Rule Breaker Portfolio

<THE RULE BREAKER PORTFOLIO>

Earnings Calendar
Timing Trump

by Paul Larson (TMF Parlay)

CHICAGO, IL (April 12, 1999) -- In a day that some of the wise were predicting could be another "Black Monday" thanks to Compaq (NYSE: CPQ) announcing some weak earnings, the market showed just what an unpredictable beast it could be and actually showed some rather impressive gains. The Nasdaq inched forward another 0.22% while the S&P tacked on 0.76% today. Here in the land of the Rule Breakers we stood pat on our investments and watched the Rule Breaker portfolio rise a modest 0.60%.

Actually, it's now been over a month since the portfolio saw its last trade, and it may very well be several more months until another trade is made. Of course, the search for more Rule Breakers is an ongoing process, but true Fools are never in a hurry. We like to put a lot of research and thought into something before jumping. So far in 1999 this portfolio has made five trades -- buying eBay (Nasdaq: EBAY) and the four Foolish four trades. I think it's a rather safe bet that there will be less than five trades for the balance of the year.

Switching gears, I thought it would be of use to try to track down the earnings release dates from all the companies in the Rule Breaker portfolio. We are about to enter a couple of weeks where the earnings releases will be flying fast and furious, as you can see below:


                       Expected
            Mean       Reporting
Company     Estimate   Date     
@Home       ($0.06)    April 15
Iomega       $0.00     April 15
3Dfx         $0.02     April 16
Caterpillar  $0.42     April 19
Amgen        $0.44     April 20
Goodyear     $0.94     April 21
Amazon      ($0.29)    April 22
DuPont       $0.59     April 22
Chevron      $0.51     April 23
Starbucks    $0.10     April 23
eBay         $0.02     April 26
AOL          $0.09     April 27
Trump       ($0.58)        ????

(Mean estimates courtesy of Zacks.)

Of course, the companies can choose to release earnings pretty much any time they wish to over the next few weeks, and all of these dates should be considered "soft" dates. In other words, write the dates in pencil and not permanent ink.

Keeping track of when quarterly profits will be announced is important because we only really get new financial information four times a year from each of the companies. The earnings estimates are also just that -- estimates.

We would ideally like to see all of our companies trounce the estimates (sans Trump, of course). Who stands the best chance of blowing away Wall Street's guestimates? I suspect 3Dfx (Nasdaq: TDFX) or one of our online auction companies (we have two now) stand to be the most likely to top the estimates. That's just my personal intuition and guess. Who do you think will report the most surprising numbers of the bunch? Who do you think Wall Street's sales analysts are underestimating? Post your guesses on the Rule Breaker message board over the next two days and I'll keep track of the best prognostications for a future recap. There is no "prize" in this contest, it's just a way to share thoughts and maybe grab a slice of bragging rights for the next few months.

The first round of earnings releases comes later this week when @Home (Nasdaq: ATHM) and Iomega (NYSE: IOM) both report after the closing bell on Thursday. Only three analysts still follow Iomega, and the average guess between them is for a break-even quarter. @Home, on the other hand, has 14 analysts publishing estimates with a mean guess of a $0.06 per share loss from the company. The actual profit (or loss, as the case may be) generated by @Home last quarter means less to us than the market penetration and number of subscribers the company has achieved. In other words, whether or not the company will dominate five years from now means much more to us than yesterday's profits. @Home was also the best performing stock in the portfolio today when it rose nearly 10% to an all-time closing high of $189.31.

Getting back to earnings, one company that I couldn't get a release date from was Trump (NYSE: DJT). I left a message at the company earlier today and was told they haven't decided when to release earnings just yet. I had a bit of d�j� vu talking to the company today since one time I called last year and was told earnings would be released "sometime this month." Thanks for telling your folks to be detailed and specific, Donald!

Here's another prediction (just for fun) about Trump: If the company has a larger loss than the published guesses, don't expect to see Trump's earnings until the last possible moment. Likewise, if the company has a profit that is better than expected, anticipate results very soon. Maybe even tonight! I can understand the psychology of wanting to sit on bad news as long as possible while getting the good news out ASAP, but Trump, in our experience, seems to take it to the extreme. I've got to say that Trump has to be one of the most interesting stocks to follow in this portfolio.

