The Motley Fools

Top 40. Jan 28, 2002 2:30 PM

» JenL_2 - Re: Changes at TMF

In response to message posted by jbking:

Yes JB - invite 'em over here....the more the merrier!.....Jen

-- posted by JenL_2

Top 41. Jul 9, 2002 8:07 AM

» KLR - Final capitulation of the Motley Fools

What is the world coming to...?

Final capitulation of the Motley Fools
Commentary: More proof that it's buying season

By Paul B. Farrell, CBS.MarketWatch.com
Last Update: 12:08 AM ET July 9, 2002

LOS ANGELES (CBS.MW) -- Extra, extra, read all about it! The Fools have finally capitulated -- proof positive that it's time to buy stocks and stock funds.

As we all know, the Motley Fools were one of the first of the new age of online financial experts, first appearing way back in the early days of America Online almost a decade ago.

For years everybody thought The Fools were wizards-in-disguise as they rode the exploding momentum of the dot-com market.

Now, coming out of the bear market, they've been reincarnated as newer, humbler wizards -- disciples of Vanguard's famous indexer St. Jack (Bogle) -- offering advice for the coming baby-bull market.

Their new book is loaded with obvious signs of their act of capitulation, concession, confession and surrender. But you gotta' hand it to these guys for baring their souls with such a public mea culpa. That's class.

Bears nothing to laugh about

The first sign of their capitulation is the cover photo of the authors, David & Tom Gardner. It's almost the same shot as the one on their original 1996 The Motley Fool Investment Guide, which was republished in 2001.

I say "almost." They aren't smiling much. Not as much teeth as in the earlier photo. In fact, their grins look forced, and they're wearing black suits looking more like undertakers at a dot.com wake than the successful Wall Street hotshots on the earlier book jacket.

Left holding the bag

Secondly, take a close look the cover of the 2001 book, there's a chart of the market behind The Fools -- with the market headed up, up and away! Obviously, back then they expected the good old go-go days of the nineties to continue.

But in the new cover, they're left holding the bag, literally. The cover shot shows the two brothers holding what looks like a moneybag, but instead of dollar signs and bank ID numbers, there's a huge question mark on the bag. That's capitulation!

Retreating veterans of brutal war

The third sign of The Fools capitulation is right up front in the dedication: "This book honors the contributions of those many people we laid off from our business in the year 2001, among them beloved friends and family members, a human congeries of passion and talent."

Hard hitting realism and honesty: "Those many people we laid off." You couldn't help but feel genuine sadness, as if this were an inscription in granite on a war memorial -- and yes, it does feel like we've been at war.

In the nineties investors marched off to battle, bands and generals leading us aggressively onward, singing loudly in praise of momentum, IPOs, tech, dot-coms, and the new information revolution, repeating the refrain over and over: "This time it's different!"

Then, for the past two years we retreated, disillusioned about the meaning of war, with all too many opportunities to honor those who made the supreme sacrifice on the Wall Street battlefields. And for that I salute the Motley Fools. Indeed, we must honor them in stone so that future generations will never forget how brave, and foolish, we were.

Lessons for future -- first, reduce expenses

What did our gallant heroes, The Fools, learn? Great lessons. This war was a brutal teacher, when you assess the total damages of $6.7 trillion since March 2000.

First, The Fools offered some good old-fashioned advice that sounded very much like what Joe Dominguez and Vicki Robin wrote in their ultra-frugal penny-pinchers bible, "Your Money or Your Life." Or better yet, it could have come directly out of Ben Franklin's 18th century "Poor Richard's Almanac." Here is The Fool's five-point version:

Reprioritize your budget: In the 1990s nobody watched expenses.

Refinance everything: Thanks Ben, a penny saved is a penny earned.

Take losses and reduce capital gains: Losses, what are they?

Live below your means: In this bear market, is there a real alternative?

Get out of credit card debt: High fees and penalties are killers.

The Fools would never have written such mundane stuff a couple years ago. They'd have been laughed out of AOL chatrooms as a couple of weenies by the momentum crowd.

Lessons for the future - second, "new" investments

But the best part of the book comes with their six investments for "the future" (which, in case you haven't noticed, has already arrived).

As you read The Fools' six recommendations, keep in mind that they once dismissed index funds out of hand by "thanking-but-no-thanking Mr. Bogle (Vanguard's redoubtable founder) and suggesting that you can look beyond his index funds."

The Fools were confident they could help Main Street investors get "better than average returns." Alas, no more. Evidence?

