RULE MAKER PORTFOLIO

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Peace of Mind

By Phil Weiss (pweiss@homemail.com)

TOWACO, NJ (March 1, 1999) -- While traveling the past two weeks, I was reminded of one of the most important benefits of Rule-Maker investing: peace of mind. Putting in the time and careful thought to research and invest in industry-leading, Rule-Making companies up front alleviates the need to follow one's investment portfolio like a hawk.

Anyone who worries about every piece of company and market news that crosses the wire will go crazy. I know that if I felt that I had to read every press release published for these stocks as well as the other stocks held in my family's portfolio, I couldn't do it. I would probably have to just dump all my money into an index fund and give up on the idea of investing in individual stocks. Fortunately, as a long-term investor in some of the world's finest companies, I can rest easy knowing that the managers of these companies will do the daily worrying for me. Meanwhile, I can focus my attention on what really counts in life -- my family.

Two weeks ago, my wife, son, and I went on a great vacation with some of my wife's immediate family. We spent four days at the Disney parks in Florida and then three days on the Disney Magic Cruise ship. If you've ever wondered why Disney (NYSE: DIS) has so much debt, just consider the fact that the company paid $2.2 billion to build that boat. On the trip, I saw Disney in a way that I had never seen it before -- through the eyes of my nineteen-month-old son as well as our two-year-old niece and five-year-old nephew. Seeing the look on my son's face as I held him while he met Mickey Mouse, Goofy, Pluto, Donald Duck, Simba, and many others was truly a sight to behold. I can't wait to take him back when he's a little bit older and can enjoy everything even more.

It was also wonderful listening to my son sing "Happy Birthday" to both my father-in-law and me (we share the same birthday) for the first time. I have to say that my father-in-law is one of the most Foolish investors that I know. Although not every stock he owns has been a stellar performer, from our discussions about investing I suspect that his returns have beaten the market over his investment lifetime -- a time period during which he has never sold a single share of stock. He's also done a good job of keeping the number of companies he owns to a manageable level, often adding more shares to an existing holding rather than buying shares in a new company.

The night after returning from vacation, I had to leave for a short business trip to Sao Paulo, Brazil. While there, I had no idea how my stocks performed, let alone the direction of the overall stock market. But, this was not a concern to me in the least. I always feel comfortable while I'm away that a compelling reason to sell any of my current holdings will never come about. What sort of short-term news is going to derail a Rule Maker? Fact is, dominant companies are not dethroned overnight. The peace of mind of investing in a basket of Rule Makers allowed me simply to enjoy my trip.

I didn't get to see much of Brazil, but the one thing that I did notice was the relative absence of American companies compared to their more pervasive presence in Europe (judging by my past experience). I noticed a couple of Coca-Cola (NYSE: KO) advertisements as well as a few McDonald's restaurants and a Pizza Hut. There was also one Lucent Technologies billboard. I came across a Ford dealership and saw a few Chevys on the roads. Although my company is U.S.-based, it's not the kind that advertises anywhere that you'd notice driving around the city. All of the other multinationals I came across were European-based companies.

Sao Paulo is a huge, if not interesting city -- click here for a cool overhead picture and some stats. The population of the city itself is around 10 million people, but counting the entire metropolitan area, that number is 18 million. I don't recall seeing very many single-family homes. As a matter of fact, I was told that most people living there prefer apartment living. That made the fact that I saw so many high rise buildings around the city a lot more understandable. The city is also a lot greener than the typical, densely populated U.S. city. It's even greener than Los Angeles.

Back from my travels now, I see that our companies deserved not an iota of worry. Here's to peace of mind.

Let's take a quick look now and see how our stocks did last week:


Rule-Maker  Last     This    Change
T. Rowe     $30.56   $30.81   0.8%
Microsoft  $147.69  $150.13   1.7%
Pfizer     $128.31  $131.94   2.8%
Intel      $128.06  $119.94  -6.3%
Cisco       $97.00   $97.81   0.8%
Gap Inc.    $62.38   $64.69   3.7%
Coca-Cola   $65.81   $63.88  -2.9%
S Plough    $53.00   $55.69   5.1%
Am Ex      $103.19  $108.50   5.1%
Yahoo!     $135.38  $153.50  13.4%

Fool Four   Last     This    Change
Kodak       $66.19   $66.19   0.0%
Exxon       $68.50   $66.56  -2.8%
GM          $85.44   $82.69  -3.2%
Chevron     $76.94   $76.88  -0.1%

S&P 500      1,239    1,238  -0.1%
Total R-M  $31,242  $31,736   1.6%

History RM   31.9%
S&P          25.1%
My quick scan of the headlines didn't show a lot of significant news for any of our stocks. On Thursday, Gap Inc. (NYSE: GPS) released earnings. If you want to read about them in more detail, you can click on Tom's report from last Thursday.

