Rule Breaker Portfolio
We Don't Care
We're flattered, but we don't care

By David Gardner

Alexandria, VA (Dec. 21, 1999) -- Three days ago, this revolutionary experiment we call The Rule Breaker Portfolio took a big stride. We sold two stocks plus a partial sale of our best holding of all, AOL, in order to further direct our assets toward biotechnology. We bought a company going head-to-head with the government's Human Genome Project, battling head-to-head in one of the most profound and important scientific races of all-time.

And we think our guys will win.

The day after our report, Friday, the stock traded an all-time record number of shares. As noted by longtime Fools, this is consistent with pretty much every trade we've made in this portfolio for several years. I was flipping through the archives today, and found our 1/28/96 buy report of Medicis Pharmaceuticals, the sort of passage we've repeated like a mantra in many reports since. And I quote:

"If the past is any prologue to the future, with the publishing of this recommendation Medicis Pharmaceutical may well rise on the Monday open. We can't ever predict for sure what will occur, of course, but we've seen jumps in our last couple of purchases [late 1995], both of which were bigger companies with more liquid stocks."

We went on:

"Why is this? Because a fair number of readers seem to buy along with [this portfolio]. That behooves us to state up front: please remember that your decision to buy or not is your own, should (as always) be made after thorough thought and research on your part, and should only be undertaken with the understanding that this is a high-risk investment not suitable for new investors or those who can't afford to keep the money in the market for a few years. Further, some people may be under the mistaken impression that we have some Foolish equivalent of the Midas touch, due to our strong historic returns. However, please go back and review our Foolish trading archive and you'll note that our last two purchases have so far turned out to be Fool's Gold...."

Et cetera. That was four years ago.

The Celera buy announcement has touched off something of a firestorm, even by past Motley Fool standards. The stock traded 1.695 million shares on Friday, an all-time record. Since then, in just 3 days, the stock has been halted in trading more than once, and is up more than 60%. This is not a micro cap. This is a multibillion-dollar enterprise at the forefront of a revolution most of the world knows little about. It's like the Internet back in 1993.

The Celera story is now hitting the mainstream media's radar. And I'm giggling. Why? Because Reuters didn't know what was happening, nor did The New York Stock Exchange, which asked the company for some comment or explanation. Bloomberg thought it must be a one-line mention in a New York Times article earlier this week, quickly agreed to by a (Wise?) fellow from BancBoston. Even a Foolish chappy, Joe Kernan, sat on the air on CNBC yesterday and said he could find nothing to account for all this.

Are the mainstream media still not using the online medium? You be the judge.

This is a great story! There's something new afoot, though the media won't see it for a while. What is essentially happening is that a website dedicated to financial solutions for people of all needs -- whether it's ridding yourself of debt or investing in high-tech stocks -- is demonstrating an influence that surpasses most brokerage firms and financial media shops.

And the beautiful thing about it is, we don't care.

We're not invested like increasing amounts of the rest of the world: for three days. We're looking three years ahead, and (if things work out), three decades after that. In a world in which everyone from a Merrill Lynch analyst to Fidelity fund managers to market-timing gooroo commentators are trying to sway the market, a single Internet URL (http://www.fool.com/rulebreaker) has a deeper influence and doesn't give a hoot.

It's not to say we aren't flattered. But we aren't playing games, here. We're making ourselves patient part owners of the best, most revolutionary companies the world has to offer. How do we find them? As often it's finding the right people, as opposed to just the right technology. Another case in point came this week, as many of you now know, and this is perhaps the most succinct example of all. We bought Amazon.com a few years ago, just a short time after Money Magazine called it "overvalued." Two years (and 30 times our money) later, Jeff Bezos is on the cover of another Time-Warner publication, Time, as the Person of the Year. We're often investing in the best people that we can -- witness Celera's Craig Venter.

This all begs the question: Is everyone who bought 1.695 million shares of Celera on Friday a Fool? Absolutely not. A bunch of you are -- you're people who come here for top stock research, having regularly made this your home to follow Rule Breakers like Amazon.com, eBay, and Starbucks. But there are many others, and they run the full gamut. You have brokers who follow us who put their clients into the stock, you have money managers who mimic our moves, you have market makers who get jazzed by this activity and start daytrading to daytraders, you have momentum players and technical analysis guys who look for "breakouts." You have scientists and technologists who follow the Fool and tell people at work. You have every imaginable type out there.