Their new "six investments for the future:"

Certificates of Deposits: After all they are beating the Nasdaq 100

Cheap Broad Market Fund: Emphasis on "cheap." They even recommend Vanguard 500 Index (VFINX: news, chart, profile) and Vanguard Total Stock Market Index (VTSMX: news, chart, profile). An obvious apology to Jack Bogle's timeless wisdom.

The Bond Index Fund: Yes, bond funds. And they specifically mention Vanguard Total Bond Market Index (VBMFX: news, chart, profile). Mea culpa, mea maxima culpa!

Companies Paying Solid Dividends: A truly novel concept back in the late 1990s.

Starbucks: And other solid companies with strong brands, must-have products, sales growth, no debt, etc. No dot-coms!

Manage Your Portfolio For Life: Forget short-term trading.

Bottom line: Not only have The Fools capitulated, but they're now disciples of Jack Bogle. What better sign is there that the bottom's been reached and the market is poised to rebound?!

So buy, buy, buy -- and listen to the wisdom of those wonderful wizards-in-disguise, the Motley Fools. They're battle-tested!

-- posted by KLR

Top 42. Jul 9, 2002 10:31 AM

» bob90245 - Re: Final capitulation of the Motley Fools

In response to message posted by KLR:

Capitulation? Almost. I haven’t read the book. But have they mentioned ASSET ALLOCATION? Once the Fools embrace that hallmark of prudent financial planning, I would say their mea culpa is complete.

-- posted by bob90245

Top 43. Jul 9, 2002 1:36 PM

» Jen_ - Re: Final capitulation of the Motley Fools

In response to message posted by KLR:

to illustrate.....

<img src="http://lookinside-images.amazon.com/Qffs..." width=307 height=475 align="left">The first sign of their capitulation is the cover photo of the authors, David & Tom Gardner. It's almost the same shot as the one on their original 1996 The Motley Fool Investment Guide, which was republished in 2001.

Left holding the bag

.....Jen

-- posted by Jen_

Top 44. Jul 9, 2002 2:24 PM

» Kirk - Motley Fool Books

In response to message posted by Jen_:

If you want to order one.... please use these links so I get a commission! (always a plut! smile )

The Motley Fool Investment Guide:
How The Fool Beats Wall Street's Wise Men and How You Can Too
by David Gardner, Tom Gardner, Inc Motley Fool

The Motley Fool's What to Do with Your Money Now:
Ten Steps to Staying Up in a Down Market
by David Gardner, Tom Gardner, Inc Motley Fool
(June 2002)

-- posted by Kirk

Top 45. Dec 13, 2002 1:09 PM

» SteveT - Fool Radio

Tomorrow I am going to give the Fools a listen. Hope it is a breath of fresh air.
http://www.fool.com/ontheair/ontheair.htm

-- posted by SteveT

Top 46. Dec 14, 2002 3:05 PM

» SteveT - Re: Fool Radio

In response to message posted by SteveT:

The Fools, Tom and David Gardner have a very fast paced hour on Public Radio. If you have heard the fools you know they never miss an opportunity to inject humor. They started out reviewing and commenting on the major business news of the week. I’ll spare you.

They next interviewed CEO of Staples Ron Sargent. Ron says business is terrific in a poor economy. They are not doing it by opening so many new stores but executing a good plan and getting back to the basics of running a good retail business. December is important but traditionally January is their best month of the year. Staples last month decided to start offering more recycled paper products because of input from customer and environmental groups as well as shareholders. The Fools asked how his salary package stacked up against Bernie Ebbers. Sargent said he drives a 10-year-old Camry with 126,000 miles and didn’t know what Bernie drives these days. Ron got started in retail by working at a Kroger grocery store while in high school and still holds shares today. Then the Fools played buy, hold, or sell with their guest. On-line retailers, Hold. Dilbert, Sell, because he was featured by a competitor in advertising a few years ago. Post-it notes, buy.

The Fools took a few phone calls and I was impressed by the length of time they spent with each caller. The first caller got a Christmas bonus and was thinking of starting a DRIP. They defined a DRIP as companies that allow direct investment without using a broker or paying fees. This can be done by dividend reinvestment or buying shares or fractional shares periodically. The caller was thinking of starting with Clorox (CLX) and wanted a couple other ideas for diversification. The Fools mention Johnson & Johnson (JNJ) in the health sector and Kraft (KFT) in the foods sector. These are a couple in a field of over 1000 stocks that participate in DRIP plans.

