Rule Breaker Portfolio

<THE RULE BREAKER PORTFOLIO>

Amgen Underperforms
Plus, chatting about Amazon, AOL, @Home

by Jeff Fischer (TMFJeff@aol.com)

Alexandria, VA (Feb. 3, 1999) -- For reasons unexplained, Amgen (NYSE: AMGN) only rose 0.54% despite a strong stock market that saw the S&P gain 0.80% and Nasdaq advance 1.22%. Amgen has consistently advanced whenever the stock market rises, and it usually outperforms the indices, too. In fact, since January 4 the stock has steadily spiraled upward from $107 per share, easily defeating the market. Not surprisingly, today's lackluster performance left analysts perplexed.

"The market was very strong after the Federal Reserve didn't take any action on interest rates this afternoon," said Bob Hussit, a stock trend expert who couldn't name his company of employment. "Almost everything worth its salt rose sharply following the non-news from the Fed. The lack of news was big news, and every good stock responded. It concerns me that Amgen went against the trend and waffled. It even dipped at one point."

Other analysts voiced the same concern. Though it can't be confirmed, one analyst is now considering lowering his published rating on Amgen from "Aggressive Buy" to "Indecisive Buy."

A friend of the analyst who asked that he be called Frank said, "My friend, an analyst, is concerned that Amgen downticked near the close today. In fact, the thing was down 0.74% at one point while the entire S&P 500 was up nearly 1.0%. That's a wide disparity. The stock is obviously underperforming, at least as of today. Whether or not the trend will last is uncertain, but all my friend can do is read the tape and then move on the ticks. He's moving to downgrade the stock. You'll probably hear about it on CNBC tomorrow. He'll sell my shares for me well before then."

Another analyst who was bearish on the shares at $87 last October reiterated his bearishness. "Today was not a good sign for the bulls, whose party is about to end. This thing is overpriced and the day of reckoning will come. It could easily lose 25% and fall back down closer to $100." When reminded that Amgen will split 2-for-1 on February 12, the analyst lowered his price estimate: "It could hit $50 then. Maybe $45 after that."

Amgen wasn't the only story on the stock market. Amazon.com (Nasdaq: AMZN) and America Online (NYSE: AOL) rose significantly. We sought those in-the-know by visiting a chat on the Web.

This afternoon in a crowded Internet trading chat room a man named TamaleDog shared his opinion on the issue. He wrote, "Amazon has formed a base at around $110 for the second time. Now it's ready to move. The close above $120 today is a very good sign. The new support price will be $120."

To which BassMan, another trader in the room, responded: "You're a joke, TamaleDog. Amazon never even based at $100, let alone $110. Look at your chart again. $110 was just a bounce both times. There wasn't enough volume to mean anything. My chart tells me $80 will be the base -- and soon. I'm doubling my short position."

Having gotten the scoop on Amazon, we asked the room why America Online rose. Traders in the room wouldn't readily comment on AOL, however. One woman finally shared that the chat room doesn't follow it anymore. "It isn't volatile enough," she explained. "It's become too established. The company has succeeded so there isn't the same opportunity anymore."

"But the stock continues to rise," we wrote to the chat room and to her. "Sure," she responded. "But that's pretty much a given. There isn't the same risk anymore and you need volatility AND risk to trade in and out of stocks. You can't just trade the companies that are steady risers, like Microsoft. There's no money in it."

Having squeezed all of the intelligence from the trading chat room that we could, we exited and investigated recent news on the Web. There was only one interesting press release: @Home (Nasdaq: ATHM) announced the completion of its deal to acquire Narrative Communications for $96 million in @Home stock.

To analyze the issue from the important consumer side, we asked a random stranger through an instant message what this news means. An AOL user who goes by the name of Stampeeeed agreed to discuss the topic. He told us that he was a 24-year-old male majoring in computer science.

"The Narrative purchase was first announced a while ago," he said. "It's about advertising. @Home wants to offer the best advertisements possible through its broadband Internet media, which includes TV set-top boxes. But also, considering the pending Excite purchase, @Home is interested in developing ads for regular dial-up Internet connections, too -- meaning, the current mass Internet."

