Fribble Fodder (or what to do with all that Junk Mail)
by MF Cubster

Once you sign up for just about any stock newsletter you open yourself up to the flood of junk mail that advertises 500% to 1000% returns. I used to just read the envelopes and toss them in the circular file, but now I've changed my approach. These make great Fribble fodder, and I now eagerly await my almost daily dose of junk stock newsletter mail.

The latest to catch my fancy comes "From the Desk of Adrian Day," editor of 'Investment Analyst.' He explains that his system is a low-risk, low stress approach that has you buy very few stocks but the few you do buy tend to perform spectacularly well.

Wow. Sounds GREAT! Maybe he uses a variation of Michael O'Higgins's "Beating the Dow." Oops, no. . . that approach ONLY gets you 20% gains year-after-year (in 5 years that's a 150% gain). . . so surely Mr. Day has something to offer better than that!

The flyer lists a few of his winning picks:

* 448% gain on a cellular stock. We bought McCaw Cellular in 1988 for $12. Five years later, in 1993, our buy and hold strategy paid off when we sold it for $53.75!

* 559% on a Hong Kong bank. Also in 1988 we bought Hongkong & Shanghai Bank. Once again, the simple principle of value investing rewarded us well. We sold in 1993 for $148.

* And 3,066% profit on an environmental stock. We cashed in on the environmental movement with Noxso, which returned over $30 for every $1 invested.

Hyping a handful of winners is common in these newsletter ads. Of course, there may have been a few that lost 50% annually, but we would have to buy old copies of his letter to sort that out. Plus, it's hard to hawk a newsletter if TOTAL ACCOUNTABILITY is part of the package.

If Mr Day---over the same time frame from 1988 to 1993---had bought Intel (300% gain, 38% annualized), Applied Materials (900% gain, 58% annualized), Microsoft (900% gain, 58% annualized), or Coca-Cola, one of Warren Buffett's favorites (a measly 300% gain, 32% annualized) he still would have had some good headlines for his ads. He might even have stuck to buying WB's Berkshire Hathaway (a humble gain of 300%, 32% annualized).

In fact, the flyer has a whole section on Warren Buffett. As if we are to assume WB had something to do with his newsletter stock tips! Headers like: "Why Warren Buffett Doesn't Worry About Being Up or Down $180 Million in a Day" (because it would be a 2% change for his portfolio); or "Four Simple Words are the Key to Wealth" (Buy Low, Sell High). Profound concepts, no?

Now here's a good part. . . Header: "There's Always a "Fool in the Market." He quotes Warren Buffet as once saying: "Any player unaware of the fool in the market probably is the fool in the market." Mr. Day doesn't pay attention to the word "fool," as one has a capital "F" and the others are lower case. I guess I'm just too sensitive to such "foolish" declarations nowadays. I suspect that "Fool" no longer has a bad connotation to the online investor! Sticks and stones may break my bones, but calling me a "Fool" no longer hurts me.

Well, it is a sixteen page ad and such a long treatise for free is the equivalent of one of those TV infomercials. It's worn me out. So I will leave you with the page 16 kicker, a "WHAT NOT TO BUY" panel. Lo and behold is the following about America Online. "Way overvalued. At a P/E of 90 it would be many years before you got your money back if this stock doesn't go way up. And with more and more competition, including from such giants as Microsoft, that's a risky bet. Stay away from America Online."

Seems like Motley Fool was hearing (but not fearing) that line in August of 1994 when he plunked down his own good money on that company for a subsequent 500% gain in a year and a quarter, and that's after accounting for commissions. . . now where is that Compounding Clown when you need him to figure the numbers out to five years?

*Stay away from America Online.* I guess if Mr. Day follows his own advice he won't get to see this Fribble. How sad. Maybe I can snail-mail it to him.

[Note: MF Cubster is, in real life, an Orthopedic Surgeon, so he wasn't kidding about the sticks and stones and broken bones stuff.]