The next caller owns a small drug store and his accountant suggested he take a bonus this year of $50,000. He wanted to know what to do with it. He has $125,000 in business debt at 5.5%. The Fools thought he should evaluate his comfort level and put a portion towards debt reduction and invest the rest in equities. The caller has most of his equity in health stocks such as Pfizer (PFE) Merck (MRK) and Bristol-Myers (BMY). They suggested a total market index or maybe a non health care sector fund.

This caller is 24 and starting a job in the financial industry and wanted to know how to educate himself and learn to council others. The Fools asked what he had in the way of debt. He had some at 14%. They thought it would be wise to try to lower the rate. Then start a regular investment program with 5-10% of his income. They then gave him three books to read. One up on Wall Street By Peter Lynch, Buffett: The Making of an American Capitalist by Roger Lowenstein, and Bargaining and Market Behavior: Essays in Experimental Economics by Vernon Smith.

Next up a light hearted interview with Dilbert creator Scott Adams. This was a fun and educational interview but had little to do with the investment world. He was there mostly to plug a new book. In the course of the interview Scott indicated he went to 100% T-Bills yesterday because he feels there is more downside than upside. He is waiting until the dust settles.

They finished the show with the mailbag and playing name that company. The hour went fast and I enjoyed it. It was a good way to get some differing viewpoints. I think I’ll try to become a more regular listener.

-- posted by SteveT

Top 47. Mar 4, 2004 8:07 AM

» Kirk - Stocks Fools Love

.
Stocks Fools Love
http://www.fool.com/specials/2004/040209...

By Motley Fool Staff
February 9, 2004

Love, love, love. All you need is love.... And a retirement nest egg so you and your honey can live like royalty in Cancun for the rest of your days, right? To that end, we are here to help.

At this time each year, we pick Stocks Fools Love and offer them up to you for Valentine's Day. It's our way of having some fun and introducing you to some of our investment ideas. Of course, what we may love may not be your cup of tea, so we encourage you to do your own homework.

And now, on to this year's Stocks Fools Love:

* Krispy Kreme (NYSE: KKD)
* Sara Lee (NYSE: SLE)
* CNS (Nasdaq: CNXS)
* TJX (NYSE: TJX)
* Hooker Furniture (Nasdaq: HOFT)

After only a month, it sure looks like they picked a basket of stocks that are out performing in the short run. It will be interesting to see how they do after a year.

Kirk's Newsletter performance



         PERIOD                Kirk  Wilshire5000  Delta
1 Year Return to 12-31-2003    +77%     +31%         46%  
3 Year Return to 12-31-2003    +25%      -7%         32%  
5 Year Return to 12-31-2003   +171%      +2%        169%  

 

Total Return:
                                  Kirk   S&P500+  NASDAQ 
5 Yrs 12/31/98 through 12/31/03  171.0%  ( 3.0%)  ( 8.6%)
Annualized Annual Return          22.1%  ( 0.6%)  ( 1.8%)
 
Click for a free issue of my newsletter 
Suitable for the aggressive growth part of your
  diversified investment portfolio.

-- posted by Kirk

Top 48. Oct 20, 2005 1:08 PM

» Normxxx - Next UltraGrowth Stock

The Next Ultimate Growth Stock

By John Reeves, TMF | 20 October 2005

It's late August 2004, and you have a dilemma. You have $5,000 to invest, and you can't decide between two stocks: one a growth selection, the other a value play. The growth stock is Google (Nasdaq: GOOG), a leader in Internet search engines that everyone is talking about. You can buy in at $100 per share. No one seems to have a clue regarding the value of this company, and you don't really know anything about search engines, except that you can search old high school buddies on Friday afternoons at work.

The value pick is Mattel, the popular maker of children's toys. Several analysts have crunched the numbers on this one and have determined that the share price is significantly undervalued at $16. And doesn't Peter Lynch recommend that you buy what you know? You may not know search engines, but you know toys. Kids like toys, and parents spend loads of money on their kids. In the end, you convince yourself to buy $5,000 of Mattel at $16 per share. Google was just too darn risky.

Today, Mattel trades at $15.11 per share, which amounts to a loss of 5.5% over the course of 14 months. Needless to say, you're not exactly pleased with the result. However, Google now trades at $305.85, which has yielded a 205% return over the same period. The $5,000 you invested in Mattel is now worth $4,725; the $5,000 you might have invested in Google would be worth $15,250. Should you consider the difference between the two investments ($15,250 - $4,725 = $10,525) the opportunity cost of choosing the safer investment?

