Rule Breaker Portfolio

Rule Breaker Portfolio
What a Web
Life in the land o' links

By Nico Detourn (TMF Nico)

Silicon Valley, CA (November 5, 1999) -- Working for The Motley Fool, I spend a lot of time on our message boards. In fact, my official job title is Message Board Stroller, which basically means that I spend most of my time sitting and clicking. The Fool has many boards that aren't dedicated to specific companies or investing, including some of our most popular, such as the Land of Off-Topic Posts. Still, the company boards are the mainstay of our Foolish community.

As you'd expect, most of the conversation in a particular board will focus on its namesake company. The tone or mood of a board at any given time might be predominantly bullish or bearish, or it might fall outside that spectrum altogether. Whatever it happens to be, the particular mix of focus and tone will depend, naturally, on its participants, giving each board the character of a distinct sub-community or neighborhood within Greater Fooldom. This is a truly wondrous thing to be part of and to watch grow and pulse and develop, and be reminded daily that "online community" isn't a metaphor, but rather a new form of interaction and social organization.

One of the things I find most enjoyable and fascinating as I click from board to board are the connections that can be found between different companies. As different as the companies might be, within a given industry each one provides some of the context in which the others need to be understood. They can be affected in different ways by the same issue, and a development surrounding one company will reflect back on another, leading to a new understanding of both. Not surprisingly, this web of interconnections can be seen among the Internet-related companies in the Rule Breaker portfolio, which includes some of the leading players in this most dynamic of industries.

For example, when you think of online auctions, you think of eBay (Nasdaq: EBAY), which thoroughly dominates that category. However, the moves of Amazon (Nasdaq: AMZN) and Yahoo! (Nasdaq: YHOO) into online auction space can't be ignored. Similarly, companies as diverse as Microsoft (Nasdaq: MSFT), Dell (Nasdaq: DELL), Lycos (Nasdaq: LCOS), and Excite@Home (Nasdaq: ATHM) have joined together to form the FairMarket Auction Network in an effort to get in on eBay's act. The point, though, isn't that these efforts will unseat eBay, which has a huge lead unlikely to be whittled away overnight. It's that following and understanding eBay means following the connections between it and these other companies, since their efforts form the context in which eBay does its thing.

Yet another link between eBay and Amazon passes through the wireless world, with both companies offering customers the ability to keep tabs on the status of auctions over non-PC devices. Amazon CEO Jeff Bezos recently spoke of making Amazon's sites available through mobile phones and handheld computers as part of an "Amazon.com Anywhere" strategy. That shouldn't be confused with America Online's (NYSE: AOL) "AOL Anywhere" strategy, by the way, which also revolves around Internet access beyond the desktop, and provides a rich example of the web of connections to be found between companies.

The alliance between the Boring Portfolio's Gateway (NYSE: GTW) and AOL to develop and market co-branded Internet access devices moves both companies into a new arena, compelling us to see them in a new light. The extensive partnership creates new opportunities for the two of them and changes their relationships to competitors. Analyzing Compaq (NYSE: CPQ) and Dell relative to Gateway now means allowing for the AOL factor. In the same way, an analysis of Excite@Home as a competitor to AOL has to take the Gateway deal into account.

The relationship between America Online and Excite@Home is a particularly complex one, revolving around the contentious issue of "open access" and whether or not a deal should or even can be made between the two of them and AT&T (NYSE: T), Excite@Home's largest shareholder, to allow AOL access to their high-speed network. Such a deal would likely be for the AOL service itself, however, and would not necessarily involve other divisions of either America Online or Excite@Home. So here too, the broader context needs to be seen in order to get a fix on how the companies are positioned. AOL, open access, and other issues are sure to come up on tomorrow's Fool Radio show, when David and Tom will be talking with Excite@Home's president, George Bell.

Have a great weekend, Fools!






Rule Breaker Portfolio

11/5/99 Closing Numbers
Ticker Company Dly Pr Chg Price
AMGNAMGEN INC5/16$85.13
AMZNAMAZON.COM7/8$64.94
AOLAMERICA ONLINE1/4$145.50
ATHMAT HOME CORP CL A23/32$39.19
CATCATERPILLAR INC3/16$54.75
CHVCHEVRON CORP-2 3/4$85.50
DDDU PONT (EI) DE NEMOURS1/2$62.63
EBAYEBAY INC1/4$133.25
GTGOODYEAR TIRE & RUBBER CO-7/16$36.69
IOMIOMEGA CORP-1/8$3.13
SBUXSTARBUCKS CORP3/16$28.75
TDFX3DFX INTERACTIVE-5/8$9.69

  Day Week Month Year
To Date
Since
8/5/94
Annualized
Rule Breaker 1.46% 3.42% 3.32% 40.19% 1,309.69% 65.47%
S&P 500 .56% .54% .54% 11.47% 198.92% 23.17%
S&P 500(DA) .56% .54% .54% 12.05% 213.17% 24.27%
NASDAQ 1.52% 4.58% 4.58% 41.48% 330.77% 32.04%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
8/5/942200AOL0.917$145.5015,765.23%
9/9/972640AMZN3.188$64.941,937.25%
5/17/951960IOM1.280$3.13144.06%
12/16/98580AMGN42.889$85.1398.48%
12/4/98900ATHM28.040$39.1939.76%
2/26/99300EBAY100.527$133.2532.55%
2/23/99300CAT46.964$54.7516.58%
2/23/99180CHV79.169$85.508.00%
2/20/98260DD58.844$62.636.43%
7/2/98470SBUX27.955$28.752.85%
2/23/99290GT48.715$36.69-24.69%
1/8/98425TDFX25.667$9.69-62.26%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
8/5/942200AOL$2,017.62$320,100.00$318,082.40
9/9/972640AMZN$8,415.03$171,435.00$163,020.00
12/16/98580AMGN$24,875.50$49,372.50$24,497.00
12/4/98900ATHM$25,236.13$35,268.75$10,032.63
2/26/99300EBAY$30,158.00$39,975.00$9,817.00
5/17/951960IOM$2,509.63$6,125.00$3,615.37
2/23/99300CAT$14,089.25$16,425.00$2,335.75
2/23/99180CHV$14,250.50$15,390.00$1,139.50
2/20/98260DD$15,299.44$16,282.50$983.06
7/2/98470SBUX$13,138.63$13,512.50$373.88
2/23/99290GT$14,127.38$10,639.38($3,488.00)
1/8/98425TDFX$10,908.63$4,117.19($6,791.44)
  Cash: $5,954.23  
  Total: $704,597.10  



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.