"Thanks for the simple explanation," we said. We then talked a bit more. It turns out that he invests long-term: buy and hold great companies and ignore all of the noise. Also, take with a grain of salt everything you read or hear. Think for yourself. ("Hey, have you heard of the Fool?")

P.S. Be certain to visit Tom and David on their Rule Breaker, Rule Maker nationwide book tour. Tomorrow (Thursday) they're in San Francisco and Walnut Creek, California.

P.S. 2. Amazon's CEO Jeff Bezos will be on Sixty Minutes II tonight on CBS. Check it out... And by the way: Remember the English genealogy book that Amazon accidentally sent my way? When contacted about it, Amazon told us to donate the book to a local library. Rather than do that, we offered it here. The book is now being donated to a very small English library on one of the smaller islands of New Zealand... Speaking of giving on a broad scale, Starbucks (Nasdaq: SBUX) offered to donate $1 to earthquake victims for every pound of Colombian coffee that it sells this month. Now that's Foolish. (Please visit the Rule Breaker message board if you care to discuss anything. We'll see you there.)

02/03/99 Close
Stock  Change    Bid 
 ---------------- 
AMZN  +15 1/2 125.75
AMGN  +  11/16127.69
AOL   +6 3/16 173.44
T     +3 1/8   95.00
ATHM  +  1/4  112.75
DJT   +  1/8    4.50
DD    +1 3/8   53.00
XON   +1 11/16 70.38
IP    +  3/8   41.56
IOM   -  1/8    7.19
LU    -  5/8  109.75
SBUX  +1 3/4   51.94
TDFX  +  9/16  12.31

 
                   Day   Month    Year  History  Annualized 
      R-BREAKER  +5.36%   0.97%  13.26% 1036.78%   71.67%
        S&P:     +0.80%  -0.59%   3.80%  191.06%   26.81%
        NASDAQ:  +1.22%  -0.50%  13.71%  246.22%   31.80%
 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    173.44    9441.59%
   9/9/97  1320 Amazon.com     6.58    125.75    1811.31%
  5/17/95  1960 Iomega Cor     1.28      7.19     461.34%
  10/1/96    84 LucentTech    23.81    109.75     360.98%
  8/12/96   130 AT&T          39.58     95.00     140.03%
  12/4/98   450 @Home Corp    56.08    112.75     101.05%
 12/16/98   290 Amgen         85.75    127.69      48.91%
  4/30/97 -1170*Trump*         8.47      4.50      46.86%
  2/20/98   200 Exxon         64.09     70.38       9.81%
   7/2/98   235 Starbucks     55.91     51.94      -7.10%
  2/20/98   215 DuPont        59.83     53.00     -11.42%
  2/20/98   270 Int'l Pape    47.69     41.56     -12.85%
   1/8/98   425 3Dfx          25.67     12.31     -52.03%

    Rec'd    #  Security     In At     Value      Change
   8/5/94  1100 AmOnline    1999.47 190781.25  $188781.78
   9/9/97  1320 Amazon.com  8684.60 165990.00  $157305.40
  12/4/98   450 @Home Corp 25236.13  50737.50   $25501.37
 12/16/98   290 Amgen      24867.50  37029.38   $12161.88
  5/17/95  1960 Iomega Cor  2509.60  14087.50   $11577.90
  2/20/98   200 Exxon      12818.00  14075.00    $1257.00
  8/12/96   130 AT&T        5145.11  12350.00    $7204.89
   7/2/98   235 Starbucks  13138.63  12205.31    -$933.31
  2/20/98   215 DuPont     12864.25  11395.00   -$1469.25
  2/20/98   270 Int'l Pape 12876.75  11221.88   -$1654.88
  10/1/96    84 LucentTech  1999.88   9219.00    $7219.12
   1/8/98   425 3Dfx       10908.63   5232.81   -$5675.81
  4/30/97 -1170*Trump*     -9908.50  -5265.00    $4643.50

                              CASH  $39332.55
                             TOTAL $568392.18

</THE RULE BREAKER PORTFOLIO>

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