Perhaps not. But the above simplistic illustration does suggest that there might be a price to be paid for ignoring high-growth sectors like biotechnology, the Internet, and nanotechnology. At Motley Fool Rule Breakers, we respect the tenets of fundamental analysis, but we also know that sometimes you have to look beyond traditional valuation techniques to find the next ultimate growth stock.

The method in our madness

The fictitious biotech start-up Cure-all is trading at $5 a share and has 10 million shares outstanding. The company will be spending $10 million a year developing a late-stage drug for the next four years. The new drug comes on the market in the fifth year and will return $100 million a year thereafter. For this company, we might use a discount rate of 15%. (Think of the discount rate as the rate of return you would require on your investment, given a particular level of risk.) To value any company, we must first add the present value of all future cash flows. The terminal value (year five and beyond) is determined by dividing the $100 million cash flow by the discount rate. We would then need to determine the present value of that figure. The numbers would look like this:

	Year 1	Year 2	Year 3	Year 4	Year 5 Onward
Cash Flows	-$10 million	-$10 million	-$10 million	-$10 million	$667 million ($100 million/.15)

Then it's just a matter of taking the present value of each of the cash flows:

(-10/1.15) + (-10/1.15²) + (-10/1.15³) + (-10/1.15⁴) + (667/1.15⁵) = $303.3 million

We would then divide the $303.3 million by 10 million shares, which would yield an intrinsic value of $30.33 per share for this company.

In other words, you can buy a stock worth $30.33 for a mere $5 per share. Even a value investor would see this as a good deal, right? Not so fast -- there's one more thing to consider. Let's say that there is a significant possibility that the drug would not be approved. In our simple example, such a scenario would lead to a valuation of zero for the company. Still interested? Faced with the possibility of a zero valuation, many investors would walk away.

But our analysts at Rule Breakers would dig deeper. Next, they would subject Cure-all to a probability analysis. If the odds of the drug being approved are 50%, then your expected return is very attractive. If the drug is approved, your $5 share is worth $30.33, resulting in a profit of $25.33. If the drug is rejected, your $5 share is worth nothing, resulting in a loss of $5. Overall, your expected return is [.5($25.33) + .5 (-5)] =$10.17.

To accurately determine the probabilities, we would need to consider how similar drugs have fared in the past and examine the track record of the firm's management. At some point, our analysts would decide whether to invest in Cure-all. Traditional valuation methods would affect the decision, but other qualitative factors would also be important.

This hypothetical example illustrates a number of lessons. First, it might be wise to invest in companies with a positive expected return -- even if there is a possibility of losing everything. With [sufficient] diversification, you will benefit over the long term. Second, growth investing demands patience and fortitude. It can take several years for your investment to pay off. Sometimes the investment might not pay off at all. Finally, the illustration shows that there is an art and a science to growth investing.

The vision thing

One of the most difficult tasks in valuing any company is trying to predict future cash flows. Obviously, this task is easier with established companies such as Lowe's (NYSE: LOW) and Procter & Gamble (NYSE: PG) than it is with younger, higher-growth companies. When David Gardner, lead analyst for Rule Breakers, first invested in Amazon.com (Nasdaq: AMZN) back in 1997, he had to look beyond classical valuation techniques and envision the opportunities for a firm in this industry. That sort of vision has rewarded him handsomely -- Amazon.com stock is up more than 1,000% since he bought it.

The recent events relating to Archipelago, a fully electronic stock exchange, offer yet another instructive case study. I think even David would admit that he never envisioned this stock rocketing up almost 60% in one day, as it did earlier this year. But he was able to look beyond the fundamentals and make an informed prediction as to where the trading industry was headed. With Rule Breaking investing, you need to be able to assess what could be, far more than what is.

There are considerable risks with this strategy, obviously. One of our biotech stock selections is down more than 60% since it was selected last fall. When you swing for the fences, there will be strikeouts along the way. We recommend that investors allocate anywhere from 5% to 30% of their portfolio to growth stocks, depending on their time horizon and risk tolerance. That way, investors will not miss out on the next Starbucks (Nasdaq: SBUX) or the next Dell (Nasdaq: DELL).

Nothing to fear but fear itself

As David has said, "The next ultimate growth stock is out there, and we're confident that our Rule Breakers team will find it." To improve our odds, our analysts use traditional analytical techniques as well as more qualitative approaches. In the end, we respect the numbers but refuse to be enslaved by them.

Thus far, our picks are handily beating the market since our launch last fall. The biotech selection Vertex Pharmaceuticals (Nasdaq: VRTX) became our first double earlier this year (up 108%), and we're hopeful we'll have quite a few more after all is said and done.

______________

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx