Rule Breaker Portfolio

<THE RULE BREAKER PORTFOLIO>

Eyes on FoolWatch
Plus, Excite@Home
continues to smolder

By Jeff Fischer (TMF Jeff)

ALEXANDRIA, VA (Sept. 2, 1999) -- On this rare day that offered little news for our Rule Breaker companies, it would be silly to pretend that events were interesting. The news included the fact that a copycat Amazon site changed its name, but I never looked into this news even when it originally arose. Supposedly, a site has a name similar to Amazon's.

(Pause. Pause. Pause.)

See, the world didn't stop spinning.

Amazon threatened the copycat and won, but the company still owns the name www.amazon.gr, and its site still resides there. I don't believe that you'll mistake it for the Amazon, however.

Today's news also held that AOL and iTurf launched a poorly named service called AOgurL, for teenage girls. The name alone can make one's stomach churn. I'm not sure why. Perhaps "gurl" is too close to hurl.

That was the extent of the news for Rule Breakers. Luckily, the Fool doesn't lack for interesting content elsewhere. In fact, it is swimming in it. The quickest way to see all of it is to visit the FoolWatch page, which lists all Foolish features run every day. One particularly interesting link (usually) from this page is the Hot Topics link. This takes you directly to several of the more interesting -- and heated -- conversations on the message boards.

From the Hot Topics page today -- and of particular interest to Rule Breakers -- we're led to a post regarding Amazon's fairly recent acquisition of Alexa. Elsewhere, on the eBay board Fools are discussing Tuesday's news of an AOL-branded eBay. Other hot topics that are linked to include Intel and Apple, and Microsoft and Sun Microsystems.

Returning to our FoolWatch page, we see several Fool news stories already covering the day's events for us. (Wonderful. Thank you, Fools!) Louis Corrigan wrote about the reincarnated fear of the Fed that arose today, ghostlike, and sent stocks ducking. Also in the news, Brian Graney wrote about today's IBM news in relation to Intel in this morning's Breakfast with the Fool. Breakfast with the Fool, by the way, is the product's name only on the East Coast and in the Midwest. On the West Coast, this early-morning product is called "Insomnia with the Fool." (Okay. That joke was about two sentences too long. And it was only two sentences total.) For all the news presented Foolishly, visit the Fool's News World.

Returning to the FoolWatch page once again, we see same-store sales listed for August (very handy), Brian Graney's StockTalk with Ariba (very detailed), and much more. As a long-term investor, you may not need to read any of the daily articles on several days; perhaps you'll read it just for pleasure or for knowledge. On other days, however, many of the stories may relate to your investments.

So, in general, the FoolWatch page is an excellent page to keep a "watch" on -- which suggests that the page is aptly named. (Certainly the name FoolWatch is better than AOgurL! Or stamps.com. Or mail.com. Or drugs.com. Or pets.com. I mean, come on! Does the Internet mean that all company names must now be incredibly uncreative, even if they offer utility?)

Excite@Home
Turning to a company with an interesting name, our December 1998 purchase of Excite@Home (Nasdaq: ATHM) at $28 amounts to a market-beating 34% return so far. That's surprising, because it doesn't seem as if the stock has gone anywhere but down for several months. It is languishing as confusion and concern -- much of it questionable -- smolder regarding cable access legislation. Despite the fears, many people believe that the courts will not force open access, and the federal government is especially not likely to impose regulations on the Internet before an election year.

Anyway, whatever direction the courts eventually take, it would require several years of litigation for a final (Supreme Court) decision, and it has been said that it would likely go as far as the Supreme Court. During that time, Excite@Home, along with RoadRunner, would stand to capture much of the broadband cable market.

Excite@Home is generally expected to have 1.1 million subscribers by year end, 2.5 million by the end of next year, and up to 5 million by the end of 2001. Provided that, 2001 revenue should top $1.18 billion (if current prices persist and if @Work customers grow as expected). For 2002, revenue estimates commonly pierce the $2 billion level. Three years is too far ahead to seriously consider, in this industry, but Excite@Home, valued at about $14 billion now, isn't outrageously priced if you believe that Excite's portal business is worth just 25%, say, of Yahoo's $36 billion market value (however, maybe you don't believe Yahoo is worth that much), and if you value the @Home portion of the business based on likely future subscribers.

