<THE RULE BREAKER PORTFOLIO>
What Happened to Fool Port?
The Minivan Market
A Port on Wheels
by Rick Aristotle Munarriz (TMF Edible)
MIAMI, FL (Jan. 11, 1999) -- Live a little, learn a lot. Over the past few years I am finding that tuition for life lessons is getting easier to come by. Sometimes I find myself on the blue highway of desperation, trying in vain to find the right words to convey a financial truth, when the mundane is often the better teacher. Uh oh, I'm doing it again. I'm reaching. I'm losing you faster than the point I was trying to make. Which was?
I went car shopping with my wife over the weekend. Ever since I stumbled across our excellent Buying a Car section I was looking forward to a little Folly flexing at my next auto-buying opportunity. That's right, being armed with a game plan got me excited about hitting the showroom and cutting a deal on wheels. Set on my own British metal box for the next few years, it was time for my wife to trade in her aging Mazda.
Here is where the problems, and the investing veritas, start. We had done the auto show thing so she could kick the tires. Literally. We scaled that cavernous convention floor and gave every display model the boot. With pulsating toes she narrowed down her wishlist to a few selections and we did a little more due diligence. Is this stock picking or what?
After we cleared the brochure mountain we had made in our den, my wife finally decided on the one vehicle that offered all she wanted for the future. Power. Comfort. Room to Grow. That's right, she fell in love with Amazon.com (Nasdaq: AMZN). Did I say Amazon? I meant to say that she settled on the Honda Odyssey.
In a nutshell, she was not alone in her heartbeat-skipping. The waiting list, that's right, waiting list, was 4-6 weeks long. The redesigned minivan appears to be in short supply since the EX model just started rolling out of the Canadian plant. We spoke to a ton of car dealers and even the ethical one had no choice but to stick to the MSRP. Fellow Fools, please forgive me! I know paying MSRP for a car is heresy but don't shed a tear for us. We finally closed the deal with the car salesman willing to give us the best price on our trade-in, but my point is simple. Amazon.com is an Odyssey.
I tried talking my wife into cars where supply ran in abundance. Oh the deals I could have probably struck on a Voyager or a Quest. I mean, isn't a quest and an odyssey or what a voyager does almost the same thing by definition? But this isn't about fundamental valuations. This isn't about some archaic formula where I figure out which minivan offers us the best Price-to-Cupholder ratio. When something is in demand, when something is done right, odds are you are going to have to pay up for the privilege to own it.
That may sound a bit peculiar when the media forces a balance scale your way. To hear that the market cap of Amazon.com has surpassed Sears (NYSE: S) or Merrill Lynch (NYSE: MER) will shake you. To think that America Online (NYSE: AOL) is valued higher than Disney (NYSE: DIS) or even the sum of publicly traded Norwegian companies will rattle you. But what ultimately rolls you? Wouldn't you rather own AOL than Norway?
Norway is a beautiful country that I have only had the luxury to visit once. The friendly folks there never once interrupted me with a popup ad, or a busy signal, though I did eat some bad salmon one night. No, there is no rational reason why one should choose America Online over this wondrous nation. However, this winter, which has proven to be the hotter selection? And what about Sears? Since that item hit the news last month the scales have continued to tip. Another 10% rise in Amazon.com and you will be able to buy not one, but two Sears! Now, the vulture in me is definitely a Sears fan. Those stores are everywhere. A year ago Amazon.com opened up only its second distribution center. Still, when pressed, you will probably go with growth.
How many Voyagers would it take to sway my wife away from her Odyssey? I love the Plymouth minivan myself, but I could stack them pyramid high on our driveway, the amount is immaterial. My wife wanted an Odyssey. She'll get hers. Amazon.com shareholders have already had theirs.
Supply. Demand. Sellers. Buyers. The market is more logical, and rooted in simple economic academia, than we have given it credit for recently. We speak of "mania" when in reality we should be saying "many us" as in many of us are willing to pay these prices on these equities. We don't want the Voyager or the Sears or the Disney. Sorry, Mickey.
Tulip bulbs ended badly. Furby will end badly. But these are extreme cases of stagnant flashes of fancy that never could have mustered any kind of staying power beyond colorful novelty. Will commerce go away? Will the Internet go away?
