Rule Breaker Portfolio

<THE RULE BREAKER PORTFOLIO>

Does it really matter?
Fool Four in the news

By Paul Larson

CHICAGO, IL (March 12, 1999) -- Like all Fridays the market is open, some stocks went up while others went down. Does it really matter what this portfolio did on the day? Not really. Similar to a broken record, I'll say it again. It's the long-term performance that really counts, not the daily, weekly, or even monthly volatility we might see in any of our stocks.

We do post the daily performance numbers here day in and day out, which may give the impression that we are watching the trading action of the Rule Breakers like a hawk. Nothing could be farther from the truth. I'm not even certain if David or Jeff checked the news or the quotes for the portfolio today, and it wouldn't surprise me one bit to learn they have no clue what happened in the market or to their stocks. If there's one point that we at The Motley Fool can hopefully illustrate it is that one doesn't need to stay glued to CNBC or streaming real-time quotes in order to beat the market. Investing in the stock market can be fun and profitable, but it doesn't need to be an all-consuming activity to be as such.

For those of you who clicked into this space to see how the Rule Breakers performed on the day and week, I'll post the numbers at the end of the recap. Sometimes I wonder why we as writers even bother to scribe the daily numbers since they are posted every single day at the very bottom of this page. Scroll all the way down and check the numbers out, if you haven't already.

Sometimes in this space we have groundbreaking analysis, other times we just spy our performance and look at the news of the day. I'm currently running low on groundbreaking thoughts, and I truly want to get through an entire recap without discussing the portfolio's performance. That leaves us with the news of the day, of which there happens to be plenty.

The news that's probably the most noteworthy to the Rule Breakers came from Iomega (NYSE: IOM). The company announced today that it has dropped the estimated street price of the 100 MB external Zip drive to $99.95. While anyone who has been watching the prices of the Zip drives should find this news anything but surprising, it is nevertheless an interesting milestone since the original drives are now roughly half the price they were when first introduced four years ago. (Has it really been four years already? I'm starting to feel old!)

The story with Iomega really hasn't changed much over the past couple of months, which is probably one of the reasons it is not mentioned here nearly as much as it once was. Shareholders are still looking at falling Zip drive prices, an increasing user base whose expansion rate is slowing, and a new management team more focused on profitability. Meanwhile, the new Clik! drives continue to be rolled out for use where highly mobile data storage is needed. Will the new drives become a mainstay in the emerging digital camera market, or will Clik! be delegated to a small market niche? How that question is answered probably says much about where you think Iomega is headed.

There was plenty of other news in the portfolio, but it's interesting to note that almost all of it came from the normally sleepy Foolish Four. In a strange turn of events, the most volatile stock in the Rule Breaker happened to be one of the Dow heavies. We've come to expect spasmodic activity from the Amazons (Nasdaq: AMZN) and eBays (Nasdaq: EBAY) of the portfolio, but from Caterpillar?

That's right, Caterpillar (NYSE: CAT) warned the street earlier today that it expects to report soft first quarter earnings. The company came out and essentially told analysts that its profit estimates were about double what they should be. Oops. After earning $4.11 per share last year, the Peoria-based company said it expects profits in the $3.50-$3.60 per share range for 1999, which is only about a dime lower than analysts had been expecting. Nevertheless, Caterpillar got churned for quite a loss today. Feel free to scroll down and see the carnage.

Our slippery Foolish Four holding Chevron (NYSE: CHV) was also in the news today. The company said it was going slice about 300 folks from the payroll of its Chevron Chemical subsidiary and move its headquarters from California to Houston. The job cuts represent less than one percent of the total employee ranks of Chevron as a whole. In other words, this news is barely a blip on the radar. Of more interest, in my opinion, is the news that the company's CEO managed to get pied by some environmental activists earlier in the week. Splat!

DuPont (NYSE: DD), also one of the huge companies that form the anchor of this portfolio, revealed in an extremely short press release today that it is in negotiations for a possible merger with Pioneer Hi-Bred (NYSE: PHB), fertilizing the Pioneer shares and sending them skyward. Since Pioneer is the nation's largest seller of seeds, I thought maybe I would ask Harry for some insight into the potential deal. I couldn't get hold of him before deadline, so we'll have to wait until Monday to see if Harry has any insight to share.