BancBoston Robertson Stephens (names don't come much Wiser, but at least it isn't boring) believes that Excite@Home could be worth $40 billion, or $100 per share, based on the asset value of Excite, @Home, and MatchLogic. Presently, I wouldn't put the company's value above Yahoo!, not to mention Amazon or eBay. In the long run, however, it is in a position of opportunity that could create that type of value. It won't be easy, but the opportunity exists. And that's what so many New Economy -- as they're called -- companies are banking on: the opportunity.

To discuss the company, visit the Excite@Home message board or the Rule Breaker companies board. Fool on!

-Jeff Fischer






Rule Breaker Portfolio

9/2/99 Closing Numbers
Ticker Company Dly Pr Chg Price
AMGNAMGEN INC-1 13/16$82.69
AMZNAMAZON.COMUnch.$59.53
AOLAMERICA ONLINE3/8$91.25
ATHMAT HOME CORP CL A-1 3/16$37.06
CATCATERPILLAR INC7/8$58.88
CHVCHEVRON CORP-3/16$92.00
DDDU PONT (EI) DE NEMOURS-7/16$64.81
DJTTRUMP HOTELS & CASINO RESUnch.$4.69
EBAYEBAY INC-1/2$121.44
GTGOODYEAR TIRE & RUBBER CO7/16$57.56
IOMIOMEGA CORP-1/16$3.44
SBUXSTARBUCKS CORP-13/16$22.25
TDFX3DFX INTERACTIVE-1/4$10.75

  Day Week Month Year
To Date
Since
8/5/94
Annualized
Rule Breaker -.32% -5.82% -1.73% 13.68% 1,043.17% 61.56%
S&P 500 -.90% -2.16% -.10% 7.31% 187.76% 23.14%
S&P 500(DA) -.86% -2.06% -.09% 7.53% 202.02% 24.31%
NASDAQ -.60% -.89% -.19% 24.70% 279.66% 30.04%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
8/5/942200AOL0.917$91.259,849.84%
9/9/972640AMZN3.188$59.531,767.64%
5/17/951960IOM1.280$3.44168.47%
12/16/98580AMGN42.889$82.6992.80%
4/30/97-1170DJT8.469$4.6944.65%
12/4/98900ATHM28.040$37.0632.18%
2/23/99300CAT46.964$58.8825.36%
2/26/99300EBAY100.527$121.4420.80%
2/23/99290GT48.715$57.5618.16%
2/23/99180CHV79.169$92.0016.21%
2/20/98260DD58.844$64.8110.14%
7/2/98470SBUX27.955$22.25-20.41%
1/8/98425TDFX25.667$10.75-58.12%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
8/5/942200AOL$2,017.62$200,750.00$198,732.40
9/9/972640AMZN$8,415.03$157,162.50$148,747.50
12/16/98580AMGN$24,875.50$47,958.75$23,083.25
12/4/98900ATHM$25,236.13$33,356.25$8,120.13
2/26/99300EBAY$30,158.00$36,431.25$6,273.25
4/30/97-1170DJT($9,908.16)($5,484.38)$4,423.79
5/17/951960IOM$2,509.63$6,737.50$4,227.87
2/23/99300CAT$14,089.25$17,662.50$3,573.25
2/23/99290GT$14,127.38$16,693.13$2,565.75
2/23/99180CHV$14,250.50$16,560.00$2,309.50
2/20/98260DD$15,299.44$16,851.25$1,551.81
7/2/98470SBUX$13,138.63$10,457.50($2,681.13)
1/8/98425TDFX$10,908.63$4,568.75($6,339.88)
  Cash: $11,675.98  
  Total: $571,381.00  



Note
The Fool Portfolio was launched on August 5, 1994, with $50,000. It was renamed the Rule Breaker Portfolio in October 1998. The investing strategy began with the first investments of the Fool Port and has evolved with time and experience. In July 2001, the portfolio began adding $12,500 each quarter (We missed Jan. 2002, so we added $25,000 in April 2002). We skip a quarter if we have enough uninvested cash or cash available in stocks we would prefer to sell to make new investments. All transactions are shared and explained publicly before being made, and returns are compared in each week's column to the S&P 500 (including dividends where noted) and the Nasdaq composite. For a history of all transactions, please click here.