Fool.com: Excite@Home and the Addictive Cycle [Fribble] May 18, 2000

Fribble Excite@Home and the Addictive Cycle

By Mike Workman (mworkmanmi@aol.com)
May 18, 2000

I've just noticed something. Purchasing Excite@Home (Nasdaq: ATHM) is unlike buying any other stock. This is the fifth time I've bought into the stock, and it occurs to me that there's always a pattern; the same one that is referred to as the "addictive cycle" by counselors. Please allow me to explain.

Excite@Home, to me, is kind of like Michelle, my first heartthrob back in the fifth grade. I was truly infatuated with Michelle. I found her extremely attractive (in a fifth-grade sort of way) and used to dream of kissing her, but my friends did not share my attraction with Michelle. As a matter of fact, they thought she was extremely unattractive, and constantly reminded everyone that she had "cooties" (to this day I'm not quite sure what the specific identifying marks were, but I do know that the fastest way to be shunned by your friends was to be seen next to someone who had been identified with this affliction). Alas, because of the power of peer pressure I could never enjoy being next to Michelle and I never was able to express my feelings towards her. But probably my deepest regret was listening to the other kids humiliate Michelle, and never once coming to her rescue in her moment of need; an act of bravery that I'd performed countless times in my imagination, but couldn't muster the courage to perform at the time.

The addictive cycle is rather fascinating if you're not familiar with it, especially if you tend to exhibit compulsive or addictive tendencies and have never noticed this pattern in your behavior before. The addictive cycle is broken up into four stages, which always follow in a certain order. They are:

1) PREOCCUPATION. In this stage the person becomes too focused on one particular thing. For me, it's the thought "Gee whiz, I can't believe how cheap @Home is...are people crazy? This company is going to rule about a third of the Internet someday." So I start watching it. Again.

2) RITUALIZATION. This is where the particular thought you have is accompanied by some sort of activity relating to your thoughts or fantasies, no matter how innocuous or distanced it may seem. For me, I start figuring how many shares of the company I could buy with the money in my cash account, or MAYBE even how many shares I could buy if I sold everything else in my account. The danger of entering the ritualization phase, of course, is that once you begin to ritualize, it's certain that you will go to phase three, acting out; it's just a matter of time. Like they say in the movie, "Dead man walking!"

3) ACTING OUT. It means just that; acting out on your fantasies or compulsions. For me it's this news flash: "Comcast executive expresses interest in buying out AT&T's interest in @Home." THAT'S IT! I'M IN (again)! I have to pay $20 1/2 a share, about 20 percent more than what it's been trading for just a few days ago, but that's OK; it'll be $42 by tomorrow afternoon, easily, right?

4) GUILT AND SHAME. This is where the addict feels remorse for his actions, and makes an emotional pledge to himself that this won't happen again. For me, it's watching the stock sink back down, within 48 hours, to $18. Then I play it out in my mind, over and over, how the last two times I've bought the stock, I've lost money -- don't I ever learn?

Actually, I'm still OK with the company, and I don't mind hanging on to it for a while. It's just that I can't talk with any of my "stock buddy" friends at work about it. I can just see the conversation sometime next week:

"Hey, Mike! How's that Burr--Brown Semiconductor thing doing that you picked up a couple of weeks ago?"
"Well, actually... I sold it a few days ago."
"Really? You were so pumped on it? What did you get?"
"Ahh, ehh... an incredible company, really. They offer high speed Internet access though cable TV lines... their growth is exponential, and all these analysts are saying $100 price targets in the next six months... and it's only twenty bucks a share!"
"If I didn't know any better... I'd say that--- HEY! did you buy @Home AGAIN?!?"
"Well, yes--"
"You idiot! Why don't you just flush your money down the toilet?"

And that kills me, because of all the long-shot speculative stocks any of my friends or I have, Excite@Home probably has the best chance of success.

So, do I break the cycle of guilt and shame, and just come out of the closet next week and tell them that I'm @Home again, or keep it as my "dirty little secret," and rub it in their faces this summer when it's at $100 a share again; or do I sell it quickly, and cut my losses, as my Investor's Business Daily urges me to do? Maybe, somewhere in the back of my mind, I even think of defending the company to everyone I meet; I'll start promoting the stock, and somehow vindicate myself from my cowardess thirty years ago. It can't have the cooties forever, can it?