How does all this news affect our Foolish Four holdings? It doesn't. No matter what happens to our Foolish Four companies we'll be holding the stocks tight until February 24 of the year 2000. Though it is interesting to watch this news as it happens, it has absolutely no bearing on the investment decision-making process for those holding to the Foolish Four discipline. No agonizing judgements to make here, just 10 minutes a year is needed to undertake the method. Click here for more info on the Foolish Four.

Have a great weekend, and hope to see you on the Rule Breaker message board!

-- Paul Larson

Rule Breaker numbers for the week:


               Today    Weekly Move 
Rule Breaker: -1.42%    +6.33%
S&P 500:      -0.24%    +1.50%
NASDAQ:       -1.27%    +1.90%

What's up with Harry Jones today?

03/12/99 Close
Stock  Change    Bid 
 ---------------- 
AMZN  -1 9/16 133.31
AMGN  +  3/8   75.00
AOL   +  7/16  96.13
ATHM  -5      113.44
DJT   +  3/16   4.50
CHV   -  3/8   84.69
CAT   -6 3/16  44.69
DD    -  3/8   57.75
GT    -1       51.19
IOM   -  1/4    5.25
SBUX  -1 3/16  60.06
TDFX  -  1/8    13.94
EBAY  -8      142.00

 
                   Day   Month    Year  History  Annualized 
      R-BREAKER  -1.42%   8.44%  23.16% 1136.18%  72.75%
        S&P:     -0.24%   4.54%   5.64%  195.97%   26.61%
        NASDAQ:  -1.27%   4.09%   8.61%  230.69%   29.70%

Rec'd    #  Security     In At       Now      Change
   8/5/94  2200 AmOnline       0.91     96.13   10476.55%
   9/9/97  1320 Amazon.com     6.58    133.31    1926.26%
  5/17/95  1960 Iomega Cor     1.28      5.25     310.03%
  12/4/98   450 @Home Corp    56.08    113.44     102.28%
 12/16/98   580 Amgen         42.88     75.00      74.93%
  4/30/97 -1170*Trump*         8.47      4.50      46.86%
  2/26/99   300 eBay         100.53    142.00      41.26%
   7/2/98   235 Starbucks     55.91     60.06       7.43%
  2/23/99   180 Chevron       79.17     84.69       6.97%
  2/23/99   290 Goodyear T    48.72     51.19       5.08%
  2/20/98   260 DuPont        58.84     57.75      -1.86%
  2/23/99   300 Caterpilla    46.96     44.69      -4.85%
   1/8/98   425 3Dfx          25.67     13.94     -45.70%

    Rec'd    #  Security     In At     Value      Change
   8/5/94  2200 AmOnline    1999.47 211475.00  $209475.53
   9/9/97  1320 Amazon.com  8684.60 175972.50  $167287.90
  12/4/98   450 @Home Corp 25236.13  51046.88   $25810.75
 12/16/98   580 Amgen      24867.50  43500.00   $18632.50
  2/26/99   300 eBay       30158.00  42600.00   $12442.00
  5/17/95  1960 Iomega Cor  2509.60  10290.00    $7780.40
  4/30/97 -1170*Trump*     -9908.50  -5265.00    $4643.50
  2/23/99   180 Chevron    14250.50  15243.75     $993.25
   7/2/98   235 Starbucks  13138.63  14114.69     $976.06
  2/23/99   290 Goodyear T 14127.38  14844.38     $717.00
  2/20/98   260 DuPont     15299.43  15015.00    -$284.43
  2/23/99   300 Caterpilla 14089.25  13406.25    -$683.00
   1/8/98   425 3Dfx       10908.63   5923.44   -$4985.19

                              CASH   $9924.87
                             TOTAL $618091.75

Note: The Rule Breaker Portfolio was launched on August 5, 1994, with $50,000. Additional cash is never added, all transactions are shared and explained publicly before being made, and returns are compared daily to the S&P 500 (including dividends in the yearly, historic and annualized returns). For a history of all transactions, please click here.

</THE RULE BREAKER PORTFOLIO>

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