Rule Breaker Portfolio

<THE RULE BREAKER PORTFOLIO>

Landscaping the Net
...and you've got upgrades

by Barbara Eisner Bayer (TMFVenus@aol.com)

HILLSBORO BEACH, FL (Jan. 28, 1999) -- Trying to stay abreast of Internet mergers has become more difficult than keeping up with Hollywood marriages. It's reminiscent of the days when royalty negotiated unions of their offspring solely for the financial and territorial benefits of such alliances. Yahoo's current engagement to GeoCities joins other industry superstars AOL/Netscape and @Home/Excite generating more excitement than the social register. I'm half expecting Robin Leach to appear on CNBC as a regular commentator -- "Lifestyles of the Rich and Cyber."

In addition, leading competitors are calling a truce in the interests of improvements for all -- Lucent, Cisco, Sun Microsystems, and Network Associates are teaming up to improve security for computer networks. The companies realized their combined expertise would most probably produce a quicker and more efficient solution than if they tackled the problems separately. And you can bet everyone will benefit from these megapowers putting down the boxing gloves and joining hands to sing a cyber version of "Kumbaya."

Speaking of betting, Federal Reserve Chairman Alan Greenspan excited the media by saying that Internet stock prices are rising under a "lottery principle" in which some companies will win and some will lose. After all, you can always get someone -- although hopefully not someone calling herself a Fool -- to pay for that one in a million shot. What the media failed to focus on, however, was all the other stuff Greenspan said -- the good stuff -- that when it comes to the Internet, "the size of the potential market is huge" and that some of the high valuations are justified given the rising use of the Internet for business.

"You wouldn't get hype working if there weren't something fundamentally potentially sound under it," Greenspan stated. "The issue really gets to the increasing evidence that a significant part of the distribution of goods and services is going to move from conventional channels into some form of Internet system."

And it is this "form," in its current infancy stage looking a lot like unmolded Jell-O, that is being shaped and refined every day through these various Internet alignments, the strongest and most visionary of which should end up leading the pack.

Greenspan also advised investors to ferret out the better opportunities prior to earnings actually materializing. Give the Chairman a Fool's cap, please!

No doubt one of the leaders and better opportunities is in Fool holding America Online
(NYSE: AOL), up $8 15/16 today. And here's food for thought: a stockholder who bought 1,000 shares for $11,500 at the company's initial public offering on March 19, 1992 and held on to each and every one of those delicious shares, would, after the latest split, own 64,000 shares valued at approximately $5 million. Holy Cyber space, Batman!

AOL's current love affair with analysts saw many of them pushing and shoving to get a kiss from the current Internet darling, as no fewer than five firms upgraded their ratings on AOL. My favorite was from the Salomon Smith Barney analyst who upgraded it from a speculative buy to a buy/high risk. Hmmm. Upgrading from a "buy" to a "buy" and a "high risk" from a "speculative." Silly me� I assumed that high risks were speculative. But I'm just a Fool� what do I know.

Also in today's news, AOL lost its bid with the U.S. Federal Communications Commission to require cable TV companies to sell their new high-speed Internet hook-ups to competing Internet companies. At least for now. What's especially interesting here is that the agency found that the number of users of broadband services exceeds the number using other communications-related consumer technologies -- including color TV and cellular phones -- at the same point in their rollouts. This bodes well for Fool holding, @Home (Nasdaq: ATHM), which skyrocketed another $5 7/8 today.

And finally, in other Fool Port highlights, Lucent (NYSE: LU) announced a new division, which will focus on the growing market for speech products in communications networks. Dan Furman, the new president of Lucent Speech Solutions, proudly states that "Lucent will be a major player in the speech market." As a matter of fact, Lucent expects to become a leader in these new markets. Just what the Rule Breaker Port ordered.

As Foolish investors, it's hard not to gape at the speed at which the Internet is evolving. Yet, as we pull our tongues back in and head over to our computers to understand business models, leadership potential and earnings -- or lack thereof -- it's essential we not let the market volatility detour us from the Foolish path. Remember, as David wrote right here in this column in Tuesday's recap, we Fools suffered through a 65% drop in AOL's share price at one point. But we held through it all, knowing it was simply the cost of growing pains for a Rule Breaker. And in the long run, it has paid off quite handsomely.

And if you happen to bump into Chairman Greenspan, let him know I'd like him to go in with me on the purchase of some lottery tickets.

Fool on!
Barbara

Check Out the New Harry Jones Portfolio

01/28/99 Close
Stock  Change    Bid 
 ---------------- 
AMZN  -2 3/4  122.88
AMGN  +3 11/16 119.56
AOL  +12 11/16 174.69
T     +4 3/8   89.88
ATHM  +5 7/8  121.88
DJT   -  1/8    4.38
DD    -  7/16  52.69
XON     ---    71.00
IP    -  13/16 40.06
IOM     ---     7.13
LU    +1 3/4  113.38
SBUX  +  1/16  48.94
TDFX  +  3/16  12.94

 
                   Day   Month    Year  History  Annualized 
      R-BREAKER  +2.66%  12.90%  12.90% 1033.20%  71.89%
        S&P:     +1.78%   2.94%   2.94%  188.75%   26.69%
        NASDAQ:  +2.92%  12.98%  12.98%  243.99%   31.74%
 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    174.69    9510.36%
   9/9/97  1320 Amazon.com     6.58    122.88    1767.62%
  5/17/95  1960 Iomega Cor     1.28      7.13     456.46%
  10/1/96    84 LucentTech    23.81    113.38     376.20%
  8/12/96   130 AT&T          39.58     89.88     127.08%
  12/4/98   450 @Home Corp    56.08    121.88     117.32%
  4/30/97 -1170*Trump*         8.47      4.38      48.34%
 12/16/98   290 Amgen         85.75    119.56      39.43%
  2/20/98   200 Exxon         64.09     71.00      10.78%
  2/20/98   215 DuPont        59.83     52.69     -11.94%
   7/2/98   235 Starbucks     55.91     48.94     -12.47%
  2/20/98   270 Int'l Pape    47.69     40.06     -16.00%
   1/8/98   425 3Dfx          25.67     12.94     -49.60%

    Rec'd    #  Security     In At     Value      Change
   8/5/94  1100 AmOnline    1999.47 192156.25  $190156.78
   9/9/97  1320 Amazon.com  8684.60 162195.00  $153510.40
  12/4/98   450 @Home Corp 25236.13  54843.75   $29607.62
 12/16/98   290 Amgen      24867.50  34673.13    $9805.63
  2/20/98   200 Exxon      12818.00  14200.00    $1382.00
  5/17/95  1960 Iomega Cor  2509.60  13965.00   $11455.40
  8/12/96   130 AT&T        5145.11  11683.75    $6538.64
   7/2/98   235 Starbucks  13138.63  11500.31   -$1638.31
  2/20/98   215 DuPont     12864.25  11327.81   -$1536.44
  2/20/98   270 Int'l Pape 12876.75  10816.88   -$2059.88
  10/1/96    84 LucentTech  1999.88   9523.50    $7523.62
   1/8/98   425 3Dfx       10908.63   5498.44   -$5410.19
  4/30/97 -1170*Trump*     -9908.50  -5118.75    $4789.75

                              CASH  $39332.55
                             TOTAL $566597.61

</THE RULE BREAKER PORTFOLIO>

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