Let's crystallize this down to a number, and close by asking what it all means.

Celera's average daily volume was 150,000 shares as of last week, trading 110,000 on Thursday the day before this portfolio's announcement. That means that on an average day, $11.4 million moved through Celera stock.

Following our announcement, the stock traded 1.5 million more shares than usual and closed at $88. The dollar volume was $132 million, more than $120 million more than average.

These numbers do not mention that the stock has traded 1 million shares a day since, rising 16% and 23% so far this week. In three days, literally $1.2 billion of shareholder value has been created.

What does it all mean? Has Celera done anything brilliant since Friday? No. Is The Motley Fool superhuman and infallible? Assuredly not. Since Friday, has a lot of America found out more about the company and liked what it hears? Yes. Is that right? Or wrong? We'll see... the long-term market returns will confirm or deny the market's pricing.

Will this company be the "DNA portal," or an also-ran that gets beaten down like one of the stocks we sold to buy it, 3dfx?

Those are the questions that really matter. And the best place in the world to go answer them is Fool.com, this portfolio page, and most of all, the Celera message board here at The Motley Fool. I have learned a tremendous amount on that board from a range of people, everyone from a New Zealand biotechnologist to a molecular biology Ph.D. to a law student who just completed an online work of art, the new Celera FAQ. (Thanks from many of us, Greg Carlin.)

We're all going to learn a lot about biotechnology together for the next 25 years, my dear Fools.

But the past three days? That's not our thing.

We don't care.

Fool on.

David Gardner

Something we do care about: The Motley Fool's 1999 Charity Drive. Have you donated yet?






Rule Breaker Portfolio

12/21/99 Closing Numbers
Ticker Company Dly Pr Chg Price
AMGNAMGEN INC1/4$50.13
AMZNAMAZON.COM7/8$99.88
AOLAMERICA ONLINE-1 1/4$85.00
ATHMAT HOME CORP CL A7/8$47.13
CATCATERPILLAR INC-3/4$44.38
CHVCHEVRON CORP-11/16$85.44
CRAPE CORP - CELERA GENOMICS GRP23$125.00
DDDU PONT (EI) DE NEMOURS-2 1/2$63.81
EBAYEBAY INC-4 11/16$144.38
GTGOODYEAR TIRE & RUBBER CO-15/16$25.50
SBUXSTARBUCKS CORP-5/16$25.69

  Day Week Month Year
To Date
Since
8/5/94
Annualized
Rule Breaker 1.88% 4.57% 15.01% 77.69% 1,686.83% 70.90%
S&P 500 1.08% .87% 3.19% 16.61% 212.70% 23.60%
S&P 500(DA) 1.08% .87% 3.19% 17.19% 226.96% 24.63%
NASDAQ 3.36% 4.21% 17.24% 78.37% 443.08% 36.96%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
8/5/944020AOL0.460$85.0018,393.80%
9/9/972640AMZN3.188$99.883,033.32%
12/16/981160AMGN21.444$50.13133.74%
12/4/98900ATHM28.040$47.1368.06%
12/17/99630CRA79.513$125.0057.21%
2/26/99300EBAY100.527$144.3843.62%
2/20/98260DD58.844$63.818.44%
2/23/99180CHV79.169$85.447.92%
2/23/99300CAT46.964$44.38-5.51%
7/2/98470SBUX27.955$25.69-8.11%
2/23/99290GT48.715$25.50-47.65%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
8/5/944020AOL$1,847.65$341,700.00$339,852.30
9/9/972640AMZN$8,415.03$263,670.00$255,255.00
12/16/981160AMGN$24,875.50$58,145.00$33,269.50
12/17/99630CRA$50,093.00$78,750.00$28,657.00
12/4/98900ATHM$25,236.13$42,412.50$17,176.38
2/26/99300EBAY$30,158.00$43,312.50$13,154.50
2/20/98260DD$15,299.44$16,591.25$1,291.81
2/23/99180CHV$14,250.50$15,378.75$1,128.25
2/23/99300CAT$14,089.25$13,312.50($776.75)
7/2/98470SBUX$13,138.63$12,073.13($1,065.50)
2/23/99290GT$14,127.38$7,395.00($6,732.38)
  Cash: $359.36  
  Total: $893,100.00  



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.