As you mull that over, and I've got plenty of time until my wife's new car is ready so please, get comfortable, let's look at the great day turned in by the Rule Breaker Port. Just six trading days into the new year we are up 27.6% -- already ahead of what the stock market averages over the course of two full years.
Actually, from a professional money management perspective, the 9.84% gained by the Port today alone would be a pretty darn good year for many mutual funds. The rest of the market certainly didn't keep up as there was a case of overdemand in the technology-rich Nasdaq Composite (up 1.7%) along with oversupply in the blue chip haven S&P 500 (down 0.9%).
The Port was fueled by that same force that had me pay up for an Odyssey this weekend. Get Net or Get Out. Our Triple-A Internet collection of @Home (Nasdaq: ATHM), America Online and Amazon.com all had gains of at least 12% today.
Merrill Lynch, the-wee-smaller-than-Amazon.com Merrill Lynch, and BT Alex. Brown reiterated buy ratings on America Online today, setting price targets of $195 and $180, respectively. Lynch's target used to be a split-adjusted $75. Brown's Shaun Andrikipoulos pointed out how AOL has signed up 181,000 subscribers over the last seven days, more than the online service had lined up over its first seven years. Citizenship growth in Scandinavia just can't beat that.
Meanwhile, Starbucks (Nasdaq: SBUX) opened up its first store in Beijing yesterday. Last time I checked the population of China one thing was obvious: there are a latte people living there.
So where there is room for growth there is opportunity. Like my wife, wanting a minivan built for seven when we are only a family of four. I guess we all want an odyssey. Though, you know what, getting there is really half the fun.
Rev On, Fools!
Day Month Year History Annualized R-BREAKER +9.84% 27.58% 27.58% 1180.55% 77.70% S&P: -0.89% 2.81% 2.81% 188.40% 26.97% NASDAQ: +1.71% 8.75% 8.75% 231.11% 30.99% Note: Yearly, historical and annualized returns for the S&P include dividends Rec'd # Security In At Now Change 8/5/94 1100 AmOnline 1.82 164.19 8932.71% 9/9/97 1320 Amazon.com 6.58 184.63 2706.17% 5/17/95 1960 Iomega Cor 1.28 9.25 622.43% 10/1/96 84 LucentTech 23.81 112.88 374.10% 12/4/98 450@Home Corp. 56.08 121.88 117.32% 8/12/96 130 AT&T 39.58 85.19 115.24% 4/30/97 -1170*Trump* 8.47 4.94 41.70% 12/16/98 290 Amgen 85.75 108.63 26.68% 2/20/98 200 Exxon 64.09 71.00 10.78% 2/20/98 215 DuPont 59.83 59.75 -0.14% 2/20/98 270 Int'l Pape 47.69 45.94 -3.68% 7/2/98 235 Starbucks 55.91 53.00 -5.20% 1/8/98 425 3Dfx 25.67 12.88 -49.84% Rec'd # Security In At Value Change 9/9/97 1320 Amazon.com 8684.60 243705.00 $235020.40 8/5/94 1100 AmOnline 1999.47 180606.25 $178606.78 12/4/98 450@Home Corp. 25236.13 54843.75 $29607.62 5/17/95 1960 Iomega Cor 2509.60 18130.00 $15620.40 10/1/96 84 LucentTech 1999.88 9481.50 $7481.62 12/16/98 290 Amgen 24867.50 31501.25 $6633.75 8/12/96 130 AT&T 5145.11 11074.38 $5929.27 4/30/97 -1170*Trump* -9908.50 -5776.88 $4131.63 2/20/98 200 Exxon 12818.00 14200.00 $1382.00 2/20/98 215 DuPont 12864.25 12846.25 -$18.00 2/20/98 270 Int'l Pape 12876.75 12403.13 -$473.63 7/2/98 235 Starbucks 13138.63 12455.00 -$683.63 1/8/98 425 3Dfx 10908.63 5471.88 -$5436.75 CASH $39332.55 TOTAL $640274.05
</THE RULE BREAKER PORTFOLIO>