<THE RULE MAKER PORTFOLIO>
Much Ado About Nothing
By Rob Landley (firstname.lastname@example.org)
AUSTIN, TX (Feb. 19, 1999) -- I suppose it was inevitable that a site named after a Shakespeare reference would eventually have a column about nothing, so here it is. The joy of being able to do absolutely nothing, and still make money.
That's what investing is all about. As long-term buy and hold investors in Rule Makers, we don't have to get up at the crack of dawn to plot and scheme and plan and strive to make our investments successful. Our companies have hired people to do that for us. We get to sleep in if we want to.
Almost a year ago, we bought the rights to a little over 1/200,000,000th of the profits of the Coca-Cola Company (NYSE: KO), in perpetuity. Every time somebody puts a quarter in a Coca-Cola vending machine, a tiny fraction of the profit goes to us. And it's not going to stop unless Coca-Cola stops making money.
Coke mails us a little of that money every few months, and recently decided to mail us a little more than before. Last year they were sending out checks for $0.15 for each of our 27 shares, or $4.05 at a time. Now they'll be sending out $0.16 per share, and we'll get checks for $4.32 four times a year, or around $17 dollars over the entire year. And we don't have to lift a finger to get it; we just cash the check and go on with our lives, or better yet tell them to keep it and buy us the rights to MORE of their profits in the future through dividend reinvestment.
But that's not ALL of our share of the profits. That's just a little skimmed off the top. Coke keeps the rest and uses some to grow its business. Our company recently decided to expand into bottled water, creating and marketing a new brand called "Dasani," and working out advertising campaigns, production schedules, and distribution routes. That's an awful lot of work, but we didn't have to do any of it. And we still get our tiny little fraction of every new dime generated by that work, whether or not we're even aware that they're doing it.
In effect, among our ten stakes in Rule Maker businesses, we have millions of people working for us. They make enough money to pay their own salaries and expenses, and we get part of the profits above that. Some of them do this while we're asleep, some keep working while we're at lunch, and most of them stay at work if we decide to take a vacation. We don't even need to send them a thank-you card. They work for us without even knowing who we are. That's capitalism for you.
All a conscientious Rule Maker investor has to do is check in every few months to make sure that nothing major has gone wrong, and every few months is being virtuous! The original Simpleton portfolio first expressing the Rule Maker concepts was designed to be buried under a mattress and forgotten for TEN YEARS, and STILL substantially outperform the market averages.
Even our volatile new stock Yahoo!, which we said we'd watch more closely than the rest, isn't worth spending every day talking about. The company is fresh and young, and its plans move faster than our older, more established companies, but it has its own staff of people making those plans and executing them. If we didn't trust them to do a good job, we wouldn't have bought a chunk of their company and the perpetual rights to a fraction of their profits. We can certainly leave them to their own devices for weeks at a time, and let them get on with their (and our) business.
The only real decisions we ever have to make about our investments is whether we like our existing companies so much we want to buy more of them, or whether we're so disappointed in them we want to sell our shares. It'll be six months before our next buy decision, and hopefully far longer than that before we sell our first Rule Maker. In the meantime, we can relax, have fun, get on with our lives, and enjoy the weekend.
Stock Change Bid AXP + 9/16 103.19 CHV -1 1/16 76.94 CSCO + 13/16 97.00 KO +1 3/16 65.81 GPS + 5/16 62.38 EK +2 3/8 66.19 XON - 3/8 68.50 GM - 1/8 85.44 INTC - 1/16 128.06 MSFT +1 15/16 147.69 PFE -2 13/16 128.31 SGP -1 1/8 53.00 TROW - 1/2 30.56 YHOO +6 1/2 135.38
Day Month Year History R-MAKER +0.38% -5.35% 2.62% 29.85% S&P: +0.15% -3.16% 1.13% 25.17% NASDAQ: +1.01% -8.88% 4.14% 38.15% Rule Maker Stocks Rec'd # Security In At Now Change 2/3/98 24 Microsoft 78.27 147.69 88.69% 5/1/98 55 Gap Inc. 34.37 62.38 81.48% 6/23/98 34 Cisco Syst 58.41 97.00 66.07% 2/3/98 22 Pfizer 82.30 128.31 55.91% 2/13/98 22 Intel 84.67 128.06 51.24% 8/21/98 44 Schering-P 47.99 53.00 10.43% 2/17/99 16 Yahoo Inc. 125.81 135.38 7.60% 5/26/98 18 AmExpress 104.07 103.19 -0.84% 2/27/98 27 Coca-Cola 69.11 65.81 -4.77% 2/6/98 56 T. Rowe Pr 33.67 30.56 -9.24% Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 17 General Mo 72.41 85.44 18.00% 3/12/98 20 Exxon 64.34 68.50 6.47% 3/12/98 20 Eastman Ko 63.15 66.19 4.81% 3/12/98 15 Chevron 83.34 76.94 -7.69% Rule Maker Stocks Rec'd # Security In At Value Change 2/3/98 24 Microsoft 1878.45 3544.50 $1666.05 5/1/98 55 Gap Inc. 1890.33 3430.63 $1540.30 6/23/98 34 Cisco Syst 1985.95 3298.00 $1312.05 2/3/98 22 Pfizer 1810.58 2822.88 $1012.30 2/13/98 22 Intel 1862.83 2817.38 $954.55 8/21/98 44 Schering-P 2111.7 2332.00 $220.30 2/17/99 16 Yahoo Inc. 2013.00 2166.00 $153.00 5/26/98 18 AmExpress 1873.20 1857.38 -$15.83 2/27/98 27 Coca-Cola 1865.89 1776.94 -$88.95 2/6/98 56 T. Rowe Pr 1885.70 1711.50 -$174.20 Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 17 General Mo 1230.89 1452.44 $221.55 3/12/98 20 Exxon 1286.70 1370.00 $83.30 3/12/98 20 Eastman Ko 1262.95 1323.75 $60.80 3/12/98 15 Chevron 1250.14 1154.06 -$96.08 CASH $185.03 TOTAL $31242.47
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.