcher Jim Surowiecki walks through how the media is viewing the phenomenon of online investing, and your role in it. Click the hypertext link The NY Times & The Fool, or drop by keyword: Rogue.

Transmitted: 7/11/96

                   Day   Month    Year  History
        FOOL     -4.41%  -5.55%  51.80% 183.45%
        S&P 500  -1.58%  -3.72%   4.83%  40.85%
        NASDAQ   -3.05%  -6.64%   5.15%  53.61%

*Scroll down or expand screen for full portfolio accounting

AMER -1 3/8 ...CHV + 3/4 ...GE -1 1/2 ...GPS -1 3/4 ...
IOMG -2...KLAC - 7/8 ...MDRX -2 3/4 ...S -1 1/8 ...


    Rec'd   #  Security     In At       Now    Change

  5/17/95 2010 Iomega Cor     2.52     27.13   976.83%
   8/5/94  680 AmOnline       7.27     37.88   420.77%
  4/20/95  310 The Gap       16.28     30.50    87.40%
  1/29/96  250 Medicis Ph    27.86     43.75    57.04%
   8/5/94  165 Sears         28.93     44.75    54.71%
  8/11/95   95 GenElec       57.91     83.88    44.83%
  8/11/95  110 Chevron       49.00     60.50    23.47%
  8/24/95  130 KLA Instrm    44.71     20.13   -54.99%


    Rec'd   #  Security      Cost     Value    Change

  5/17/95 2010 Iomega Cor  5063.13  54521.25 $49458.12
   8/5/94  680 AmOnline    4945.56  25755.00 $20809.44
  4/20/95  310 The Gap     5045.25   9455.00  $4409.75
  1/29/96  250 Medicis Ph  6964.99  10937.50  $3972.51
   8/5/94  165 Sears       4772.65   7383.75  $2611.10
  8/11/95   95 GenElec     5501.87   7968.13  $2466.26
  8/11/95  110 Chevron     5389.99   6655.00  $1265.01
  8/24/95  130 KLA Instrm  5812.49   2616.25 -$3196.24


                             CASH  $16434.53
                            TOTAL $141726.41