It's comforting to see that the Microsoft (Nasdaq: MSFT) antitrust trial is on at least a six-week break, as some of the key participants have to attend to other trials for a while. All the witnesses have now been called. When the trial resumes, each side will be able to call rebuttal witnesses. That will be followed by closing arguments. At this point, it seems like the judge will decide against Mr. Softy, but that will most likely lead to one or more appeals. So, this one is probably still a long way from being over.

Intel (Nasdaq: INTC) had a week of both good and bad news. On the positive side was the release of its new Pentium III chip. Intel expects the PIII to boost the growth of the Internet and to speed adoption of electronic commerce. As part of its efforts to make this chip the industry standard, our company is planning to spend $300 million promoting the benefits of the new chip.

On Friday we learned that due to the significant number of sub-$1,000 PC's sold in January, processors manufactured by Advanced Micro Devices (NYSE: AMD) surpassed sales of those made by Intel for the first time. There is also a belief by some that, in a repeat of last January, there is an inventory glut of PC's available in the marketplace.

In other news, Celebrex, an anti-arthritis pain drug developed by Monsanto (NYSE: MTC) and jointly marketed by Pfizer (NYSE: PFE) was officially launched on Monday. After 5 weeks, prescriptions for this drug are second only to those of Pfizer's Viagra.

Last but not least, we're going to start a new feature here in Rule Maker Land -- the question of the week. Each week, we'll give a prize to the person who posts the best response. This week, the question is:

"What criteria should we add to the Rule-Maker scoring methodology?"

This week's prize is a signed copy of David and Tom's latest book, Rule Breakers, Rule Makers. Please post your response on the Rule Maker Strategy message board under the title "question of week." Good luck!

I'll be back tomorrow night with some thoughts on stock splits, dividends, and share buybacks.

Fool on,

Phil

03/01/99 Close
Stock  Change    Bid
AXP   +3       111.50
CHV   -  13/16 76.06
CSCO  +1 5/8   99.44
KO    -  3/16  63.69
GPS   +  1/16  64.75
EK    -  3/8   65.81
XON   -1 3/8   65.19
GM    +  7/16  83.13
INTC  -2 7/8   117.06
MSFT  +1 5/8   151.75
PFE   +1 3/16  133.13
SGP   -  11/16 55.00
TROW  +1 3/16  32.00
YHOO  +6 5/8   160.13

                   Day   Month    Year  History
        R-MAKER  +0.67%   0.67%   4.94%  32.78%
        S&P:     -0.18%  -0.18%   0.88%  24.87%
        NASDAQ:  +0.31%   0.31%   4.67%  38.86%

Rule Maker Stocks

    Rec'd    #  Security     In At       Now    Change
    2/3/98   24 Microsoft     78.27    151.75    93.88%
    5/1/98   55 Gap Inc.      34.37     64.75    88.39%
   6/23/98   34 Cisco Syst    58.41     99.44    70.24%
    2/3/98   22 Pfizer        82.30    133.13    61.76%
   2/13/98   22 Intel         84.67    117.06    38.25%
   2/17/99   16 Yahoo Inc.   125.81    160.13    27.27%
   8/21/98   44 Schering-P    47.99     55.00    14.60%
   5/26/98   18 AmExpress    104.07    111.50     7.14%
    2/6/98   56 T. Rowe Pr    33.67     32.00    -4.97%
   2/27/98   27 Coca-Cola     69.11     63.69    -7.84%

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   17 General Mo    72.41     83.13    14.81%
   3/12/98   20 Eastman Ko    63.15     65.81     4.22%
   3/12/98   20 Exxon         64.34     65.19     1.33%
   3/12/98   15 Chevron       83.34     76.06    -8.74%

Rule Maker Stocks

    Rec'd    #  Security     In At     Value    Change
    2/3/98   24 Microsoft   1878.45   3642.00  $1763.55
    5/1/98   55 Gap Inc.    1890.33   3561.25  $1670.92
   6/23/98   34 Cisco Syst  1985.95   3380.88  $1394.93
    2/3/98   22 Pfizer      1810.58   2928.75  $1118.17
   2/13/98   22 Intel       1862.83   2575.38   $712.55
   2/17/99   16 Yahoo Inc.  2013.00   2562.00   $549.00
   8/21/98   44 Schering-P   2111.7   2420.00   $308.30
   5/26/98   18 AmExpress   1873.20   2007.00   $133.80
    2/6/98   56 T. Rowe Pr  1885.70   1792.00   -$93.70
   2/27/98   27 Coca-Cola   1865.89   1719.56  -$146.33

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   17 General Mo  1230.89   1413.13   $182.24
   3/12/98   20 Eastman Ko  1262.95   1316.25    $53.30
   3/12/98   20 Exxon       1286.70   1303.75    $17.05
   3/12/98   15 Chevron     1250.14   1140.94  -$109.20

                              CASH    $185.03
                             TOTAL  $31947.91

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.

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