RULE MAKER PORTFOLIO

<THE RULE MAKER PORTFOLIO>

We're Buying Yahoo!
Plus, tech stock round-up

By Rob Landley (landley@flash.net)

AUSTIN, TX (Feb. 16, 1999) -- Guess what, everybody. We're buying Yahoo! (Nasdaq: YHOO).

This is our fourth high-tech stock, which establishes a distinct high-tech tilt to our portfolio. Not that our other three tech stocks haven't been doing a pretty good job of tilting the balance in their favor through sheer appreciation already. With this purchase, we're sticking with what works while adding a bit more risk to the portfolio. Read more about it in the buy report, and tune in later this week for the mystic coin-flip determining when we actually make our purchase.

In keeping with our newfound high-tech tilt, I'd like to cover news from our four tech stocks today, starting with our newest member, Yahoo. I believe it was Jack Welch, Chairman and CEO of General Electric (NYSE: GE), who said that his company's stock could never be too overvalued because he could always use it as currency to buy other businesses. Acquisition is the one time that investors forgive a company for revving up the presses and issuing more stock, especially when they agree it's overvalued. This is exactly what Yahoo! did when it bought GeoCities (Nasdaq: GCTY) last month. As long as our company takes good care of its core business, using stock based purchases to acquire hard assets, gobble up potential competitors, and simply diversify a bit, makes perfect sense to me.

Intel (Nasdaq: INTC) is in great shape, and the best evidence of this is that the competition is floundering. Advanced Micro Devices (Nasdaq: AMD) expects to lose money in the first quarter due to price cuts from Intel. Intel simply has better margins than AMD, due both to its manufacturing skill and its lock on the high-end of the market. Intel can literally starve AMD out any time it chooses, and it has been tightening AMD's leash a bit lately. Not only are Intel's low-end Celerons getting faster and cheaper, but on February 26th Intel will launch the Pentium III in a direct assault on the 3D graphics market.

Cisco (Nasdaq: CSCO) has been having fun as well. Almost in passing, it beat out competitor Newbridge Networks for most of a half-billion dollar contract last week. But the big news is the imminent launch of Internet2, an experiment in high-bandwidth communications technology connecting universities coast-to-coast at 2.4 billion bits per second. Cisco is one of the three corporate sponsors behind Internet2, which is a large field test of the new technology that will someday replace the existing Internet infrastructure.

Yup, not only is the Internet growing explosively, but every single centimeter of it around the world will someday be ripped out and replaced with newer technology, probably several times. One of those new technologies is IPV6, a new Internet addressing scheme with four times the address space. (An IP address is a bit like a phone number. Now imagine that phone number just got four times as many digits.) The internet is making room for explosive growth, and Cisco intends to be ready.

Microsoft (Nasdaq: MSFT) has done a bit of housecleaning, re-organizing itself into four distinct sections. The company has also acknowledged that the consumer edition of Windows 2000 will be based on Windows 98, and not on the NT kernel after all. (The business edition of W2K continues to be based on NT.) On the whole, these are probably positive developments for the company -- attempts to contain costs and guarantee future revenue. If nothing else, it now has a new product I believe it is capable of actually shipping.

In other tech-related news, I've finally figured out why this whole Year 2000 problem is causing so much trouble. Fixing it depends on programmers finding a date. This isn't exactly one of our classic strengths.

I'm off to read more of Rule Makers, Rule Breakers in hopes of having something coherent to say about it later this week. I also hope to catch up on the message boards. (I'm only 459 messages behind in Rule Maker Strategies...)

- Oak

Yahoo! Buy Report

02/16/99 Close
Stock  Change    Bid
AXP   +2 1/16  102.19
CHV   -  3/8   79.50
CSCO    ---    99.06
KO    +1       64.88
GPS   +1 1/16  61.50
EK    -  3/8   65.00
XON   -  7/8   68.56
GM    -  3/4   83.06
INTC  -  1/4   126.25
MSFT  -1 1/2   156.25
PFE   +  11/16 130.81
SGP   +  5/16  54.75
TROW  -  5/16  31.00

                   Day   Month    Year  History
        R-MAKER  +0.16%  -4.96%   3.05%  30.40%
        S&P:     +0.95%  -2.95%   1.35%  25.44%
        NASDAQ:  -0.35%  -7.66%   5.53%  39.99%

Rule Maker Stocks

    Rec'd    #  Security     In At       Now    Change
    2/3/98   24 Microsoft     78.27    156.25    99.63%
    5/1/98   55 Gap Inc.      34.37     61.50    78.94%
   6/23/98   34 Cisco Syst    58.41     99.06    69.60%
    2/3/98   22 Pfizer        82.30    130.81    58.95%
   2/13/98   22 Intel         84.67    126.25    49.10%
   8/21/98   44 Schering-P    47.99     54.75    14.08%
   5/26/98   18 AmExpress    104.07    102.19    -1.81%
   2/27/98   27 Coca-Cola     69.11     64.88    -6.12%
    2/6/98   56 T. Rowe Pr    33.67     31.00    -7.94%

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   17 General Mo    72.41     83.06    14.72%
   3/12/98   20 Exxon         64.34     68.56     6.57%
   3/12/98   20 Eastman Ko    63.15     65.00     2.93%
   3/12/98   15 Chevron       83.34     79.50    -4.61%

Rule Maker Stocks

    Rec'd    #  Security     In At     Value    Change
    2/3/98   24 Microsoft   1878.45   3750.00  $1871.55
    5/1/98   55 Gap Inc.    1890.33   3382.50  $1492.17
   6/23/98   34 Cisco Syst  1985.95   3368.13  $1382.18
    2/3/98   22 Pfizer      1810.58   2877.88  $1067.30
   2/13/98   22 Intel       1862.83   2777.50   $914.67
   8/21/98   44 Schering-P   2111.7   2409.00   $297.30
   5/26/98   18 AmExpress   1873.20   1839.38   -$33.83
   2/27/98   27 Coca-Cola   1865.89   1751.63  -$114.27
    2/6/98   56 T. Rowe Pr  1885.70   1736.00  -$149.70

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   17 General Mo  1230.89   1412.06   $181.17
   3/12/98   20 Exxon       1286.70   1371.25    $84.55
   3/12/98   20 Eastman Ko  1262.95   1300.00    $37.05
   3/12/98   15 Chevron     1250.14   1192.50   -$57.64

                              CASH   $2205.98
                             TOTAL  $31373.79

Added $ 2,000 on August 4, 1998 to the portfolio; this will show in the numbers at a later date.

Note: The Rule Maker Portfolio began with $20,000 on February 2, 1998, and it adds $2,000 in cash (which is soon invested in stocks) every six months.

Read More Rule Maker Reports