Rule Breaker Portfolio

Rule Breaker Portfolio
A Fool in the Mirror
Plus, Nasdaq's record keeps spinning

By Jeff Fischer (TMF Jeff)

NAPLES, FL (Nov. 11, 1999) -- Fifty days remain until the year 2000, and then we can look back at the 1990s as those silly olden days. These were the days that gave validation to rambling novels; these were the days that gave rise to Seinfeld and ER; these were the days when violence without war became a running sideshow, and war became an afterthought. These were the days when idiots like me rambled about what would become of "these days."

On this day, the portfolio had "one of those days," a rare day, as we actually lost to the market indices against which we compete. Sometimes it is said by others that we tout this portfolio's consistently strong performance too often. Sometimes we believe that we don't tout it enough. The point of sharing the portfolio's performance isn't to brag. Being motley, Fools don't tie their egos to a basket of stocks alone. The point of highlighting this portfolio's performance is to show by example.

From the start, Tom and David Gardner's message has been that you can invest your money yourself and do better than any professional. This portfolio is just one living example of that belief -- a belief arguably proven as more than valid. The Rule Breaker portfolio shares wall space with the Rule Maker, Foolish Four, Drip, and Bore Ports. Whether they're all beating the market or not, they all serve as examples from which to learn, as does the entire Strategies area on the Fool.

One question frequently asked of the Fool portfolio managers is, "How do I buy your portfolio? Do I just buy an equal amount of each stock that you hold?" This question makes my stomach sink, but it's easy to rebound from the sinking feeling and simply explain to the new Fool that the portfolios are not here for the copying.

The best approach for new Fools who want to begin investing is to first read the 13 Steps to Investing Foolishly. In the course of reading these 13 steps, you'll start at the beginning (do you have debt to pay?) and you'll eventually study the principles underpinning many of the Fool's real-money portfolios. Investment principles are shared by every real-money Fool portfolio for you to learn by. You might care to read investment books suggested by the Fool as well. Eventually, piece by piece, you will begin to understand the various investing alternatives before you.

Many Fools followup their initial "how do I copy your portfolio?" question several weeks later by sharing that they are now buying some stocks that are held by the Fool's various portfolios, and they are also buying many stocks that they found on their own. They have read enough to know what to search for in an investment. Even more important than that, they now understand why they are investing, and why they are buying certain companies. Now and in the future, they plan to use the Fool's real-money portfolios for ideas and for continued learning, rather than as a checklist of stocks to buy.

From the beginning in 1994, this has been the hope. Provide real-money portfolios that explain why the portfolios are buying or selling an equity before the trade is made; provide a list of investment principles to support and explain the portfolio's positions and philosophy; and provide a daily recap of events and thoughts to keep readers updated (Fool News complements this incredibly well). Surprisingly, at this late date -- only 50 days before 2000 -- there is still nothing quite like the Fool portfolios anywhere else in cyberspace.

That said, these portfolios only work so well on the Fool because you are here. You make the portfolio-related conversations enlightening on the message boards; you challenge the positions and trades being made; and you ask questions in hopes of finding better investment approaches. It is largely through interaction with others that David and Tom Gardner developed and refined the Rule Breaker and Rule Maker principles, and it is largely with the community that we in Drip Port make our investment decisions. So, when you read these portfolio columns, you are in a sense looking into a mirror. These portfolios perform so well largely because the community helping to shape them is so strong.

Any News?
Nine of the past ten days, the Nasdaq National Market closed at a new record high. The "stock market for the next 100 years" has been on fire for the past four:

1995    39.9%
1996    22.7%
1997    31.6%
1998    39.6%
And this four-year legacy is about to extend.

So far this year, the Nasdaq has gained about 45% while the S&P 500 has gained less than 12%. It is worth noting that in the prior four years of this zealous market, the S&P 500 kept pace or beat the Nasdaq each year except last year, when it gained only 28% to the Nasdaq's 39%. This performance divergence has increased this year to near record levels. Why? It seems apparent that the revolution in technology represented by the Internet is propelling the values of technology-selling companies much higher (and faster) than other companies. Nasdaq is, of course, home to many technology-centric companies.

Amgen (Nasdaq: AMGN) joined the Nasdaq in scoring a new all-time high today, while Starbucks (Nasdaq: SBUX) announced that it'll open coffee bars in more than 100 Albertson's (NYSE: ABS) supermarkets. Fools are talking about this on the message board. The delicious coffee giant announces quarterly results in one week.

Be Foolish!

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What do you think?
Please post your thoughts about tonight's report on our Rule Breaker Strategy board. Alternatively, if you have ideas, analysis, or questions about a particular Rule Breaker company, pull up a chair at the roundtable discussion on our Rule Breaker Companies board.






Rule Breaker Portfolio

11/11/99 Closing Numbers
Ticker Company Dly Pr Chg Price
AMGNAMGEN INC3/4$90.50
AMZNAMAZON.COM1$73.00
AOLAMERICA ONLINE-6$140.00
ATHMAT HOME CORP CL A-1 9/16$42.69
CATCATERPILLAR INC1/4$55.00
CHVCHEVRON CORP-1 1/16$90.50
DDDU PONT (EI) DE NEMOURS-2 1/16$60.13
EBAYEBAY INC-3/16$133.13
GTGOODYEAR TIRE & RUBBER CO-5/16$36.88
IOMIOMEGA CORP1/8$3.56
SBUXSTARBUCKS CORPUnch.$28.31
TDFX3DFX INTERACTIVE1/16$9.50

  Day Week Month Year
To Date
Since
8/5/94
Annualized
Rule Breaker -1.45% 2.32% 5.72% 43.53% 1,343.29% 65.95%
S&P 500 .58% .82% 1.36% 12.38% 201.37% 23.28%
S&P 500(DA) .58% .82% 1.36% 12.96% 215.62% 24.37%
NASDAQ 1.31% 3.06% 7.78% 45.82% 343.96% 32.69%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
8/5/942200AOL0.917$140.0015,165.51%
9/9/972640AMZN3.188$73.002,190.19%
5/17/951960IOM1.280$3.56178.23%
12/16/98580AMGN42.889$90.50111.01%
12/4/98900ATHM28.040$42.6952.24%
2/26/99300EBAY100.527$133.1332.43%
2/23/99300CAT46.964$55.0017.11%
2/23/99180CHV79.169$90.5014.31%
2/20/98260DD58.844$60.132.18%
7/2/98470SBUX27.955$28.311.28%
2/23/99290GT48.715$36.88-24.30%
1/8/98425TDFX25.667$9.50-62.99%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
8/5/942200AOL$2,017.62$308,000.00$305,982.40
9/9/972640AMZN$8,415.03$192,720.00$184,305.00
12/16/98580AMGN$24,875.50$52,490.00$27,614.50
12/4/98900ATHM$25,236.13$38,418.75$13,182.63
2/26/99300EBAY$30,158.00$39,937.50$9,779.50
5/17/951960IOM$2,509.63$6,982.50$4,472.87
2/23/99300CAT$14,089.25$16,500.00$2,410.75
2/23/99180CHV$14,250.50$16,290.00$2,039.50
2/20/98260DD$15,299.44$15,632.50$333.06
7/2/98470SBUX$13,138.63$13,306.88$168.25
2/23/99290GT$14,127.38$10,693.75($3,433.63)
1/8/98425TDFX$10,908.63$4,037.50($6,871.13)
  Cash: $6,381.51  
  Total: $721,390.90  



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.