My guess about Trump's numbers? They will be released after May 1 and will be below the published estimates. And if they are released before May 1, I'll be wrong and the numbers are probably better than expected. Not that any of this guessing changes our thoughts on the company, it is just entertaining to make predictions based upon our experiences.

Before I go, I suppose I should recap some of the news from the day. Amazon (Nasdaq: AMZN) reported they were buying Livebid.com, the premier provider of "real time" auctions over the Internet. I think it's safe to say Amazon is serious about becoming a major player in the online auction universe.

eBay, not to be outdone by Amazon, also announced a strategic initiative today. eBay revealed a partnership with Mail Boxes Etc. and iShip that will simplify the shipping process for both buyers and sellers on eBay's service. Anything that makes the fulfillment side of the auction easier is good news in my book.

With that, I bid you a good evening. Make sure to click back tomorrow when David will have some interesting thoughts from his trek to the NYSE on behalf of you, the individual investor. Fool on!

-Paul Larson

What's up with Harry Jones today?

04/12/99 Close
Stock  Change    Bid 
---------------- 
AMZN  +1 9/16 184.44
AMGN    ---    78.06
AOL   -1 3/4  157.75
ATHM  +16 11/16 189.31
DJT   +  1/4    4.31
CHV   +1 1/2   95.50
CAT   +2 5/8   51.38
DD    +2 1/4   61.06
GT    -  1/4   50.94
IOM   +  1/16   4.94
SBUX  +  1/16  32.44
TDFX  +  3/16   17.75
EBAY  -6 3/4  176.63

 
                   Day   Month    Year  History  Annualized 
      R-BREAKER  +0.60%   9.65%  74.27% 1649.12%  84.21%
        S&P:     +0.76%   5.62%  10.85%  209.95%   27.31%
        NASDAQ:  +0.22%   5.57%  18.52%  260.86%   31.51%


    Rec'd    #  Security     In At       Now      Change
   8/5/94  2200 AmOnline       0.91    157.75   17257.10%
   9/9/97  1320 Amazon.com     6.58    184.44    2703.32%
  5/17/95  1960 Iomega Cor     1.28      4.94     285.62%
  12/4/98   450 @Home Corp    56.08    189.31     237.57%
 12/16/98   580 Amgen         42.88     78.06      82.07%
  2/26/99   300 eBay         100.53    176.63      75.70%
  4/30/97 -1170*Trump*         8.47      4.31      49.08%
  2/23/99   180 Chevron       79.17     95.50      20.63%
   7/2/98   470 Starbucks     27.95     32.44      16.04%
  2/23/99   300 Caterpilla    46.96     51.38       9.39%
  2/23/99   290 Goodyear T    48.72     50.94       4.56%
  2/20/98   260 DuPont        58.84     61.06       3.77%
   1/8/98   425 3Dfx          25.67     17.75     -30.85%

    Rec'd    #  Security     In At     Value      Change
   8/5/94  2200 AmOnline    1999.47 347050.00  $345050.53
   9/9/97  1320 Amazon.com  8684.60 243457.50  $234772.90
  12/4/98   450 @Home Corp 25236.13  85190.63   $59954.50
  2/26/99   300 eBay       30158.00  52987.50   $22829.50
 12/16/98   580 Amgen      24867.50  45276.25   $20408.75
  5/17/95  1960 Iomega Cor  2509.60   9677.50    $7167.90
  4/30/97 -1170*Trump*     -9908.50  -5045.63    $4862.88
  2/23/99   180 Chevron    14250.50  17190.00    $2939.50
   7/2/98   470 Starbucks  13138.63  15245.63    $2107.00
  2/23/99   300 Caterpilla 14089.25  15412.50    $1323.25
  2/23/99   290 Goodyear T 14127.38  14771.88     $644.50
  2/20/98   260 DuPont     15299.43  15876.25     $576.82
   1/8/98   425 3Dfx       10908.63   7543.75   -$3364.88

                              CASH   $9924.87
                             TOTAL $874558.62
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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